OLD LYME — In 2018-19 fiscal year, Old Lyme took in higher revenues and paid several lower expenses than were expected. This allowed for a $739,152 contribution toward the town’s general fund balance of $11,309,944 on June 30, 2019, according to an annual audit presented to the Board of Finance Tuesday night.
Board of Finance Chair Andrew Russell said that this general fund balance — which is equal to over a quarter of Old Lyme’s most recent annual budget — will help to keep a steady mill rate by preparing for unexpected one-time costs, and get a low interest rate if the town chooses to bond for any large projects in the future.
“Our town has always gotten high marks for the way we do business and the way we manage our money,” Russell said in a Wednesday interview. “We’ve never really had a problem there whatsoever. Our finance director and leadership within the town take it very seriously, and we’re a conservative town. We certainly don’t spend money we don’t have.”
The audit, compiled by firm BlumShapiro, said that the boon to the town’s coffers came primarily from collecting more tax money and more state aid than the town originally budgeted, according to the annual financial report prepared by the firm BlumShapiro, dated November 25,2019.
The unassigned portion of the town’s general fund is $9,008,689, or 63.1 percent of the total general fund. This is the portion that’s not already marked for debts or other obligations and “is available for spending at the Town’s discretion,” according to BlumShapiro’s report.
“We try not to dig into that surplus,” Russell said, “but if we do — mainly it would be for capital needs if something happened to a building or vehicles unexpectedly or if we knew we had to purchase something,” Russell said. “We don’t tend to go into that reserve fund for general operating expenses. Those we have to budget for and stick to those budgets.”
The unassigned general fund balance and how it compares to the size of the annual operating budget of a town is often used by financial institutions as an indication of how healthy the town is financially.
In the report, BlumShapiro writes, “In particular, unassigned fund balance may serve as a useful measure of a Town’s net resources available for spending at the end of the fiscal year.”
That $9 million in unassigned funds equals just over 25 percent of the $35.9 million budget that the town enacted for 2018-19.
Revenues, expenses, and debts
For 2018-19 the town’s actual revenues exceeded what was budgeted by $757,543, according to the budget presentation (page 26). The town had expected to take in $35,931,775 in revenues for its budget, but instead the actual revenues totalled $36,689,318.
Additional revenues included: the town collected $327,121 more in property taxes, interest, and liens than was expected. The town also took in $216,418 more in government aid than was expected, mostly from education cost sharing and payment in lieu of taxes. Finally, the town’s income on investments exceeded expectations by $187,490 and its charges for services revenue exceeded expectations by $26,514.
Actual expenses were less than what was budgeted by about $471,495. The town had budgeted to pay $35,854,550 over the course of the year but instead spent $35,383,055.
Within that, the town’s general government spending was down $134,316 under budget mostly from savings on workers compensation insurance, other changes in employee benefits and salaries, and a reduced costs to operate town hall.
Funds paid to boards and commission came in $67,680 under budget when the costs for weed treatment at Rogers Lake and land use operation came in lower than expected.
Police services come in $32,146 under budget, which is attributed in the audit report to the department not reaching its limit on overtime.
All of these savings and revenue boons together added up to $1,229,038, but they were offset by $684,375 in additional appropriations that were approved over the course of the year.
The biggest single additional appropriation in 2018-19 was $500,000 for library renovations, followed by $73,000 for health insurance premium increases, $46,000 for capital IT upgrades, and $26,000 from increased rates on trash disposal through the Materials Innovation and Recycling Authority.
Over the course of 2018-19, the town’s total debt decreased by $320,000, from $2,135,000 at the beginning of the fiscal year to $1,815,000 at its end. This does not include debt service for Lyme-Old Lyme Schools, which totalled $19,795,710 for Old Lyme’s obligation at the fiscal year’s end on June 30, 2019.
The auditor’s report did not cover major obligations that the town has taken on since June 30. In that time, the town has taken on an additional $1,250,000 in new debt for the library renovations that voters approved in July 2018, and the town also approved at referendum bonding up to $9.5 million for constructing sewers in the Sound View Beach and Miscellaneous Town Area B, although part of that $9.5 million is expected to be covered through state reimbursements.
Russell said that taxpayers’ approval through referendums showed that the public supported the borrowing and that the added debt won’t have a significant impact on upcoming town budgets and mill rates.
“For a town of our size we have very little debt,” he said.
When the town does issue bonds for a project, Russell said that having a strong general fund balance will help town officials to get a lower interest rate and save money over the years that the bonds are being repaid.