HANOVER - December 1 - In a significant move to ensure fiscal sustainability, the Hanover Select Board is poised to adopt a comprehensive new financial policy designed to make the town’s 2025 override last through fiscal year 2032 without requiring additional tax increases. The policy establishes strict guidelines on everything from departmental budget increases to how the town spends meals tax revenue.
The Full Story
The proposed policy, designated as Finance Policy 7-20 and titled “Post Override Financial Plan for General Fund Operating Budget Sustainability,” was presented at Monday night’s meeting by Select Board members Vanessa O’Connor and Rachel Hughes, who spearheaded the initiative as part of their board goals. Budget Director Jim Hoyes provided detailed analysis of how the policy would work in practice, walking through numerous financial scenarios and projections extending to 2032.
“The goal of this being that this is a plan that hopefully, if we follow it, will be sustainable to get us through 2032,” O’Connor explained. “This is a plan that helps ensure that even as the board makeup changes... there will be kind of continuity in the decision making and a plan for deviation from that, because a deviation from the plan that we’ve kind of put together ultimately would put our ability to make it to fiscal year 2032 without an override less sustainable.”
The policy establishes seven core goals, including maintaining town services across municipal and school departments, using prudent financial approaches, strengthening the town’s credit rating, managing long-term liabilities, and mitigating property tax increases to residents and businesses. At its heart, the policy seeks to balance service levels with fiscal responsibility while honoring the commitment made to voters when the override passed in May 2024.
Departmental Budget Caps
The policy sets clear ceilings on annual budget increases: school departments cannot exceed 3% growth, while municipal departments are capped at 2.5%. For the fiscal year 2027 budget currently being developed, Town Manager Joe Colangelo has issued guidance rates even lower than these caps—2.75% for schools and 2.25% for municipal departments. Select Board member Steve Louko raised questions about whether existing collective bargaining agreements would fit within these constraints, to which Hoyes acknowledged that salary increases would need to be balanced against other expenses to maintain the overall departmental run rates.
Revolutionary Changes to Meals Tax Allocation
Perhaps the most dramatic shift in town financial practice involves how Hanover will spend its local meals tax revenue. Historically, 100% of meals tax receipts went to fund the town’s Other Post-Employment Benefits (OPEB) liability. Under the new policy, that approach changes entirely. The policy directs that 60% of meals tax revenue—no less than $500,000—be allocated to capital budget items. Another 20%—at least $100,000—must go to the general stabilization fund. Only the remaining 20% would continue funding OPEB obligations.
“This is probably in the whole document the biggest change area,” Hoyes said. The town now receives nearly $1 million annually in meals tax revenue, a figure projected to cross that threshold definitively by fiscal year 2028. Hoyes demonstrated that using 90% of the prior year’s meals tax receipts as the baseline for allocations would meet all the policy’s minimum funding requirements while providing conservative budgeting.
The shift recognizes that meals tax is an unpredictable revenue stream that shouldn’t fund recurring operating expenses like salaries. “Using what’s an unknown amount of money and betting it in the operating budget for recurring expenses, including salary” was identified as poor practice. By dedicating these funds to capital projects and reserves instead, the town can build financial resilience while still maintaining some OPEB contributions.
Strategic Use of Excess Levy Capacity
The policy also addresses the approximately $1.8 million in excess levy capacity created by the override and conservative budgeting. Rather than applying this cushion immediately to the fiscal year 2027 budget—which the town could legally do—the policy calls for spreading it strategically over three to five years. This approach aims to smooth out property tax increases for residents and businesses while maintaining financial flexibility.
“I think as we were outlining some of the goals up front and what those objectives were and really trying to balance the needs of the community, but also understanding we don’t want to increase the tax burden so greatly coming off of the override last year, it felt more prudent for us to spread the excess capacity over a few years versus taxing right up to it this year,” Hughes explained.
Hoyes noted that the excess levy capacity will be most strategically useful over the next three years, since in the fourth year the town will see significant excluded debt drop off, naturally reducing the tax burden.
Snow and Ice Formula
To eliminate arbitrary budgeting for winter weather, the policy establishes a formula: the snow and ice budget will be set at a five-year rolling average plus 15%, accounting for weather variability and inflation. For fiscal year 2027, this formula produces a budget of $625,600, less than the current year’s $750,000 appropriation but higher than the town’s historical average of $523,000. The formula allows the budget to grow toward approximately $805,000 by fiscal year 2032, which represents the five highest historical expenditures plus 15%.
Stabilization Fund Growth
The policy prioritizes growing Hanover’s general stabilization fund, which currently sits at 3.3% of the operating budget—below the state Department of Revenue’s recommended range of 4-7%. The town has set an internal goal of reaching 5-6%. Through the dedicated meals tax contributions, Hoyes projected the fund would reach approximately $4.2 million by fiscal year 2032, representing nearly 5% of the anticipated operating budget.
Importantly, the policy also addresses the possibility that the town may need to tap into stabilization during fiscal year 2031 to cover the final Plymouth County retirement assessment payment. If such a withdrawal becomes necessary, the policy mandates that it be accompanied by a three-to-five-year repayment plan—a requirement that rating agencies expect to see.
