Faced with a $1 million structural deficit years in the making but not widely recognized until very late in the game, Little Compton officials are slashing spending proposed for the 2025-26 fiscal year and have asked for state approval to increase this coming fiscal year’s tax levy by 12 percent — three times the yearly 4 percent increase allowed under state law.

In a sometimes tense and contentious meeting Tuesday evening, town council members voted unanimously to reach out to the town’s legislative delegation and ask that the request be voted on before the General Assembly. Rep. Michelle McGaw submitted that legislation Thursday, and added that it comes with a contingency — if it’s approved at the state level, it must also be approved by voters at the Financial Town Meeting Tuesday, June 17.

What happened?

According to several town officials, Little Compton’s financial difficulties appear to be a ‘perfect storm’ of several issues that went mostly unnoticed but came to a head this year. Among them are one-off errors in this year’s budget not discovered until very recently, the town’s recent reliance on its General Fund to help cover yearly budgets while keeping past years’ tax increases minimal, and a lack of transparency in the town’s budget and financial reporting.

The structural deficit

Over the past several years, town officials have regularly used reserve funds to help balance budgets without having to reach or exceed the 4 percent levy cap imposed by the state. General funds like Little Compton’s are normally fed by unspent money left over at the end of each fiscal year, and it is not an uncommon practice across the state to draw from such funds to help balance budgets while keeping taxes as low as possible.

Among the problems that can arise from that practice, officials said, is that yearly general fund dipping is not sustainable in the face of ever-rising fixed costs and new spending, and in effect kicks the fiscal can down the road.

Starting in 2023, the town “increasingly relied” on general fund reserves to cover recurring operational expenses, budget committee member Andrew Rhyne wrote in an e-mailed response to an inquiry by the Sakonnet Times Thursday, noting that he was speaking for himself, and not on behalf of the committee.

In fact, during the 2023 and 2024 fiscal years, taxpayers saw no levy increase at all.

“The result was a textbook structural deficit,” Rhyne wrote.

By last year, the town drew more than $1 million from the fund to balance the budget, despite a 3.92 percent tax levy increase.

Oversight issues

Officials also said the compounding issues were somewhat masked by a lack of oversight and frequent turnover in key positions. Town administrator Antonio Teixeira recently submitted his resignation, and the town has had two finance directors over the past two years. Currently, school finance director John McNamee is serving as interim finance director for the town.

Another problem this year was a computational error made before Teixeira transmitted his spending plan to the town council, which left the bottom line budget number about $600,000 short of what it actually was. The discrepancy was caught after the council forwarded an $18.3 million spending plan to the budget committee, and officials realized they were actually dealing with a number closer to $19 million. The committee’s response was to cut items, among them:

● $375,774 from the capital budget;

● $103,910 from computer services;

● $49,837 from the department of public works;

● $20,000 from the tax assessor's revaluation budget;

● and $100,000 in funding for the town's tennis courts.

In addition, budget committee members added in $65,000 for increased health benefits costs that were not included in the budget they’d received.

What’s next?

One oddity in Little Compton is that while the budget committee is required to hold a public budget hearing each year, there is no stipulation that it be held before the committee approves the budget for town meeting. That is what happened this year and while the budget has been finalized and is ready for town meeting, Little Compton will hold its required public hearing this coming Tuesday, May 27, at the Wilbur McMahon School. It starts at 7 p.m.

What about taxes?

Little Compton held its state mandated revaluation this year and with the collective value of every taxable property in town increasing some 20 percent, last year’s tax rate of $5.08 per $1,000 assessed value was previously estimated to drop. However, with the true budget numbers now known, interim finance director John McNamee said that expected tax rate will be approximately $4.70, higher than the $4.41 estimated by the assessor several months ago.

What does this mean? Given new spending and the budgetary shortfall, a taxpayer whose property previously assessed at $500,000 rose 20 percent, to $600,000 under the reval, will see his or her bill rise from $2,540 last year to $2,820 this coming fiscal year.