Reserve fund vote saves penny on tax rate

The Milton Selectboard’s decision to not fund two reserve funds this fiscal year will lower the tax rate by a penny.

At its Aug. 7 meeting, the board set the fiscal year 2018 tax rate at $.5251, slightly higher than FY17’s $.5188 but lower than the $.5263 projected in January.

This is due to $17 million in grand list growth, the highest since 2009, thanks to large development projects like Cathedral Square’s Elm Place and the Acorn Lane senior housing projects, interim manager Don Turner said.

See a breakdown of your town tax bill here.

The rate is the result of not funding two halfpenny reserve funds for roads/sidewalks and recreation.

Approved by voters in 2012 and 2013, respectively, the reserve funds save money for recreation projects and for restoring highways and building sidewalks. Had they been funded, they would have each raised about $54,755 in FY18.

At this month’s meeting, board members said the funds aren’t transparent and expressed a desire to end them in FY19.

“If you went out on the street and took a poll, nine out of 10 wouldn’t know they approved this,” said vice-chairman Ken Nolan, leading the meeting in chairman Darren Adams’ absence. “There’s a tax rate here people don’t know they’re paying.”

Turner countered, saying voters approved the funds with the expectation they’ll be funded and put toward larger items.

This year, the majority of the recreation fund’s $194,000 balance will build new bathrooms at Bombardier Park. Two hundred thousand of the road fund’s $208,000 will go toward paving projects; added to grants and general fund dollars, $1 million in roads will be paved in FY18, Turner said.

The board left alone the ¾-cent fire and rescue reserve since it pays the annual $59,100 debt for the town’s tower truck. That loan will be repaid in FY24, finance director Jessica Morris said.

Board members were critical of the funds’ large balances. Morris said the fire/rescue fund has consistent in- and outflow, where the others are always funded but only drawn from in large amounts.

“The reality is that’s probably a more effective way,” Turner said. “You need significant money to do significant projects.”

Turner said reserve funds allow the public to have some control over spending: If projects were all funded through general fund dollars, the board has the ultimate discretion, he told the board.

In a subsequent interview, Turner and Morris said although the board saved a penny on the tax rate this year, it means the town isn’t saving long-term.

“The idea behind a reserve fund is to create that savings account to build funds up over time so you don’t have to go into debt to finance a project” and pay interest, Morris said.

Turner sees the move as artificially deflating the tax rate for a year, since if the board makes up the lacking $109,000 in the general fund in FY19, that’s an automatic penny increase on top of any other budget increases.

“People are struggling, and I get that, but we have an obligation to take care of the town’s assets, to invest in the way the residents want us to invest,” he said. “We’re happy this year we’ve had these funds because we’re going to be able to do a lot of things we wouldn’t be able to do within the general fund.”

Turner expects the board will prefer funding these projects through the capital budget, a subset of the general fund instead of an additional halfpenny tax.

Nolan spoke to this at the Aug. 7 meeting, saying he’s spent too much time figuring out the balance of these reserve funds.

“I’d say at least a quarter of times I’ve been in meetings, it’s been discussing funds, where’d it come from, where’d it go,” he said. “You can trace it all back to the fact we’ve got all these funds and money moving from one pocket to the other, and it’s very difficult to trace what’s going on.”

Turner agreed more transparency is needed, which is why he and Morris included a page explaining exactly where Miltonians’ taxes go in this year’s tax bills.

Turner doubted the board’s diligence in keeping FY18’s rate down will even be noticed when Miltonians get their tax bills, as many will see a 5-cent increase when the education taxes are added in.

Indeed, the town’s tax bill handout shows 73 percent of taxpayers’ bill goes toward school taxes, whose rate is set by the state.

“We’re going to give them all the information,” Turner said, adding, “it’s not always the answer they want, but we’re going to give them the information.”

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