Town Money
The Undesignated Fund Balance
The undesignated fund balance is carefully managed so that we arrive at 10% of our annual expenses, or about 1.3 million, each fall after the year end surplus (or deficit) is determined. The purpose of this fund is to pay for extraordinary one time expenses caused by unforseen events for which no other funding source exists. The idea is to protect the taxpayers from unusual one year tax hikes.
For example, in the fall of 2012, the surplus for fiscal year 2012 (July 1 2011 – June 30 2012), if added to the undesignated fund balance, would have put the total over $2 million. It was reduced by the town manager creating, on his own, an “Irene Fund” of about $385K and his suggestion to the Selectboard that, instead of using the $500K bond passed by the voters to rebuild the W Hartford community center and library, the town should use around $500K in surplus funds. This manuever let the audit say that our undesignated fund balance was 1.3 million, right on target.
However, as events turned out, the Selectboard, after the election, directed the town manager to use the bond; and to date the town’s actual expenses, after all FEMA and other funds are applied, to recover from Irene are — wait for it — zero! Maybe $75K, but that, too, is uncertain. So both the “funds” that were put aside so they would not show up in the “undesignated” funds are once again available to be redirected.
The Annual Surplus or Deficit
During the past 15 years, Hartford has only once had a deficit. In other years, our surplus has ranged from relatively modest amounts to over a million dollars. Surpluses come from many factors: unexpected grants that pay for things we were going to use property taxes for; lower expenses than anticipated (for example, not having a police chief for 6 months); new properties being added to the tax base, so we collect more property taxes than expected; underestimating the growth in the grand list, also leading to collecting more taxes than expected.
Funds established by the Town Manager for specific future needs
When there is more of a surplus than the Undesignated Fund Balance can absorb without going over the target value of 10% of annual town expenses, these monies get parked in “funds” that are for some useful and necessary purpose. For example, the town manager was rightly concerned that FEMA might not pay for all the projects that were still under way in the summer and fall of 2012 and set aside $385K for that.
Funds established by the Selectboard for routine capital needs
The Selectboard — largely at the urging of Chuck Wooster during his first term on the board 2006-2009 — created a number of important reserve funds that we add to each and every year out of both the surplus and tax dollars. We all pay a little every year toward fire, police and highway equipment so we never need to bond for those.
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