On March 31st, Selectboard member Andy Watts made a post to Front Porch Forum titled “Missing Information About Separation.” In this post Andy expresses his concerns about the projected $2.7 Million deficit that residents living in the Town outside the Village would experience under recent separation calculations. Here is a copy of his comments for reference.
We want to make sure that everyone has as much accurate information as possible to make a well reasoned and rational judgment about merger and separation, so we thought it imperative to explore Andy’s concerns and see what the impact might be. To be clear, we have nothing against Andy. We are reviewing his concerns.
Andy has expressed the following concerns about the financial projections created by the Town’s Finance Director:
(1) “The City of Essex Junction will have to pay their share of County Taxes which, I believe, is a per capita rate. The Town now pays $125,825 to the County.”
(2) “The new City of Essex Junction will need to decide whether to join Green Mountain Transit and… will have to pay their share of the GMT Assessment… The Town now pays $287,132 for the bus that stops at Amtrak.”
(3) “Debt needs to stay with those who voted for it so the new City will need to continue to pay a share of current Town debt. The Town currently pays $522,281 for debt service for the Police building and vehicle leases.”
(4) “There are a few other line items like the Chittenden County Regional Planning Commission, the Winooski Valley Park District, and Essex Rescue that the Town pays for but were not accounted for in the calculations…”
Andy’s message leads us to believe that these costs were left out of the memo. It’s important to note that the projections created by the Town Finance Director included all of the expenses noted by Andy as missing. The expenses are part of the FY22 budget, which is what the projections were based on. This not only proves that the Town’s Finance Director is executing her due diligence to convey accurate information, but it also means that the information we previously published in our deep dives on these figures remains correct.
It turns out that after changing the basis of separation from using the grand list, the impact is minimal. The TOV’s $2.7 Million deficit per year remains between $2.55 Million and $2.7 Million upon separation. Taxes for residents living in the TOV will still go up by 29.5% to 31.5% at minimum – a range higher than merger and one that is much more immediate. Additionally, the Village maintains a surplus of $2.38 Million to $2.5 Million per year upon separation. Our conclusion remains that merger is the most financially beneficial option for residents living in the Town outside of the Village.
We have also heard a small of number of residents in the TOV say something along the lines of, “it’s only $2.7 Million to buy our way out of the Village. That’s worth it.” We feel this is flawed reasoning based on a misunderstanding of the shortfall’s impact. It’s important to understand that this deficit will cause a tax spike estimated at 31.5% and that a large portion of it will happen immediately upon separation. The separation tax spike neither protects those on fixed incomes nor those living paycheck to paycheck in the way that the merger plan does. Even at the lower end of the range, at $2.55 million, residents living in the Town outside the Village will still need to cut 23.4% of their FY22 budget to maintain tax rates at the current level. That 23.4% means cutting services which equates to layoffs. So not only will our neighbors experience drastic tax hikes and reduced services, some of us will also lose our jobs. It’s difficult to see how this change could be construed positively for residents like us that live outside of the Village.
General Comment
The recent memo by the Finance Director has an easy to misunderstand comment in it. The memo’s final paragraph reads, “A myriad of additional calculations would be required to get a final figure for the Town. These would include a shifting of costs for County & Regional Functions…” Referring to this paragraph in his March 31st Front Porch Forum post, Andy then states, “The $2.7M number was before considering all of the other things that will have to be split out. The new City of Essex Junction will have to pay their share of County Taxes…” This, and comments made during the March 25th Selectboard meeting, are why we believe Andy thinks some expenses were left out of the final figures.
At first glance, these statements indicate that County Taxes, Green Mountain Transit, etc. were not part of the final calculation for tax changes in the Finance Director’s memo. This is not true. All of these items were included in the merger and separation tax calculations. They are part of the FY22 Town Budget – which is the basis for the calculations.
It appears that Andy’s actual concern is that these costs shouldn’t be split based on the grand list, which is how they were originally done. Rather, Andy believes it would be more appropriate to split these costs other ways, such as per capita.
Let’s do some work to calculate these items with the adjustments Andy is requesting.
Issue 1: County Taxes
Per Andy’s comment, the Town pays $125,825 on a per capita rate. The numeric differences based on the grand list vs. per capita payments are shown below. We use the latest population information from Census.gov for the Village of Essex Junction and Wikipedia for the entire Town since Census.gov data isn’t available for the rest of the Town.
The important thing to note here is the difference between the grand list and per capita calculations. It is a total of $9,951.07. This is negligible to the overall $2.7 Million gap. In fact, it is about .35% of the gap.
Issue 2: Green Mountain Transit
Per Andy’s comment, Green Mountain Transit is paid $287,132 for it to stop at the Amtrak station – but it’s not just the Amtrak station that GMT stops at. They also stop at areas outside the Village, and those stops contribute to the $287,132. He then says, “GMT Assessment is based on routes and ridership” and the “Town outside the Village has minimal routes and ridership.” “Minimal” is subjective and we should look into that further.
GMT has a great interactive map of all their stops. You can go here to see it. If we take an overlay of the Village and Town boundaries as acquired from Google, you can see the GMT stops in both the Village (grey) and the TOV (red).
