Mar 25, 2008
Redding
Finance board eyes revenue projections
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by RACHEL KIRKPATRICK
rkirkpatrick@thereddingpilot.com
The town’s anticipated revenue shortfall is growing.
According to revised revenue projections the Board of Finance was provided with at its March 17 meeting, the shortfall is about $175,000 more that previously estimated.
The town was already facing a $900,000 shortfall, but is now closer to $1.1 million. The revenue shortfall is occurring because the Gilbert & Bennett redevelopment project did not get under way as expected due to delays in state permits and approvals. The town anticipated collecting fees for building and zoning permits, as well as conveyance tax fees.
To offset the shortfall, the finance board directed the town and schools to find expense reductions in the current budget.
So far, approximately $800,000 in reductions were found on the town side, and approximately $100,000 were found in the school budget.
Monday night, the finance board redirected the town and schools to take another look at the current budget and to try to find more.
The town’s undesignated fund balance is down, and while there was adequate reserve in the fund balance when the mill rate was set for the last three years, the projected revenue from the redevelopment never materialized in the 2006-07 budget, according to Bill Alvarez, the finance board chairman. Then, the projected revenue was again counted on in the 2007-08 budget. The problem is that the finance board didn’t know the revenue would be off in 2006-07 because it set the mill rate for the next fiscal year in May, before the 2006-07 fiscal year-end.
As a result, in both fiscal years, the redevelopment project revenue was off.
How to recover
In the long term, the revenue from the redevelopment project will be used to replenish the town’s general fund balance, Mr. Alvarez said.
The board analyzed revenue projections for the next fiscal year as well, and at its last meeting, heard revised revenue projections for the 08-09 fiscal year. Town departments are actively working to cut back on expenditures in the 08-09 budget in order to address an estimated $336,000 shortfall, which finance board members calculated based on trends from the prior year’s budget, projections and actual numbers.
Joe Dolan, a finance board member, said he did not want the redevelopment project to be factored into 2008-09 revenue projections.
“Some of these revenue projections are fairly aggressive,” Mr. Dolan said.
Larry Hutvagner, the town controller, said departments have not done so, but the building department’s projected revenue, for example, reflects anticipated growth in new house construction and building additions, decks and other improvements.
Other departments, such as Park and Recreation with camp registrations beginning, should see revenue coming in over the next several months. This is the same for the tax collector, Mr. Hutvagner said, which could generate revenue through planned tax sales. Fees for the Transfer Station were raised as of Jan. 1, which is expected to bring in more revenue.
At the start of 2008, the fund balance was approximately $1,551,000 — $1,156,000 of that was allocated toward this year’s budget to offset the anticipated revenue shortfall.
As of right now, the undesignated fund balance is $395,000. Historically, the fund balance in past years has totaled at least $2 million to $3 million, or more, according to Mr. Hutvagner, and other town officials present at the meeting.
“I think where we’re at is recoverable, but we’re going to have to pray the Georgetown Land Development comes through,” Mr. Dolan said.
Finding more savings
Mr. Alvarez suggested the Board of Education be asked to defer any capital items that it can.
“I think we need to ask the town or Board of Education to freeze expenses wherever possible,” said Christina Kearney, a finance board memer. “We’re in a position where we’re not going to meet our budget.”
She later made a motion for the schools to freeze expenditures completely, “that is anything not necessary, as in not contractual, is not spent,” Ms. Kearney said.
Mr. Alvarez said departments, and the schools, were already asked to stop discretionary spending.
“I’m not sure what the mechanism would be for that type of motion,” he said.
After the motion received a second from Albert Viscio, a board member, Nick Simeonidis, also a board member, in discussion said he would be concerned with putting the school system “between a rock and a hard place,” in terms of state mandates it has to meet.
Ms. Kearney said during Mr. Simeonidis’ tenure on the Board of Education, he froze expenditures. She suggested her motion be voted down and revised to follow what the school board had done.
The motion was voted down, with Ms. Kearney being the only one for vote.
“We’ve gone through most of the discretionary items,” Mr. Hutvagner said. “Some departments will justify how many oil filters they will be using in their car; this is the way some of these departments do their budgets.”
Dr. Allen Fossbender, superintendent of the Redding, Easton and Region 9 school districts, said he and Peggy Sullivan, the three districts’ director of finance and operations, could outline priorities and justification for future spending in the current budget.
Ms. Sullivan added that she was unsure of how capital items would be deferred, since one paving project at the Redding Elementary School is scheduled to start in June.
“We went through this exercise in January,” said David Lewson, the school board chairman. “My concern is of the short-term deferring; how do we get it back into the budget for the next fiscal year?”
On the town side, Mr. Hutvagner said most capital items have already been spent. As far as equipment, a truck has already been purchased.
“I’ve already given you what’s left in the capital accounts,” he said.
Mr. Dolan suggested the town consider a sale and lease-back, as a “way to generate some cashflow,” he said.
First Selectman Natalie Ketcham reminded the board that there is $240,000 sitting in this year’s budget, through the capital and nonrecurring expense account, that has not been allocated.
She told the board that the building department, for example, has to balance its current activities with the needs of the future, should the redevelopment project get underway.
Mr. Simeonidis made a motion, which was approved by the finance board, to direct the town and the Board of Education to go back to the current budget to look for expense reductions, while being mindful of the current shortfall situation, and without disrupting necessary services, and to report back to the finance board at its next meeting, Monday, March 31.
© Copyright 2008 by Hersam Acorn Newspapers
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