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TO THE HONORABLE TOWN COUNCIL AND CITIZENS OF DEXTER: INTRODUCTION TO THE FY 2004 MUNICIPAL BUDGET The municipal budget in Dexter includes funding requirements to cover town operations, the local share contribution to School Administrative District #46, and the annual tax levy set by Penobscot County to fund county operations, including emergency dispatch services. This year about 65% of our total funding needs are paid for by property taxes with the remaining 35% covered by a variety of local revenue sources, state reimbursements, and grants. This represents an increasing shift of dependence on property taxes to fund municipal operations, our schools, and contributions to county government. In comparison, in FY2003 60% of our total funding requirements were paid by taxation. This trend reflects the dramatic decrease in revenues being experienced by municipalities throughout the state. The most disturbing decrease has been experienced in revenues received from the state. We have been unable to compensate for the loss of state revenues even with increases in some local fees and charges. Out of each municipal dollar that will be spent in FY 2004 approximately 65 cents will go towards operating the town, 32 cents to help fund the schools, and 3 cents go for services provided by Penobscot County. We're now in the sixth year of our program to move the municipal budget to a pure “gross budgeting” process. Separate Expense, Revenue, and Capital Budgets combine to make up the "municipal budget package". This is the type of budgeting and accounting arrangement used by most municipal governments in Maine, and is designed to clearly project and account for all expenses and revenues in separate budget documents. Prior to 1998 a number of our department expense budgets also included projected income from fees, services, and reimbursements. This procedure often masked the real cost of doing business, reduced overall revenue projections, and detracted from the value of the budget as an effective management device. In correcting this past fiscal procedure we have attempted to clearly define all true expenses as well as revenues, and improve our accounting procedures. This positive trend has been reflected in annual audits conducted each year since we began the changeover. As you review the expense budget please keep in mind the very important fact that many of the departmental expenditures are often offset by revenues that are presented in the accompanying revenue budget. Developing the budget for FY 2004 has presented the difficult challenge of providing for the needs of the community and its future development while attempting to minimize the impact on property taxes. This year we're particularly sensitive to the issue of increasing property taxes, because of the recent closure of Dexter Shoe and the fact that we're working hard at trying to attract new business and industry to the area. Obviously, high property taxes aren't conducive to attracting new business. The most frustrating factor to deal with this year has been trying to cope with increases in operating costs as well as the dramatic decrease in projected revenues. In fact, many of the factors affecting the municipal funding requirements are due to issues and conditions over which we have very little local control. The impact of escalating costs for education, power, utilities, fuel, insurance, minimum wage increases, postage, and state requirements, has placed us in a position of having to contend with nearly $ 300,000 in increased fixed costs before we even addressed the funding needs of each municipal department, or considered the contributions to our Capital Improvement Programs. The situation was worsened by the fact that projected revenues for FY 2004 are down by more than 4 percent over last year. This is in part due to reduced levels of state revenue sharing, and lower levels of income being derived from municipal investments because of current market conditions. The proposed FY 2004 Expense Budget reflects an overall spending increase of 5.4% over the previous year, and is the first time in four years that municipal spending has increased. This modest increase was necessitated primarily because of increased personnel costs, major capital expenditures for equipment and paving, and rapidly escalating costs for energy and maintenance of our aging facilities. We have also dedicated a significant sum to efforts to attract new business and industry to the area. Even with this modest increase we continue to under-fund many of our Capital Improvement Programs that are critical to the long-term welfare of the community. The increasing demands on the municipal dollar that are often beyond the ability of municipal leaders to influence will inevitably have an impact on the Town's ability to provide the level of programs and services that have been available in the past. The sobering reality is that the combination of these factors with the impact of reduced revenue projections for FY 2004, translates into a net increase of more than 11% in funding requirements that will most probably be passed along to property taxpayers in the form of an increased mil rate. This is particularly disturbing since we've worked so hard over the past six budget cycles to maintain a reasonably level property tax mill rate. Also of significant note is the fact that we are recommending the withdrawal of $150,000 from the General Fund to help offset the potential increase in property taxes. While increasing the level of withdrawal from the General Fund for this purpose appears to be a "quick fix" to addressing the tax burden, such action could serve to endanger our ability to conduct day-to-day operations without having to borrow funds in anticipation of payment of taxes. We are currently relatively solvent, and it's in all of our best interests to stay that way. Over the past several years the demand on the tax dollar to support municipal services, education and the county has increased significantly. This has placed the municipal leadership in the unenviable position of having to raise taxes or reduce programs. During the last several years we have been fortunate enough to offset most of the increased spending with an increase in revenues and a growth of the municipal property valuation, which has resulted in a relatively stable mill rate. Unfortunately, as we look to the coming fiscal year, we are faced with a decline in the municipal valuation and dramatically lower levels of revenue, while the cost of funding basic municipal operations increases. Respectfully submitted, Robert F. Simpson |