Letter: Vote for zero percent tax hike at Tiverton FTR

To the editor:

Thanks to the Financial Town Referendum (FTR) on Tuesday, May 20, Tiverton voters can choose to have a tax increase of 0.0 % — further proof the FTR process is an overwhelming success.

Three years ago, when the Tiverton voters chose the FTR as a replacement for the financial town meeting by a 2 to 1 margin, one of the opposition’s main arguments was that the ability for an elector to place his own budget proposal on the FTR ballot would pave the way for feckless, fiscally naive, and dangerous budget proposals that would pose a great danger to the town and the schools.

To the contrary, the Katz budget proposal submitted under the FTR process by elector petition is remarkably the opposite. While fully funding the Budget Committee’s recommendation for the school, library and municipal budgets by using $602,000 from the town’s unreserved general fund (taxpayers’ money) to offset property taxes, the Katz proposal manages to keep the tax cap levy increase at 0.0%. And it leaves the general fund $200,000 in excess of the Town Charter mandate of 3.0% of the current operating budget. It should also be noted that an affirmative 4/5ths vote of the Town Council enables the town to dip below the 3% should there be a catastrophic emergency.

For those who may worry that a decrease in the unreserved general fund balance will place the town at credit risk, please recall that in recent years the general fund balance dropped close to 1%, all while the town successfully financed and built three new schools totaling over $30 million.

Mr. Katz’s Elector Petition proposal recognizes that the unreserved monies in the general fund are, indeed, taxpayer monies that accumulate due to overtaxing in prior years, and the 0.0% proposal gives that money back to taxpayers.

Not only has the FTR worked to keep tax levy increases at historically low percentages and thereby limit the ever increasing property taxes that Tiverton has experienced, especially in the last decade, but this year, by using taxpayer monies sitting in the general unreserved fund, Mr. Katz’ Elector Petition proposal keeps the property tax levy increase at 0.0% in a manner that furthers the accountability of the town government to the taxpayer.

Nancy L. Driggs
Tiverton

Ms. Driggs is former co-chairman of the Financial Town Meeting Changes Advisory Committee.

 

3 Comments

  1. tubby barton said:

    So gutting the town’s rainy day fund (or unreserved general fund) to balance a budget is now toted by the TCC as proof the FTR is an “overwhelming success”? The self-serving platitudes might be a tip-off, but did anyone validate that the “author” actually wrote the letter? This looks to me like it could be another TCC false-letter writing campaign.

    In any event, the author now feels that this “Katz Math” budget is proof no one can ever submit a budget that is “…feckless, fiscally naive, and dangerous budget proposals that would pose a great danger to the town”. Is everyone following that logic? Seems like more TCC-think to me.

  2. Mike said:

    Repeat: Another reckless approach from Mr. Katz and his Tiverton Tea Party (aka Tiverton Citizens for Change and Tiverton Taxpayers Association) cohorts.

    The purpose of the general fund is to maintain creditworthiness with bond rating agencies; however, it serves several other purposes, including:

    1. Ensure short-term cash is available when revenue is unavailable or unanticipated expenditures occur;
    2. Minimize interest expense for operating budget needs (short term-borrowing) and capital projects;
    3. Provide for investment income;
    4. Provide for stable tax rates (absorb fluctuations); and
    5. Improve longer-term planning capability.

    A general fund of 3% puts our community at significant risk. A 16% general fund is recommended as a best practice. Nearby towns mandate a minimum 8%. This proposal is very shortsighted.

  3. Mike said:

    GET THE FACTS!
    Please review this information and make an informed decision as you consider voting for a budget proposal for the Town of Tiverton.

    Will my taxes go up if I vote for Option 1?
    Your taxes will go up very little. Option 1 calls for very small increase of only 1.29% (Portsmouth voters recently approved a 2.4% increase). This is one of the lowest tax increases in recent history. In fact, the annual property tax bill on a home assessed at $300,000 will increase by only $74. That’s right, only $74 a year to ensure we maintain our schools and services, while strengthening our position with investors.

