The Waitsfield Select Board is deep into its budgeting process, this week spending time fine tuning the town’s long-term capital improvement plans and the reserve funds that support them. Waitsfield town has joined other local towns in planning and pre-funding large expenditures rather than borrowing. The town is also looking at how a local option tax might support future infrastructure needs. (See updated information on local option tax on page 2.)
At a January 12 meeting, select board member Chach Curtis outlined how the town’s financial practices have evolved over the past decade. Previously, Waitsfield often borrowed to pay for major equipment purchases such as fire trucks, loaders and dump trucks. The town has shifted toward setting aside money in advance through designated reserve accounts, allowing it to pay cash for many capital expenses.
LARGE SCALE
Curtis said the move away from borrowing has been especially beneficial as interest rates have risen. With less outstanding debt, the town spends less of its operating budget on principal and interest payments. He noted that debt service has dropped significantly and is projected to decline further next year, freeing up capacity in the budget.
The board’s intent, Curtis said, is to maintain that approach while recognizing that borrowing still makes sense for certain large-scale projects. Long-term infrastructure such as a new town garage, a future fire station or wastewater system do justify taking on low-interest, long-term debt, he said, particularly if the town can take advantage of state and federal programs that fund infrastructure.
As part of the budget discussion, Curtis presented a summary of the town’s roughly 25 reserve accounts, grouped into major categories including road vehicles and facilities, paving and bridges, fire department equipment, town buildings, parks and conservation, and general town operations.
RESERVES
The town began the current fiscal year with about $2.6 million in reserve funds. With an operating budget of roughly $2.9 million, that balance represents nearly a full year of operating expenses set aside. He said the reserve balance has grown steadily over the past four to five years, aided by transfers from prior-year budget surpluses. Last year, about $300,000 in undesignated fund balance was moved into reserves for items such as paving and vehicle replacement.
About $1.1 million in reserve funds are projected to be used in the current fiscal year. Major expenses include the East Warren Road paving project, new equipment for the road department, and maintenance work at town facilities such as the Wait House.
After accounting for that spending, the town expects to end the current fiscal year with about $2.1 million in reserves. Board members won’t rely on any anticipated budget surplus to replenish reserves in fiscal year 2027, describing that approach as a conservative way to present the budget to voters.
UNEXPECTED EXPENSES
Looking ahead to fiscal year 2027, the capital plan projects continued heavy use of reserves, especially in the road and fire departments. A major item is the purchase of a new fire department pumper truck. Curtis said Waitsfield’s share is expected to be about $400,000 or 60% of the cost, with the remainder covered by Fayston.
Under current projections, the town would start fiscal year 2027 with about $2.1 million in reserves, spend roughly $1 million, and transfer about $500,000 back into reserve accounts, leaving an estimated year-end balance of about $1.6 million. Curtis told the board that while the plan generally provides adequate funding for known needs, some reserve balances become lean when projected several years out.
The capital plan extends five years for most categories and as far as 2040 for certain fire department vehicles. Curtis said the projections help the board anticipate future capital demands but leave limited room for unexpected expenses.
LOCAL OPTION TAX
That concern has influenced discussion of a proposed local option tax, which would require voter approval at Town Meeting. Curtis said no local option tax revenue has been assumed in the current projections. If adopted, revenue collection would begin partway through fiscal year 2027 because of administrative timing. Officials estimate first-year proceeds could total about $400,000, rising to roughly $600,000 in a full year.
Towns can decide how to spend local option tax funds and the board discussed initially focusing those funds on infrastructure such as road paving, fire and road equipment, bridges, the wastewater system or a new town garage. The board also discussed using some of the revenue to create a formal emergency reserve fund, something the town does not currently have aside from its undesignated fund balance.
Recent flooding prompted discussion about whether the town should increase its cash reserves or establish a dedicated emergency response account. Creating a new reserve would require voter approval.
Updated figures reduce LOT impact on Waitsfield residents
As the Waitsfield Select Board considers how funds from a local option tax might impact town budgeting, the board is also reviewing updated information on how the 1% tax on rooms, meals, alcohol and retail sales will impact town residents. The town will hold a hearing to discuss adopting an LOT at its January 19 meeting.
With Waitsfield serving as The Valley’s downtown, a Waitsfield LOT will impact residents of nearby towns. This week the board clarified the impact on Waitsfield residents. The Mad River Valley Planning District, which prepared town-by-town white papers on LOT impacts for Warren, Waitsfield and Fayston, took an in-depth look at town populations and spending patterns, creating an analysis of resident tax burden. The planning district found that based on spending patterns and the approximate population distribution of The Valley, that Waitsfield residents would pay an additional $186 in annual taxes on average due to an LOT.
Per the planning district analysis, on a household basis, this represents an average annual cost of $186 or approximately $15.50 per month. This results in residents being responsible for 18% of the funds directed to the LOT, while visitors would cover the remaining 82% of the total tax burden.
The data show that Mad River Valley residents make 40% of the in-person retail purchases subject to the LOT, representing 11% of in-person retail funds raised across The Valley if three towns adopt an LOT. About one-third of Valley residents are Waitsfield residents.
Of the total online retail sales, 45% will be paid by local residents with 60% of online purchases made by local residents and 40% by part-time residents, second homeowners and visitors. The analysis assumed that three-quarters of the online retail purchases were made by Waitsfield residents, and one quarter are from Warren/Fayston residents with a PO box or zip code in Waitsfield.
The annual tax includes the meals, alcohol and rooms portion of an LOT.
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