Newport Council votes to withhold funding of several FY24‑25 committed reserves to protect cash flow

The Newport City Council on June 2 voted to instruct the city treasurer not to fund a list of fiscal year 2024–25 committed reserves and four water‑ and sewer‑related sinking or replacement funds, a move council leaders said is intended to prevent further cash‑flow shortfalls.

Chip Stern, NEMREC’s interim financial systems consultant, told the council that the city’s spreadsheet showed $1,529,009.51 in committed financing even while the city’s unreserved fund balance at the end of fiscal year 2024 showed a deficit of about $1,411,000. ‘‘I don’t have it in the bank,’’ Stern said, urging the council to avoid moving money that is only budgeted on paper into restricted accounts.

President Kevin Charbonneau read a motion directing the treasurer not to fund any FY24‑25 commitments listed in the city’s restricted/committed fund balances spreadsheet and to withhold specific FY24‑25 budgeted amounts from the sewer and water budgets. The motion singled out four funds: a $50,000 sewer factor sinking fund, a $50,000 water factor sinking fund, a $100,000 Sias Avenue sinking fund, and a $30,000 water treatment facility replacement fund. Carter Finnegan seconded the motion; the council voted in favor and the motion carried.

Council members and staff said the step is a temporary cash‑management action, not an erasure of obligations. Laurie Grama, a member of the financial reporting and fiscal practices task force, said the council had already moved committed‑fund cash into general operating accounts to meet immediate bills and that the action on June 2 prevents further paper‑only commitments from deepening that operational shortfall.

Stern explained the mechanics behind the recommendation: the city had historically treated a state municipal tax adjustment on tax bills as ‘‘extra’’ revenue when it was, in fact, a component of total taxes; those entries have cumulatively distorted budget projections. His spreadsheet review also found instances where accounts listed as committed were not carried as cash reserves in bank accounts.

Councilors said they will continue to refine reporting and work with lenders to address structural obligations. Carter Finnegan and Stern said they will prepare lender‑facing cash‑flow material and follow up with the treasurer and accounting staff to clarify next steps.

The council framed the action as short‑term cash preservation; officials stressed that long‑term solutions — including potential borrowing strategies for the water tower project, reassessing capital priorities, or asking voters about long‑term obligations — remain to be fully considered.

The council concluded the item by thanking Stern and the task force for the expedited review and said additional financial updates will follow at future meetings.