Newport City Council hears consultant: city faces an $870,000 shortfall, may seek taxpayer-approved notes

Chip Stearns, the council's financial consultant, told the Newport City Council on June 16 that the city does not have enough cash on hand to meet immediate obligations and is projecting continued cumulative deficits unless the council and voters approve new financing measures.

"We are $870,000 in the red," Stearns said as he walked the council through month-by-month cash-flow projections showing the city would be deeply negative if it used available cash to pay off its $1.8 million tax anticipation line of credit. "We cannot pay the bill. We don't have the money," he added.

Why it matters: Stearns' presentation identified structural issues across multiple funds (general, water, sewer, public safety and recreation), flagged where grant and donation revenues had been recorded in ways that obscure true operating results, and showed that several enterprise funds (notably sewer and water) carry liabilities with little cash backing. That combination leaves the general fund short of liquid resources at a critical date (the tax note is due before June 30) and forces the council to consider both short-term bank financing and longer-term voter-authorized loans.

What was proposed: Stearns presented five interventions the council could pursue, and noted which require voter authorization:

- A $2,725,000 tax anticipation note for immediate cash flow to allow the city to pay the $1.8 million line and keep operating while other steps are taken; this would be arranged with the bank as short-term borrowing.

- A bond anticipation note (estimated $3,000,000) to convert the Watertown (water tower) construction loan into longer-term financing, followed by an application to the Vermont Municipal Bond Bank for multi-decade repayment and a water-rate adjustment to service the debt.

- Replacement/refinancing of the existing $1.8 million line of credit with a public vote to authorize repayment terms spread over multiple years if necessary.

- Long-term debt (Stearns cited roughly $1,000,000) for wastewater interfund balances that would be repaid through sewer rates.

- A lease or loan adjustment (up to $65,000) to complete the voter-approved fire truck purchase, to be repaid by taxpayers if increased authorization is required.

Council response and next steps: The council agreed to meet with the bank the next morning to present the cash-flow certificate and hear financing options. The chair told the council a special meeting may be required within one week to consider short-term borrowing and that any voter-authorized measures would need formal warning (the chair suggested a July 7 warning deadline to allow an August vote, with statutory notice periods noted). Several council members and finance task force participants urged a public-education campaign and a series of forums about each funding question before any vote.

Community concerns: Residents and task-force members pressed for clear explanations of specific account items, why certain grants or donations appear in different funds (Gardner Park activity was cited as an example), and whether depreciation and debt-service entries were budgeted correctly. Council members said the finance team would produce more detailed, line-item backups and hold focused public sessions (for example, separating general fund and water/sewer explanations).

Votes at a glance: The meeting produced a number of procedural approvals distinct from the financing discussion (all by voice vote): the council carried a motion to approve the consent agenda while excluding vendor-permit item 5 (the yellow bus), approved appointments to a fire department task force, appointed John Aldridge to the recreation committee, approved proposed vision and dental insurance rates, approved the police chief's recommendation to hire a part-time dispatcher after executive session, and set the next regular meeting for July 7 at 6:00 p.m.

What to watch next: The council's scheduled meeting with its bank and a likely special meeting next week to consider short-term borrowing are the near-term milestones; any long-term solution (bond or note measures) will require voter approval and public education sessions. Stearns and the treasurer indicated the finance team will prepare the backup documents the council requested.

Representative quotes from the meeting

"We are $870,000 in the red," Chip Stearns, financial consultant.

"We cannot pay the bill. We don't have the money," Chip Stearns.

"If we add those loans in, those things will reduce the cumulative deficit so that effectively we'll finish the year at 0," Unidentified Chair summarizing how voter-approved borrowing would appear in the cash-flow model.

Ending: Council members agreed to continue reviewing balance sheets at every meeting for the near term, meet with the bank to test the cash-flow certificate, and warn whatever special meeting(s) are necessary to consider short-term borrowing next week; any voter-backed financing measures would be preceded by public education and a formal warning process.