Fraser staff push more conservative budget approach
October 22, 2015
As the Town of Fraser wades into its 2016 budget process, town staff has recommended the board to trustees consider a more conservative budget approach going into the future.
Finance Director Nat Havens presented the board with a list of proposed financial policies at its Oct. 21 meetingthat included maintaining an unassigned fund balance equal to or greater than four months of budgeted expenditures.
"As you noticed from the budget we're getting awful thin and one year down the road, potentially two years if things don't change, we could be in trouble in the general fund," Havens said. "And I think it's time we get back in a savings and reserve behavior."
For the last nine years, Fraser has adopted budgets with expenditures exceeding revenue projections.
“I just want to be clear, nobody from staff is saying the sky is falling or the Town of Fraser is going bankrupt, but we do we have things we need to be thinking about.”Jeff DurbinFraser Town Manager
Since 2009, the town has adopted a strategy of budgeting up to $250,000 of unreserved fund balances over revenue projections each year, the goal of which was to maintain services and reach 2017 with enough money to pay of its debt.
But current staff projections show that continuing on its current trajectory, the town would need to spend $1.2 million of its general fund reserves in 2018 to maintain baseline services, putting the town's general fund in the red.
"I just want to be clear, nobody from staff is saying the sky is falling or the Town of Fraser is going bankrupt, but we do we have things we need to be thinking about," said Town Manager Jeff Durbin.
A recurring theme in the policies presented was the recommendation that the town maintain a certain amount of unassigned fund balances, or the amount of money left in a fund that carries over, relative to expenditures.
Specifically, Havens proposed that the town maintain a carry-over balance in the town's general fund equal four months worth of expenditures for the same year.
"This year, let's say our expenditures were $3 million," Havens said. "One third of that is a million dollars in unassigned fund balance and that allows us to cash flow the town."
Havens said he hoped the town could maintain an unassigned fund balance even larger than four months to allow the town fund capital projects in the future.
"That unassigned fund balance is also used as the savings to pay for the things down the road that you guys identify that you guys really want to achieve," Havens said.
The town has had its sights on a new public works facility for some time, and though it has yet to set any money aside for the project, Havens said the unassigned general fund balance could be the place to start accruing that money.
Havens also proposed that the town increase the amount of committed reserves in the general fund from $750,000 in 2015 to $1 million in 2016.
Committed reserves are used primarily for emergencies.
Further down the road, the town can start allocating money to its capital asset fund to purchase future asses and maintain current assets like roads, Havens said.
"Right now we're not saving for our assets, our streets, and we're not spending the money that is being recommended by the public works director on the maintenance of those streets on a yearly basis," Havens said. "We don't have those dollars available. We need to find where those are going to come from."
Though Fraser's sales tax revenue took a hit with the closing of ALCO last year, Havens wrote in a board memo that a number of factors including new businesses and the real estate market could improve the town's economic outlook.
Increasing demand for new homes and building could boost the town's one-time revenues, and the impending opening of Murdoch's and the reopening of the Holiday Inn Express will funnel more revenue the town.
Better than anticipated revenues could push back the time frame for when the town would need to dip into reserves.
This year, sales tax revenue from Safeway and local marijuana businesses "has basically eclipsed" losses from ALCO and the temporary closure of the Holiday Inn following a fire," Havens said.
Still, Havens said the town should remain cautious of both planned economic blows like a grocery store in Winter Park and unforeseen events like economic downturns and natural disasters.
Havens said the $1 million in committed general fund reserves was adequate for that kind of preparation.
Durbin said he agreed with Havens' conservative approach.
"I would balance that a little bit with, within 10 years I think there's an equally strong likelihood that there will be additional new retailers in the Town of Fraser," Durbin said. "Those are the types of things you need to be thinking about in terms of how conservative or liberal you want to be with your financial perspectives for the town."
The town has scheduled public comment periods for budget process during its Nov. 4, Nov. 18 and Dec. 2 meetings.