Analyzing the rainy day fund
As many of you know, I've been advocating a cost/benefit analysis to understand the Town's "rainy day fund." Unfortunately, I haven't made much progress... though the recent budget committee meeting minutes have shed some light on the difficulties I'm encountering...
Budget Committee Chairman Mike Ecke said "(I am) not sure how this would be approached."
And "Mr. Milone pointed out that this fund balance does not lend itself to a cost benefit analysis, because the start is a false premise that there is a cost involved. There is no cost; there is a revenue investment that sits there that is being debated as to its use."
Now understanding why it's been impossible to perform a cost/benefit analysis, I realized that the only way to move this discussion forward would be to do it myself... a rather time-consuming, but worthwhile effort I think.
So here's my first attempt at an "investment/benefit analysis" of the rainy day fund:
And just a bit of explanation for this... as noted in the minutes, the TM said there were 15 reasons for the fund balance policy (or the related 8% funding level??)... and if you read the minutes... the conversation was likely fluid and while I'm sure the minutes are an accurate representation of the discussion... the discussion itself is not entirely clear. And the 15 reasons are not listed anywhere... so I'll email the Town Manager for the list of 15 reasons. In the meantime, I thought you all may be able to offer some analysis of your own.
Oh... and one benefit I forgot to include... with the additional $3.3million in taxes that have already been collected and the additional $90,000 in taxes that will be collected annually... we'll be saving about $20,000/yr. (I base that number on last year's estimated savings of $30,000 - 50,000 for the biennial bond issuance... I averaged it to $40,000 and divided by two.) Of course, if we went from a AA bond-rated town to a A bond-rated town, we (or the underwriters) could just buy bond insurance for $5,500... and we could return to the 5% level (that was perfectly acceptable only four years ago) and return $3,000,000 to the taxpayers! But of course... it's not that simple... so bloggers... I hope you can do your stuff and provide some critical analysis on my investment/benefit analysis.
By the way... that $550,000 that gets incorporated into the budget... that seems to get incorporated every year... that's normally fallout from the seemingly annual surplus of $2,000,000. So it's not as if that is necessarily a "drawdown" of the rainy day fund.
Anyway... is the cost to maintain the 8% rainy day fund worth the benefit?
Tim White
Town Council, 4th District
p.s. For the record... generally speaking, during his tenure, the Town Manager has done a good job with the town's finances. But going forward, I don't want to see my favorite Democratic Council become Cheshire's version of the Republican "no oversight is needed" Congress. :)
9 comments:
There needs to be a public explanation of how we have arrived at the amount in the fund. There are a several reasons and they need to be understood, it not all happen from overtaxing. Increased state aid after the budget had been set is one, reduced expenses by the Town and BOE could be some, increases in local charges for town services. Before we decide what to do with it or set limits we need to see how we got here and will the future bring the same results.
"Rainy day". How about hail stones the size of baseballs that's how I feel is happening to me with the price of oil going up to $100/barrel. We sure have our work cut out for us. Hope we find a solution for these high oil prices soon.
6:55...
1) conservation
2) alternative fuels
3) increased production inside the US (offshore and onland)
That's what we need to do... unfortunately, I don't see it happening. Additionally, it wouldn't reduce the price overnight... but at least it would be a step toward reducing our dependence on foreign oil.
Tim,
how right you were when you ran for state rep and said we need a "Marshall plan" for alternative energy development and conservation.
We're now facing $4 gas and even higher heating oil. Some analysts see $500/barrel in five years (= $15-20/gallon gas).
Too bad most federal, state and local officials aren't as foresighted as you, and will wait until we're already deep in a crisis.
Bush has done nothing to seriously develop alternative energy. And I'm sorry to say, your guy Ron Paul won't either. He sees all energy and environmental initiatives as matters for the private market only (ignoring the fact that the oil oligopolies have a vested interest in NOT developing competitive alternatives to oil).
Fortunately, at least two other GOP candidates, McCain and Giuliani, do see a government role for alternative energies.
Redtown... thanks for your kind words. I'm ok with Dr. Paul's lack of a Marshall Plan for energy though. What he's really calling for is a broader Marshall Plan to restore the Constitution... and that's ok by me. :)
This is wonderful
good analysis
It is now easy to see why we should have a 8% fund balance
It is here in black and white
Good to see it explained
I can support this now
Yes good sheet here
Now I can see why you support the 8%
It is good for our town
With the asked for increase of 4 mil by the Supt for the school system we will need the surplus to reduce the upcoming tax increase.
The grand list has probably increased and they are aware of it so they ask for more. Let's wait and see.
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