Keeping Granby fiscally strong

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During my recent office hours, an attendee asked whether the fiscal planning work contemplates enough negative impact from the state aid reductions and cost shifting. This individual was the only one to show at either of the two office sessions that were held who isn’t a candidate nor is politically connected. He wondered whether he can afford to stay in town over time. This is really a Connecticut question as much as it is a Granby question. Elsewhere in this issue another person questions whether more should be spent on education and how that might be funded. Such questions highlight the many faceted considerations and perspectives we, as citizens, and those serving as board members, need to contemplate as we ultimately look to balance the needs of the community with a sensitivity to taxpayers’ pockets.

The capital planning work done this past spring is intentionally a conservative outlook at how capital and operating expenditures may come together against revenues and, in particular, our property taxes. While not the “worst case,” it is definitely conservative by design and not intended to present a rosy picture. Voters need both eyes open when voting. As stated numerous times at the public meetings and in the Drummer, the assumptions and inputs built into the planning work were selected to inject an abundance of caution within the process, with the stated intent being to work not at, but within, the parameters of the plan. In the past three decades the Boards of Selectmen, Finance, and Education have three times come together to produce and then commit to, and adhere to, a multi-year capital plan – to work within its parameters and limitations. In each case, the impact on mill rates was less than projected. Once again this year, the boards signed on to work to manage the combined operating and capital numbers so that overall and over time they fall within, not at, the parameters of the plan and, in particular, the mill rate bottom line.

Anything to the contrary is a fabrication and contrary to the historical record. From where I sit as chair of the Board of Finance, I look to keep the boards working within the overall parameters – not necessarily at them. While over time some components may be higher and others lower, the goal and commitment is to bring in the bottom line mill rate changes within, not at, the plan projections.

Built into the planning scenario is what the governor had proposed in reducing education money to Granby quicker than the legislature’s intent. Also factored in is his starting to shift the teacher’s pension cost over to the towns. These inclusions should provide significant buffer for what damage may come our way from upcoming state budgets. Significant bumps in Special Ed costs like we’ve encountered for the past couple of budgets plus more negative actions from the state also could throw off the planning work. Being fiscally prudent by carrying sufficient reserves will help us to help stay within bounds.

Regarding reserves, the General Fund is essentially the retained earnings account as we call it in the business world – the aggregate accumulation over time of the net results of each year’s operations: actual revenues less actual expenses. Towns conservatively budget and have to end each fiscal year in the black, with the net flowing into and increasing the general fund or drawing from it if ending in the red. We’ve never been in the red in my 37 years on finance. For the past few decades the bond credit rating agencies – Moody’s, Fitch and Standard and Poor – have looked for towns our size to maintain a reserve of 5-10 percent of the annual budget. Given the recent mounting and recurring issues regarding the state budget deficits and the repeated threats to reduce state monies to the towns, these rating agencies are now looking for the towns to carry a stronger reserve position of 10-15 percent. Within the next couple of years we will go to the bond market for the recently approved capital expenditures. After consultation with our bonding advisor, we may consider it fiscally prudent to improve our reserve position so that we maintain our existing AA+ rating or the bonding agencies may improve it to AAA. 

By running a fiscally sound operation, the credit rating for Granby has improved three times in the past 20 years. Some towns have had their credit rating reduced and future interest rate expense increased, not so much for anything they did, but rather given the threat of reduced state revenues and a lack of sufficiently strong and recommended reserve levels. Given our responsibilities to the town and its taxpayers, we are of the mindset that it is wiser to prepare for tomorrow than worry about it too late.