ORLEANS – A tax will be needed in Orleans in a few years.
Town Administrator John Kelly recently told the board of selectmen that the town would run out of unused levy capacity by Fiscal Year 2023 due to shifting hotel/motel taxes to a stabilization fund for wastewater and a reduction in beach revenue.
“There has been a significant shift in the availability of non-property tax revenues,” Kelly said.
The 4 percent lodging tax for hotels and motels brings in about $235,000 per year.
In May, town meeting voted to put that money and short-term rental tax revenue into the special stabilization fund for wastewater.
Beach receipts have also dropped an estimated $135,000.
“Those two alone put us up at $370,000 of revenue that isn’t going to be there going forward,” Kelly said.
Kelly said that will result in a further reliance on property taxes.
Towns are generally only able to raise property taxes 2 ½ percent each year.
“We have had, historically, a significant amount of unused levy capacity, and that is the amount that we don’t have to spend each year stays in the ability to raise it in later dates,” Kelly said.
“But because we have $370,000 less revenue, but our operating expenses staying the same, we are quickly going to run out of unused levy capacity and we are projecting an override right now needed in FY23.”
If the status quo remains for the town’s budget, a 4 percent increase is projected for nothing more than to maintain the current level of services.
Kelly recommends looking at increasing recurring revenue sources, including the town’s fee structure.
“One-shot revenue helps to some extent, but when you are talking about funding an operating budget you have to have sustainability,” he said.
Kelly said the town’s fee structure needs to be looked at again.
“Given the pressures we have at our beaches to increase expenses to address related safety and all the things that are changing,… our operation is running further and further in the red,” Kelly said.
“And we don’t have any ability to make that up except through taxes.”
The town is seeing reduced revenue from off-road vehicle permits to daily parking.
“I think we are going to face some challenges in the next couple of years in terms of making sure that we can provide the services that residents expect,” Kelly said.
Kelly said the goal is to maintain services without getting into a situation where residents vote against a general override.
“Since most of our costs are in personnel we would potentially it means we have to potentially not have as many people working here,” Kelly said.
Kelly said looking at options at raising revenue is going to be very important to reduce what is going to be an override in coming years.
Department managers’ budgets are due by November 15. The recommended spending plan from the Town Administrator’s office will be provided to selectmen and finance committee by mid-January.
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