You’ll notice that there are approximately 2x more potential stops in the TOV as the Village. Potential stops means there is no formal arrival time for the bus and the bus does not stop unless there are people waiting at the stop. There is one formal stop in the Village at the Amtrak station on the blue line and one on the orange line. There is one formal stop on the pink line and two formal stops on the orange line in the TOV. That means there are 2 formal stops in the Village and 3 in the TOV. A formal stop is a stop that has a scheduled arrival time.
The TOV has both more formal and potential stops than the Village.
Beyond the number of stops, we need to look at the number of riders. We don’t have public numbers on this, but it’s fairly straight forward to reason out. The fairest way to reach a conclusion is based on the frequency each line runs. The blue line has far more frequent schedules than the orange and pink lines, so ridership in the Village is likely higher. With the higher ridership in the Village, but making up 40% of the total formal and 33% of total potential stops in the Town of Essex, it seems reasonable to split the costs 50/50.
However, since there are still some unknowns and 50/50 being fair is a subjective judgment, let’s say that the Village pays anywhere from 40-60% of the bill, while the TOV pays the rest.
That would be a cost of $114,852.11 to $172,279.20 for the 40-60% range. When compared to the grand list, that means the Village’s contribution compared to the grand list either goes down by $4,649.27 if they pay 40% or goes up by $52,777.82 if they pay 60%. The cost to the TOV would go down by $52,777.50 if they paid 40% or up by $4,648.59 if they paid 60%.
Issue 3: Debt
In the same Front Porch Forum post, Andy makes note of $522,281 in debt to pay for the police building and vehicle leases. He insinuates that this information wasn’t included in the Finance Director’s merger and separation calculations. The information was and those costs were split based on the grand list. You can see the debt as an expenditure on the FY22 Town Budget in the lower corner of page 1.
Let’s change debt around to be per capita to offer a different perspective as Andy addresses. We use the same population numbers from before and see that the difference between calculating the Town debt based on grand list vs. per capita changes a total of $41,305.46 to the Village.
Issue 4: A Few Other Line Items
Andy notes that a “few other line items like the Chittenden County Regional Planning Commission, the Winooski Valley Park District, and Essex Rescue that the Town pays for but were not accounted for in the calculations.”
The Finance Director did account for these items in the original calculation based on grand list. Forgive us for sounding like a broken record. It’s important to understand that no costs were hidden from the public and they were all accounted for.
Just like County Taxes, Chittenden County Regional Planning Commission and the Winooski Valley Park District are rolled up into the FY22 budget under “110-19-10 – County and Regional Functions”. Chittenden County Regional Planning Commission is expenditure “800.101-CCRPC” and Winooski Valley Park District is “800.109-Winooski Valley Park District” on page 6.
These items are rather small at $24,486 and $61,530 for the Planning Commission and Winooski Valley Park District, respectively. It’s hard to argue that the Planning Commission should be split any other way than via the grand list even if separation occurs. This is a net gain/loss of $0 to the Finance Director’s original numbers.
However, one could argue that the Winooski Valley Park District should be paid based on the amount of land in the TOV and Village. The image below shows 60% (or more) of the Winooski Park in the TOV and 40% is in the Village. The red lines in the image below are the TOV and Village boundaries.
These percentages are very close to how the bill was originally split, 58% to the TOV and 42% to the Village, so the there’s no change needed to be made to the financials. We can safely say that the numbers will be the same because the percentages are very close.
As for Essex Rescue, it is also accounted for in the original calculations. Essex Rescue falls under “110-18-10 – Health and Human Services” in the FY22 budget.
Since we are talking about a full split and want to capture all costs, let’s assume the TOV and Village have the option of having an Essex Rescue or not. It is an all or nothing situation. You can’t take 40% of an ambulance. That means the each entity has a cost of $0 or $73,600 based on getting rid of the service or keeping it, respectively.
If the Village decides to get rid of their Essex Rescue, their budget goes down by $31,775.27 as compared to the grand list. If they decide to keep their Essex Rescue, they take on an additional cost of $44,544.72. If the TOV decides to get rid of their Essex Rescue, their budget goes down by $44,544.72. If they keep Essex Rescue, their budget goes up by $31,775.27.
Final Numbers
When we recalculate the items that are a focus of Andy’s concern, we come up with a range for the new deficit that residents in the Town outside of the Village will be stuck with if the Village separates. On the high end, the TOV’s $2.7 Million deficit would go down by as much as $148,579.73 or down by as little as $14,832.65. In the best case scenario for residents living in the Town outside of the Village, the TOV still has a budget deficit of $2.55 Million per year.
Based on these same calculations we also created new ranges for the Village. The Village surplus might decrease by as little as $14,831.97 or by as much as $148,579.05. That would leave the Village with a surplus of at least $2.38 Million.
To be fair, there are certainly other items we could pick at. However, there comes a point when those items have such a low impact on the overall budget that the exercise of dividing costs differently is more psychologically beneficial than financial. It doesn’t change the final result, as much as many would like to believe.
The takeaway here is that Andy Watts seemed genuinely concerned in his Front Porch Forum post about these line items. However, if he had taken a moment to do some additional research, he likely would have come to the same conclusions that are outlined in this article – which is that these budget line items have a minimal impact on the total TOV deficit that would occur with separation. We strongly encourage everyone, especially all Selectboard members, to do their due diligence so that they don’t accidentally spread misinformation or create a false impression of the very real consequences of separation.