BRATTLEBORO—Early and cautious estimates show the town ending the financial year in good health, despite the uncertainty created by the COVID-19 global pandemic.
According to Town Manager Peter Elwell, it appears the municipality will close the fiscal year on June 30 with revenues and expenses approximately $500,000 below budgeted amounts.
“I want to be really, really clear that everything that comes after this sentence comes with a really large asterisk attached to it,” said Elwell in an update on the town’s financial situation at the Selectboard’s May 5 meeting.
The pandemic has thrown plenty of sand into the town’s financial gears.
As a starting point, Elwell noted that the municipality had expected to spend approximately $18 million this fiscal year, which ends on June 30.
He said that revenues will likely be down due to the community’s response to the pandemic. For example, with fewer people going to restaurants, the town’s share of rooms, meals, and alcohol tax will decrease. The town also decided to enact free parking, cutting off cash flow from parking fees and fines.
At the same time, the first two quarters of the fiscal year brought in higher-than-projected tax revenues, which will likely balance out the shortfalls in the third and fourth quarters, he said.
On the expense side of the equation, Elwell said expenses are also down for a variety of reasons.
So, he said, if all goes well, it’s likely the town’s lower expenses and lower revenues will still balance each other out.
If this first estimate turns out to be accurate — and town staff will keep updating the figures, Elwell said — “What it means is that we will end the year without a surplus or a deficit or [with] a tiny surplus or tiny deficit, budget to budget.”
He said, however, that the staff is working off a number of assumptions about the town’s finances and that such presumptions make him “uncomfortable with the margin of error” involved in the first estimate.
“And why we all must be cautious about drawing too many conclusions from it,” Elwell added.
Will revenues from property taxes fall short?
One wildcard is how much money the town will raise from property taxes due on May 15. According to Elwell, such taxes fund approximately 82 percent of the town’s budget.
As of the board meeting, he said, property tax payments were arriving at a rate similar to what the town experienced in early May 2019.
“Where we stand as of today, in total collections for the year, [is] 85 percent and in collections for the quarter, we’re at 45 percent,” he said. “And, with about 10 days to go in the final quarter of the year before the final deadline, that leaves us at right about on normal.”
Still, he does not know how many community members will miss the May 15 deadline because of the economic ramifications of COVID-19.
Even when the town is expecting a normal rate of collection of property taxes, some property owners aren’t able to to pay on time.
Most of those who end up paying the full bill late are not intending to seek a lower bill through the abatement process. In general, the Board of Civil Authority, which oversees abatements, grants very few.
Town Clerk Hilary Francis said community members could find more information about the property tax abatement process on the Town Clerk’s page at Brattleboro.org.
She advised against property owners choosing not to pay their property tax bill while they waited for an abatement decision. Fees will continue to build on the overdue payment, she said. If the board decides against abatement, then property owners could end up paying more, she said.
Elwell said he felt unsure what this year’s abatement requests will look like given COVID-19’s impact on the economy.
“The sum total of this is that I think it would be reasonable to expect that we might end up a little below the collection rate of 98.7 percent but we don’t have any way to predict how much below, and every percent of that is worth $150,000 to the town’s budget,” he said.
“A small difference has a huge impact in the final outcome, and we won’t really have a better handle on this until a few weeks from now,” until after the tax due date of May 15, he said.
So the difficulty for the town is that the budget has no margin for error.
Another assumption is that staff members don’t expect to receive significant revenue from the rooms and meals tax, Elwell said, as lodging (limited to essential personnel) and restaurant businesses (limited to takeout or delivery) have slowed down to either little or nothing.
The staff’s budget estimate does assume revenue from the sales tax, however, he added. According to Elwell, there’s still “a fair amount of commerce” from other types of retail and online businesses in town.
Decisions could tip budget into deficit
Finally, Elwell said that the board has some policy items on its plate that could tip the town budget toward a deficit.
In their projections, staffers have assumed that the board will decide to hold off payments into any carbon-offset programs — such as Green Mountain Power’s Cow Power energy program — this fiscal year, he said.
But if the board decides to go ahead with such a program, then “it could be a tipping point where the town must dip into the unassigned fund balance.”
Dipping into the unassigned fund balance — sometimes referred to as the budget surplus — could result in a budget deficit.
Likewise, he continued, the projections do not presume payment of any relief or recovery funds to businesses or individuals. Such expenses could similarly tip the town into a deficit, he said.
For the record, Elwell noted that the town is working with other communities and the state around a coordinated effort to provide business relief through a town’s program income funds. If the town participates in such a program, then those funds would come from the federally funded Community Development Block Grant program administrated through the state, not from local taxpayers.
Elwell said he will supply the board with additional updates at the May 19 board meeting.