    Why should I not vote for the “0.0% tax increase” promised by Option 2?
    The budget proposed in Option 2 is the latest attempt by a small group with an extreme political agenda to cripple the town financially. Having failed in previous years to decimate funding to our school and community services, their strategy now is to strip the Unrestricted General Fund and claim the result is a “0.0% tax increase” that won’t cut services. Based on how finances actually work, this view is either woefully uninformed or intentionally deceptive. They even foolishly refer to the town’s General Fund, the guide of a town’s financial health, as a “slush fund.” As is usually the case, when something sounds too good to be true, it is.

    What is the purpose of the Unrestricted General Fund?
    The unrestricted general fund balance provides for stable tax rates, investment income and greater long-term planning capability. In addition, it ensures short-term cash availability when unanticipated expenditures occur. The unrestricted general fund balance has a significant impact on the town’s bond rating and its ability to borrow money for long-term investments in the community. Higher bond ratings result in lower interest rates on the town’s financial obligations. That’s why it must be maintained at sufficient levels.

    How much should the town allocate to the Unrestricted General Fund?
    Tiverton’s charter mandates a minimum amount of 3% of the total budget’s expenditures. However, the Government Finance Officers Association recommends, at a minimum, that governments “maintain unreserved fund balance in their general fund of no less than five to 15 percent.” Based on best practices, Tiverton’s elected officials have recently tried to increase the amount to stabilize taxes and town finances, and Option 1 puts the amount at only 4.7%, which is certainly reasonable. The town’s independent auditor even twice commended the council for its policy of wisely and prudently beginning to increase the town’s unreserved fund balance. Furthermore, two former Town Councilors who proposed growing the amount by 0.5% each year have gone against their own thinking, shortsightedly endorsed budget option 2, and put the town’s finances at risk – all to save just $74 a year.

    How much do other Rhode Island towns allocate to the Unrestricted General Fund?
    Our immediate neighbors, Portsmouth and Middletown, require a minimum of 8%, and 30 of the 39 other communities had a higher combined fund balance than Tiverton, as indicated in a 2012 State of RI report designed to measure fiscal stress on communities. Neighboring Little Compton’s Budget Committee is even advocating a 12% balance in order to maintain maximum financial flexibility and the only AAA (highest) credit rating in the state.

    Does the balance in the Unrestricted General Fund really drive bond ratings?
    Yes. In fact, Moody’s bond rating agency cautioned the town that building its reserves instead of drawing them down will “remain an important rating factor” for future borrowing (like next year’s library bond.) Tiverton’s town treasurer also warned regarding our rating in a May 1, 2014 letter to residents, “Moody’s has developed a new rating methodology … review of our general fund balance accounts for 50% of the Finance Review – that is a hefty portion.” She further cautioned, “Tapping into our UGF could cost us down the road. I urge you to protect your investment in the town.”

    What is the real financial impact – in dollars and cents – of a higher bond rating?
    Again, we need only look next door at Little Compton to find the answer. The benefits of the strategy to maintain the highest possible credit rating have already been proven because the town will save close to $1 million in interest on the school bond, according to their budget committee.

    Is Tiverton the highest taxed town in the highest taxed state?
    No. These are falsehoods put forth by the proponents of Option 2. First, Rhode Island’s highest personal income tax rate is not the highest in the country. Furthermore, Tiverton is not the highest taxed town. Tiverton’s residential property tax rate is actually closer to the median of Rhode Island cities and towns.

    Have taxes in Tiverton more than doubled in the past decade?
    No. This is another misrepresentation by the proponents of Option 2. “More than doubled” implies a greater than 100% increase to your property tax bill. Taxes have gone up, but they have gone up for all towns – as have assessments. Increases are driven by town expenditures, the increase in the value of property, improvements made to property, zoning changes, etc. An analysis was conducted on a significant sample, which concluded taxes have increased at a pace with inflation and with other towns. The claim by the proponents of Option 2 actually overstates the increase by more than two-thirds.

    Do elected official have plans for the amount allocated to the Unrestricted General Fund?
    No. The proponents of Option 2 mislead again. Their concern is that the UGF, or “slush fund” as they refer to it, will be raided to fund a contract with the teachers. However, this is simply not true. The proponents of Option 2 oppose anything to do with the schools, despite the fact that Tiverton’s teachers are the lowest paid in the state and the schools continue to perform very well. Nevertheless, any expenditure out of the UGF requires a vote of the citizens in the form of a referendum. The Town Council cannot just spend it.

    Please visit http://www.tiverton-today.com/yeson1 for more information.

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