March 2, 2001

Taxing times: spotlight on Tom Iacobucci
Amesbury News - By JOEL BECK
 
The financial decisions that are made in Amesbury affect each and every one of its residents. As a Municipal Councilor and the Chairman of the Audits and Appropriations Committee, Tom Iacobucci is a key figure in the process of making these decisions. In a recent e-mail interview, Iacobucci explained his role in the town’s finances and described the way much of the way financial decision making works.
 
What is your role as chairman of the Audits and Appropriations Committee? What role does the committee itself play?
 The Committee on Appropriations and Audit is a subcommittee of the Municipal Council.

The committee basically has jurisdiction over any matter which would affect the town’s finances. Its specific responsibilities include reviewing the mayor’s annual budget proposal, as well as any other appropriations measures or transfers which may get submitted to the council during the course of the fiscal year; overseeing the annual audit of the town’s books and accounts; reviewing proposals to bond or borrow on behalf of the town; reviewing measures related to insurance, salaries or wages; reviewing the mayor’s capital improvement plan; reviewing all applications for federal or state funds; and reviewing the fee schedules of all town departments.

 The committee makes recommendations on these matters, which can then be adopted or rejected by the council as a whole.  All of the committee’s meetings are public. We try to meet the third Wednesday of every month, although of course sometimes our schedule changes. All of our meetings are posted in the town clerk’s office.

 As chairman of the committee, my main role is to coordinate the committee’s work. I schedule meetings, try to track down information the committee may need, and then give the committee’s report to the Municipal Council.
 
 Who does the committee work most closely with in order to make its financial decisions?
 In the past, the committee has worked with the town’s chief financial officer, the mayor’s aide and the town’s auditor.  Under the charter, the auditor is supposed to be an employee of the Municipal Council.  But this year, the auditor ended up doing a lot of work for the administration, not just the council, and as a result, that bill already exceeds the amount we had appropriated to pay for it.
 
We are trying to work with the mayor to figure out a fair way to pay for the excess.  In the meantime, obviously, the Appropriations Committee doesn’t want to run that bill up any higher than it already is — so we have not had the same type of discussions with the Auditor that we were able to have last year.  But the auditor has committed to making a final presentation of last year’s audit to the Municipal Council. That’s currently scheduled for a special council session on Saturday, March 10th. 

 So, given the current situation, I’m not too sure the committee will have any one person to work closely with.  We do intend to bring in each of the department heads as part of the process of setting next year’s budget.  And we will continue to use whatever outside resources we can, such as information from the Department of Revenue. 
 
 What is " excess capacity " and how does it affect the tax rate?
 A town’s  " excess capacity " is the difference between the levy limit and the actual tax revenues, so it is a measure of how much higher the taxes could have been, without exceeding the levy limit.  This fiscal year, Amesbury had a little less than $2 million in excess capacity, which means the Town could have had a tax rate of about $20.12 without exceeding the Proposition 2 1/2 levy limit. 

 In order to calculate what a particular amount of excess capacity would translate to, on the tax rate, you simply divide the amount of excess capacity by the town’s total assessed values. This fiscal year, Amesbury has total assessed values of about $1.088 billion. Dividing $2 million in excess capacity by $1.088 billion in total assessed values equals 0.00184, or, about $1.84 per thousand dollars of valuation.
 
 In most communities, in most situations, the levy limit is lower than the tax levy ceiling. I can only think of one instance where Amesbury’s tax levy ceiling might become the lower limit, and that would be if property values were to fall drastically — because when property values fall, the town has to impose a higher tax rate in order to get the same amount of revenues.

If property values were to fall by 20 percent or more, then the tax ceiling would become the more important limit, because even with a $25 tax rate, the town wouldn’t be able to raise the maximum revenues allowed by the levy limit. 
Hopefully, this won’t ever be an issue, because hopefully, property values won’t ever fall that much. Property values in Amesbury did fall by about 17 percent in the early 1990s, so we can’t completely forget about the tax levy ceiling. But for now, the levy limit is far more relevant to our municipal budgeting process.
 
What does it mean when a project goes to a referendum? Is it unusual for the fate of a project to be decided this way?
 A " referendum " is a mechanism for the public to veto an affirmative action which has been taken by the Municipal Council. Since the charter change, this has happened only once — two and a half years ago, when the voters rescinded the council’s declaration of land on the south side of Woodsom Farm as " surplus " so that it could be leased to the Soccer Association. 
 But under the new charter, there are several types of council actions which cannot be reversed through a referendum, including approvals of " revenue loan orders, " or bonds.  This is one of the things that I, personally, think should be changed in the charter. 

I strongly believe that, since each bond is essentially a 10- 20- or 30-year spending commitment, the public should be able to veto them if they don’t agree with the Municipal Council’s spending priorities. 

 As it stands now, it would be almost impossible for a capital project to go to a referendum, since capital projects usually involve bond authorizations or appropriations, both of which are exempt from the referendum process.

 But there are a number of other ways that a particular issue can be " sent to the voters " .  One way would be through a " non-binding ballot question. " The council can schedule a non-binding ballot question on any topic whatsoever.  These are essentially public opinion questions, and they have no real legal meaning.

Unlike referendums, they can’t force the council to undo a particular action, they can only quantify how the voters feel about that action. I think the council would be extremely reluctant to incur the expenses of a special election, just for the purpose of putting a non-binding ballot question to the voters.  However, the council might well be willing to put a non-binding question on the ballot, if an election was already being held for other purposes. 

That is basically what happened two-and-a-half-years ago, with the ballot question about the golf course.
 Another way for an issue to " go to the voters " would be through an initiative petition process.  Initiative petitions allow voters to propose and approve measures — as opposed to referendums, which only allow voters to reject measures which the council has already approved.  The same list of " prohibited topics " applies to initiative petitions as applies to referendums.  The town has not had an initiative petition since the new charter was adopted.

 Issues can also go to the voters through one of the Proposition 2 1/2 mechanisms.  Right now, there is a proposal – sponsored by myself and other councilors – to send the high school project to the voters for a Proposition 2 1/2 debt exclusion vote.  This is a very different mechanism than a referendum question.  When they approve a debt exclusion, voters actually agree to have the levy limit increased by the amount necessary to pay for the project’s bonds. Or, in other words, voters agree to have their taxes raised in order to pay for a particular project.  Amesbury voters have done this several times in the past, approving debt exclusions for the hospital debt, the purchase of Woodsom Farm, and the renovations to the middle school. 

 Debt exclusions expire once the bonds have been paid off.  The hospital bonds will be paid off in 2003, after which the levy limit will drop by about $874,000, equivalent to about 80 cents on the tax rate.  The Woodsom Farm bonds will be paid off in 2004, after which the levy limit will drop by about $337,000, equivalent to about 31 cents on the tax rate. The middle school bonds won’t be paid off for another two decades or so; right now, that project accounts for about $1.8 million of the levy limit, equivalent to about $1.65 on the tax rate. 

In other municipalities, it is common practice to ask voters to approve large projects through debt exclusions, since that’s often the only way to afford the projects. 

 Proposition 2 1/2 also allows for voters to approve " overrides " or " underrides, " which change the base levy limit, either increasing it or decreasing it. In an override, like a debt exclusion, voters agree to pay higher taxes – but an override permanently changes the levy limit, while a debt exclusion expires eventually.  In an underride, voters force a cut in the levy limit, which usually has the effect of permanently lowering their taxes.
 
The Department of Revenue has a very good publication explaining Proposition 2 1/2, available on their Web site at:
http://www.state.ma.us/dls/PUBL/MISC/levylimits.pdf