To: Board of Warden and Burgesses
Date: April 29, 2020
In these troubled times, we are fortunate that the Borough's financial conditins is excellent.
Current Fiscal Year. My projection of the Borough’s projected operating surplus for the current fiscal year ending June 30 is about $127,000, all of which probably is transitory. About $100,000 of that surplus comes from an extraordinary amount of building activity in the Borough that is unlikely to be repeated anytime in the near future. The remaining surplus comes from exceptional golf revenues due to good weather and the dearth of other recreational opportunities in Old Saybrook. Indeed, nonresident greens fees are likely to exceed the annual record of $343,000 set in 2015-16. We allocated a portion of our golf windfall toward cash bonuses to our dedicated employees who worked so hard to keep the course open and the Borough functioning. The only major unexpected expense was to repair the wave boards and stringers on the pier, which seems to be a never-ending object of maintenance and repair. You also will note the new playground equipment that was made possible by generous donations to the Fenwick Improvement Fund and hence did not impact the Borough’s operating budget.
Cash Balances. This year’s surplus will be the third in a row. As a result, our cash balances at Royal Bank of Canada have risen to about $500,000. Some of these balances should be saved as a ‘contingency’ for untoward events, but some portion should be spent on long-postponed infrastructure projects. The Burgesses have committed to raising and reconfiguring the entrance to the Borough – a long-delayed project that we hope will be completed by calendar yearend – that I guess-estimate will cost $150,000.
How Much to Save? A rough rule of thumb for municipalities is to maintain liquid savings of about three months of annual revenues for precautionary purposes. Very few do so and instead resort to borrowing to cover unexpected expenses. For the Borough, that contingency would amount to about $400,000. I recommend that the Borough target a reserve of at least $150,000 to go along with our line of credit of $100,000 at Essex Savings Bank.
How to Spend It? My first principle of sound public finance is: “Do not waste the residents’ money”. Indeed, avoidance of waste is more crucial to the Borough’s long run financial health than any other budgetary measure. For many years, we have been very successful at improving the Borough and its facilities without allowing cost overruns or taking on poorly planned projects. As a result, we now have a shorter, albeit still formidable, list of infrastructure projects to complete: namely, the golf course plan, some roads, and the shoreline. Next year’s budget includes an allocation of $20,000 for the second (of three) stage of rebuilding the tee boxes as well as the customary planned operating surplus of $50,000 to cover unplanned expenses and repairs.
Shoreline. Here is where we stand on the first two living seashore projects.
- Hepburn Preserve – The Connecticut River Conservancy (CRC), which is administering the grant money on behalf of the Lynde Point Land Trust, has received about $550,000 in awards for this project, which includes moving Crab Creek and the culvert to the Hepburn Pond, adding the rock shoals, and replenishing the sand dune. Of that, the Borough and Land Trust have contributed a combined $37,500 toward the design/permitting cost of $63,000. As to costs, Andy Fisk of CRC has bids to do the creek and culvert work for $150,000; he will solicit bids on the remainder of the work by the end of May. My guess is that the total cost of the project will be $550,000 to $600,000.
- Eastern shoreline – Andy Fisk is applying for a grant for $100,000 from the Long Island Futures Fund, which also committed funding for the Hepburn Preserve project, to cover the engineering and permitting costs for a similar living seashore along the Borough’s eastern shoreline. The application requires matching local funding of $30,000 if the grant is awarded, which seems quite possible. The great advantage that Fenwick enjoys in seeking outside funding is that the Borough has been a first-mover in the State of Connecticut in designing and engineering living seashores that meet with the approval of state and federal regulators.
FY 2020-21 Budget. Notwithstanding this year’s sizeable surplus, we cannot count on extraordinary golf and fee revenue to repeat itself. Moreover, the budget must include a scheduled increase in the minimum wage. We also are setting aside money for major equipment purchases or leases. In effect these latter allocations are transforming our operating budget into more comprehensive budget that includes some recurring capital expenditures. Although these additions usually would necessitate a tax increase, the budget plan for next fiscal year manages to accommodate our goals without any change in the mill rate. The Burgesses will vote on the budget at the virtual meeting on June 4.
Treasurer, Borough of Fenwick