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Massachusetts Department of Revenue Division of Local Services
Navjeet K. Bal, Commissioner Robert G. Nunes, Deputy Commissioner and Director of Municipal Affairs
Municipal Finance Glossary
May 2008
Visit our website at
http://www.mass.gov/dlsSource page 2
Department of Revenue/Division of Local Services
Abatement – A reduction or elimination of a real or Advance Refunding of Debt – This occurs when
personal property tax, motor vehicle excise, a fee, new debt is issued to replace or redeem old debt
charge, or special assessment imposed by a before the maturity or call date of the old debt.
governmental unit. Granted only on application of Under these circumstances, the proceeds of the
the person seeking the abatement and only by the new debt must be placed in escrow and used to pay
committing governmental unit. (See Commitment) interest on old, outstanding debt as it becomes due,
and to pay the principal on the old debt either as it
Accelerated New Growth – MGL Chapter 59
matures or at an earlier call date. (See Refunding
§2A(a) is a local option statute that allows a
of Debt, Current Refunding of Debt)
community to value and assess new growth (e.g.,
new construction or other physical additions to real Agency Fund – This is one of four types of
property) occurring by June 30 for the fiscal year fiduciary funds. It is used to report resources in a
beginning July 1. This local adoption law, purely custodial capacity by a governmental unit.
commonly referred to as Chapter 653, allows the Agency funds generally involve only the receipt,
community to assess improved parcels, which temporary investment, and periodic transfer of
ensures the property owner is paying his fair share money to fulfill legal obligations to individuals,
of the cost of government operations for the fiscal private organizations, or other governments. For
year beginning July 1 rather than a year later. example, certain employee payroll withholdings
typically accumulate in an agency fund until due
Accounting System – The total structure of
and forwarded to the federal government, health
records and procedures that identify record,
care provider, and so forth.
classify, and report information on the financial
position and operations of a governmental unit or Amended New Growth – When the assessors
any of its funds, account groups, and organizational discover properties that were inadvertently omitted
components. that would have been new growth (See Omitted and
Revised Values), they may submit an “Amended
Accrued Interest – The amount of interest that has
Tax Base Growth Report (Form LA-13A) to BLA
accumulated on the bond since the date of the last
before setting the tax rate for the next fiscal year.
interest payment, and in the sale of a bond, the
BLA will certify the amount of any additional tax
amount accrued up to but not including the date of
base growth and notify BOA. BOA will then
delivery (settlement date). (See Interest)
recalculate the community’s levy limit and notify the
Ad Valorem – A Latin phrase meaning according to assessors of the new base for the purposes of
the value. For example, the property tax is an Ad calculating the succeeding year’s levy limit.
Valorem tax because it is based on the full and fair
Amortization – The gradual repayment of an
cash value (FFCV) of the real or personal property.
obligation over time and in accordance with a pre-
(See Assessed Value)
determined payment schedule.
Additional Assistance – This state aid program
Appellate Tax Board (ATB) – Appointed by the
provides unrestricted, general fund revenue to a
governor, the ATB has jurisdiction to decide
certain number of communities through the Cherry
appeals from local decisions relating to property
Sheet. Additional Assistance evolved from the old
taxes, motor vehicle excises, state owned land
resolution aid formula of the 1980s, but following
(SOL) valuations, exemption eligibility, property
state budget cuts, it was level funded beginning in
classification, and equalized valuations.
FY92 and then subsequently reduced.
Municipal Finance Glossary 1Source page 3
Department of Revenue/Division of Local Services
Appropriation – An authorization granted by a Assessment Sale Ratio (ASR) – Property
town meeting, city council or other legislative body assessed value divided by sales price. Expresses
to expend money and incur obligations for specific the relationship between the assessed value of a
public purposes. An appropriation is usually limited sold property and the most recent sales price of the
in amount and as to the time period within which it property. The ASR is instrumental in the triennial
may be expended. (See Encumbrance, Line-Item certification of municipal property values by BLA.
Transfer, Free Cash)
Assessors’ Maps – (See Tax Maps)
Arbitrage – As applied to municipal debt, the
ATFC – Association of Town Finance Committees
investment of tax-exempt bonds or note proceeds in
higher yielding, taxable securities. Section 103 of Audit – An examination of a community's financial
the Internal Revenue Service (IRS) Code restricts systems, procedures, and data by a certified public
this practice and requires (beyond certain limits) accountant (independent auditor), and a report on
that earnings be rebated (paid) to the IRS. the fairness of financial statements and on local
compliance with statutes and regulations. The audit
Arbitrage Certificate – A certified statement
serves as a valuable management tool for
requested by bond or note purchasers, and by law
evaluating the fiscal performance of a community.
firms serving as bond counsel in Massachusetts
that borrowing proceeds of a specified bond issue Audit Committee – A committee appointed by the
shall not be used for the purposes of arbitrage. selectmen, mayor, or city council, with specific
responsibility to review a community's independent
Arm’s Length Sale – A transfer of property
audit of financial statements and to address all
ownership between a willing seller not under
issues relating to it as well as those outlined in the
compulsion to sell and a willing buyer not under
accompanying management letter.
compulsion to buy. The sale price is the amount of
money, or its equivalent, that probably would be Audit Management Letter – An independent
arrived at through fair negotiations taking into auditor's written communication to government
consideration the uses to which the property may officials, separate from the community's audit. It
be put and allowing a reasonable time for exposure generally identifies areas of deficiency, if any, and
to the market. presents recommendations for improvements in
accounting procedures, internal controls and other
Assessed Valuation – A value assigned to real
matters.
estate or other property by a government as the
basis for levying taxes. In Massachusetts, assessed Audit Report – Prepared by an independent
valuation is based on the property's full and fair auditor, an audit report includes: (a) a statement of
cash value as set by the Assessors. (See Ad the scope of the audit; (b) explanatory comments as
Valorem; Full And Fair Cash Value) to application of auditing procedures; (c) findings
and opinions; (d) financial statements and
Assessment date – The date property tax liability
schedules; and (e) statistical tables, supplementary
is fixed. In Massachusetts, property taxes are
comments, and recommendations. It is almost
assessed as of the January 1 prior to the fiscal
always accompanied by a management letter.
year. Assessors determine the physical status of
taxable real and personal property, its ownership, Available Funds – Balances in the various fund
fair cash value and usage classification as of that types that represent non-recurring revenue sources.
date. By local option (MGL Ch. 59 §2D), the As a matter of sound practice, they are frequently
physical status of real property on June 30 is appropriated to meet unforeseen expenses, for
deemed to be its condition on the previous January capital expenditures or other onetime costs.
1. Examples of available funds include free cash,
Municipal Finance Glossary 2Source page 4
Department of Revenue/Division of Local Services
stabilization funds, overlay surplus, water surplus, annually as of July 1, the excise is paid to the
and enterprise net assets unrestricted (formerly community where the boat or ship is usually
retained earnings). moored or docked.
Balance Sheet – A statement that discloses the Bond – A means to raise money through the
assets, liabilities, reserves, and equities of a fund or issuance of debt. A bond issuer/borrower promises
governmental unit at a specified date. in writing to repay a specified sum of money,
alternately referred to as face value, par value or
BAN – Bond Anticipation Note
bond principal, to the buyer of the bond on a
Bank Qualified – When a municipality issues specified future date (maturity date), together with
$10,000,000 or less in bonds or notes in a calendar periodic interest at a specified rate. The term of a
year, the bonds and or notes issued are designated bond is always greater than one year. (See Note)
as “bank qualified.” The bank which purchases the
Bond and Interest Record (Bond Register) – The
security receives a tax deduction (80% of the
permanent and complete record maintained by a
interest cost) for this type of purchase. This
treasurer for each bond issue. It shows the amount
deduction makes bank qualified bonds and notes
of interest and principal coming due each date and
an attractive purchase.
all other pertinent information concerning the bond
Betterments (Special Assessments) – Whenever issue. (See Debt Statement)
part of a community benefits from a public
Bond Anticipation Note (BAN) – Short-term debt
improvement, or betterment (e.g., water, sewer,
instrument used to generate cash for initial project
sidewalks, etc.), special property taxes may be
costs and with the expectation that the debt will be
assessed to the property owners of that area to
replaced later by permanent bonding. Typically
reimburse the governmental entity for all, or part, of
issued for a term of less than one year, BANs may
the costs it incurred in completing the project. Each
be re-issued for up to five years, provided principal
property parcel receiving the benefit is assessed a
repayment begins after two years (MGL Ch. 44
proportionate share of the cost which may be paid
§17). Principal payments on school related BANs
in full, or apportioned over a period of up to 20
may be deferred up to seven years (increased in
years. In this case, one year’s apportionment along
2002 from five years) if the community has an
with one year’s committed interest computed from
approved project on the Massachusetts School
October 1 to October 1 is added to the tax bill until
Building Authority (MSBA) priority list. BANs are full
the betterment has been paid.
faith and credit obligations.
BLA – Bureau of Local Assessment
Bond Authorization – The action of town meeting
Block Grant – A Block Grant is a Federal grant of or a city council authorizing the executive branch to
money awarded by formula under very general raise money through the sale of bonds in a specific
guidelines that allow grantees broad latitude in amount and for a specific purpose. Once
spending activities. Recipients are normally state or authorized, issuance is by the treasurer upon the
local governments. signature of the mayor, or selectmen. (See Bond
Issue)
BMFL – Bureau of Municipal Finance Law
Bond Buyer – A daily trade paper containing
BOA – Bureau of Accounts current and historical information of interest to the
municipal bond business.
Boat Excise – In accordance with MGL Chapter
60B, this is an amount levied on boats and ships in Bond Counsel – An attorney or law firm engaged
lieu of a personal property tax for the privilege of to review and submit an opinion on the legal
using the Commonwealth’s waterways. Assessed aspects of a municipal bond or note issue.
Municipal Finance Glossary 3Source page 5
Department of Revenue/Division of Local Services
Bond Issue – The actual sale of the entire, or a Budget Message – A statement that, among other
portion of, the bond amount authorized by a town things, offers context by summarizing the main
meeting or city council. points of a budget, explains priorities, describes
underlying policies that drive funding decisions, and
Bond Premium – The difference between the
otherwise justifies the expenditure plan and
market price of a bond and its face value (when the
provides a vision for the future.
market price is higher). A premium will occur when
the bond’s stated interest rate is set higher than the Budget Unit – A board or department to which the
true interest cost (the market rate). Additions to the municipality’s legislative body appropriates funds.
levy limit for a Proposition 2 ½ debt exclusion are
Bulk Sale of Tax Receivables – A community may
restricted to the true interest cost incurred to
make bulk assignments of its delinquent property
finance the excluded project. Premiums received at
tax receivables and liens (MGL Ch. 60 §2C) to third
the time of sale must be offset against the stated
parties. DLS recommends that municipal officers
interest cost in computing the debt exclusion. If
discuss whether to use this authority and what
receipt of the premium and the payment of interest
receivables would be assigned. (See DOR IGR 05-
at maturity of an excluded debt occur in different
208)
fiscal years, reservation of the premium for future
year’s debt service is required at the end of the Bureau of Accounts (BOA) – A bureau within the
fiscal year when the premium was received. (See State Division of Local Services charged with
DOR Bulletin 2003-20B) overseeing municipal execution of financial
management laws, rules and regulations.
