South Berwick budget slashed
Portsmouth Herald
Town councilors sharpened their pencils and pared an 18 percent increase in the town budget to 13 percent this week.
Elected South Berwick town officials face many challenges
Foster’s Daily Democrat
Job description: attend multiple meetings a week, address questions and concerns from residents at all times, …
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April 26th, 2008 at 9:02 am
Please look at this little chart and
let me know where you think the biggest drop in budgeted revenues is.
Town of South Berwick’s Budgeted Revenues
April 26th, 2008 at 1:17 pm
The newspaper article says:
“Unlike past years, the new budget does not involve transferring funds from the undesignated fund balance, Orsini said.”
The town is now:
unable to keep the tax rate steady by using their tried and true method of using the undesignated fund as an escrow account.
The town’s “Undesignated Fund Balance” is so low
that they are unable to make use of it as they have in the past.
Over the last 3 or 4 years the town has drained this fund to a bare minimum.
For over 20 years the town had been able to draw from this fund and replenish it. That is how escrow funds are supposed to work.
Over the last 3 or 4 years fiscal responsibility went out the door.
The idea of replenishing and maintaining a responsible balance seems to have been lost.
It is important to get a town manager that is mathematically savvy and will make financial decisions based on a long term point of view.
April 27th, 2008 at 8:08 am
Amen. I would add to that a town manager with some sense of the overall economic environment, and some passing familiarity with the world of real estate, real estate values, and the current state of the credit markets.
You know……there were several articles on Bloomberg.com about small towns in Pennsylvania being hoodwinked by JP Morgan in the area of interest rate swaps. Upshot — these towns lost several milion dollars (while JPM profited mightily) and are now looking at skeleton budgets for the next several years. My point here is, we need a Town Manager with real savvy. Not someone hustled along briskly by real estate brokers and lawyers into completing a deal at inflated prices in a rapidly declining market. Because the deal “will be good in the long term” and “we have the cash”.
In the short term, the deal for the Church is going to put the town in an even more tenuous position as we will now be on the line for carrying costs, maintenance……and heating oil at 4 bucks or more a gallon. Longer term, given the state of the real estate market overall, the prospects for the Church are problematic as well. Will the town have the money to do the renovations that will be required? Will we be able to insure it for the purchase price which is higher than the appraisal price? How much will have to be spent to make the Church useable?
Much of what is going on today in finance, credit finance, muncipal finance and real estate is highly complex. Moreover, it is being sold hard to municipalities by people no longer simply trying to make a nice profit, but rather, to unload untenable situations before the real crunch hits. The Church is a prime example of this. There are no competing bids. Given the tightness of the credit markets, there are no developers with the cash to launch competing bids any more. There’s no pressure to complete this deal now. And yet, we’re moving along briskly at the behest of the Town Council to completing the purchase of what will be — without any doubt — a cement block around the Town’s neck for at least the next two to three years.
So, a friendly Town Manager with solid accounting skills isn’t enough anymore. He/She has to be aware of what’s going on — not only aware, but on top and on high alert. And with the ability to stand up and say NO to simply foolish moves. He/She has to have the savvy to be a real guardian.
April 27th, 2008 at 8:55 am
The town council and staff seem to be doing a responsible job of meeting South Berwick’s current budget challenge. Not a pleasant task, slashing services and spending, but look how much they’ve accomplished in recent weeks. I am grateful to the town officials and employees who have put in all this hard work.
Thank you for the analysis too, Gretchen. This year’s predicament has been an eye opener for those of us who didn’t really know much about how the town budget works, and were unaware of the over-use of the Undesignated Fund.
April 27th, 2008 at 9:23 am
KC- OK, we all know about you opinion about your prediction of the coming demise of the economy and financial markets. Noted.
But the Council had to make a decision in real time, and did. I believe they showed courage in an otherwise “cut the budget” environment, and made a wise decision about the long term asset that is St. Michaels. They needed to show leadership, and did. It will play out; I think events will prove out their wisdom.
April 27th, 2008 at 9:30 am
KC-I agree we need a Town Manager with business savvy but we also need one with vision; someone who can recognize an opportunity and will be able to be creative and bold in cashing in on that opportunity. The last thing we need, or any town needs, at this time is someone who is paralyzed by fear and unwilling to plan for the future. My guess is more small towns have gone into decline from lack of vision than from taking appropriate well thought out risks.
April 27th, 2008 at 10:51 am
guys….
what you seem to be missing here, is the fact that the Church will more than likely be available to be bought within a year for about 15-20% LESS. That would be an additional 100-125K to spend on other things. To maintain the church. To upgrade the church. No one is saying not to buy it, but rather, to buy it smart. Right now, completing the purchase now — which may be purchase well worth making in the long run — is a dumb money move.
