Easthampton may seek $5.8M tax override to help close budget deficit

EASTHAMPTON — City officials are weighing whether to ask voters to approve a roughly $5.8 million Proposition 2½ override this spring after discovering the full magnitude of a large deficit that has grown to upward of $7 million heading into fiscal year 2027.

Easthampton joins other communities in the Valley, including Southampton, Westhampton and South Hadley, facing an override this year, as officials struggle to keep up with the rising costs of health insurance, inflation and more. Easthampton residents will have to consider the question that their neighbors are, too — whether to vote for an override that raises property taxes or see significant cuts made to city services.

Officials had already been preparing to plug a $4 million gap created in the current fiscal year when the city dipped into reserves to fund contractual obligations and other expenses. But as more numbers fell in place, due to further increases in health insurance premiums and contractual obligations to city employees, Derby said an additional $3 million in the deficit became apparent.

“When all the numbers fell into our laps yesterday and we put them all together, finally it was closer to $7 million,” Derby said at the City Council’s April 8 meeting on Wednesday. “Again that’s just because of the $4 million [deficit] plus health insurance, plus contractual obligations.”

The city currently has approximately $3 million in general stabilization funds. Derby said $2 million of those funds might be used to bridge the gap.

The $5.8 million override figure comes from the difference between the deficit and $1.2 million in savings that would likely come from city departments finding “items that we could trim,” and reallocation of unused funds, Derby said, noting that there aren’t a lot of options left.

“We came to the realization yesterday, which I’m still a little bit in shock, is that we’re going to potentially either have to make $3.8 million in cuts or we’re going to have to go to the community and make a case for the important work that our departments do,” Derby said, considering that $2 million in reserves would be used in that scenario.

“This is not something I wanted to have to do in my first budget,” added Derby, who began in the position on Jan. 1.

The average single-family property value for fiscal year 2026 in Easthampton is $418,000, based on estimates from the Massachusetts Department of Revenue (DOR). A $5.8 million override would result in an approximately $920 increase to property taxes, based on that average home value. A $3.8 million override would increase property taxes $602.

Derby said the city has been looking for creative ways to find sources of revenue and pockets of money to help bridge that gap, but he said this is a “structural deficit” that expands beyond the city, as many communities face similar struggles with health insurance costs and tax levy increase limit of only 2.5%.

Specific to Easthampton, it doesn’t help that the city was without a treasurer for many months last year, Derby said.

Easthampton, one of 72 members of the Hampshire County Group Insurance Trust, faced two, approximately 20% increases in health insurance premiums last year. The trust approved another 12.48% increase in February, that the city is negotiating with unions over how to allocate the increase.

City officials told the Gazette that Easthampton provides health insurance for approximately 379 employees, active and retired, excluding certain retirees. The city estimates it is facing an increase of close to $1 million after the trust raised premiums twice last year, and that does not include the just-approved increase.

At the same City Council meeting, the council passed a resolution in support of An Act Establishing Medicare for all in Massachusetts, a bill currently in front of state legislators on Beacon Hill. One of the sponsors for the bill is state Rep. Lindsay Sabadosa, D-Northampton.

Several councilors said the news about the budget is disappointing, but some were expecting this and had already been notified by Derby about it. According to DOR statistics, the last override passed in Easthampton was in 1995, but it was said at the meeting that others may have been proposed since then.

“Anyone who’s been here for a little while has probably heard me complain about how the Prop 2½ is set up,” said Precinct 3 Councilor Thomas Peake. “Matched with COVID-level, post-COVID inflation, this is just not going to be sustainable long term.”

Moving forward, Derby said members from the DOR visited Thursday to discuss options and other matters.

In an interview with the Gazette, Derby said an override will likely be presented either at a special City Election in the coming months, or tagged onto the state Primary Election in September or State Election in November. It is undetermined where cuts would be made at this time if an override fails, he said.

“We’re going to be trying to figure that out,” Derby said, adding that it is under the City Council’s purview to authorize how an override is presented.