Bond Rating (Municipal) – A credit rating assigned
to a municipality to help investors assess the future Bureau of Information Technology (IT) – A
ability, legal obligation, and willingness of the bureau within the State Division of Local Services
municipality (bond issuer) to make timely debt charged with enhancing the flow of information
service payments. Stated otherwise, a rating helps between DLS and communities, maintaining DLS’
prospective investors determine the level of risk Internet site, and providing training, support, and
associated with a given fixed-income investment. consulting services to communities using the DOR
Rating agencies, such as Moody's and Standard Computer Assisted Mass Appraisal (CAMA) and
and Poors, use rating systems, which designate a Tax Administration System.
letter or a combination of letters and numerals
where AAA is the highest rating and C1 is a very Bureau of Local Assessment (BLA) – A bureau
low rating. within the State Division of Local Services charged
with overseeing municipal execution of state laws,
Bonds Authorized and Unissued – Balance of a rules and regulations involving real and personal
bond authorization not yet sold. Upon completion or property assessments. BLA is also responsible for
abandonment of a project, any remaining balance determining equalized valuations and overseeing
of authorized and unissued bonds may not be used the valuation of state owned land.
for other purposes, but must be rescinded by town
meeting or the city council to be removed from Bureau of Municipal Finance Law (BMFL;
community's books. formerly Property Tax Bureau) – A bureau within
the State Division of Local Services charged with
Budget – A plan for allocating resources to support providing legal advice to local officials on municipal
particular services, purposes and functions over a finance or tax issues, legal opinions to
specified period of time. (See Level Funded Budget, communities, periodic Legislative Bulletins
Performance Budget, Program Budget, Zero Based summarizing recent legislation affecting property
Budget) taxation and municipal finance, and Informational
Municipal Finance Glossary 4Source page 6
Department of Revenue/Division of Local Services
Guideline Releases (IGRs) detailing municipal tax Capital Outlay Expenditure Exclusion – A
and financial procedures. temporary increase in the tax levy to fund a capital
project or make a capital acquisition. Exclusions
Business-Type Activities – One of two classes of
require two-thirds vote of the selectmen or city
activities reported in the GASB 34 government-wide
council (sometimes with the mayor's approval) and
financial statements. These activities are financed
a majority vote in a community-wide referendum.
in whole or in part by fees charged to users for
The exclusion is added to the tax levy only during
goods or services. Some examples are enterprise
the year in which the project is being funded and
(MGL Chapter 44 §53F½) , special revenue (MGL
may increase the tax levy above the levy ceiling.
Ch. 44 §69B) water, and municipal electric fund.
Capital Projects Fund – Fund type used to
Capital Assets – All tangible property used in the
account for financial resources to be used for the
operation of government, which is not easily
acquisition or construction of major capital facilities
converted into cash, and has an initial useful live
(other than those financed by proprietary funds).
extending beyond a single financial reporting
period. Capital assets include land and land Cash – Currency, coin, checks and bankers' drafts
improvements; infrastructure such as roads, on hand or on deposit with an official or agent
bridges, water and sewer lines; easements; designated as custodian of cash and bank deposits.
buildings and building improvements; vehicles,
Cash Book – A source book of original entry, which
machinery and equipment. Communities typically
a treasurer is required to maintain, for the purpose
define capital assets in terms of a minimum useful
of recording municipal receipts, adjustments to
life and a minimum initial cost. (See Fixed Asset)
balances, deposits to municipal accounts and
Capital Budget – An appropriation or spending disbursements through warrants.
plan that uses borrowing or direct outlay for capital
Cash Management – The process of monitoring
or fixed asset improvements. Among other
the ebb and flow of money in an out of municipal
information, a capital budget should identify the
accounts to ensure cash availability to pay bills and
method of financing each recommended
to facilitate decisions on the need for short-term
expenditure, i.e., tax levy or rates, and identify
borrowing and investment of idle cash.
those items that were not recommended. (See
Capital Asset, Fixed Asset) Cash Receipts – Any money received by a
municipality or its departments whether by cash,
Capital Improvements Program – A blueprint for
check or electronic transfer.
planning a community's capital expenditures that
comprises an annual capital budget and a five-year Categorical Grant – A type of intergovernmental
capital program. It coordinates community planning, payment, which is characterized by extensive
fiscal capacity and physical development. While all restrictions on the uses to which the funds may be
of the community’s needs should be identified in the “spent” by the recipient government.
program, there is a set of criteria that prioritizes the
expenditures. CD – Certificate of Deposit
Capital Outlay – The exchange of one asset (cash) Cemetery Perpetual Care – Funds donated by
for another (capital asset), with no ultimate effect on individuals for the care of gravesites. According to
net assets. Also known as "pay as you go," it is the MGL Ch. 114 §25, funds from this account must be
appropriation and use of available cash to fund a invested and spent as directed by perpetual care
capital improvement, as opposed to incurring debt agreements. If no agreements exist, the interest
to cover the cost. (but not principal) may be used as directed by the
Municipal Finance Glossary 5Source page 7
Department of Revenue/Division of Local Services
cemetery commissioners for the purpose of Chapter Land – Forest, agricultural/horticultural,
maintaining cemeteries. and recreational lands classified, valued and taxed
according to MGL Chapters 61, 61A, and 61B. Land
Certification – Verification of authenticity. Can
is valued at its current use rather than the full and
refer to the action of a bank, trust company, or
fair cash value. The commercial property tax rate is
DOR’s Bureau of Accounts (BOA) in the issuance
applicable for land defined under these chapters,
of State House Notes, to confirm the genuineness
unless the community adopts a local option
of the municipal signatures and seal on bond
provision within each chapter to apply the open
issues. The certifying agency may also supervise
space rate.
the printing of bonds and otherwise safeguard their
preparation against fraud, counterfeiting, or over- Cherry Sheet – Named for the cherry colored
issue. Also refers to the certification by the Bureau paper on which they were originally printed, the
of Local Assessment (BLA) that a community’s Cherry Sheet is the official notification to cities,
assessed values represent full and fair cash value towns and regional school districts of the next fiscal
(FFCV). (See Triennial Revaluation) year’s state aid and assessments. The aid is in the
form of distributions, which provide funds based on
Certificate of Deposit (CD) – A bank deposit
formulas and reimbursements that provide funds for
evidenced by a negotiable or non-negotiable
costs incurred during a prior period for certain
instrument that provides on its face that the amount
programs or services. Links to the Cherry Sheets
of such deposit, plus a specified interest, is payable
are located on the DLS website at
to the bearer or to any specified person on a certain
www.mass.gov/dls. (See Cherry Sheet
date specified in the instrument, at the expiration of
Assessments, Estimated Receipts)
a certain specified time, or upon notice in writing.
Cherry Sheet Assessments – Estimates of annual
Chapter 70 School Aid – Chapter 70 refers to the
charges to cover the cost of certain state and
school funding formula created under the Education
county programs.
Reform Act of 1993 by which state aid is distributed
through the Cherry Sheet to help establish Cherry Sheet Offset Items – Local aid that may be
educational equity among municipal and regional spent without appropriation in the budget, but which
school districts. must be spent for specific municipal and regional
school district programs. Current offset items
Chapter 90 Highway Funds – State funds derived
include racial equality grants, school lunch grants,
from periodic transportation bond authorizations
and public libraries grants. (See Offset Receipts)
and apportioned to communities for highway
projects based on a formula under the provisions of CIP – Can refer to an abbreviation for Commercial,
MGL Ch. 90 §34. The Chapter 90 formula Industrial, and Personal properties by the Bureau of
comprises three variables: local road mileage Local Assessment (BLA). It also can refer to
(58.33 percent) as certified by the Massachusetts Capital Improvements Program.
Highway Department (MHD), local employment
Classification of Real Property – Assessors are
level (20.83 percent) derived the Department of
required to classify all real property according to
Employment and Training (DET), and population
use into one of four classes: Residential, Open
estimates (20.83 percent) from the US Census
Space, Commercial, and Industrial. Having
Bureau. Local highway projects are approved in
classified its real property, local officials are
advance. Later, on the submission of certified
permitted to determine locally, within limits
expenditure reports to MHD, communities receive
established by statute and the Commissioner of
cost reimbursements to the limit of the grant.
Revenue, what percentage of the tax burden is to
be borne by each class of real property and by
Municipal Finance Glossary 6Source page 8
Department of Revenue/Division of Local Services
personal property owners. (See Classification of the petition, together with referendum approval by
Tax Rate) majority vote. The local program is funded by a
local surcharge up to 3 percent on real property tax
Classification of the Tax Rate – Each year, the
bills and matching dollars from the state generated
selectmen or city council vote whether to exercise
from registry of deeds fees. (See DOR IGR 00-209
certain tax rate options. Those options include
as amended by IGR 01-207 and IGR 02-208)
choosing a residential factor (MGL Ch. 40 §56), and
determining whether to offer an open space Community Preservation Fund – A special
discount, a residential exemption (Ch. 59, §5C), revenue fund established pursuant to MGL Ch. 44B
and/or a small commercial exemption (Ch. 59, §5I) to receive all monies collected to support a
to property owners. community preservation program, including but not
limited to, tax surcharge receipts, proceeds from
CMR – Code of Massachusetts Regulations
borrowings, funds received from the
Code of Ethics – The provisions and requirements Commonwealth, and proceeds from the sale of
of MGL Ch. 286A pertaining to the standards of certain real estate.
behavior and conduct to which all public officials
Compensated Absences – Time off, with pay,
and employees are held. (See State Ethics
made available to employees for vacation leave,
Commission)
sick leave, and similar benefits. For financial
COLA – Cost of Living Adjustment reporting purposes, compensated absences are
strictly limited to leave that is attributable to services
Collective Bargaining – The process of already rendered, and is not contingent on a
negotiating workers' wages, hours, benefits, specific event (such as illness) that is outside the
working conditions, etc., between an employer and control of the employer and employee.
some or all of its employees, who are represented
by a recognized labor union. Compensating Balance Agreement – An
alternative to the payment of direct fees for banking
Commitment – This establishes the liability for services. In this case, a bank specifies a minimum
individual taxpayers. For example, the assessors' balance that the municipality must maintain in non-
commitment of real estate taxes fixes the amount interest bearing accounts. The bank can then lend
that the collector will bill and collect from property this money (subject to a reserve requirement) and
owners. earn interest, which will at least cover the cost of
services provided to the municipality.
