At the April 11 Board of Finance meeting, the Board recommended a mill rate of 16.47 for the 2019-20 fiscal year, which represents a 2.4 percent increase over the current mill rate. Note: The Darien Times had initially reported a different figure for the mill rate but has since received additional clarification.
By comparison, New Canaan is considering a 7.7 percent mill rate increase for next year, from 16.96 to 18.26. The substantial increase is because the New Canaan Grand List declined significantly — by $637 million — with property values falling over 7.7 percent. The amount that will be raised by taxes, though, is going down only slightly, from $140 million to $139 million.
Wilton’s mill rate is 28.19 for the current fiscal year, representing an approximate 1.5 percent increase over the previous 27.77 rate. Ridgefield’s current 2018-19 mill rate is 27.78, an increase of 1.8 percent from the previous year.
Board of Finance Chairman Jon Zagrodzky summarized the changes made to the Board of Selectmen and Board of Education budgets, indicating that budgeted revenues were increased by $90,000, while budgeted expenses were decreased by $2,056,000. Most of the decreases occurred because the Board of Finance decided to bond several capital projects rather than fund them out of the operating budget, he told The Darien Times.
“The preponderance of those are projects that we elected to bond, which include Highland Farms for $600,000 as well as the Hindley Elementary School roof replacement for $550,000,” Zagrodzky said. “In addition, we’ve got the $569,000 in healthcare reductions that the Board of Education identified.”
The healthcare reductions resulted from lower-than-expected health insurance renewal rates. Other changes included assumptions for lower expected debt service and legal costs as well as a decision to defer the implementation of land use software until next year.
Board of Finance member James Palen stated that the mill rate for 2019-20 was calculated based on a newly revalued Grand List. While the mill rate is going up 2.4 percent, taxes required are going up less.
“Actual tax bills that we’re sending out are only going up by 1.5 percent,” he noted. “The mill rate is nominally going up because home values were brought down on average.” The Grand List has dropped by about $116 million from what it was before, about 1.4 percent. It may decline further depending on the outcome of valuation challenges still underway.
General Fund Balance
Last fall, the Board of Finance updated the town’s Fund Balance policy. Fund Balance is essentially the financial reserve the town maintains, which would be available in the event of an emergency or significant unforeseen expenditure. The Board set 12 percent of budgeted town revenues as the minimum level for the Fund Balance. Maintaining a strong Fund Balance is an important factor in preserving the town’s Aaa credit rating, Zagrodzky told The Darien Times.
However, because of some operating results favorable to Darien, the Fund Balance is projected to be 15.2 percent of budgeted revenues. As such, Palen considered whether it might be appropriate to draw down Fund Balance modestly, which would reduce the planned mill rate increase. To assess the impact of this, Palen noted that every $100,000 taken from Fund Balance would lower the mill rate by about .01, “which is about $10 for the average taxpayer,” he said.
Before deciding to recommend a draw on the Fund Balance, Palen identified five factors that might negatively affect the Town’s budget.
“The first would be our contribution to the teachers’ pensions, which would be just shy of $500,000, that we need to contribute,” he said.
He also looked at building projects. “There were three fairly substantial building projects that are all going to contribute a fair amount of building permit revenues,” regardless of when they happen, he said.
These revenues are estimated at about $750,000 for 2019-20 — “there could be a risk that one or two of those projects don’t move forward. That could be another potential $500,000 that we need to come up with.”
He brought up the Education Cost Sharing grant. “That’s about $400,000 that we receive,” Palen said. “That’s determined by the state by a formula.”
The last item is the highway grant — Town Aid Road (TAR), which is budgeted at $340,000.
“When you look at those numbers, you are at about $2,250,000,” Palen said.
He added that the probability of all those factors happening is “very low.” However, the probability of any one of them happening is “realistic.” That said, even if they all did happen, Fund Balance would not fall below the minimum.
“So, if you add up all of those numbers, that would bring our Fund Balance down closer to around $20,000,000, which would bring the actual percent of our taxable revenue to 13.5 percent, which is still above our 12 percent target,” Palen said.
His conclusion was that the Board could safely draw from the Fund Balance. “We could probably consider a small contribution from Fund Balance to offset what we tax residents,” he added, suggesting a figure between $0 and $500,000. The Board took his recommendation and elected to draw Fund Balance down by $500,000.
To implement the drawdown in Fund Balance, Town Director of Finance Jennifer Charneski identified $500,000 in small capital projects that could be removed from the budget and funded through a special appropriation from Fund Balance.
She brought up new sidewalk installation for $200,000, the Noroton and Ledge intersection design for $175,000 and the Short Lane construction for $50,000. She also suggested either the town hall gymnasium upgrades or the gas-fired HVAC unit at the Board of Education, both planned to cost $75,000. Zagrodzky said he supported choosing the Board of Ed project.
The sum of all those projects totals $500,000 exactly.
Zagrodzky said that funding these projects out of the Fund Balance rather than the operating budget would reduce taxes required by $500,000.
First Selectman Jayme Stevenson said that is a “great idea.”
The town still has “a healthy Fund Balance,” Zagrodzky said. “We’ve provided a modicum of taxpayer relief as part of this process and I think we are in a good spot.”
The RTM will meet May 13, when they’ll vote on the final appropriation. The next Board of Finance meeting is May 14.