Insider's Guide to Acton's Finances

The town Fiscal Year ("FY") starts July 1st and ends June 30th. It is designated by the year when it ends, i.e. currently we are in "FY2007".

The town's revenue is from several sources ; property taxes (also called the "levy"), funds from the State ("State Aid" also referred to a the "Cherry Sheet"), excise taxes, fees, interest, and miscellaneous items such as gifts. The total revenue for the current year (FY07) is approximately $ 65 million. The "levy" (property taxes) account for approximately $57 million (88%).

In addition to the "general revenue", the town and the regional School District maintain special funds (called 'Enterprise Funds" or "Revolving Funds") for items such as the transfer station, the school lunch program, etc.

The town expenditures are generally referred to as "budgets" but are really determined by town meeting appropriations. At the Annual Town Meeting in April, appropriations are voted for the four major budgets : the "municipal budget" (operation of all town activities other than schools), the Acton Public School (K-6) budget, the AB Regional School District (8-12) assessment, and the Minuteman Vocation School assessment. Approximately 70% of the total appropriation is for the school budgets.

By state law, town meeting cannot specify how the amount appropriated for the schools budgets will be spent - that is controlled by the School Committee. Although there are no state restrictions on how town meeting appropriates funds for the municipal budget, it has been the practice in recent years for town meeting to vote a total, the so-called "bottom line budget", which is under the control of the Board of Selectmen.

The Town Manager is given the authority to move funds from account to account to make up for shortfalls in one account with surpluses in another. Specific items that are funded through individual warrant articles must be spent on those items. There is a three-year window in which the funds may be spent, and unexpended funds are returned to Free Cash.

"Free Cash" is the term used for monies that are available for appropriation from a variety of sources, including underexpenditures and windfalls. It is not specifically money in a bank account, although it is treated as such. Most towns try to maintain a healthy free cash balance for unforseen expenses and to act as a fiscal cushion. Acton recently spent down its Free Cash balance to nearly zero, but it has recently been coming back and there seems to be the desire among some town officials to build it back up to around 5% of the operating budgets.

(Revised 3/27/07)

We have an unusual windfall on the horizon. The NESWC Enterprise Fund, which collects money from the transfer station operation, has been running at a large surplus. A surplus was built into the fees because there was the anticipation that the town's landfill would need to be capped, which would cost a couple million dollars. It was recently discovered (by an inquisitive citizen) that the state already considered the landfill as capped, so much of this fund balance will be available and should flow to free cash within the next couple of years.

Like many towns in Massachusetts, Acton has had its share of Proposition 2 1/2 overrides. Some have succeeded and some have failed. It seems somewhat inevitable that costs like salaries and benefits will continue to rise, over time, faster than the revenues which are constrained by Prop 2 1/2. Operating overrides increase the annual tax levy by the amount approved, which must be passed by a majority vote at a town election. Capital overrides (for specific capital purchases) are for a short period of time, just long enough to pay for the expense or bond, and then the levy decreases to pre-override levels.

Some of the town's expenses are "within" Prop 2 1/2, meaning they are coming out of the current budgets and taxes are not raised (over the 2 1/2 percent increase normally allowed.) If an override is approved, the funding can be secured "outside" Prop 2 1/2, meaning the voters have approved an additional tax increase to pay for the expenditure. The portion of the new school buildings not funded by the state are financed outside Prop 2 1/2, and as that debt decreases, the extra surcharge also decreases.

The Health Insurance Trust is a local program that self-insures employee health insurance. A committee oversees this function which sets health insurance rates that are charged to the town (with employees picking up about 15% of the cost currently, and retirees picking up 50% of the cost currently.) The trust is required to offer expensive insurance like Master Health Plus, but also offers HMOs which save both the town and employee money. Over the past few years, this program has saved Acton taxpayers money because we purchase the insurance in a large group and don't have the same overhead costs that other towns have to offer insurance to their employees.

The current year's spreadsheet of revenues and expenses are printed in the annual Town Warrant which is available on the town's website. This spreadsheet, prepared by the ALG, typically looks three years into the future.

Tax bill basics

(From 2003)

The tax bill for a property is calculated by multiplying the "Property Value" (sometimes called Assessed Value) by the Tax Rate. Both are shown on the tax bill. The bill is for the municipal fiscal year, which starts July 1st and ends June 30th of the following year. A fiscal year is referred to by the ending year, for example, the current fiscal year is "FY03", started July 1st 2002 and will end June 30th, 2003.

In Acton, the tax bill is paid in quarterly installments. The first two installments (due Aug 1st and November 1st) are almost always estimated, because the selectmen have not set the tax rate when these bills are issued. Once the tax rate is set, the remaining quarterly bills are adjusted to make the total correct.

Starting this year (FY'03), Acton adds a surcharge to tax bills for the Community Preservation Act fund, the "CPA". It is 1.5% but excludes the first $100,000 of Property Value. To calculate it, deduct $100,000 from your Property Value, multiply by the Tax Rate and then multiply again by 0.015. There are additional exemptions for certain situations.

Each year, the Tax Rate is a derived number, obtained by dividing a fiscal year's total levy by the fiscal year's total town valuation. The total levy is the total of all the property tax bills issued by the town, and the total town valuation is the total of all the Property Values. Your tax bill is the same percentage of the total levy as the percentage that your Property Value is of the total town valuation. Property Values are supposed to be true market values, and are updated constantly by the town assessors. The value of a property will also change if there is new construction (you add a porch) or other reasons. The Board of Selectmen sets the Tax Rate indirectly, by approving the total levy. It is up to the selectmen each year to decide whether or not to use all of the yearly 2.5% increase allowed under Proposition 2 ½ -- they can even set the levy lower than the previous year.

Acton's selectmen have stated publicly and repeatedly that they will raise the levy to the fullest possible extent ("tax to the max"), so it is safe to predict that Acton's tax bills will increase a minimum of 2.5% yearly in the foreseeable future.

(Revised 3/27/07)

Times do change. The Selectmen are now on record as supporting a lower tax increase for 2008. Instead of raising taxes 2.5%, they plan on raising them about 1.4%, with the difference being made up out of the Free Cash balance.

The current ALG plan is to make up for this lost revenue in FY2009, with a 3.6% tax increase, so the break to the taxpayers will be short-lived. However, it is possible that with the increase in Chapter 70 state aid, next year's boards may find a way to extend the break further into the future. Eventually, however, it is expected that the taxes will be raised to catch back up.