Council uses fund balance to minimize increases
CARIBOU, Maine — With Maine voters approving a minimum wage increase, the city councilors had to alter the 2017 budget. These changes, according to City Manager Austin Bleess, will have an approximate $13,000 impact and only affect the Parks and Recreation Department. This number will increase by $9,000 every year until 2020, at which point the hourly rates are tied to inflation.
Bleess expressed concern with Council’s recent decision to utilize $427,070 from the city’s fund balance to avoid another tax increase.
“This leaves us with 8.4 percent of our expense budget in our expense budget, or one month’s worth of expenses,” Bleess said. The minimum recommended amount to have in a fund balance is 17 percent. Going back to 2005, we have never had a fund balance that low, and have not looked back further than that.”
The City Manager explained the possibility of a cash flow impact during the months of June, July and August.
“2016 is the first time in about seven years we did not have to delay paying bills or take out a tax anticipation note,” Bleess said. “That was, in part, related to the position of our fund balance in 2016.”
Caribou Mayor Gary Aiken asked Bleess where the “magic 17 percent figure” comes from.
“MMA (Maine Municipal Association), the Government Finance Officers Association, and the International City/County Management Association generally accept the 17 percent figure,” Bleess said.
Mayor Aiken defended the lower fund balance, citing Caribou’s unique position as a municipality.
“We have a capital improvement program here,” Aiken said. “It may not be perfect, but at least we have one. We’re putting money into that program for future purchases whereas a lot of other municipalities don’t have that. Our neighbors in Limestone have to buy a loader for $165,000 and haven’t put anything away for it so they have to discuss whether or not they really need to buy it.”
The mayor said he might look at the situation differently if the city didn’t have “three million dollars sitting in the bank,” and doubled down by saying he was not worried about having a fund balance that reflects 17 percent of the total budget.
“If we didn’t have a capital improvement program, if we had a big debt load like most other municipalities, and if we didn’t have three million sitting in the bank, then I’d go along and say we should probably carry more than we are right now,” Aiken said. “I’m not worried that we only have $800,000 sitting there. Maybe a lot of people disagree with me but that’ the way I see it.
Deputy Mayor David Martin agreed with Aiken’s comments.
“Maybe the three million is locked in,” Martin said, “but if worse comes to worse we could borrow from it.”
Councilor Phil McDonough agreed, but said the city should still establish a cap for the fund balance, so “going into budget season, everybody knows what it’s going to be so we have some degree of flexibility.”
