Government budgets can be tough to understand, but now the City of Northampton, Massachusetts is providing the next generation of accessibility in financial information that allows citizens to view, engage with, and discuss.
AbatementA reduction or elimination of a real or personal property tax, motor vehicle excise, a fee, charge, or special assessment imposed by a governmental unit. Granted only on application of the person seeking the abatement and only by the committing governmental unit. (See Commitment)
Additional AssistanceThis state aid program provides unrestricted, general fund revenue to a certain number of communities through the Cherry Sheet. Additional Assistance evolved from the old resolution aid formula of the 1980s, but following state budget cuts, it was level funded beginning in FY92 and then subsequently reduced.
Advance Refunding of DebtThis occurs when new debt is issued to replace or redeem old debt before the maturity or call date of the old debt. Under these circumstances, the proceeds of the new debt must be placed in escrow and used to pay interest on old, outstanding debt as it becomes due, and to pay the principal on the old debt either as it matures or at an earlier call date. (See Refunding of Debt, Current Refunding of Debt)
AmortizationThe gradual repayment of an obligation over time and in accordance with a pre- determined payment schedule.
Appellate Tax Board (ATB)Appointed by the governor, the ATB has jurisdiction to decide appeals from local decisions relating to property taxes, motor vehicle excises, state owned land (SOL) valuations, exemption eligibility, property classification, and equalized valuations.
AppropriationAn authorization granted by a town meeting, city council or other legislative body to expend money and incur obligations for specific public purposes. An appropriation is usually limited in amount and as to the time period within which it may be expended. (See Encumbrance, Line-Item Transfer, Free Cash)
ArbitrageAs applied to municipal debt, the investment of tax-exempt bonds or note proceeds in higher yielding, taxable securities. Section 103 of the Internal Revenue Service (IRS) Code restricts this practice and requires (beyond certain limits) that earnings be rebated (paid) to the IRS.
Assessed ValuationA value assigned to real estate or other property by a government as the basis for levying taxes. In Massachusetts, assessed valuation is based on the property's full and fair cash value as set by the Assessors. (See Ad Valorem; Full And Fair Cash Value)
Assessment dateThe date property tax liability is fixed. In Massachusetts, property taxes are assessed as of the January 1 prior to the fiscal year. Assessors determine the physical status of taxable real and personal property, its ownership, fair cash value and usage classification as of that date. By local option (MGL Ch. 59 S2D), the physical status of real property on June 30 is deemed to be its condition on the previous January 1.
AuditAn examination of a community's financial systems, procedures, and data by a certified public accountant (independent auditor), and a report on the fairness of financial statements and on local compliance with statutes and regulations. The audit serves as a valuable management tool for evaluating the fiscal performance of a community.
Audit Management LetterAn independent auditor's written communication to government officials, separate from the community's audit. It generally identifies areas of deficiency, if any, and presents recommendations for improvements in accounting procedures, internal controls and other matters.
Audit ReportPrepared by an independent auditor, an audit report includes: (a) a statement of the scope of the audit; (b) explanatory comments as to application of auditing procedures; (c) findings and opinions; (d) financial statements and schedules; and (e) statistical tables, supplementary comments, and recommendations. It is almost always accompanied by a management letter.
Available FundsBalances in the various fund types that represent non-recurring revenue sources. As a matter of sound practice, they are frequently appropriated to meet unforeseen expenses, for capital expenditures or other onetime costs. Examples of available funds include free cash, stabilization funds, overlay surplus, water surplus, and enterprise net assets unrestricted (formerly retained earnings).
Balance SheetA statement that discloses the assets, liabilities, reserves, and equities of a fund or governmental unit at a specified date.
BANBond Anticipation Note
Betterments (Special Assessments)Whenever part of a community benefits from a public improvement, or betterment (e.g., water, sewer, sidewalks, etc.), special property taxes may be assessed to the property owners of that area to reimburse the governmental entity for all, or part, of the costs it incurred in completing the project. Each property parcel receiving the benefit is assessed a proportionate share of the cost which may be paid in full, or apportioned over a period of up to 20 years. In this case, one year's apportionment along with one year's committed interest computed from October 1 to October 1 is added to the tax bill until the betterment has been paid.
BondA means to raise money through the issuance of debt. A bond issuer/borrower promises in writing to repay a specified sum of money, alternately referred to as face value, par value or bond principal, to the buyer of the bond on a specified future date (maturity date), together with periodic interest at a specified rate. The term of a bond is always greater than one year. (See Note)
Bond Anticipation Note (BAN)Short-term debt instrument used to generate cash for initial project costs and with the expectation that the debt will be replaced later by permanent bonding. Typically issued for a term of less than one year, BANs may be re-issued for up to five years, provided principal repayment begins after two years (MGL Ch. 44 S17). Principal payments on school related BANs may be deferred up to seven years (increased in 2002 from five years) if the community has an approved project on the Massachusetts School Building Authority (MSBA) priority list. BANs are full faith and credit obligations.
Bond CounselAn attorney or law firm engaged to review and submit an opinion on the legal aspects of a municipal bond or note issue.
Bond IssueThe actual sale of the entire, or a portion of, the bond amount authorized by a town meeting or city council.
Bond PremiumThe difference between the market price of a bond and its face value (when the market price is higher). A premium will occur when the bond?s stated interest rate is set higher than the true interest cost (the market rate). Additions to the levy limit for a Proposition 2 « debt exclusion are restricted to the true interest cost incurred to finance the excluded project. Premiums received at the time of sale must be offset against the stated interest cost in computing the debt exclusion. If receipt of the premium and the payment of interest at maturity of an excluded debt occur in different fiscal years, reservation of the premium for future year's debt service is required at the end of the fiscal year when the premium was received. (See DOR Bulletin 2003-20B)
Bond Rating (Municipal)A credit rating assigned to a municipality to help investors assess the future ability, legal obligation, and willingness of the municipality (bond issuer) to make timely debt service payments. Stated otherwise, a rating helps prospective investors determine the level of risk associated with a given fixed-income investment. Rating agencies, such as Moody's and Standard and Poors, use rating systems, which designate a letter or a combination of letters and numerals where AAA is the highest rating and C1 is a very low rating.
