WELLFLEET — Town Administrator Richard Waldo received word on Friday that a key goal for the town had been achieved: the Mass. Dept. of Revenue had finally certified Wellfleet’s free cash account. Better yet, it was certified in the amount of $4,514,126 — much more than he, or any other town staff member, had expected.
“We were all hopeful, but we definitely thought it was going to be less,” Waldo told the Independent after his meeting with the DOR on April 21. “The town has waited a long time for this, and it has taken a lot of hard work from a lot of people to get it done. It’s very nice to have it happen.”
The news came just eight days before Wellfleet’s annual town meeting, where voters expected to see 20 Proposition 2½ override and debt exclusion requests totaling $4.5 million. On Tuesday, as this edition went to press, the select board decided to lower that total by $625,000 and pay for those items with free cash instead.
Wellfleet’s free cash account, with unspent funds from previous fiscal years, had not been certified since June 30, 2019. The DOR would not certify the account until it received the town’s fiscal 2021 audit, which auditors Powers & Sullivan could not produce because the town’s cash books for 2020 and 2021 were not reconciled.
A two-year scramble to fix the ledgers ended in January when the town submitted its books to Powers & Sullivan, who completed the 2021 audit in March. The $4.5 million in certified free cash is the total from the three years the town went without any, Waldo said.
Just over $1 million of that amount had already been directed towards items on the 53-article town meeting warrant, Waldo said. Article 16 would transfer $639,200 to replenish the stabilization fund, which was drained at the 2021 town meeting to fund fiscal 2022’s operating budget. “This was not a preferred approach, but due to the severity of the town’s fiscal condition, there were few alternatives at that moment,” the warrant says.
The purpose of the stabilization fund, Town Moderator Dan Silverman said at a pre-town meeting forum on April 20, is to be “a rainy-day fund, in case something happens down the road.” A two-thirds vote is required to transfer money out of the fund; transfers into the fund require only a majority, Silverman said.
The rest of the $1.1 million in free cash that was already on the warrant would cover last year’s unpaid invoices and pay for four items in the capital budget.
On April 25, Waldo and the select board decided to reserve $2.7 million of the $4.5-million pot for spending in upcoming years. “We don’t want to deplete our free cash right off the bat,” Waldo said.
That left $625,000 for “knocking some of those Proposition 2½ articles down,” in Waldo’s words. At the pre-town meeting forum, Waldo suggested using free cash for items including a $50,000 feasibility study for an addition at the Adult Community Center, a $50,000 maintenance dredge at the marina, and $75,000 for a meter replacement in the town’s water system.
Waldo also said that the purchasing of vehicles — $440,000 worth, according to the capital budget — could be funded with free cash. “We don’t want to bond for a vehicle if we can pay for it outright,” Waldo said.
Before the free cash certification news, there had been $3.1 million worth of debt exclusions in the capital budget, with a total tax impact of $204 on a median-value $790,000 home, Waldo said at the forum.
Waldo said the capital budget is running high this year because of a backlog of projects that could not be funded in past years because of the town’s financial crisis.
“The town is typically around $2 million in capital projects, but we’ve had a bit of queueing of projects because of our financial situation,” said Waldo. “We are trying to get back to a regular schedule for replacement of vehicles, equipment, and capital repairs to our facilities.”
Even with the late infusion of free cash, the total override amount at town meeting will be around $3.8 million, more than Wellfleet has seen in past years.
Last year, Wellfleet voters approved $1.77 million in overrides. This year’s operating budget override of $635,192 is the second in a row; last year’s was $400,000. Before that, voters had not faced an operating budget override since 2005.
Waldo said that the key mover for the budget is a 5-percent increase in the public schools’ budget — $320,000 more than last year. A 12-percent increase in health and liability insurance also contributed.
A 16-percent increase in the finance department’s budget is due to the town’s newly created accountant-finance director role, which cost an extra $40,000, Waldo said. That job remains unfilled.
Now the Bad News
While the town’s free cash came just in time for town meeting, it did not come in time to maintain the town’s Standard and Poor’s highest bond rating of AAA. On April 7, S&P downgraded Wellfleet to AA+ “with a negative outlook,” Waldo said, citing frequent turnover of financial staff, the town’s inability to certify its free cash, and its delays in completing annual audits.
“It’s tough to read that we are getting dinged at this point for free cash and audits when we are about to make a full recovery,” Waldo told the select board on April 18. “But it’s not completely unexpected.”
Waldo said that the town anticipates a 0.25-percent increase in interest rates for new borrowing. Current bonds will not be affected by the lower rating. According to the fiscal 2021 audit, the town had $23.3 million in bonded outstanding debt in 2021.
Provincetown, Truro, and Eastham all have bond ratings of AA+, Waldo pointed out. “We are not in a category of our own — we are with other communities.”
Now that free cash is certified and the fiscal 2022 audit is a few weeks away, Waldo said, Wellfleet is poised to catch up with every other town in the Commonwealth. Waldo said his goal would then be “getting that negative outlook squared away by stabilizing the town with staffing.”
“It’s not going to solve all our problems,” Waldo said. “They want to see stability in our finance department, they want to see us get our tax bills out on time, and they want to see this happening for at least a couple of years.
“Having free cash certified is not the finish line of our financial problems,” Waldo concluded. “It’s the start of building things back up.”
