Wind: 10 mph
By Rachel Goff
After gaining a greater understanding of their town's current financial situation, Duxbury residents decided to stick with the original debt repayment plan they approved this spring.
At a second Special Town Meeting on Monday, July 28, taxpayers voted 61-52 to not rescind an action taken at the first Special Town Meeting in May, in which residents authorized Duxbury to appropriate the sum of $70,000 to be applied to its outstanding debt.
Both before and after the May meeting, residents, elected officials and accountants questioned exactly what the town's outstanding debt was and how it was incurred. "There has been a tremendous amount of inaccurate, confusing information on this topic," Bonnie Batchelder of Batchelder Associates told a packed room on Monday.
Batchelder performed a 2013 audit for the town that showed Duxbury ending the year with a $110,000 deficit. "In 2013, your expenses exceeded what the [Duxbury] Select Board had anticipated," she explained. "As we all know as business owners, budgets change."
After receiving the audit report, select board chair Dick Charland told residents that Duxbury had a deficit of $338,000, "but Batchelder never said the deficit was $338,000," Charland clarified. "I misspoke."
What Charland meant to say, he explained on Monday, was that in addition to the town's $110,000 deficit for 2013, it also owed $228,000 on a line of credit that became due last September, for which Duxbury was granted an extension until June.
The town took out the $1.5 million line of credit with Merchants Bank to pay for repairs from Tropical Storm Irene in August of 2011 before it received reimbursement from the Federal Emergency Management Agency (FEMA). Once all of the reimbursement checks came in, the town received more than it had anticipated—$1.7 million—but still had $228,000 remaining on the line of credit.
"The fact is, money came in and it didn't go where it was supposed to go," Charland said, explaining that the town set up a separate account to handle the FEMA funds without the select board's knowledge, and that money from that account was used to pay for the town's operating expenses rather than the line of credit. But former town treasurer Ken Scott said otherwise.
"The select board approved opening the FEMA account," Scott said on Monday, explaining that he never could have opened it without providing the bank with minutes from the meeting in which the board authorized the transaction.
Regardless of whether the town was aware of the account or not, several taxpayers spoke up, saying it was the select board's duty to provide oversight. "For you to sit there and say, 'How would we know we overspent our money?'" one resident told Charland. "Shame on you. As the select board chair, you should know," she said.
Back in May, Charland told residents that Duxbury would not be in its present financial situation if Tropical Storm Irene had never happened, but the FEMA reimbursement checks had all come in by the end of 2012, so Duxbury can't blame its current debt on the mishandled funds, former town auditor Bill Yacavoni said on Monday.
According to Yacavoni, Duxbury ended 2012 with a $41,000 deficit, which the town raised via taxes, "So how can the situation we're in now have anything to do with anything other than 2013?" he asked.
As one resident pointed out, "An audit is simply a snapshot in time," and Yacavoni tried to get residents to focus on only the town's finances for 2013.
The budget for 2014 "will take care of itself," Yacavoni said. "I don't believe you are in any crisis whatsoever," he said.
By asking residents in May to approve the appropriation of $70,000 to be applied for the town's outstanding debt, Duxbury was thinking beyond the balance sheets. While the appropriation of $70,000 was only approved for one year, the select board's intent was to ask residents to approve the appropriation of an additional $70,000 a year for the next four years—$350,000 in total.
The main question is, "Should you be borrowing in the long term or should you be borrowing as you need it?" Yacavoni said, advocating for the latter. "If you need money, why don't you borrow from your own bank account?" Yacavoni said, as the interest rate is much, much lower.
At the first Special Town Meeting in May, taxpayers approved the article authorizing the town to appropriate the sum of $70,000 to be applied to its town's outstanding debt, but in the weeks afterward a petition asking to rescind the article received the requisite number of signatures, thus requiring Monday's second Special Town Meeting.
In the meantime, however, "the town took out two loans," Charland said, explaining that state statutes required that Duxbury come up with a plan to pay back its deficit. And so, at its meeting on July 14, the select board moved to pay off its 2013 deficit with funds from Community National Bank in the amount of $110,344, to be paid back with an interest rate of 1.675 over five years. And on June 24, Duxbury paid off its line of credit with Merchants Bank with funds from Community National Bank in the amount of $230,371.04, to be paid back with an interest rate of 1.675 over five years.
The select board had to take out the loans, select board member Amy Scharf said, asking residents not to rescind the appropriation of $70,000 for this year only. "It would be great if at the end of this year we didn't have to keep going with four more years," Scharf said.
At the end of the evening, taxpayers cast their votes via paper ballot—51 yes to 62 no—to the article asking voters to rescind the appropriation of funds, meaning that the select board will have $70,000 for this year. And moving forward, "we have a plan," Scharf said.