Council to consider options on 2021 budget
With the end of the fiscal year about five weeks away, and with a decreasing chance the town will be able to hold budget discussions and a Financial Town Meeting before then, Finance Director Amy Land has given the Town Council a number of options to consider in order to craft a municipal budget for 2021. The Financial Town Meeting was scheduled for Monday, May 4, but restrictions due to the current pandemic prevented the vote from occurring. The fiscal year ends on June 30 and 2021 begins on July 1, 2020.
Land said that whatever budget is passed before July 1 will include a bit of guesswork due to the fact that revenue is already falling.
“We have a $500,000 deficit at this point, which is not normally where we are at this time of year. We’re looking at a conservative deficit of over $800,000” by the end of the fiscal year. “We’re right on the mark for budget expenditures, but the falloff of revenue is significant,” Land told the council during a Zoom meeting on Wednesday, May 20.
On the positive side, Land said, “We went into this year with a very healthy reserve of $2.5 million. The projected deficit will still be in a range we can absorb... That gives us more flexibility than a lot of other communities.” She also said, “The town’s cash position remains very strong. If collections continue to increase it won’t be a problem, but at this point the town’s cash position is sufficient to carry us through.”
As for tax collections, Land said for the month of April they “were right on the mark. In the first part of May they were a little bit slow.” Land said that the first round of tax bills that are scheduled to be sent out in August, the first round in the new fiscal year, will be looked at closely. Land has said that a good portion of homeowners pay for the entire year in August, which puts the town on solid financial footing as the town heads into the winter months.
“It’s really the August collection we’ll be looking at,” said Land.
Interim Town Manager Jim Kern said the current economic crisis is just what financial directors and town managers should prepare for. Kern said he wanted to give the town’s “financial leadership credit for the circumstances you find yourself in. You budget and operate in such a way so that you have an undesignated fund balance, or a stabilization balance, and New Shoreham has endeavored to do that. [The financial position] is higher than what communities would normally have, thanks to Amy’s leadership, and others, and to find yourself in this position is commendable.”
As for how the town can pass a budget for 2021, Land urged the members of the council to consider two options simultaneously: have the town council extend the current budget under the provisions of the town’s emergency ordinance, or adopting a new budget that addresses projects and priorities with the acknowledgement that this approach will require approval from the state legislature.
There are other options, Land said, that have come out of various discussions she has been having with other cities and towns that also pass their budgets through a public vote.
Those ideas include holding a virtual meeting or perhaps a drive-in-style meeting where people gather in cars, at Fred Benson Town Beach, as an example, during which people can participate and perhaps vote by hand. These ideas have logistical and technical issues that will have to be resolved before they could be practically implemented, which is why Land suggested the more conventional options be studied first.
As for New Shoreham, Land said, “It’s clear we will not be able to have an adequate site gathering before June 30. We’ve been working with other cities and towns to come up with creative solutions that may or may not be effective.” Land said Rhode Island General Law allows that “if the community does not appropriate a new budget the existing budget will carry forward. That is already in place under Rhode Island law.” The downside, said Land, is that this approach does not give the town an “opportunity to implement new priorities.” It does meet the two requirements of giving the town spending and taxing authority. That new budget would stay in effect until the town is able to schedule a Financial Town Meeting and approve a budget in the manner outlined in the town charter.
The next approach that the council should think about is not only to prepare a new budget but find a way to have voters involved, as it normally would at public budget discussion meetings and at the FTM. “It will take work to do the public engagement part, but its important to move forward with” trying to make that happen, said Land. If the town council adopts a “new budget that is different than your current town budget... does require legislative approval.” She said other cities and towns have looked upon this approach favorably. Legislative approval would not give the town continuing authority to pass budgets but is an emergency stop gap and would sunset at some point, Land said.
Kern recommended the council discuss the options Land has put on the table. “This is a discussion not a vote,” he said, “but asking you, as leadership, which way we want to go.”