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Mayor warns debt service will rise as stabilization reserves fall; 2018 bond and housing-aid timing cited
Summary
Mayor discussed the town's use of revenue stabilization and debt-service reserves to smooth the impact of 2018 school construction bonds, warned those reserves would be depleted by repeated draws, and flagged PayGo and state housing-aid timing as drivers of near-term budget pressure.
Mayor Mutter outlined the town's multi-year plan to use reserves created after the 2018 voter-approved school construction bond to smooth tax-rate impacts, and warned the town may need to change its self-imposed 3% tax-rate limit if reserves are repeatedly drawn.
"The debt service is the bill, that's the credit card bill. When we borrow the money to pay the school construction projects, that bill's coming in," Mayor Mutter told the joint meeting, summarizing the pressures the town faces as school bond principal payments become principal-and-interest obligations.
Mutter described the town's prior use of two reserve accounts established by resolutions to bridge the period between borrowing and full debt payments. He said the town opened FY2025 with a revenue-stabilization balance of about $182,695 and appropriated $700,000 in the FY25 municipal budget, leaving an estimated $1,182,695 in the stabilization reserve. Mutter said the debt-service fund opened at about $603,000 and the adopted FY25 municipal budget included $1,011,225 for debt service; drawing the planned amounts would leave the debt-service fund in deficit without other offsets.
The mayor said the town originally planned the reserves to help keep tax-rate increases within a local 3% policy while still covering the cost of the 2018 bond. He warned that drawing the stabilization account repeatedly would exhaust both reserves within a short period: "If you took $400 [thousand] from the stabilization fund to fund the debt service, you're now at 782 [thousand] ... and then if you did that again in 2026, you would have effectively zeroed out both those accounts."
Mutter said a roughly $400,000 statewide correction to education aid (due to double-counted pre-K students) also reduced expectations of external offsets, and he noted the town's ARPA transfer of $450,000 has been spent. He said the town may need to identify new revenue or reduce expenses to balance future years without reserves.
He also described housing-aid timing and PayGo adjustments as complicating factors: housing-aid reimbursements depend on whether projects are considered "substantially complete" by RIDE and on program offsets such as PayGo. Mayor Mutter said the town will continue coordinating with school officials and finance staff going into the FY26 budget cycle. Ending
Mutter said the town and school need to coordinate closely in coming budget cycles as bond principal payments increase and available one-time offsets decline. He urged councilors and committee members to plan for those impacts in forthcoming budget votes.
