To the editor:
The Tiverton Financial Town Referendum is about one thing this year: What is the appropriate level of funding for the town’s unrestricted reserve fund?
The budget put forward by the Budget Committee leaves the unrestricted reserve fund at 3.5% of expenditures. The citizen’s petition, authored by Justin Katz, removes $600,000 from the unrestricted reserve fund. The allocations and level of spending are identical in the two proposals. The Budget Committee’s proposal results in an estimated tax increase of 1.29% or $25 per $100,000 of home value. Mr. Katz’s proposal is estimated to result in no net increase in the tax rate.
Zero sounds good but is poor policy. The unrestricted reserve fund (also known as a rainy day fund) should stand higher in general, likely at least as high as 5 to 8%. Mr. Katz acknowledged this at the Financial Town Hearing yet still put in his fiscally unsound proposal. The Town Council recognized the need to keep a higher percentage in our rainy day fund a few years ago and intentionally pursued a policy of allowing this fund to gradually grow. Why is this a good idea?
Common sense would suggest to most that having money set aside for unanticipated costs is a benefit to the town and its taxpayers. A higher reserve fund also demonstrates to potential creditors and rating agencies that the town has its financial house in order and its leadership knows how to pursue a fiscally prudent policy. Finally, maintaining or growing the rainy day fund allows the town to lessen the impact of a large tax increase if one should become necessary in the future.
Mr. Katz suggested at the Financial Town Hearing that the people of Tiverton, if they had five years of zero percent increase in taxes, probably wouldn’t mind an increase of 10% in one year. Hmm. Really? That is a problem with short term memory, not just misguided policy
Zero sounds good but is poor policy. A short term gain (political, financial or otherwise) at the expense of a less secure fiscal position for the town is a bad idea. Rhode Islanders should have learned this lesson from the current state-wide pension crisis. On May 20, we ask all Tiverton voters to support the budget recommended by the Budget Committee.
Chairman, Tiverton Democratic Town Committee