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Board of Finance: Join Us and Support This Budget Proposal

Board of Finance members breakdown and explain the budget for voters before the second referendum vote this Tuesday.

To the Editor:

Why did a fiscally conservative Board of Finance (BOF) unanimously put out a budget with a 4+% increase in mill rate? Let us try and explain why we support this budget.

We started reviewing the budget and while we don't always agree on everything in the budget, we share some common principles: 

1. Limit the increase in spending,

2. Try and pay for what we spend and avoid deferring necessary expenses,

3.  Be conservative in all estimates both revenue and expense, and

4. Don’t use our savings (undesignated fund) to pay for normal budget issues.

We ended up with a budget that increases spending by 2.17%. While not very low, most of the people we have spoken with understand that costs go up. The town has  contractual obligations, and just maintaining the status quo typically costs more year over year. Included in this spending increase are three new S.R.O.s (School Resource Officers) for our elementary schools, funding for mental health, funding for replacement vehicles, HVAC for town hall, new fields at Wolf Park, increased budget funding for roads and increased equipment funding for the fire departments. We are lowering Bonded debt by almost a million dollars and are properly funding our pension obligations (not kicking the can down the road).

If the story ended there, we believe the budget would have passed on the first vote.  Most people would agree with a conservative approach and a low 2% increase does not seem unreasonable.  Unfortunately finance is never that simple. The level of taxes the BOF must raise is affected by a number of other factors. The first is revenue. Estimating revenue for the future is always difficult. The revenue the town generates is often affected by the state of the economy.  Predicting home sales a year out, residents’ spending on Park and Rec programs and other revenue generating items is difficult. Our conservative principles compel us to project lower rather than higher revenue estimates.

State and federal funding also affect how much revenue Monroe receives. As anyone who reads the paper knows, the state of CT has not done a very good job of running their finances. The state is looking at ways of dealing with a bulging deficit and we can expect to receive less, not more, funding from the state.

With all the information we have received, we had to forecast a drop in revenues of $389,000 which forces us to raise revenue from taxes by 3.14% more than last year.

While the town has had increases larger than that in the past, 3.14% sounds a lot worse that 2.17%. In the past, this is where the Grand List has helped to bail us out.

A bad situation gets worse

The final piece of the puzzle is that the BOF must set the Mill Rate. The Mill Rate is a fairly complicated calculation but we will walk you through the theory. First, the assessor compiles a grand list effective October 1, 2012. The grand list is in constant flux as people appeal assessments, sell cars, go bankrupt, etc. Second, the town must re-coop tax rebates that are given to elderly, volunteers, etc. In the past, the story stopped here and we did the math and figured what mill rate would generate the $s needed and we were done. However, a problem last year caused us to add an additional step.

Last year, the BOF made the calculation based on the numbers provided by the assessor in January. When we met with the Tax collector around September, he advised the BOF that he had a problem. Apparently the grand list had changed dramatically (downward) from January to July when the tax bills are sent out, and he would have a difficult time collecting the 98.5% target we had projected. A large number of cars had been dropped, personal property assessments had become uncollectable and he was forced to be more aggressive in collections to reach his target. While we will collect the amount expected, this will have a negative impact on the amount of prior year taxes available for collection in 2013/14. 

Because of this, we decided to spend more  time examining in detail the Grand List and asked the Assessor to do an historical analysis of Grand List changes over the last 10 years. We did a calculation of the Grand List variances over the past five years factoring in assessment and non assessment years.  Based on this analysis, the BOF decided to reduce the Grand List presented by the Assessor by the average variance in non assessment years which generated a lower adjusted Grand List number. The BOF believed that following the principles of conservative estimating, this would give us a more accurate estimate of where the Grand List should be on July 1, 2013. This left us with a Mill Rate increase of over 4%.

What to do

Obviously, no one on the BOF was happy with a 4% increase, so we discussed our options. We could use $s from the General Fund; however, this is not an option as the General Fund has only this year gotten above the minimum 5% level that the BOF policy requires. If we broke our own policy the first year without an extraordinary event, Moodys (our bond rating agency) would not look favorably on our financial management. We could change our revenue or Grand List numbers.  Based on the best and latest information we have gathered, our estimates looked right, so changing just to hit a mill rate number would be irresponsible. The last option was to let the voters decide.

Now What?

The First Selectman has made the decision to cut $200,000 from the spending increase, reducing it to 2.1%. Some have said this is only a modest cut, but please remember that this represents 10.5% of the proposed spending increase. We applaud this decision. The First Selectman listened to the voters and the Board of Education, the BOF and Town Council who sent forward a good budget. If this referendum fails, we will again look for more cuts.

Drivers

What is causing the 2.1% spending increase? The Major drivers include:

S.R.O Contingency - $150,893

School Resource Officers will be added to the three schools that do not currently have an S.R.O. We have listed this item as a contingency since the possibility of Federal funding exists, but conservative accounting forces us to plan for the possibility that the funding will not occur.

Health Insurance — $259,605 increase

While we will not know what the increase will be until the fall, we have made an estimate based on historical increases. Again, a conservative approach makes us prepare for an 8% increase.

Legal - $120,000 increase

This account has been grossly underfunded for the past two years and the BOF felt that both the First Selectman and the Town Council did not properly fund the budget for 2013/14 

Rolling Stock - $111,267

While this is a new account, we have just moved from leases to equipment replacement. Historically the town has been remiss in replacing vehicles and have stretched beyond typical service lives, which end up adding expense to maintenance. This plan will allow us to self lease and replace our aging fleet but using funds previously spent on more expensive outside leases.

Full Day Kindergarten - $193,602

Anyone who has had a recent Kindergartener will realize these kids are more than ready for a full day of learning and we need to give them every opportunity to excel and go beyond their peers, not fall behind. This is the time to start and this will improve the school system from the beginning.

Debt Service - $245,000 increase

To remain fiscally prudent, we need to continue to pay down our outstanding debt. Some of these repayments are required by maturities — others make sense to retire higher interest rate debt to save on interest expense.

If you have managed to read through this rather lengthy explanation, we hope you now have a better understanding of why the numbers are what they are.   No one likes to see taxes go up. I believe the spending increases make sense and are necessary to continue to make Monroe a town we are all proud to call home. The BOF is making sure we are taking a conservative long term approach to the finances of the town. If we continue to take this approach, we will not have the long term issues many communities are currently struggling with. We hope you will join us and support this budget proposal with a YES vote next Tuesday.

Monroe Board of Finance:

Chris Baudouin  

Michael Manjos

John Ostaszewski

Scott Ownes  

Ted Quinlan  

Mark Reed

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