Making Democracy Work

Finances

Town finances are explained here

The Town of Falmouth is a complex organization of over 35,000 residents and thousands of visitors each year and running the town is expensive. In 2009, the expense was over $177.5 million in general fund activity. In addition, 2009 Retirement Fund disbursements totaled $6.49 million. The Trust Fund is made up of cash, short-term investments and long-term investments and these totaled $3.375 million. The short and long-term debt outstanding as of the June 2009 financial report was $148,781,240.

Since 1980 Falmouth, like every other community in Massachusetts, has been constrained by a state law known as Proposition 2 1/2, which limits both the tax rate a community may charge and the amount of money which can be raised by property taxes. Those limits can be exceeded only if a favorable Town Meeting vote is then approved by referendum.

The town's fiscal year runs from July 1 to June 30; thus most financial planning takes place in the winter and most budget decisions are made at the April Town Meeting. The tax rate is set in the fall. Tax bills are sent out semi-annually, usually in October and April. Half the tax is billed each time; payment is due one month later. Major roles in the town's financial affairs are played by assessors, who evaluate all the taxable property in town and set the tax rate; the treasurer, who oversees the town's cash position and is responsible for bonding; the collector, who collects all taxes and other local revenues; and the accountant, who keeps running accounts and makes sure the money is spent as directed by Town Meeting.

Treasurer/Collector.The Town Treasurer has custody of all of the town's money. The treasurer's office receives all funds coming into the town treasury and processes all payments of town monies. The Treasurer negotiates interest rates, investment terms and rates while ensuring sufficient cash availability to meet accounts payable warrants, and tracks department expenditures against loan proceeds to ensure compliance with SEC regulations. The Treasurer reconciles cash quarterly and annually, reporting to the Massachusetts Department of Revenue, and provides a copy to the Town Accountant and information to the Director of Assessing for use in tax levy calculation. The Treasurer prepares warrants for payment of payroll agency funds including taxes, deferred compensation, school annuity plans, union dues, and health, life and long-term disability insurance premiums. The Treasurer takes custody of and manages the inventory of deeds to municipal property, including land owned by the town; receives and takes charge of liens placed on properties for non-payment of real estate taxes; manages tax title cases and negotiates payment agreements; forecloses owners' rights of redemption, and is responsible for the sale of municipal owned property through the tax foreclosure process. The Treasurer/Collector is responsible for the billing and collection of all real estate and personal property taxes, excise taxes for vehicles and boats, as well as water and sewer charges, dock and mooring fees, permit fees, parking ticket collection, Municipal Lien Certificates, shellfish permits, and betterment charges.

Town Accountant. The Town Accountant, appointed by the Selectmen, is responsible for keeping all town financial records and prepares all required financial reports. The Town Accountant monitors all town budgets, processes all payables for the town and the schools, and processes the weekly payroll. The Town Accountant approves vouchers signed by department heads, approves payments to be made by the treasurer, and prepares a weekly list of town expenditures to be approved by the Manager and Selectmen. The Accountant is responsible for auditing all expenditures. A detailed record of the town's financial transactions, prepared by the accountant, is published annually in the Town Report. The accountant's records are audited every three years by the state.

Budget Process

The Town Charter spells out the budget process in detail. The Manager is responsible for preparing and annually updating a long-range Strategic Plan (general financial plan), which is reviewed by both the Finance Committee and the Selectmen, who may revise it. The plan is a forecast of revenues and all expenditures including capital projects and debt servicing. The budget preparation begins in October with estimates of revenues for the upcoming fiscal year submitted to the Manager. Policy statements setting the fiscal limits and general objectives for the year are issued by the Selectmen on November 1. Requests from department heads are submitted to the Manager by December 1. An updated five-year capital improvement plan is submitted by the Manager on December 15 and a comprehensive budget for all town functions with explanations is submitted by the Manager to the Selectmen by January 1. The school department budget is prepared by the superintendent and School Committee. The Selectmen then have until February 1 to review and revise the document and transmit it to the Finance Committee.

Finance Committee

The Finance Committee has 15 members elected by Town Meeting for overlapping three year terms. It meets at least monthly; all meetings are public and are posted in Town Hall. It reviews the line item operating budget, the capital plan, and all warrant articles involving finances after these documents have been prepared by the Town Manager and approved by the Selectmen. The Finance Committee then prints its recommendations in The Falmouth Enterprise and in a warrant booklet which is mailed to each town meeting member 14 days before the town meeting. Recommendations may be debated on Town Meeting floor. Town Meeting may accept, reject or amend any recommendation. A referendum is required for bonding or spending beyond the limits of Proposition 2 .

