| Steve Libby, Select board budget advisor |
To the Board of Selectmen, Brenda Fox-Howard, Town Manager, and Citizens of New Gloucester
What a crazy world right now. Who would have ever imagined this?
As the Select Board’s Budget Advisor, I wanted to reach out to the Board, manager and citizens prior to the final signing of the warrant. I’m happy the Board asked the new manager to make a final pass through the budget. Another set of eyes, from the outside is a good thing.
There are some very important things to consider when looking for extra money in this budget and trying to fund additional operations. We must look ahead at the next few years. We must consider what was not funded this year and passed on to next year. Outlined below is a list, in no particular order of very important factors we must consider. All of these items were discussed during the process. I thought it would be good to see them on one page all at once.
Paving: We have not fully funded paving for 15+ years, the last 6 years we average less than $300 thousand towards hot top. We are now at a legitimate breaking point with paving. Next year we must consider $500,000 for paving just to avoid the cost of rebuilding our roads before we can overlay. This budget has $290,000 for paving and the FY22 proposal has $455,000. That’s a hit of $165,000 on next year! If the manager “found” money, shouldn’t it be used here to soften the blow next year? If we continue to only fund $300,000 each year the compounded amount of road miles not paved grows very fast. This account is in trouble. Paving is funded from the Undesignated Fund Balance.
Public Works Capital Reserve: This account is real close in the coming years. If we fully fund it we will be okay, assuming no major equipment failures. Money for this reserve comes entirely from the Undesignated Fund Balance.
Fire/Rescue Capital Reserve: This is the reserve account I’m most concerned with. One, it’s a moving target each year as needs change. And two, this equipment is so expensive. Due to lack of funding in recent years this account goes negative unless we lease equipment. Remember the intent of the capital reserves, fund them on the front end so we can purchase what we need when needed. Once we start leasing we are funding on the backend and can never get out of that hole. We cannot build reserves for needed equipment and make lease payments at the same time. This account must be brought up and soon. Money for this reserve comes entirely from the Undesignated Fund Balance.
Stevens Brook: For a few reasons this project will not be considered this year. We had a great bid for the project and the engineer is estimating next year the bid could be $900,000 to 1 million! This will be a big hit to the budget over the next 5 years. This project will be bonded with funds coming entirely from the Undesignated Fund Balance.
Other Capital Reserves / Projects: For obvious reasons we have not funded other wanted and needed reserves and projects such as needed fire/rescue equipment, fairgrounds, library, town hall, maintenance reserves, transfer station safety, building upkeep reserves and park & recreation. Money for these projects and reserves come entirely from the Undesignated Fund Balance.
One-time revenue for FY21/expenses pushed to FY22: The proposed budget has one-time revenue of $75,000 and expenses of $100,000 pushed into next year. This is a $175,000 hit on the budget next year!
State Revenue Sharing: This is our second largest non-property tax revenue after auto excise tax. In early March we were told to carry an estimate of $442,000. COVID-19 came along and the state re-issued a statement that we will receive substantially less. No estimate was given, and realistically how could they give us a number. I modified my estimate to $320,000 and now I’m concerned with that number. A report came out 6-7-20 that the reported unemployment numbers were off and the actual number is much higher than first reported. The state’s revenues are going to be way off, hence limited revenue to share. And the state is short within its own budget, and in my opinion will decrease revenue sharing to help balance their budget. They have already done so with the funding of 16 counties. This number could be off by $150,000 to 200,000. I conveyed my concerns to the Chair and she agrees my number of $320,000 could be off. She went on the say State Revenue Sharing could be as low as 0!
Excise Tax: I reached out to my sources again last week. They are still predicting low numbers. And don’t be fooled by a small bump where autos over the last three months need to be registered now. My number of $850,000 is okay. Some may argue it’s a little low but I know it’s close.
Structural Gap: My Conveyance letter to Board in January outlined the structural gap in the proposed budget of approximately $500,000. I pointed out to the Board the increases in revenues did not cover the increases in fixed costs. Things like pay increases, insurances, retirement, contractual items etc. In other words we needed to use the Undesignated Fund Balance to fund basic operations! Unless we make substantive changes this gap remains and we go further down this hole.
Undesignated Fund Balance (UFB): Ah, the so-called big pot of money and even I admit, it looks like a lot! Before we jump to suck money out, for more operations, we must put our fiscal hats on. Look at the list I provided. Look at our trend of using the UFB for basic operations. Look at the tax increase I projected for next year. Yes this UFB can help us. Let’s not use it irresponsibly. Be smart.
It would be so easy to drawdown the UFB for staffing positions and worry about the consequences later.
-What happens then, raise taxes?
It would be so easy to “fund our capital reserves next year” for staffing positions this year.
-What happens then, raise taxes?
It would be so easy to not fund paving for staffing positions and rebuild roads later.
-What happens then, raise taxes?
It would be so easy to increase our revenues to unobtainable targets to fund positions.
-What happens when we don’t make our revenue targets? Blame the Governor? Blame COVID-19?
It would be so easy to forget about the overly high estimated state revenue sharing.
-What happens when the state money doesn’t materialize, raise taxes?
I respect the new manager’s background. It appears she has “found” some money but with only a week on the job she has not had a chance to learn our town. If she had time I’m sure she would have reached out and done more research and seen the entire picture. There is a lot more to this than looking at the numbers over three days. The Select Board and Budget Committee know the above information I provided is just a snapshot of what is going on with our finances and if she had more time I’m sure she would see it differently.
In the past the Select Board was always presented with options and a recommendation. I’m disappointed the manager wasn’t given time to follow this past practice so the Select Board could consider how to use this “found” revenue. Options such as more paving, less use of Undesignated Fund Balance, more money into capital reserves, reinstatement of the public works position just to name a few.
I should remind everyone, our bond rating was upgraded the last two times we were looked it. Fiscal responsibility was the primary reason. We never over-estimate our revenues, we never take chances, we try to plan ahead, we do what is right.
This budget has gone through more scrutiny than any budget in my 34 years involvement with the town budget process. I want to commend the Select Board for stepping up and being leaders by making the tough unpopular decisions this budget cycle. As the Select Board’s Budget Advisor, I ask that they not fall prey to special interests that want their favorite department to receive more funds. The underlying issues I presented in January remain the same. COVID 19 has only exacerbated the problem and adding staff back in is fiscally irresponsible. We need to curb our spending and both the Select Board and the Budget Committee made those tough decisions and balanced the budget. Please stay the course and sign off on the budget that went though the public hearing, that you preliminarily approved in May, that is in your packet for consideration.
Budget Advisor
Steve Libby
June 7, 2020