Bonds Authorized and UnissuedBalance of a bond authorization not yet sold. Upon completion or abandonment of a project, any remaining balance of authorized and unissued bonds may not be used for other purposes, but must be rescinded by town meeting or the city council to be removed from community's books.
BudgetA plan for allocating resources to support particular services, purposes and functions over a specified period of time.
Bureau of Accounts (BOA)A bureau within the State Division of Local Services charged with overseeing municipal execution of financial management laws, rules and regulations.
Bureau of Local Assessment (BLA)A bureau within the State Division of Local Services charged with overseeing municipal execution of state laws, rules and regulations involving real and personal property assessments. BLA is also responsible for determining equalized valuations and overseeing the valuation of state owned land.
Bureau of Municipal Finance Law (BMFL; formerly Property Tax Bureau)A bureau within the State Division of Local Services charged with providing legal advice to local officials on municipal finance or tax issues, legal opinions to communities, periodic Legislative Bulletins summarizing recent legislation affecting property taxation and municipal finance, and Informational Guideline Releases (IGRs) detailing municipal tax and financial procedures.
Capital AssetsAll tangible property used in the operation of government, which is not easily converted into cash, and has an initial useful live extending beyond a single financial reporting period. Capital assets include land and land improvements; infrastructure such as roads, bridges, water and sewer lines; easements; buildings and building improvements; vehicles, machinery and equipment. Communities typically define capital assets in terms of a minimum useful life and a minimum initial cost. (See Fixed Asset)
Capital BudgetAn appropriation or spending plan that uses borrowing or direct outlay for capital or fixed asset improvements. Among other information, a capital budget should identify the method of financing each recommended expenditure, i.e., tax levy or rates, and identify those items that were not recommended. (See Capital Asset, Fixed Asset)
Capital OutlayThe exchange of one asset (cash) for another (capital asset), with no ultimate effect on net assets. Also known as "pay as you go," it is the appropriation and use of available cash to fund a capital improvement, as opposed to incurring debt to cover the cost.
Cash BookA source book of original entry, which a treasurer is required to maintain, for the purpose of recording municipal receipts, adjustments to balances, deposits to municipal accounts and disbursements through warrants.
Cemetery Perpetual CareFunds donated by individuals for the care of gravesites. According to MGL Ch. 114 S25, funds from this account must be invested and spent as directed by perpetual care agreements. If no agreements exist, the interest (but not principal) may be used as directed by the cemetery commissioners for the purpose of maintaining cemeteries.
Chapter 70 School AidChapter 70 refers to the school funding formula created under the Education Reform Act of 1993 by which state aid is distributed through the Cherry Sheet to help establish educational equity among municipal and regional school districts.
Chapter 90 Highway FundsState funds derived from periodic transportation bond authorizations and apportioned to communities for highway projects based on a formula under the provisions of MGL Ch. 90 s34. The Chapter 90 formula comprises three variables: local road mileage (58.33 percent) as certified by the Massachusetts Highway Department (MHD), local employment level (20.83 percent) derived the Department of Employment and Training (DET), and population estimates (20.83 percent) from the US Census Bureau. Local highway projects are approved in advance. Later, on the submission of certified expenditure reports to MHD, communities receive cost reimbursements to the limit of the grant.
Chapter LandForest, agricultural/horticultural, and recreational lands classified, valued and taxed according to MGL Chapters 61, 61A, and 61B. Land is valued at its current use rather than the full and fair cash value. The commercial property tax rate is applicable for land defined under these chapters, unless the community adopts a local option provision within each chapter to apply the open space rate.
Cherry SheetNamed for the cherry colored paper on which they were originally printed, the Cherry Sheet is the official notification to cities, towns and regional school districts of the next fiscal year?s state aid and assessments. The aid is in the form of distributions, which provide funds based on formulas and reimbursements that provide funds for costs incurred during a prior period for certain programs or services. Links to the Cherry Sheets are located on the DLS website at www.mass.gov/dls. (See Cherry Sheet Assessments, Estimated Receipts)
Cherry Sheet AssessmentsEstimates of annual charges to cover the cost of certain state and county programs.
Cherry Sheet Offset ItemsLocal aid that may be spent without appropriation in the budget, but which must be spent for specific municipal and regional school district programs. Current offset items include racial equality grants, school lunch grants, and public libraries grants.
Classification of Real PropertyAssessors are required to classify all real property according to use into one of four classes: Residential, Open Space, Commercial, and Industrial. Having classified its real property, local officials are permitted to determine locally, within limits established by statute and the Commissioner of Revenue, what percentage of the tax burden is to be borne by each class of real property and by personal property owners. (See Classification of the Tax Rate)
Classification of the Tax RateEach year, the selectmen or city council vote whether to exercise certain tax rate options. Those options include choosing a residential factor (MGL Ch. 40 S56), and determining whether to offer an open space discount, a residential exemption (Ch. 59, ?5C), and/or a small commercial exemption (Ch. 59, S5I) to property owners.
Collective BargainingThe process of negotiating workers' wages, hours, benefits, working conditions, etc., between an employer and some or all of its employees, who are represented by a recognized labor union.
CommitmentThis establishes the liability for individual taxpayers. For example, the assessors' commitment of real estate taxes fixes the amount that the collector will bill and collect from property owners.
