By Tracy F. Seelye, Express editor
HANSON – Finance Committee Chair Kevin Sullivan recommended that a free cash balance of 5 percent of the total be kept in reserve after Town Meeting and is recommending to his committee that they maintain the highest possible level of free cash as they vote on whether to recommend Town Meeting article requests.
Capital improvement and highway requests were among the few areas he saw room for trimming. While they are important, he said maintaining free cash was more critical and, if cuts were needed, those would have to be priority areas as opposed to other requests that appear absolutely necessary.
“We made promises in May that we’d fund in October and we’re running a razor-thin budget here,” Sullivan said.
Grants and other funding avenues would also need to be looked at, he said, and made the “unpopular statement” that, when the tax rate is set in November, he would advocate raising taxes.
“If we don’t do something now, we are going to be in significant dire straits,” he said. “It’s not sustainable.”
He is currently comparing the rates of surrounding communities and crunching numbers with Town Accountant Eric Kinsherf.
“Right now, out of a $34 million budget, that would require us to have a free cash reserve of $1.7 million,” he told the Select Board, on Tuesday, Sept. 12. “If we spend all the free cash that we’ve allocated for the articles, we’ll be at between $300,000 to $400,000, which is well below the 5 percent threshold.”
He said that figure has not yet been certified.
When the free cash is certified, Sullivan said the belief is that it will be at about $1 million, but the Town Meeting articles are proposing expenditures on almost $800,000.
Cutting the capital and highway improvement articles would bring the spending requests down to about $550.000, but Sullivan said that would not help the free cash reserve problem.
“We don’t even have that now,” he said. “If we didn’t spend a dime, we still don’t have it [a 5-percent reserve], because … the absolute minimum is 3 percent.”
The state recommends the 5 percent figure to maintain a community’s bond rating as well as to maintain a “rainy day fund.
Select Board Chair Laura FitzGerald-Kemmett said spending nothing is not an option, but spending less is an option.
“We’re estimating that, come the springtime, it will have deficit of over $1 million,” Sullivan said. “So we’re taking a hard look at a lot of the free cash [requests]. I’ve never been a proponent of using free cash in an operational budget.”
Sullivan said he understands that promises have been made and things were discussed, but he sounded a note of caution.
“October has generally been a period where we get projects done that are nice to have, [but] there’s a real concern right now with the [free cash] balance. We’re under 1 percent if everything is funded.”
He said the final decision is, of course, up to the voters and they can vote free cash down to a zero balance if they want, but he stressed he is warning them about his concern for the springtime that they run into a risk of talking about cuts and overrides and not having a revenue base to support what the town is doing now.
“To be clear, we’re going to be having that conversation, even if you trim it to the bone now,” FitzGerald-Kemmett said, “I’m not saying throw caution to the wind now … but I want to be clear that [a reserve] will soften the blow a little bit, but it’s not going to completely [eliminate it].”
Sullivan said he was aware of that, but that the town finances are at a point where if free cash drops below a certain level, it’s not going to meet the town’s needs.
“None of us want to affect the bond rating,” FitzGerald-Kemmett said, noting that they have not voted on it as a board. “None of us want to go below 5 percent. We’re in the process of having some financial projections done.”
While they had not previously had solid numbers from Town Accountant Eric Kinsherf, now that they do, that information would definitely shape some of their decisions that night.
Sullivan said this would be the third budget cycle in which the town has not put any money in the stabilization accounts, which also has the potential to affect the bond rating.
“It looks very innocuous,” he said. “There’s really nothing very egregious in these articles … they all have their merits. I struggle because we’re approaching, I think a critical point.”
There’s also not a lot of flexibility, with some articles such as school transportation, but they will be asking if capital projects can be put off for another cycle.
“We’re at one of the tougher positions I’ve seen,” Sullivan said. “We’ve done this many times in October … it’s when we expend free cash. … Then the spring comes and we’re talking about cutting people’s jobs, and I don’t think anyone wants to do that.”
“No, we don’t want to do that,” FitzGerald-Kemmett said. She noted that the town did manage to put a modest amount into stabilization in May, but agreed it was no game changer.
“That’s a good lens for us to look through,” she said.
The Board reviewed warrant articles for the Oct. 2 special Town Meeting, with Town Administrator Lisa Green saying there were no substantive changes in numbers since the previous week’s meeting.
Green said WHRSD Business Manager John Stanbrook has sent emails to Hanson regarding capital items approved at past town meetings for which money can be released – capital items that came in lower than what was budgeted for, but Kinsherf has already incorporated those figures into the free cash balance.
She said that is likely an installment of what will be released as Stanbrook’s office continues calculating.
Kinsherf, who joined the discussion late, said the 5 percent the state wants to see set aside should be a combination of savings in free cash and satbilization.
“In my opinion, you’d be at 5 percent even if you did those [capital and highway improvement] articles,” he said of the combined accounts. But, Kinsherf said, the town can’t go wrong by avoiding the use of one-time money for operational budget items.
“All through that warrant there’s operational stuff that, when you go back, that probably should have been in the budget,” he said. “Any decision you can make that saves free cash is definitely saving this yar but also projecting up to next year.”
Green also said she received some news about a transportation request for a Norfolk Agricultural student centering on which school district is responsible for the expense.
“There’s movement to the new district becoming responsible for that transportation,” she said, regarding a potential transfer of the student to the regional school district where they’re being housed right now.
“That’s awesome, but it’s still in flux right now,” FitzGerald-Kemmett said.
The Board made final recommendations on warrant articles and voted to close the warrant for the Monday, Oct. 2 special Town Meeting. Selectman David George was absent.
Among the articles referred to Town Meeting was a capital projects article, which included $125,000 in ARPA-eligible dirt replacement for the town’s ballfields. The remaining $322,282 of articles for school technology upgrades for the schools is sourced from free cash “that we’re getting a very strong read that FinCom is not going to recommend,” FitzGerald-Kemmett said.
Board Vice Chair Joe Weeks said that, with in the next 12 months, maybe two budget cycles the board is going to have to be “really transparent with townspeople around where they want to spend their money and where they want to see their tax dollars go.”
“Being fiscally responsible is where we’re at right now,” he said. “Conservatism implies that we have the money and we’re just trying to spend it conservatively. We’re not. We’re trying to be responsible with it.”
By referring to Town Meeting he said he was not trying to punt a decision to be made, but that people who show up on Oct. 2 need to make a decision on where they want to see their money go.”
“We’ve done a really good job of not raising taxes through the roof,” Weeks said. “We’ve done a really good job of stretching the dollar as far as we can
The board split the ballfield portion into another ARPA-funded article to clarify the issue, but FitzGerald-Kemmett said the two ARPA articles should be separate and the board voted to recommend the infield dirt article.
By Tracy F. Seelye, Express editor