Timing does, ultimately, matter a great deal to success. As it stands now, the town will complete the purchase, and then further deplete its resources holding and maintaining the site for a year or two while resources are collected to fix it up to whatever the ultimate use will be. During that time, an honest, realistic broker will admit as Goldman Sachs, Morgan Stanley, and even some Fed governors are admitting, real estate values are going to more than likely fall another 15-20%.
So, if you bottomline it, say it costs 40K per year to hold, we’re going to be holding an asset that cost us 800K. Say it costs 40K to hold over two years….and values also fall 10% over that time……so at the end of the day, we’ve paid 80K to hold a property that lost another 80K in value…..so, now we’ve 160K behind the eight ball, and not a plank has been painted.
If you take a first option to buy for 20K for two years, you have the chance to met any offer that does show up…..and you incur no carrying costs…..that’s a savings of 80K right there. then, say someone does show up. A serious buyer/developer is not going to offer more than the appraised price, 730K, so now you are going to be meeting a realistic price.
Its nice to talk about vision, but that has to be coupled with someone who sits down and does a spreadsheet on what it costs. Look, no one wants to acknowledge that things are bad in the real estate markets and are going to get worse. But they are. You can hammer on all you want about having a “negative view”, but……these are the mathematics of the bond markets and credit derivatives that are now outstanding. these are the realities imposed by our falling dollar. There’s no way out of this mess without prices falling another 15-20% and realigning.
None of us want to acknowledge this, we all are going to be hurt. But this is the elephant in the middle of the room.
April 27th, 2008 at 11:14 am
KC, You are a broken record. We got it already! (and I think we disagree…)
The Council had the vision to work with the Diocese, complete a deal and get to work. I’m glad they did.
April 27th, 2008 at 11:54 am
It’s nice to conjecture that the property will still be available in 2-3 years at a lesser cost, but there are no guarantees that this would be the case.
At some point in time, you have to say that it’s time to stop waiting, and go ahead with a purchase.
PC costs seem to keep coming down, and the newest technology seems to be right around the corner, but at some time, you just need to upgrade.
The same is true for some of these purchases the town is making.
At some point, you just need to bite the bullet and go forward.
It’s always easy to say, look, the price went down a year after we bought, but how many times is this not the case?
April 27th, 2008 at 12:23 pm
Mathematics are the mathematics. let’s talk again in the fall, when housing prices, now clear from the futures prices will be some 10% less.
You know, its the chickens coming home to roost, clearly. So few people have any solid grounding these days in finance or economices, it makes it incredibly easy for those who do to take complete advantage of those who don’t.
April 27th, 2008 at 12:52 pm
Well, the way I see it is this.
We had a vote on whether or not to authorize a bond to purchase the building for the library.
The motion was voted in.
The Town Council heard arguements, and vote 5-0 to purchase the property for a specific price.
In order to change any of this KC, maybe you should start a petition and convince the correct number of people to sign it, then submitted to the council to get the results of these decisions changed.
The bottom line is, the decision has already been made.
The purchase of the St Michaels property is going through.
No amount of arguement at this point is going to change any of isat.
April 27th, 2008 at 1:18 pm
we should have a petition. the way things are going, it easy to see how the town might end up begging someone to take this building off its hands within two years.
its easy to dis anyone quibbling as “negative”, “doom and gloomer”. but…………..ignoring the realities and denigrating those who do understand some of the intricacies of what is going on is how we got where we are.
those of us who do, well, its like watching your own town load up a bus and go speeding towards the cliff. what can we do to prevent this? Its very discouraging from my point of view to get constantly put down as a “doom and gloomer”….particularly when, if you do do some of the math, you can see where all of this is heading.
One year from now, there are going to be a lot more people than me freaking out about the lack of really serious budget cutting on the part of the Town Council.
But by then, its going to be way too late.
April 27th, 2008 at 1:23 pm
KC,
I don’t believe I was denigrating anyone. I was offering a suggestion as to how you could work towards the goal you want to accomplish.
Until something like that happens, no amount of blogging is going to change the fact that the building will be purchased.