Community Preservation Act (CPA)Enacted as MGL Ch. 44B in 2000, CPA permits cities and towns accepting its provisions to establish a restricted fund from which monies can be appropriated only for a) the acquisition, creation and preservation of open space; b) the acquisition, preservation, rehabilitation, and restoration of historic resources; and c) the acquisition, creation and preservation of land for recreational use; d) the creation, preservation and support of community housing; and e) the rehabilitation and restoration of open space, land for recreational use and community housing that is acquired or created using monies from the fund. Acceptance requires town meeting or city council approval or a citizen petition, together with referendum approval by majority vote. The local program is funded by a local surcharge up to 3 percent on real property tax bills and matching dollars from the state generated from registry of deeds fees. (See DOR IGR 00-209 as amended by IGR 01-207 and IGR 02-208)
Community Preservation FundA special revenue fund established pursuant to MGL Ch. 44B to receive all monies collected to support a community preservation program, including but not limited to, tax surcharge receipts, proceeds from borrowings, funds received from the Commonwealth, and proceeds from the sale of certain real estate.
Conservation FundA city or town may appropriate money to a conservation fund. This money may be expended by the conservation commission for lawful conservation purposes as described in MGL Ch. 40 ?8C. The money may also be expended by the conservation commission for damages arising from an eminent domain taking provided that the taking was approved by a two- thirds vote of city council or town meeting.
Debt AuthorizationFormal approval by a two- thirds vote of town meeting or city council to incur debt, in accordance with procedures stated in MGL Ch. 44 S1, 2, 3, 4a, 6-15.
Debt ExclusionAn action taken by a community through a referendum vote to raise the funds necessary to pay debt service costs for a particular project from the property tax levy, but outside the limits under Proposition 2«. By approving a debt exclusion, a community calculates its annual levy limit under Proposition 2«, then adds the excluded debt service cost. The amount is added to the levy limit for the life of the debt only and may increase the levy above the levy ceiling.
Debt LimitThe maximum amount of debt that a municipality may authorize for qualified purposes under state law. Under MGL Ch. 44 S10, debt limits are set at 5 percent of EQV. By petition to the Municipal Finance Oversight Board, cities and towns can receive approval to increase their debt limit to 10 percent of EQV.
Debt PolicyPart of an overall capital financing policy that provides evidence of a commitment to meet infrastructure needs through a planned program of future financing. Debt policies should be submitted to elected officials for consideration and approval.
Debt ServiceThe repayment cost, usually stated in annual terms and based on an amortization schedule, of the principal and interest on any particular bond issue.
Debt StatementReference to a report, which local treasurers are required to file with the DOR, showing authorized and issued debt, debt retired and interest paid by a community during the prior fiscal year, as well as authorized but unissued debt at year-end. Also known as the "Statement of Indebtedness."
Deferred RevenueAmounts that do not meet the criteria for revenue recognition. Also, earned amounts that are not yet available to liquidate liabilities of a current period.
DeficitThe excess of expenditures over revenues during an accounting period. Also refers to the excess of the liabilities of a fund over its assets.
Demand LetterNotice to a delinquent taxpayer of overdue taxes or charges typically mailed soon after payment period has ended. While it is a courtesy, there is no requirement to issue correspondence of this type.
Demand NoticeWhen a tax bill becomes past due, the collector sends a demand notice requesting payment. The collector is required to issue a demand before initiating a tax taking.
Deputy CollectorIf 14 days after the mailing of a demand payment is not received, the collector may issue warrants to one or more deputy collectors authorizing them to collect delinquent taxes, commonly motor vehicle excise. For outstanding excise, the deputy may mark licenses/registrations or provide evidence (e.g., death absence, poverty, insolvency or other inability of the persons assessed to pay) that the accounts are uncollectable. All amounts collected by the deputy collector should be deposited to a municipal bank account from which the deputy may be paid his compensation by check signed by the collector once the tax payments have cleared (MGL Ch. 60 ?92). However, if a community requires all receipts be paid over to the treasurer, the deputy collector must be paid through the warrant process. (See DOR IGR 90-219)
Education Reform Act of 1993State law that authorized the seven-year, Ch. 70 funding program for education and that established spending targets for school districts as a means to remedy educational inequities. Scheduled to end by FY00, the program has been extended, pending agreement on further reforms.
Eminent DomainThe power of a government to take property for public purposes. Frequently used to obtain real property that cannot be purchased from owners in a voluntary transaction. Property owner receives fair compensation (market value at the time of the taking) as determined through court proceedings.
EncumbranceA reservation of funds to cover obligations arising from purchase orders, contracts, or salary commitments that is chargeable to, but not yet paid from, a specific appropriation account.
Enterprise FundAn enterprise fund, authorized by MGL Ch. 44 S53F«, is a separate accounting and financial reporting mechanism for municipal services for which a fee is charged in exchange for goods or services. It allows a community to demonstrate to the public the portion of total costs of a service that is recovered through user charges and the portion that is subsidized by the tax levy, if any. With an enterprise fund, all costs of service delivery--direct, indirect, and capital costs--are identified. This allows the community to recover total service costs through user fees if it chooses. Enterprise accounting also enables communities to reserve the "surplus" or net assets unrestricted generated by the operation of the enterprise rather than closing it out to the general fund at year-end. Services that may be treated as enterprises include, but are not limited to, water, sewer, hospital, and airport services. See DOR IGR 08-101
Estimated ReceiptsA term that typically refers to anticipated local revenues listed on page three of the Tax Recapitulation Sheet. Projections of local revenues are often based on the previous year's receipts and represent funding sources necessary to support a community's annual budget. (See Local Receipts)
Excess Levy CapacityThe difference between the levy limit and the amount of real and personal property taxes actually levied in a given year. Annually, the board of selectmen or city council must be informed of excess levy capacity and their acknowledgment must be submitted to DOR when setting the tax rate.
