From all appearances, this will be a tough year for both Waldoboro budget makers and Waldoboro taxpayers.
Several factors appear to be combining to make it nearly impossible to avoid an increase in taxes this year, according to town officials.
Although the process is in its earliest stages and more detailed information will be available in the coming months, an expected increase in the RSU/MSAD 40 school budget, increases to fuel, insurance and other fixed costs, and a depletion of fund balance, which is usually used to pay down taxes, will likely leave budget makers with a choice between raising taxes and cutting services, officials said.
Interim Town Manager Eileen Dondlinger addressed the issue directly at the Jan. 19 Board of Selectmen’s meeting.
“We might need to take a close look at what constitutes an essential service,” Dondlinger said.
Late last year, the RSU/MSAD 40 School Board approved a three percent budget cap for this coming school budget. This means that as administrators put together the district budget this year, they are authorized to increase the overall budget up to three percent, said Superintendent Frank Boynton.
Last year’s budget was $20,867,957. A three percent increase would bring the total to just over $21,493,995.
“We’re still in the very preliminary stages, but that’s a general target for where we’d like to be,” Boynton said.
Boynton said the increase is necessary because of increases in teachers’ salaries, benefits and changes in staff, as well as increases in the price of heating and transportation fuel. The district also has several maintenance, classroom materials and technology related projects they plan to fund in this year’s budget, Boynton said.
Waldoboro’s share of that budget will almost certainly change – as it does every year – based on the town’s population relative to the other towns in RSU/MSAD 40, but if the shares were to stay the same relative to one another, Waldoboro would see a three percent increase in it’s share.
Last year, Waldoboro’s share of the budget was $4,175,648. A three percent increase to that share would bring the total to just over $4,300,917.
“If we’re really concerned about keeping taxes down, it’s them we need to scream at,” Selectman Bob Butler said at the Jan. 19 meeting.
The fund balance is essentially an account made up of undesignated accrued surplus funds from previous years. Over the past 10 years, Waldoboro has typically had around a million dollars in fund balance – with a peak of more than $1.3 million in 2007 – but over the last three years, the fund balance has decreased to a low of just under $264,000 in 2010, according to the town’s most recent independent financial audit.
In this year’s budget, “it looks as though” Waldoboro will not budget any money to be used from fund balance, Dondlinger said.
Traditionally, Waldoboro has used between $250,000 and $275,000 from fund balance to pay down taxes – they use the surplus funds to supplement tax revenue to decrease the burden on residents, Dondlinger said.
However, due to the limited balance available this year, that money won’t be available, Dondlinger said. “That’s an added $250,000 we need to raise from taxes.”
The loss of fund balance is a result of a combination of large expenditures – all of which were approved by voters at town meeting – and a taxation policy over the last few years that stressed keeping taxes down instead of budgeting for a surplus.
The large expenditures from the fund balance in the last few years include: former Town Manager Lee Smith’s $100,000-plus severance package; the Jefferson Street bank stabilization project; and the $95,000 purchase and first year’s operating cost of the AD Gray building and an abutting property.
At the same time, mil rates in the last few years were set to keep taxes as low as possible, including a decrease in taxes two years ago, rather than a stable mil rate and extra surplus, former Waldoboro Town Manager William Post said in an interview prior to his resignation earlier this month.
Post said that policy was a misstep on the part of town.
The Board of Selectmen and a few residents in attendance at the Jan. 19 meeting shared the sentiment, expressing a hope that in future the town will learn from the past few years.
At least for the first year or two that the town was chewing through its fund balance, it was expected that the economy would turn around and the balance would be rebuilt, Post said in the interview. The length of the economic downturn made it difficult for the town to recover any surplus funds without increasing taxes, and the fund balance is now too low, Post said.
According to many officials in several towns and several accountants, the amount of fund balance a town should have is highly debatable. The Maine Municipal Association recommends that town’s have the equivalent of six to eight percent of their gross budget in fund balance.
For Waldoboro, which had a combined municipal, school and county gross budget of just over $8 million in 2010, that’s between $480,000 and $640,000.
“In the past, we’ve tried to keep a little more than that,” Dondlinger said. “It gives a couple of months of capital if something were to happen.”
However, the town has no written policy governing fund balance. Prior to Post’s resignation, he said that the town was looking into creating such a policy.
What direction town budget makers will take this year will become clearer in the weeks to come, Dondlinger said, “but it’s at a point where cutting any further means losing eyes.”