Natick leaders take fresh look at financial policies, mull new commitments

There’s nothing like a possible $7M budget override vote to get town leadership looking more closely at the way it manages finances—after all, so many across Natick are paying at least some attention to this now. The Natick Select Board’s decision to put an override question on the March 25 ballot has come along with subsequent reviews of the town’s financial policies and procedures and stated commitments to look for more ways to lessen the financial pain for residents already reeling from escalating property taxes and broader inflation.

Town Administrator Jamie Errickson shared an update on the current state of the town’s financial policies and procedures at the March 11 Select Board meeting, and discussed possible changes to these policies, which were adopted in 2011 and last formally revised in 2016. The Board and Errickson agreed to start an annual review—with possible revisions—ahead of Fall Annual Town Meeting.

Financial Management Principles

While the town’s financial management principles get into the weeds, in basic terms, they cover everything from reserve funds to capital planning and budgeting to debt issuance and management, along with retirement funding and other post-employment benefits. The principles set forth guidelines based on specific percentages and ranges, such as “A minimum of 6-7% of net general fund revenues (i.e. within-levy) should be set aside annually to fund capital needs, inclusive of cash appropriations and the subject year’s debt budget.”

Errickson said the principles are well conceived and that the town has largely attempted to adhere to them, with the major recent exception being during the pandemic, when certain funds were used for more unusual purposes, say covering operational expenses rather than capital ones. Though given that the principles haven’t been revised in nearly a decade, Errickson acknowledged opportunities to update them.

“Our intent is to be coming back into compliance with these policies pending the override vote,” Errickson said. In other words, if the override vote fails, then the town will be much more challenged to comply with the policies across the board. Town finance officials have discussed many times in recent years how they’ve been forced to use free cash, considered one-time funds since they are not reliably predicted, for operating expenses rather than for capital (like road work and building maintenance) and other non-recurring expenses. One current challenge is that capital projects are now backlogged and finding funding will be a huge challenge without the override, per the administration.

Board members made various suggestions about things that could be clarified in a revised policy document. Rich Sidney, for instance, raised the possibility of having a specific principle about the use of free cash. Board Chair Kathryn Coughlin brought up the possibility of defining the allowed uses and recommended balances of enterprise funds, such as from water and sewer (Errickson called this “an absolutely great idea.”). Coughlin also put forth the idea of specifying the use of local options taxes (such as a percentage you get dinged on restaurant bills) for capital expenses. “Capital just seems like it’s always underfunded. It’s the last place we look. We’re always deferring. I have never met a resident who says ‘God, our roads are great,'” she said.

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Making Commitments

The Select Board shifted after the financial principles discussion into an agenda item on making financial commitments to taxpayers in light of the possible override that would increase their property taxes.

Coughlin was hoping that the town and school system might come up with a joint set of such commitments, but because of the way the schools operate and School Committee meets, she said the Select Board would really need to come up with its own set of pledges.

One idea is for the town to have a “tax recap policy,” which the state defines as displaying “a municipality’s entire budget plan for the fiscal year. It summarizes all anticipated expenditures.”

The Board has been looking at a list of commitments issued by the town of Arlington, Mass., as a result of its operational override in 2023. Arlington, in its document, promised no Proposition 2.5 overrides for at least another four years and committed to a certain level of spending on education, among other things.

The Natick Select Board also discussed doing a better job of getting the word out to the public about its tax breaks for seniors, including a tax deferral program for those meeting an income level requirement. Coughlin said that of the town’s 6,000 seniors (a quarter of Natick’s population), just 25 are in the tax deferral program. The Board and Natick Assessor’s Office highlight such programs at least yearly during the tax rate classification hearing, and the town also consolidates info on assistance programs on its website.

More challenging might be coming up with commitments that will be meaningful to the middle class. It so often earns too much to qualify for financial breaks of any kind, whether it be on student loans or other discounts, but bears the brunt of property tax hikes and other fee increases.

The Board will look to spell out its commitments on the Select Board page on the town website.

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