Municipalities struggle to stay in the black
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Williamstown manager Garrett Earls, left, works on the town budget. |
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By Sarah Hinckley Times Argus Staff - Published: December 1, 2008
MONTPELIER As the state economy continues to crumble, municipal officials are mulling ways they can stay in the black.
Property taxes, fuel, health care and a revenue shortfall at the state level are all issues municipalities are weighing while crafting budgets in fiscal year 2010. While gasoline prices have dropped significantly in the last month, there are no guarantees they will stay at current levels through this year.
"We're projecting budgets that are 18 months out, who knows what the price of fuel will be then," said William Fraser, city manager in Montpelier. "We are seeing many of our regular operating expenses no new projects but our regular expenses are going up."
Road salt prices have jumped as much as $10 per ton in two years, fuel prices have fluctuated wildly in the last year and health insurance continues to climb. Cities and towns that are insured through the Vermont League of Cities and Towns are expected to see an increase of 21 percent in health insurance costs.
"Health insurance is going up, that's a guarantee," said Garrett Earls, the Williamstown town manager. "Budgets for municipalities are tight to begin with.
Our job is to have it not affect the taxpayer or the employee.
The Grand List isn't necessarily growing."
In a time where the housing market is taking a huge hit, a state that relies heavily on property taxes for its revenue may be in a self-perpetuating pinch.
"We're seeing people losing their jobs," said Steve Jeffrey, executive director of Vermont League of Cities and Towns. "We're going to be seeing people less able to pay their property taxes. It's never the state being left short that will have to be made up by other taxpayers."
The vast majority of Vermonters qualify for income-sensitivity, which means they pay their property taxes based largely on their earnings, not on how much their property is worth. The state's unemployment rate has risen from 3.8 percent to 5.2 percent in less than a year and is expected to rise in tandem with the national rate, which was 6.5 percent in October, through 2009, according to Legislative Economist Tom Kavet.
"It's kind of a rough time in some respects," said Chester Town Manager David Pisha. "Insurance prices are rising and prices for commodities like salt are increasing, but these are costs we can't avoid. If the insurance goes up, we have to pay it. If salt goes up, we still 'have to buy it because we have a certain number of miles of road we have to cover."
While town officials have their worries, those concerns are echoed on a smaller scale by the residents who also have to contend with rising prices in the face of layoffs and unemployment, he said.
Pisha said not everything is gloomy.
Falling fuel oil prices have been an unexpected benefit for the town.
Ludlow's Town Manager Frank Heald noted the difficulty in trying to predict economic forces affecting the town in the future. Heald said the town's department heads are compiling their budgets for the next fiscal year, beginning July 1.
"Right now, we're trying to prognosticate what's going to happen spring 2010," Heald said. "Six months ago, if I told people I was going to be paying $1.99 a gallon for gas like I did today in Ascutney, they might have looked at me strangely,"
But no one is sure how long the drop in fuel prices will last and many locked into prices earlier this year.
"We were really scared in September, we didn't lock into any prices," said John Craig, city manager for Barre city, adding that the city took a hit last winter. "Last year was a pretty atrocious year.
We did spend more than we budgeted."
Nearly $100,000 over is what Craig estimates was spent on fuel and overtime hours combating winter storms. But the spending did not have a major effect on the city's financial state.
"We were able to make up for the expenses of the last year in the budget in other areas," said Craig, explaining that room is being made in the FY '10 budget for increases. "We're having to budget for increased fuel costs.
We haven't spent any money on salt yet, we're way over on that budget line."
Health insurance increases may be the toughest pill for Barre city to swallow.
While most of the state is seeing a painful average of 21 percent increase in health insurance, Barre's increase may be greater than 30 percent. Last year the city's health insurance rates increased a mere 10 percent, according to Craig.
In Northfield, the rise in health insurance costs does not have as much of an effect.
"We have a plan in place so we basically self-fund health care," said Nanci Allard, municipal manager for the town and village of Northfield. "I'm trying my very best to not raise taxes, but to level-fund. It's not the time to raise taxes."
While last winter was hard on Northfield's town highway budget, Allard said there were several areas of the budget in which there was a surplus of funds.
That same strategy is what helped Barre city with its budget.
"We were able to make up for the expenses of last year in the budget in other areas," said Craig. "We're going to be pretty close to even, if we can justify where we are on spending."
Revenues are what have some municipalities in a crunch.
In the capital city, not as many people are building new homes, which equates to a drop in income. In fact, state statistics show new housing, which includes permits, materials and construction jobs, is down 60 percent, the lowest it has been in 30 years.
Several towns in the state have adopted local options taxes, typically a 1 percent tax added to a choice of one or all three of the following: sales, alcohol or rooms and meals. When people are spending less, there is less revenue from this tax.
"If people are not buying, that tax source shrivels up," said Jeffrey. "There's a lot of moving parts that go into the (education) fund and taxes a lot of it depends on spending.
It's pretty scary what could happen."
Contact Sarah Hinckley at sarah.hinckley@timesargus.com. Josh O'Gorman of the Rutland Herald contributed to this article.
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