Selectboard Letter on 2015-16 Budget Proposal and Town Finances

February 27, 2015
Dear Killington Residents,

We are writing to further explain our budget proposal (Article 3) and the financial status of the Town to address questions and misinformation that have been circulated in the last few days.

The reality is that Town finances, while not ideal, are the deliberate result of how we, as a community, decided to pay for damage associated with Tropical Storm Irene. After Irene, the Board voted to fix the damage and not raise taxes to fund the repairs. Over the next two years, instead of raising taxes, the Board voted to use the Town’s capital reserves to make repairs and use the undesignated funds to balance the budget. At the 2012 and 2013 Town Meetings, the voters approved the Selectboard’s budgets.

As a result of these deliberate actions, we strained the cash flow for the Town. We began relying on the money we collect for state property taxes to temporarily fund our operations until we begin collecting our property tax revenues for the upcoming year. This is not an uncommon practice in Vermont. Related, the State even created a temporary policy after Irene which extended the turnover of education funds and provided additional temporary cash flow for Towns.

The Town Finances are audited every year by RHR Smith & Company, C.P.A.’s. RHR Smith & Company, C.P.A.’s is a firm of professionally trained certified public accountants who conduct municipal audits for many Vermont Towns. The Board of Selectman is very aware of this issue and has worked with our Treasurer and Auditor to ensure we follow applicable Governmental Accounting Practices throughout this process and take proper care of Town financing. Our auditor confirms that the Town’s financials are in accordance with generally accepted accounting principles (GAAP) as established by the Governmental Accounting Standards Board (GASB).

The information about the Town’s cash flow strain is not new information. Charlie Demarest and Billy Bauer raised these questions at Town Meeting in 2014. Following the meeting, the Selectboard held a special meeting on May 7, 2014 to revisit this issue at length with our Auditors. At the special meeting, we reviewed the decisions following Irene, the effect on the Town’s balance sheet and re-committed to our plan to slowly rebuild our cash balance without unduly burdening taxpayers.

At the time of this special meeting, the auditor wrote about this issue in an email:

“I actually see a few things that really jump out at me based on past conversations and audits:

1) The Town has not raised taxes through Hurricane Irene

2) The Town has knowingly spent a large amount of its general fund balance to put the Town back together because of the disaster.

3) The Town should really think about going to 3 to 4 collections per year of property taxes to collect money to run the various operations of the Town. This will improve cash flow which has been depleted over the past few years.

4) Based on my past conversation with Town parties, the Town appears to be right where they thought they would financially after this disaster as of December 31, 2013.

5) The necessity of a fund balance policy going forward that has been much talked about in the past few audits.”

As the Auditor noted, we are right where we thought we would be. Additionally, we continue to take his recommendations to improve our financial standing. For this Town Meeting we have created an 18-Month budget proposal to transition our fiscal year, and in that process we are moving to adopt four tax collection periods (Article 2). Finally, this year (as we planned at the Special Meeting on May 7, 2014) the Board will formalize the fund balance policy we have been developing.

Also this year, we expect to do the final reconciliation with FEMA and resolve this outstanding issue. We are working with the State and FEMA to finalize the reimbursement for our two largest projects – Stage and Ravine Road Bridges. We have been working with them over the course of the year to complete all the paperwork and respond to all of their questions. It is an extremely long and detailed process that we have addressed with thoughtful care and extensive documentation.

Once that is resolved, we will take the next steps to continue to right the ship. Irene was a once in a lifetime occurrence and the Town’s decisions on how to handle it financially require time to complete.

As we mentioned, we are very aware of these issues and have been and will continue to work to resolve them. In the meantime, we need to keep moving forward. We firmly believe the budget proposal (Article 3) and Tax Collection Plan (Article 2) will keep us on track. For more information on this please feel free to reach any of us or come to the Public Information Meeting on Monday, March 2nd at 7:00 pm at the Elementary School.


Killington Selectboard
Patricia McGrath
J. Christopher Bianchi
Kenneth Lee

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