ExemptionA discharge, established by statute, from the obligation to pay all or a portion of a property tax. The exemption is available to particular categories of property or persons upon the timely submission and approval of an application to the assessors. Properties exempt from taxation include hospitals, schools, houses of worship, and cultural institutions. Persons who may qualify for exemptions include disabled veterans, blind individuals, surviving spouses, and seniors.
Field Review AuditA review of assessment valuation methods and support documentation by the BLA performed as a prerequisite to a triennial certification of property values.
Financial AdvisorAn individual or institution that assists municipalities in the issuance of tax exempt bonds and notes. The public finance department of a commercial bank or a non-bank advisor usually provides this service.
Financial StatementA presentation of the assets and liabilities of a community as of a particular date and most often prepared after the close of the fiscal year.
Fiscal Year (FY)Since 1974, the Commonwealth and municipalities have operated on a budget cycle that begins July 1 and ends June 30. The designation of the fiscal year is that of the calendar year in which the fiscal year ends. Since 1976, the federal government fiscal year has begun on October 1 and ended September 30.
Fixed AssetsLong-lived, tangible assets such as buildings, equipment and land obtained or controlled as a result of past transactions or circumstances.
Free Cash (Also Budgetary Fund Balance)Remaining, unrestricted funds from operations of the previous fiscal year including unexpended free cash from the previous year, actual receipts in excess of revenue estimates shown on the tax recapitulation sheet, and unspent amounts in budget line-items. Unpaid property taxes and certain deficits reduce the amount that can be certified as free cash. The calculation of free cash is based on the balance sheet as of June 30, which is submitted by the community's auditor, accountant, or comptroller. Important: free cash is not available for appropriation until certified by the Director of Accounts. (See Available Funds)
FundAn accounting entity with a self balancing set of accounts that is segregated for the purpose of carrying on identified activities or attaining certain objectives in accordance with specific regulations, restrictions, or limitations.
Fund AccountingOrganizing the financial records of a municipality into multiple, segregated locations for money. A fund is a distinct entity within the municipal government in which financial resources and activity (assets, liabilities, fund balances, revenues, and expenditures) are accounted for independently in accordance with specific regulations, restrictions or limitations. Examples of funds include the general fund and enterprise funds. Communities whose accounting records are organized according to the Uniform Municipal Accounting System (UMAS) use multiple funds.
Fund BalanceThe difference between assets and liabilities reported in a governmental fund. Also known as fund equity. (See Unreserved Fund Balance)
GASB 34A major pronouncement of the Governmental Accounting Standards Board that establishes new criteria on the form and content of governmental financial statements. GASB 34 requires a report on overall financial health, not just on individual funds. It requires more complete information on the cost of delivering services and value estimates on public infrastructure assets, such as bridges, road, sewers, etc. It also requires the presentation of a narrative statement analyzing the government's financial performance, trends and prospects for the future.
GASB 45This is another Governmental Accounting Standards Board major pronouncement that each public entity account for and report other postemployment benefits (See OPEB) in its accounting statements. Through actuarial analysis, municipalities must identify the true costs of the OPEB earned by employees over their estimated years of actual service.
General FundThe fund used to account for most financial resources and activities governed by the normal town meeting/city council appropriation process.
General Fund SubsidyMost often used in the context of enterprise funds. When the revenue generated by rates, or user fees, is insufficient to cover the cost to provide the particular service, general fund money is used to close the gap in the form of a subsidy. The subsidy may or may not be recovered by the general fund in subsequent years.
General LedgerThe accountant's record of original entry, which is instrumental in forming a paper trail of all government financial activity.
Generally Accepted Accounting Principles (GAAP)Uniform minimum standards and guidelines for financial accounting and reporting that serve to achieve some level of standardization.
Generally Accepted Auditing Standards (GAAS)Auditing standards established by the Auditing Standards Board of the American Institute of Certified Public Accountants. All financial statement audit engagements must follow GAAS.
Generally Accepted Government Auditing Standards (GAGAS)These are auditing standards established by the U.S. Governmental Accountability Office (GAO) publication "Government Auditing Standards" also known as the "Yellow Book". GAGAS for financial statement audits incorporate the fieldwork and reporting standards of GAAS.
Government Finance Officers Association (GFOA)A nationwide association of public finance professionals.
Governmental Accounting Standards Board (GASB)The ultimate authoritative accounting and financial reporting standard-setting body for state and local governments.
Hotel/Motel ExciseA local option since 1985 that allows a community to assess a tax on short-term room occupancy. The community may levy up to 4 percent of the charge for stays of less than 90 days at hotels, motels and lodging houses. The convention center legislation imposed an additional 2.75 percent charge in Boston, Cambridge, Springfield and Worcester.
Informational Guideline Release (IGR)A DLS publication that outlines a policy, administrative procedure, or provides a law update related to municipal finance. Refer to online listing of IGRs.
Inside DebtMunicipal debt incurred for purposes enumerated in MGL Ch. 44, S7, and measured against the community's debt limit as set under Ch. 10. Consequently, the borrowing is inside the debt limit and referred to as inside debt. (See Outside Debt)
JudgmentAn amount to be paid or collected by a governmental unit as a result of a court decision, including a condemnation award in payment for private property taken for public use.
Land CourtEstablished in 1898, the Land Court has the exclusive jurisdiction to foreclose rights of redemption on a property in tax title.
Land of Low Value (MGL Ch. 60 ?79)After 90 days from the date of taking, the treasurer may work with the assessors to pursue land of low value foreclosure (MGL Ch. 60 S79) through DOR, an alternative foreclosure procedure to seeking a decree from Land Court. Annually, DLS publishes the maximum valuation of parcels qualifying for the land of low value foreclosure procedure.
Late InterestWhen taxes and excise are overdue, late interest accrues automatically. For fees and charges, a community may establish an ordinance/bylaw to charge interest on overdue accounts to encourage timely payments (MGL Ch. 40 S21E). In the ordinance/bylaw, the community must establish due dates and set an overdue interest rate not to exceed the rate that applies to overdue taxes (currently 14 percent annually).
