Submitted by Sean Goldrick, Riverside
Greenwich town government is awash with cash, and this is the time to put some of that cash to use for our school capital projects. I believe that Greenwich should allocate up to $40 million from our $92.2 million cash reserves towards those projects. Here’s why.
Greenwich and other municipalities keep cash reserves in a “general fund balance,” or colloquially, a “rainy day fund.” for emergency short-term funding requirements. Credit rating agencies consider those cash reserves relative to a town’s annual operating budget in their rating metrics. Greenwich’s total fund balance stands at $92.2 million at the end of the last fiscal year, equal to nearly 20% of our upcoming operating budget. But that doesn’t capture the entire picture, since substantial funds remain unspent from the $50 million the town received from ARPA and Covid support that aren’t included in that figure. And in the town’s January presentation to rating agencies, First Selectman Fred Camillo claimed that its government funds unrestricted cash totaled $195.2 million. Yet, while Greenwich continues to add to cash, GOP leaders tell taxpayers that we have nowhere near sufficient reserves.
The argument against using cash rests on Greenwich’s odd accounting practices. Specifically, we only need to maintain one general fund, but Greenwich actually has three. Rating agencies only consider what is called “unrestricted” fund balance for calculation of cash reserves. Two of Greenwich’s funds, however, are considered “restricted,” and not counted.
One of those “restricted” funds, the “Capital Non-Recurring Fund,” is used to pay for major repairs, or reconstruction of, a town building when it is seriously damaged or destroyed, and while the town is waiting to be reimbursed by its property insurers. That fund holds $12.5 million. The other restricted fund is the Risk Fund. It is from that fund that the town cuts checks for legal settlements, or lawsuits the town loses. It holds $3.9 million. So $16.4 million of our fund balance is kept in “restricted” funds that aren’t considered by the rating agencies when calculating our cash reserves. Instead, they only consider the $75.9 million that is “unrestricted.” Do we need maintain three different funds? No. And maintaining them creates the misleading illusion that our cash reserves are substantially smaller than they are.
There is another accounting quirk that also dramatically underestimates our reserves. Each year, the BET approves a budget that artificially inflates our operating expenses by some $20 million. It then votes to take cash from Greenwich’s fund balance to fill that non-existent budget gap. There is no budget deficit, and the BET knows it. At the end of each fiscal year, expenses magically come in sharply lower than budgeted, even after interim appropriations. The fund balance, instead of declining, actually increases by millions of dollars, and the BET pats itself on the back for keeping expenses “under control.” But the practice results in rating agencies” further reducing their calculation of our cash reserves, which leads BET Republicans to claim that we can’t put taxpayers’ funds to use, because our fund balance is too low.
So instead of considering our real fund balance of $92 million, rating agencies will start with the $76 million “unrestricted” fund balance, then subtract $23.5 million “use of cash,” which the BET says it “needs” to balance the budget, and come up with a ratio of just 11%. But that figure is barely half of what our cash reserves actually are. BET Republican Dan Ozizmir told Greenwich Free Press recently that our fund balance ratio stands at just 8.9%, well below the level of other comparable Connecticut towns.
But take a look at what Greenwich GOP First Selectman Fred Camillo told rating agencies in the town’s official presentation in January. In that presentation, Camillo claimed that Greenwich’s fund balance ratio stood 16.3% of operating budget, nearly double what Ozizmir claimed just last week, and well above the average for comparable Connecticut municipalities. That same presentation also lists the town’s available fund balance, according to Moodys’ calculation, at over $88 million, and a ratio of 16.5%. And instead of having to use fund balance to plug budget holes, as Ozizmir claimed, Camillo’s presentation to the credit agencies made clear that Greenwich had achieved budget surpluses for ten years in a row, including adding $4.5 million to cash balances last year alone. His data also showed that Greenwich had nearly doubled its unrestricted fund balance over the last nine years, adding some $40 million. So while BET Republicans are telling taxpayers Greenwich is woefully short of cash, less than three months ago, Republican First Selectman Fred Camillo told leading credit agencies that Greenwich enjoyed ample, and sharply rising, cash reserves, and a long string of budget surpluses.
So how much cash do we actually need for economic emergencies? In the depths of the Great Recession in 2009-2010, the worst economic downturn since the Great Depression, Greenwich utilized its entire cash reserve, which at the time was equivalent to just 4% of operating budget. With some staff retrenchments, the town made it through.
Are we at risk of losing our AAA credit rating should we draw down some of our cash reserves to help finance badly needed school construction? Absolutely not. In fact, Greenwich’s total credit metrics- extremely low debt levels, high average household income, extremely low mil rate, and strong and stable economic foundation- put our town well into the top 10% of all AAA-rated municipalities nationwide. Indeed, Greenwich maintained AAA credit ratings for years before our cash reserves rose to their present levels.
The town of Greenwich is awash in cash. Town officials told that truth to the rating agencies back in January. We are not in danger of losing our AAA rating. But we are in danger of yet again shortchanging critically important school construction and renovation projects. Devoting $40 million in fund balance toward our school projects would still leave roughly $50 million in reserves, which, without the accounting machinations, represents a reasonable 10% of operating budget. Indeed, we can draw down the entire $12.5 million from the “restricted” Capital Non-Recurring Fund alone without moving our fund balance ratio a single percent. And we will be putting cash to use where it is needed. Our cash reserves belong to taxpayers, and taxpayers should rightly demand that the GOP-controlled BET allocate taxpayer funds to support our schools. Now.
Goldrick served as a Democratic member of the Board of Estimate and Taxation for four years