General fund underfunded, auditors say

Karen Gerrish (Courtesy photo)

LEBANON - In Fiscal Year 2011-2012 and 2012-2013 Lebanon selectmen moved $600,000 - $300,000 each year - from the town’s general fund to reduce property taxes leaving the fund in what auditors now refer to as an unsustainable level.

Whether this results in higher taxes this year and next is unclear, but what is certain is that there will be no funds to expend this year to soften the mil rate blow.

Officials at both the Maine and New Hampshire municipal associations, which assist towns with financial planning and other governmental functions, said towns should have a three-month cushion in their general fund to cover fixed expenses like the nearly $440,000 sent monthly to SAD 60.

Right now the town general fund is at $1.1 million, but with other expenses like $30,000 a month to Waste Management, town employee salaries and utilities, there’s just not enough to create a sustainable fund, which all towns are urged to carry to cover expenses if an unforeseen funding emergency faces the town.

“It’s like a family budget. You don’t want to have nothing left each month after you pay for the mortgage, food and utilities,” said one auditor. “You want to have some set aside for emergencies.”

So basically, the town’s emergency fund is barebones and not solvent.

Details of the two general fund debits in the two fiscal years came to light in several documents The Lebanon Voice obtained using a Right to Know request.

Some $300,000 in general fund withdrawals were made in both Fiscal Year12 and Fiscal Year 13. Even so the tax rate rose about 5 percent each year, well more than double the rate of inflation.

In an audit report released earlier this year and also obtained using a Right to Know request, selectmen were told that the fund is in dire distress and it “remains below a level able to sustain expenses for two months.”

Not having a healthy general fund also causes problems in that they often force the town to take Tax Anticipation Notes or TANS which are short-term loans so the town can cover its operating costs, sort of like borrowing on receivables. TANS are interest bearing loans that cost the town money and are necessary when reserves in the general fund run low like they are now.

The Lebanon Voice found that no money had been taken from the general fund to reduce taxes in the three years previous to FY 2011-2012.

In the last three years, however, even with the $600,000 expenditure from the general fund, Lebanon real estate taxes have gone up 12.6 percent, while inflation the last three years has gone up about 4.7 percent, according to USinflationcalculator.com.

A rule of thumb in calculating the mil rate – the rate charged by towns for every $1,000 of appraised property value – is that for every $500,000 of appropriation, add a dollar.

The current fiscal year mil rate, which was set in 2013 and reflects the $300,000 shot in the arm afforded it from the general fund, is $14.50. Without the general fund money, it likely would have been more than $15, which reflects a whopping 11 percent hike in one year.

Meanwhile, there are only a few painful ways to get more money into the general fund to make it sustainable. One is to cut department budgets. The other is to ask taxpayers to appropriate funds, which means more taxes.

Selectman Ben Thompson estimated recently that even if all the referendum questions are approved next month, any mil rate hike this year is expected to be minimal, maybe 2 or 3 percent.

Fiscal years run from July 1 to June 30 and are used for accounting purposes by towns and government.

Meanwhile, in online selectmen meeting minutes reviewed by The Lebanon Voice since June 2010, there is no mention of a vote on moving the $300,000 in either fiscal year 2012 or 2013.

Neither is there any mention of the most recent auditor’s report - dated June 30 - which on Page 10 notes that the general fund is underfunded after the two $300,000 withdrawals.

Minutes of Tuesday evening selectmen meetings are recorded by a Town of Lebanon employee, but afternoon meeting minutes beginning last July were generally recorded by Selectmen Chair Karen Gerrish, who earlier this week was queried in an email from The Lebanon Voice about the two $300,000 deductions from the general fund. The email also asked whether there was a vote on the two disbursals and why there has been no mention in minutes the current year regarding the disturbing underfunded condition of the general fund.

As of today – two days after the email was sent – there has been no response from Gerrish, who is normally very prompt with email communications.