Taxing considerations

Taxing considerations


The town released its Comprehensive Annual Financial Report (CAFR) on December 30, 2013. It contains 108 pages of financial and economic information together with the results of the fiscal year ending June 30, 2013. The mayor held a press conference to discuss these matters, and the R-J was there covering it. Later, the R-J ran a story with a headline that read, “Wallingford audit shows healthy revenue” (R-J, 1-1-14).

Healthy revenue is generally a good thing. Wallingford residents, however, are not shareholders in a private Wallingford corporation. The town should not be managed like a corporation — to maximize profit. Although “healthy revenue” is good for corporate shareholders, “healthy revenue” for municipal government means the town has more of our taxes, about $3 million more in 2013 than in the year before. Healthy revenue, therefore, comes with a price.

The audit also reported that the town had an operating surplus of more than $2 million. That’s a big one. Not only did the town have more of our money, therefore, it also had more than it needed. Although a surplus is preferred instead of a deficit, the unneeded taxes that made up the surplus are locked in the general fund, and the money isn’t coming back. The surplus is nice, therefore, and it’s good for bragging rights, but it has its downside.

In addition to the surplus in 2013, the town also had a surplus in 2012 of almost $1.7 million. So, what if anything, should be done about the build up of cash? Towns will not issue refund checks for taxes that are collected and not needed. But, can we use the surplus to reduce future taxes? Although that sounds attractive, it’s not realistic.

One way to use a $2 million surplus to reduce taxes is to intentionally create an offsetting $2 million deficit the following year. That would require the town to take $2 million out of the “rainy day” fund, put it in a budget, and actually spend it (and not return it to the general fund balance a year later). Which public officials want to intentionally cause a $2 million deficit? A show of hands, please.

The CAFR also informs us that spending is substantially stable in municipal government except in three departments: Education expenditures increased by $3 million in 2013; and spending grew noticeably in both the Police Department and in the Department of Public Works. It’s no one’s fault; prices and wages go up.

The police budget is the most inscrutable, however. Expenses have been rising and the town has consistently overfunded the police salary accounts since at least 2005. In recent years, the police department typically doesn’t use about $425,000 that’s available to it for salaries. In 2013, $515,00 was left over. Moreover, the police department did not use an additional $333,000 appropriated to it for other purposes, leaving $848,000 unspent. This overfunding is a chronic issue. What’s going on and what should be done?

The mayor has tried to contain costs, by reducing staff through attrition. The 2009 CAFR stated that he would not fund 3 “open” positions for police officers caused by retirements, until the economy recovers. Starting in 2010, and every year since, each CAFR reported that the mayor would not budget for 4 “open” positions. In 2009, the mayor approved 101 employees in the police department, but starting in 2011, he approved 95. Yet, we still face rising costs and problematical overfunding, which benefits no one, and that deserves a closer look.

Money appropriated for police budgets originate as taxes. If taxes go unused, they worm their way back to the general fund as part of a surplus. Then, the process starts over again. Some support this recycling of money, because it shows support for law enforcement. We should define the problem, however; determine why we traditionally overfund, then budget realistically. Tight budgeting reduces the odds of over-taxation.

Mike Brodinsky is a former town councilor, chairman of the School Roof Building Committee and host of public access show “Citizen Mike.”


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