East Lyme board to present $76M budget
East Lyme — After nearly a dozen hours of deliberation this past week, the Board of Finance agreed it will present residents with an overall $76.1 million 2020-21 budget with a proposed 28.36 mill rate at a virtual public hearing Monday.
The board then will finalize the overall budget May 27 and set the mill rate.
The decision to move forward with a 0.17-mill increase did not come lightly for board members, who are responsible for decreasing and finalizing the town’s proposed budget without the possibility for a referendum due to the COVID-19 pandemic that has left hundreds of East Lyme residents unemployed, they’ve said.
An overall $77.6 million budget with a 4.6% increase — and a 1.07 mill rate increase, Finance Director Anna Johnson has said — was presented before the pandemic began. Both the selectmen and education boards agreed in April to reduce their budgets before coming back to the Board of Finance for further deliberations — an unprecedented move town officials deemed necessary to decrease the tax rate increase.
The Board of Selectmen reduced the general government budget by $312,544, while the Board of Education reduced its budget by about $827,000.
From there, the Board of Finance this past week made further cuts in the general government budget and the town’s capital plan, while also finding reductions in the amount the town would pay toward debt service next year.
The finance board voted to keep the revised $50.87 million 2020-21 education budget untouched, which is 3.3% higher than this year’s schools spending, preserving plans to purchase portable learning devices for every student this upcoming academic year. It proposed to spend $18.8 million for the general government, $5.8 million in debt service and almost $649,000 in capital improvements. The new $76.1 million budget is 2.7% more than this year’s spending plan.
As has been the case in many other area towns this budget season, the board decided to pull $900,000 from town savings to help further decrease the proposed mill rate. As of July 1, 2019, the town’s undesignated fund balance sat at $6.2 million, representing 8.4% of the current year’s budget.
Some board members argued more money should be pulled from the town’s savings to bring the tax rate increase to zero, while members Anne Santoro and John Birmingham argued more should be left in the town’s savings — proposing up to a 0.4 mill rate increase — in the event an even larger emergency hit in the future, as well as to better preserve the town’s credit rating score based on suggestions from financial advisors.
A better credit rating score, they argued, would allow the town to bond money with better interest rates in the future.
Grant concerns
Santoro also raised concerns about the possibility of not receiving state grants in the future — “hundreds of thousands of dollars” worth, she said — because of the economic downturn.
“Generally speaking, it’s acceptable practice that we use the fund balance for one of two possibilities: either for an emergency or a one-time opportunity, for example a land sale. And you try not to touch it,” she said during deliberations Thursday. “My own feeling is let’s be careful, perhaps, with how much of that fund balance you really want to dig into because a) it’s hard to get back and b) you want to plan for the future.”
“That fund balance is not just about COVID and all the economic downturn of COVID and COVID part 2 and COVID part 3,” Santoro said. “It’s about having some kind of a safety net for the town should there be some other episode: hurricanes, other natural disasters ... and other financial ruin that can happen.”
Board of Finance Chairwoman Camille Alberti argued that because the town and the schools combined expected to give back about $1.5 million in unspent funds this year to the town’s savings account, and because the town has been making a concerted effort to raise its savings, more money could be used to bring the mill rate to a zero percent increase.
“Anyone looking at our financials would say we are doing fantastically,” Alberti said to the board Thursday. “I would say this is an emergency. This is an international pandemic. If it’s not raining today, I’m really not sure when it’s going to rain. This is pretty serious. It is a big psychological boon for people to know that we are trying to take care of them; I think that goes a long way in terms of confidence of town government.”
They met in the middle with the 0.17 mill rate increase, which means that a taxpayer with a home assessed at $250,000 will pay $7,090 next fiscal year, compared to the $7,047.50 this year — a difference of about $43.
The town’s undesignated fund still is expected to receive approximately $700,000 in unspent funds this year, even accounting for the $900,000 to lower next year’s budget, Alberti said by phone Friday, raising the town’s savings to about $6.9 million at the end of this fiscal year.
“I think we have a win, win, win,” she said. “We are still implementing some new initiatives with technology, both with the schools and the town in this budget. We are still able to increase our fund balance at the end of this fiscal year. And we will add a very minimal tax increase to the taxpayer this year.”
The board also decided to center its proposed budget around an expected 98% tax collection rate, lower than the typical 98.4% rate the town budgets for, “to build in some protection against tax defaults,” Alberti said.
“By putting this plan forward, we have 12 months to assess, re-evaluate and plan,” she said. “So, the trick is let’s not wait to the end of next year to see where we are and react, let’s plan now in case disaster hits the economy.”
“Just because we approved the budget doesn’t mean the work is done,” she added. “The town still has to come together to preplan for further disaster in the economy.”