LevyThe amount a community raises through the property tax. The levy can be any amount up to the levy limit, which is re-established every year in accordance with Proposition 2« provisions.
Levy CeilingA levy ceiling is one of two types of levy (tax) restrictions imposed by MGL Ch. 59 S21C (Proposition 2 1/2). It states that, in any year, the real and personal property taxes imposed may not exceed 2« percent of the total full and fair cash value of all taxable property. Property taxes levied may exceed this limit only if the community passes a capital exclusion, a debt exclusion, or a special exclusion. (See Levy Limit)
Levy LimitA levy limit is one of two types of levy (tax) restrictions imposed by MGL Ch. 59 S21C (Proposition 2 1/2). It states that the real and personal property taxes imposed by a city or town may only grow each year by 2« percent of the prior year's levy limit, plus new growth and any overrides or exclusions. The levy limit can exceed the levy ceiling only if the community passes a capital expenditure exclusion, debt exclusion, or special exclusion. (See Levy Ceiling)
LienA legal claim against real or personal property to protect the interest of a party (i.e., a city or town) to whom a debt is owed (i.e., taxes). In the case of real property, the lien in favor of a municipality automatically arises each January 1, but must be secured through other action. (See Lien Date)
Lien DateThe date a lien arises on real property to protect the municipality's right to payment of taxes. Property tax liens arise by law on the January 1 assessment date. The lien is secured when the collector makes a tax taking and places the property in tax title. Unless the lien is secured, it expires if five years elapse from the January 1 assessment date and the property is transferred in the meantime. Securing a lien on a motor vehicle or boat excise, personal property tax requires civil court action.
Local Acceptance StatuteA requirement placed within the language of a General Law that a community affirmatively accept the statute by town meeting or city council action or referenda before availing itself of the provisions of the particular law.
Local AidRevenue allocated by the Commonwealth to cities, towns, and regional school districts. Estimates of local aid are transmitted to cities, towns, and districts annually by the "Cherry Sheets." Most Cherry Sheet aid programs are considered general fund revenues and may be spent for any purpose, subject to appropriation.
Local ReceiptsLocally generated revenues, other than real and personal property taxes. Examples include motor vehicle excise, investment income, hotel/motel tax, fees, rentals, and charges. Annual estimates of local receipts are shown on the tax rate recapitulation sheet. (See Estimated Receipts)
Lock Box ServiceA service typically offered by a financial institution for a fee to receive, process, and deposit payments made to municipalities for property taxes, motor vehicle excise, boat excise, and/or utility payments. At the end of each processing day, the community receives payment information on disk or other medium, which can be automatically posted to the collectors' cash receipts software. Printed reports are also provided.
Long-Term DebtCommunity borrowing, or outstanding balance at any given time, involving loans with a maturity date of 12 months or more. (See Permanent Debt)
Mass AppraisalUse of standardized procedures for collecting data and appraising property to ensure that all properties within a municipality are valued uniformly and equitably.
Massachusetts Association of Assessing Officers (MAAO)A professional organization for individuals who are assessors in Massachusetts.
Massachusetts Certified Public Purchasing Official (MCPPO)A certification and designation program for public officials responsible for municipal procurements in Massachusetts. (See Uniform Procurement Act)
Massachusetts Collectors and Treasurers Association (MCTA)A professional organization for individuals who are municipal tax collectors or treasurers in Massachusetts.
Massachusetts Government Finance Officers Association (MGFOA)A professional organization promoting the advancement of the profession of Public Finance in Massachusetts.
Massachusetts Municipal Association (MMA)A statewide organization for bringing together municipal officials to develop and advocate uniform policies and share information about providing municipal services.
Massachusetts Municipal Auditors and Accountants Association (MMAAA)A professional organization for individuals who are municipal auditors or accountants and others with an interest in these activities in Massachusetts.
Massachusetts Municipal Depository Trust (MMDT)An investment program, founded in 1977 under the supervision of the State Treasurer, in which municipalities may pool excess cash for investment.
Massachusetts School Building Authority (MSBA)Administers the state program that reimburses cities, towns, and regional school districts varying percentages of their school construction costs depending on the wealth of the community or district and the category of reimbursement. Projects that received their first reimbursement payment prior to July 26, 2004 will continue to get annual state payments to offset the related annual debt service. Thereafter, cities, towns, and regional school districts will receive a lump sum amount representing the state?s share of the eligible project costs. (See DOR IGR 06-101)
MGLMassachusetts General Laws
Motor Vehicle Excise (MVE)A locally imposed annual tax assessed to owners of motor vehicles registered to an address within the community, in accordance with MGL Chapter 60A. The excise tax rate is set by statute at $25.00 per $1000 of vehicle value. Owner registration and billing information is maintained by the State Registry of Motor Vehicles and is made available to a city or town, or to the Deputy Collector who represents it.
Municipal Data BankLocated within the Division of Local Services (DLS), the Municipal Data Bank collects, organizes, stores and publishes historical financial information on cities and towns, regional districts and the Commonwealth. Public access to the data is available through links at the DLS website at www.mass.gov/dls.
Net Assets Unrestricted (formerly Retained Earnings)An equity account reflecting the accumulated earnings of an enterprise fund that may be used to fund capital improvements, to reimburse the general fund for prior year subsidies, to reduce user charges and to provide for enterprise revenue deficits (operating loss).
