Subject Headings: Town of Barnstable, MA Budget, Adopted Municipal Budget.
Appendix B - Glossary
A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | S | T | U | V | W | Y | X | Z |
- Abatement: A 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).
- Accounting system: The total structure of records and procedures that identify, record, classify, and report information on the financial position and operations of a governmental unit or any of its funds, account groups, and organizational components.
- Accrued interest: The amount of interest that has accumulated on the bond since the date of the last interest payment, and in the sale of a bond, the amount accrued up to but not including the date of delivery (settlement date). (See Interest).
- Ad valorem: A Latin phrase meaning according to the value. For example, the property tax is an Ad Valorem tax because it is based on the full and fair cash value (FFCV) of the real or personal property. (See Assessed Valuation).
- Adopted Budget: The resulting budget that has been approved by the Town Council.
- Advance refunding of debt: This 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 also Refunding of Debt).
- Allocation: The distribution of available monies, personnel, buildings and equipment among various Town departments, divisions or cost centers.
- Amortization: The gradual repayment of an obligation over time and in accordance with a pre-determined payment schedule.
- Annual budget: An estimate of expenditures for specific purposes during the fiscal year (July 1 - June 30) and the proposed means (estimated revenues) for financing those activities.
- 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.
- Appropriation: An 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).
- Arbitrage: As 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 valuation: A 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 date: The 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 §2A9a), the physical status of real property on June 30 is deemed to be its condition on the previous January 1.
- Audit: An 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 committee: A committee appointed by the selectmen, mayor, or city council, with specific responsibility to review a community's independent audit of financial statements and to address all issues relating to it as well as those outlined in the accompanying management letter.
- Audit management letter: An 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 report: Prepared 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.Almost always accompanied by a management letter.
- Automated recapitulation: An automated method that municipalities can use to submit data for the annual tax recapitulation process. DLS provides this Excel-based alternative to submitting data on paper forms. Municipal personnel enter required data in specially designed Excel spreadsheets and send the completed spreadsheets as computer files to DLS for uploading to a database.
- Available funds: Balances 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 fund, overlay surplus, water surplus, and enterprise retained earnings. (See reserves).
- Balance sheet: A statement that discloses the assets, liabilities, reserves, and equities of a fund or governmental unit at a specified date.
- Balance budget: A budget in which receipts are greater than (or equal to) expenditures. A requirement for all Massachusetts cities and Towns.
- Base aid: A component of Chapter 70 state aid to a municipality for education costs. Districts are guaranteed a certain base amount of aid that is increased annually by new increments in the following categories: Minimum aid; Foundation aid; School Choice aid
- 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.
- Boat excise: An amount levied on boats and ships in lieu of a personal property tax for the privilege of using the Commonwealth’s waterways. Assessed annually as of July 1, the excise is paid to the community where the boat or ship is usually moored or docked.
- Bond: A 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 that one year. (See Note).
- Bond and interest record (bond register): The permanent and complete record maintained by a municipal treasurer for each bond issue. It shows the amount of interest and principal coming due each date and all other pertinent information concerning the bond issue.
- 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 §17). 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 authorization: Action of town meeting or a city council authorizing the executive branch to raise money through the sale of bonds in a specific amount and for a specific purpose. Once authorized, issuance is by the treasurer upon the signature of the mayor, or selectmen. (See Bond Issue).
- Bond counsel: An attorney or law firm engaged to review and submit an opinion on the legal aspects of a municipal bond or note issue.
- Bond issue: The actual sale of the entire, or a portion of, the bond amount authorized by a town meeting or city council.
- Bond premium: The 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 2½ 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.
- Bond rating: 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 Poor’s 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 unissued: Balance 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.
- Budget: A plan for allocating resources to support particular services, purposes and functions over a specified period of time. (See Level Funded Budget, Performance Budget, Program Budget, Zero Based Budget)
- Budget basis of accounting: The Town’s general fund and enterprise fund budgets are prepared on a basis other than generally accepted accounting principles (GAAP basis). The actual results of operations are presented on a “budget (cash) basis” to provide a meaningful comparison of actual results with the budget.
- Budget calendar: The schedule of key dates or milestones which a government follows in the preparation and adoption of the budget.
- Budget message: A statement that, among other things, offers context by summarizing the main points of a budget, explains priorities, describes underlying policies that drive funding decisions, and otherwise justifies the expenditure plan and provides a vision for the future.
- Business-type activities: One of two classes of activities reported in the GASB 34 government- wide financial statements. These activities are financed in whole or in part by fees charged to users for goods or services. Some examples are enterprise (MGL Chapter 44 §53F½ ), special revenue (MGL Ch. 41 §69B) water, and municipal electric fund.
