Finance Board Sets Projected Budget Growth At Under Three Percent

The Board of Finance January 8 voted unanimously to adopt a five-year budget growth average of 2.92 percent. According to Chairman John Kortze, his board adopted “a policy to address in a reasonable and simple way, anticipated growth in the budget.”

In recent years the finance board has been successful in adopting such a formula based on a rolling average figuring the past four years actual growth and a best guess estimate for the coming year based on myriad factors.

“That gives us a number that is reasonable and based in reality,” Mr Kortze told The Bee following the meeting. Setting the growth ratio in this fashion by board policy also helps its members get a true picture of how far the town can go with borrowing for capital projects before it hits its self-imposed 10 percent debt cap limit.

Mr Kortze explained that as the budget grows, the amount the town can factor to borrow for projects while restraining itself under the cap also increases. “But if the budget lessens, that slope flattens and we simply can’t borrow as much,” Mr Kortze continued.

He said his board chose to “err on the side of conservative” when estimating growth, and that estimate has reduced the scope of borrowing within the constraints of the ten percent cap. For that reason, the finance board assumed a zero increase for the upcoming budget.

“Every economic data point is worse this year than last. So I don’t see how anyone could ask for more, or expect more than last year,” Mr Kortze said.

During deliberations, board member Michael Portnoy tendered the first motion — to assume a five percent reduction. But that motion failed 5-1. Mr Kortze defended the move, however, saying it was Mr Portnoy’s way of opening up a broader opportunity to borrow for capital projects by cutting the operational side of the equation.

“His goal was to open up more room for debt service,” Mr Kortze said of his colleague’s motion. “But the result of cutting the operational budget by five percent is flattening the debt cap chart, which means that we risk breaching our debt cap more severely.”

Mr Kortze said the town might instead consider the implications of “pay as you go” for certain projects, and adding $5 million to the operational side for capital expenses. But he said that scenario would require a larger proportionate reduction than the actual $5 million expenditure.

“Not bonding [that $5 million] would protect the debt cap,” Mr Kortze said.

The finance chairman said the policy also provides for some upward or downward shifts. “Don’t forget, last year we assumed a zero growth and we actually had a minus 1.66 percent retraction.”

Since the next two years only permit projected borrowing under the debt cap at $4 million total, Mr Kortze said the town needs to “figure out what we can postpone and do cheaper. “We may be able to restructure debt to fit a little more in, but we won’t be able to — and it wouldn’t be prudent to do — nearly everything in the school and town capital plans.”

Ultimately, he said, the finance board has vowed to not make the “same mistake other towns and the state are making.”

“We can’t borrow our way out of the current financial situation,” Mr Kortze said.

There are some glimmers of positive news compared to other towns and cities, he added.

“Financially, Newtown is in really good shape thanks to the decisions that have been made over the past ten years,” he said. “We’ve got no big pension problems; no big deficits; but the global economy has affected everybody. And it will require some very hard, unpopular but very important decisionmaking [locally] to get us through while maintaining our current bond rating and financial health.”