Town borrows $800K to cover year-end expenses
NEW IPSWICH — The town will be taking out at least $800,000 in a short-term tax anticipation note to cover year-end costs, for the first time in several years, according to the Select Board.
The board has known since last week’s Select Board meeting this is a step the town might have to take. Town Administrator Roberta Fraser told the board she was concerned a slight delay at the state level in setting the tax rate could in turn delay the town’s ability to get the tax bills out on time, so the town could be short on revenue at the end of the year. Originally, board members discussed taking out a single loan for $1.2 million dollars. The cost of local school payments, which will cost $1.2 million for the next two months, was a top concern. The board also noted that besides the school payment, there is also two large warrant articles, for road paving and pool repairs, which still have to be paid for.
The board discussed whether it would be more prudent to take on a loan of one large sum, or two smaller loans back-to-back. A smaller loan would carry the town through the upcoming month, noted board member Ben Cargill. If the tax notices were able to be sent on time or not much later than last year, the town may not need more than that. If more is needed, he said, the borrower has the option to apply for additional funds.
The interest on the loan would be 1.4 percent, said Fraser. The town would be able to pay it back following the collection of taxes. The board agreed to arrange for a short-term loan of $800,000 for the month of November, with the option to borrow up to another $800,000 for December.
The board also discussed the town tax rate. In the past, the board has retained approximately $1 million in the unexpended fund balance — any additional unexpended funds above that $1 million were used to reduce the town tax rate . Fraser noted that keeping $1 million in the unexpended fund balance is a high percentage — about 40 percent of the town’s budget. Other towns generally keep between five and 15 percent in the fund, she said. However, she added, generally towns that keep a lower percentage of the fund balance expect to take out a tax anticipation note at the end of the year to cover year-end expenses until tax bills are collected. “Keep in mind, if we do it that way, we may be in the same cash-flow situation next year,” she said.