Uh-Oh. Is Voter Approval Needed Before Using $$ In Undesignated Fund Balance?

Submitted 14 days ago
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Selectboard okayed disbursements for road repairs and building cost overruns without voters

Did the Norwich Selectboard erroneously skip over voters in paying for building cost overruns and road repairs?   

Former Selectboard member Stephen Flanders thinks voter input is required by law, as stated in a recent email to Town officials.  I think he has a valid point. The email from Mr. Flanders is in the January 9 Selectboard packet, at unnumbered page 47.

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Voters approve Town budgets. 17 V.S.A § 2664.  Mr. Flanders says the "voters have not yet authorized the expenditures to cover cost overruns in the 2017-8 capital budget, as ill-timed and unavoidable as they may have been." 

So where did the authority come from to pay the $244,000 in building cost overruns relating to the public safety building and DPW garage addition? Hmmm. Good question. 

The money for the cost overruns did not come from the annual or building budget. Instead, the Selectboard 'authorized'  in July 2018 that the $244,000 be paid from the  Undesignated Fund Balance (UFB), the Town's emergency and liquidity fund. See What Is An "Undesignated Fund Balance? 

Is tapping the emergency fund enough to skip voter approval?  No, according to Mr. Flanders.  "The UFB is a source of liquidity, not a source of approved funding," he told me in an email. That makes sense to me. The Vermont Secretary of State opined in 2011 and 2004  that a budget surplus cannot be spent without voter approval. See also 24 V.S.A. § 2804.

In his email to the Selectboard, Mr. Flanders raised a similar concern with using the UFB to pay for unreimbursed road repairs from the July 1 Storm Event.† He states the "voters authorized a line of credit to address cash flow," but have not voted on how to pay for those expenses.

The former Selectboard member thinks that the building cost overruns and unreimbursed road repairs should be bonded over a period of years. "The impact on the tax rate from bonding should be minimal and easy to explain to the voters as unfortunate, necessary and unavoidable costs, whose impact is mitigated through bonding," said his Selectboard email. 

There is a bright side to this approach. Bonding those amounts will "restore the undesignated fund balance on a path to l6% [for] the next time it sets the tax rate, and have it available for providing cash flow for the next town emergency."

† I am not sure the Selectboard discussed or authorized using the UFB for unreimbursed road repairs, but Board members appear to assume that is the case. 

POSTED: 01.09.2019 

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