Community Preservation Act (CPA) – Enacted as
Compensating balance agreements are permitted
MGL Ch. 44B in 2000, CPA permits cities and
under MGL Ch. 44 §53F and must be approved
towns accepting its provisions to establish a
annually by town meeting or the city council.
restricted fund from which monies can be
appropriated only for a) the acquisition, creation Computer Assisted Mass Appraisal (CAMA) – An
and preservation of open space; b) the acquisition, automated system for maintaining property data,
preservation, rehabilitation, and restoration of valuing property, notifying owners, and ensuring tax
historic resources; and c) the acquisition, creation equity through uniform valuations.
and preservation of land for recreational use; d) the
creation, preservation and support of community Conservation Fund – A city or town may
housing; and e) the rehabilitation and restoration of appropriate money to a conservation fund. This
open space, land for recreational use and money may be expended by the conservation
community housing that is acquired or created commission for lawful conservation purposes as
using monies from the fund. Acceptance requires described in MGL Ch. 40 §8C. The money may also
town meeting or city council approval or a citizen be expended by the conservation commission for
Municipal Finance Glossary 7Source page 9
Department of Revenue/Division of Local Services
damages arising from an eminent domain taking Book provides a listing of domestic and foreign
provided that the taking was approved by a two- corporations doing business in Massachusetts as of
thirds vote of city council or town meeting. January 1 and which are subject to a tax or excise
under MGL Chap. 59 (local property tax), 60A
Consumer Price Index (CPI) – The statistical
(motor vehicle excise), or 63 (corporation excises).
measure of changes, if any, in the overall price level
The listing provides information primarily to
of consumer goods and services. The index is often
assessors about the taxable status of businesses
called the "cost-of-living index."
located within their community. Links to the Corp.
Contingent Appropriation – An appropriation that Book are located on the DLS website at
authorizes spending for a particular purpose only if www.mass.gov/dls.
subsequently approved in a voter referendum.
Cost Approach – A method used to estimate the
Under MGL Ch. 59 §21C (m), towns may make
present market value of an existing property by
appropriations from the tax levy, available funds or
calculating the current cost to rebuild it, then
borrowing, contingent upon the subsequent
adjusting the cost downward for depreciation based
passage of a Proposition 2½ override or exclusion
on the property's actual age. Land is valued
question for the same purpose. If initially approved
separately and added to the depreciated
at an annual town meeting, voter approval of the
replacement cost.
contingent appropriation must occur by September
15. Otherwise, the referendum vote must occur Cost of Living Adjustment (COLA) – It is often
within 90 days after the town meeting dissolves. used in municipal contracts that provide for annual
The question may be placed before the voters at or periodic increases in salaries and wages for
more than one election, but if not approved by the employees over the course of the contract. The
applicable deadline, the appropriation is null and amount of an increase is most often negotiated
void. If contingent appropriations are funded based on a community's ability to pay, but is
through property taxes, DOR cannot approve the sometimes tied to the annual change in a specified
tax rate until the related override or exclusion index, i.e., consumer price index (CPI). In
question is resolved or the deadline passes, Massachusetts, it is also used in the Optional Cost
whichever occurs first. of Living Adjustment for Property Exemptions.
Contingent Debt – Debt that is not in the first Cost-Benefit Analysis – A decision-making tool
instance payable as a direct obligation of the that allows a comparison of options based on the
governmental unit, but has been guaranteed by a level of benefit derived and the cost to achieve the
pledge of its faith and credit. The obligation to pay benefit from different alternatives.
by the guarantor arises upon the default of the
CPI – Consumer Price Index
borrower. An industrial revenue bond guaranteed
by a municipality would constitute contingent debt. Current Refunding of Debt – When the proceeds
of the refunding debt are applied immediately to
Contingent Liabilities – Items that may become
redeem the old debt. That is, the maturity date on
liabilities as a result of conditions undetermined at a
the old debt coincides with the issuance date of the
given date, such as guarantees, pending law suits,
new borrowing obligation. (See Refunding and
judgments under appeal, unsettled disputed claims,
Advance Refunding of Debt)
unfilled purchase orders, and uncompleted
contracts. Cyclical Inspection Program – A cyclical
reinspection program involves completing an
Control Board – (See Finance Control Board)
interior and exterior inspection of all property over a
Corporations Book (Corp. Book) – Annually multi-year period, not exceeding nine years.
updated and published on the Internet, the Corp
Municipal Finance Glossary 8Source page 10
Department of Revenue/Division of Local Services
Data Collection – Process of inspecting real and and the payment of, general long-term debt
personal property and recording its attributes, principal and interest. In Massachusetts, these are
quality, and condition. only allowed by special legislation.
Debt Authorization – Formal approval by a two- Debt Statement – Reference to a report, which
thirds vote of town meeting or city council to incur local treasurers are required to file with the DOR,
debt, in accordance with procedures stated in MGL showing authorized and issued debt, debt retired
Ch. 44 §§1, 2, 3, 4a, 6-15. and interest paid by a community during the prior
fiscal year, as well as authorized but unissued debt
Debt Burden – The amount of debt carried by an
at year-end. Also known as the "Statement of
issuer usually expressed as a measure of value
Indebtedness."
(i.e., debt as a percentage of assessed value, debt
per capita, etc.). Sometimes debt burden refers to Deferred Revenue – Amounts that do not meet the
debt service costs as a percentage of the total criteria for revenue recognition. Also, earned
annual budget. amounts that are not yet available to liquidate
liabilities of a current period.
Debt Exclusion – An action taken by a community
through a referendum vote to raise the funds Deficit – The excess of expenditures over revenues
necessary to pay debt service costs for a particular during an accounting period. Also refers to the
project from the property tax levy, but outside the excess of the liabilities of a fund over its assets.
limits under Proposition 2½. By approving a debt
Deficit Bonds – Long-term borrowing vehicle
exclusion, a community calculates its annual levy
intended to fund operating deficits and available to
limit under Proposition 2½, then adds the excluded
cities and towns only through special legislation.
debt service cost. The amount is added to the levy
limit for the life of the debt only and may increase Demand Letter – Notice to a delinquent taxpayer of
the levy above the levy ceiling. overdue taxes or charges typically mailed soon
after payment period has ended. While it is a
Debt Limit – The maximum amount of debt that a
courtesy, there is no requirement to issue
municipality may authorize for qualified purposes
correspondence of this type.
under state law. Under MGL Ch. 44 §10, debt limits
are set at 5 percent of EQV. By petition to the Demand Notice – When a tax bill becomes past
Municipal Finance Oversight Board, cities and due, the collector sends a demand notice
towns can receive approval to increase their debt requesting payment. The collector is required to
limit to 10 percent of EQV. issue a demand before initiating a tax taking.
Debt Policy – Part of an overall capital financing Deputy Collector – If 14 days after the mailing of a
policy that provides evidence of a commitment to demand payment is not received, the collector may
meet infrastructure needs through a planned issue warrants to one or more deputy collectors
program of future financing. Debt policies should be authorizing them to collect delinquent taxes,
submitted to elected officials for consideration and commonly motor vehicle excise. For outstanding
approval. excise, the deputy may mark licenses/registrations
or provide evidence (e.g., death absence, poverty,
Debt Service – The repayment cost, usually stated
insolvency or other inability of the persons
in annual terms and based on an amortization
assessed to pay) that the accounts are
schedule, of the principal and interest on any
uncollectable. All amounts collected by the deputy
particular bond issue.
collector should be deposited to a municipal bank
Debt Service Fund – Governmental fund type used account from which the deputy may be paid his
to account for the accumulation or resources for, compensation by check signed by the collector
Municipal Finance Glossary 9Source page 11
Department of Revenue/Division of Local Services
once the tax payments have cleared (MGL Ch. 60 Eminent Domain – The power of a government to
§92). However, if a community requires all receipts take property for public purposes. Frequently used
be paid over to the treasurer, the deputy collector to obtain real property that cannot be purchased
must be paid through the warrant process. (See from owners in a voluntary transaction. Property
DOR IGR 90-219) owner receives fair compensation (market value at
the time of the taking) as determined through court
Designated Unreserved Fund Balance – A
proceedings.
limitation on the use of all or part of the expendable
balance in a governmental fund. Encumbrance – A reservation of funds to cover
obligations arising from purchase orders, contracts,
DLS – Division of Local Service
or salary commitments that is chargeable to, but not
DOR – Department of Revenue yet paid from, a specific appropriation account.
Education Reform Act of 1993 – State law that End User – The person or persons for whom a
authorized the seven-year, Ch. 70 funding program particular hardware device or software application
for education and that established spending targets was designed to be used.
for school districts as a means to remedy
Enterprise Fund – An enterprise fund, authorized
educational inequities. Scheduled to end by FY00,
by MGL Ch. 44 §53F½, is a separate accounting
the program has been extended, pending
and financial reporting mechanism for municipal
agreement on further reforms.
services for which a fee is charged in exchange for
Electronic Transfer – The electronic transmission goods or services. It allows a community to
of payments from one bank to another through a demonstrate to the public the portion of total costs
wire system, used in lieu of checks. (See Wire of a service that is recovered through user charges
Transfer) and the portion that is subsidized by the tax levy, if
any. With an enterprise fund, all costs of service
ESE – Department of Elementary & Secondary delivery--direct, indirect, and capital costs--are
Education (formerly Department of Education, identified. This allows the community to recover
DOE) total service costs through user fees if it chooses.
Enterprise accounting also enables communities to
Emergency Board – A board authorized by MGL
reserve the "surplus" or net assets unrestricted
Ch. 44 §8 (9) to review and approve emergency
generated by the operation of the enterprise rather
loan requests of municipalities. As used in this
than closing it out to the general fund at year-end.
clause, emergency means a sudden, unavoidable
Services that may be treated as enterprises include,
event(s) that could not have been reasonably
but are not limited to, water, sewer, hospital, and
foreseen or anticipated at the time of submission of
airport services. See DOR IGR 08-101
the annual budget for approval.
Equalized Valuations (EQVs) – The determination
Emergency Finance Board (EFB) – This board
of an estimate of the full and fair cash value (FFCV)
was abolished July 31, 2003. (See Municipal
of all property in the Commonwealth as of a certain
Finance Oversight Board)
taxable date. EQVs have historically been used as
Emergency Spending – MGL Ch. 44 §31 allows a a variable in distributing some state aid accounts
community to spend in excess of appropriation in and for determining county assessments and other
cases of major disasters that pose an immediate costs. The Commissioner of Revenue, in
threat to the health or safety of persons or property, accordance with MGL Ch. 58 §10C, is charged with
following the emergency declaration by council or the responsibility of biannually determining an
selectmen and the approval of the Director of equalized valuation for each city and town in the
Accounts. Commonwealth.
Municipal Finance Glossary 10Source page 12
Department of Revenue/Division of Local Services
Estimated Receipts – A term that typically refers to Expenditure – An outlay of money made by
anticipated local revenues listed on page three of municipalities to provide the programs and services
the Tax Recapitulation Sheet. Projections of local within their approved budget.
revenues are often based on the previous year's
Expense – An identified cost incurred to
receipts and represent funding sources necessary
accomplish a particular goal.
to support a community's annual budget. (See Local
Receipts) Fair Market Value – (See Full and Fair Cash
Value)
Excess and Deficiency (E&D) – Also called the
"surplus revenue" account, this is the amount by Federal Aid Anticipation Note (FAAN) – Short-
which cash, accounts receivable, and other assets term debt instrument used to generate cash with
exceed a regional school district’s liabilities and the expectation that the debt will be paid from
reserves as certified by the Director of Accounts. anticipated federal aid. As a note, FAANS are
The calculation is based on a year-end balance typically issued for a term of less than one year and
sheet, which is submitted to DOR by the district’s are full faith and credit obligations.
auditor, accountant, or comptroller as of June 30.