April 28th, 2008 at 9:21 am
Please consider this… any real estate transaction requires a willing seller and a willing buyer. KC may be completely right in his estimate of the housing/real estate market. He makes a plausible arguement for obtaining an option of first refusal from a buyers perspective. Here’s the rub… sellers often do not want letters of first refusal as it impacts marketability. A perspective buyer looks at a property zoned business such as this. They are going to look at what the potential return in development is going to be. This requires engineering, exploration about zoning, discussions with the town about possible uses and building requirements (investment dollars). An option of first refusal must be registered in order to be binding. A perspective buyer is going to see this at the registry as they do their diligence. They know they will be talking with their buying competition when they speak to the town. This places their plans for the property at risk for the time investment they would be making to do them. There would be many reasons for the church to not want to persue this option as they are interested in moving forward with their plans for building a new building on Blackberry Hill Rd. The seller ultimately sets the terms for a sale as they are the parcel owner.
April 28th, 2008 at 9:50 am
Thinking,
That was well put.
Another way of looking at all of this, is that the decision has already been made to purchase the property.
Any argument for or against is now moot.
It is now up to us as citizens to get involved to try to make it work.
April 28th, 2008 at 9:59 am
Dave-Absolutely. I think we as citizens need to push for a good planning process and thinking about how to make the most of the property so that not only does is not take resources from the town, but it adds value to the town’s efforts to become more financially sustainable.
April 28th, 2008 at 5:57 pm
Yes, the decision to purchase the church property has been made. But that still doesn’t mean that all of us are happy about it. I don’t possibly see how this purchase will increase income for the town, but I can certainly think of how it will increase our expenses. I was at the April 14th public budget meeting and the general consensus was that we needed to hold down the spending. The purchase of the church property was contrary to that sentiment. That’s why there has been a lot of discussion on this topic.
April 28th, 2008 at 7:06 pm
I also was at the budget meeting on the 14th and agree the general consensus was to hold down spending. I am not suggesting that there needs to be personnel cuts , but I do beleive that we as a town better get smart about the way the money is being spent.
Some bottom line mathematical statistics that can’t be debated, and should be an indicator for everyone that we need to tighten our belts. Unemployment is now over 5% nationwide, oil closed at 188.75 per barrel, heating oil at 329.88 per gallon, consumer spending is almost non-existant at about 0.1% nationwide, new housing starts which was at a high of 2.35 million units in 2006 is now at approximately 0.90 million units in 1st quarter of 2008 and dropping. All of these statistics were taken from directly from todays wall street journal.
I feel we whoever the next Town Manager is, better have a soild buisness background as I believe we are going to need it. If we as a town are in the hole 625K due to the lack of income from exise tax and building permits I certainly do not see those areas improving significantly over the next year. As far as the 2009 budget, the proof will be in June when we as tax payers have the decision to make on whether or not we can live with the proposed 18% increase. And what effect it is going to have if it is implemented. Indications are that we may see an increase in unpayed property tax’s (which by the way were up 2% in march) which is certainly not going to improve the situation.
April 28th, 2008 at 11:50 pm
Thank you John. No one wants to face the unpleasant fact that we are moving into a very severe recession, but it is coming. Today oil hit 120 during trading, and tonight, the Algerian OPEC minister said he can see it easily hitting 200 per barrel in the next year.
The smart thing to do is to cut costs to the bone and hunker down, not to fund things “we’d like to have”. Spending for the long term would be an option if we still had rainy day funds, but we don’t. So essentially this type of thing becomes a luxury we can’t afford. Not if the town is going to weather what’s coming. The budget the Town Council is now putting forward, even with its cuts, make that problematic.
April 29th, 2008 at 8:45 am
Mikec,
I agree not everyone is happy about the purchase.
I voted against bonding when it was on the ballot.
I stood up at a town meeting and said that I didn’t think we should purchase the property when the budget has so many problems.
The point I want to make is that since the decision to purchase has already been made, we need to focus on other things we can still change.
There will be a special meeting on May 12th to authorize pulling money form the undesignated fund.
There will also be a budget meeting on June 12th where we can vote on the budget.
We should focus on what is in the budget, and then decide what cuts we as the voting public can make.
The June 12th meeting is our last chance to reduce any tax increase.
Since the council voted to accept the budget as it is, and submit it to the town, it is now our job to make any further cuts with our votes.
We need to ensure that there are so many people at that meeting that they have to move to a bigger space.
We need to get people in this meeting voting for what they feel is a fair budget.
This is the chance we all have to let our voices be heard on the budget.
I think I would rather focus on what we can possibly change instead of worrying about something I can’t
KC, you keep talking about cutting the budget. I don’t disagree with you.
The fact is that the council is not going to make the cuts you want, so it is up to you, and I, and Mikec, and JohnR and everyone else who is unhappy with the budget to get to these meetings and let your frustration be heard in a way that it can make a change.
