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Redding
Revenue shortfall: Final total still on table
Apr 10, 2008
by Susan Wolf
pilot@thereddingpilot.com
The finance board continued to grapple with the projected revenue shortfall in the current town budget Monday night, frustrated that it still did not have a definitive number on the table.
While the town has come up with reductions totaling $1,022,102, and the school board as much as $303,000, the shortfall is still estimated by Bill Alvarez, finance board chairman, at around $368,000. Even this number is not considered cast in concrete at this time.
In fact, late Tuesday afternoon, Town Controller Larry Hutvagner said he had met with Tax Collector Patricia Moisio and Town Assessor John Ford to work on the revenue numbers. Mr. Hutvagner said the remaining shortfall will now be lower than estimated by Mr. Alvarez on Monday night.
The revenue shortfall is being attributed to delays in state permits for the Georgetown Land Development Co.’s redevelopment of the Gilbert & Bennett property. The town anticipated collecting fees from the project that never materialized.
In January, the town anticipated a $900,000 revenue shortfall; last week that number was at $1,250,000. This week, the number is potentially $368,000 more. To date, $1,324,789 has been identified to help offset the shortfall.
Part of the confusion about the actual remaining revenue shortfall arose Monday because of a difference in the amount of taxes Ms. Moisio said she was charged with collecting and the number Mr. Hutvagner was using. The amount Ms. Moisio does not collect would add to the revenue shortfall for the 2007-08 fiscal year.
The tax collector said the finance board had charged her to collect 99.5% of current taxes, but now her collections stand at 99.2%. Mr. Hutvagner estimated that $571,160 will not be collected, and that includes a $28,000 revenue adjustment he recently made. Ms. Moisio put the number at $476,000 at the 99.5% rate. That was on Monday before the two met with Mr. Ford.
At Monday’s meeting, several finance board members said the two need to meet before the board’s meeting to discuss the numbers for the finance board to consider, and they should agree on the numbers.
“I’m betting the shortfall will be adjusted again,” said Nick Simeonidis, a finance board member.
“You and Pat have to reconcile this on a monthly basis,” said Bill Alvarez, board chairman, to Mr. Hutvagner.
Mr. Alvarez determined the remaining deficit as of Monday night was $518,000 but with the school board’s offset — reductions it will make in its current budget — the amount would be around $368,000.
Joe Dolan, another finance board member, told the controller and tax collector that because of the town’s financial situation, it is important that the board have numbers “that are in sync.”
“We’re supposed to be figuring out what we should do about this [the revenue shortfall], but [instead] we’re trying to figure out the numbers,” said Mr. Simeonidis. “All relevant people should sit down before these meetings and make sure they are comfortable with the numbers.”
School board
Earlier in the meeting, the Redding school board, which oversees the elementary and middle schools, discussed the areas where it could find savings.
Last week the board identified about $103,000, which included a $50,000 reduction in its monthly contribution to its health insurance reserve, and $50,000 in capital items — for stair repairs and a paving project at the elementary school — with the proviso the work would still get done this summer. These items have since been moved to a proposed capital plan that will go to a town meeting later this month. (See other story.)
Monday, David Lewson, board chairman, said the board was willing to consider taking another $100,000 from the medical reserve account.
With that amount removed, he said, the board’s medical reserve account would be at roughly $400,000, but claims are projected at $216,000 per month. That means the account would not have two months of projected claims in the account, the reserve amount recommended by the board’s insurance consultant.
Mr. Lewson said his board realizes “we’re all in this together, and we need to work together for a solution for this year.” However, he said, some members want to make sure before voting “for the additional risk in the medical reserve account” that this would be “the least worst option.”
The town does have about $400,000 in its unreserved fund balance, and assuming that amount holds, it could be used to cover the revenue deficit. However, if the town continues to have a shortfall, said Mr. Simeonidis, there are three options.
The town’s options are “a destructive layoff and massive cuts,” issuing tax anticipation notes that would impact the town’s borrowing interest rate, or using some of the school board’s medical reserve, he said. He classified the latter as the “least worst option.”
He said the finance board should recognize the school board has an obligation to its employees. He believes the finance board should commit to the school board that it will restore the medical reserve account to the recommend level “as soon as possible.”
When the board discussed its proposed 2008-09 budget, Mr. Simeonidis favored adding money to bring the medical reserve up to the insurance consultant’s recommended amount. No action has been taken on this recommendation since the board has not completed its budget for 2008-09.
Lewis Goldberg, a school board member, said there are revenues going into this account and the board might not need the money at the beginning of the fiscal year. But if the account is in need of money, he said, “ultimately the risk shifts to the town” since the medical reserve account is part of the board’s contractual obligations.
Mr. Dolan said he views at the board’s medical reserve account as a Social Security account. He favored taking as minimal amount as possible from it.
The school board, at Mr. Simeonidis’s suggestion, worded and unanimously passed a motion that allows the school board to transfer up to $100,000 of its medical reserve account to the town upon the request of the finance board.
By the end of the finance board’s meeting, members indicated that money will most likely be required to help offset the new revenue shortfall.
Selectmen
First Selectman Natalie Ketcham told the board she had verified with department heads that their revenue projections for the current year “are still achievable.”
Ms. Ketcham said the selectmen had earlier “created” savings of $855,854 in the town’s current budget. She presented the finance board with another $166,248 on Monday night. In total, the selectmen have come up with $1,022,102 to help offset the revenue shortfall.
Public comment
During public comment, Jim Bacon said the town is living beyond its means, and while the “embedded” costs may be difficult to get control of this year, the board must work to do this. “There’s an elephant in the room and it’s the cost of personnel,” said Mr. Bacon. “Unless something is done here, nothing else makes a difference.”
Mike D’Agostino called the finance board’s decision to ask the school board to use some of its medical reserve to help offset the revenue shortfall “unfair.”
Mr. Alvarez explained there is just one town budget and sometimes it is necessary to shift money from one account to another. “We don’t want to end the year in a deficit,” he said, adding it is more advantageous to the town to get rid of the shortfall.
“We’ll get through this and with the least amount of risk to the town and school board,” he said.
Jeanne Wendschuh said she is concerned about the town’s fund balance and recommended the finance board fund it as much as it can in the next budget to restore it, because its amount affects the town’s borrowing interest rate.
Mr. Alvarez said the town won’t go to bonding for a year or two, so the town has some time to build up the fund balance.
The finance board is meeting again this Friday, April 11, at town hall at 6:30 to resume its discussion on the revenue shortfall.
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