The regional school committee must apply certified FFCV – Full and Fair Cash Value
amounts exceeding five percent of the district’s
Fiduciary Funds – Repository of money held by a
prior year operating and capital costs to reduce the
municipality in a trustee capacity or as an agent for
assessment on member cities and towns.
individuals, private organizations, other
Important: E&D is not available for appropriation
governmental units, and other funds. These include
until certified by the Director of Accounts.
pension (and other employee benefit) trust funds,
Excess Levy Capacity – The difference between investment trust funds, private-purpose trust funds,
the levy limit and the amount of real and personal and agency funds.
property taxes actually levied in a given year.
Field Review Audit – A review of assessment
Annually, the board of selectmen or city council
valuation methods and support documentation by
must be informed of excess levy capacity and their
the BLA performed as a prerequisite to a triennial
acknowledgment must be submitted to DOR when
certification of property values.
setting the tax rate.
Finance Control Board – A board created by
Exemption – A discharge, established by statute,
special legislation and comprised of state officials to
from the obligation to pay all or a portion of a
oversee the financial management of a community,
property tax. The exemption is available to
which may have received deficit borrowing
particular categories of property or persons upon
authorization or state loans to finance operating
the timely submission and approval of an
deficits.
application to the assessors. Properties exempt
from taxation include hospitals, schools, houses of Financial Advisor – An individual or institution that
worship, and cultural institutions. Persons who may assists municipalities in the issuance of tax exempt
qualify for exemptions include disabled veterans, bonds and notes. The public finance department of
blind individuals, surviving spouses, and seniors. a commercial bank or a non-bank advisor usually
provides this service.
Exemption Date – Exemption status is determined
as of July 1. All qualifying factors must be met as of Financial Disclosure Law – MGL Chapter 268B
that date. requires certain individuals, officials and candidates
for elected office to file statements of financial
interests (SFI) with the State Ethics Commission.
Municipal Finance Glossary 11Source page 13
Department of Revenue/Division of Local Services
Financial Management Review – At the request of the previous fiscal year including unexpended free
the chief executive officer(s) of a community, DLS cash from the previous year, actual receipts in
will assemble a consulting team to study a excess of revenue estimates shown on the tax
municipality's financial operations and condition to recapitulation sheet, and unspent amounts in
determine its strengths and weaknesses. Additional budget line-items. Unpaid property taxes and
information on this and other consulting services certain deficits reduce the amount that can be
may be found on the DLS website at certified as free cash. The calculation of free cash is
www.mass.gov/dls. (See Municipal Data based on the balance sheet as of June 30, which is
Management and Technical Assistance Bureau) submitted by the community's auditor, accountant,
or comptroller. Important: free cash is not available
Financial Statement – A presentation of the assets
for appropriation until certified by the Director of
and liabilities of a community as of a particular date
Accounts. (See Available Funds)
and most often prepared after the close of the fiscal
year. Full Accrual – Basis of Accounting – A method of
accounting that recognizes the financial effect of
Fiscal Year (FY) – Since 1974, the Commonwealth
transactions, events, and interfund activities when
and municipalities have operated on a budget cycle
they occur, regardless of the timing of related cash
that begins July 1 and ends June 30. The
flows.
designation of the fiscal year is that of the calendar
year in which the fiscal year ends. Since 1976, the Full and Fair Cash Value (FFCV) – Fair cash
federal government fiscal year has begun on value has been defined by the Massachusetts
October 1 and ended September 30. Supreme Judicial Court as "fair market value, which
is the price an owner willing but not under
Fixed Assets – Long-lived, tangible assets such as
compulsion to sell ought to receive from one willing
buildings, equipment and land obtained or
but not under compulsion to buy. It means the
controlled as a result of past transactions or
highest price that a normal purchaser not under
circumstances.
peculiar compulsion will pay at the time, and cannot
Fixed Costs – Costs that are legally or exceed the sum that the owner after reasonable
contractually mandated such as retirement, effort could obtain for his property. A valuation
FICA/Social Security, insurance, debt service costs limited to what the property is worth to the
or interest on loans. purchaser is not market value. The fair cash value
is the value the property would have on January
Float – The difference between the bank balance first of any taxable year in the hands of any owner,
for a local government’s account and its book including the present owner." (Boston Gas Co. v.
balance at the end of the day. The primary factor Assessors of Boston, 334 Mass. 549, 566 (1956))
creating float is clearing time on checks and
deposits. Delays in receiving deposit and Full Faith and Credit Obligations – A pledge of
withdrawal information also influence float. the general taxing powers for the payment of
governmental obligations. Bonds carrying such
Foreclosure – (See Tax Title Foreclosure) pledges are usually referred to as general obligation
or full-faith-and-credit bonds.
Foundation Budget – The spending target
imposed by the Education Reform Act of 1993 for Full Measure and List – An inspection program
each school district as the level necessary to completed by assessors to maintain up-to-date
provide an adequate education for all students. property records. Inspections are usually carried out
by assessors, in-house staff or by contract data
Free Cash (Also Budgetary Fund Balance) –
collectors. Properties are literally measured and re-
Remaining, unrestricted funds from operations of
listed in the assessors' records with any changes in
Municipal Finance Glossary 12Source page 14
Department of Revenue/Division of Local Services
conditions since the last inspection as indicated on accounting statements. Through actuarial analysis,
field cards. Also referred to as a cyclical inspection municipalities must identify the true costs of the
program, BLA recommends a full measure and list OPEB earned by employees over their estimated
be completed at least every 7-to-10 years. years of actual service.
Fund – An accounting entity with a self balancing General Fund – The fund used to account for most
set of accounts that is segregated for the purpose financial resources and activities governed by the
of carrying on identified activities or attaining certain normal town meeting/city council appropriation
objectives in accordance with specific regulations, process.
restrictions, or limitations.
General Fund Subsidy – Most often used in the
Fund Accounting – Organizing the financial context of enterprise funds. When the revenue
records of a municipality into multiple, segregated generated by rates, or user fees, is insufficient to
locations for money. A fund is a distinct entity within cover the cost to provide the particular service,
the municipal government in which financial general fund money is used to close the gap in the
resources and activity (assets, liabilities, fund form of a subsidy. The subsidy may or may not be
balances, revenues, and expenditures) are recovered by the general fund in subsequent years.
accounted for independently in accordance with
General Ledger – The accountant's record of
specific regulations, restrictions or limitations.
original entry, which is instrumental in forming a
Examples of funds include the general fund and
paper trail of all government financial activity.
enterprise funds. Communities whose accounting
records are organized according to the Uniform General Obligation Bonds – Bonds issued by a
Municipal Accounting System (UMAS) use multiple municipality for purposes allowed by statute that are
funds. backed by the full faith and credit of its taxing
authority.
Fund Balance – The difference between assets
and liabilities reported in a governmental fund. Also Generally Accepted Accounting Principles
known as fund equity. (See Unreserved Fund (GAAP) – Uniform minimum standards and
Balance) guidelines for financial accounting and reporting
that serve to achieve some level of standardization.
GANS – Grant Anticipation Notes
Generally Accepted Auditing Standards (GAAS)
GASB 34 – A major pronouncement of the
– Auditing standards established by the Auditing
Governmental Accounting Standards Board that
Standards Board of the American Institute of
establishes new criteria on the form and content of
Certified Public Accountants. All financial statement
governmental financial statements. GASB 34
audit engagements must follow GAAS.
requires a report on overall financial health, not just
on individual funds. It requires more complete Generally Accepted Government Auditing
information on the cost of delivering services and Standards (GAGAS) – These are auditing
value estimates on public infrastructure assets, standards established by the U.S. Governmental
such as bridges, road, sewers, etc. It also requires Accountability Office (GAO) publication
the presentation of a narrative statement analyzing "Government Auditing Standards" also known as
the government's financial performance, trends and the "Yellow Book". GAGAS for financial statement
prospects for the future. audits incorporate the fieldwork and reporting
standards of GAAS.
GASB 45 – This is another Governmental
Accounting Standards Board major pronouncement GIS (Geographical Information System) – A
that each public entity account for and report other computerized mapping system and analytical tool
postemployment benefits (See OPEB) in its
Municipal Finance Glossary 13Source page 15
Department of Revenue/Division of Local Services
that allows a community to raise information on a Home Rule Charter – An alternative, under MGL
parcel, area or community wide basis. It also allows Ch. 43B, to create a charter commission by which
parcels to be identified and sorted on the basis of cities and towns create, adopt, revise and amend
certain specified criteria. The system can integrate local charters.
assessors' property data, water and sewer line
Hotel/Motel Excise – A local option since 1985 that
networks, wetlands, floodplains and as well as other
allows a community to assess a tax on short-term
data.
room occupancy. The community may levy up to 4
Governing Body – A board, committee, percent of the charge for stays of less than 90 days
commission, or other executive or policymaking at hotels, motels and lodging houses. The
body including the school committee of a convention center legislation imposed an additional
municipality. 2.75 percent charge in Boston, Cambridge,
Springfield and Worcester.
Government Finance Officers Association
(GFOA) – A nationwide association of public House 1 or 1A – Designation given to the
finance professionals. Governor's annual budget request, which is
submitted to the House of Representatives by the
Governmental Accounting Standards Board
fourth Wednesday of January. Except that a newly
(GASB) – The ultimate authoritative accounting and
elected governor has eight weeks from the day
financial reporting standard-setting body for state
he/she takes office to submit a budget. The budget
and local governments.
is designated House 1 in the first year of the two-
Governmental External Investment Pool – An year legislative session and House 1A in the
arrangement that commingles money of more than second year.
one legally separate entity and invests, on the
HUD – U.S. Department of Housing and Urban
participants’ behalf, in an investment portfolio. A
Development
pool can be sponsored by an individual
government, jointly by more than one government, IAAO – International Association of Assessing
or by a nongovernmental entity. An example is the Officers
Massachusetts Municipal Depository Trust.
IG – Inspector General
Governmental Funds – Funds generally used to
Income Approach – A method of estimating
account for tax-supported activities. There are five
property value by converting anticipated net rental
different types of governmental funds: the general
revenue, generated by the property, into an
fund, special revenue funds, capital projects funds,
indication of market value. Used primarily to value
debt service funds, and permanent funds.
commercial/industrial properties and apartment
Grant Anticipation Notes (GANS) – Short-term, buildings, which are normally bought and sold on
interest-bearing notes issued by a government to the basis of their income producing capability.
raise capital to be repaid by grants proceeds, which
Incurred But Not Reported (IBNR) – Per Ch. 61 of
are anticipated at a later date. GANS allow the
the Acts of 2005, any political subdivision that self-
recipient of the grant to begin carrying out the
insures its group health plan under G.L. Ch. 32B
purpose of the grant immediately.
