The proponents of Citizen Budget #2 have once again put forth a budget that strips our town’s unreserved fund balance (UGF). Don’t worry, they say, it won’t affect our credit rating for our new library bond, it won’t cause a spike in taxes next year or cause cuts in services when our savings are gone and that bond comes due. They “assure” us that taking $600,000 of savings to pay for day-to-day expenses, leaving us with a bare minimum fund balance of 3% of expenses, is really okay.
Many others disagree:
1) Moody’s bond rating agency cautioned the town that building its reserves instead of drawing them down will “remain an important rating factor” for future borrowing (like next year’s library bond.)
2) In a May 1, 2014, letter to citizens, Tiverton’s town treasurer warned regarding our rating, “Moody’s has developed a new rating methodology … review of our general fund balance accounts for 50% of the Finance Review – that is a hefty portion.” Further cautioning that, “Tapping into our UGF could cost us down the road. I urge you to protect your investment in the town.”
3) The town’s independent auditor twice commended the council for its policy of wisely and prudently beginning to increase the town’s unreserved fund balance to provide financial stability.
4) The Government Finance Officers Association recommends, at a minimum, that governments “maintain unreserved fund balance in their general fund of no less than five to 15 percent.”
5) Our immediate neighbors, Portsmouth and Middletown, require a minimum of 8%. In a 2012 State of RI report designed to measure fiscal stress on communities, 30 of the 39 other communities had a higher combined fund balance than Tiverton.
6) This year’s Little Compton Budget Committee FTM report states, “We believe that the 12% (UGF) balance is an important level to return to in order to maintain our excellent credit rating and maximum financial flexibility. The benefits of this strategy have already been proven as Little Compton has the only AAA credit rating in the state, which will save us close to $1 million in interest on the school bond.”
An adequate fund balance is not some secret pot of cash or some conspiracy cooked up by government insiders to take taxpayer money. An adequate fund balance is part of a responsible, long-term financial plan that provides for community services and programs. Support the small 1.29% increase recommended by Tiverton’s elected budget committee that leaves our savings intact.
Approve Budget #1 on May 20.
Deborah Pallasch
Tiverton
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