NORWAY — The Board of Selectmen agreed last week to hold off on voting on a new undesignated fund balance policy until its first meeting in April.
Town Manager David Holt told the selectmen that “a long, long time ago, there was no policy for undesignated fund balance.”
“What the town did was say, ‘We’re going to keep a million dollars in our unappropriated surplus,’” Holt said. “That was so long ago that we don’t even call it ‘unappropriated surplus’ anymore. We call it ‘undesignated fund balance.’”
He said that auditors have come up with a “more complicated scheme” to determine how large a town’s surplus should be.
“This is probably an oversimplification, but what they do is determine what it costs to run the town for three months,” Holt said. “That is what the auditors say a town’s unallocated fund balance should be.”
As of March, Norway’s undesignated fund balance is $2.06 million, $119,551 less than the amount auditors recommend.
However, Holt said, “Norway is different than many other communities” because “our biggest taxpayer pays less than 2 percent of our taxes.”
“If we lost our biggest taxpayer, which is Central Maine Power, we’d still be collecting taxes at a pretty good clip,” he said. “Looking at a paper mill town, if the mill folds, then 60 percent of their taxes go away, and then they’re in a crisis. For us, CMP only pays less than 2 percent, while the next-biggest taxpayers pay less than 1 percent of our taxes.”
He explained to the board that Norway has “done well” by keeping a “larger surplus than most surrounding towns,” and as a result, “we’re getting to the time when policies — like the undesignated fund balance policy we have now — need to be updated.”
He suggested to the board that the town institute a policy that would require the undesignated fund balance to be set at an amount equal to what it costs to operate their town for two months, rather than three, as auditors have recommended.
“I don’t think it’s critical in Norway to (use the three-month policy),” Holt said. “The two-month policy is more than adequate for any circumstances that I can see for the town of Norway.”
The board’s next meeting is scheduled for Thursday, April 6.
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