PARIS — The town could be in the red by March, and Town Manager Amy Bernard had tough words Monday night for the town’s recent budgeting practices.
“It’s created a situation now that we have approximately $371,000 less in the bank than we did at this time last year,” she told selectmen. “It’s a problem.”
She was especially critical of a controversial decision to spend $150,000 from a reserve account earmarked for infrastructure improvement to offset the tax rate. Despite some protest against it, residents approved the transfer of funds from the reserve account.
“I know that prior management recommended the utilization of $150,000 of undesignated fund balance to offset taxes,” Bernard said. “Undesignated funds is cash on hand.”
She called it “a poor decision.”
As of Dec. 31, the town had $828,000 in the bank, down from about $1.2 million at the same time in 2011. Bernard said that won’t get the town through to the next tax installment, due in May. “In the first week in March, we will not have enough funds in the bank,” she said, to pay for the town’s expenditures.
Bernard said town departments have been on a spending freeze since Jan. 2. All spending not deemed completely necessary, such as payroll and fuel for town vehicles, is frozen. She said some vendors have been informed that payments will be late.
She said the town underfunded the overlay, and abatements would probably exceed the town’s cash reserves.
“There is no more money coming in” from last year’s taxes, Bernard said.
She also criticized the expenditure of nearly $500,000 for road improvements. “Instead of utilizing your capital investment account for roads to offset that expenditure, you used that to offset taxes.”
“I will not sign checks if we do not have money in the bank,” Bernard told selectmen. “I don’t do it personally, and I won’t do it professionally.”
She said if spending continues at the same level, the town would be $700,000 in the red before revenue began streaming in again.
The town will likely have to take out tax anticipation notes, or short-term loans, later this year. She said if residents pay their taxes early, it could ease the burden a bit.
Board Vice Chairman Robert Kirchherr asked how the town was so broke.
“Did not revenues not meet anticipation, or did we underbudget?” he asked.
“You spent a lot more money this year,” Bernard said. “Almost half a million dollars more were you spending in road and infrastructure improvements before you received your first tax installment for the commitment. That doesn’t help.”
She said that by offsetting the tax commitment with reserve funds rather than putting them straight toward road improvements, the town also offset the expenditures toward the school and the county.
Bernard said the town needed to have at least three months’ operating budget in its overlay. For Paris, that means about $1.6 million in cash on hand. “You’re not there,” she said.
“How long will it take us to dig out of this?” Selectman Gerald Kilgore asked.
“If we can roll over some of this budget by not spending it, and raise and appropriate a significant amount of overlay, it could take a year or a year and a half for us to get out of it,” she said.
In the meantime, Bernard said, the town will need to make some hard decisions. With the school budget increasing, the town will need to find ways to save. “I think we’re at the point now where we’re going to be cutting services.”
“Are we prepared to cut services, or are we prepared to go to the townspeople to tell them that we’ve underfunded these departments for a while and they need to be funded to the level that they’re providing the service?” Bernard asked.
“I appreciate your attention to detail,” Kirchherr told Bernard. “It’s been awhile since we’ve had that.”