Those of us in leadership positions made the decision not to discuss The Audit until it was finalized. However, it's been discussed in open meeting and reported in the local media causing me revise my thinking.
While the reported findings are preliminary, the concerns raised are significant enough to warrant notifying the DOR, and both the Town's bond and financial counsels as well as legal counsel. This was done by the Interim Town Manager and the Auditor and, as chair of the BoS, with my knowledge. The BoS was immediately notified. By doing so, we have been proactive and transparent which is being viewed favorably by the DOR.
While what we have learned so far are irregularities such as misclassifying operational expenses as capital expense and paying for them out of bond funding, they are consequential and have serious ramifications for the Town's finances: i.e., capital funds will have to be replenished.
Until the audit is complete we won't know the exact amount but figures presented at Monday's emergency BoS meeting range anywhere from $600,000 to over a million just to resolve a 12/10 bonding deadline. Tinytown Unleashed
Where will the money come from? There are no good solutions. We could borrow from cash reserves but these have already been decimated to balance the water enterprise fund FY11 budget. We could raise water rates. Oops, we already did that. We could hold a Special Town Meeting and ask for an override or debt exclusion. Should the voters say no, cuts would have to made in the Town and School Budgets. Or we could just go ahead and make those cuts. Ultimately how the Town resolves this problem depends greatly on the DOR.
In order to identify available funds in the FY11 budget, the Interim Town Manager has issued a town-wide freeze on all discretionary spending. Mariner
Other implications could be that it might affect the town's bond rating and the rate at which we can borrow money; and existing tax-free municipal bonds may become taxable to the bond holder causing a federal tax issue.
Another unintentional consequence is that it may affect the Town's ability to set the tax rate. The Assessors will present their report to the BoS on Monday night at which time we will vote to set the tax classification for submission to the DOR. However, the DOR may choose not to set the Town's tax rate pending their receipt and review of the final audit. If that happens the Town can issue estimated tax bills based on the previous year's tax rate but new betterments cannot be included. Should this happen it may cause a cash flow problem for the sewer enterprise fund as the FY11 budget is based on the Little Harbor Project betterments being paid.
This sounds dreadful. It is. Fixing this is going to hurt.
5 comments:
WHERE IS GLENN PRATT's RESIGNATION? Every town-side department has been scrimping and saving for the past three years and the water department was spending money on new trucks, smartboards for their conference room, foolish (and expensive) handmade signs that tell us that our water is getting better, and who knows what else.
I fear that this is only the tip of the iceberg. If anyone lets Glenn Pratt get involved with the new proposed senior center we will be on skid row!
Amen to that brother! You may want to include the Beechwood ball field that he was one of the driving forces for. Within a short time of "completion" they were looking for money to fix drainage issues and install a higher fence in the outfield. The drainage problem should have been corrected by the original contractor, or the designer as it obviously waqs poorly designed and/or built. The fence also questions the design. The etire Water Dept board should have walked the plank a LONGGGGG time ago.
Complicating our future town finances is the probability of interest rate increases for all municipal borrowings. Many financial commentators, myself included, believe that we are in the midst of a "bond bubble"...and that it is bursting. Bond prices are high which means interest rates are low...in other words a bond buyer pays a lot for the small amount of interest income from the bond.
If this bursting bubble continues then the interest costs for any additional long term debt will become increasingly expensive. This will also apply to debt refinancings or rollovers.
Combine this with the increased funding demands from other Town provided services and the prognosis is grim.
Now I wonder if it was wise to give away a plot of land for a Senior Center? Maybe we should stop giving away things that should be sold at fair market value.
If we are going to be $1M short, the conversation about Cohasset and money just got very large. We are going to have to chose: what do we NEED vs what do we WANT. Just like at home when someone has lost a job or takes a cut in pay.
We are going to have to cut services, raise taxes or a combination of both. We have to pay for what we demand from government.
Some help from the Water Tower cell phone if we can make that happen, some help from the Turkey Hill Turbine if that happens, some help when the new hardware store opens. But most of this is going to be impact in the next fiscal cycle, not this one.
I think we are going need to learn to live with less until we can dig out from this.
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