V. TOWN FINANCE
The cost of government in Dover, as elsewhere,
has increased gradually in recent years, reflecting the higher costs
of operating all town departments. Under the state legislated Proposition
2 1/2, enacted in 1980, the amount raised by taxes may increase
each year by a maximum of 2 1/2% over the previous year's total
tax levy, plus "new growth" unless explicitly over-ridden
by a townwide vote. Formulation of financial policies and procedures
is the concern of many people, but it is Dover citizens at Town
Meeting who vote the appropriations necessary to operate the Town.
ADMINISTRATION
The ultimate financial responsibility for town
services lies with the Selectmen. They are the top administrative
officers of the town and are aided in their work by a number of
other elected and appointed officials with whom they keep in close
touch. Every dollar spent must be accounted for against a specific
department budget, originally approved by the voters at the previous
Town Meeting. No department may borrow from another department's
budget.
BUDGET
Each department draws up its budget annually. In
addition to this, there are certain capital expenditures that do
not fairly reflect the yearly operating cost of the department if
included in the regular budget. These are not included in the general
appropriations article which covers all operating budgets but appear
as special articles.
WARRANT COMMITTEE
Approximately six weeks before Town Meeting, the
Warrant Committee holds its Open Hearing, where voters have
an opportunity to discuss each of the budgets and special articles
in the warrant. As a rule, all department heads are present to answer
questions pertaining to their particular budgets and special articles.
The Warrant Committee then writes its Blue Book. Every article
is listed in the Blue Book along with the Warrant Committee's comments
as to the reasons it recommends or does not recommend passage of
each article. The Warrant Committee also recommends to the voters
the method by which funds may be generated, i.e., as transfers from
available funds, and/or new borrowings. If the voters at Town Meeting
accept the recommended program of the Warrant Committee, then the
new tax rate reflects the approved expenditures.
CAPITAL BUDGET COMMITTEE
Composed of representatives of other town boards
as specified in the town bylaws, the Capital Budget Committee annually
prepares a capital budget program for use by the Warrant Committee,
the voters, and other town boards and officials in their deliberations.
Its purpose is to stabilize the tax rate by coordinating capital
spending. Capital items are generally defined as non-recurring
items, not operating items, the benefits of which will occur
over a long period of time, i.e. school and other buildings, fire
engines, trucks and refuse disposal facilities. As a method of forward
planning, Capital Budget Committee members contact the various departments
to determine their capital spending needs for the next five years.
The Warrant Committee, the Selectmen and the town departments utilize
these forecasts in making budget decisions and making capital budget
recommendations to the town.
TOWN INCOME AND TAX RATE
Real estate taxes are the primary single source
of income for the town. The town also receives money from the state,
including school aid and school building assistance funds. In addition,
Dover also has revenue from the motor vehicle excise tax and from
a variety of other local sources: interest, rentals, and permits
and fees, for example. The voters at Town Meeting approve the appropriations
for the fiscal year, to which are added other expenditures such
as state and county assessments, overlay for the year and snow and
ice deficits. This provides the gross amount to be raised. From
this amount, the Assessors deduct certain available funds and estimated
state and local receipts, which yields the net amount to be raised
by taxation on real and personal property. This amount is then used
by the Assessors in determining the tax rate by dividing the total
amount of money to be raised for a fiscal year by the total taxable
valuation of the town.
FINANCIAL TERMS
There are a number of technical terms involved
with taxation in towns in the Commonwealth of Massachusetts. Among
the most important are:
The Overlay: an amount of money raised by
the Assessors in excess of appropriations and other charges for
the purpose of creating a fund to cover abatements and exemptions
granted by the Assessors. This fund is referred to as the Overlay
Reserve. By state law, Assessors may estimate the overlay up
to 5% of the total assessed valuation of the town. The Overlay Reserve
raised in any one fiscal year cannot be commingled with the Overlay
Reserve of another year. When an amount of money in the Overlay
Reserve for a specific year is no longer required to be held, the
Assessors may transfer these funds to the Overlay Surplus.
By vote of Town Meeting, the Overlay Surplus may be used to fund
specific appropriations.
The Reserve Fund: a fund of money established
by the voters at the annual Town Meeting, which may not exceed 5%
of the tax levy of the previous year, to provide for extraordinary
or unforeseen expenditures. The Warrant Committee must approve transfers
from the Reserve Fund during the year. Each year, Town Meeting votes
as to whether or not it should make additional appropriations to
the Reserve Fund.
Stabilization Fund: a fund of money set
aside in advance of planned capital outlays. It may also be used
for any other municipal purpose. Monies in a Stabilization Fund
may be invested and draw interest. The amount appropriated to this
fund in any year may not exceed 10% of the assessed valuation of
the Town in the preceding year. Appropriations from this fund require
a two-thirds vote at the Annual Town Meeting or at a Special Town
Meeting.
Surplus Revenue: the amount by which cash,
accounts receivable, and other assets exceed liabilities and reserves.
Free Cash: funds available in the treasury
at the end of the year which are not earmarked for any budget or
appropriation, and which represent the difference between estimated
and actual receipts. The Massachusetts Department of Revenue calculates
the amount of Free Cash by subtracting uncollected taxes from Surplus
Revenue. Free Cash may be used in modifying the tax rate or for
other purposes as determined by voters at Town Meeting.
Cherry Sheet: a piece of paper (named for
the color of paper on which it was formerly issued) that is sent
annually by the Massachusetts Department of Revenue to each town.
The Cherry Sheet lists the estimated charges for the town's share
in county and state government. It also gives estimated receipts
to the town from state aid through the various funds. The Assessors
use these figures to compute the tax rate.
TOWN BORROWING AND DEBT LIMIT
The town can raise money for its expenditures by
appropriations from the tax levy, by voting money from available
funds, or by borrowing. When the town authorizes any major capital
improvement such as the building of a new school, it is customary
to finance at least part of the cost by borrowing. Bonds are usually
issued, and the money to meet principal and interest obligations
must be raised and appropriated each year.
Since 1980, the statewide Proposition 2 1/2
is a fundamental part of a town's fiscal management. A community
cannot levy taxes in excess of a levy ceiling, which amounts
to 2 1/2 percent of the total assessed cash value of all taxable
real and personal property of the community. In addition, from year
to year, a community may only increase taxes by a certain amount,
up to a given levy limit which will always be below, or at most
equal to, the levy ceiling. The levy limit increases every year
by 2 1/2 percent, plus the increase in the community's tax base
resulting from new growth. However, a community may permanently
increase its levy limit by successfully voting an operating budget
override. The amount of such an override then becomes a permanent
part of the levy limit base. For the payment of certain capital
projects and their related debt service costs, Proposition 2 1/2
also allows a community to assess taxes above the levy limit. These
capital costs then become exclusions to the levy limit and require
voter approval. They are designated as capital outlay
expenditure exclusions and as debt exclusions respectively.
By state law, the Town's fiscal year runs from
July 1 to June 30. This law, implemented in 1973, brings town finances
into conformity with the state's fiscal year. Real estate taxes
are now collected on a quarterly basis (February, May, August, and
November), thereby reducing the amount of money necessary for the
town to borrow in anticipation of taxes.
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