Marblehead Faces Growing Structural Budget Deficit, Possible Override

MARBLEHEAD, MA — Marblehead has reached a long-predicted budget crossroads with a structural deficit set to force tough decisions on substantial cuts or a tax override.

Town Administrator Thatcher Kezer laid out projections to the Select Board on Wednesday night that included a $1.77 million gap between revenues and expenses next year based on what he called "an optimistic" 3 percent increase in expenses, a $3.13 million gap based on "mostly likely" 4.5 percent increase in expenses and a $4.48 million gap based on a "pessimistic" 6 percent increase in expenses.

Kezer said the town is on pace for 1.31 percent growth in revenue for next year to pay for those expenses.

In recent years, increases in so-called "free cash" or reserves had been used to offset the revenue/expense gap, but this year the amount of available free cash decreased from $10.2 million to $8.564 million — a trend that will only continue to deplete that account if the town continues to use it.

"We have a structural deficit and we need to work our way out of it," Kezer said told the Select Board.

He said part of doing that will be to increase new growth revenue through smart development.

But, in the short term, patching it could mean cuts or a tax override.

"The big question — the override," he said. "And it's purposefully put as a question. What I have said publicly, and in my conversations, is that my intent is to develop a balanced town budget assuming no override. I have to do that. I cannot presume the will of the voters on what may happen. I have to assume a budget with no override with the revenues that we have.

"But we have to develop, at some point in conversation with everybody, develop override scenarios."

A $3.1 million tax override for a school supplemental budget failed overwhelmingly in a townwide vote last year. The last general tax override that passed in Marblehead was in 2005.

Kezer said public conversations will have to take place about finding cuts to meet current projections, an override that plugs the deficit for one year, or a more comprehensive general override that pays for future shortfalls and covers "core priority enhancements."

Under the 4.5 expense-growth continuation — which Kezer said may be mitigated by slowing of inflation and additional state aid over time — Kezer said Marblehead's growth-expense gap will grow to $7.936 million in 2025, $10.694 million in 2026, $13.196 million in 2027 and $15.851 million in 2028.

He said contributing factors to these expenses included limited development growth, increases in town health care costs, new collective bargaining agreements due in 2024 for police, fire and other unions, increases in town recycling disposal fees and the need for technology and municipal infrastructure improvements.

After years of "kicking the can down the road," Marblehead residents are now faced with how to pay for those factors.

"Those are all question marks in the end," Kezer said. "We need to have public discussions. Do we try to fix the problem for one year and then try to work on a plan following that? Do we try to come up with a fix that fixes us for a five-year period? Big differences in numbers by doing so.

"But that's the conversation that we need to have."

(Scott Souza is a Patch field editor covering Beverly, Danvers, Marblehead, Peabody, Salem and Swampscott. He can be reached at Scott.Souza@Patch.com. Twitter: @Scott_Souza.)