§3A must conduct an annual audit of its health
Home Rule – This refers to the power of insurance claims fund to ensure that all claims
municipalities to regulate their affairs by by- incurred but not reported are properly accrued at
law/ordinance or home-rule charter subject to the end of the fiscal year. Any year-end deficit must
certain limitations. be funded in the succeeding year. Any political
subdivision that has a deficit in its self-insurance
Municipal Finance Glossary 14Source page 16
Department of Revenue/Division of Local Services
health fund at the end of FY2005 because it has not conditions and property value trends, adjustments
been accruing these IBNR claims is allowed a one- may increase, decrease or leave values
time opportunity to amortize that deficit over a unchanged. (See IGR No. 05-401)
period not to exceed three years, beginning in
Internal Service Fund – A municipal accounting
FY2007. (See IGR No. 05-101)
fund used to accumulate the cost of central services
Indirect Cost – Costs of a service not reflected in such as data processing, printing, postage, motor
the operating budget of the entity providing the pool. Costs or charges to an internal service fund
service. An example of an indirect cost of providing are then allocated to other departments or funds
water service would be the value of time spent by within the government unit.
non-water department employees processing water
Investments – Securities and real estate held for
bills. A determination of these costs is necessary to
the production of income in the form of interest,
analyze the total cost of service delivery. The
dividends, rentals, or lease payments. The term
matter of indirect costs arises most often in the
does not include fixed assets used in governmental
context of enterprise funds.
operations.
Informational Guideline Release (IGR) – A DLS
IT – Information Technology
publication that outlines a policy, administrative
procedure, or provides a law update related to Joint Labor Management Committee (JLMC) –
municipal finance. Refer to online listing of IGRs. The purpose of the JLMC is to mediate police
officer or fire fighter collective bargaining disputes
Inside Debt – Municipal debt incurred for purposes
with municipalities when negotiations have reached
enumerated in MGL Ch. 44, §7, and measured
an impasse. The JLMC enters the collective
against the community's debt limit as set under Ch.
bargaining process only when petitioned to do so by
10. Consequently, the borrowing is inside the debt
either party or by both parties acing jointly.
limit and referred to as inside debt. (See Outside
Debt) Judgment – An amount to be paid or collected by a
governmental unit as a result of a court decision,
Interest – Compensation paid or to be paid for the
including a condemnation award in payment for
use of money, including amounts payable at
private property taken for public use.
periodic intervals or discounted at the time a loan is
made. In the case of municipal bonds, interest Land Court – Established in 1898, the Land Court
payments accrue on a day-to-day basis, but are has the exclusive jurisdiction to foreclose rights of
paid every six months. redemption on a property in tax title.
Interest Rate – The interest payable, expressed as Land of Low Value (MGL Ch. 60 §79)– After 90
a percentage of the principal available, for use days from the date of taking, the treasurer may
during a specified period of time. It is always work with the assessors to pursue land of low value
expressed in annual terms. foreclosure (MGL Ch. 60 §79) through DOR, an
alternative foreclosure procedure to seeking a
Interim Year Valuation Adjustment – State law
decree from Land Court. Annually, DLS publishes
requires that local assessed values reflect market
the maximum valuation of parcels qualifying for the
value every year. Every three years, BLA reviews
land of low value foreclosure procedure.
and certifies that an individual community's
assessed values meet the standard. In between Land Schedule – A table, typically developed by
these triennial revaluations, a community must assessors and revaluation consultants, which is
complete an annual analysis to determine whether used to arrive at consistent assessed values for
an interim year value adjustment is warranted and land within defined neighborhoods. Based on an
report the results to BLA. Depending on market
Municipal Finance Glossary 15Source page 17
Department of Revenue/Division of Local Services
analysis of market sales, neighborhood prime site Levy Ceiling – A levy ceiling is one of two types of
value, secondary site value, and so forth are levy (tax) restrictions imposed by MGL Ch. 59 §21C
established within a computer program. As the (Proposition 2½). It states that, in any year, the real
property characteristics of other land parcels are and personal property taxes imposed may not
entered, the computer program assigns a value exceed 2½ percent of the total full and fair cash
based on the land schedule. value of all taxable property. Property taxes levied
may exceed this limit only if the community passes
Late Interest – When taxes and excise are
a capital exclusion, a debt exclusion, or a special
overdue, late interest accrues automatically. For
exclusion. (See Levy Limit)
fees and charges, a community may establish an
ordinance/bylaw to charge interest on overdue Levy Limit – A levy limit is one of two types of levy
accounts to encourage timely payments (MGL Ch. (tax) restrictions imposed by MGL Ch. 59 §21C
40 §21E). In the ordinance/bylaw, the community (Proposition 2½). It states that the real and personal
must establish due dates and set an overdue property taxes imposed by a city or town may only
interest rate not to exceed the rate that applies to grow each year by 2½ percent of the prior year's
overdue taxes (currently 14 percent annually). levy limit, plus new growth and any overrides or
exclusions. The levy limit can exceed the levy
Law Enforcement Trust Fund – A revolving fund
ceiling only if the community passes a capital
established to account for a portion of the proceeds
expenditure exclusion, debt exclusion, or special
from the sale of property seized from illegal drug-
exclusion. (See Levy Ceiling)
related activities. Funds may be expended to defray
certain qualified law enforcement costs as outlined LGAC – Local Government Advisory Committee
in MGL Ch. 94C §47. Funds from this account may
Lien – A legal claim against real or personal
be expended by the police chief without further
property to protect the interest of a party (i.e., a city
appropriation.
or town) to whom a debt is owed (i.e., taxes). In the
Legal Level of Budgetary Control – The level at case of real property, the lien in favor of a
which a government’s management may not municipality automatically arises each January 1,
reallocate resources without approval from the but must be secured through other action. (See
legislative body. Lien Date)
Legal Opinion (Debt Issuance) – An opinion by an Lien Date – The date a lien arises on real property
attorney or law firm that bonds have been legally to protect the municipality’s right to payment of
issued by a public body, and, usually, that the taxes. Property tax liens arise by law on the
bonds are exempt from federal income taxes and January 1 assessment date. The lien is secured
some Massachusetts taxes under existing laws, when the collector makes a tax taking and places
regulations, and rulings. the property in tax title. Unless the lien is secured, it
expires if five years elapse from the January 1
Legislative Bulletins – The Division of Local
assessment date and the property is transferred in
Services publishes Bulletins (announcements and
the meantime. Securing a lien on a motor vehicle or
useful information) for local officials and municipal
boat excise, personal property tax requires civil
finance professionals.
court action.
Levy – The amount a community raises through the
Line-Item Budget – A budget that separates
property tax. The levy can be any amount up to the
spending into categories, or greater detail, such as
levy limit, which is re-established every year in
supplies, equipment, maintenance, or salaries, as
accordance with Proposition 2½ provisions.
opposed to a program budget.
Municipal Finance Glossary 16Source page 18
Department of Revenue/Division of Local Services
Line-Item Transfer – The reallocation of a budget Long-Term Debt – Community borrowing, or
appropriation between two line-items within an outstanding balance at any given time, involving
expenditure category (e.g., salaries, expenses). loans with a maturity date of 12 months or more.
Employed as a management tool, line-item transfer (See Permanent Debt)
authority allows department heads to move money
Maintenance Budget – A no-growth budget that
to where a need arises for a similar purpose and
continues appropriations for programs and services
without altering the bottom line. Whether or not line-
at their current year levels. The actual appropriation
item transfers are permitted depends on how the
to maintain programs and services may still
budget is presented (i.e., format) and what level of
increase due to inflation or other factors.
budget detail town meeting approves.
Market Value – (See Full and Fair Cash Value)
Local Acceptance Statute – A requirement placed
within the language of a General Law that a Mass Appraisal – Use of standardized procedures
community affirmatively accept the statute by town for collecting data and appraising property to
meeting or city council action or referenda before ensure that all properties within a municipality are
availing itself of the provisions of the particular law. valued uniformly and equitably.
Local Aid – Revenue allocated by the Material Weakness – A term used in connection
Commonwealth to cities, towns, and regional school with financial auditing. This is a significant
districts. Estimates of local aid are transmitted to deficiency in a community’s internal financial
cities, towns, and districts annually by the "Cherry control. It is a reportable condition (internal control
Sheets." Most Cherry Sheet aid programs are weakness) of such magnitude that it could
considered general fund revenues and may be potentially result in material misstatements of
spent for any purpose, subject to appropriation. financial condition.
Local Appropriating Authority – In a town, the Maturity Date – The date that the principal of a
town meeting has the power to appropriate funds, bond becomes due and payable in full.
including the authorization of debt. In a city, the city
council has the power upon the recommendation of Massachusetts Association of Assessing
the mayor. (See Legal Level of Budgetary Control) Officers (MAAO) – A professional organization for
individuals who are assessors in Massachusetts.
Local Receipts – Locally generated revenues,
other than real and personal property taxes. Massachusetts Certified Public Purchasing
Examples include motor vehicle excise, investment Official (MCPPO) – A certification and designation
income, hotel/motel tax, fees, rentals, and charges. program for public officials responsible for municipal
Annual estimates of local receipts are shown on the procurements in Massachusetts. (See Uniform
tax rate recapitulation sheet. (See Estimated Procurement Act)
Receipts)
Massachusetts Collectors and Treasurers
Lock Box Service – A service typically offered by a Association (MCTA) – A professional organization
financial institution for a fee to receive, process, and for individuals who are municipal tax collectors or
deposit payments made to municipalities for treasurers in Massachusetts.
property taxes, motor vehicle excise, boat excise,
Massachusetts Government Finance Officers
and/or utility payments. At the end of each
Association (MGFOA) – A professional
processing day, the community receives payment
organization promoting the advancement of the
information on disk or other medium, which can be
profession of Public Finance in Massachusetts.
automatically posted to the collectors' cash receipts
software. Printed reports are also provided.
Municipal Finance Glossary 17Source page 19
Department of Revenue/Division of Local Services
Massachusetts Municipal Association (MMA) – established by the Commissioner of Revenue, is
A statewide organization for bringing together used to make certain that the shift of the tax burden
municipal officials to develop and advocate uniform complies with the law. If the MRF would be less
policies and share information about providing than .65, the community cannot make the maximum
municipal services. shift and must use a CIP factor less than 1.50.
Chapter 200 of the Acts of 1988 allows certain
Massachusetts Municipal Auditors and
communities to use a CIP of up to 1.75 percent with
Accountants Association (MMAAA) – A
specified conditions.
professional organization for individuals who are
municipal auditors or accountants and others with Modified Accrual Basis of Accounting – A
an interest in these activities in Massachusetts. method of accounting that recognizes revenues in
the accounting period in which they become
Massachusetts Municipal Depository Trust
available and measurable.
(MMDT) – An investment program, founded in 1977
under the supervision of the State Treasurer, in Motor Vehicle Excise (MVE) – A locally imposed
which municipalities may pool excess cash for annual tax assessed to owners of motor vehicles
investment. registered to an address within the community, in
accordance with MGL Chapter 60A. The excise tax
Massachusetts School Building Authority
rate is set by statute at $25.00 per $1000 of vehicle
(MSBA) – Administers the state program that
value. Owner registration and billing information is
reimburses cities, towns, and regional school
maintained by the State Registry of Motor Vehicles
districts varying percentages of their school
and is made available to a city or town, or to the
construction costs depending on the wealth of the
Deputy Collector who represents it.
community or district and the category of
reimbursement. Projects that received their first Municipal(s) – (As used in the bond trade)
reimbursement payment prior to July 26, 2004 will "Municipal" refers to any state or subordinate
continue to get annual state payments to offset the governmental unit. "Municipals" (i.e., municipal
related annual debt service. Thereafter, cities, bonds) include not only the bonds of all political
towns, and regional school districts will receive a subdivisions, such as cities, towns, school districts,
lump sum amount representing the state’s share of special districts, but also bonds of the state and
the eligible project costs.. (See DOR IGR 06-101) agencies of the state.
