Thoughts on the Town Budget

Here are some ideas on the town budget by Town Council member Laura Flanagan. If anyone has ideas on how the town can save $$ please attend the public hearings on the municipal budget Wednesday 4/15 and the school budget Thurs. 4/16 and share them.

It is important for the taxpayers of Coventry to be educated and informed as to the finances of their town. I have long felt that our tax burden was too high and the underlying reasons for this burden were not being discussed with or disclosed to the community. Year after year, we have borne large increases, bringing us to a crossroad, the place we are today. I would submit to you that our community can no longer sustain such increases. During my campaign, and today, I was and remain committed to addressing the tax burden with conservative, fiscally sound decisions. I believe that my fellow council members are committed to this end, as well. The newly elected members of the Council share a love of Coventry and a desire to advocate for the taxpayers of the community. Further, they possess the tools, breadth of background, wisdom and knowledge necessary to take on the task before us.

It goes without saying, our national economy is in the midst of a difficult, long lasting recession that we have yet to see a clear way out of. “Why?” and “How?” many ask, did this occur. I would like to offer a brief, yet poignant answer, to this large question. As individuals, and as a society, we have lived well beyond our means for far too long. Today, we are brought the reality that we can no longer do so. As Rhode Islanders, we are all very much aware of the added stress this recession places on our own State’s economy, with unemployment and foreclosure rates at a height most of us have not seen in our lifetimes, and a State deficit that is staggering.

Here in Coventry, we are in the midst of the 2009/2010 budget cycle. Taxpayers will hear many things from many different special interests groups who are struggling to maintain the “status quo”. Some will say that this new council is being “dramatic” or that we are “alarmists”. Some will say that we have misrepresented the revenues and expenditures of our town to the public. Many groups will say that their departments are too important or too essential to take one dime less than they received last year. Some will say that it just isn’t fair. The truth of the matter is simple…. We must change the way local government operates in Coventry. We cannot continue down the same path, because we can no longer afford “business as usual”. By human nature, people are generally afraid of change. Comfort is found in the normal routines we have grown accustomed to. Even still, it is true that hard times and drastic measures can bring folks together, to brainstorm and think outside the box, resulting in a positive plan to move forward. We, as a community, should embrace the financial position we find ourselves in and allow it to move us in a positive direction, creating efficiency and using our innovation to become a better, wiser and more thoughtful community. It is clearly time to move Coventry in a new direction.

Our financial problems will not go away by hiding from them, masking them, creating paper numbers that are more attractive or by any other tool of avoidance. Positive change only comes when we stand willing to face and address problems squarely.

So, here is the challenge….

As a council, we received a proposed budget that called for approximately $5,500,000 in new money. This figure is arrived at for a number of reasons.

1) Governor Carcieri, and our state representatives, have indicated that there will be no state aid to towns and cities in fiscal year 2009/2010. This results in $847,000 in lost State Aid and Grants for Coventry.
2) The phase-out of excise automobile tax resulted in an additional loss of revenue to Coventry of approximately $500,000.
3) There have been declines in general Town revenues in the approximate amount of $598,000. These declines relate, in large part, to local economic conditions, consisting of reductions in land evidence recordings, building permits, licensing fees, interest on investments, among other things.
4) An additional structural deficit was created by the prior council through its use of $653,606 from the Town’s reserve fund to meet expenses in the 2008/2009 fiscal year.

These items, when aggregated, represent an approximate $2,600,000 deficit before new requests from the school or other departments are considered. The school has requested approximately $1,900,000 and municipal departments have requested approximately $1,000,000. $2,600,000 (deficit) plus $1,900,000 (requested from schools) plus $1,000,000 (requested by municipal departments) equals $5,500,000.

Senate Bill 3050 places a cap on the amount a municipality can raise in revenue from taxes. This year, the limit is 4.75% of last year’s levy, or approximately $2,807,610. (For budgeting purposes, we estimate a 98% rate of collection during the fiscal year, or $2,751,457.) It is important to note that the auto excise tax loss of $500,000 is added back, bringing the total maximum allowable increase on taxpayers to approximately $3,307,610, or an average 6% increase to property owners.

In simple terms, if the Council were inclined to raise taxes to the maximum amount, it would still lack over $2,000,000. ($5,500,000 (need) minus $3,300,000 in new, collected taxes equals $2,200,000).

I submit to you that a full increase on the taxpayers of Coventry is unacceptable. Folks in our community are struggling, some out of work, some with reduced hours, some facing foreclosures. Businesses are struggling as well, with a number being forced to close their doors. Our real estate market is seeing very little movement or growth, and there is an approximate 91 pupil decline in enrollment in our schools.

I would also suggest that taking from our reserve account to plug this whole is not a wise, or responsible, option. Our $5,000,000 reserve account is more than offset by debt primarily loaned out to the Sewer Enterprise Fund of approximately $5,500,000 in the form of tax anticipation notes. As you will note, this liability is larger than our cash reserves! If we dip into this fund, we can be fairly certain of a number of negative consequences:

1) We could face a significant increase in the interest rate on our debt (it currently stands at 5% but could increase to the maximum amount allowed under state law);
2) We would decrease our credit worthiness (our bond rating). A decrease here would make it costly to bond necessary projects in the future, and may even preclude us from issuing bonds, when appropriate.
3) We would create an additional structural deficit for the FY 2010-2011, only pushing today’s problems off to tomorrow. We cannot go into the next fiscal year creating deficit of over $2,000,000 before we are even out of the gate.

If our desire is to create a local economy that attracts young families and businesses to move into our community, we must work diligently to lower our tax burden. Lower taxes stimulate growth. Lower taxes give residents more money to put into their local economy. Lower taxes attract businesses that can further stimulate growth.

We simply must decrease our expenses and live within our means. This is certainly a large challenge and this Council has given our department heads a tough, but attainable, job to do. With the right attitude and by coming together as a community, I believe we can accomplish this task. If we do so, Coventry will indeed be better for it in the future.

Laura A. Flanagan
Councilwoman – District 2
Coventry