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TO THE HONORABLE TOWN COUNCIL AND CITIZENS OF DEXTER: INTRODUCTION TO THE FY 2002 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. About 60% of our total funding needs are paid for by property taxes with the remaining 40% covered by a variety of local revenue sources, state reimbursements, and grants. Out of each municipal dollar that will be spent in FY 2002 approximately 64 cents will go towards operating the town, 33 cents to help fund the schools, and 3 cents go for services provided by Penobscot County. We're now in the fourth 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 our 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 2002 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. The most frustrating factor to deal with this year has been trying to cope with dramatic increases in costs over which we have very little control. The impact of anticipated escalated costs for education, power, utilities, fuel, insurance, minimum wage increases, and state "masked mandates", placed us in a position of having to contend with more than $240,000 in increased fixed costs before we even addressed the funding needs of each municipal department, or considered the contributions to our Capital Improvements Program. The situation was worsened by the fact that projected revenues for FY 2002 are down by nearly four percent. The proposed FY 2002 Expense Budget has an increase of 3.2% over the previous year. This was achieved only through making some difficult and substantial cuts in departmental requirements as well as forcing significant modifications to a number of our long range capital programs. 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 2002, translates into a net increase of 7.9% 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 four years to maintain the existing 20.5 mil rate on property. Also of significant note is the fact that we are recommending the withdrawal of only $100,000 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 reducing the tax burden, such action could serve to endanger our ability to conduct 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. As we look to the coming fiscal year we are faced with a multitude of challenges; however we continue to posture ourselves for future development and to meet the long term needs of the community. Respectfully submitted, Robert F. Simpson |