MDM/TAB – Municipal Data Bank/Technical Municipal Bond Insurance – An insurance policy
Assistance Bureau that guarantees the interest and principal on a bond
issue will be paid as scheduled. The municipal bond
MGL – Massachusetts General Laws
insurer will pay the debt whether or not the default
MHD – Massachusetts Highway Department was caused by an economic crisis or a natural
disaster.
Minimum Required Local Contribution – The
minimum that a city or town must appropriate from Municipal Charges Lien – For delinquent water
property taxes and other local revenues for the (MGL Ch. 40 §§42A-F), sewer (MGL Ch. 83 §§16A-
support of schools (Education Reform Act of 1993). F), and trash (MGL Ch. 44 §28C(f)) charges, a
community may lien these amounts on the property
Minimum Residential Factor (MRF) – tax provided the enabling legislation is accepted
Massachusetts’ law allows for a shift of the tax and a certificate of acceptance is on file at the
burden from the residential and open space classes Registry of Deeds. For other unpaid local charges
of property to the commercial, industrial and and fees, a community may adopt MGL Ch. 40 §58
personal property classes (CIP). The MRF, separately for each purpose in order to lien each
Municipal Finance Glossary 18Source page 20
Department of Revenue/Division of Local Services
upon the property tax. The lien is created by Multiple Regression – A technique for valuing real
recording a listing of a particular type of charge or property that uses an equation generated through
fee (by parcel of land and by name) at the Registry sales analysis to estimate the value of unsold
of Deeds. properties.
Municipal Data Bank – Located within the Division Net Assets Unrestricted (formerly Retained
of Local Services (DLS), the Municipal Data Bank Earnings) – An equity account reflecting the
collects, organizes, stores and publishes historical accumulated earnings of an enterprise fund that
financial information on cities and towns, regional may be used to fund capital improvements, to
districts and the Commonwealth. Public access to reimburse the general fund for prior year subsidies,
the data is available through links at the DLS to reduce user charges and to provide for enterprise
website at www.mass.gov/dls. revenue deficits (operating loss).
Municipal Data Management and Technical Net School Spending (NSS) – School budget and
Assistance Bureau (MDM/TAB) – A bureau within municipal budget amounts attributable to education,
the State Division of Local Services charged with excluding long-term debt service, student
three primary functions: coordinating financial transportation, school lunches and certain other
management consulting services, providing specified school expenditures. A community’s NSS
financial and demographic information thru the funding must equal or exceed the NSS
Municipal Data Bank, and managing the process of Requirement established annually by the
preparing the Cherry Sheets and distributing local Department of Education (DOE). (See Education
aid through a number of state aid programs. (See Reform Act of 1993)
Cherry Sheet, Financial Management Review,
New Growth – The additional tax revenue
Municipal Data Bank)
generated by new construction, renovations and
Municipal Finance Oversight Board – Upon other increases in the property tax base during a
abolishing the Emergency Finance Board (EFB), calendar year. It does not include value increases
this board (consisting of the attorney general, state caused by normal market forces or by revaluations.
treasurer, state auditor, and director of accounts) New growth is calculated by multiplying the
was created. The types of actions that previously assessed value associated with new construction,
required EFB approval will now require either: (1) renovations and other increases by the prior year
no approval beyond the local votes the action tax rate. The additional tax revenue is then
requires, (2) approval of certain municipal officials, incorporated into the calculation of the next year's
or (3) approval of this board. (See DOR IGR 04- levy limit. For example, new growth for FY07 is
101) based on new construction, etc. that occurred
between January and December 2005 (or July 2005
Municipal Revenue Growth Factor (MRGF) – An
and June 2006 for accelerated new growth
estimate of the percentage change in a
communities). In the fall of 2006, when new growth
municipality's revenue growth for a fiscal year. It
is being determined to set the FY07 levy limit, the
represents the combined percentage increase in
FY06 tax rate is used in the calculation.
the following revenue components: automatic 2½
percent increase in the levy limit, estimated new Non-Recurring Revenue Source – A one-time
growth, the change in selected unrestricted state source of money available to a city or town. By its
aid categories, and the change in selected nature, a non-recurring revenue source cannot be
unrestricted local receipts (Education Reform Act of relied upon in future years. Therefore, such funds
1993). should not be used for operating or other expenses
that continue from year-to-year. (See Recurring
Revenue Source)
Municipal Finance Glossary 19Source page 21
Department of Revenue/Division of Local Services
Non-Renewal Program – Upon request, the OPEB (Other Postemployment Benefits) –
Registry of Motor Vehicles marks the license and Employees of state and local governments may be
registration of delinquent excise payers for non- compensated in a variety of forms in exchange for
renewal. This program has proved particularly their services. In addition to a salary, many
effective. employees earn benefits over their years of service
that will not be received until after their employment
Note – A short-term loan, typically with a maturity
with the government ends. The most common type
date of a year or less.
of these postemployment benefits is a pension.
Objects of Expenditures – A classification of Postemployment benefits other than pensions
expenditures that is used for coding any department generally take the form of health insurance and
disbursement, such as "personal services,” dental, vision, prescription, or other healthcare
“expenses,” or "capital outlay". benefits provided to eligible retirees, including in
some cases their beneficiaries. They may also
Official Statement – A document prepared for include some type of life insurance. As a group,
potential investors that contains information about a these are referred to as OPEB. (See GASB 45)
prospective bond or note issue and the issuer. The
official statement is typically published with the Operating Budget – A plan of proposed
notice of sale. It is sometimes called an offering expenditures for personnel, supplies, and other
circular or prospectus. expenses for the coming fiscal year.
Offset Receipts – A local option that allows Other Amounts to be Raised (Tax Recapitulation
estimated receipts of a particular department to be Sheet) – Amounts not appropriated but raised
earmarked for use of the department and through taxation. Generally, these are locally
appropriated to offset its annual operating budget. If generated expenditures (e.g., overlay, teacher pay
accepted, MGL Ch. 44 §53E limits the amount of deferral, deficits) as well as state, county and other
offset receipts appropriated to no more than the special district charges. Because they must be
actual receipts collected for the prior fiscal year. funded in the annual budget, special consideration
The Director of Accounts must approve use of a should be given to them when finalizing the budget
higher amount before appropriation. Actual recommendations to the city council or town
collections greater than the amount appropriated meeting.
close to the general fund at year-end. If actual
Outside Debt – Municipal borrowing for purposes
collections are less, the deficit must be raised in the
enumerated in MGL Ch. 44, §8. Debt incurred that
next year’s tax rate.
is not measured against the community's debt limit
Omitted and Revised Values – Corrections, per Ch. 10. Consequently, the borrowing is outside
submitted by assessors, after the annual the debt limit and referred to as outside debt. (See
commitment is made to reverse unintentional or Inside Debt)
inadvertent mistakes that cause some owners not
Overlapping Debt – A community's proportionate
to be assessed or to be incorrectly assessed for the
share of the debt incurred by an overlapping
fiscal year. These must be committed by June 20 or
government entity, such as a regional school
90 days after bills are issued, whichever is later.
district, regional transit authority, etc.
On-line Bill Payment Service – A third-party
Overlay (Overlay Reserve or Allowance for
service provider that gives taxpayers the ability to
Abatements and Exemptions) – An account
pay taxes, excise and utility payments by electronic
established annually to fund anticipated property
check transfers or credit card payments 24 hours a
tax abatements, exemptions and uncollected taxes
day.
in that year. The overlay reserve need not be
Municipal Finance Glossary 20Source page 22
Department of Revenue/Division of Local Services
funded by the normal appropriation process, but Pension (and other employee benefit) Trust
rather is raised on the tax rate recapitulation sheet. Funds – A fiduciary fund type used to report
resources that are required to be held in trust for
Overlay Deficit – A deficit that occurs when the
the members and beneficiaries of defined benefit
amount of overlay raised in a given year is
pension plans, defined contribution plans, other
insufficient to cover abatements, statutory
postemployment benefit (OPEB) plans, or other
exemptions, and uncollected taxes for that year.
employee benefit plans.
Overlay deficits must be provided for in the next
fiscal year. Pension Cost – A measure of the periodic cost of
an employer’s participation in a defined benefit
Overlay Surplus – Any balance in the overlay
pension plan.
account of a given year in excess of the amount
remaining to be collected or abated can be Pension Plan – An arrangement for the provision
transferred into this account. Within ten days of a of pension benefits to employees upon their
written request by the chief executive officer of a retirement. All assets accumulated are used to pay
city or town, the assessors must provide a benefits (including refunds of member contributions)
certification of the excess amount of overlay to plan members or beneficiaries, as defined by the
available to transfer, if any. Overlay surplus may be terms of the plan.
appropriated for any lawful purpose. At the end of
PERAC – The Public Employee Retirement
each fiscal year, unused overlay surplus is "closed"
Administration oversees and directs the state
to surplus revenue; in other words, it becomes a
retirement system and administers benefits for
part of free cash.
members.
Overnight Repurchase Agreement – A contract
Performance Audit – Such audits examine the
between a financial institution and a community
implicit assertion of management, that it is meeting
authorizing the financial institution to operate a
its responsibilities efficiently and effectively.
sweep account on behalf of the municipality. (See
Performance audits typically focus on individual
Sweep Account)
departments, agencies, activities, or functions
Override – A vote by a community at an election to within a government.
permanently increase the levy limit. An override
Performance Budget – A budget that stresses
vote may increase the levy limit no higher than the
output both in terms of economy and efficiency.
levy ceiling. The override question on the election
ballot must state a purpose for the override and the Permanent Debt – Borrowing by a community
dollar amount. (See Underride) typically involving a debt service amortization period
of greater than one year. (See Long-Term Debt)
Override Capacity – The difference between a
community's levy ceiling and its levy limit. It is the Permanent Funds – A fiduciary fund type used to
maximum amount by which a community may report resources that are legally restricted to the
override its levy limit. extent that only earnings, and not principal, may be
used for purposes that support the reporting
Payments in Lieu of Taxes – An agreement
government’s programs, that is, for the benefit of
between a municipality and an entity not subject to
the government for its citizenry. An example is a
taxation, such as charitable or educational
cemetery perpetual care fund.
organizations, in which the payer agrees to make a
voluntary payment to the municipality. By law, a city Personal Property – Movable items not
or town must make such a payment to any other permanently affixed to, or part of the real estate. It
community in which it owns land used for public is assessed separately from real estate to certain
purposes.
Municipal Finance Glossary 21Source page 23
Department of Revenue/Division of Local Services
businesses, public utilities, and owners of homes Proprietary Funds – Funds that account for
that are not their primary residences. government’s business-type activities (e.g.,
activities that receive a significant portion of their
Personnel Costs – The cost of salaries, wages
funding through user charges). The fund types
and related employment benefits.
included in proprietary funds are the enterprise fund
Preliminary Tax – The tax bill for the first two and the internal service fund.
quarters of the fiscal year sent, no later than July 1,
Purchase Order – An official document or form
by communities on a quarterly tax billing cycle. The
authorizing the purchase of products and services.
tax due on a preliminary tax bill can be no greater
than the amount due in the last two quarters of the Purchased Services – The cost of services that
previous fiscal year. are provided by a vendor.
