By Beth David, Editor
At the Fairhaven Select Board meeting on 3/20, board member Bob Espindola presented an explanation of the financial policy to show why the policy is important. He said the policy affects bond ratings and borrowing.
Mr. Espindola showed, through slides on the screen, that a 1/4 point increase in borrowing could result in millions of dollars over the life of loans the town faces in the near future, such as the BPW roof, Millicent Library HVAC, middle school roof and the public safety complex.
A 1/4 percent would save $97K annually, and $2.8 million over the life of three loans in his example, with the $50 million for the safety complex separate.
“It’s huge,” said Mr. Espindola. “If we start borrowing this amount of money.”
Sound financial policies that the town adheres to helps with bond ratings, said Mr. Espindola.
The discussion is happening with the backdrop of a proposed override of Proposition 2 1/2, to close a budget gap of $450,000.
Mr. Espindola said he wanted to show the board how the policy is organized so they could debate the policy itself at a future meeting.
He said some of the stabilization/ reserve funds do not have adequate explanations, limits on spending and other details that he said should be in the “budget book.”
Mr. Espindola ran through a number of different funds, including the retirement fund. He said the town has not documented its strategy for funding OPEB (Other Post Employment Benefits). Having the strategy in writing helps with the bond rating, he said.
SB chair Stasia Powers asked if other communities are that specific with their OPEB contributions.
“It’s our board’s financial policy,” said Mr. Espindola. “We can put whatever we want in there. We can take whatever we want out.”
He said the financial policy they have came from other sources and was not created from scratch. He went over some language he received from the Mass. Department of Revenue and said it could be tailored for Fairhaven.
Mr. Espindola also said the town was in the lower bond rating and he felt the town could get a higher rating.
Town Administrator Angie Lopes Ellison, however, said the town is at its highest possible bond rating. She said the ratings are based on population. She said Fairhaven is at AA. The next one up is AAA and it has a “population factor,” requiring a higher population.
Mr. Espindola said he was told another community that is much smaller than Fairhaven had a higher rating.
“Let’s look into that,” said Ms. Powers.
Ms. Espindola said he would like to see if there is any opportunity to improve the bond rating.
Mr. Espindola also pointed out some discrepancies in the current budget book they are using and the actual stabilization funds the town has. He made a number of recommendations, noting that the language he got from a variety of sources would have to be tailored to Fairhaven.
He said he wanted to convey to the board how the policy is organized and why. He said he hoped they could go through all the details at another meeting.
He ran through each of the stabilization funds with more detailed explanations of what they are for and the rules around using them. He said the funds are listed in the budget, but are not in the financial policy.
He also highlighted a few things in the policy that they should be doing but are not. He said they should explain why they are not doing it.
“I copied some of this language,” said Mr. Espindola. “It might not be best for us, but I think we should be, at least, having a discussion.”
Mr. Espindola said he was hoping to at least get a consensus from the board that the matter is important, and they will discuss it at another meeting.
Vice Chair Leon Correy said he did not know enough at that stage to even form a question or form an opinion on its importance. He said there was a lot of information and he would like time to “digest it.”
The board decided to discuss the policy at a future meeting.
At its meeting on 3/28, the board discussed the budget, the $450K deficit, and Town Meeting warrant articles.
The board discussed two budget possibilities, one that counted on the Prop 2 1/2 override, and one that did not, and so included budget cuts.
Ms. Ellison explained that the override would only add 11 cents to the tax rate, and with the decrease in the tax rate that had already been decided, the end result would still be a net lowering of the rate compared to last year.
Mr. Espindola pointed out that with the other borrowing on the horizon, property taxes could go up nearly $1,000 a year.
Ms. Ellison pointed out that the public safety complex is at least seven years away, most likely 10.
Mr. Espindola countered that they should then take it off the capital expenditures list and take the money they have been putting aside for it towards the budget.
The column that includes cuts to balance the budget requires laying off two of the four firefighters that the town just agreed to add to the department.
The board discussed if they would be making a real recommendation to Town Meeting for one budget or the other, or if they would just present two and let TM decide. Mr. Espindola said they should show leadership and decide.
Mr. Correy said he was not in favor of cutting firefighters, so “that right there puts me in the override category.”
He said they’ve been hearing for eight months how everyone loves their firefighters.
“We’re a small town. We don’t have a million revenue streams,” said Mr. Correy. “So I support the ability to keep the firefighters, thus the override.”
SB member Charlies Murphy said he was not comfortable voting on the budget that night.
“I don’t want to see any services cut, to be honest with you,” said Mr. Murphy.
“I think we need to give them both options,” said SB member Keith Silvia.
Ms. Ellison ran through the numbers, with union raises 5-6%, Cost of Living Increases, step increases, and inflation, but the town can only raise property taxes by 2 1/2 percent.
She also noted that the town has been using free cash to supplement the budget. That by itself created a situation that made our tax levy lower because it looked like we were spending less.
“I feel we need to right the ship,” said Ms. Powers.
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