At his annual State of the Town address on Wednesday night, Town Administrator Thatcher Kezer said officials intend to balance Marblehead’s projected $111.2 million budget for fiscal year 2025 without asking voters for a Proposition 2 1/2 tax override.
However, it remains to be seen whether the school district will require an override to avoid teacher and program layoffs. Members of the Marblehead Education Association, the union representing teachers, attended the State of the Town Wednesday evening wearing black and red.
MEA co-chair and sixth-grade teacher Jonathan Heller said more education cuts could negatively impact the financial health of the whole town, he warned.
“If we continue to strip our budget, we will lose high quality people who can go elsewhere,“ Heller said. “Families may leave or choose not to come to Marblehead due to concerns over the quality of the school system.”
Kezer projected a $4.2 million gap in the $111 million budget, split evenly between the town and the schools. Rather than using an override, part of the initial proposal to close the gap would involve having Town Meeting pass local-option meals and rooms taxes.
“We’re not out of the woods, in a long-term sense, of dealing with our structural deficit,” Kezer told a standing-room-only crowd in the Select Board Room. “Very likely at some point our only option is going to be an override.”
Kezer presented the following numbers:
Projected revenues for fiscal year 2025: $107,013,225
- Base property tax levy + 2 1/2 percent: $73,202,404
- New growth (from new construction/renovations): $300,000
- Debt exclusions: $10,993,076
- State aid: $8,240,155
- Local receipts: $7,092,340
- Other available funds: $35,000
- Free cash: $6,500,000
- Municipal Light surplus: $330,000
- Water, sewer, harbor, general government: $320,250
Town’s projected expenditures for FY 2025: $111,269,738
- Total expenses-town: $50,636,849
- Total expenses-schools: $48,224,813
- Total warrant articles: $1,350,000
- Total debt – Town/school: $11,058,076
Kezer said the goal when building the budget is to keep pushing the need for a general override out further.
‘We’re making progress’
“We think that’s our duty to the taxpayers is to look at every other option there is so as not to have to [impose] a broad-based tax increase on everybody,” he said. “So as far as addressing the structural deficit we’re making progress.”
Revenue growth remains slow due to lack of new construction and Prop 2 1/2, the state law that limits property tax increases to 2.5%, leaving the town little room to maneuver as salaries, contractual obligations and a projected 8% increase in health insurance costs outpace revenue.
Meanwhile, the clock is ticking on several union contracts, including for police, municipal employees and teachers, which expire this summer.
“We are working to address the structural deficit in light of these expiring agreements and the need to negotiate fair contracts,” Kezer said.
Among the bright spots Kezer highlighted is an intention to use less free cash. He said the town would use about $5 million in free cash to balance this year’s budget. That’s half the free cash the town needed to build the budget two years ago.
“We continue to face significant budget challenges,” Kezer said, “But we have also made major strides toward stabilizing our financial footing over the past two years.”
Kezer said growing the town’s reserves has helped protect its AAA bond rating.
The work ahead, as the town puts the budget together, is closing the $4.2 million gap, Kezer said. He believes the town side should be able to reach a balanced budget.
The work ahead
Efforts are underway to introduce new revenues to alleviate budget pressures. Two proposed home-rule petitions, if Town Meeting approves them, would implement a rooms and meals tax that could generate $800,000 to $1 million. Kezer also noted that his office is sponsoring an article to look at raising some town fees.
“We need to drill down and focus on making sure we’re doing all the things that we need to do to capture every ounce of new growth revenue,” Kezer stressed.
Efficiency gains through investments in technology and staff training represent another priority that can bend the cost curve over time, Kezer said. To hone his latter point, he announced the debut of ClearGov transparency software on the town’s website. He also noted the transition to Office 365 Suite and the newly hired human resources director.
“Sometimes we have to spend money to create improvements in productivity that pay themselves back over time,” he explained.
He also spoke about developing a consistent five-year capital planning process that would help identify needed projects and find ways to fund improvements in a sustainable manner. In this regard, he has sponsored an article to update the capital improvement committee bylaw to reconstitute the committee with new membership.
“We want to look at how to better formulate that committee. As it currently is in the bylaws, its purpose is to take a look at the big capital items, it sets criteria as to the big picture and the big ticket items, review them and make a report to me,” Kezer said. “So we’re going to update that and clean this up to have the committee focused on reviewing and prioritizing major capital projects and improvements.”
Kezer emphasized that long-term financial planning is crucial.
“Step one is reviewing revenue streams and proposing new recurring revenues and restructuring fees to support operations,” he said. “Step two involves reducing costs through improved efficiencies, such as reprogramming old completed capital projects to fund new capital needs.”
He added, “Finally, step three would be an override request to address the structural deficit after the previous measures have been implemented.”
