Fund balance nears zero

Cash-strapped Winsted may need to borrow to stay afloat

WINSTED — A resolution to borrow as much as $2.5 million against future tax receipts to pay town bills was approved the Board of Selectmen Monday night but still must be approved by voters in September as a way to contend with a dangerously low fund balance this fiscal year.

Winchester Finance Director Henry Centrella brought the proposal to the board, asking for tax anticipation notes to be used for fiscal year 2010-11 as temporary funding for reimbursable projects that take place throughout the year. With the fund balance now hovering at approximately $170,000, Centrella said, the town is too close to running out of money to maintain normal business operations without the danger of bouncing a check.

Centrella said the notes do not increase any line items in the budget for 20010-11, but that interest charged on borrowed funds could range from 1.25 to 2.25 percent. The notes must be paid in full by the end of the fiscal year on June 30, 2011, and the money would be used to meet cash-flow needs throughout the year.

“The town has a low fund balance,� Centrella said. “The fund balance is normally used throughout the fiscal year, when the town has a low cash position, to meet expenditures.

“We do have $1.4 million in projects in this budget that are 100-percent grant-reimbursable. Normally it takes 90 days or longer to receive those grant payments, so if we go forward with these projects, we are going to need to have some cash on hand as we are waiting for these grant reimbursements.�

Centrella said there will be no additional impact on taxpayers, as any interest payments on the borrowed money would be paid out of the current budget.

“We are only going to borrow the money if we need to,� he added.

Mayor Candy Perez noted that the town will receive more than $6 million in state Education Cost Sharing  money this year, but that the payments from the state come in staggered installments, contributing to the possibility that the town may not have enough money at certain times throughout the year to keep current on its bills.

Selectman Karen Beadle said she would vote for the measure with the hope that Centrella would not have to use any tax anticipation notes to pay the bills this year. Selectman Ken Fracasso opposed the motion, saying he thought $2.5 million was “a little on the high side� to approve for tax anticipation notes.

Selectmen voted 6-1 to make a resolution to issue the tax anticipation notes. The resolution must be approved by voters at a town meeting and subsequent referendum, which the board voted to schedule for Sept. 7 and 11, respectively.

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