Increasing the Capital Reserve Fund

QUESTIONS and ANSWERS

Why does the Town Meeting ballot include a question, “Shall the Town of Essex increase the Capital Reserve Fund by adding 1 cent to the tax rate, in addition to the two cents previously authorized, for the purpose of financing capital projects?”

When the Village of Essex Junction separated from the Town of Essex, the Town lost approximately 41 percent of its tax base. As a result, the Town also lost 41 percent of the revenue that was generated each year by the 2-cent capital tax rate.

The capital budget is used to fund ongoing maintenance, repairs, and replacements on buildings, facilities, and heavy equipment. The budget is broken into several areas: Buildings, Highways, Equipment, Park Facilities, Paths/Walks/Trails, Stormwater, Information Management, Natural Resources Management, and Undesignated.

To make up the entirety of the lost revenue, the Town would need to raise the capital tax to 3.39 cents. (The tax rate is on $100 of assessed value of a property; for the average home in Essex, which has an assessed value of $280,000, the 2-cent capital tax costs $56 per year.)

The Selectboard chose to ask voters to increase the capital tax rate to 3 cents, and not 3.39 cents, for two main reasons:

The loss of the Essex Junction tax base is already driving a proposed 22 percent property tax rate increase on the general fund budget;
A town-wide reappraisal, to be completed by June 2025, is expected to result in higher residential property values, which will in turn generate more revenue on the fixed capital tax rate.

How much money will the Town raise with the existing 2-cent capital tax rate, and how does that compare to what was raised before the separation of Essex Junction?

The 2-cent capital tax rate is estimated to generate $322,000 in fiscal year (FY) 2024. When Essex Junction was part of the Town, the 2 cents generated about $530,000 each year.

How much revenue will the additional 1 cent raise for the Capital Reserve Fund, and at what cost to owner of the average home?

An additional 1 cent would generate approximately $161,000. For the owner of the average $280,000 home, 1 cent would cost $28 per year.

How would the additional money be used?

Capital revenue would more fully fund projects such as stormwater infrastructure, road improvements, building repairs and maintenance, parks assets, and heavy equipment such as Public Works and Fire vehicles. The capital budget is also instrumental in providing local matches to state and federal grants.

For perspective, capital requests in FY24 totaled $531,000. Capital requests for just highways ($160,000) and stormwater infrastructure ($150,000) totaled $310,000. Existing capital reserves can be used for some projects in FY24, and other projects can be delayed.

Capital reserves, however, will not last forever without additional funding. As one example, stormwater costs will only increase as stricter standards are required by federal and state governments, and existing infrastructure will need replacements or upgrades before it fails; the unexpected stormwater repairs for failures on Heatherbush Road and Cypress Lane in the past year resulted in a cost of $240,756.

More details about specific capital projects are available online at www.essexvt.org/761/Budget.

Why isn’t the capital need decreasing following the separation of Essex Junction?

Although the pre-separation, Town-wide capital tax rate supported all portions of the community – for instance, stormwater infrastructure, improvements to the Town Offices, road improvements near the Susie Wilson Road and Pearl Street intersection – the bulk of the capital tax supported assets outside the Village of Essex Junction boundaries.

Road mileage maintained by the Town of Essex Public Works Department remains the same following separation. The same holds true for the number of parks maintained by the Town Parks and Recreation Department, and the number of buildings owned and maintained by the Town.