A second topic was debated on a FaceBook site called Accountability in Newtown, where some made a repeated effort to convince readers that a $700,000 surplus has been hidden. On Newtown Patch, others referred to the $700,000 as a slush fund.
In fact, the $700,000 has been discussed in repeated town meetings of the Board of Finance and the Legislative Council since March. That it was not adequately covered in the media may, in part, be due to the fact that unless one is a mathematician, the numbers make the average person’s head spin.
According to First Selectman Patricia LLodra, "The $700,000 comes as savings and a premium paid through the bond refunding activity."
According to Llodra, “The bonds were refunded at a much lower rate than originally sold and therefore produced a financial benefit to the town."
Llodra said that the decision to invest that "financial benefit" in the fund balance (savings account) "is consistent with the town’s strategy for positive financial management.”
Llodra said the hope is to, “Reduce debt, reduce taxation and increase savings, which will result in a sustained, improved bond rating. A positive bond rating for Newtown is very important as we look to the future for borrowing for school and town capital needs.”
Citing HVAC projects at the elementary schools, auditorium refurbishments at the high school, fire truck replacements, community center and senior center, Llodra noted that all of the projects identified in the approved Capital Plan involves selling bonds in order to generate funding.
Llodra said that currently, the savings account (fund balance) is at 7.1 percent of the operational budget. According to Moody’s, and confirmed by finance director Robert Tait through data collection, towns with similar bond ratings typically have 10 percent of their operational budget in their fund balance. At the two previous ratings reviews, Moody’s rating agency cited the need for the town to build its fund balance.
In order to achieve the higher fund balance, the Board of Finance adopted a policy that identifies a short term goal to reach a minimum of 8 percent.
The current budget proposal, to be voted on June 5, has $900,000 identified for the fund balance. Llodra said that the $700,000 will come from the bond refunding and $200,000 will come from taxation in the form of additional revenue.
(The Legislative Council reduced the amount from revenue from $400,000 to $200,000 after the failed second referendum).
If the June 5 proposal is passed at referendum, the fund balance will be at 7.81 percent of the operational budget. According to the plan presented by the finance director, additional monies will be invested in the fund balance over the next few years to get to the minimum of 8 percent. Some of that investment has already been identified as additional savings from the bond refunding.
Llodra added that she is hoping that in the future, the town will be able to depend on tax increases from new businesses rather than the private sector to build up the balance.
Finance Director Robert Tait and Board of Finance John Kortze did not return calls. The information below was provided by Llodra.
The money generated by the bond refunding is scheduled by the Board of Finance as follows:
To Fund Balance: $350,000 from bond savings, plus $350,000.00 cash premium, results in $700,000
To municipal operations: $45,246.88
To Debt Service:
$804,619.45 fiscal 2013
$375,618.76 fiscal 2014
$44,306.40 in 2015-2027