Town of Rumford, Maine, should have action plan in case NewPage ever permanently shuts down its paper mill there, auditor advises town's governing board, suggests talking with town officials in Jay and Bucksport, Maine, to learn how they planned ahead
June 23, 2014
– Selectmen learned Thursday night from town auditor Ron Smith that Rumford is doing well financially.
Smith said Rumford uses about $1.2 million in tax revenue in the budget, but only needs about $150,000 of that.
"So that's the good news," he said.
Concerns in 2013-14, were a large property abatement, a tough winter, and a lot of road projects happening, Smith said.
He said auditors use a benchmark of 30, 60 and 90 days that they like to see a town's operating budget sit in reserve. Selectmen Chairman Greg Buccina asked him to explain.
Smith said that means a town should have $1.5 million in reserve for 30 days, $3 million for 60 days and $4.5 million for 90 days.
He said Rumford's operating budget is at $3.6 million for the year ending June 30, 2013.
"I'm not sure you're going to be there come June 30, 2014," due to a lot of fiscal challenges this year, he said.
"Rumford's a very busy town and this was a challenging year," Smith said.
He said Rumford has about $1.2 million in capital reserve funds and plenty of reserve funds it can access if needed.
"This town is in good financial shape," Smith said. "I think 2014 is going to be more of a trying year on your resources, for lack of a better word."
"So the way that we're doing our business, in your words, keeping our capital reserve funds strong and stable, is a good thing?" Buccina asked.
"You are above average financially in the state of Maine," Smith said. "I think you have a management that understands their business and understands how to move a piece of paper from Point A to Point B, and those are the things that we continue to work on with you."
Buccina asked for advice going forward should the NewPage paper mill start to go downhill. It is one of Rumford's biggest taxpayers.
"We are a mill town and things can go south pretty quickly," Buccina said.
"If that mill goes, so does Rumford and Mexico and all the other communities that surround the area," Smith said. "One of the dynamic things that happened to you all last year was the large abatement given to the mill."
He said last year Rumford reduced its budget to accommodate the abatement, but what it really needs to do is focus on creating a policy that addresses the mill and when it goes out.
"And you'll find out $3.6 million doesn't go very far," Smith said. "I hope that mill, which has been a good neighbor, will continue to be a good neighbor."
But seeing the challenges the paper mills are facing and the problems they can bring on municipalities, Smith said Rumford needs to establish a course of action now should the worst happen in the future.
"The time to deal with it is now," he said. "It really, truly impacts your cash flow."
Smith suggested that selectmen talk with town officials in Jay and Bucksport to learn how they've planned for such an event and create a plan that works for Rumford.
"Madawaska really got hit hard three years ago with the trials and tribulations of that mill," he said.
Town Manager John Madigan said the assessors granted a $9 million abatement to the mill this year and the following morning, Rumford had to send a check to NewPage for $223,000. He said he was relieved to learn that the town had previously allocated $400,000 to its overlay, so the town didn't take a hit from the abatement.
Smith suggested tying the overlay to the fund balance policy so that if a certain percentage isn't spent, it would get directed to the overlay. That, he said, would prevent hitting taxpayers with a substantial tax increase should anything dire happen. He said Rumford has $3.6 million in its fund balance and could set aside a percentage in a reserve account.
"I think the mill is your biggest challenge going forward," Smith said.
When asked by resident Kevin Saisi if Rumford is at risk of bankruptcy, Smith responded with a resounding, "No!"
Smith said if the mill closed, Rumford is prepared to handle it without going bankrupt, but needs to build up its cash reserves should the town lose the mill as a taxpayer.
He also advised the board to be careful about taking money from surplus to buy down the tax rate, which amounts to being a good neighbor for taxpayers, but runs the risk of increasing taxation to get it back.
"Be very careful with tax relief," Smith said.
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