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Avon finance staff warn of a "fiscal cliff" as FY2026 budget relies on volatile revenue
Summary
Town staff told the Board of Finance the proposed FY2025–26 budget increases 2.96% and must cover loss of one-time and volatile revenues — including reduced motor-vehicle grants and potentially declining interest income — creating a risk the town will need tax increases or spending cuts.
Brandon presented the Town of Avon’s proposed FY2025–26 budget on behalf of staff, reporting a 2.96% overall increase (about $3.4 million) and stressing that several one-time or volatile revenue sources used in the prior budget have disappeared or declined.
Brandon identified four specific revenue reductions that together create what he called a “fiscal cliff”: use of $1,250,000 in unassigned fund balance from the prior year; elimination of a $827,238 motor-vehicle reimbursement grant after revaluation; a $545,146 decrease in the motor-vehicle grand list driven by a change in state valuation methodology; and a $189,390 revenue loss related to an expanded state-mandated veterans’ exemption. He said those items alone put upward pressure on the mill rate.
Brandon and Finance Director Tom DiStasio emphasized the town has increased its budgeted interest-income projections substantially in recent years and cautioned that falling federal interest rates would reduce that revenue. "If these rates come down that fast, you have a lot of statutory issues that come into play," Brandon said, warning that a sudden decline in interest income could force midyear adjustments.
To keep the town-side budget increase low, Brandon said staff re-amortized past OPEB liabilities (pushing roughly $400,000 of cost to future years) and made reductions to the cash capital program. Board members asked about the composition of the OPEB/pension investments and whether cuts to capital were sustainable; Tom DiStasio said the pension/OPEB portfolios are invested in diversified index strategies and that actuarial recommendations guide contributions.
Board members also raised alternatives to closing the budget gap, such as seeking additional user fees, reclassifying some programs to special revenue funds, or prioritizing field programming to generate revenue at underused facilities like Fisher Meadows. Brandon said options are limited for municipalities and that the town may have to use a combination of reserve use, revenue changes and expenditure reductions or a tax increase if the projected revenue shortfalls materialize.
The Board received the presentation and discussed next steps; Town Council budget decisions from March were expected to inform future Board of Finance action.
