|Peter Bragdon, Budget Committee Chair|
[Editors’ note: We asked Peter to write a primer on the budget process for our readers. Here’s his explanation with some commentary. The 2020-21 budget season is upon us. Peter explained in a prior letter that the town’s current tax rate is $16.90 per thousand dollars of property. Roughly 24% of that $16.90 goes to the Town of New Gloucester, 4% to Cumberland County, and the remaining 71% to the school district.]
There are two committees in the town that review the budget requests along with the selectmen. The first one I will speak of is the CIP or Capital Improvement Committee. Department heads along with the town manager develop their list of needs and wants on any capital item over $7,500. Requests are submitted through the selectmen to the CIP. The committee listens to department head presentations and then ranks each request with a detailed scoring system. The items are listed in a priority order and sent back to the selectmen. Almost always the selectmen accept the rankings of the CIP and then decide how many items can be funded. Not many are usually funded; last year it was about 4 out of 20ish requests. There are two types of CIP funding: either directly from taxation for a smaller project, or from capital reserves (savings), which is money set aside each year, most often to fund large projects like a fire truck or public works truck. With a good CIP program, it prevents New Gloucester from borrowing (bonding) money.
The other committee is the Budget Committee. The department heads and manager submit their budget to the selectmen. They spend several workshops going through and editing the budget the best they can. The budget then gets sent to the budget committee for their review. Once the committee has reviewed the budget, it is then sent back to the selectmen. They can accept the budget committee’s recommendations, disregard them, or list them separately on the town meeting agenda for the public to vote between the two. There are usually not big differences between the two groups.
When the budget goes to the town meeting it can only be lowered and not raised. This recommended method is used so the deck can’t be stacked at the town meeting to get a budget increased significantly. It allows citizens to know what the maximum budget will be coming out of the town meeting. I think discussion at the town meeting is great, but usually what is presented is passed.
Also affecting the budgeting process is the undesignated fund balance. This is funded by money that was budgeted and not spent or excess income above projections. I was recently told that we added about $100,000 to the undesignated fund this past fiscal year. We will be taking out $550,000 for this current year’s budget, leaving a balance of roughly $3.5 million. The fund was able to be used this year, as there was enough of a balance to withdraw and keep it a sufficient level. I believe auditors recommend it should be around $3.5-4 million dollars. This will be sufficient to keep enough money in “the check book” between taxes being collected and for other drops in revenue or unexpected expenses. If the undesignated fund gets too low, it could mean the town borrowing money if revenue is slow or we are hit with a major expense we were not expecting.
The budget is paid for by several sources. The largest portion comes from taxation on your property and business items. The next largest funding source is excise tax from vehicles that are registered in New Gloucester. This number is much larger than one would think; it’s around $1 million. There is also state revenue-sharing, which is money that is sent from the states treasury, and fees from different sources in the town, including building permits, clerk fees, Fire & Rescue billing, and recreation programs. Lastly, the town has Tax Increment Financing (TIF) account. This is set up for the Pineland area. Taxes collected from there are then put into a special account and can only be used for certain items. There are a lot of benefits to this account, but it would take me a lot of paper to fully explain its operation.
The selectmen recently adopted the parameters or guidelines for this coming budget. In summary, they are the same as last year. A budget built from the bottom up with no unjustified increases, no cost of living raises but up to a 3% merit raise for employees, no new employees unless justified, no excessive use of the undesignated fund balance. As the selectmen said, these leave a lot of room for interpretation and I certainly agree. I think the selectmen are really trying to say everyone needs to be frugal and develop a lean budget. I have full faith in the selectmen and budget committee to do that. My priorities may be different than theirs, and yours may be different than mine. That’s why we need to work together and come to something we can all agree on.
The CIP committee has started to meet to review those requests. The selectmen will be reviewing the general budget and sending it to the budget committee in late January. The town meeting will vote on it in May. After a few months off in the summer, the process starts all over again in the fall. If you want a true say in the budget, the best time is during the budget committee public hearing before they send the budget back to the selectmen.
The last topic to touch on is the revaluation, or equalization as others call it. Currently the town’s property is assessed at about 85% of the true market value. The revaluation will look at every property in town, and some will increase in value, some will stay the same, and a handful will decrease. With property values increasing in general it gives the town a broader tax base. X amount of funds are needed to fund the town budget. That amount will still be raised, but it may be through a lower tax rate. For example, if the value of your house after the revaluation becomes $250k instead of $225k, you could still pay the same tax bill. As a result, the tax rate may go below $16.90 in the future, but that doesn’t mean the town is collecting any less money.
I hope this helps clarify the process and how the budget is developed. With this said, I remove the hat of Budget Committee Chair and state I personally feel this year will be one of the most challenging budgets we have faced recently.
The cost of everything is increasing. Postage, electricity, insurance, oil, materials, staff costs are all rising. As the minimum wage goes up, everything rises. Starting in the middle of the budget year, the town must provide vacation time for all part-time employees working over 120 hours a year.
We are facing a large project of replacing the dam at Stevens Brook on Gloucester Hill Road. Cost was just revealed to be at around $750k; last year it was projected at $370k. The cost associated with the construction market is skyrocketing and I believe there was some tainted information. This project currently has $192,000 set aside for it. There may be a few reserve accounts we could tap, but it could potentially cost the taxpayers $550,000 in taxation this year to complete this project. This project must be done, as the road and dam are failing.
This is not the only project for the town. Parks and Recreation is looking at funding several projects along with putting money into reserves for the infield at the fairgrounds, all totaling about a million dollars when completed. Reserve accounts need to be funded for the Fire Department and Public Works. As an example, in the next ten years the Fire and Rescue is suggesting almost $2 million in replacement equipment! Currently in that reserve account is $490k. An account for building emergencies and repairs at the town hall complex needs to be funded. Currently there is about $5000 set aside. As an example, there are buildings that need to be stained and boards repaired very soon; the town hall alone is $25k. There are heating and cooling issues approaching in the buildings that will cost tens of thousands of dollars to address.
We can’t forget the paving program, which is requested at $326k this year. No fault of the Public Works, but that is just keeping our head above water with the amount of paving that needs to be done.
These numbers are all really concerning. I am not supporting or picking on any of them. There is a point where we can only put off funding projects for so long. But on the flip side, we need to determine what a need is really and what a want is, and what we are willing to pay for that want. This budget is going to require some hard work by the selectmen, budget committee, and town manager. It’s going to require us to sharpen our pencils and potentially open our wallets.