UPDATE: Budget Deficit

The Selectboard held a special meeting on July 25 the sole topic being "FYE 2018 Financial Year Discussion.” Thank you, Selectboard for responding to public concern. See Yikes: Norwich Has A Budget Deficit Of Over $500,000. Below are some of my takeaways on three matters discussed at that meeting, as supplemented by emails from the Town Manager. 

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Is there a $520,000 “budget deficit”? 

Depends on your perspective.

The $520,000 number primarily consists, in round numbers, of: (a) $240,000 for cost overruns relating to the public safety building and DPW garage addition, and (b) $280,000 for the unreimbursed costs incurred in FYE 2018 for road repairs from the July 1 Storm Event. Neither is a line item in the FYE 2018 annual budget that closed on June 30. They are tracked separately. 

Town Manager Herb Durfee says that term "deficit" is best applied to the regular annual budget of the Town.  With respect to the FYE 2018 annual budge, that budget “currently is 96.5% spent, [but] some expenses accruable to that fiscal year remain outstanding” said the Town Manager on Friday. He suggested that ultimately there may be a deficit in the annual budget. [In contrast, my understanding is that the prior two budgets had a surplus.]

Whether part of the annual budget or not, the $520,000 is money the Town has to pay. Call it a shortfall or "overall deficit" or something else, it is a financial issue of importance. I think it would be helpful if the public received periodic updates regarding spending on the annual budget as well as separately tracked items. 

What did the Selectboard do with respect to the $520,000 shortfall?

With respect to the $240,000 for building cost overruns, the Selectboard and Town Manager likely "understand" that money from the rainy day fund has been authorized for use to pay that bill. 

I use "understand" because neither the paper trail nor the CATV video supports that understanding. No vote was taken. Nothing in the Selectboard agenda, Selectboard packet materials, or draft meeting minutes for the July 11 meeting allude to that action. To me, it is a stretch to fold that into approval of the tax rate.  A tad too casual and informal approach to town finances for my taste. One possible cure is for Selectboard to confirm its understanding by vote at its next meeting.   

For the $280,000 in road repairs, voters authorized the Town to borrow up to $4 million to cover road repair costs, in part because reimbursement from FEMA and the State won’t come anytime soon. The total in unreimbursed costs may reach $600,000. For now, they will be covered by the line of credit. Ultimately, the unreimbursed amount will likely need to be financed over a period of years. See Town To Borrow $4.3 Million Short Term, Then $537,500 For Ten Years.

Although the Selectboard has not yet officially decided to finance the unreimbursed amount, the decision seems inevitable. Absent a windfall to the Town, there is not excess money in the rainy day fund (officially known as the Undesignated Fund Balance or UBF) to prudently pay that bill.  

What if the annual budget from FYE 2018 is overspent? 

Better numbers should be available by the August 8 Selectboard meeting. If there is a deficit, the prior Selectboard authorized a draw of $300,000 from the UFB to buy down the tax rate. This amount is also there to backstop any deficit. But, is it? That decision was made when the Town’s rainy day fund had more cash. At present the balance is about $45,000 less than the Town Manager would like. Would a further draw impair the Town’s ability to respond to a major emergency?

POSTED: 08.01.2018  


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