continued The fund balance in 2007 was $1.5 million, spokesman for Moody’s David Jacobson said. Three years later, in fiscal year 2010, the town’s reserves dropped to $936,000. Jacobson said for 2011 it’s expected $287,000 will be squeezed out from reserves.
As far as 2012, the town’s budget is slated to not tap any of its reserves, but Landry previously said fees would be increased for town recreation programs and home alarm systems tied to the police department.
“It is better to not dip into reserves every year,” Landry said. “If you are not taking from them every year you are going to replenish them.”
The state tax cap imposed upon municipalities will also make it harder to replenish fund balances “as fast as wanted” without overriding the law, Landry said.
“We are in a new financial situation here as a municipality. Prior to this year we did not have a tax cap. Going forward and every year thereafter we have a tax cap,” said Landry.
A lower bond rating may affect the town’s ability to borrow money, Jacobson said, because higher interest rates could be imposed. When a bond rating drops the value of the bonds go down. The town currently has $10.4 million in outstanding debt, Jacobson said.
Landry said Moody’s outlook on the state is negative too. Overall, he said the downgrade was a reflection of the looming fiscal reality.
“If you look at what Moody’s is saying we still have a strong rating. I just feel that is an adjustment in the market,” Landry said. “I believe you are going to see other municipalities that are going to realize the same type of downgrades.”