Click here for the agenda and item 6) 7:25 p.m. Elimination of the Infrastructure Investment Fund (IIF).
This is my third year on the Holden Finance Committee (FINCOM) and I have dealt with the IIF numerous times. In light of this agenda item, I would like to share my thoughts on the IIF.
History
Holden Infrastructure Investment Fund (IIF) was formed by special legislation in 1993, click here for legislation. Per the legislation, the 7 members of the IIF (4 of which must be from FINCOM) decide whether or not money should be appropriated from the IIF fund. At Town Meetings the voters then need to approve with a 2/3 res vote anything the IIF forwards to them. If the IIF does not approve a request for monies, it never gets to Town Meeting for a vote. In essence these 7 unelected members of the IIF control the current balance of $1,344,766, not the voters at Town Meeting.
May 2015 Town Meeting
During the budget planning process, Bond Counsel informed the Town of Holden that we could no longer use the funds in the IIF to pay the debt service on tax exempt bonds, which was the only item the IIF was doing. As a result, there was no money budgeted for the IIF. Instead the Town paid the debt service for bonds paid by the IIF from the General Funds.
A few weeks prior to the May 2015 Town Meeting, however, FINCOM voted to put $1,400,000 back into the IIF. When that article was not placed on the warrant, FINCOM amended an existing article (12) increasing the General Stabilization Fund from $450,000 to $1,850,000. At the Town Meeting the $1,400,000 increase was defeated (click this link for Town Meeting minutes);
I did not support FINCOM efforts and voted in support of Selectmen Lavigne’s ammendment at Town Meeting, which was supported by all the other Selectmen. Also please note this from the Town Manager’s budget message for FY16.
I am recommending that we continue to build our General Stabilization Fund with a goal of reaching $3.0 Million. Coupled with Free Cash balance target at $1 Million, this will be approximately 10% of Total Town revenue and is consistent with the bonding agencies’ and auditor guidelines of maintaining a 10% to 15% reserve level.
Fall of 2015 goals for Town Manager
A goal of the Town Manager was set by the Selectmen to eliminate the IIF. This quote from the Landmark on October 22, 2015:
“The IIF puts too much government between the people and their money,” Selectman Anthony Renzoni said. “It has served its purpose and is not needed anymore.”
Instead of wiping out the IIF, however, a study group has been formed to determine the future of the IIF.
To date the study group has decided it wants to invest $2,500 on another study, which the prior Town Manager refused to do, to determine the yield the IIF has returned to the Town of Holden. The IRS says, if we can “guarantee that the investment yield from IIF does not exceed the yield on the applicable outstanding tax-exempt obligations” then we can use these funds in the IIF to pay debt interest on the the tax-exempt bonds, like we did prior to the 2015 Town Meeting.
If we do spend the money on this study, find out the yield on the IIF is in fact restricted and use the IIF (again) to pay the debt on tax exempt bonds, it will save the taxpayers nothing. Actually it will cost us money since we have to spend $2,500 on the study.
FY18 Budget
For the 3rd year in a row the Town Manager has recommended that no monies be put into the IIF, which has not had an official meeting since June of 2014 and currently has no chair. The current budget also provides for $750,000 of additional property taxes to be added to the General Stabilization Fund (current balance is $3,216,167), when added to free cash brings the total balance to $5,591,118.
Here is my suggestion:
- Give the taxpayers a break and remove the $750,000 of additional property taxes from this budget to fund the General Stabilization Fund.
- Do not spend $2,500 on a study.
- Eliminate the IIF now
- Move the monies in the IIF (1,344,766) to the General Stabilization bringing the total to $6,188,184
If this was done, we would have approximately 12% of the current period budgeted expenses in the cash, save the taxpayers 750,000 in taxes , save $2,500 on a study and return $1,334,766 of taxpayer money back to the control of the voters at Town Meeting. In closing, I support the agenda item to eliminate the IIF.
If you have any questions, send me an e-mail.
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