Net School Spending (NSS)School budget and municipal budget amounts attributable to education, excluding long-term debt service, student transportation, school lunches and certain other specified school expenditures. A community's NSS funding must equal or exceed the NSS Requirement established annually by the Department of Education (DOE). (See Education Reform Act of 1993)
New GrowthThe 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. New growth is calculated by multiplying the assessed value associated with new construction, renovations and other increases by the prior year tax rate. The additional tax revenue is then incorporated into the calculation of the next year's levy limit. For example, new growth for FY07 is based on new construction, etc. that occurred between January and December 2005 (or July 2005 and June 2006 for accelerated new growth communities). In the fall of 2006, when new growth is being determined to set the FY07 levy limit, the FY06 tax rate is used in the calculation.
Non-Recurring Revenue SourceA one-time source of money available to a city or town. By its nature, a non-recurring revenue source cannot be relied upon in future years. Therefore, such funds should not be used for operating or other expenses that continue from year-to-year. (See Recurring Revenue Source)
Official StatementA document prepared for potential investors that contains information about a prospective bond or note issue and the issuer. The official statement is typically published with the notice of sale. It is sometimes called an offering circular or prospectus.
On-line Bill Payment ServiceA third-party service provider that gives taxpayers the ability to pay taxes, excise and utility payments by electronic check transfers or credit card payments 24 hours a day.
OPEB (Other Postemployment Benefits)Employees of state and local governments may be compensated in a variety of forms in exchange for their services. In addition to a salary, many employees earn benefits over their years of service that will not be received until after their employment with the government ends. The most common type of these postemployment benefits is a pension. Postemployment benefits other than pensions generally take the form of health insurance and dental, vision, prescription, or other healthcare benefits provided to eligible retirees, including in some cases their beneficiaries. They may also include some type of life insurance. As a group, these are referred to as OPEB. (See GASB 45)
Operating BudgetA plan of proposed expenditures for personnel, supplies, and other expenses for the coming fiscal year.
Other Amounts to be Raised (Tax Recapitulation Sheet)Amounts not appropriated but raised through taxation. Generally, these are locally generated expenditures (e.g., overlay, teacher pay deferral, deficits) as well as state, county and other special district charges. Because they must be funded in the annual budget, special consideration should be given to them when finalizing the budget recommendations to the city council or town meeting.
Outside DebtMunicipal borrowing for purposes enumerated in MGL Ch. 44, ?8. Debt incurred that is not measured against the community's debt limit per Ch. 10. Consequently, the borrowing is outside the debt limit and referred to as outside debt. (See Inside Debt)
Overlay (Overlay Reserve or Allowance for Abatements and Exemptions)An account established annually to fund anticipated property tax abatements, exemptions and uncollected taxes in that year. The overlay reserve need not be funded by the normal appropriation process, but rather is raised on the tax rate recapitulation sheet.
Overlay DeficitA deficit that occurs when the amount of overlay raised in a given year is insufficient to cover abatements, statutory exemptions, and uncollected taxes for that year. Overlay deficits must be provided for in the next fiscal year.
Overlay SurplusAny balance in the overlay account of a given year in excess of the amount remaining to be collected or abated can be transferred into this account. Within ten days of a written request by the chief executive officer of a city or town, the assessors must provide a certification of the excess amount of overlay available to transfer, if any. Overlay surplus may be appropriated for any lawful purpose. At the end of each fiscal year, unused overlay surplus is "closed" to surplus revenue; in other words, it becomes a part of free cash.
OverrideA vote by a community at an election to permanently increase the levy limit. An override vote may increase the levy limit no higher than the levy ceiling. The override question on the election ballot must state a purpose for the override and the dollar amount. (See Underride)
Override CapacityThe difference between a community's levy ceiling and its levy limit. It is the maximum amount by which a community may override its levy limit.
Payments in Lieu of TaxesAn agreement between a municipality and an entity not subject to taxation, such as charitable or educational organizations, in which the payer agrees to make a voluntary payment to the municipality. By law, a city or town must make such a payment to any other community in which it owns land used for public purposes.
Pension (and other employee benefit) Trust FundsA fiduciary fund type used to report resources that are required to be held in trust for the members and beneficiaries of defined benefit pension plans, defined contribution plans, other postemployment benefit (OPEB) plans, or other employee benefit plans.
Pension CostA measure of the periodic cost of an employer's participation in a defined benefit pension plan.
Pension PlanAn arrangement for the provision of pension benefits to employees upon their retirement. All assets accumulated are used to pay benefits (including refunds of member contributions) to plan members or beneficiaries, as defined by the terms of the plan.
PERACThe Public Employee Retirement Administration oversees and directs the state retirement system and administers benefits for members.
Personal PropertyMovable items not permanently affixed to, or part of the real estate. It is assessed separately from real estate to certain businesses, public utilities, and owners of homes that are not their primary residences.
Preliminary TaxThe tax bill for the first two quarters of the fiscal year sent, no later than July 1, by communities on a quarterly tax billing cycle. The tax due on a preliminary tax bill can be no greater than the amount due in the last two quarters of the previous fiscal year.
Procurement OfficerAn individual defined under MGL Ch. 30B, S2 and authorized to procure supplies or services for a governmental body.
Proposition 2 1/2A state law enacted in 1980, Proposition 2 1/2 regulates local property tax administration and limits the amount of revenue a city or town may raise from local property taxes each year to fund municipal operations.
Proprietary FundsFunds that account for government's business-type activities (e.g., activities that receive a significant portion of their funding through user charges). The fund types included in proprietary funds are the enterprise fund and the internal service fund.
Purchase OrderAn official document or form authorizing the purchase of products and services.
Raise and AppropriateA phrase used to identify a funding source for an expenditure or expenditures, which refers to money generated by the tax levy or other local receipt.
Recap Sheet(See Tax Rate Recapitulation Sheet)
ReceiptsMoney collected by and within the control of a community from any source and for any purpose.
Receipts Reserved for AppropriationProceeds that are earmarked by law and placed in separate accounts for appropriation for particular purposes. For example, parking meter proceeds may be appropriated to offset certain expenses for parking meters and the regulation of parking and other traffic activities.