- Capital assets: All 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 budget: An 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 for each recommended expenditure, i.e., tax levy, rates, and identify those items that were not recommended. (See Capital Asset, Fixed Asset).
- Capital expenditures/improvements: Items generally found in the capital budget such as construction or major repairs to municipal buildings. The fees for architects, engineers, lawyers, and other professional services, plus the cost of financing advance planning, may be included in addition to the cost of materials and installation/construction.
- Capital improvements program: A blueprint, for planning a community's capital expenditures that comprises an annual capital budget and a five-year capital program. It coordinates community planning, fiscal capacity and physical development. While all of the community’s needs should be identified in the program, there is a set of criteria that prioritizes the expenditures.
- Capital outlay: The 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.
- Capital outlay expenditure exclusion: A temporary increase in the tax levy to fund a capital project or make a capital acquisition. Exclusions require two-thirds vote of the selectmen or city council (sometimes with the mayor's approval) and a majority vote in a community-wide referendum. The exclusion is added to the tax levy only during the year in which the project is being funded and may increase the tax levy above the levy ceiling.
- Capital projects fund: Fund type used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds).
- Cash: Currency, coin, checks and bankers' drafts on hand or on deposit with an official or agent designated as custodian of cash and bank deposits.
- Cash basis of accounting: An accounting method used that records and recognizes revenues when cash is received and expenses when cash is paid out of the Town treasury.
- Cashbook: A 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.
- Cash management: The process of monitoring the ebb and flow of a money in an out of municipal accounts to ensure cash availability to pay bills and to facilitate decisions on the need for short-term borrowing and investment of idle cash.
- Cash receipts: Any money received by a municipality or its departments whether by cash, check or electronic transfer.
- Categorical aid (see offset item): Type of state aid distributed to jurisdictions via the Cherry Sheet. An offset item constitutes categorical aid and as such the funds must be spent for specific municipal and regional school district programs. The funds may be spent with appropriation in the local budget.
- Categorical grant: A type of intergovernmental payment, which is characterized by extensive restrictions on the uses to which the funds may be “spent” by the recipient government.
- Cemetery perpetual care: Funds donated by individuals for the care of gravesites. According to MGL Ch. 114 §25, 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.
- Certificate of Deposit (CD): A bank deposit evidenced by a negotiable or non-negotiable instrument that provides on its face that the amount of such deposit, plus a specified interest, is payable to the bearer or to any specified person on a certain date specified in the instrument, at the expiration of a certain specified time, or upon notice in writing.
- Chapter 200 (tax recapitulation): Chapter 200 of the Acts of 1988 provides relief for those communities in which the maximum shift results in a residential share that is larger than the prior year's. Those communities may increase the commercial and industrial properties share of the levy by as much as 75 percent if the residential class would not be reduced to less than 50 percent of its single tax rate share by doing so. However, this residential share cannot be less than the residential share in any year since the community was first certified at full and fair cash value. General reference to the regulations and associated procedure for determining the maximum shift of tax burden from the Residential property class to the Commercial, Industrial, and Personal Property classes (CIP). The Chapter 200 form used in the tax rate approval process develops the maximum shift allowed
- Chapter 59 assessment of local taxes: Portion of the Massachusetts General Laws that defines how municipalities assess local taxes. This chapter defines the role and responsibilities of assessors and methods for assessing property. Section 5 describes property and persons entitled to exemptions. There are a number of exemptions that a municipality can vote to adopt. A municipality can be reimbursed by the state for some tax exemptions mandated by Chapter 59 - Section 5. A municipality applies for reimbursement by submitting documentation to DOR each year.
- Chapter 61 land: Forest, agricultural/horticultural, and recreational lands valued 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.
- Chapter 70 school funds: Chapter 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 funds: State 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 §34. 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, and then later on the submission of certified expenditure reports to MHD, communities receive cost reimbursements to the limit of the grant. Under the formula, communities with a larger number of road miles receive proportionately more aid than those with fewer road miles.
- Charges for services: (Also called User Charges or Fees) The charges levied on the users of particular goods or services provided by local government requiring individuals to pay for the private benefits they receive. Such charges reduce the reliance on property tax funding.
- Charter school aid: A component of Chapter 70 state aid provided to a municipality for public education. Beginning in fiscal year (FY) 99, no new charter aid will be included in Chapter 70 aid, and any Charter Aid distributed in FY98 and prior years has been included in FY99 base aid.
- Cherry sheets: A form showing all state charges and reimbursements to the Town as certified by the state director of accounts. Years ago this document was printed on cherry colored paper.
- Cherry sheet assessments: Estimates of annual charges to cover the cost of certain state and county programs.
- Cherry sheet offset items: Local 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, School Choice Receiving Tuition and public libraries grants. (See also Offset Receipts).
