New London, NH
On Saturday morning, the Board of Selectmen and the Citizen’s Advisory Committee reviewed the upcoming budget process and discussed the 18-month budget that will be required to transition from a January to July fiscal year. Although I covered this subject in my June 1 column, all felt that it was worth repeating so that people are as informed and as educated as possible. This will not be the last you’ll hear on this subject.
On October 4, 2010, the Department Heads and I will present an 18-month budget to the Board of Selectmen. On November 15, after three work sessions on the budget, the Board of Selectmen will present its budget recommendation to the Budget Committee. The Budget Committee will hold work sessions from November-January, with a public hearing scheduled for Monday, February 7, 2011. The complete meeting schedule is on the Town website at
The 18-month budget will be presented to Town Meeting on March 9, 2011. If voters approve it, the budget will run from January 1, 2011 to June 30, 2012.
The Board of Selectmen and Budget Committee recommend changing the fiscal year for a number of reasons. There are many disadvantages to the traditional January-December fiscal year. The fiscal year starts in January, before the budget is finalized. Town Meeting does not have the opportunity to approve the new budget until mid-March, two-and-a-half months into the year, which means that we lose almost three months of productivity because new projects cannot start until they have been approved by voters.
In addition, the January-December fiscal year requires us to live off fund balance remaining at the end of the year and manage cash flow to avoid borrowing money between tax collections. Our first influx of tax payments is halfway through the year and our second collection is at the end of the year. We often must delay projects and payment of bills,
including to our own School District, until we receive tax payments in June
There are smaller problems with the traditional fiscal year as well: budget development overlaps with the holiday season and requires critical decisions to be made in December and early January. Budget development also coincides with the closing of the fiscal year, requiring finance staff to focus on end-of-the-year reporting and audit preparation at the same time that they are preparing a new budget.
The change to a July fiscal year would allow Town Meeting to be held in May, two months before the start of the fiscal year rather than two months after. This not only gives our seasonal residents a better opportunity to participate in Town Meeting, but it allows budget development to occur between January and April so the budget can be approved before the fiscal year starts. This will result in improved department efficiency, as departments will be able to hit the ground running on July 1.
There is another benefit to the change: the State of NH operates on a July fiscal year. Given the State’s current budget crisis, for the past two years it has made decisions that affect the Town’s revenues in late spring after the Town has already approved its operating budget. Aligning with the State’s fiscal year should allow the Town and voters time to better respond to any cost-shifting or loss of State revenue.
The challenge of the 18-month transition is that there has to be a source of funding the extra six-month budget. The Board of Selectmen and Budget Committee agree that the best way to make the transition is to switch to a quarterly tax billing cycle, spreading the annual property tax payments over four bills instead of two. Quarterly billing is a win-win for the Town and for taxpayers: it allows the Town to pay for the fiscal year transition while allowing taxpayers to spread out the cost of property taxes. While individual taxpayers may lose some bank interest (assuming favorable interest rates) by paying on a quarterly basis, the Town would receive more interest income, which it counts as revenue and uses to lower the tax rate.
Although the Board of Selectmen and Budget Committee have already voted to change the fiscal year, the rest of the process is in the voters’ hands. Town Meeting in March 2011 will be asked to adopt a one-time 18-month budget to transition from a January 1 to a July 1 fiscal year; change from March to the optional May Town Meeting; and change from semi-annual to quarterly property tax billing.
We will keep you informed about the budget development process, and will provide more specific budgetary information and tax rate projections over the next few months.
The Board of Selectmen’s page on the Town website contains many of the background materials reviewed by the Selectmen and Budget Committee in making their decision to change fiscal year and switch to quarterly billing. As always, please feel free to contact me with any questions.
Jessie Levine, Town
375 Main Street
New London, NH 03257
Phone: 603-526-4821 extension 13