ReceivablesAn expectation of payment of an amount certain accruing to the benefit of a city or town.
Reconciliation of CashPeriodic process where the accountant and treasurer compare records to confirm available cash in community accounts. DOR requires an annual reconciliation of cash without variances to be submitted with as balance sheet as a prerequisite to certifying a community's free cash.
Reconciliation of ReceivablesPeriodic process where the accountant and collector compare records to confirm amount of taxes outstanding. DOR requires an annual reconciliation of receivables without variances to be submitted with a balance sheet as a prerequisite to certifying a community's free cash.
Records Disposition ScheduleGuidelines published by the Records Management Division of the Secretary of State's Office and pursuant to MGL Ch. 66, informing local officials as to how long, and in what form, municipal records must be maintained, and identifying what records may be lawfully disposed.
Refunding of DebtTransaction where one bond issue is redeemed and replaced by a new bond issue under conditions generally more favorable to the issuer. (See Current and Advance Refunding of Debt)
RequisitionForm used by the requesting department when ordering products and services from external vendors. This document generates a Purchase Order.
Reserve FundAn amount set aside annually within the budget of a city (not to exceed 3 percent of the tax levy for the preceding year) or town (not to exceed 5 percent of the tax levy for the preceding year) to provide a funding source for extraordinary or unforeseen expenditures. In a town, the finance committee can authorize transfers from this fund for "extraordinary or unforeseen" expenditures. Other uses of the fund require budgetary transfers by town meeting. In a city, transfers from this fund may be voted by the city council upon recommendation of the mayor.
Residential ExemptionA municipality can grant a residential exemption of a dollar amount that cannot exceed 20 percent of the average assessed value of all residential class properties. The exemption reduces, by the adopted percentage, the taxable valuation of each residential parcel that is a taxpayer's principal residence. Granting the exemption raises the residential tax rate and shifts the residential tax burden from moderately valued homes to apartments, summer homes and higher valued homes.
RevenuesAll monies received by a governmental unit from any source.
Revolving FundAllows a community to raise revenues from a specific service and use those revenues without appropriation to support the service. For departmental revolving funds, MGL Ch. 44 ?53E« stipulates that each fund must be re- authorized each year at annual town meeting or by city council action, and that a limit on the total amount that may be spent from each fund must be established at that time. The aggregate of all revolving funds may not exceed ten percent of the amount raised by taxation by the city or town in the most recent fiscal year, and no more than one percent of the amount raised by taxation may be administered by a single fund. Wages or salaries for full-time employees may be paid from the revolving fund only if the fund is also charged for all associated fringe benefits.
Sale of Cemetery Lots FundA fund established to account for proceeds of the sale of cemetery lots. The proceeds may only be appropriated to pay for the cost of the land, its care and improvement or the enlargement of the cemetery under provisions of MGL Ch. 114 ?15.
Schedule AA statement of revenues, expenditures and other financing sources, uses, changes in fund balance and certain balance sheet account information prepared annually by the accountant or auditor at the end of the fiscal year. This report is based on the fund account numbers and classifications contained in the UMAS manual.
Sick Leave BuybackA community's obligation, under collective bargaining agreements or personnel board policies, to compensate retiring employees for the value of all, or a percentage of, sick time earned, but not used.
Single Audit ActFor any community that expends $500,000 or more per year in federal grant awards, the Single Audit Act establishes audit guidelines that reduce to only one the number of annual audits to be completed to satisfy the requirements of the various federal agencies from which grants have been received.
Special Assessment ExemptionFull discharge from the payment of betterments and special exemptions granted only to government properties occupied for public purposes.
Special ExclusionFor a few limited capital purposes, a community may exceed its levy limit or levy ceiling without voter approval. Presently, there are two special expenditure exclusions: 1) water and sewer project debt service costs which reduce the water and sewer rates by the same amount; and 2) a program to assist homeowners to repair or replace faulty septic systems, remove underground fuel storage tanks, or remove dangerous levels of lead paint to meet public health and safety code requirements. In the second special exclusion, homeowners repay the municipality for the cost plus interest apportioned over a period of time, not to exceed 20 years (similar to betterments).
Special Revenue FundFunds, established by statute only, containing revenues that are earmarked for and restricted to expenditures for specific purposes. Special revenue funds include receipts reserved for appropriation, revolving funds, grants from governmental entities, and gifts from private individuals or organizations.
Stabilization FundA fund designed to accumulate amounts for capital and other future spending purposes, although it may be appropriated for any lawful purpose (MGL Ch. 40 S5B). Communities may establish one or more stabilization funds for different purposes and may appropriate into them in any year an amount not to exceed ten percent of the prior year?s tax levy. The total of all stabilization fund balances shall not exceed ten percent of the community?s equalized value, and any interest shall be added to and become a part of the funds. A two-thirds vote of town meeting or city council is required to establish, amend the purpose of, or appropriate money into or from the stabilization fund. (See DOR IGR 04-201)
State Aid Anticipation Note (SAAN)A short- term loan issued in anticipation of a state grant or aid (MGL Ch. 44 S6A).
State House NotesDebt instruments for cities, towns, counties and districts certified by the Director of Accounts. State House Notes, payable annually, are usually limited to maturities of five years and principal amounts of $2,250,000. The notes are attractive, more often to smaller communities, because certification fees are low, neither an official statement nor full disclosure is required, and they are issued in a short period of time.
Surety BondA performance bond that protects the municipality against any financial loss arising from a breach of public trust by an employee who collects money on behalf of the community.