June 12th is the day we need to let the council know that the proposed budget is not acceptable, and make the cuts ourselves.
April 29th, 2008 at 10:13 am
How do we urge the school board to do the same to their budget? If we vote down the budget in June does that mean the Town and SAD35 will go back to the drawing board and make changes? Or, is it best we individually approach each school board member?
April 29th, 2008 at 10:18 am
Unfortunately, I haven’t been able to go to any SAD 35 budget meetings because they always hold them when I’m at work.
Maybe someone who regulary goes to them can answer that question, but i would imagine it would be similar.
April 29th, 2008 at 10:49 am
Found a budget timeline on SAD35 website: Here are recent and future dates/info for anyone interested:
April 16 (Wed) S/B Public Input on Budget
May 7 (Wed) S/B Public Input on Budget – S/B approve budget
May 9 (Fri) S/B approve and sign warrant (Superintendent’s Office)
May 12 (Mon) Warrant and Notice to Town Clerks
May 14 (Wed) Budget mailed to voters
June 5 (Thu) District Budget Meeting
June 10 (Tue) Budget Referendum
April 29th, 2008 at 11:12 am
If the SAD35 budget is voted down in June, the district has to operate on its current budget until such time a new budget is passed.
April 29th, 2008 at 11:37 am
If the budget in town is not approved, does the school board go back and make any changes?
April 29th, 2008 at 1:00 pm
I believe its more complicated than that, as ours is not the only town involved.
April 29th, 2008 at 1:10 pm
There are two budgets. Town and SAD 35. They are separate. The tax rate does combine them, but the budget proces is two separate processes.
Remember that the State aid formula for South Berwick results in a huge contribution to the account of South Berwick for SAD 35 costs, and a lesser contribution for Eliot. South Berwick loses this signigicant state aid proportionally with additional tax base (as from “economic development”).
April 29th, 2008 at 1:30 pm
I’ll b e a broken record on this, but the paragraph above is generally ignored by the folks insisting on blind “economic development”, but it is very real, and very important.
April 29th, 2008 at 1:39 pm
I realize they are two separate budgets. I was asking because I think if the sad 35 budget is what is driving our town budget higher perhaps that budget needs to be re-worked. That’s all.
April 29th, 2008 at 1:44 pm
LadyJane,
It appears that there will be a proposed increase in both.
The school budget will probably be increasing more than the town budget, but once both are passed, that’s what will determine the total tax increase.
Both budgets need reducing.
April 29th, 2008 at 1:46 pm
I still say that our Town’s employee Health plan should look into self-insuring.
April 29th, 2008 at 2:52 pm
Yes, I know they need to both be reduced. My questions were about precisely that point. The SAD budget needs to be reduced. It also impacts our town budget. All I was trying to find out was when and where during this whole process might that happen, and who was responsible for doing it. I actually don’t need a response again on this issue.
April 29th, 2008 at 3:08 pm
lj, the two budget approval processes are totally separate. SAD 35 does not impact the Town budget at all. The resuiting tax rate is a combination of the Town , SAD 35, and County budgets; which are all separate.
April 29th, 2008 at 3:19 pm
Thank you for the clarifications. I guess what I meant was the SAD 35 budget impacts our tax RATE and needs to be reduced. I know they are separate, I know they are two different budgets, I know they have separate approval processes. Thanks again for setting me straight.
April 29th, 2008 at 3:41 pm
You should compare SAD 35 costs to other school costs state-wide. You will find that the per-pupil cost, and per administrator costs are WAY below the state average; like near the bottom. That would suggest that SAD 35 is quite eficient in providing what they need to provide. Does anyone understand the value of things, as opposed to the cost of things?
April 29th, 2008 at 4:26 pm
I’m with you Bill. The major factor in the school budget increase is the increase in the cost of fuel (heating oil, diesel for the busses, etc). Diesel fuel has gone up 65%. Many of the areas of increase are areas beyond our control.
We have dedicated teachers that work well past the closing bell, many well into the evening. Many of them purchase supplies for their classrooms out of their own pockets.
April 29th, 2008 at 5:02 pm
And your points are….? Why shouldn’t the school district be expected to tighten it’s belt like everyone else is doing? I don’t mind if you think the school budget is just fine, but you also shouldn’t mind that others disagree.
April 29th, 2008 at 5:13 pm
Who said I minded?
The point is we have a very efficient school system. If you have an idea of what is reasonable to cut, propose it to the Board. Just to say “cut” doesn’t seem informed.
April 29th, 2008 at 5:15 pm
And SAD 35 has cut and tightened a tremendous amount so far with this budget.
