As Annual Town Meeting approaches, the jargon of municipal government fills the air, bewildering newcomers as well as many longtime residents who have forgotten what they learned during budget season the previous year. Here is a handy guide to the terms you will be seeing in the next three issues of the Press and hearing from Town Meeting speakers in the Bromfield gym three weeks from now on Saturday, March 28.
Articles
Items of business to be voted on at Town Meeting. The Town Meeting warrant consists of articles, each of which is given a number.
Available funds (often referred to as free cash)
The amount certified as surplus every year by the Massachusetts Bureau of Accounts after the books are closed and all bills are paid.
Bond rating
Standard & Poor’s raised Harvard’s bond rating from AA+ to AAA last year. This rating recognizes S&P’s view that Harvard’s financial condition is sound and its governance and management effective. A good bond rating reduces the interest paid on future borrowings.
Capital budget
Part of the Finance Committee’s budget planning process. Capital projects, including land purchases, are those that cost more than $20,000 and have a useful life of more than five years. Capital expenditures are projected for five years in Harvard.
Capital exclusion (also known as a capital outlay exemption)
A mechanism that allows a community to pay for a capital purchase or capital project through a one-year increase in the tax levy. In this way, the city or town avoids long-term interest costs. Majority votes at Town Meeting and at Town Election are required to exclude an appropriation for a specific capital project from the levy limit.
Cherry Sheet
State forms listing all items of revenue the town can expect from the state and charges from the state or county to the town.
CPA fund
The Community Preservation Act, adopted by Harvard in 2001, permits Harvard to levy a real estate surtax of 1.1 percent on Harvard properties with the possibility of matching funds provided by the state. The fund can be spent on conservation, historic preservation, and affordable housing. A minimum 10 percent of the annual income must be spent or reserved for each area.
Debt exclusion (also known as excluded debt)
An action to exclude the debt service costs for a particular project, such as the Town Hall or Hildreth House renovation, from the levy limit. By approving a debt exclusion, a community calculates its annual levy limit under Proposition 2½, and then adds the excluded debt service cost. The addition is reflected in a higher tax rate and requires a two-thirds vote at Town Meeting and a majority vote at an election.
Fiscal year
Fiscal years run from July 1 to June 30.
Free cash
Funds remaining from line items in Harvard’s previous year’s budget, plus revenue received in excess of budget, less any unpaid back taxes, and reduced by any fund deficits. These funds are certified each year by the Department of Revenue and are then available to the town.
General fund
This term refers to the accounting location for money taken in or paid out by the town, including federal and state reimbursements. The money may be appropriated only by a majority vote of Town Meeting.
Levy
The amount of money that Harvard can raise through real and personal property taxes.
Levy ceiling
The maximum amount Harvard can raise through real and personal property taxes. The levy ceiling is determined by calculating 2.5 percent of the total full and fair cash value of taxable property in a city or town.
Levy limit
The dollars Harvard can raise by taxation under Proposition 2½ as certified by the Department of Revenue. This is the maximum the tax levy can be in a given year.
Local receipts
Income derived by the town from motor vehicle excise taxes, Transfer Station fees, licenses and permits, penalties and interest on taxes, and so on.
New growth
The additional tax revenue generated by new construction, renovations, and other increases in the property tax base during a calendar year. It does not include value increases caused by normal market forces or by revaluations. The amount is added to the levy limit in addition to the 2.5 percent inflation increase allowed under Proposition 2½.
Omnibus budget
For convenience, all recommended appropriations for operating expenses of Harvard’s various town departments are gathered in one multipage article for the Annual Town Meeting. Also referred to as the line item budget. The period covered by the omnibus budget is the upcoming fiscal year, and money not spent during this period reverts to free cash.
Overlay
The overlay is an amount up to 5 percent of the tax levy added each year to the town’s appropriations and other charges. The town’s tax assessors calculate this amount and use it as insurance against a possible shortfall in tax revenue from tax abatements and to avoid fractions in the tax rate, as required by law.
Overlay reserve
After all taxes for a year have been abated or paid, the unused overlay balance is held in an account called the overlay reserve. From that account, the Town Meeting may transfer an amount to the Reserve Fund, or it may be held for the following year’s overlay.
Override
A vote by the town to increase the levy limit allowed under Proposition 2½. Such an increase requires a majority vote at both a Town Meeting and an election.
Proposition 2½
Since 1980, towns have been limited in the amount of property tax they may levy without an override vote. This limitation requires the property tax to be held to no more than 2.5 percent of the previous year’s tax levy plus the value of taxable property added by new construction.
Recap
A projection of all revenue and spending expected in the coming fiscal year. A recap will also include actual figures from prior years as well as the anticipated figures for the current year.
Reserve Fund
An annual fund established by a Town Meeting warrant article to cover extraordinary or unforeseen expenses during each fiscal year. Any department needing to spend more than its budget on a particular line item must request that the Finance Committee make a transfer. Sums not transferred by June 30 revert to the overlay reserve. The two largest items in any given year that require Reserve Fund transfers are typically extra money for snow removal and unexpected spending for special education students.
Stabilization Fund
A permanent fund used to smooth out annual increases in planned or unplanned expenses or capital projects. Harvard has two such funds: One is known as the Stabilization Fund to cover increases in the town budget, and a second is called the Capital Planning and Investment Fund for capital projects.
Surplus revenue
The amount by which cash, accounts receivable, and other floating assets exceed the liabilities and reserves. During budget season, the term refers to money Harvard is authorized to raise within its levy limit, but which has not yet been allocated to specific line items or proposed warrant articles. Unlike the state’s, Harvard’s annual budget must be balanced. Deficit spending is not allowed.
Town Meeting
The legislative branch of local government. A meeting at which registered voters conduct the business of governing Harvard, including making laws and expending money.
Transfers
Money appropriated for use in a line item of Harvard’s omnibus budget and later proposed to be moved to another line item or to be expended for another purpose. It is also the money from any designated fund proposed for use in a warrant article. Must be approved by a majority vote of Town Meeting.
Underride
A vote by the town to lower the levy limit to an amount that is less than the amount allowed under Proposition 2½. Such a decrease requires a majority vote at both Town Meeting and an election.
Warrant
The list of articles that make up the agenda for Town Meeting.
Windfall
A term used in Harvard in the 1980s to describe the additional amount of state reimbursements received based on census data that included, for the first time, the population of Fort Devens—initially $1 million. After the fort closed in the 1990s and following the 2000 census, the windfall disappeared.
Sources:
- Harvard League of Women Voters, “Guide to Local Government” (Glossary)
- Harvard 2014 Annual Town Meeting warrant booklet, “A Town Meeting Vocabulary”
- Massachusetts Department of Revenue, Department of Local Services, “Municipal Finance Glossary” (May, 2008)