Principal – The face amount of a bond, exclusive Purchasing Agent – Through local acceptance of
of accrued interest. MGL Ch. 41, §103, a city or town may establish a
purchasing department and appoint a purchasing
Private-Purpose Trust Funds – A fiduciary trust
agent who shall purchase all supplies for the city or
fund type used to report all trust arrangements,
town. (See Procurement Officer)
other than those properly reported in pension trust
funds or investment trust funds, under which Qualified Bond – A program, unique to
principal and income benefits individuals, private Massachusetts, for municipalities that have
organizations, or other governments. An example marginal credit ratings in which the State Treasurer
is a scholarship fund. pays the debt service directly from a community’s
local aid, reinforcing the security of the bond and
Procurement Officer – An individual defined under
improving its marketability. Issuers of qualified
MGL Ch. 30B, §2 and authorized to procure
bonds have been able to obtain bond insurance and
supplies or services for a governmental body.
these credit enhancements have reduced the cost
Proforma Recap Sheet – The Tax Recapitulation of borrowing in recent years. The Municipal Finance
Sheet submitted to DOR by communities on a semi- Oversight Board authorizes issuance of these
annual tax billing cycle which seek to send a bonds under Ch. 44A.
preliminary tax notice for the first half of the fiscal
Raise and Appropriate – A phrase used to identify
year because they are in a recertification year or
a funding source for an expenditure or
have a valuation related delay.
expenditures, which refers to money generated by
Program – A combination of activities to the tax levy or other local receipt.
accomplish an end.
Real Property – Land, buildings and the rights and
Program Budget – A budget that relates benefits inherent in owning them.
expenditures to the programs they fund. The
Recap Sheet – (See Tax Rate Recapitulation
emphasis of a program budget is on output.
Sheet)
Property Tax Bureau – (See Bureau of Municipal
Receipts – Money collected by and within the
Finance Law)
control of a community from any source and for any
Proposition 2½ – A state law enacted in 1980, purpose.
Proposition 2½ regulates local property tax
Receipts Reserved for Appropriation – Proceeds
administration and limits the amount of revenue a
that are earmarked by law and placed in separate
city or town may raise from local property taxes
accounts for appropriation for particular purposes.
each year to fund municipal operations.
For example, parking meter proceeds may be
Municipal Finance Glossary 22Source page 24
Department of Revenue/Division of Local Services
appropriated to offset certain expenses for parking exchange for the same securities within a given
meters and the regulation of parking and other number of days.
traffic activities.
Requisition – Form used by the requesting
Receivables – An expectation of payment of an department when ordering products and services
amount certain accruing to the benefit of a city or from external vendors. This document generates a
town. Purchase Order.
Reconciliation of Cash – Periodic process where Reserve for Abatements and Exemptions – (See
the accountant and treasurer compare records to Overlay)
confirm available cash in community accounts.
Reserve Fund – An amount set aside annually
DOR requires an annual reconciliation of cash
within the budget of a city (not to exceed 3 percent
without variances to be submitted with as balance
of the tax levy for the preceding year) or town (not
sheet as a prerequisite to certifying a community's
to exceed 5 percent of the tax levy for the preceding
free cash.
year) to provide a funding source for extraordinary
Reconciliation of Receivables – Periodic process or unforeseen expenditures. In a town, the finance
where the accountant and collector compare committee can authorize transfers from this fund for
records to confirm amount of taxes outstanding. "extraordinary or unforeseen" expenditures. Other
DOR requires an annual reconciliation of uses of the fund require budgetary transfers by
receivables without variances to be submitted with town meeting. In a city, transfers from this fund may
a balance sheet as a prerequisite to certifying a be voted by the city council upon recommendation
community's free cash. of the mayor.
Records Disposition Schedule – Guidelines Residential Exemption – A municipality can grant
published by the Records Management Division of a residential exemption of a dollar amount that
the Secretary of State's Office and pursuant to MGL cannot exceed 20 percent of the average assessed
Ch. 66, informing local officials as to how long, and value of all residential class properties. The
in what form, municipal records must be exemption reduces, by the adopted percentage, the
maintained, and identifying what records may be taxable valuation of each residential parcel that is a
lawfully disposed. taxpayer's principal residence. Granting the
exemption raises the residential tax rate and shifts
Recurring Revenue Source – A source of money
the residential tax burden from moderately valued
used to support municipal expenditures, which by
homes to apartments, summer homes and higher
its nature can be relied upon, at some level, in
valued homes.
future years. (See Non-recurring Revenue Source)
Residential Factor – Adopted by a community
Refunding of Debt – Transaction where one bond
annually, this governs the percentage of the tax
issue is redeemed and replaced by a new bond
levy to be paid by property owners. A residential
issue under conditions generally more favorable to
factor of “1” will result in the taxation of all property
the issuer. (See Current and Advance Refunding of
at the same rate (single tax rate). Choosing a factor
Debt)
of less than one results in increasing the share of
Repurchase Agreement (Repo) – An agreement the levy raised by commercial, industrial and
whereby a local government transfers cash to a personal property. Residential property owners will
financial institution, and the financial institution therefore pay a proportionately lower share of the
transfers securities to the local government and total levy. (See Minimum Residential Factor)
promises to repay the cash plus interest in
Retained Earnings – (See Net Assets
Unrestricted)
Municipal Finance Glossary 23Source page 25
Department of Revenue/Division of Local Services
Revaluation – The assessors of each community Revenues – All monies received by a governmental
are responsible for developing a reasonable and unit from any source.
realistic program to achieve the fair cash valuation
Revolving Fund – Allows a community to raise
of property in accordance with constitutional and
revenues from a specific service and use those
statutory requirements. The nature and extent of
revenues without appropriation to support the
that program will depend on the assessors’ analysis
service. For departmental revolving funds, MGL Ch.
and consideration of many factors, including, but
44 §53E½ stipulates that each fund must be re-
not limited to, the status of the existing valuation
authorized each year at annual town meeting or by
system, the results of an in-depth sales ratio study,
city council action, and that a limit on the total
and the accuracy of existing property record
amount that may be spent from each fund must be
information. Every three years, assessors must
established at that time. The aggregate of all
submit property values to the DOR for certification.
revolving funds may not exceed ten percent of the
Assessors must also maintain fair cash values in
amount raised by taxation by the city or town in the
the years between certifications so that each
most recent fiscal year, and no more than one
taxpayer in the community pays his or her share of
percent of the amount raised by taxation may be
the cost of local government in proportion to the
administered by a single fund. Wages or salaries for
value of his property. (See Triennial Certification)
full-time employees may be paid from the revolving
Revenue Anticipation Borrowing – Cities, towns fund only if the fund is also charged for all
and districts may issue temporary notes in associated fringe benefits.
anticipation of taxes (TANS) or other revenue
Roll-back Taxes – Back taxes that become due
(RANS). The amount of this type of borrowing is
when land which is valued, assessed and taxed
limited to the total of the prior year's tax levy, the
under MGL Ch. 61, 61A or 61B, no longer qualifies
net amount collected in motor vehicle and trailer
as actively devoted to purposes specified in each
excise in the prior year and payments made by the
chapter.
Commonwealth in lieu of taxes in the prior year.
According to MGL Ch. 44 §4, cities, towns and Sale of Cemetery Lots Fund – A fund established
districts may borrow for up to one year in to account for proceeds of the sale of cemetery lots.
anticipation of such revenue. The proceeds may only be appropriated to pay for
the cost of the land, its care and improvement or
Revenue Anticipation Note (RAN) – A short-term
the enlargement of the cemetery under provisions
loan issued to be paid off by revenues, such as tax
of MGL Ch. 114 §15.
collections and state aid. RANS are full faith and
credit obligations. (See Tax Anticipation Notes, Sale of Real Estate Fund – A fund established to
Bond Anticipation Notes) account for the proceeds of the sale of municipal
real estate other than proceeds acquired through
Revenue Bond – A bond payable from and
tax title foreclosure. MGL Ch. 44 §63 states that
secured solely by specific revenues and thereby not
such proceeds shall be applied first to the
a full faith and credit obligation.
retirement of debt on the property sold. In the
Revenue Deficit – The amount by which actual absence of such debt, funds may generally be used
revenues at year-end fall short of projected for purposes for which the city or town is authorized
revenues and are insufficient to fund the amount to borrow for a period of five years or more.
appropriated. In such a case and unless otherwise
Sales Comparison Approach – A method of
funded, the revenue deficit must be raised in the
estimating the value of property by comparing
following year's tax rate.
verified data about similar properties that have
recently sold or are offered for sale on the open
Municipal Finance Glossary 24Source page 26
Department of Revenue/Division of Local Services
market and adjusting for differences from the Special Assessment Exemption – Full discharge
subject, or unsold, property. from the payment of betterments and special
exemptions granted only to government properties
Schedule A – A statement of revenues,
occupied for public purposes.
expenditures and other financing sources, uses,
changes in fund balance and certain balance sheet Special Exclusion – For a few limited capital
account information prepared annually by the purposes, a community may exceed its levy limit or
accountant or auditor at the end of the fiscal year. levy ceiling without voter approval. Presently, there
This report is based on the fund account numbers are two special expenditure exclusions: 1) water
and classifications contained in the UMAS manual. and sewer project debt service costs which reduce
the water and sewer rates by the same amount;
Security – For Massachusetts’ municipalities,
and 2) a program to assist homeowners to repair or
bonds or notes evidencing a legal debt on the part
replace faulty septic systems, remove underground
of the issuer.
fuel storage tanks, or remove dangerous levels of
Short-Term Debt – Outstanding balance, at any lead paint to meet public health and safety code
given time, on amounts borrowed with a maturity requirements. In the second special exclusion,
date of 12 months or less. (See Note) homeowners repay the municipality for the cost plus
interest apportioned over a period of time, not to
Sick Leave Buyback – A community's obligation, exceed 20 years (similar to betterments).
under collective bargaining agreements or
personnel board policies, to compensate retiring Special Revenue Fund – Funds, established by
employees for the value of all, or a percentage of, statute only, containing revenues that are
sick time earned, but not used. earmarked for and restricted to expenditures for
specific purposes. Special revenue funds include
Single Audit Act – For any community that receipts reserved for appropriation, revolving funds,
expends $500,000 or more per year in federal grant grants from governmental entities, and gifts from
awards, the Single Audit Act establishes audit private individuals or organizations.
guidelines that reduce to only one the number of
annual audits to be completed to satisfy the Stabilization Fund – A fund designed to
requirements of the various federal agencies from accumulate amounts for capital and other future
which grants have been received. spending purposes, although it may be
appropriated for any lawful purpose (MGL Ch. 40
Small Commercial Exemption – A property tax §5B). Communities may establish one or more
classification option where a community may stabilization funds for different purposes and may
exempt up to 10 percent of the value of a Class appropriate into them in any year an amount not to
Three, Commercial parcel. The parcel must be exceed ten percent of the prior year’s tax levy. The
occupied by small businesses and have an total of all stabilization fund balances shall not
assessed valuation of less than $1 million. In effect, exceed ten percent of the community’s equalized
the option shifts the tax burden from parcels value, and any interest shall be added to and
occupied by small businesses to those occupied by become a part of the funds. A two-thirds vote of
other commercial and industrial taxpayers. Eligible town meeting or city council is required to establish,
small businesses have an average annual amend the purpose of, or appropriate money into or
employment of no more than ten persons. (See IGR from the stabilization fund. (See DOR IGR 04-201)
00-403)
State Aid Anticipation Note (SAAN) – A short-
SOL – State Owned Land term loan issued in anticipation of a state grant or
aid (MGL Ch. 44 §6A).
