While rummaging through some boxes in its fiscal attic, Payson found $1.1 million stashed in two mislabeled reserve funds, according to the town’s March fiscal report.
So the town’s not going to go broke this year after all — although it still looks like a pretty close call.
In fact, for the first time since cutting costs and laying off workers in December, the town in March broke into the black.
The latest bit of good news came when Town Manager Debra Galbraith went to work on the books to prepare for the fiscal year that starts in July.
Rummaging through dusty fiscal boxes marked as general funds, restricted funds, special revenue funds and unrestricted funds, she came upon two stashes of “reserved” cash.
But try as she might, she couldn’t figure out why it had been put into a “do not spend” account.
One stash was a “restricted fund balance for capital” totaling $589,216. The other was stowed in a dusty account that mostly holds gas tax money collected and passed along by the state, used for building roads and maintaining streets.
Galbraith went to the town’s auditors and discovered the auditors had questioned the purposed of those funds almost annually for several years, but had never gotten a clear answer.
As nearly as Galbraith could figure out, the funds had been set aside years ago as a down payment on a capital improvements project, but had been more or less forgotten.
“I’m assuming a previous financial manager reserved the funds and didn’t document it and over the years didn’t have any backup and maybe forgot,” said Galbraith.
Galbraith was originally hired to work in the finance department, but was then promoted to town manager after the retirement of then-town-manager Fred Carpenter. She did the job of the town manager, finance manager and and personnel director until early last year, when the town hired a new finance manager. However, the new finance manager, for performance reasons, didn’t last beyond his three-month probation period — which ended just as the council authorized the layoff of six full-time employees and all the seasonal and part-time workers.
That action, coupled with the cancellation of most capital projects and other economies, cut the budget for the year by about 25 percent.
The town’s March fiscal report about the mysterious reserved funds concluded “a conversation with the auditors told us that they have also asked for many years for the documentation and that prior financial services staff was unable to find any documentation … In agreement with the auditors, we have removed the restriction and have moved the funds to the carry forward balance.”
Galbraith said the now-departed finance manager prepared the budget last year, but didn’t question the purpose of the two restricted funds.
The discovery proved well-timed, effectively adding $1 million to the reserve funds the town didn’t even know about.
Prior to the adoption of last year’s budget, the town had gone through more than $3 million in reserves without the council fully realizing it.
Galbraith said after finding the million dollars in the two mystery funds, she scoured the fund balances for any other pleasant surprises.
Even without the discovery of the mis-labeled reserves, the town’s budget had pulled back from toppling into the deficit pit in the three months since the council hacked away at spending.
The town imposed a hiring freeze, closed town hall on Fridays, laid off more than 120 part-time workers, plus the recreation director, the town manager’s assistant and several other full-time workers.
In the three months since, taxes have largely stabilized — still well below last year’s totals, but not as bad as the trends looked in December.
Sales tax receipts have limped along just below last year’s levels and income tax receipts rose slightly.
The town has also fared well when it comes to various stimulus grants, although that doesn’t directly affect the budget bottom line and the town won’t even receive that money in the current fiscal year.
Building permits — once a major source of town revenue — have remained almost non-existent.
So have building plan fees and other revenue they generate.
The dockets of the planning commission, design review board and town council have been largely empty for nearly 12 months now, with only a handful of new projects processed by town staff.
In January, the town’s revenues were still running $312,000 behind spending, forcing the town to draw on its almost non-existent reserves. But by February, the deficit had shrunk to $90,000.
In March, the town finally straggled into the black — by about $51,000, according to Galbraith.
The turn-around grew from the effects of the spending cuts, which had a modest initial effect because the town had to first make severance payments to the laid-off workers.
Galbraith said that if current spending and revenue trends continue, the town should end up with a year-end surplus in June of “several hundred thousand” dollars.
Galbraith noted that reserves should be far higher for a budget as large as Payson’s, especially in the face of projected additional state cuts next year.
“I don’t really know at this point, we’ve just started work on next year’s budget,” she said.
“I’m hoping we’re over the worst and we may have to maintain at this level as we slowly pick up again — I hope.”
She said the state has warned towns to brace for an additional 12 percent cut in the sales tax revenue the state collects and distributes on a per capita basis.
In addition, towns may face an additional 15 percent reduction in gas-tax-based support for the HURF fund, which pays for new roads and street maintenance. That could mean another year without major road projects and only minimal maintenance of existing streets, said Galbraith.