(6/11) May and June are typically "Budget Time" in town government. We are continuing the tradition as we finalize the fiscal year 2012 (FY2012) budget which will go into effect on July 1st. After two years of declining budgets, we are faced with a bottom line increase of approximately four percent for FY2012 to $1,622,586.00 As we get the
final results from the current budget year and continue to plan for the next, it has become apparent that we have a continuing ‘structural deficit’ of approximately $90,000 or 5.5%.
To this point, we have chosen to plug the gap by using monies from the "rainy day" fund – or, more accurately, the General Fund Balance of approximately $640,000 prior to the conclusion of the current budget. The reality is that in the current budget, the upcoming budget, and in future budgets, we will routinely be spending more than we
receive in revenue. Spending our savings to cover the gap seems to make the problem go away but will only take us so far. We only have a "balanced" budget in the sense that we currently have savings to make up for our overspending.
Most of our primary sources of income (Real Estate Tax revenue at $700,000 and County Tax Equity payments at $200,000) have stabilized. However, a huge and continuing gap has opened as Highway User Tax revenue traditionally transferred from the State government has largely dried up. We have seen an annual reduction of over $125,000 from the
State in respect to these funds. Even if the economic environment continues to improve, I don’t believe the State will ever return these funds that they have already redirected to their own purposes. Over the last two years, we have found savings to cover almost $35,000 dollars of the loss but will continue to have the remaining deficit.
A structural deficit can only be resolved in two ways: raise taxes and / or cut spending. The easiest way for a government, of course, is to raise taxes on people who have no other choice but to move… In our case, a tax increase of 4.5 cents or 12.5% to the current tax rate of 36 cents per $100 of assessed value would (probably) plug the
hole. Since approximately 40% of the town’s assessable tax base is tax-exempt, the amount of revenue received per penny of tax is much less than many other municipalities. (This is why our tax rate is already so high compared to other jurisdictions.) Obviously, this is the least attractive option.
When looking at spending, most people are immediately drawn to the cost of overheard – employees’ salaries, benefits, etc. At roughly 36% of the General Fund budget, our current costs are high but not outrageously so. Although we may be able to realize some savings by restricting Cost of Living Adjustments (COLAs), covering the gap will not
be possible by chopping this area of the budget alone. The Town Council should maintain a pattern of supporting our current staffing levels of town employees.
We should be able to save at least $45,000, half of the remaining gap, by trimming expenditures in numerous areas such as COLAs, Office and Operating Supplies, Conferences and Travel Expenses, and by not budgeting toward future purchases of equipment. The General Fund balance (or "rainy day fund") can legitimately be used for any emergency
purchase of equipment that might be unforeseen but required in the budget year. We should use the fund balance of the Sewer and Water Enterprise funds to pay down high interest sewer or water improvement related loans in order to reduce debt maintenance. We should also review the list of town owned properties with a goal to sell at least one, thereby increasing
the town coffers and returning property to the tax rolls.
Lastly, we need to revisit contractual expenses. Last Fall, the Board reviewed the current contract for three Community Deputies that has been in place for about three years now and was unwilling to reduce coverage. At $120,000 per deputy, the cost of this contract represents approximately 22% of the General Fund budget. I’m not convinced
that our current revenue can continue to support this expense. In my mind, the choice is eventually going to come down to raising taxes or cutting a deputy. We all need to think about where we stand on this decision and if we are willing to live with consequences – either way.
I encourage you to share your opinions on these and other issues with your elected officials. Have a great month – Chris Staiger
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