Town puts undesignated funds in play to help school budget
MADAWASKA, Maine – Following a Tuesday, July 19 meeting of the Madawaska Board of Selectpersons, an issue which appears to be the main stumbling block in voters passing a school budget this year may soon be resolved.
Board members voted unanimously Tuesday to call a special town meeting to ask voters if they would approve utilizing up to $200,000 in undesignated funds to help offset an increase in the mill rate this year. That increase would be due to a shortfall in the school budget.
That special town meeting is scheduled for 6 p.m., Tuesday, August 2 at the Madawaska High School library.
Madawaska voters, who rejected the nearly $6.4 million budget at referendum on June 14, will have a first look at the revised school budget Tuesday, July 26 at the school department’s budget hearing. A referendum vote on the school budget is set to take place August 16, if it passes at the upcoming hearing.
The Madawaska School Committee recently proposed use of these undesignated municipal funds as a way to offset an anticipated mill rate increase due to an increase in the school budget. Because of a combination of obligated expenses and reductions in revenue, the proposed school budget for 2016-2017 requires an increase of $312,777 in local tax dollars compared to this year.
Undesignated – or reserve funds – result from any leftover revenues the town collects, and are carried over each year. It is general practice for municipalities to retain such funds as a reserve, in case of unexpected expenses, emergencies or to offset mill rate increases.
The school department has a separate undesignated funds account, which it had been drawing from over the last few years to reduce the impact on local taxpayers; however, that account is now depleted to less than $100,000.
In discussing the reasoning behind his motion to put the question before voters, Selectman Don Chasse said he believes an error was made following a 2012 agreement, regarding how much of its own reserve funds the school department needed to give back to the town as part of a property tax abatement agreement with Twin Rivers Paper Company.
As part of the abatement agreement, the town and school department agreed to each pay back half of an anticipated $411,670 tax abatement. The school used its own reserve funds to do that. Records indicate that the school department had also cut its budget to achieve that savings, and in doing so may have paid its share of that tax abatement twice, according to Chasse.
If the school paid back too much from its own reserve account, Chasse reasoned, then it makes sense to possibly use town funds to help them at this time.
Fellow board member Vince Frallicciardi pointed out that what actually happened may not be quite so clear cut, considering that the town had subsequently covered some school expenses.
“At the time we did the best we could with the figures we had,” Frallicciardi said.
“It was a dynamic situation,” he added, referring to the tax abatement negotiations with the mill and the potential of massive job losses if the mill had shut down.
In the end, Frallicciardi did not object to the idea that the town may be in a position at this time to help the school department, and agreed that putting the question to the voters was appropriate.
Board Chair Brian Thibeault said he was concerned that making use of the town’s undesignated funds in such a way may go against the existing policy governing the use of such funds.
When the board was dealing several years ago with the property tax devaluation at the mill and subsequent loss of tax revenue, they adopted a policy designed to better build up and manage that undesignated funds account.
Town Manager Ryan Pelletier said he thought the current policy was “very aggressive,” requiring three months of gross operating budget for the town, school department and Aroostook County tax commitments.
Pelletier said that, while the policy has resulted in a current undesignated fund balance of approximately $2.3 million, that amount is more than adequate.
The policy in place actually requires nearly $3 million on hand. The town has never met that and the need for such an aggressive policy does not exist any longer, Pelletier said.
“This community has been conservative,” Chasse said.
The board agreed to form a subcommittee which will revise the undesignated funds policy. This needs to be done before voters can approve use of those funds and prior to the town sending out tax bills this fall.