Frequently Asked Questions

The city budget process typically involves several key steps:

1. Departmental Requests: City departments assess their financial needs and submit budget requests for the upcoming fiscal year.
   
   

2. Executive Review: The mayor reviews these requests, balancing them against projected revenues and priorities, and then drafts a proposed budget.
   
   

3. Legislative Approval: The city council examines the proposed budget, holds public hearings for community input, and makes necessary adjustments before approving it.
   
   

4. Implementation and Monitoring: Once approved, the budget is implemented, with ongoing monitoring to ensure funds are used as intended. << We are here

Proposition 2 ½ is a Massachusetts law designed to keep taxes predictable, while giving the voters the power to approve local tax increases to fund the services they believe are necessary and valuable.

Proposition 2½ was passed in 1980 and limits the amount of property taxes a city or town can collect, called the total tax levy.  But over time, it’s made it difficult for cities and towns to keep up with inflation and rising costs for schools, public safety, and services. Here are the limits:

• Levy Ceiling: A municipality cannot collect more than 2.5% of the total assessed value of all taxable property in a given year. (This is not affecting us in Melrose - we are at 1.03% for fiscal year 2025.)

• Levy Increase Limit: The total amount a city or town can increase its property tax revenue each year is capped at 2.5% over the previous year's levy, plus additional revenue from new property developments (referred to as "new growth"). This is what is constraining us in Melrose!

If a community needs to raise more funds than these limits allow, it must seek approval from its voters through a process known as an "override" or "debt exclusion." An "override" is an increase, or bump up, to the total tax levy amount, and a "debt exclusion" is an increase that only lasts as long as it takes to pay off a specific large expense, like a building.

You can watch an explainer video here and read about it here.

Across virtually every metric—school spending, city spending, and tax rates—Melrose lags behind neighboring communities, and in many cases behind state averages.

Per-student spending

In FY2023 (the most recent year for which compiled statewide data is available), Melrose spent $16,293 per pupil. That’s 14.9% less than the average in this list of our peer communities, which average $19,147 per pupil.

• Melrose: $16,293

• Saugus: $18,564

• Reading: $19,058

• Winchester: $19,015

• Lynnfield: $19,534

• Wakefield: $20,658

• Stoneham: $20,910

City spending

We spend less per capita than neighboring comparable communities (2025 data):

• Melrose: $3,889

• Stoneham: $4,122

• Saugus: $4,342

• Wakefield: $4,646

• Reading: $5,003

• Lynnfield: $5,681

• Winchester: $7,301

Sources: The Massachusetts Department of Elementary & Secondary Education and The Massachusetts Department of Revenue – Division of Local Services.

For years, Melrose was in the middle of the pack statewide for per pupil spending, but since 2005, Melrose has consistently spent less per student than almost every other district in the state—now below the 8th percentile.

You might remember a time when Melrose had the resources it needed. Unfortunately, our investment in the city and schools hasn’t kept pace over time. Our students are paying the price.

Per-pupil spending affects everything from class size and staffing to competency in reading and math. When we underfund, we also:

• Lose support staff who help struggling students early on - this leads to higher needs down the road 

• Fail to provide in-district support for all learners—this leads to expensive out of district placements

• Fail to keep pace with peer districts in course offerings, extracurriculars, and technology—this leads to losing students to other towns and private schools, meaning less funding for Melrose from the state.

• Burn out our teachers and lose them to better-funded districts—leading to more costs to find and hire new teachers

Underfunding now costs more later, and Melrose has been underfunding for years.

The override isn’t about frills. It’s about funding the basics—reading support, keeping students current in STEM subjects, manageable class sizes, and the staff to meet every student’s needs.

No, the City does not get a windfall from rising property values. By law, and setting aside new growth, each year the City’s total property tax levy can only increase by 2.5%.

The “total property tax levy” is the total amount the city can collect. Even if property values go up by an average of 5% in a year, the “total property tax levy” can still only go up by 2.5%.

In fact, if the total value of all property in the City increases, the tax rate has to decrease so that the total amount of property tax collected increases by only 2.5%.  For Melrose, this has been the case, as the residential property tax rate has steadily decreased from $11.05 in 2020 to $9.90 in 2025.

You can see an explainer video on this here.

New growth has been helpful, but unfortunately not a game changer.  Despite new apartments and condos, and other improvements to properties, since 2020 the tax levy increase from new growth has averaged only about $750,000 / year, or about 0.7% of the City budget.

Melrose has very little open land available for development. When existing properties are redeveloped, people have many different views on what kinds of development should occur. Most streets are residential, and Melrose doesn’t have a large commercial corridor like Route 1 through Saugus, 95 through Woburn, or even Route 28 through Stoneham.