Once Spring Town Meeting has approved spending for the following fiscal year, department heads may negotiate authorized purchases and recruit candidates for new positions, but no money may be spent before July 1. Department heads may not exceed the amount in any starred line item in the budget without approval of a fund transfer from the Manager and the Finance Committee. Town Meeting may approve transfers from the Stabilization Fund, Certified Free Cash or the overlay surplus.

The Stabilization Fund is usually augmented in the fall, when the financial picture is clearer. It is, in effect, the town's savings account and may be spent at any subsequent meeting for any bondable purpose, generally capital projects. The Overlay Reserve is a cushion to cover tax abatements; any surplus is available for spending. Free Cash is any year-end surplus which results from unspent appropriations and from revenues in excess of estimates and fees. Free cash cannot be spent until the amount has been certified by the state Department of Revenue.

Another reserve, the Finance Committee Reserve Fund, is voted by Town Meeting as a budget line item, usually $300,000. It is to be used by the Finance Committee to deal with extraordinary or unforeseen needs.

Revenues

Property Tax. Proposition 2 1/2 limits both the tax rate and the tax levy. The tax rate ceiling is 2 1/2 percent or $25 per $1,000 of assessed valuation; Falmouth is well below that level. The tax levy is the total amount which can be raised by taxes. The levy increase is limited to 2 1/2 percent each year.

There are four ways to exceed the tax levy limit: growth, override, and debt or capital exclusions. Growth is a measure of additions to the tax base, generally through new construction. The levy limit is automatically increased each year by the amount the new growth would have been taxed at the previous year's tax rate. An override is a referendum vote to spend for specified purposes; it results in a permanent addition to the tax levy limit. Exclusion is a temporary increase in the levy limit, also voted by referendum. Debt exclusion can be used only for debt service, usually for major capital improvements. Capital exclusion is for the direct purchase of capital equipment. Override and exclusion referenda must first be approved by Town Meeting, then by the voters. They are normally voted at the annual town election in May.

The three-member Board of Assessors, appointed by the Selectmen, is responsible for determining the tax base, which is the total value of taxable land and personal property in Falmouth. The actual assessing is done by paid town employees or a consulting firm using a formula based on location, area, floor space, number of bathrooms and special features like hot tubs and fireplaces. By state law, property must be assessed at its fair market value, and town-wide revaluation is required every three years. Appeals from individual assessments may be made to the Board of Assessors; special exemptions are allowed for the blind, elderly, veterans, widows, widowers, and hardship cases.

Local Receipts. Revenue from other taxes and fees for town services are included in local receipts and usually go into the general fund.

State Aid is paid annually by the Commonwealth to the cities and towns to help offset the constraints of Proposition 2 1/2 and equalize the differences between rich and poor communities. Each town's share is determined by a formula approved by the state legislature. The total amount available depends on the state of the economy. Falmouth also receives funding from the state for other purposes, such as partial reimbursement for school construction, school bus transportation, highway construction and extended library services.

Town Debt

Falmouth's ability to go into debt is controlled by both federal and state statutes. Federal law effectively limits the amount of new town borrowing in any calendar year. Debt service costs come under the limits of Proposition 2 1/2, unless both Town Meeting and the voters in referendum approve that a debt be excluded.

The Town Treasurer has authority to borrow as needed to meet obligations for which taxes or other anticipated revenues have not been received. Long-term borrowing may be voted by Town Meeting. Such borrowing goes first through Town Meeting and then to a referendum. Once the additional debt is approved, the Treasurer may negotiate and schedule the actual borrowing.

The twenty year Land Bank Assessment is a 3% surcharge on real estate property tax bills that was adopted in 1998 when voters in every town on Cape Cod approved the question on their ballots. Additionally, the Town receives a state match generated by a transaction fee at the Registries of Deeds throughout the Commonwealth. The money is assigned to the Community Preservation Committee (CPA) specifically for use in acquiring open space, community housing, historic resource preservation and recreation space. The estimate for fiscal year 2010 is $2.1 million from the local surcharge and $634,621 from the state match. Since voters passed the Community Preservation Act for Falmouth in 2005, the Town has received more than $18.8 million.