The purpose of this letter is to update you on the plan for the 2023/24 budget, and our overall financial picture. In summary, our town is in great financial shape, but there are economic uncertainties and challenges that we will need to work through this year. Let me share some highlights.
On February 7th, the New Canaan Board of Finance will begin analyzing the Town’s budget for the fiscal year 2023/2024 that begins on July 1st. The town departments have been working on their needs and requests over the past few months. The Board of Selectman will review the budget requests and send it to the Board of Finance this month. Our Board will spend most of the month of February analyzing the needs and requests for each department as well as the revenue assumptions. In March we will send the budget to the Town Council for their review and approval. It then comes back to us for the final setting of the mill rate, and final approval in June.
As a reminder, over the prior four years, the Board of Finance, working with the First Selectman’s office and the Town Council have held the amount of money raised by taxation flat. This is an unprecedented achievement over the prior 30 years. We were able to do this while continuing to invest in our town, our facilities, and especially our great school system that continues to rank among the best. Had we increased spending at a rate of just 2.5% each year as many towns have, taxpayers would have spent an additional $18 million in property taxes over this same four-year period. By keeping spending in check and taxes flat, we were able to avoid $18 million in additional taxes. That $18 million is avoided forever.
For the current fiscal year that began on July 1, 2022, we did implement a modest increase to our mill rate of 1.14%. Given the pressures of rising healthcare costs and inflation, it was necessary to have a small increase.
As we head into this ‘budget season’, we know economic forces will impact our budgeting and planning. We know rising interest rates will put a chill on housing activity. An engineered contraction in the economy by the Federal Reserve, with a declining money supply will, at best, drive economic caution. Regarding revenue, aside from property tax revenue, we are currently seeing a slowdown in conveyance fees for real estate sales compared with the prior year. We continue to see parking fees rise, but still below pre-pandemic levels. And building permit fees are also running below the prior year.
One bright spot this year on the revenue side is interest income. We expect to earn nearly $1 million more in interest this year than budgeted. And we expect to earn more next year than this year as we benefit from a full year of higher money market rates. The Board of Finance has worked successfully with our Town CFO Anne Kelly Lenz, and our Treasurer Andrew Brooks to maximize the income we earn on our cash while providing safety and liquidity for our town. Kudos to Anne and Andrew. We will review all of these revenue streams during the budget process and plan accordingly.
We have reduced the town debt from the all-time high of $147 million to approximately $95 million last year. With a lower base to operate from, we can safely add debt for key capital projects including on-going school building maintenance, and other town projects and programs. Over the past four years, we also issued and refinanced debt at historically low levels saving the town millions of dollars in interest expense. As many of you may know, we pay down our principal and interest costs for each bond that we issue on a straight-line basis each year. We reduce our debt by approximately $15 million each year before adding new debt for new projects. We have watched rates fall in recent months and will issue future debt prudently.
The past three budget seasons have been difficult. We have gone from plummeting revenues with Covid, to rising expenses with inflation. But working together with the town departments, the Board of Selectman, and the Town Council, we have met the needs our town while keeping the amount raised by property taxes nearly flat. These budgets have fully funded our schools, police, fire, and town programs. They have funded our parks, all the health and human services requests, all the emergency services, town sports, town departments, and so many other important programs and initiatives, including the necessary capital needs for buildings, roads, and equipment. Through careful spending and planning over the past three years, we have not cut school programs, sports, arts, teachers, important social programs, or any emergency services, or safety spending. And through a very healthy partnership between the town and private investments, we will open a new library shortly, and a refurbished movie theater this Fall.
Today, we remain in strong financial shape. Our rainy-day fund is in the range we plan for, although it has come down over the past 5 years as we return excess budget surplus amounts to the taxpayers by reducing the amount raised by taxation. And our town pension fund and OPEB health liabilities are very well funded and are at or near the highest levels compared with every other town in the State.
As has been the case for decades, the New Canaan Board of Finance supports our great school system, helping keep it a leading district. As we have said many times, this takes time, commitment, and leadership. We want to retain our great schools for the next decade. That remains our top priority. This town and its taxpayers have always believed it is an important social responsibility to have a leading school district. The Board of Finance will always assess spending and ask how to optimize the money spent. That’s our job too. But I believe the town bodies share a common goal – providing for and delivering a top tier school district every year.
The combined economic challenges of inflation, rising rates, and an economic slowdown will present challenges to our budget for this coming fiscal year. We will work to maintain financial strength as a town, cutting expenses where we can, while we continuously improve our town assets, services, and the support that our residents expect.
We will send an update on the status of the budget in June.
Chairman, Board of Finance, Town of New Canaan