SALEM — When selectmen resume their budget talks next month, they will be asked to consider some tough choices in the wake of rising town expenses.
But they will make those decisions knowing town finances are in better shape than previously thought. Selectmen heard the news last week from finance director Jane Savastano.
“That was good news,” Selectmen’s Chairman Everett McBride Jr. said yesterday. “It’s very positive.”
Savastano told the board a recent audit showed revenues for the last fiscal year were up $400,000 — from $4 million to $4.4 million.
She said unanticipated revenue increases and various cost savings, especially on municipal bonds, will help ease some of the pain for taxpayers. A substantial increase in the town’s general fund balance — money that can be used in fiscal emergencies — will also help, she said.
That amount has risen to $7.1 million, compared to $4.8 million a year ago, Savastano said.
A big chunk of the revenue is from the approximately $750,000 the town received last year from the state for bridge cost reimbursement. The town is reconstructing several red-listed bridges the state Department of Transportation has said are in urgent need of repair.
Officials also learned the town will retain its AA bond rating — the second highest possible rating — as they continue to tackle major infrastructure improvements, Savastano said.
Savastano said the 1.81 percent interest rate is the lowest she has seen in 15 years.
But her positive revenue report came on the heels of selectmen’s discussion last month that it could be another difficult fiscal year.
Savastano and selectmen agreed yesterday the town faces some serious financial challenges.
“It’s going to be a tough year,” Savastano said. “We have some payroll costs that are going to go up that we have no control over.”
Rising expenses, especially for employee health insurance, have forced selectmen and Town Manager Keith Hickey to cut funding for services. It’s also meant layoffs and reduced hours for some workers the last few years.
“The board will be faced with some tough decisions again as we always are,” Selectman James Keller said.
There were 12 layoffs this past year, according to Hickey. Layoffs the previous year included all four members of the town’s information technology department and several other employees.
IT services were outsourced to reduce costs, saving thousands of dollars, Hickey said.
When selectmen began their preliminary budget talks in June, Hickey said the town portion of the tax rate could increase 8.4 percent unless cuts were made. Much of that increase was due to the $4.6 million allocated for bridge and road work.
The town’s $38.8 million budget could rise to $43.2 million if spending isn’t cut, he said. This means the town portion of the tax rate would rise 59 cents — from $7.02 per $1,000 to $7.61. Salem’s overall tax rate is $20.58.
Selectmen have agreed they want a level tax rate for 2014, but it’s a challenging goal.
“Every year, our costs go up and we don’t want to cut back on services,” Selectman Michael Lyons said.
He said he was encouraged to hear about the revenue increase, especially the money received through DOT reimbursement.
Selectman Patrick Hargreaves said he was concerned about spending in some accounts.
“I just want to make sure we are sticking to our budget,” he said yesterday. “You have to keep an eye on everything. The last thing we want to do is lay off people, but health insurance is killing us.”
Selectman Stephen Campbell agreed.
“It’s going to be a struggle,” he said. It will be a challenge — no doubt about it.”
But selectmen said they were encouraged by Savastano’s report.
“We are being very responsible,” Campbell said. “The report showed we are living within our means.”