HOULTON — While the municipality’s 2010 annual audit showed no financial irregularities, it did reveal that the town’s surplus account has shrunken significantly in the past year.
Officially called the undesignated fund account, surplus money has been used to offset taxation and lower or maintain the mill rate. It also has helped the town deal with unexpected costs.
But the surplus fund account now stands at $256,000, well below what the town’s auditor has recommended for the past decade.
The 2010 audit was conducted by RHR Smith and Co. of Buxton.
Ron Smith, a representative from the firm, has always advised the town that keeping approximately $1 million in surplus makes good fiscal sense. Councilors have frequently argued over whether that number was too high, but the fund has consistently been stocked with at least $700,000 over the past few years.
In 2009, there was $900,000 in the surplus account, and in 2008 it was at $1.2 million.
“Our undesignated fund balance is precariously low,” Town Manager Doug Hazlett told the council Monday evening. “We need to have between 30 and 90 days worth of operating capital in that account in case of an emergency. We also have a fund balance policy that requires it.”
Smith had advised the council for several years to adopt an undesignated fund balance policy to give the councilors a guideline for coordinating how much money to keep in the surplus account. The policy was created last year.
Hazlett said a number of factors influenced the decrease in the surplus account, including lower than expected ambulance revenues. It is difficult to calculate such revenue, as town officials cannot accurately forecast all of the calls that the ambulance service will receive each year, so they cannot calculate how much money the department will need or how much revenue will come in. Revenue sharing also has affected the surplus account.
Last July, the town saw a nearly $300,000 dip in state revenues. In Houlton, 88 percent of the town’s revenue comes from sources such as property and excise taxes and state revenue-sharing money. State revenue sharing, which is affected by the economy, has decreased in the poor economic climate.
Hazlett said he expects the ambulance revenue to increase, but he also drafted a plan to filter more money into the surplus account.
He suggested the council be extra vigilant with the current budget while also finding and collecting all revenue that the town is entitled to. The town sets the mill rate in July and begins drafting next year’s budget in late November. Hazlett said the town would have to be “very conservative” when drafting next year’s budget.
Hazlett will pass on monthly reports regarding the surplus account in the future.