The Town Council will consider changing the proportion of money it retains for fund balance, after a discussion with Town Administrator Galen Stearns and Chief Financial Officer Susan Hickey.
Stearns had mentioned changing the percentage of money going to fund balance, using the rest to reduce taxes, as part of a list of strategies to reduce the town’s tax rate. In a follow-up discussion after Stearns’ preliminary budget presentation, he and Hickey said it was doable but warned that using it as a one-time expense would produce its own problems.
Councilor David Fischer said, “We are not preoccupied only with staff reduction. It’s important as Galen moves forward and presents us with data that we consider changing our policy regarding the fund balance.”
Fischer reminded the Council and audience that the New Hampshire Department of Revenue Administration recommends a range of 8 to 17 percent to be retained, and that Derry currently is at 12.5 percent. It is one of the mechanisms the Council could consider as an alternative to cutting jobs, he said, and would reduce the proposed job cuts by half.
“It would allow us to achieve our goals, but not at the expense of those positions,” Fischer said.
Councilor Michael Fairbanks agreed with the necessity to look at reducing the percentage, but warned that he didn’t want the town to form a habit of using the fund balance to reduce the operating budget.
Fischer agreed that they needed to proceed with caution, because “using it to reduce expenses on a regular basis could come at a serious cost.”
Hickey said changing the percentage would reduce the tax rate, but it would be classified as a one-time revenue source “and next year we’ll be in the same position.”
Hickey advised using the savings to mitigate the Veterans Tax Exemption or go toward capital projects rather than the working budget. “That would be a better approach,” she said.
Hickey also noted that changing the proportion of funds going to the unexpended fund balance might affect the town’s bond rating.
“We need to do it in a way that would not jeopardize our long-term financial stability,” Fischer warned.
Hickey said she and Stearns would be working on this and other alternatives over the next few weeks.
“We’ll try to ‘make the magic happen’ and achieve both goals,” she said.
“We will try to achieve the $6 million in savings by other means than staff reduction,” Stearns said.