3 Simple Steps to Avoid an Override and Higher Taxes in FY27.

It was alluded to during last May's Town Meeting. And as discussions are ongoing about this year's Town Budget, the Town Manager, with the support of the Select Board, is gearing up to ask for a Tax Override for next year, FY27. In the following paragraphs I'll offer 3 simple steps that we can take to avoid the need for an Override that will increase our tax bills.

Background.

Just some basics and terminology so that we're all starting on the same page.

• The Town Budget is made up of 3 major cost centers:

  • Sudbury Public Schools (PreK-8)

  • Lincoln-Sudbury Regional High School (9-12)

  • Town (Public Safety, Department of Public Works, Culture and Recreation, etc.)

• Every year the Town Manager gives "guidance" to each cost center with the percentage increase they can expect in the coming year; it's based on the estimated revenues. Our Town revenue typically increases about 3% every year, and the guidance to the cost centers ranges from 2.5-3.5% every year. (These are rough estimates just to give you a sense of what the numbers typical are.)

• The typical 3% increase is due to usually a 2.5% increase (the limit set by a state law referred to as "Prop 2 1/2") plus any new growth. New growth can be due to a new tax revenue (eg. We will be receiving approximately $1 Million in additional taxes from Eversource now that the power line project has completed.)

• Most of our expenses are staff salaries. On the order of 80-85% of expenses are to pay our municipal staff. And most of those salaries are determined by contracts. In these contracts (publicly available online) salary increases are on the order of 2 to 2.5% (sometimes higher) each year.

Step 1 - Don't play favorites.

When looking at what the Town Manager is suggesting as a "balanced budget" for FY27, the proposal severely underfunds education. The increases proposed for FY27 are:

• Sudbury Public Schools - 2.5% increase

• Lincoln-Sudbury Regional High School - 1.09% increase

• Town - 3.58% increase

  
  

As I mentioned earlier, the majority of expenses are salaries, which are dictated by contracts. And these contracts typically have salary increase around 2.5% (plus or minus) per year. So, any budget which is proposing a smaller increase, is essentially proposing a layoff. So if the Select Board are not opposing this projection for 1.09% increase for LSRHS, then they are complicit in supporting a layoff of staff at LSRHS.

Why would this approach be taken to underfund LSRHS while significantly increasing the funding to the Town? It makes it seems that the cost centers are not being equally valued. Is the Town playing favorites?

I would propose that the cost centers be equally valued and funded. This can be done in the following manner.

• Sudbury Public Schools - 2.6% increase

• Lincoln-Sudbury Regional High School - 2.6% increase

• Town - 2.6% increase

• Benefits line item - reduced from a 7.23% increase to a 5% increase.

Wait, why did I introduce the "Benefits line item?" One big reason why there appears to be a shortfall in the Town Manager's FY27 budget is because he is projecting a 7.23% increase in the Benefits line item. This is the line item in the budget that covers benefits for Town and SPS employees. There's a history behind this line item. During my tenure on the Finance Committee, it was noticed that the Town regularly projected higher than necessary increases to the Benefits line item. For example, we would predict at 7-8% increase, when the increase was less than 5%. This was a consistent pattern which regularly created excess free cash. After several years of bringing this issue up, the Town finally stopped over-budgeting the Benefits line item a couple of years ago. But, now, the tactic appears to be back with this new administration. Projecting a 5% increase in benefits should suffice. And, worst case, if the cost is a little higher, then we can use the Reserve Fund ($300,000.). This is a fund that we budget for every year (in case of budget shortfall), but I cannot recall it ever being used.

The above graph illustrates the "uneven" distribution of funds. The blue columns are the uneven increases proposed by the Town Manager / Select Board. The red columns are an alternative "equal" distribution.

By not playing favorites, and distributing our revenue equally amongst the cost centers, an override can be avoided with 2.6% increases to each cost center. (Note: this is based on a very conservative revenue projection of a 2.5% increase. Typically our town revenue increases by 2.75-4%.)

If you are worried that 2.6% increase isn't enough, then the following additional steps, Step 2 and Step 3, can be taken to assure a higher budget increase.

Step 2 and Step 3 - Reduce the taxes collected for CPA by 1.5% and Increase the taxes collected by the Levy by 1.5%.

As you may have noticed on the recent tax bill, we currently collect an additional 3% as a "surcharge" on top of your regular taxes (the Levy). This surcharge funds the Community Preservation Act (CPA) fund. This fund can only be used for projects allowable by the CPA guidelines set by the state. There are specific projects allowable in the areas of housing, historical preservation, and open space and recreation. The surcharge can range from 1 to 3% and is decided by the town. We are currently charging 3% - which results in about $3 Million in funds for the CPA every year.

However, in the past many years, we have not spent all of this money, and a surplus is building up (more than $6 Million in surplus). But, these funds are "locked" for use only for CPA allowable projects.

The proposal here is to reduce the CPA surcharge to 1.5%, since we aren't spending the money anyway, and increase the taxes collected by the Levy by 1.5%. By reducing CPA and increasing the Levy, taxpayers will not see a change in their tax bills, but the Town will be able to more efficiently use the funds. The Town budget will increase by over $1.5 Million, but individual tax bills will not increase.

Step 2 - In May of 2025, Reduce the CPA surcharge from 3% to 1.5%. This will require a vote at Town Meeting and at vote at the ballot.

Step 3 - In May of 2026 (the following year), increase the Levy by 1.5%. This will also require a vote at Town Meeting and a vote at the ballot.

Note: While technically Step 3 could be called an override, here it is paired with Step 2 (a tax reduction), so the combination of Step 3 and Step 2 would not increase taxes.

The graph below illustrates the Town Manager / Select Board proposal for a $3 Million override vs this Step 2, Step 3 alternative.

Summary of 3 Steps to Avoid an Override and Tax Increase:

Step 1 - Don't play favorites.

Step 2 - In May 2025, reduce the CPA surcharge from 3% to 1.5%.

Step 3 - In May 2026, increase the Levy by 1.5% (approximately the amount CPA was reduced)

Note: The data in this article was gathered from Town budget documents, Town Meeting warrants, and other meeting packets. If you find any errors, please don't hesitate to reach out. Thank you.