Unexpended Fund Balance Could Defray FY17 Taxes

The Derry Town Council will once again look into the efficacy of using the Unexpended Fund Balance to defray the tax impact of the upcoming FY 17 budget.

Councilor David Fischer made the suggestion at the Jan. 19 Town Council meeting. While Interim Town Administrator and Chief Financial Officer Susan Hickey was absent due to illness, the Council agreed to have her look more deeply into the pros and cons of tapping the Fund Balance.

At the Jan. 5 meeting, Hickey was charged with putting together four different scenarios for the FY 17 budget.

The town portion of the tax rate is currently $9.16 per $1,000. The current working budget is $22,820,287.

In a memo to Councilors, Hickey noted the projected components and increases of the FY 17 budget:

• Total CIP, $3,192,607, .03 cents on tax rate;

• Total Debt Service, $952,963, .04 cents on tax rate;

• Total Transfers, $111,701, zero on tax rate;

• Total Credits/Overlay, $794,800, .03 cents on tax rate;

• Total Operational Costs, $7,553,890, $3.02 on tax rate

• Total Personnel Costs, $27,014,279, $10.80 on tax rate

• For a Total Appropriation of $39,620,240 or a $15.84 town portion of tax rate.

Revenues are anticipated at $15,833,824 or $6.33, making an estimated town portion of $9.51 or a 35-cent increase.

Hickey based her scenarios on a working budget of $23,786,416.

Hickey delivered the following four scenarios:

• Cutting the estimated tax rate by 28 cents per $1,000. With $23,786,416 to be raised, this would mean $700,000 in cuts and a 9.23 cent per $1,000 tax rate, or increase of .07 cents.

• Cutting the estimated tax rate by 35 cents per $1,000, with the same amount of $23,786,416 to be raised, with $875,000 in cuts and the current 9.16 per $1,000 tax rate, with no increase.

• Cutting the estimated tax rate by 43 cents per $1,000, with $23,786,416 to be raised, with $1,080,000 in cuts. This would drop the town portion of the tax rate to 9.08 per $1,000, and a decrease of .08 on the tax rate.

• Cutting the current tax rate by 43 cents, with $23,786,416 to be raised, for a total town tax rate of 8.73 per $1,000. This would require a cut of $1,950,000 to the budget.

Fischer said, “I am deeply concerned about this year’s budget. There has been a lot of discussion and feedback this past year, most recently through the survey (see related story page 8). The survey had a 79 percent response, the highest response of any survey in the town of Derry, and we learned that people want lower taxes.

But Fischer also observed that the town received $1.5 million more in taxes than it needed to fund its budget, and this money had been placed in the Unassigned Fund Balance (UFB).

The UFB is currently at $11.3 million as of June 30, 2015. The UFB is 13 percent of the operating budget, and is at the “midpoint” of the range recommended by the New Hampshire Department of Revenue Administration.

“We need to be responsive to the community and decrease the tax rate,” Fischer maintained.

Fischer, continued, “Since we taxed the community $1.5 million more than we should have, I believe we should take half of that and use it to defray the tax burden.”

But Councilor Richard Tripp noted that according to RSA 32:5-b 1-a, the $700,000 the town took from the UFB last year must be replaced this year. He added that the RSA allows the town to override the tax cap.

The RSA states, “The legislative body may override the cap by the usual procedures applicable to annual meetings and deliberative sessions of the legislative body. The provisions of this section shall not limit the legislative body’s authority to increase or decrease the amount of any appropriation or the total amount of all appropriations.”

“I believe we should look into the positives and negatives of adopting this RSA,” Tripp said.

Councilor Joshua Bourdon said, “The majority of people responding to the survey also said they valued safety.” In the matter of Hickey’s calculations he noted, “We can’t tell what the impact on services would be.”

Bourdon said, “I don’t believe it’s fiscally responsible for us to take money from the Unassigned Fund Balance. I argued against it last year, and I’ll argue against it this year.”