Special Assessment – (See Betterments)
Municipal Finance Glossary 25Source page 27
Department of Revenue/Division of Local Services
State Ethics Commission – This state agency was threshold to a temporary investment elsewhere for
established to foster integrity in government and the benefit of a higher, overnight investment return.
promote public trust. The Commission enforces a At the end of the overnight investment period, the
Code of Ethics and the Financial Disclosure Law. funds are returned to the municipal account and are
available for use. (See Overnight Repurchase
State House Notes – Debt instruments for cities,
Agreements)
towns, counties and districts certified by the
Director of Accounts. State House Notes, payable TA – Technical Assistance Section (See Municipal
annually, are usually limited to maturities of five Data Management and Technical Assistance
years and principal amounts of $2,250,000. The Bureau
notes are attractive, more often to smaller
Tailings – Unclaimed municipal funds, or a
communities, because certification fees are low,
repository, referred to as a "tailings account," for the
neither an official statement nor full disclosure is
retention, until eventual disposition, of unclaimed
required, and they are issued in a short period of
funds in the custody of a municipality. Tailings
time.
might include unclaimed tax refunds, vendor
State Receivership – (See Finance Control Board) payments yet to clear, overages on the community's
commitment, etc. (MGL Ch. 200A) (See Unclaimed
STF – State Tax Form
Checks)
Supplemental Tax Assessments on New
Tax Anticipation Notes (TAN) – A short-term note
Construction (MGL Ch. 59 §2D) – A community
issued to provide cash to cover operating expenses
may make pro rata assessments on the value of
in anticipation of tax proceeds.
improvements that are greater than 50 percent of
the billed value when an occupancy permit is issued Tax Increment Financing Exemption (TIF) – In
after January 1 (MGL Ch. 59 §2D). This provision accordance with MGL Chapter 59 §5(51), a
allows a community to issue a bill (back to the date property tax exemption negotiated between a
of occupancy between January 1-June 30) for the community and a private developer, typically
current fiscal year on qualifying property implemented over a period up to 20 years, and
improvements, resulting in additional general intended to encourage industrial/commercial
revenue. These improvements would be included development. (See DOR IGR 94-201)
in the subsequent year’s new growth calculation.
Tax Maps – Used to determine the location of the
Surcharge – An additional sum added to a property, indicate the size and shape of each
particular, already existing charge such as a tax, a parcel, and show its relation to features that affect
fee, a fine or penalty. value. Maps also provide a complete inventory of all
land parcels, helping to minimize the problems of
Surety Bond – A performance bond that protects
omitted parcels and duplication of listing. Also
the municipality against any financial loss arising
referred to as assessors' maps.
from a breach of public trust by an employee who
collects money on behalf of the community. Tax Possession – Once a tax title has been
foreclosed in Land Court, the municipal treasurer
Surplus Revenue – The amount by which cash,
records the decree at the Registry of Deeds as a
accounts receivable, and other assets exceed
municipally owned property, hence becoming a tax
liabilities and reserves.
possession. For a property issued a Land of Low
Sweep Account – A municipal bank account from Value affidavit, the municipality must hold an
which the host financial institution electronically auction prior to it becoming a tax possession.
transfers all or part of the balance over a specified
Municipal Finance Glossary 26Source page 28
Department of Revenue/Division of Local Services
Tax Rate – The amount of property tax stated in Teachers' Pay Deferral – Option available under
terms of a unit of the municipal tax base; for the 1993 Education Reform Law allowing
example, $14.80 per $1,000 of assessed valuation communities to defer further contributions to
of taxable real and personal property. teachers retirement funds until 1997, after which the
full obligation must be satisfied in no more than 15
Tax Rate Recapitulation Sheet (Recap Sheet) – A
years.
document submitted by a city or town to the DOR in
order to set a property tax rate. The recap sheet Technical Assistance Section – Part of
shows all estimated revenues and actual MDM/TAB, the Technical Assistance Section
appropriations that affect the property tax rate. The completes financial management reviews for cities
recap sheet should be submitted to the DOR by and towns, and is otherwise available to advise
September 1 (in order to issue the first-half finance officers and administrators on sound
semiannual property tax bills before October 1) or financial management practices.
by December 1 (in order to issue the third quarterly
Temporary Debt – Borrowing by a community in
property tax bills before January 1).
the form of notes and for a term of one year or less.
Tax Title (or Tax Taking) – A collection procedure (See Short-Term Debt)
that secures a city or town's lien on real property
Triennial Certification – The Commissioner of
and protects the municipality's right to payment of
Revenue, through the Bureau of Local Assessment,
overdue property taxes. Otherwise, the lien expires
is required to review local assessed values every
if five years elapse from the January 1 assessment
three years and to certify that they represent full
date and the property has been transferred to
and fair cash value (FFCV). Refer to MGL Ch. 40
another owner. If amounts remain outstanding on
§56 and Ch. 59 §2A(c).
the property after issuing a demand for overdue
property taxes and after publishing a notice of tax Trust Fund – In general, a fund for money donated
taking, the collector may take the property for the or transferred to a municipality with specific
city or town. After properly recording the instrument instructions on its use. As custodian of trust funds,
of taking, the collector transfers responsibility for the treasurer invests and expends such funds as
collecting the overdue amounts to the treasurer. stipulated by trust agreements, as directed by the
After six months, the treasurer may initiate commissioners of trust funds or by town meeting.
foreclosure proceedings. Both principal and interest may be used if the trust
is established as an expendable trust. For non-
Tax Title Foreclosure – The procedure initiated by
expendable trust funds, only interest (not principal)
a city or town treasurer in Land Court or through
may be expended as directed.
land of low value to obtain legal title to real property
already in tax title and on which property taxes are Turnover Sheet – A form, completed by municipal
over due. The treasurer must wait at least six departments, that accompanies the physical
months from the date of a tax taking to initiate Land transfer of departmental revenues, or bank deposit
Court foreclosure proceedings (MGL Ch. 60 §65). slips reflecting revenues, to the treasurer.
Tax Title Redemption – The act of a property Unclaimed Checks – (See Tailings)
owner to pay overdue taxes, plus any fees,
charges, other costs and interest, on real property Uncollected Funds – Recently deposited checks,
that the community had placed in tax title to secure included in an account's balance, but drawn on
its lien. The taxpayer's right to redeem terminates other banks and not yet credited by the Federal
when the treasurer receives a Land Court Decree Reserve Bank or local clearinghouse to the bank
or Land of Low Value affidavit, records and holds cashing the checks. These funds may not be
an auction.
Municipal Finance Glossary 27Source page 29
Department of Revenue/Division of Local Services
loaned or used as part of the bank's reserves, and as enhanced comparability of data among cities
they are not available for disbursement. and towns.
Underride – A vote by a community to permanently Uniform Procurement Act – Enacted in 1990,
decrease the tax levy limit. As such, it is the exact MGL Ch. 30B establishes uniform procedures for
opposite of an override. (See Override) local government to use when contracting for
supplies, equipment, services and real estate. The
Undesignated Fund Balance – Monies in the
act is implemented through the Office of the
various government funds as of June 30 that are
Inspector General. (See Massachusetts Certified
neither encumbered nor reserved, and are therefore
Public Purchasing Official).
available for expenditure once certified as part of
free cash. (See Designated Fund Balance) Unreserved Fund Balance (Surplus Revenue
Account) – The amount by which cash, accounts
Unfunded Mandate – A requirement imposed by
receivable, and other assets exceed liabilities and
law, regulation or order without underlying financial
restricted reserves. It is akin to a "stockholders’
support, thereby resulting in direct or indirect costs
equity" account on a corporate balance sheet. It is
to the body made responsible for its
not, however, available for appropriation in full
implementation.
because a portion of the assets listed as "accounts
Unfunded OPEB Liability – This is the difference receivable" may be taxes receivable and
between the value assigned to the benefits (other uncollected. (See Free Cash)
than retirement) already earned by a municipality’s
User Charges/Fees – A municipal funding source
employees and the assets the local government will
where payment is collected from the user of a
have on hand to meet these obligations. While
service to help defray the cost of providing the
there is no requirement in Massachusetts to fund
service. Note that any increases in the fees must
this liability, GASB 45 requires that the dollar value
satisfy the three tests set forth in the so called
of the unfunded OBEB liability is determined every
Emerson case. (See Emerson College v. Boston,
two years. (See GASB 45; OPEB)
391 Mass. 415 (1984))
Unfunded Pension Liability – Unfunded pension
Valuation (100 percent) – The legal requirement
liability is the difference between the value assigned
that a community’s assessed value on property
to the retirement benefits already earned by a
must reflect its market, or full and fair cash value.
municipality’s employees and the assets the local
retirement system will have on hand to meet these Voucher – A document or form authorizing the
obligations. The dollar value of the unfunded holder to redeem it for cash or credit in an amount
pension liability is redetermined every three years certain.
and is driven by assumptions about interest rates at
Warrant – An authorization for an action. For
which a retirement system's assets will grow and
example, a town meeting warrant establishes the
the rate of future costs of living increases to
matters that may be acted on by that town meeting.
pensioners. (See Pension Plan)
A treasury warrant authorizes the treasurer to pay
Uniform Municipal Accounting System (UMAS) – specific bills. The assessors’ warrant authorizes the
UMAS succeeds the so-called Statutory System tax collector to collect taxes in the amount and from
(STAT) and is regarded as the professional the persons listed, respectively.
standard for municipal accounting in
Water Surplus – For water departments operating
Massachusetts. As a uniform system for local
under MGL Ch. 41 §69B, any unspent water
governments, it conforms to Generally Accepted
appropriations or revenues in excess of estimated
Accounting Principles (GAAP), offers increased
water receipts close-out to a water surplus account.
consistency in reporting and record keeping, as well
Municipal Finance Glossary 28Source page 30
Department of Revenue/Division of Local Services Water surplus may be appropriated to fund water- Wire Transfer – The electronic authorization related general and capital expenses or to reduce crediting money from one bank or financial water rates. institution account to another. Waterways Improvement Fund – An account into Zero Based Budget – A budget building technique which fifty percent of boat excise tax and mooring where each department begins at zero and adds fees imposed under MGL Chapter 91 §10A receipts the cost of essential programs up to an established are deposited. Use of these proceeds is limited to funding limit. Each year the process begins again at certain waterway expenses as outlined in MGL Ch. zero prompting close scrutiny and prioritization of 40 §5G. costs annually. A publication that was used in developing this glossary was Governmental Accounting, Auditing, and Financial Reporting, by Stephen J Gauthier. Chicago: Government Finance Officers Association, 2001 Municipal Finance Glossary 29