Hanover Town Hall Superimposed over a negative balance sheet.
Rising costs and the constraints of Proposition 2½, has pushed Hanover into a precarious financial position

Hanover Officials Debate Budget Priorities Amid Override Talks

Free cash, tax burdens, and long-term sustainability drive intense discussion as town faces fiscal decisions.
Published on

The Hanover Advisory Committee met on Feb. 12 to tackle the town’s budget, facing crucial decisions about tax increases, free cash reserves, and the sustainability of town finances. The discussion highlighted disagreements over how to manage financial stability while addressing immediate affordability concerns. With rising costs and shifting economic factors, committee members explored various scenarios to ensure a balanced approach to fiscal planning. The town's financial leadership emphasized the importance of both near-term relief for taxpayers and safeguarding resources for future needs.

FY26 Budget Overview

FY26 Budget Overview

Debate Over Using Free Cash to Reduce Tax Impact

A central issue was how much of the town’s $2.6 million in free cash should be used to lower the tax increase for residents. Some members favored a cautious approach, leaving more reserves for future budget years. Others felt the town should use a portion to help ease the tax burden and improve voter support for the override.

“The only way that I can see to make the budgets more affordable absent cutting them in any department budget is to put more free cash towards them,” said Advisory Board Chair Emmanuel Dockter.

One proposal would use $1.28 million in free cash, which would bring the average tax increase for homeowners closer to $690, down from the original projection of $911. The committee noted that this number aligns with the additional $310 annual cost of the new transfer station sticker fees, making the combined impact on residents approximately $1,000 per year.

Others expressed concern that this could create long-term financial instability. If free cash is used to offset the override this year, it could lead to a gap in future budgets, necessitating another override sooner than expected. Some committee members proposed a phased approach to free cash utilization to strike a balance between short-term affordability and future stability.

Long-Term Financial Sustainability vs. Short-Term Relief

Some members emphasized the need to plan beyond the next fiscal year and ensure Hanover remains financially stable until at least FY 2032, when debt and pension obligations are expected to ease. They argued that while temporary relief may help in the short run, a lack of proper fiscal planning could create deeper structural deficits that would be even harder to address in the coming years.

“I would love to get off of using free cash towards balancing the operating, but I question whether we should do it, rip the tape off, and do it all at once,” said committee member David Fobert.

Financial officials projected that fixed costs, including pensions and healthcare, would continue rising at approximately 8% per year. If the town does not account for these increases, officials warned that another override request could be inevitable in the coming years. To mitigate this, some suggested re-evaluating cost-saving measures within municipal departments and reassessing revenue sources to lessen reliance on tax increases.

Concerns Over Excess Levy and Potential Spending Increases

Some committee members worried that leaving too much free cash available could result in additional spending requests at Town Meeting. They argued that previous instances of unallocated funds have led to last-minute spending proposals that may not align with the town’s long-term financial goals.

“If we use free cash to reduce the tax burden, it could lead to a situation where someone at Town Meeting argues for additional funding increases for departments,” Dockter pointed out.

Others countered that keeping the budget tight would prevent departments from requesting additional funds beyond what is already planned. They stressed the importance of clear financial guidelines to ensure that funds are directed toward critical infrastructure and service needs rather than discretionary spending.

The Transfer Station Fee Factor

A significant concern for residents has been the recent transition of the town’s transfer station to an enterprise fund, which now requires residents to pay $310 annually for a sticker. Some members suggested that free cash could help offset this cost for taxpayers, making the transition more manageable, especially for those on fixed incomes.

“The transfer station isn’t part of the override or part of this budget, but it’s still going to be hitting people around the same time,” Fobert noted.

The town’s Affordable Housing Trust is also exploring financial assistance programs for lower-income residents struggling to pay for town services like the transfer station fee. This initiative could alleviate some of the financial strain, but questions remain on how it will be structured and funded in the long term. Some officials stressed that these fees, while burdensome, are necessary to keep the transfer station self-sustaining without impacting the general budget.

Projected Budget Growth and Future Override Concerns

Financial projections presented at the meeting indicated that Hanover’s budget would continue to grow at an estimated 4.6% annually. Rising costs for pensions, healthcare, and municipal services have officials worried about long-term sustainability. The ability to control these costs while still delivering quality services remains a critical challenge.

“Health insurance alone will likely be seven or 8%,” committee member Thomas Raab noted, warning that without financial planning, the town could face another budget crisis soon. Other factors, such as unexpected infrastructure repairs or shifts in state aid, could further complicate budget projections. Officials discussed potential strategies, including contract renegotiations and grant funding, to offset some of the anticipated costs.

Discussions on Community Preservation Act (CPA) Funding

Some members proposed revisiting the town’s 3% Community Preservation Act (CPA) surcharge as a way to reduce tax burdens. However, previous attempts to cut or suspend the CPA surcharge have failed. A discussion ensued on whether a temporary reduction could free up taxpayer dollars while still maintaining funding for important projects.

During COVID, a similar effort was rejected at Town Meeting. “It got killed,” Docktor recalled, noting that many residents support CPA-funded projects. Others argued that the match funding from the state, which amplifies local CPA contributions, makes it a valuable program that should not be reduced without serious consideration of the long-term implications.

Town Meeting Strategy and Select Board Influence

The final decision on the override amount will be determined by the Select Board, but the Advisory Committee debated how best to present their recommendations at Town Meeting. A clear and unified message will be necessary to gain resident support, especially given the complexity of financial considerations at play.

“There’s tremendous value in selling the $690 (increase) story because people can wrap their minds around it,” Fobert said, referencing the attempt to align tax increases with the transfer station fee. Committee members acknowledged that public outreach and transparency would be crucial in educating residents on the implications of the budget decisions.

The committee will reconvene in two weeks to finalize their recommendations before Town Meeting and the override ballot vote.

South Shore Times
southshoretimes.com