April 29th, 2008 at 5:48 pm
So, where do you find the SAD 35 proposed budget?
The link on the school board site only says the time line has been posted.
You then have to hunt for that.
I can’t find the proposed budget anywhere.
April 29th, 2008 at 5:50 pm
Bill, Your last two points were precise and to the point!
Thanks!
April 29th, 2008 at 6:47 pm
Yes, my question also. Where is the budget?
April 29th, 2008 at 6:47 pm
Oops. Anonymous was me.
April 29th, 2008 at 7:53 pm
Correct me if I am mistaken, but the way I understand the proposed budget is the 7% increase for the town is to make up for the 625K shortfall that they experienced this year from the decline in exsise tax and lack of building permits. (Which I do not understand why in the world that much was budgeted on buisinesses that are totally dependent on the economy).
And the 11% increase is for the approximately 1.2 million shortfall from the cuts in the school budget coming from the state or a part there of (as I am sure that 11% does not make up the complete amount that was cut by the state.) That being said it is hard to make an informed decision when I have been unable to find and review the school and/or county budget proposals.
To me presenting the proposed town budget to tax payers prior to inclusion of the school and county budgets (even though they are separate budgets but all impact property tax) is like putting the cart before the horse. I personally think that 18% is to high but without all of the numbers it is hard to determine what cuts have already been made and what could potentially be recommended.
April 30th, 2008 at 7:46 am
The school budget information can be found on the district website. It is listed under School Board>Budget Info. Select the heading at the top of the page “FY 08″, then select a link to the left.
April 30th, 2008 at 8:08 am
That’s great for the current years budget,
Where is the proposed budget for 2008-2009 which we will be voting on?
April 30th, 2008 at 9:19 am
John R: The lion’s share of the Town revenue shortfall is the depletion of the Undesignated Fund Balance over the last 3-4 years, and NOT a predicted shortfall in excise taxes and bulding permits. (Those are a mere fraction of the shortfall). There’s not enough left to be a “revenue” source. Because the former manager talked the council into “raiding” the Undesignated balance over the last 3-4 , having the Town essentially live beyond its means, it’s time to pay the piper.
April 30th, 2008 at 9:32 am
Copies of a proposed budget sheet for 2008-2009 are available at the Superintendent’s office. This is the budget that will be voted on next week by the school board. This is not a line by line budget, it just shows cost centers. To see a line by line budget one needs to make an appointment.
April 30th, 2008 at 9:43 am
So we are supposed to vote on a budget that we have no knowledge of?
How convenient.
April 30th, 2008 at 9:45 am
It’s a huge document. If you need to, make an appointment.
April 30th, 2008 at 10:22 am
All I am asking for is something like they have posted on the website for the current years budget.
I don’t need a break down of what each person makes, etc…
What I’m being told is that if someone wants this, they need to take time off from work to go to the administrators office to get a copy.
If they can’t get the time to do this, just vote for it in ignorance of what is proposed.
April 30th, 2008 at 10:31 am
Your point is well taken. Perhaps if enough people email and/or call the Superintendent and School Board members asking for the overview to be put on the web site they will put it up.
April 30th, 2008 at 10:51 am
The huge document you refer to Bill is the line by line budget, however, the sheet that I was told about when I called doesn’t sound so large it can’t be posted on the web-it is the same size as the other budgets already there.
April 30th, 2008 at 11:03 am
I sent an e-mail to Helene Cass this morning requesting an updated posting of the budget proposal.
April 30th, 2008 at 11:26 am
Thank you so much!
April 30th, 2008 at 7:07 pm
Bill: thank you for the information. I understood that the undesignated fund had been used alot over the last 3-4 years but was unaware that it was the driving force behind the towns shortfall. As you say if you live beyond your means then it eventually catches up with you.
It looks to me like there is a property tax hike in our future no matter what. We know its 18% if the 2009 budget that has been approved by the Town Council is voted in. But even if tax payers vote that down and the 2008 budget is used it could result in a potentially higher increase as I believe the proposed town budget for 2009 is now actually below the 2008 budget. Kind of looks to me as a catch 22 situation no matter which way it goes.
I have never minded paying my fair share in any state and/or town that I have ever lived in. As I understand that school systems and other services cost alot and are increaseing on a dailey basis just as is our cost of living. But it upsets me alot to think that this problem was created by overspending and now we have to pay the piper for it, when it could have been prevented or at least minimized by prudent spending.
April 30th, 2008 at 7:42 pm
Here’s an idea….down south, various condo associations are now taking their rainy day funds, avoid raising taxes, and use the rest to help people save their homes….thereby preserving the property values of the owners’ homes. What we should do…..we have the church money….we could walk on that transaction, and put the money to better use helping people in town prevent foreclosures….which would preserve the value of all our homes.
