Friday, May 31, 2013

Overlay, Underlay, Ondalay

Where do you stash your cash?

While Amherst may have the highest property tax rate in the region because of the high cost of our public schools and high percentage of tax exempt entities, town officials are kind of stingy when it comes to the "overlay account."

A reserve taken off the top of annual property taxes collected (our number one source of revenues for the town's $68 million budget) and held in case someone disputes their assessment. Massachusetts Department Of Revenue recommends municipalities withhold 3% ($1.2 million) but since Amherst runs a tight ship we apply only 1% or $400,000.

Currently for FY13 (which ends June 30) we have a balance of $229,345.37, having used $183,485.14.

But of that amount used the majority was not for property tax abatements brought on by complaints of overly zealous high assessments. Every year Amherst Town Meeting unanimously approves "Personal Exemptions" which benefit veterans, blind or disabled citizens, senior citizens, surviving spouses, etc.

This year that amount alone came to $134,000 -- or more than two thirds. While there still may be an appeal to the Appellate Tax Board on appeals handled at the local level safe to assume $200,000 will end up surplus.

Not exactly a slush fund since any monies expended would need Town Meeting approval, but still somewhat "found money" that can be line item targeted toward endeavors that may be a tad controversial.

Kind of like what happens with Community Preservation Act money. Town Meeting spends that as though it flowed from the Quabbin Reservoir.

The Town Manager had originally thought about financing the $60,000 joint study with UMass by using $30,000 from the overlay account but then simply went with a free cash appropriation. Since the Chancellor was scheduled to champion the article, no special help was required.

In addition to the $200,000 that will be left over this year, the overlay account for FY2012 has $37,000 and FY2011 has $27,000 and, finally, FY2010 still has $1,000.  Or a grand total of $265,000.

Additionally the town has $4,326,501 in Free Cash and $1,821,401 in Stabilization.  Oh yeah, and $202,000 that Town Meeting appropriated two years ago for War Memorial Pool renovations that was never used due to a state grant covering the costs. 

(Just don't tell anyone.) 


Anonymous said...

You are making something out of nothing. It's not possible nor desireable to figure out a budget that collects exactly the money that will be needed in a given year since you are guestimating the amount of tax you will collect and you have to guestimate some of the expense.

Larry Kelley said...


But Town Meeting passed the outdoor pool budget and nobody seemed to mention the $200K stashed away.

The Juggernaut said...

The state grant should be returned. Isn't that the idea of the state? Super-liberal Amherst should support such a notion as well.

Dr. Ed said...

Amherst Town Meeting unanimously approves "Personal Exemptions" which benefit veterans, blind or disabled citizens, senior citizens, surviving spouses, etc.

ONLY for those who own their own residences, at the expense of those who rent!

I'm not sure everyone understands the concept but all expenses of the landlord (including property tax) are paid by the tenant via rent. Forget making a profit, a landlord who does not charge a rental rate high enough to cover expenses will go bankrupt.

Hence the family renting a house pay the exact same amount in property tax that an owner/occupant would -- and I believe this is true for a condominium as well.

However, the funky manner in which Amherst treats the first $100K of a property's value serves to inflate the property tax charged to the tenants of multi-unit properties. Take a hypothetical duplex with twice the value of a single-family home -- i.e. two single-family homes hypothetically bolted together.

There is only one first $100K on the property, and thus the tax assessed to each unit is only reduced by half of what it would be were each half of the duplex taxed as a separate property.

As the number of units comprising a property increases, each individual unit benefits less and thus the tenant winds up paying a higher property tax (relative to the value of the rented property) than the owner-occupant.

Hence the veterans, blind or disabled citizens, senior citizens, surviving spouses neither prosperous enough to own a home nor poor enough to qualify for a housing subsidy, already paying more than homeowners, pay a little bit even more to provide this exemption.

Dr. Ed said...

Three other things:

First, taking Echo Hill via Eminent Domain actually would have lowered the rents in a way that folks might not have realized -- it would have taken it off the property tax rolls (with all other taxable properties paying more to make up the balance).

Take the property tax charged, divide by the number of units, and that is the amount each tenant is paying in property tax. Not having to pay this would enable any landlord, public or private, to make a corresponding reduction in rent.

Second, the Amherst Housing Authority already owns more properties in town than people realize -- and for all the complaints about the expenses incurred by the tax-exempt UMass, wouldn't it be interesting to tabulate all the expenses incurred by the tax-exempt AHA properties?

Police/Fire/EMS alone would be interesting when one realizes that (a) MassHealth/Medicaid don't reimburse AFD the same amount that UMass Health does and (b) there is no UMPD providing police services to the AHA properties -- the APD has to do it.

Third with the Rental Registration, it now will be known exactly which properties are rentals -- and thus exactly which property tax bills are for rental property.

I think people would be quite surprised to learn what percentage of the property tax is paid by those who complain the loudest, the owner occupants, and how much is being paid indirectly by tenants.

Wouldn't people be surprised to learn that UMass Students are (indirectly) paying more than half the total bill?!?!?!?