Pittsfield's taxing capacity faces test
PITTSFIELD -- The city has been advised to consider raising property taxes to create a stabilzation fund because Pittsfield's leeway to tax more without an override vote is rapidly disappearing.
Thomas Scanlon Jr., of the firm Scanlon & Associates of Deerfield, made the suggestion while briefing the City Council's Finance Committee on March 27 on the final city audit for fiscal year 2013.
While the city has been taxing for years below its annual Proposition 212 levy limit -- having $8 million in excess levy capacity this fiscal year -- the 1980 law also specifies a "levy ceiling," which in Pittsfield's case is falling. That's because it is based on a municipality's total property assessed valuation, Scanlon said, and that figure has declined in Pittsfield since the nation's real estate bubble burst about six years ago.
Total property value is now at $3.3 billion, and the Proposition 212 levy ceiling is 2.5 percent of that, or $83.3 million.
Proposition 212 limits local tax hikes to 2.5 percent annually plus growth in the valuation, and for Pittsfield this fiscal year that equals $78.8 million, compared to the amount actually levied in the current budget -- $70.3 million. This means the city could raise another $8 million for an unexpected expense without an override vote, but the levy ceiling has fallen to near the maximum tax limit and apparently is still dropping.
"This is where I would caution you," Scanlon told councilors in his audit presentation. From fiscal 2009 to fiscal 2014, he said, the levy ceiling figure has plummeted from $22 million above the city tax levy maximum to $4.7 million above.
Which means, he said, Pittsfield might be more than $8 million below its annual levy limit, but the ceiling could soon restrict the city's capacity to raise that amount in taxes without an override vote.
"This is something that bond companies look at," Scanlon said, and they consider that taxing capacity a kind of reserve fund that can enhance a municipality's bond rating.
In the extreme, the accountant said, property values could sink to the point where it is difficult to raise taxes even in small percentages. "There are some cities that are in that bind now," he said.
In a telephone interview this week, Scanlon said the falling levy ceiling "is economy-driven" and could resolve itself if the local economy picks up. He added that he doesn't foresee the ceiling for Pittsfield falling enough within two or three years to affect the ability to raise taxes without an override.
But that has happened, he said, in other Massachusetts communities, such as Spring field. In the county, North Adams is nearing the point where its levy ceiling and levy limits could meet, according to information on the state Department of Revenue website.
"As the ceiling approaches the levy limit, you lose the ability to tax [without an override vote]," he said, and bond companies monitor such developments.
The rapid drop in the ceiling over five years in Pittsfield prompted his firm to make the recommendation, Scanlon said, suggesting that adding $1 million or a similiar amount to a stabilzation fund each year might be advisable.
At the moment, Scanlon said, "it's nice that you have some flexibility."
Mayor Daniel L. Bianchi, who did not attend the meeting, said afterward that placing money in a fund "certainly will be looked at" during prep aration of the next budget, but he added that such a decision would be difficult given other likely increases facing the city.
That would mean raising property taxes to create a fund, and none of the Finance Committee members or other officials present at the meeting seemed eager to do that. Councilor at large Barry Clairmont joked after the meeting that the auditor could make such a comment but elected officials wouldn't fare well with voters if they advocated a tax hike.
He did say, however, that the situation is a concern and the city should continue to actively monitor it if property values fail to rise.
To reach Jim Therrien:
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n Levy ceiling FY 09 -- $86.3
n Levy limit FY 09 -- $64M
n Levy ceiling FY 14 -- $83.6M
n Levy limit FY 14 -- $78.8M
n Levy (actual) FY 14 -- $70.3M
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