By Chet Hagenbarth
The general fund budget is comprised of three primary sections: operations, capital funds and debt service.
This year’s budget proposes to reduce the operations budget, bring capital funding to a sustainable level, and hold debt service funding at or below the most recent 5-year levels. This budget and Articles 6 & 7 for the annual town meeting will allow the town to return to its pre-Irene levels of reserve cash, sustainable levels of bonded indebtedness to maintain our facilities and services we depend on and allow for required levels of operations reserve funding.
The towns cash position remains poor and while the revenue overage exceeded the overage in expenses and allowed for a budgeted carryover of $120,791, the net cash position in town saw little change due to the continuing carryover of the Tropical Storm Irene projects. As a result, the town continues to have a net cash position of less than $100,000. The Vermont Municipal Bond Bank and Peoples Bank, (town lending institutions), recommend having the months of funds in reserve or 25 percent of our general fund budget expense along with the need to fund the Irene debt carryover in order to improve our cash position. The town’s ability to fund future projects will depend upon these steps to strengthen our financial standing. Article 6 to raise $588,000 for Tropical Storm Irene bridge replacements and Article 7 to create a reserve to fund to allow for up to 25 percent of the general fund budget will dramatically improve our cash position over time.
Operations budget
The operations budget will decrease this year due to some efficiencies being undertaken. For example, the assistant clerk and assistant bookkeepers positions have been combined as well as some reductions in insurance and benefits. The operations budget has been reduced from $2,878,575 to $2,743790.28, for a total reduction of $134,784.75.
Capital fund appropriations
Since 2002, capital fund appropriations for paved and gravel roads have averaged $211,619.76. The appropriations in the 1980s averaged $339,166.67 or $686,811, inflation adjusted. The appropriations in the 1990s averaged $361,000 or $510,811. This reduction for road capital appropriations coincides with the implementation of Act 60, the statewide property tax program. Unfortunately, the underfunding has put the town well behind of keeping the roads in a serviceable condition. The current budget includes a sustainable funding program to maintain the roads without financing in the future but in order to bring some failed roads up to standard, we may need to finance some projects in the short term. The capital portion of the general fund budget will increase from $943,586 (includes $75,000 for the future pool) to $1,305,597. This is an increase of $362,011. This increase is the only increase in this year’s budget, but it is critical to ensure the town’s infrastructure does not continue to deteriorate.
Current debt service
The current level of debt service includes $735,000 of equipment financing for which the payments are included in the associated restricted funds for those departments. The debt service for the facility portion of the general fund has hovered between $650,000 and $783,000. Keeping this as a goal, future project needs will be identified in order to maintain the current debt structure so as to not be the cause for tax increases.
The sustainable budget proposed will remain level for operations, capital, and debt service for the foreseeable future including the debt service for a new public safety building if approved. This plan also eliminates the need to finance equipment purchases, such as plow trucks going forward, which will also dramatically improve the town’s financial outlook.
Tax rate implications
The current billed tax rate was .4127 and the proposed tax rate of .4665 represents a .0538 change in the municipal tax rate. The rate increase is entirely due to the critical need to bring the capital funding appropriations up to a sustainable level.
The chart below depicts the effect of the tax rate change for several assessed valuations. For example, a residence valued at $250,000 will see an increase in the municipal portion the tax bill of $135 for the FY 2020 budget year.
Editor’s note: Chet Hagenbarth is the Killington town manager. He will be writing a weekly column explaining the budget until Town Meeting Day March 5.
