Operating Budget 2025-2026

Principles of Sound Financial Management (cont.) 4. Department Heads are responsible for managing departmental budgets within the total appropriated budget. 5. Replacement of Town vehicles, including Fire, Rescue and Police vehicles, should be fully funded through the Equipment Replacement Fund. 6. The Town’s goal is to add $120,000 annually to a capital reserve to set aside funds for future debt service or to be utilized for capital projects. Withdrawals from the reserve are only for “down payments” for large capital projects, to transition to debt service, or an emergency approved by Town Council. 7. The Town’s goal is to budget an amount of cash (pay-as-you-go) funding for capital projects equal to 5% of General Fund revenues (less capital transfers), with a minimum level of 3%. While it is the Town’s intent to use this pay-as-you-go funding annually for capital projects, should revenue shortfalls or unanticipated operating expenditures occur in the General Fund, this funding may be used as a source of budgetary flexibility. 8. Financial Trend Indicators should be prepared and reviewed annually to determine the Town’s financial condition. Town Council will review these indicators prior to the development of the Capital Improvement Program and annual operating budget. The Financial Trend Monitoring System (FTMS) offers the following: a. A method for quantifying a significant amount of information in relatively simple terms to gain better understanding of the Town’s financial condition; b. Places the events of a single year into a longer perspective and permits the Town to evaluate trends; and, c. A straightforward picture of financial strengths and weaknesses. 9. General Fund Unassigned Fund Balance is targeted at no less than 10% of operating expenditures exclusive of capital improvements. However, the Town will strive to increase the level to a target of 15% of operating expenditures exclusive of capital improvements. Unassigned Fund Balances should only be used for one-time uses. Bond Proceeds should be deposited and budgeted into the Capital Project Funds. 10. The Town Council may, from time-to-time, appropriate fund balances that will reduce available fund balances below the 10% policy for the purposes of a declared fiscal emergency or other such global purpose as to protect the long-term fiscal security of the Town. In such circumstances, the Council will adopt a plan to restore the available fund balances to the policy level within 36 months from the date of the appropriation. If restoration cannot be accomplished within such time period without severe hardship to the Town, then the Council will establish a different but appropriate time period. 11. Tax-supported debt service should strive to be less than 10% and not exceed 15% of operating expenditures exclusive of capital improvements. 12. The Town intends to maintain its ten-year tax-supported debt and lease payout ratio at or above 60% at the end of each adopted five-year Capital Improvement Program. 13. Net Debt as a percentage of total assessed value of taxable property should not exceed 2.0%. Net Debt is defined as any and all debt that is tax-supported. 14. A five-year financial forecast should be developed annually to determine net capital financing potential, to react to changes in the economy, and to accommodate regulatory and legislative mandates.

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