Excess levy capacity – It means the City can Raise Taxes more than 2.5%

Lowell City Council

Lowell City Council

Excess levy capacity can and is generally presented by most Administrations as a potential municipal reserve. It comes out of the taxing operation constraints that exist under Proposition 2 1/2. It is the difference between the maximum property tax revenue a community is permitted to raise under Proposition 2 1/2 rules (levy limit) and the tax revenue actually raised (levy).

So when Lowell, under Manager Lynch and the council were keeping Lowell’s tax increases to 1% – .05 % over a three year period, they were also raising the tax levy. On one hand, it provided relief for citizens but on the other, it just pushed tax increases for services down the road so that you get whacked at a higher rate.

If a city like Lowell creates excess levy capacity as was done, then it can in other years tap into this taxing capacity to finance municipal spending without restriction and raise taxes higher than the Proposition 2 1/2 limit.

This year Lowell saw a 3.5% Tax increase on property. In this years City Budget total expenditures went up by $14 Million roughly a 5% increase from the previous year. Part of that included the city providing an additional $2.9 Million dollars to the School side.

Last night the City Administration voted to give the schools another $1.4 Million dollars toward the State mandated Net School Spending, they also voted to eliminate the Ch. 17 fund and pledged that the remaining $2.2 million would be put toward the Schools to bring Lowell into compliance of its Net School Spending.

However what they did not tell the public is that even if Lowell meets the requirement, this additional $3.6 Million must now be automatically included in next years budget. Once you committee funds to the schools in one year, that is your lowest dollar value you can start with the following year.

They also wrongly gave the impression that when the School Dept. closes its books next June and the City has met its net school spending figure, that any money left over would then go to the City’s “FREE CASH”.

The fact is under Education reform the Schools have a lot more leeway to be able to encumber money and so if at the end of May, Jay Lang the talented Fiscal guru at the School dept. forecast that the schools let’s say have an excess of $1,000,000 the School Dept. could then decide to buy new text books or new computers and if they have the bid out and an open PO then the city side doesn’t get that money.

Don’t believe that the Schools would give back anything. They can always find a use and ED Reform provides them a huge tool to hang onto funds.

So Lowell Taxpayers better prepare themselves for another 3.5% – 5.00% Tax increase in 2016. The June City budget has to reflect the contracts that have been settled, the extra $3.6 million in net school spending and the increasing retirement unfunded liability.

Unless the City Council who have wanted greater public safety decides to cut police or go back to closing more fire stations, cut services like Park maintenance or Pools and Summer programs then the budget has to go up and taxes have to go up to pay for these services.

The City can try to stave off a big increase by doing what has been done in the past and use reserves to artificially keep taxes lower in an Election year. Not the best Fiscal practice but Lowell has a history of doing just that.

We may have $8.2 million has already been drained $17 Million in City reserves between 2003-2006 with consent from former State Rep./ then City Manager Cox.

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