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Preliminary Budget Update to Orange Taxpayers

By James A. Leahy, Vice Chairman; Orange Board of Finance

As Governor Malloy and the State Legislature propose new ways to deal with our state fiscal crisis, the impact to the Town of Orange is beginning to become all too clear, and the news is not good.  Under the current proposed budget, the average Orange property tax bill would rise by 10.92% to $8,888, an increase of $875.

If the budget stays as proposed by the Governor, Education Cost Sharing (ECS) funding will be cut by $1.5 million in the 2017-2018 fiscal year.  In addition, Orange will be receiving a bill from the State for $1.9 million in 2018 and over $2 million in 2019 to cover 1/3 of the State’s teacher pension obligations.  The Amity Regional school system will also be losing major state aid.

As a result of these and other municipal aid cuts, the burden once again falls on the local taxpayers in the form of dramatically higher property taxes.  Add the fact that both boards of education are requesting budget increases and the “GAP” between expenditures and revenues to pay for them will rise to over $6.9 million.

At the Orange Board of Finance (OBOF) meeting on February 27, I outlined the following material to the Board members, the Orange Board of Education leadership, and the Amity Board of Education Leadership.  Since that time, I have modestly updated this material.

This article summarizes the following for the taxpayers of Orange:

  • Expenditures Requests to date
  • Revenue available to support expenditures: both tax-based and non-tax based
  • Size of the “Gap” between Expenditures and revenue
  • Leverage points to reduce the burden on taxpayers
  • Impact to Taxpayers using the current data
  • Teachers’ Pension & their Impact

Expenditures Requests:

As of March 1, Expenditure requests were received as follow:

  • Town of Orange, $24,933,331, an increase of $1,279,093 (5.41%);
  • Orange Public Schools $20,318,648, an increase of $318,585 (1.59%);
  • Amity Regional Schools $23,667,447, an increase of $1,105,909 (4.90%);
  • Amity Resource Officer $45,000, an increase of $800 (1.81%);
  • Total Requests: 68,964426, an increase of $2,704,387 (4.08%).

Revenue available

The Town pays for expenditures through two major sources of revenue:  tax revenue, based off the mill rate, for both residential & commercial property; and non-tax revenue, from government & other sources.

Tax revenue calculation of the new grand List at last year’s rate of 32.2 mills amounts to $60,901,028.  Non Tax revenue is estimated at $3,144,987; significantly down from last year primarily attributable to a reduction of $1,238,332 in intergovernmental revenue.  Total Current Revenue:  $64,046,015.

The “GAP”

As a result, the Board now faces an estimated budget “GAP” of $4,918,411.  This “GAP” must be filled by expenditure reductions or increased revenues from non-tax sources.  Whatever amount is left over can only be filled by a property tax increase.

Leverage Points Areas

Going forward, the OBOF will utilize “levers” to control the impact of this GAP on taxpayers.  First, it will work with the Leaders of the major budget components to reduce the budgets from their current levels.  That will mean the OBOF will work with Orange Board of Education, Amity Board of Education, and Town Leaders to reduce spending requests.

Another lever is to work with elected State officials to get intergovernmental funding – particularly ECS funding—back to prior year levels.  As mentioned, the proposed shift in ECS funds cost the Town of Orange well north of $1 million.  A final “lever” would be to utilize refunds (such as money from Amity budget surplus) as an input to the budget process and possibly use a portion of the Town’s Fund Balance.

Impact to Taxpayers

At this moment however, the GAP is $4,918,411.  If no other action was taken or if no reduction in budget requests are attained, then the mill rate would increase 2.50 mills from the current mill rate of 32.2 to 34.70 mills, an increase of 7.76%.  The average residential tax bill is currently $8,013.  Under this scenario, that average tax bill would rise by 7.76% to $8635, an increase of $622.

Teachers’ Pensions & Impact

Over & above this analysis, the Governor has – somewhat magically in my mind – proposed to transfer part of the State’s Teachers’ Pension responsibility to the Towns.  The impact of this to Orange is projected to be $1,997,989 in FY 2017-2018 and $2,062,923 in FY 2018-2019.  Were this to happen, then the budget GAP would rise to $6,916,400.

To cover this increased GAP, the mill rate would increase 3.52 mills from the current mill rate of 32.2 to 35.72 mills, an increase of 10.92%.  The average residential tax bill is currently $8,013.  Under this scenario, that average tax bill would rise by 10.92% to $8888, an increase of $875.

Naturally, the OBOF is very concerned about the data presented above and the impact a budget like this would have on the taxpayers of our Town.  We encourage people to keep up with the facts as things will shift – often quickly & significantly – on the path forward.  We also encourage people to share this information with your neighbors & friends and make your voices heard to the members of the Orange Board of Finance and to elected officials at State & local governments.

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