standing letters

The Board of Finance over the past 15-plus years has strived to keep property tax increases generally in line with the level of inflation. It was a matter of fundamental fairness; that is, to ensure tax increases did not exceed the growth in our citizens’ incomes, and especially to protect middle-income wage-earners and retirees from invading savings or other assets to pay inflated property taxes. The result was average annual growth in taxes in Westerly of 2.33 percent over the past decade, consistent with the U.S. wage-growth index, cost-of-living inflation data, and increases in Social Security benefits.

Now there are contrary viewpoints emerging as the town contends with the budget process for FY 2019-20 and the proposed $71 million elementary school renovation project. In the budget meeting of Feb. 19, it was stated that keeping tax increases at the level of inflation was “starving the town and the schools” (Westerly Sun, Feb. 20). Earlier in the month, at the Feb. 5 meeting of the Elementary School Building Subcommittee, it was stated that the recent history of low-to-moderate tax increases represented “the old way of thinking” (Westerly Sun, Feb. 7).

The current $90.7 million Town of Westerly budget, an increase of $2.3 million over the prior year, represents a definition of “starvation” not familiar to me. Consider that the municipal and school departments have racked up significant budget surpluses in many of the years since the recession of 2008-09. We certainly like surpluses more than deficits, but they don’t indicate any shortfall in funding for these departments.

Here are the three key tenets of the so-called old way of thinking: 1. responsible and disciplined operating budgets for municipal and school departments; 2. high-priority infrastructure investments, for example $40 million to build a new middle school, $30 million to renovate our high school, $16 million for a new police station and public works facility, and the latest $15 million road bond; and 3. most importantly, respect for what our citizens are contributing in taxes to support these initiatives. 

Most leading economists are predicting a recession within the next 12-18 months. We cannot wait for the next rating-agency downgrade to practice fiscal restraint. The classic strategy for municipalities anticipating a recessionary economy is to strengthen fund balances, shore up pension funding, and deleverage or at least manage any new debt strategically. The adage “Be careful of making decisions in a good economy that you must pay for in a bad economy” applies.

Richard A. Smith

Westerly

The writer was the chairman of the Westerly Board of Finance from 2007-13.

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(1) comment

KJM

Richard A. Smith makes excellent points on budgeting and expenditures. One must appropriately balance past, present, and the forecast of future economic conditions before creating an unsustainable budget or before employing the "new way of thinking" that simply elevates tax rates. The "new way of thinking" must also take into account that the tax base demographics continues to shift to people on fixed income. Thus, tax increases can have a disproportionate impact. Finally, the emotional terms "old way of thinking" and my own, "new way of thinking", should be discarded and discussion/decision making based upon the principles Richard A. Smith listed.

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