Preston's budget surplus a healthy one
Preston - When municipal bond rating agencies and auditors urge their clients to have at least 8 to 10 percent of their annual budget totals in the town surplus account, Preston officials this summer can respond: "We'll double that."
With a few bills still to come, projected figures for the 2013-14 fiscal year show the town likely will have $2.7 million to $2.8 million in the bank after a budget surplus of $600,000 to $630,000.
That total is nearly 18 percent of the combined town and school budget of $15.1 million even after the Board of Finance removed $515,000 from the surplus fund to reduce the tax rate this year.
Town officials credited several factors for the healthy budget balance that has carried the town even during the recent recession and a revaluation that deflated property values.
The Board of Finance routinely budgets conservative revenue estimates each spring. Preston several years ago decided to hire a combined town and school finance director.
That move alone, 18-year First Selectman Robert Congdon said, has helped town and school officials to pool resources to get better deals on insurance, gasoline and diesel fuel and heating oil. Congdon and Finance Director Greg Schuyler watched the fuel market daily in the spring before locking in a price some 30 cents lower than initially expected, saving almost $20,000.
In the 2012-13 fiscal year, the town faced a potential 18 percent increase in health insurance costs. Town and school officials went out on the market, signed on with a new carrier, ConnectiCare, and cut the increase to 10 to 11 percent.
"That's been the way we've done it," Board of Finance Chairman Jerry Grabarek said, "and that's probably why we have the surplus that we do."
Having the large surplus has allowed town officials to set new higher minimums to keep in reserve based on bond rating firms and auditors' recommendations. Five years ago, Congdon said, the town policy was to keep at least a 6 percent surplus. The Board of Finance increased that amount, raising it to 9 percent last year and 9.5 percent this year.
"The auditor is recommending 10 percent," Grabarek said.
As a result, the town's bond rating improved from A to A+ to AA+, a very high rating for a town of 4,700, Congdon said. A high bond rating gives the town lower interest rates on borrowing.
One major factor in this year's surplus was the legislature's reversal of Gov. Dannel P. Malloy's initial budget that cut several town grants. The Board of Finance budgeted for those cuts, but the final state budget added $208,000 to Preston's Mohegan-Pequot slot revenue grant, restored the $89,477 public transportation grant and the $32,700 state revenue sharing grant.
Also, both the Board of Education and Board of Selectmen have returned surplus funds to the town for the past few fiscal years. Final figures aren't in yet, but Schuyler said the Board of Education surplus should be about $60,000, while the town budget surplus could top $200,000.
"The Board of Education and the superintendent need to be credited for (returning surplus money)," Congdon said. "Before that, 10 years ago, the Board of Education never returned money to the town. It raises confidence with the voters that you are being fiscally responsible with their money."
One figure at the top of the year-end revenue sheet stands out. Preston collected 102 percent of property taxes owed in 2013-14, including overdue taxes and interest.
The town's healthy surplus has become a point of discussion each spring at budget time. Using some surplus funds, the Board of Finance has kept the tax rate stable for the past four years. The tax rate went up last year, but only to account for the reduced property values in the revaluation.
This year, the tax rate was cut from 23.7 to 23.14 mills using $515,000 from surplus. Congdon argued that the board should have used a lower amount given estimates of $1 billion in state deficits for the next two years.
"We're in a better position than the vast majority of municipalities in Connecticut to face that," Congdon said. "We're very conservative in trying to prepare."
Schuyler cautioned if state revenues are cut, the town would only have the luxury to use $500,000 to cut taxes for two additional years before reaching the minimum 9.5 percent level.
"We've got a few years, but it's not a 10-year type of thing," Grabarek said. "Maybe we can stretch it out three years, but this state has one of the highest debt-per-capita in the nation. Just because you have the money doesn't mean you have to spend it."
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