- Cherry sheet receipts: Chapter 58, Section 25A of the Massachusetts General Laws provides that the Commissioner of Revenue estimate the state's funding of local reimbursement and assistance programs as authorized by law and appropriated by the legislature.Local assessors are required to use these figures when determining the local property tax rate.
- Classification of the tax rate: Each year, the selectmen or city council vote whether to exercise certain tax rate options. Those options include choosing a residential factor to adopt (MGL Ch. 40 §56), and determining whether to offer an open space discount (Ch. 61, 61A and 61B), a residential exemption (Ch. 59, §5C), and/or a small commercial exemption (Ch. 59, §5I) to property owners.
- Collective bargaining: The 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.
- Commercial, Industrial, Personal property (CIP): A group of three property types used to describe the effect of multiple tax rates. A municipality can take a number of actions to shift the levy burden associated with a single tax rate from Open Space and Residential categories to the CIP categories.
- Commitment: An authorization to collect taxes, fees or other charges due a municipality. For example, the assessors' commitment of real estate taxes authorizes the collector to pursue and receive payment from property owners.
- Community Preservation Act: Enacted as MGL Ch. 44B in 2000, the community preservation act permits cities and towns accepting its provisions to establish a restricted fund from which monies can only be appropriated for a) the acquisition, creation and preservation of open space; b) the
- (CPA): 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, 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 fund: Formerly known as the “Landbank Fund” in Town, this was a voter approved surtax levied at 3 percent on all real estate taxes. The State had initially set up a $15 million dollar matching fund and reimbursed Cape Cod Town’s 50 cents per dollar of surtax collected. This matching fund has been depleted as of FY04. The matching fund is now supported by a real estate transfer fee collected by the registry of deeds across the state. The revenue collected from this program can be used for land acquisitions for recreation and to preserve open space, historic preservation and affordable housing.
- Computer Assisted Mass Appraisal (CAMA): An automated system for maintaining property data, valuing property, notifying owners, and ensuring tax equity through uniform valuations.
- Conservation fund: A city or town may appropriate money to a conservation fund, which money may be expended for lawful conservation purposes as described in MGL Ch. 40 §8C. The money may also be expended 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.
- Contingent appropriation: An appropriation that authorizes spending for a particular purpose only if subsequently approved in a voter referendum. Under MGL Ch. 59 §21C (m), towns may make appropriations from the tax levy, available funds or borrowing, contingent upon the subsequent passage of a Proposition 2½ override or exclusion question for the same purpose. If initially approved at an annual town meeting, voter approval of the contingent appropriation must occur by September 15. Otherwise, the referendum vote must occur within 90 days after the town meeting dissolves. The question may be placed before the voters at more than one election, but if not approved by the applicable deadline, the appropriation is null and void. If contingent appropriations are funded through property taxes, DOR cannot approve the tax rate until the related override or exclusion question is resolved or the deadline passes, whichever occurs first.
- Contingent liabilities: Items that may become liabilities as a result of conditions undetermined at a given date, such as guarantees, pending law suits, judgments under appeal, unsettled disputed claims, unfilled purchase orders, and uncompleted contracts.
- Cost-benefit analysis: A decision-making tool that allows a comparison of options based on the level of benefit derived and the cost to achieve the benefit from different alternatives.
- Cost Of Living Adjustment (COLA): Reference to language in municipal contracts that provide for annual or periodic increases in salaries and wages for employees over the course of the contract. The amount of an increase is most often negotiated based on a community's ability to pay, but is sometimes tied to the annual change in a specified index, i.e., consumer price index (CPI).
- Cost Center: The lowest hierarchical level of allocating monies.Often referred to as a program, project or operation.
- Debt authorization: Formal approval by a two-thirds vote of town meeting or city council to incur debt, in accordance with procedures stated in MGL Ch. 44 §§1, 2, 3, 4a, 6-15.
- Debt burden: The amount of debt carried by an issuer usually expressed as a measure of value (i.e., debt as a percentage of assessed value, debt per capita, etc.). Sometimes debt burden refers to debt service costs as a percentage of the total annual budget.
- Debt Exclusion: An 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 2½. By approving a debt exclusion, a community calculates its annual levy limit under Proposition 2½, 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 limit: The maximum amount of debt that a municipality may authorize for qualified purposes under state law. Under MGL Ch. 44 §10, debt limits are set at 5 percent of EQV for a city and 5 percent of EQV for a town. By petition to the Municipal Oversight Board, cities and towns can receive approval to increase their debt limit to 5 and 10 percent of EQV, respectively.
- Debt policy: Part 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 service: The repayment cost, usually stated in annual terms and based on an amortization schedule, of the principal and interest on any particular bond issue.
