Clarifying The Cost of Fire Protection
One of the biggest flashpoints in the proposed budget for next year is the cost of fire protection services. According to the tentative budget released last week, the tax revenue needed to support those services is $687,462 more than last year, a stunning 59% increase. However, without context those numbers are misleading. According to its multi-year contract, the Volunteer Fire Department is set to receive an increase of 2%, or just $27,462.
How can there be such a huge discrepancy between the Fire Department's contractual increase and what the town says those services are going to cost us additionally? According to Maria Angelico, the town's director of finance, last year the Town Board approved a budget that applied $450,000 of its fund balance for fire protection to the town's fire protection expenses. However, as Angelico noted in an email, that fund balance exists to support the volunteer firefighters' pension retirement system and is not intended for discretionary use. She said some of it was allowed to be used in this way this year but now, "some of that needs to be replaced to keep that percentage at the correct level as required by law."
Despite the decision to tap that fund balance to such an unusual degree, a review of the video recordings of last October's pre-work session, work session and public hearing about the budget show that the subject never came up. In those meetings former supervisor Jacqueline Annabi noted how helpful it was to stay under the tax cap by obtaining new revenue from the county's sales tax sharing agreement ($240,000) and the filming of a Netflix series ($60,000) but made no mention of the $450,000 from the fund balance for fire protection services. And though Town Board member Louie Luongo sits on the board of the Fire Department, he made no comment about it nor did any other Town Board member.
Relying on fund balances to address rising costs
While questions are now being raised about Annabi's decision to use $450,000 of the fund balance for fire protection to support this year's budget, the decision by current supervisor Alison Jolicoeur to draw down the town's reserves by $2 million next year, leaving about $1.5 million, is also causing concern. Angelico says that would bring the town's reserve level down to about 19%, which she says is still above auditors' recommended standard of 10-14%.
A review of the last five years of town budgets shows that the reliance on fund balances to minimize the overall burden on taxpayers is not new. This year it's just become a more visible topic. Last year, for instance, then-Supervisor Annabi and the Town Board approved $2.1 million in drawdowns from reserve funds for this year's budget which helped mask big cost increases the town was facing then. In addition to the $450,000 from the reserves for fire protection, $900,000 came from the town's fund balance, another $600,000 from the Highway Department's reserve fund, and $168,000 from districts decreasing their fund balances. During Annabi's tenure as Town Supervisor, staying below the state tax cap was an annual goal and using fund balances was a key way to accomplish that.
Jolicoeur's tentative budget for next year proposes to utilize $177,500 more from fund balances than Annabi relied on for this year's budget. By choosing that path, the amount Jolicoeur's tentative budget proposes to raise from property taxes is actually less than in any year of Annabi's administration. Next year, the tentative budget calls for $3,739,672 to come from property taxes. In 2024, the first year that Annabi prepared a budget as Town Supervisor, $3,741,515 was projected to come from property taxes.
The strategy of using fund balances to cover sharply rising costs has about run its course, as there are fiscal and legal constraints to how low fund balances are allowed to go. "Use of fund balance is and has been a common practice to keep the budget within tax cap limitations," Angelico explained by email. "Over the past few years I have been cautionary in continued use of fund balance for that purpose." As Jolicoeur has acknowledged, this is not a sustainable strategy. Whoever becomes the next supervisor will have to take a hard look at raising taxes more, reducing town services, or getting more grants and/or larger amounts of sales tax revenue from the county. We may also see Town Board members looking more closely at details hiding in plain sight.
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