The city has regularly increased fees to offset costs. For example, for the coming year, school extracurricular fees increased by 10%, and early education fees increased by 7%, with an increase of over 6% also approved for after school programming. These are the largest increases in recent history, and these fees now total more than $2M in revenue to run school programs.

Local receipts (e.g., other fees, meals tax) are important as well, but only account for 7% of the City budget and are less reliable because they fluctuate. Most other options that people suggest (e.g. parking meters) don’t have an income potential even close to the magnitude of our financial problems. Property taxes account for more than 70% of the city budget, and are the only way to reliably increase funding at the level we need.

The last override passed in 2019 and was the first to pass in nearly 30 years. The funds from the 2019 override were used as proposed to solve a structural deficit, replace income from renting out the former Beebe school property on West Foster St, increase funding for teacher pay, curriculum, materials and supplies, and add teaching and support positions previously cut.

The override returned the schools to level operations after reduced state funding and an increased student population had created structural deficits—but the 2019 override did not get the city ahead.

While the 2019 override restored some school-related services, the Covid crisis plus rapidly increasing costs over the last six years have left the city underfunded again. In the six years since 2019, the cost of providing municipal services has exceeded the 2.5% constraint on the tax levy posed by Proposition 2 1/2, especially in key areas like transportation, employee benefits, and utilities—major expenses for every city. In fact, the city anticipates the following cost increases over the next five years.

• 7% annual increase in transportation

• 10% annual increase for employee and retiree benefits

• 5% annual increase in utilities and IT costs

• 5% annual increase in property and casualty insurance

• 7% annual increase in special education tuitions

The city faced a $6.1M budget gap this year, which it met by making significant cuts to city services. Without an override, the city will face a $4M gap next year, requiring even more drastic cuts.

Each year, Melrose prepares an Annual Comprehensive Financial Report(ACFR), which includes an independent audit conducted by an outside firm. The ACFR is sent to the Massachusetts Department of Revenue, Division of Local Services, for review.

In addition, the city’s finances are reviewed by another outside firm to determine Melrose’s bond rating— currently the highest it’s ever been at AA+. This bond rating is like a personal credit score, determining borrowing rates. Having a strong bond rating saves the city money on loan interest.

These annual reviews by multiple organizations confirm the city is managing its money responsibly. While these reports show Melrose is responsible in tracking its funds, these reports don’t evaluate whether the revenue raised sufficiently provides for the vibrant and diverse needs of our community. Our low per-resident spending and low per-pupil spending make it easy to see that Melrose is spending well below the norm.

In 2022, there was an accounting error in the school department - they had counted grant income in two places so they didn’t have an accurate view of the budget.  Every dollar was still spent appropriately, but not tracked correctly.  At the same time, the pandemic meant sharp increases in education costs that are outside the district’s control (such as transportation and out of district tuition) and decreases in revenue from the Franklin ECC, facility rentals, and athletics due to drops in usage.  

Since then, the new school finance director has implemented a better system to make sure this error doesn’t happen again. This includes detailed monthly presentations to the School Committee on grants, revenue, and budget spending, in addition to the annual audit checked by outside auditors.

We’ve all felt the burden of inflation, and we understand that when costs rise and budgets can’t keep up, a certain amount of “belt tightening” must occur.

But Melrose has been operating with a very tight budget for years, and at this point, further cuts jeopardize our safety, basic public services, and our ability to fulfill contracts and meet state education standards.

In fact, in FY2025, Melrose per capita revenue and spending was in the lowest third of communities statewide (27th percentile), and was lower than that of peer communities like Stoneham, Saugus, Wakefield, Reading, Lynnfield, and Winchester.

At this point, a lack of appropriate funding could even end up costing the city more money in the long run due to out-of-district student placements, lack of efficiency, and more.

In November 2023, the voters of Melrose passed (59% to 37%) a debt exclusion to fund the construction of three new public safety buildings and the renovation of the Central Fire Station. Since that time, the City has been working with professionals to design the buildings. The project is currently on schedule, with the first buildings—the Tremont Street Fire Station and the Police Station—anticipated to go out to bid this September and November, respectively.

When voters approve a debt exclusion, it means that they approve the City borrowing money for a defined project, and then temporarily increasing property taxes as project costs occur until the loans are paid off (typically 30 years). The city council will start to get additional updates in July and August 2025, and then the city will be able to provide more detailed information on the timing and impacts of this voter approved project. The City information from the time of the vote is available here.

The only other time Melrose citizens approved a debt exclusion was in 2003, for the Melrose Veterans Memorial Middle School. The bonds for that project are expected to be paid off in 2029, with a corresponding approximate $200 annual tax decrease for the average Melrose homeowner.