- Debt service fund: Governmental fund type used to account for the accumulation or resources for, and the payment of, general long-term debt principal and interest. In Massachusetts, these are only allowed by special legislation.
- Debt statement: Reference 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 revenue: Amounts that do not meet the criteria for revenue recognition. Also, earned amounts that are not yet available to liquidate liabilities of a current period.
- Deficit: The excess of expenditures over revenues during an accounting period. Also refers to the excess of the liabilities of a fund over its assets.
- Demand letter: Notice to a delinquent taxpayer of overdue taxes typically mailed soon after the thirty day, or otherwise determined, payment period has ended.
- Demand notice: When 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.
- Department: A principal, functional, and administrative entity created by statute and the Town Manager to carry out specified public services.
- Department Of Revenue (DOR): State department responsible for collecting a wide variety of taxes, providing taxpayer support, and administering programs related to municipal finance through the Division of Local Services (DLS).
- Designated unreserved fund balance: A limitation on the use of all or part of the expendable balance in a governmental fund.
- Division of Local Services (DLS): A division within the DOR (Department of Revenue) responsible for helping Massachusetts cities and towns achieve sound and efficient fiscal management through technical assistance, training, and oversight. DLS bureaus are responsible for ensuring the fairness and equity of local property taxation, the accuracy and quality of local accounting and treasury management, interpreting state laws that affect local governance, distributing local aid, maintaining a comprehensive databank on local finances, and auditing local school districts.
- Education Reform Act of 1993: State 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.
- Emergency spending: MGL Chapter 44 §31 allows a community to spend in excess of appropriation in cases of major disasters that pose an immediate threat to the health or safety of persons or property, following the emergency declaration by council or selectmen and the approval of the Director of Accounts.
- Eminent domain: The 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.
- Encumbrance: A 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 Funds: An enterprise fund, authorized by MGL Ch. 44 §53F½, 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 retained earnings 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. Barnstable has seven: water pollution, solid waste, golf course, airport, marinas, water and Sandy Neck Park. Both the costs and the revenues of the enterprise are segregated from other finances of the Town.
- Equalized Valuations (EQV): The determination of an estimate of the full and fair cash value of all property in the Commonwealth as of a certain taxable date. EQVs have historically been used as a variable in distributing some state aid accounts and for determining county assessments and other costs. The Commissioner of Revenue, in accordance with MGL Ch. 58 §10C, is charged with the responsibility of biannually determining an equalized valuation for each city and town in the Commonwealth.
- Estimated receipts: A term that typically refers to anticipated local revenues listed on page three of the Tax Recapitulation Sheet. Projects 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 capacity: The 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.
- Exemptions: A 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 veterans, blind individuals, surviving spouses, and persons over 70 years of age.
- Expendable trust: A fund, administered by the treasurer, from which both principle and interest can be expended for the purposes specified and agreed upon when the money was donated or transferred to the community.(See Trust Fund; Non-Expendable Trust).
- Expenditure: An outlay of money made by municipalities to provide the programs and services within their approved budget.
- Expense: An identified cost incurred to accomplish a particular goal.
- Fair market value: Fair cash value has been defined by the Massachusetts Supreme Judicial Court as "fair market value, which is the price an owner willing but not under compulsion to sell ought to receive from one willing but not under compulsion to buy. It means the highest price that a normal purchaser not under peculiar compulsion will pay at the time, and cannot exceed the sum that the owner after reasonable effort could obtain for his property. A valuation limited to what the property is worth to the purchaser is not market value. The fair cash value is the value the property would have on January first of any taxable year in the hands of any owner, including the present owner" (Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 566 (1956).
- Fiduciary funds: Repository of money held by a municipality in a trustee capacity or as an agent for individuals, private organizations, other governmental units, and other funds.These include expendable trust, non- expendable trust, pension trust, and agency funds.
- Financial statement: A 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: 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. For example, the 2000 fiscal year is July 1, 1999 to June 30, 2000. Since 1976, the federal government fiscal year has begun October 1 and ended September 30.
- Fixed assets: Long-lived, tangible assets such as buildings, equipment and land obtained or controlled as a result of past transactions or circumstances.
- Fixed costs: Costs that are legally or contractually mandated such as retirement, FICA/Social Security, insurance, debt service costs or interest on loans.
- Foundation budget: The spending target imposed by the Education Reform Act of 1993 for each school district as the level necessary to provide an adequate education for all students.
- Free Cash: 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)
- Full accrual: A method of accounting that recognizes the financial effect of transactions, events, and interfund activities when they occur, regardless of the timing of related cash flows.
