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Select Board debates use of free cash and reserve policy; plans to revisit financial management policy
Summary
Board members discussed concerns about repeated use of one-time funds and proposed revisiting the town’s financial management policy to increase reserves and reduce reliance on free cash for recurring expenses.
Select Board members spent substantial time discussing the town’s use of free cash and its broader financial-management policy during the May meeting, concluding the board will place a formal item on a future agenda to consider changes.
The topic matters because the board’s policy determines how one-time revenues (free cash) are applied to operating expenses or set aside in reserve funds. Several members said recent budgets have relied on free cash to balance operating costs — including a $400,000 payment to schools noted by the chair — and that the town’s policy (which currently allows a larger share of free cash to be used for operating purposes) should be revisited to prioritize reserves, capital stabilization and OPEB (other post-employment benefits) funding.
Board members cited past Department of Revenue (DOR) and Division of Local Services reviews recommending stronger structural budget practices. The chair said he will place a policy amendment on a future agenda proposing revised percentages for free-cash allocation and a three-year plan to avoid recurring use of one-time funds. Members discussed the trade-offs: increasing reserves reduces available free cash for immediate needs but improves creditworthiness and lowers long-term borrowing costs for capital projects.
The discussion did not contain a final vote; members asked staff to return with comparative data and suggested options for a phased approach to change the policy and develop a plan to achieve a structurally balanced budget within a multi-year timeframe.
