Town Administrator: Templeton has hit 'bottom'

Part 1 of May 12, 2014 BOS/Adv. Board Meeting

Part 2 of May 12, 2014 BOS/Adv. Board Meeting 

Part 3 of May 12, 2014 BOS/Adv. Board Meeting

 

Town Administrator: Templeton has hit 'bottom'

Robert T. Markel
Interim Town Administrator

To The Editor: 

The financial situation in Templeton is very grim.  When the Selectmen learned that the Fiscal 2014 budget was $505,000 out of balance, they ordered all departments to implement a 5% reduction in spending on January 27. 

When I arrived in February, the selectmen and I agreed on a strategy to balance the budget — which I will call Strategy #1. 

The plan was to close the budget gap by utilizing the $150,000 from the 5% budget cuts and then add “free cash” and, if necessary, some funds from the town’s reserves (Stabilization Fund) to bring the budget into balance.

Free cash represents the accumulated spending and revenue surpluses from the prior years, and it must be certified by the state Department of Revenue.  It is not good policy to use free cash to balance the operating budget, but in this emergency, it was necessary. 


The town’s financial management system was in disarray, and as a result, the town had not been able to close out Fiscal Year 2013, which ended on June 30, 2013.  The Department of Revenue would not allow the town to close out FY’13 until accurate and reliable financial data was presented.  

The importance of closing FY’13 was to get the DOR to certify “free cash.”  Once certified, free cash is available for any purpose determined by the town. The town’s free cash had been abundant in recent years, going above $800,000 in 2010. 

Financial management was reorganized in February.  In mid-March, the town supplied accurate data to the Department of Revenue to close out Fiscal 2013.  We waited for free cash to be certified and scheduled a Special Town Meeting for March 29 to close the budget gap. 

On March 28, the DOR notified the town that no free cash could be certified and, in fact, there was a free cash deficit of $26,000.  Strategy #1 could not work. 

At the March 29 Special Town Meeting, the Selectmen proposed and the Town Meeting adopted Strategy #2:  A request to the voters for a $505,000 general override of the Proposition 2 1/2.  An override ballot question was added to the annual election warrant for May 5.    

As a backup plan, Strategy #3 was put into effect.  The Department of Revenue was asked to prepare special legislation to permit the town to borrow $505,000 from the state in exchange for a pay back over five years. 

It was understood that deficit legislation and a loan would be accompanied by state control of the town’s finances for the five year period.  The DOR prepared the legislation, and Strategy #3 was ready in case the override failed. 

At the town election on May 5, the override was defeated by a vote of 789-to-666.  Almost simultaneously, a new and very threatening crisis emerged that undermined Strategy #3.  

I was informed by the Town Accountant that a severe cash flow problem was on the horizon.  He said that he had done an analysis and that the town would run out of cash to pay bills, meet payroll and service debt as of June 13. 

Without a balanced budget, the DOR would not allow the town to set a tax rate and send out tax bills.  Estimated bills had been sent out for the first and second quarters, but bills for the third and fourth quarters could not be legally sent. 
Anticipating a cash flow problem in January, the town had issued a short-term note for $2.65 million.  The note will be rolled over on May 15, but that will not be enough to get through the end of the fiscal year, and we cannot increase the borrowing. 

The prospect of a new crisis more serious than the budget deficit – the inability to meet payroll, pay vendors and most importantly, the possibility of defaulting on a June 15 bond payment – now looms.
Strategy #4.   

In a telephone call with the head of the Bureau of Accounts in Boston, it was recommended that the town consider abandoning Strategy #3 because the legislative process would require too much time.  

With the prospect of running out of money to pay bills in June, it is critically important to balance the budget, get DOR approval for a tax rate and send out bills without delay.  The town must bring tax dollars into the Treasury to avoid defaulting on our obligations.   

We now have little choice but to close the budget gap by making deep cuts in the budgets of all town departments.  A budget that cuts $505,000 from departmental budgets was put before the Board of Selectmen on May 8 and adopted unanimously.   These cuts will result in layoffs, and town services will be almost entirely eliminated for the next seven weeks. 

I did not come to Templeton to lay off employees and slash services, but now there is no other sensible or acceptable alternative.  The town must accept these painful reductions, or we will face an even worse crisis.  

This is the bottom. 

On July 1, we start a new fiscal year with a very austere budget.  However, some of the services and employees cut on May 8 will be restored, and the town will begin the process of recovery.