- Full and Fair Cash Value (FFCV): Fair cash value has been defined by the Massachusetts Supreme Judicial Court as "fair market value", which is the price an owner willing but not under compulsion to sell ought to receive from one willing but not under compulsion to buy. It means the highest price that a normal purchaser not under peculiar compulsion will pay at the time, and cannot exceed the sum that the owner after reasonable effort could obtain for his property. A valuation limited to what the property is worth to the purchaser is not market value. The fair cash value is the value the property would have on January first of any taxable year in the hands of any owner, including the present owner" (Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 566 (1956).
- Fund: An accounting entity with a self balancing set of accounts that are segregated for the purpose of carrying on identified activities or attaining certain objectives in accordance with specific regulations, restrictions, or limitations.
- Fund accounting: Organizing 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 balance: The difference between assets and liabilities reported in a governmental fund. Also known as fund equity. (See also Unreserved Fund Balance)
- GASB 34: A 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 45: This is another Governmental Accounting Standards Board major pronouncement that each public entity account for and report other post-employment 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 fund: The fund used to account for most financial resources and activities governed by the normal town meeting/city council appropriation process.
- General fund subsidy: Most often used in the context of enterprise funds. When the revenue generated by rates, or user fees, are 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 ledger: The accountant's record of original entry, which is instrumental in forming a paper trail of all government financial activity.
- General obligation bonds: Bonds issued by a municipality for purposes allowed by statute that are backed by the full faith and credit of its taxing authority.
- 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): Accounting standards that define the conventions, rules, and procedures necessary to make valid financial presentations. The Governmental Accounting Standards Board (GASB) provides specific interpretations of the GAAP for application in state and local governments. Criteria used by auditors to determine if financial statements are fairly presented.
- Generally Accepted Government Auditing Standards (GAGAS): These are auditing standards established by the U.S. General Accounting Office publication "Government Auditing Standards" (1988) also known as the "Yellow Book ". GAGAS for financial statement audits incorporate the field work and reporting standards of GAAS.
- Government accounting standards board (GASB): The ultimate authoritative on accounting and financial reporting standard-setting body for state and local governments.
- Governmental funds: Funds generally used to account for tax-supported activities. There are five different types of governmental funds: the general fund, special revenue funds, capital projects funds, debt service funds, and permanent funds.
- Grant: A contribution of assets by one governmental unit or other organization to another. Typically, these contributions are made to local governments from the state and federal government. Grants are usually made for specific purposes.
- Grant Anticipation Notes (GAN): Short-term, interest-bearing notes issued by a government to raise capital to be repaid by grants proceeds, which are anticipated at a later date. GANS allow the recipient of the grant to begin carrying out the purpose of the grant immediately.
- Hotel/Motel Excise: A 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, Chicopee, Springfield, West Springfield and Worcester.
- House 1 (Governor's budget proposal): Designation given to the Governor's annual budget request, which is submitted to the House of Representatives by the fourth Wednesday of January. Except that a newly elected governor has eight weeks from the day he/she takes office to submit a budget. The budget is designated House 1 in the first year of the two-year legislative session and House 1A in the second year.
- Income approach: A method of estimating property value by converting anticipated net rental revenue, generated by the property, into an indication of market value. Used primarily to value commercial/industrial properties and apartment buildings, which are normally bought and sold on the basis of their income producing capability.
- Indirect cost: Costs of a service not reflected in the operating budget of the entity providing the service. An example of an indirect cost of providing water service would be the value of time spent by non-water department employees processing water bills. A determination of these costs is necessary to analyze the total cost of service delivery. The matter of indirect costs arises most often in the context of enterprise funds.
- Inside debt: Municipal debt incurred for purposes enumerated in MGL Ch. 44, §7, 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 also Outside Debt).
- Interest: Compensation paid or to be paid for the use of money, including amounts payable at periodic intervals or discounted at the time a loan is made. In the case of municipal bonds, interest payments accrue on a day-to-day basis, but are paid every six months.
- Interest rate: The interest payable, expressed as a percentage of the principal available, for use during a specified period of time. It is always expressed in annual terms.
- Interfund transactions: Payments from one administrative budget fund to another, which results in the recording of a receipt and an expenditure.
- Intrafund transactions: Financial transactions between activities within the same fund. An example would be a budget transfer.
- Interim year valuation adjustment: State law requires that local assessed values reflect market value every year. Every three years, BLA reviews and certifies that an individual community's assessed values meet the standard. In between these triennial revaluations, a community should complete an annual analysis to determine whether an interim year value adjustment is warranted. Depending on market conditions and property value trends, adjustments may increase, decrease or leave values unchanged. If the overall assessed value of the community changes by 10 percent, up or down, BLA must be notified.
- Internal control structure: The policies and procedures established by management to ensure the integrity and comprehensiveness of the data collected by the accounting system for use in internal and external financial reports, as well as the overall control environment in which the government operates.
