SOUTHINGTON — Town leaders don’t want to use reserve funds for the upcoming fiscal budget despite calls from some residents to spend savings to offset losses in state aid.
The chairmen of the Town Council, Board of Education and Board of Finance signed a letter explaining why they don’t want to include a portion of the town’s $20.1 million unassigned fund balance to pay for operating costs in the 2018-19 budget. Leaders cited the risk of hurting Southington’s credit rating and creating a “fiscal cliff” by using savings to pay for operating expenses.
“This is not a one-time fiscal emergency,” the letter said.
During Monday’s council meeting, Chairman Chris Palmieri, a Democrat, read the letter in response to questions from residents about using reserves.
The town’s policy is to use reserves only for one-time capital projects or emergencies, such as the 2011 ice storm, or to pay down debt.
Victoria Triano, a Republican councilor and minority leader, agreed with the letter.
“The use of the rainy day fund is very, very specific,” she said. “We can use it to pay down debt, we can use it for capital projects…historically we have never used it for operating costs.”
“That’s just not a pot of money that you can take out whenever you want it,” Triano said.
Phil Pomposi, a former finance board member, urged the council to use some of the savings, in addition to expense reductions, to keep taxes from rising dramatically.
“With a fund that large, if it does come to having to use a little bit of that, it’s not going to affect our bond rating,” Pomposi said at Monday’s meeting. “I would never, never suggest using (savings) unless we saw some real reductions in the cost of government, especially in the Board of Education.”
The growth of the reserve fund represents “overtaxing,” according to Pomposi.
John Leary, chairman of the finance board, said the town’s policy is to keep the equivalent of 10 percent of the town’s revenue in reserve. As the town’s budget has grown, the rainy day fund has also grown.
Money in excess of the 10 percent is spent, Leary said. More than $2 million was spent to pay down debt in the current budget.
The current reserve fund is 12.4 percent of the town’s annual revenue according to Finance Director Emilia Portelinha.
Leary said he’s been asked frequently about using town reserves. He said credit rating agencies are closely watching how towns and cities in Connecticut handle declining state revenues.
“I think it would be an absolute death spiral for us to use the rainy day funds for operations,” he said.
A more appropriate use for reserves would be to fund any costs associated with downsizing government, such as severance payments to former employees.