Free Cash Guidelines
While acknowledging that best practices call for avoiding the use of free cash in operating budgets, the policy recognizes that Hanover will need to continue this practice strategically to achieve sustainability goals. The policy emphasizes that free cash should not fund salaries or other recurring expenses, and when used in the operating budget, it should be applied to capital items when possible. The policy stresses that generating adequate free cash requires effort across all town departments through careful expense management and conservative revenue forecasting.
Debt Policies
The policy establishes clear thresholds for debt financing: it should be used for equipment, vehicles, or improvements costing over $500,000 with a useful life exceeding 10 years. For vehicles with useful lives over three years but costing under $500,000, debt financing or leasing should be considered. Critically, any debt authorization request exceeding $1 million will be presented to voters as a debt exclusion, allowing residents to decide whether to support the borrowing outside the levy limit.
Transparency and Flexibility
A key feature of the policy is Section 4, which addresses deviations. When budget proposals don’t adhere to the established guidelines, the policy requires full discussion of why the deviation is necessary, whether it’s essential or merely desirable, what the trade-offs are, and how it impacts future budgets. “We would want to flag these things to residents that these are indeed deviations, and there’s nothing kind of secretly slipped into the budget,” Hoyes said.
The policy is designed to be reviewed annually by the Select Board prior to December 1st, ensuring it remains relevant and can be adjusted as circumstances change. Hughes emphasized this point: “I think putting it into a policy and knowing that it can be deviated from if needed, but putting some sound kind of fiscal best practices for the board to talk about every year... if you need to prioritize one over the other, we’re having a transparent conversation.”
O’Connor acknowledged struggling with the balance between establishing firm guidelines and not overly constraining future boards. “I did struggle kind of even on my own a little bit with what is dictating what another board is doing versus what is following through on what we promised residents this year and last year,” she said. “And I do think this finds a reasonable middle ground in that one, it’s a policy. So absolutely, it can be deviated from when necessary. But it also does kind of put some strength behind the words that we put forward at town meeting.”
Board Response and Next Steps
While Town Manager Colangelo indicated his preference would be adoption that evening to facilitate budget planning, Select Board Chair Rhonda Nyman suggested waiting until the next meeting to allow absent member Greg Satterwhite time to review the comprehensive document. “I think it’s important to just kind of take a breath and just take another peek at it before we make the decision and rush into taking the vote,” Nyman said. Colangelo agreed that a two-week delay wouldn’t create significant problems and acknowledged the value of full board input.
Louko praised the policy’s thoroughness, noting it “definitely sets the tone to try to get us to 2032,” while acknowledging that future boards may choose to tweak it as the town’s financial position strengthens. Hoyes suggested the policy would actually reduce the number of budget meetings in future years by establishing clear anchors, allowing more focused discussion on service levels rather than financial mechanics.
In related financial news, Colangelo announced that the town plans to switch from Moody’s to Standard & Poor’s for its next debt issuance credit rating, with the expectation that stronger financial policies may result in a better rating. The town has been working toward this change with its debt advisor, Hilltop Financial.
Why It Matters
This financial policy represents a fundamental shift in how Hanover manages its money and plans for the future. For residents, it means greater predictability in property tax increases and transparency in budget decisions. The policy’s emphasis on building reserves and managing debt prudently should strengthen the town’s financial position and potentially improve its credit rating, which could lower borrowing costs. Most importantly, by establishing a clear roadmap to fiscal year 2032, the policy honors the commitment made to voters when they approved the override—that careful management would extend its benefits for years without requiring another tax increase. The policy transforms abstract financial management into concrete, measurable practices that any resident can understand and track, making town government more accountable and accessible.
Meeting Minutes
Key Motions & Votes
Motion: Approve Select Board commentary for the special town meeting. Outcome: Approved. Vote: Unanimous. (Timestamp: 45:37)
Motion: Open the May 2026 annual town meeting warrant (accepting articles until January 26, 2026 at noon) and the 2026 special town meeting warrant (accepting articles until February 23, 2026 at noon). Outcome: Approved. Vote: Unanimous. (Timestamp: 47:10)
Motion: Adjourn meeting. Outcome: Approved. Vote: Unanimous. (Timestamp: 52:18)
Public Comment
No public comments were made either in person or via Zoom during the public comment period. Chair Nyman noted that no one was in attendance at the start of the meeting.
What’s Next
The Select Board will vote on adopting Finance Policy 7-20 at their next meeting on December 15, 2025, after absent member Greg Satterwhite has had opportunity to review the document. The tax classification hearing remains open pending Department of Revenue certification of numbers and will likely close at the next meeting. Budget Director Hoyes will begin incorporating the policy guidelines into the fiscal year 2027 budget development, pending final board approval. Town Manager Colangelo will provide an update on ARPA funding status at a future meeting. Winterfest is scheduled for Friday night with road closures around Four Corners, and the Lions Club will hold their annual tree lighting ceremony at the library this weekend.
This is an execptional example of structural budgeting done right. The decision to shift meals tax away from 100% OPEB funding and toward capital projects and stabilization reserves shows real fiscal maturity because volatile revenue should never underpin recurring obligations. The 60/20/20 split creates flexibility while still honoring prior commitments. What really impresses me is teh deviation transparency clause in Section 4, forcing explicit conversations about trade-offs instead of letting choices hide in the spreadhseet. Municipal budgets usually fail not from lack of planning but from lack of accountability mechanisms when plans change.