Good news: your taxes for FY2025 will be lower. Bad news: it's because you paid too much last year.

 

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Last night the Select Board held the town's Tax Classification hearing, clearing the way for the town to submit tax rates for FY2025.    Though the appropriation approved in May was up 4% over the previous year, many tax payers will pay less in taxes for FY2025 (the year ending in June) because the town approved a budget that uses $1,000,000 in free cash (unused balances from prior years) and stabilization funds.   

This is a victory for residents who pressed for a budget that more accurately portrayed expenses after two years of wildly inflated budgets, but we'll need to continue pressing for transparency and accurate budgeting.

 
The Select Board held it's annual "Tax Classification Hearing" on Monday night.    After the hearing the board voted to approve a single tax rate for all classes of property for FY2025.   If the tax rate shown last night is approved by the state, we'll pay $16.15 per $1000 for FY2025.

 

 

The tax relief will come after the town approved using $1 million in free cash and stabilization funds to reduce the levy for this years budget.  The total appropriation we approved in May is actually 4% higher than last years levy.

Town expenses in the FY2023 and FY2024 budgets were grossly inflated, and the town had been accumulating an unnecessary large amount of free cash.

In 2022, new town administrator Kate Hodges arrived in April and presented the FY2023 budget at town meeting.    That budget called for a (at the time, mystifying) 19% increase in town expenses and 16.4% increase in town payroll.  

In 2023, we approved an FY2024 budget that increased town expenses another 19% and salaries another 7.34%.     We were told that without a $1.2 million override the town faced imminent cuts to the library, police and fire department.

According to the presented budgets, from FY21 to FY24 the town's expenses had increased from $5,259,926.22 to $6,570,599.  That would be an increase of $1,311,533 or 25%. 

Where was the new money going?   We later learned that a large amount of it was going nowhere.   Actual town expenses for FY23 and FY24 were far lower than budgeted and the town was accumulating the difference.

We approve $1.2 million levy limit override in May, 2023 and red flags appeared shortly thereafter.  Although the FY24 budget had requested a 7.34% increase in town expenses,  it turned out that FY2023 actual expenses had been well below budget.   

The town bristled at questions about those FY2023 actual expenses, but the scale of the budget padding became undeniable after the town's end-of-year balance sheet (6/31/2024) was reviewed and "free cash" entering FY24 was certified by the state.   Free cash is unused revenue and carried balances at the end of the prior fiscal year.    As it turned out, while town hall was threatening imminent cuts to services, it had actually accumulated an additional $1.4 million in free cash during fiscal year 2023.   The town concealed that until after the override was passed and none of that free cash was allocated for use towards the FY2024 budget. 

FY2024 taxes soared:  the average FY2024 real estate tax bill increased 9% over the prior year.

This year town hall finally presented an FY25 budget with moderated town expense and salary increases.  Budgeted FY25 town salaries "only" increased 8% over last year, and town expenses decreased 5%.   (Even with the decrease, the budget for town salary and expenses in FY25 is still 30% higher than in the FY22 budget.)    The budget allows $717,731 of the free cash balance to be used towards the budget, and pays for $296,500 in capital expenditures from the stabilization fund balance.

Lower real estate taxes this year will be welcome relief for Lancaster tax payers, but we should remember that the year-over-year decrease only reflects that last year's bill was much higher than it needed to be.   Even with the decrease, from FY2022 to FY2025, the tax bill for the "average single family home" in Lancaster has increased from $7,570 to $8,449.

The state has yet to certify the town's FY2025 free case using the town's balances as of 6/31/2024.   Because the FY2024 budget was a steep increase over a padded FY2023 budget,the town will likely report high free cash again.   The state recommends that town's carry free cash equal to 3-5% of their budget from year to year, and residents should press that free cash beyond that be used to offset taxes in the following year.  

Residents should continue to press that budgets accurately reflect the expected expenses for the coming fiscal year.   When the town needs to build stabilization fund balances as part of a long term plan, that should be transparently reflected in the budget so that residents can consider whether the increase to the levy is justified.