- Internal service fund: A municipal accounting fund used to accumulate the cost of central services such as data processing, printing, postage, motor pool. Costs or charges to an internal service fund are then allocated to other departments or funds within the government unit.
- Land court: Established in 1898, the Land Court has the exclusive jurisdiction to foreclose rights of redemption on a property in tax title.
- Legal Level of Budgetary Control: The level at which a government's management may not reallocate resources without approval from the legislative body
- Levy: The 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 2½ provisions.
- Levy ceiling: A levy ceiling is one of two types of levy (tax) restrictions imposed by MGL Ch. 59 §21C (Proposition 2½). It states that, in any year, the real and personal property taxes imposed may not exceed 2½ 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 limit: A levy limit is one of two types of levy (tax) restrictions imposed by MGL Ch. 59 §21C (Proposition 2½). It states that the real and personal property taxes imposed by a city or town may only grow each year by 2½ 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).
- Lien: A 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. On other property, a lien must be recorded to become secure.
- Line item budget: A budget that separates spending into categories, or greater detail, such as supplies, equipment, maintenance, or salaries, as opposed to a program budget.
- Local aid: Revenue 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 receipts: Locally 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.
- Long-term debt: Community borrowing, or outstanding balance at any given time, involving loans with a maturity date of 12 months or more. (See Permanent Debt).
- Maintenance budget: A no-growth budget that continues appropriations for programs and services at their current year levels. The actual appropriation to maintain programs and services may still increase due to inflation or other factors.
- Market value: Fair cash value has been defined by the Massachusetts Supreme Judicial Court as "fair market value, which is the price an owner willing but not under compulsion to sell ought to receive from one willing but not under compulsion to buy. It means the highest price that a normal purchaser not under peculiar compulsion will pay at the time, and cannot exceed the sum that the owner after reasonable effort could obtain for his property. A valuation limited to what the property is worth to the purchaser is not market value. The fair cash value is the value the property would have on January first of any taxable year in the hands of any owner, including the present owner" (Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 566 (1956).
- Mass appraisal: Use of standardized procedures for collecting data and appraising property to ensure that all properties within a municipality are valued uniformly and equitably.
- Massachusetts General Laws (MGL): Laws passed by the Massachusetts legislature. The MGL is organized by chapters with multiple sections in each chapter. Currently there are 282 chapters. See www.mass.gov/legis/laws/mgl/index.htm. Note that laws enacted prior to the current legislative session are in one location and those enacted in the current session are located in a separate location.
- Minimum local contribution: The minimum that a city or town must appropriate from property taxes and other local revenues for the support of schools (Education Reform Act of 1993).
- Modified Accrual Basis of accounting: A method of accounting that recognizes revenues in the accounting period in which they become available and measurable.
- Motor Vehicle Excise (MVE): A locally imposed annual tax assessed to owners of motor vehicles registered to an address with in the community. 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 Revenue Growth Factor (MRGF): An estimate of the percentage change in a municipality's revenue growth for a fiscal year. It represents the combined percentage increase in the following revenue components: automatic 2½ percent increase in the levy limit, estimated new growth, the change in selected unrestricted state aid categories, and the change in selected unrestricted local receipts (Education Reform Act of 1993).
- 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) (Education Reform Act of 1993).
- Net school spending requirement: Sum of a school district's minimum local contribution and the Chapter 70 aid received in a given fiscal year (FY). Municipalities and regional school districts must appropriate funds sufficient to the net school spending requirement. In addition to the NSS requirement funds need to be appropriated to support costs of student transportation, fixed assets, long term debt service, and other costs not part of the NSS. Section 126 of Chapter 194 of the Acts of 1998 limits the net school spending requirement for regional vocational districts to 150 percent of the foundation budget. When the net school spending requirements exceed 150 percent of the foundation budget, the required local contributions of the member towns are reduced proportionately. Any reduction is applied to any below foundation districts to which the municipality belongs.
- New Growth: The 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 FY09 is based on new construction, etc. that occurred between January and December 2007. In the fall of 2008, when new growth is being estimated to set the FY09 levy limit, the FY08 tax rate is used in the calculation.
- Non-allocated receipts: Municipal receipts that need not be expended in a particular way due to their source. Non-allocated receipts are listed on page 3 of the Tax Rate and Pro Forma Recapitulation form. Specifically excluded are offset receipts, enterprise funds, and revolving funds.
- Non-expendable trust: A trust fund administered by the treasurer, from which principle, but not interest, can be expended for the purposes specified by the donor or agreed upon when the money was donated or transferred to the community. See Trust Fund; Expendable Trust.
- Non-recurring revenue source: A 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).
- Objects of expenditures: A classification of expenditures that is used for coding any department disbursement, such as "personal services,” “expenses,” or "capital outlay".