TailingsUnclaimed municipal funds, or a repository, referred to as a "tailings account," for the retention, until eventual disposition, of unclaimed funds in the custody of a municipality. Tailings might include unclaimed tax refunds, vendor payments yet to clear, overages on the community's commitment, etc. (MGL Ch. 200A) (See Unclaimed Checks)
Tax Increment Financing Exemption (TIF)In accordance with MGL Chapter 59 S5(51), a property tax exemption negotiated between a community and a private developer, typically implemented over a period up to 20 years, and intended to encourage industrial/commercial development. (See DOR IGR 94-201)
Tax MapsUsed to determine the location of the property, indicate the size and shape of each parcel, and show its relation to features that affect value. Maps also provide a complete inventory of all land parcels, helping to minimize the problems of omitted parcels and duplication of listing. Also referred to as assessors' maps.
Tax PossessionOnce a tax title has been foreclosed in Land Court, the municipal treasurer records the decree at the Registry of Deeds as a municipally owned property, hence becoming a tax possession. For a property issued a Land of Low Value affidavit, the municipality must hold an auction prior to it becoming a tax possession.
Tax RateThe amount of property tax stated in terms of a unit of the municipal tax base; for example, $14.80 per $1,000 of assessed valuation of taxable real and personal property.
Tax Rate Recapitulation Sheet (Recap Sheet)A document submitted by a city or town to the DOR in order to set a property tax rate. The recap sheet shows all estimated revenues and actual appropriations that affect the property tax rate. The recap sheet should be submitted to the DOR by September 1 (in order to issue the first-half semiannual property tax bills before October 1) or by December 1 (in order to issue the third quarterly property tax bills before January 1).
Tax Title (or Tax Taking)A collection procedure that secures a city or town's lien on real property and protects the municipality's right to payment of overdue property taxes. Otherwise, the lien expires if five years elapse from the January 1 assessment date and the property has been transferred to another owner. If amounts remain outstanding on the property after issuing a demand for overdue property taxes and after publishing a notice of tax taking, the collector may take the property for the city or town. After properly recording the instrument of taking, the collector transfers responsibility for collecting the overdue amounts to the treasurer. After six months, the treasurer may initiate foreclosure proceedings.
Tax Title ForeclosureThe procedure initiated by a city or town treasurer in Land Court or through land of low value to obtain legal title to real property already in tax title and on which property taxes are over due. The treasurer must wait at least six months from the date of a tax taking to initiate Land Court foreclosure proceedings (MGL Ch. 60 ?65).
Tax Title RedemptionThe act of a property owner to pay overdue taxes, plus any fees, charges, other costs and interest, on real property that the community had placed in tax title to secure its lien. The taxpayer's right to redeem terminates when the treasurer receives a Land Court Decree or Land of Low Value affidavit, records and holds an auction.
Triennial CertificationThe Commissioner of Revenue, through the Bureau of Local Assessment, is required to review local assessed values every three years and to certify that they represent full and fair cash value (FFCV). Refer to MGL Ch. 40 S56 and Ch. 59 S2A(c).
Trust FundIn general, a fund for money donated or transferred to a municipality with specific instructions on its use. As custodian of trust funds, the treasurer invests and expends such funds as stipulated by trust agreements, as directed by the commissioners of trust funds or by town meeting. Both principal and interest may be used if the trust is established as an expendable trust. For non- expendable trust funds, only interest (not principal) may be expended as directed.
Turnover SheetA form, completed by municipal departments, that accompanies the physical transfer of departmental revenues, or bank deposit slips reflecting revenues, to the treasurer.
Undesignated Fund BalanceMonies in the various government funds as of June 30 that are neither encumbered nor reserved, and are therefore available for expenditure once certified as part of free cash. (See Designated Fund Balance)
Unfunded MandateA requirement imposed by law, regulation or order without underlying financial support, thereby resulting in direct or indirect costs to the body made responsible for its implementation.
Unfunded OPEB LiabilityThis is the difference between the value assigned to the benefits (other than retirement) already earned by a municipality?s employees and the assets the local government will have on hand to meet these obligations. While there is no requirement in Massachusetts to fund this liability, GASB 45 requires that the dollar value of the unfunded OBEB liability is determined every two years. (See GASB 45; OPEB)
Unfunded Pension LiabilityUnfunded pension liability is the difference between the value assigned to the retirement benefits already earned by a municipality's employees and the assets the local retirement system will have on hand to meet these obligations. The dollar value of the unfunded pension liability is redetermined every three years and is driven by assumptions about interest rates at which a retirement system's assets will grow and the rate of future costs of living increases to pensioners. (See Pension Plan)
Uniform Municipal Accounting System (UMAS)UMAS succeeds the so-called Statutory System (STAT) and is regarded as the professional standard for municipal accounting in Massachusetts. As a uniform system for local governments, it conforms to Generally Accepted Accounting Principles (GAAP), offers increased consistency in reporting and record keeping, as well as enhanced comparability of data among cities and towns.
Uniform Procurement ActEnacted in 1990, MGL Ch. 30B establishes uniform procedures for local government to use when contracting for supplies, equipment, services and real estate. The act is implemented through the Office of the Inspector General. (See Massachusetts Certified Public Purchasing Official).
Unreserved Fund Balance (Surplus Revenue Account)The amount by which cash, accounts receivable, and other assets exceed liabilities and restricted reserves. It is akin to a "stockholders equity" account on a corporate balance sheet. It is not, however, available for appropriation in full because a portion of the assets listed as "accounts receivable" may be taxes receivable and uncollected. (See Free Cash)
User Charges/FeesA municipal funding source where payment is collected from the user of a service to help defray the cost of providing the service. Note that any increases in the fees must satisfy the three tests set forth in the so called Emerson case. (See Emerson College v. Boston, 391 Mass. 415 (1984))
VoucherA document or form authorizing the holder to redeem it for cash or credit in an amount certain.
WarrantAn authorization for an action. For example, a town meeting warrant establishes the matters that may be acted on by that town meeting. A treasury warrant authorizes the treasurer to pay specific bills. The assessors? warrant authorizes the tax collector to collect taxes in the amount and from the persons listed, respectively.