Deficit spending needed to keep New Castle going
Post Independent Staff
NEW CASTLE — As is the case with other governments in the region, this town is engaging in deficit spending to keep itself afloat during the slow recovery from the Great Recession that began in 2008.
“It’s going to be tight,” said Finance director Lyle Layton on Friday, referring to the town’s ability to get through the year in good fiscal shape.
In a recent report to the town council, Layton noted that the town’s two main budgetary funds — the General Fund and the Utility Fund — together show a combined deficit of nearly $196,000 for the first quarter of 2013.
But, he told the Post Independent on Friday, the deficit for the General Fund, $33,218, is somewhat deceptive because the town was able to arrange an early payment of roughly half of a $386,000 grant from the Federal Mineral Leasing District, which disburses money paid by energy companies to the state to mitigate impacts to the local economies where oil and gas drilling is occurring.
Layton reported that the use of the grant money also will enable the town to pay for infrastructure projects, such as road and sidewalk repairs, that otherwise might have caused added losses from the General Fund.
Given that boost to the town’s finances, Layton told the Post Independent, “Really, for the first quarter, we’re probably a little bit further behind where we were last year.” At this time last year, he said, the town found itself more than $78,000 in the red in the General Fund.
The General Fund budget for 2013, which essentially covers the town’s day to day operating costs, calls for spending of roughly $2.87 million.
In the utility fund, which has a budget of approximately $2.25 million, one distorting factor was a payment of $237,000 against the outstanding debt for the town’s 2008 water/wastewater plant construction.
Overall, Layton said, the town expects to dip into its cash reserves to the tune of up to $230,000 or more, which will leave the town with approximately $600,000, the equivalent of about two and a half months’ worth of typical operating general fund expenses.
That amount is well within the amount recommended by municipal financing experts, who suggest that towns keep anywhere from one month’s to six months’ spending in reserve.
Still, Layton noted, the town is in considerably better shape than it was at the end of 2009, a year into the Great Recession, when there was “almost nothing” in the cash reserve fund.
Town Administrator Tom Baker, referring to the issues raised by Layton, conceded, “We’ve got thin reserves and we’re trying to do as much as we possibly can” with existing financial resources.
He noted that although sales tax receipts rose in January by approximately 9 percent over the previous January, February’s sales tax income was “dead level” with the year before.
He stressed, however, that it is too soon to even attempt to predict the town’s financial fate.
“Until you get six months in, it’s hard to tell,” he said. “In general, we’re being guarded” in the town’s pronouncements about the fiscal future.
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