At its September meeting, all six members of the Board of Finance supported using the General Fund over the next few years to offset all or a portion of the projected Debt Service for the capital projects approved last year. The intent is to help flatten the rate of increase in the mill rate over the next few years.
While the voters authorized the Town to issue bonds for the projects approved by the public at referendum last year, nothing has been borrowed, because the initial design work and expenditures have been covered from cash reserves. It is felt that by using existing reserves we can prevent the impact of the school and bridge projects which were projected to require two percent more in taxes over time.
The General Fund is essentially the checkbook that tax dollars and most other revenues flow into each year. Expenditures approved within the annual budget and any additional appropriations approved throughout the fiscal year, get paid from the General Fund. The residual balance at the end of any given year is essentially the sum of the pluses and minuses of that year and all previous years—similar to the corporate concept of retained earnings. While it is a recommended good practice to keep sufficient reserves on hand—currently recommended by credit rating agencies to be 12–15 percent of the annual budget—it is also true that some reserves are often used to hold down the mill rates of upcoming budgets as well as to cover one-time expenditures such as capital items.
The Board of Finance has a long history of looking to moderate mill rate changes over time while meeting the needs of our community. This is another step in doing so. Using the General Fund to cover much or all of the debt service or project costs, directly isolates the impact of the capital expenditures from affecting the mill rates of upcoming budgets in the near term. We believe this is sound policy as we endeavor to balance meeting the needs of Granby given the cost of doing so.