- Official statement: A 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.
- Offset Receipts: A local option that allows estimated receipts of a particular department to be earmarked for use of the department and appropriated to offset its annual operating budget. If accepted, MGL Ch. 44 § 53E limits the amount of offset receipts appropriated to no more than the actual receipts collected for the prior fiscal year. The Director of Accounts must approve use of a higher amount before appropriation. Actual collections greater than the amount appropriated close to the general fund at year-end. If actual collections are less, the deficit must be raised in the next year’s tax rate.
- Operating budget: A plan of proposed expenditures for personnel, supplies, and other expenses for the coming fiscal year.
- Operational audit: A private-sector term used to describe economy and efficiency audits and program result audits.
- Other Post Employment Benefits (OPEB): (Other Post Employment Benefits) Employees of state and local governments may be compensated in a variety of forms in exchange for service that will not be received until after their employment with the government ends. The most common type of these post employment benefits is a pension. Post employment 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).
- Outside debt: Municipal borrowing for purposes enumerated in MGL Ch. 44, §8, the debt incurred for which 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).
- Overlapping debt: A community's proportionate share of the debt incurred by an overlapping government entity, such as a regional school district, regional transit authority, etc.
- Overlay reserve: An account established annually to fund anticipated property tax abatements, exemptions and uncollected taxes in that year. The overlay reserve is not established by the normal appropriation process, but rather is raised on the tax rate recapitulation sheet.
- Overlay Deficit: A 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 Surplus: Any 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. 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.
- Override: A 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 capacity: The 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 taxes: An 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.
- Performance audit: Such audits examine the implicit assertion of management, that it is meeting its responsibilities efficiently and effectively. Performance audits typically focus on individual departments, agencies, activities, or functions within a government.
- Performance budget: A budget that stresses output both in terms of economy and efficiency.
- Personal property tax: Movable 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.
- Personnel Costs: The cost of salaries, wages and related employment benefits.
- Preliminary tax bill: The 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.
- Program: A combination of activities to accomplish an end.
- Program budget: A budget that relates expenditures to the programs they fund. The emphasis of a program budget is on output.
- Property tax levy (see levy): The 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 2½ provisions.
- Proposition 2 1/2: State law enacted in 1980 that regulates local property tax administration. Major provisions of this legislation are located in MGL Ch 59 - Assessment of Local Taxes § 21C and relate to the determination of a levy limit and levy ceiling for each town.
- Proprietary funds: Funds 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. The internal service fund accounts for certain central services (e.g., data processing, printing, postage, motor pool) and then allocates the cost among departments or funds within the governmental unit.
- Public Employee Retirement Administration (PERAC): The Public Employee Retirement Administration oversees and directs the state retirement system and administers benefits for members.
- Purchase order: An official document or form authorizing the purchase of products and services. Outstanding purchase orders are called encumbrances.
- Quarterly tax bills: Local option to issue two estimated (or three estimated when authorized by the General Court) property tax bills followed by two (or one, if three estimated) regular bills by prescribed dates.
- Real property: Land, buildings and the rights and benefits inherent in owning them.
- Receipts reserved: Proceeds 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.
- Recertification (see triennial certification): The 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 §56 and Ch. 59 §2A(c).
- Requisition: Form used by the requesting department when ordering products and services from external vendors. This document generates a Purchase Order.
- Reserve for abatements and exemptions (see overlay): An account established annually to fund anticipated property tax abatements, exemptions and uncollected taxes in that year. The overlay reserve is not established by the normal appropriation process, but rather is raised on the tax rate recapitulation sheet.
- Reserve Fund: An 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.
- Reserves: Money accumulated for future expenditure. The General Fund savings account and the Stabilization Fund are general reserves that may be used for a wide variety of purposes. Some reserves are available only for restricted purposes, for example, the Pension and Insurance reserve.
- Rating agencies: This term usually refers to Moody’s Investors Service, Standard and Poor’s Corporation, and Fitch ICBA, Inc. These are the three major agencies which issue credit ratings on municipal bonds.
- Registered bonds: Bonds registered on the books of the issuer as to ownership; the transfer of ownership must also be recorded on the books of the issuer. Recent changes in federal tax laws mandate that all municipal bonds be registered if their tax exempt status is to be retained.
- Reserve for contingencies: A budgetary reserve set aside for emergencies or unforeseen expenditures not otherwise budgeted for. The Town Council has a 4 percent policy reserve that sets aside a portion of the certified General Fund savings account balance that is equal to 4 percent of the Town’s General Fund budget, net of transfers.
