Council Responds to School Board Decision on $600,000 Shortfall

At Monday night’s Town Council meeting, the subject of the $600,000 shortfall was once again brought to the attention of the public.

Last week, members of the School Board voted 4-1 to pay $0 towards the tax shortfall, because this was a “town made error” and the school should not have to pay because of the town’s mistake.

This came as a shock to Councilor Tom Dolan who felt this was a misrepresentation of the facts of what happened and what’s going to happen going forward.

Dolan addressed the article written in last week’s issue of the Londonderry Times of how “the town was responsible for the shortfall” according to the School Board.

“I want to correct the record,” Dolan said “With the most important element being: What is right for the taxpayer.” Dolan also said the council (and he himself) always use that question as a threshold for action. He continued on to review what happened after the shortfall was discovered and what exactly happened in the first place. “First of all, the town never asked the school for help with the shortfall,” Dolan said. “We (the town) simply identified that the town government had a $160,000 problem and the School District had a $440,000 problem.

Once explained, the school’s finance leader understood and wanted to pay for a portion of the school’s shortfall and suggested the town help the school district to make up the rest of the school shortfall.” The reason for this was due to the fact that the school’s “rainy day” fund was still in its early stages.  Dolan continued to say “The Town Council was very sympathetic, but wanted the School Board themselves to determine the amount they would contribute and how much help they wanted from the town”.

Dolan then took a moment to explain to the public exactly what had happened to cause this shortfall in the first place. “Each year the State’s financial authority (The Department of Revenue Administration) determines the local tax rates. They traditionally have the town submit all the property values to the state. They process that information along with the taxpayer approved budgets and determine the tax rates (both town and school) to collect enough taxes to cover the money needed for the budgets.

This past year, a new system was introduced. The state went digital and had the town submit electronic inputs to a software algorithm to achieve the same end result. However; it was determined after the fact that those towns with TIF (Tax Increment Financing) properties were not properly accounted for in the algorithm. Hence, the wrong tax rate was determined by the state. By state statute, it is the state’s responsibility to get that right. Once the error was determined, it was up to the town government to come up with an additional $160,000 and the School District to come up with an additional $440,000. To not do so would mean the two governments would be spending money they don’t have. Dolan said the town was prepared to pay their shortfall and willing to help the school district with theirs.

There were other alternatives that could have been chosen, but were not. The town could sue the School District to pay their bill, but that would cause legal expenses for both the school and the town. This would also result in taxpayer dollars spent for legal cost with no net gain. The district also had the option to reduce their expenditures by the $440,000 shortfall. This would result in layoffs and/or a reduction in services to the children. The final alternative could be to collect additional school taxes from the taxpayers, which would cause financial disruption to the taxpayers.

Dolan made the recommendation to Chairman John Farrell to help the School Board this year. He then added the recommendation to modify the town’s policy so that this will be the last time the town helps and make it clear to the School District that they will be responsible to pay their own obligations going forward. Dolan finished his statement with a personal note to the School Board. “I am disappointed that the School Board has not stepped up to pay for their obligations and budget, but I am thankful that the town, through sound financial management has the rainy-day funds available to protect our taxpayers from any additional unnecessary/unscheduled costs-should we vote to do so.”

Chairman Farrell stepped in to say that some policy changes would have to be made. He explained what this meant to the taxpayer overall. “We gave $500,000 back to the taxpayer earlier this year and now we’ll be giving $600,000 back so it’ll be a $1.1 million return of revenue to the taxpayers from the town.” Farrell also said that they will be able to figure this all out this year, but going forward will have to be figured out at a later time.

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