I know you all think I’m a broken record, but we aren’t even 1/3 of a way thru the mortgage situation. Subprimes were the tip of the ice berg. The next set to readjust and start a wave of foreclosures are the Options Arms loans. There were 3x as many of those sold as subprimes. These loans are nuclear bombs — not only do they adjust, but for the past year/two years depending on the loan’s terms, a borrower has chosen how much to pay, with the balance not paid added to the principal owed. So…….not only does the borrower get the jack up from interest rates, in most cases (something like 87% according to the stats) most people are going to be paying on more principal owed. Estimates are that these loans can — and many will — adjust to payments 60-100% higher.
I don’t mind paying my fair share either. What I object to mightily is taking a fair share from all, not looking at what’s actually going on, and then spending it foolishly.
April 30th, 2008 at 8:26 pm
KC, The only problem with that idea is that the money for the church is going to come from a bond, which the voters specifically approved for use on a library.
Can the town use that bonding authority for anything else? Probably not. Likewise to the “extra” money in the library fund is reserved specifically for the library.
April 30th, 2008 at 11:39 pm
This is where you put the initiative to change the purpose of the money raised due to circumstances. Its time for a little sanity, and some thinking outside the box. Simply because the money is there doesn’t mean that it has to be spent foolishly.
May 1st, 2008 at 6:35 am
So the answer to overspending the last several years and covering it from the undesignated fund, is to overspend and cover it from somewhere else?
May 1st, 2008 at 7:56 pm
I have to believe that the money raised for the library was done so with a lot of heart, soul and dedication behind it on the part of those behind the “new library” initiative. I understand that some may not agree with the purchase of the church, but taking from Peter to pay Paul is not the answer either. The money designated for the libaray needs to remain just that, regardless of the current circumstances.
May 1st, 2008 at 8:07 pm
The town budget is over by about $485,000
There are approximately 2700 houses in South Berwick.
$485,000/2700=$179.63 additional tax per house per year
$179.63/12=$14.97 per house per month
And that isn’t counting property taxes on businesses
If people are goning to go bankrupt because of an additional $179.63 a year, then they have bigger problems than you can imagine.
I agree the town budget needs to be cut, but the school budget is going to be the biggest problem.
May 1st, 2008 at 10:14 pm
I thought I was seeing double! Our taxes are assessed based on the value of our homes by the town. The budget overage will not be divided equally among the number of homes. It may amount to very little, or a lot, depending on the value of your home. Some people will see upwards of $400-$500 increase, maybe even more. Some will see less than that.
May 2nd, 2008 at 8:07 am
It’s okay Ladyjane, according to KC we’re all going to get foreclosed on anyways…. We’ll al be huddled up in KC’s underground Y2K bunker eating government cheese raumen noodles.
May 2nd, 2008 at 8:13 am
LadyJane,
First off, I was only indicating the town’s approximately 7% increase.
Secondly, I realize that the amount will depend on valuation, but very few houses will see an increase for the town’s portion of less that $100
Some people will see $250 to $300 others would see less.
Don’t forget that businesses are not included in that.
They will also be covering a portion of the tax increase
Now add the schools estimated 11% increase, and we are talking about a significant increase for everyone.
The town can not cut that budget though, That is up to us.
Yes the town still needs to get down around LD1 levels, but unless you target the school budget as well, you’ll never get there.
May 2nd, 2008 at 8:26 am
Anonymous,
The LD1 limit is completely independant of the School budget. It’s Town-budget only. The school and county budgets are entirely separate from that calculation.
May 2nd, 2008 at 8:32 am
Be that as it may Bill, the largest part of the property tax increase is still going to be the school’s 11% increase.
So let’s cut the town budget down to the point where we don’t have that 7%, and we meet LD1
Does that mean our property taxes won’t go up?
May 2nd, 2008 at 10:42 am
Nope. The school and county portions will affect that.
By the way, the 7% town budget increase is approximately the amount of Undesignated Surplus that the former manager used as “revenue” in his town budget last year(and the previous 3 budgets as well). The current council wisely is not continuing to have “a party” with that reserve as a revenue source. It was raiding the savings to lower taxes in the short term, giving taxpayers the false inmpression that taxes stayed the same.
The Council has been responsible, aggressively cut the proposed budget so that it is in line with last year’s expense side. The previous manager had proposed a huge increase, and now they have it back in line. It’s the lost “revenue” of the Undesignated Surplus “party” that is missing.