- Residential exemption: An option that allows a community to grant an exemption to owner occupied residential properties of up to 20 percent. The exemption shifts a portion of the tax burden, within the residential class, away from lower valued, single family homes to multi-family properties, apartment buildings and non-resident property owners. Boston, Cambridge and Somerville have been granted special legislation to increase the percentage shifted to 30 percent. The legislation is as follows: Boston - Chapter 403 of the Acts of 2003 Cambridge -Chapter 90 of the Acts of 2003 Somerville -Chapter 257 of the Acts of 2000
- 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).
- Revaluation: The assessors of each community are responsible for developing a reasonable and realistic program to achieve the fair cash valuation of property in accordance with constitutional and statutory requirements. The nature and extent of that program will depend on the assessors’ analysis and consideration of many factors, including, but not limited to, the status of the existing valuation system, the results of an in-depth sales ratio study, and the accuracy of existing property record information. Every three years, assessors must submit property values to the DOR for certification. Assessors must also maintain current values in the years between certifications so that each taxpayer in the community pays his or her share of the cost of local government in proportion to the value of his property. (See Triennial Certification)
- Revenue Anticipation Note (RAN): A short-term loan issued to be paid off by revenues, such as tax collections and state aid. RANS are full faith and credit obligations. (See Tax Anticipation Notes, Bond Anticipation Notes)
- Revenue deficit: The amount by which actual revenues at year-end fall short of projected revenues and are insufficient to fund the amount appropriated.In such a case and unless otherwise funded, the revenue deficit must be raised in the following year's tax rate.
- Revenues: All monies received by a governmental unit from any source.
- Revolving fund: Allows 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 §53E½ 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 fund: A 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.
- Sale of real estate fund: A fund established to account for the proceeds of the sale of municipal real estate other than proceeds acquired through tax title foreclosure. MGL Ch. 44 §63 states that such proceeds shall be applied first to the retirement of debt on the property sold. In the absence of such debt, funds may generally be used for purposes for which the city or town is authorized to borrow for a period of five years or more.
- School choice aid: A component of Chapter 70 state aid provided to a municipality for public education. If a district is spending below the foundation budget and it was a "sending" district under school choice in the prior fiscal year (FY), the district generally receives school choice aid in an amount equal to any increase in its prior year estimated gross school choice liability, when compared to the previous year.
- Short-term debt: Outstanding balance, at any given time, on amounts borrowed with a maturity date of 12 months or less. (See Note)
- Small commercial exemption: A property tax classification option where a community may exempt up to 10 percent of the value of Class Three, Commercial parcels. In effect, the option shifts the tax burden from parcels occupied by small businesses to those occupied by other commercial and industrial taxpayers. Eligible small businesses have an average annual employment of no more than ten persons. (See Information Guideline Release 00-403)
- Special assessments (see betterments): 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.
- Special exclusion: For 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 purpose fund: Money set aside by appropriation for specific purposes authorized by statute only. Money remains in the fund from year-to-year, but unlike special revenue fund balances, can be diverted to other uses by vote of the appropriating authority.
- Special revenue fund: Funds, 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, and grants from governmental entities and gifts from private individuals or organizations.
- Stabilization fund: A fund designed to accumulate amounts for capital and other future spending purposes, although it may be appropriated for any lawful purpose (MGL Ch. 40 §5B). 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 from the stabilization fund
- Submitted budget: The proposed budget that has been approved by the Town Manager and forwarded to the Town Council for their approval. The Council must act upon the submitted budget within prescribed guidelines and limitations according to statute and the Town charter.
- Supplemental appropriations: Appropriations made by the Town Council after an initial appropriation to cover expenditures beyond original estimates.
- Surplus revenue: The amount by which cash, accounts receivable, and other assets exceed liabilities and reserves.
- Tax Anticipation Note (TAN): A short-term note issued to provide cash to cover operating expenses in anticipation of tax proceeds.
- Tax rate: The 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 recapitulation 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: 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 foreclosure: The procedure initiated in Land Court by a city or town treasurer to obtain legal title to real property already in tax title and on which property taxes are overdue.
- Tax title redemption: The 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 files a petition to foreclose on the property in the Land Court.
- Triennial Certification: The 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 §56 and Ch.59 §2A(c).
- Trust fund: In 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. (See Expendable Trust and Non-Expendable Trust)
- 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.
- Undesignated fund balance: Monies 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 mandate: A 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 pension liability: Unfunded 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.
- Underride: A vote by a community to permanently decrease the tax levy limit. As such, it is the exact opposite of an override.
- Unreserved fund balance: 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/fee: A 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); also DOR IGR 88-207)
- Valuation: The legal requirement that a community’s assessed value on property must reflect its market, or full and fair cash value.
- Warrant: An 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.
- Zero based budget: A budget building technique where each department begins at zero and adds the cost of essential programs up to an established funding limit. Each year the process begins again at zero prompting close scrutiny and prioritization of costs annually