MEXICO – Auditor Keel Hood advised selectmen on Wednesday to reduce the revenue estimate and to decrease expenses as he reviewed the town’s books for the fiscal year that ended June 30, 2004.

The town has no surplus, and also owes more than $130,000 to its undesignated account, an amount that must be replaced as soon as possible, he said. Such a financial situation leaves the town with a poor cash flow.

“Towns have been paying so much attention to their tax rates that they have reduced their surplus/undesignated funds balances,” he said.

He said towns the size of Mexico are expected to carry from $300,000 to $450,000 in undesignated funds.

Hood and Town Manager Joseph Derouche said much of $130,000 owed to the undesignated fund is the result of overages in the recreation, Wellness Center and general assistance accounts. Derouche added on Thursday that higher-than-expected police coverage costs also led to the town’s deficit, as well as unexpectedly higher costs for health insurance, Med-Care Ambulance Service, and many other smaller accounts. The deficit must be covered before the town can start building a surplus.

Selectmen Monique Aniel added that the town must reduce its expenses.

“We have a serious issue here that we need to address responsibly,” she said, adding that sometimes residents at town meeting return to the budget some costs that selectmen had tried to cut out.

This year’s adopted municipal budget came in at about $1.8 million, up just over $200,000 from last year’s $1.6 million. The tax rate this year is $28.50 per $1,000.

Hood also directed selectmen to conduct a townwide inventory of all its assets, a requirement recently mandated by the Governmental Accounting Office.

Derouche said he expects the inventory will be conducted in-house, rather than through the hiring of a consultant.

He said the deficit will be addressed when town officials start the budget process for next year, something that usually begins in November or December. He said the deficit most likely cannot be covered in one year.

Whether the deficit will affect municipal employees is not known at this time.

In a related tax issue, selectmen again declined to take a stance on the so-called Palesky tax-cap proposal.

Selectman Reggie Arsenault, a strong opponent of the proposal, argued that board should take a stance.

“Other communities are taking stances and we’ve got to let our employees know that we back them,” he said.

The rest of the board, however, disagreed.

Aniel said sending a newsletter offering information on both sides of the question showed leadership.

“Being a leader is being your own person. We’re giving people the entire picture,” she said.

Tied to the results of the tax-cap proposal is the planned lease and purchase of two new police cruisers. Although the cruisers had been budgeted, selectmen decided to hold off on the final purchase until after the election.