May 2nd, 2008 at 10:54 am
but raises, both merit and Cola are still included, right? along with maintenance of the current benefits packages, right?
May 2nd, 2008 at 11:09 am
Seems so.
May 2nd, 2008 at 12:00 pm
The manager used the funds with the voters approval ! Iwas there and everyone there as taxpayers said yes to the use of undesignated funds to reduce the taxes to be raised. Lets put the blame were it belongs if its even needed to be placed!
May 2nd, 2008 at 12:07 pm
Bill! where have you been the last 20 pluss years ? The town voters have always voted to reduce amounts to be rased by using the undesignated fund balance. It is not a new concept
May 2nd, 2008 at 12:28 pm
John C, Right here in South Berwick. It’s true the fund has been used in the budgeting process, but in a very different way. If you look at the balance of that reserve over the last 10-15 years, you will find that over the last 4 years, it has been markedly different. If you look at the fund balance over these 4 years, you see it declining by way over half. Past managers and Councils saw that the fund was replenished, and maintained a healthy balance at year’s end. If it got too high, they would apply some to the budget in a “cash flow” operation. But at the end of the year, it was generally replenished. Over the last 4 years, it has steadily declined to the point that there is no way it can be used.
May 2nd, 2008 at 1:03 pm
You are are on right track seeing the Fund Balance change in trend.
Look at these historical figures. Note the DRAMATIC drop of the fund in just the last few years. Because of this drop, the fund cannot be used like an escrow account to keep the budget stable.
It is a real shame that all of this is because of 2 simple clerical mistakes made at town hall and the manager had been shouting economic developement instead of “oops” we better own up to our 2 fundamental mistakes and fix them.
General
Year End Fund Balance
1995 1,100,469
1996 1,414,097
1997 1,454,901
1998 1,673,601
1999 1,844,564
2000 2,133,610
2001 2,074,973
2002 2,057,740
2003 1,934,273
2004 2,212,296
2005 2,127,332
2006 1,805,872
2007 1,494,872
as of 3/31/08 976,355
May 2nd, 2008 at 1:53 pm
In an attempt to get non-accountants to understand the errors:
An apartment house of 6 people vote to rent a parking lot at a price of $400
The landlord says he will chip in $100 but the rest will have to come out of the tenants’ pockets. The tenants now have to come up with $300. They decided to share the cost between them and they come up with the formula - $300 ÷ 6 tenants = $50.
So now with the $100 from the landlord and the 6 $50 bills they have the $400 needed to rent the parking lot.
Suppose they had made a simple mistake with the formula – (300 minus 60) ÷ 6 tenants.
Then each tenant would only produce $40 each. They would be $60 short when they went to pay the rent.
In 04/05 the townspeople voted to spend a certain dollar amount and when the town calculated the monies to be collected from property tax levies to pay for these expenses the town administration made the exact mistake I described in the above paragraph. The administration inadvertently subtracted $99,000 from their formula. The following year they repeated the mistake by accidentally subtracting $105,000.
So now you have the town inadvertently not collecting $204,000 ($99,000 plus the $105,000).
The story does not end there. Please bear with me.
The $99,000 error has cost an additional $441,273 budget shortage!
The LD1 law says….if you only asked for $40 from the tenants back in 04/05 you are allowed to ask for roughly 4% more each year. So now in 05/06 when the apartment house wants to rent the parking lot again the tenants can only be charged 4% more and that comes out to $41.60 per tenant. Now they are short $50.40.
This cycle continues each year and the tenants are always short on funds for this parking lot because they made a mistake way back when. If the parking lot rent price increases they will be even shorter on funds.
If you decide to rent the parking lot even though you are short on funds the money has to come from somewhere. In the Town of South Berwick’s case it comes from draining the Undesignated Fund Balance.
I’m sorry this write up is so lengthy. I just don’t know how else to get the point across.
May 2nd, 2008 at 1:55 pm
As you all know past managers have also been run out of town so do not give them all the credit for good management style. Heck one even went to jail for embezzlement. The balence as a whole has demminished. As the value of the dollar, I remember when 500,000 was a lot in the fund balance but yet gas was only a buck ten per gallon. Maine the way life used to be. It is not going to be the little village again. Those days will never be seen here! It,s time to move forward and develop for the future not the past. The roads are paved, crime does exist, solidwaste is our problem, water needs to be cleaned as the local village springs are closed,and 18,000 vehicle,s including large trucks pass by town hall every day. The street is still the same width but the cows and horses no longer come through. NO MORE VILLAGE PEOPLE PLEASE. Lets work as a community and deal with the real life issues with common sence not special interest groups . O buy the way the fire trucks cost 500,000 now and need fuel not hay to run on!!
