Paris 'out of money' – faces financial crisis/Bernard estimates cash will run out by March

PARIS — By April, the town could be operating more than $696,000 in the red.

That's the sobering assessment given to selectmen by Town Manager Amy Bernard during Monday's board meeting.

Bernard told the board she had ordered a spending freeze and requested overtime limits in all departments but projected that by March 1, the town would not have enough cash on hand to pay its expenses.

Poor financial practices, particularly last year's decision to utilize $150,000 in undesignated fund balance to offset taxes was a major contributor to the tough situation Paris now finds itself in, Bernard said.

"Undesignated fund balance is cash on hand," Bernard said. "When you don't have enough money to pay for your expenses you shouldn't be utilizing it to offset taxes."

Other poor budgeting practices compounded the situation, Bernard reported. Only $18,000 was budgeted for overlay, not enough to replenish cash on hand. The town's abatements would likely exceed its overlay, Bernard estimated.

At the same time, the town increased spending by $489,000 as Paris embarked on its road improvement plan.

Instead of using $258,000 in capital improvement funds for the project, this money was also used to offset taxes, Bernard lamented. She said the fund should never have been used as a revenue.

"It's created a situation now where we're approximately $371,000 less in the bank than we did this time last year," Bernard reported. "It's a problem."

Bernard told board members she would do her best to minimize expenses to get through the interim, but the town had expenses from November and December it needed to pay.

She acknowledged that purchases, including new breathing apparatuses for the fire department, had been approved before she understood the scale of the problem.

The school district, facing state funding cuts, would be less lenient with late payments from the town, Bernard expected – there is a possibility the town will need to take out a short-term Tax Anticipation Note loan.

"I will not sign checks if we don't have money in the bank. I don't do it personally and I won't do it professionally," Bernard told board members.

A TAN (Tax Anticipation Note) could present the town with even more challenges, as the loan cost was not budgeted for this year, Bernard said.

Replying to Selectman Gerald Kilgore's inquiry about a timeline for recovery, Bernard predicted it could take up to two budget cycles to get Paris on steady financial ground.

She said the town needed to seriously consider its budget process and consider all expenses, including unanticipated damage to roads or buildings.

The town had been underfunding departments but still expending more than it budgeted, Bernard said.

"It's going to be very hard to level-fund this [2013-2014] budget," she told the board –  tough choices about cuts to services or an increase in the budget would need to be considered in the coming year.

"I appreciate your attention to detail, it's been a while since we've had that," Vice Chair Bob Kirchherr said, following Bernard's presentation.