May 2nd, 2008 at 2:13 pm
I’am Bad ” DIMINISHED”
May 2nd, 2008 at 2:20 pm
So Gretchen,
What you are trying to say is that the $485,000.00 that this years budget is over by should be included in the total and should be the level our LD1 cap gets adjusted to, and we should just accept the 7% increase in the budget? This way when the budget comes around next year, we won’t be looking at as much of an increase, right?
I’m not throwing stones, just making sure I understand what you are saying.
May 2nd, 2008 at 2:44 pm
Gretchen, Please stop playing as some one who has a grasp. However, as a council person I would vote for you . We are not simple minded and need not to see your parking lot example to understand funding and budgeting. It’s real simple. If the budget was incresed a little every year instead of holding it to a few % as it was.The balance would have been larger. we are now playing catchup for past years of holding the line. It is without question.
The balance comes from padded budgets and over taxing people in the first place. Its not a savings account it is tax dollars collected along with more tax dollars of sorts. Exise vehicle tax, sales tax, personal tax. on and on Taxes. We towns people are not as simple as you attempt to make us look!
May 2nd, 2008 at 2:49 pm
No offense Gretchen - but it seems John C has a better grasp on what’s really going on in the Town of South Berwick.
May 2nd, 2008 at 3:00 pm
John C, and Bob, I think, in fact, that you do misunderstand. LD1 has been too low for 4 years. We got locked in low, because of an error. And the trouble is, the Town did NOT hold the line to that lower number. It raided the Undesignated Fund pretty much by that amount, to artificially keep taxes low. People thought that was OK. It was actually a “party”. The party’s over, and the error needs to be corrected. Gretchens analysis shows that pretty clearly, and that eludes some of you.
May 2nd, 2008 at 3:24 pm
Thanks for the parking lot example, Gretchen, and for all the analysis you have been doing. I am not in line for a Nobel prize in economics like some of the people who write in here (!!! yes, that’s a joke), and so your straightforward info has been very helpful.
May 2nd, 2008 at 3:38 pm
Anonomous – I am not very good at getting my thoughts across but here is an attempt.
I believe the LD1 cap base needs to be increased by $117,315 in order or stop this $99,000 error from continuing to compound.
05/06 $99,000 times LD1 rate of 1.0421 created a loss in possible revenue of $103,168
06/07 $103,168 times LD1 rate of 1.0465 created a loss in possible revenue of $107,965
07/08 $107,965 times LD1 rate of 1.0450 created a loss in possible revenue of $112,825
08/09 $112,825 times LD1 rate 1.0398 will create a loss in possible revenue of $117,315
Each year we lose more and more in funding power because this $99,000 error is in our originally established LD1 base.
To stop the compounding effect of this error we must vote to increase the LD1 base by $117,315.
As far as increasing the LD1 cap by the remainder of the excess over the LD1 cap, well that is answered by everybody differently depending on their value system.
I will vote for the full amount that the Town Council recommends as an increase the LD1 cap.
I believe they have worked very hard at, and accomplished, paring down the budget.
To get the town back on a stable financial footing the more you can return to the Undesignated Fund the better.
Then once again the town will be able to go back to its tried and true method of using an escrow system to keep the tax rate as stable as possible.
May 2nd, 2008 at 3:52 pm
Simple minded and not ashamed -
Thank you for the positive feedback.
Getting all these facts and figures has been a job for me but since my field is accounting it is easier for me to put perspective on the various audited reports and schedules provided by the town.
As I say to others… we all have our fields.
If a nurse handed me a needle and told me to give somebody an injection
I would feel a great need for information on how to do such a thing
and I too would not feel ashamed.
Thanks again for your kind words.
May 4th, 2008 at 9:42 am
What is the process if the town budget or the school budget does not pass?
May 4th, 2008 at 4:52 pm
Just as an update, there has been no 2008-2009 proposed budget for MSAD35 posted on their website as of yet. Hope they are able to do it.
May 4th, 2008 at 5:21 pm
I asked the School Board Chair about the budget proposal posting to the website:
“The proposed budget has not yet been finalized;
that is why it is not currently on the website. The
budget is scheduled to be voted on at our Wednesday
night meeting (5/7). That vote will establish the
actual budget that the public will vote on. It will be
posted on the website ASAP following the Wed. meeting,
and a copy of the proposed budget will be sent out to
each residence in South Berwick and Eliot.”
May 4th, 2008 at 9:19 pm
Thanks for the information.