The Saratoga Sun -

Saratoga faces cash flow problems

 


According to a memo obtained by the Saratoga Sun from a source who wished to remain anonymous, the town of Saratoga is facing some cash flow problems.

In the memo written by town clerk Susie Cox and delivered to the Saratoga Town Council prior to the town council’s last meeting Aug. 1, Cox warned council members cash flow had been disrupted and council members needed to address spending before the town found itself in a direr predicament.

“We have tapped into our reserves at a rate that we have not seen in the past and there are no longer funds available for any unexpected problems, and it has been nearly impossible to add funds to any of the investment accounts due to the decrease in revenues and increase in spending,” the memo reads in part.

Cox said in the memo the cash flow situation was serious enough that some vendors to the town are being paid late, and the town is being charged interest for some of those accounts.

Cox stressed that the most significant issue at the time is cash flow. The town is paying its bills, but checks are not being issued until funds come in, which is often after the expenses are due to be paid.

“…Checks approved at the July 18th meeting have not been released because we’re still releasing checks from prior check runs,” the memo read.

“It’s a cash flow issue at this point,” Cox said. “There have been some fairly high expenditures and the cash flow hasn’t had an opportunity to catch up with those expenditures.”

The beginning of the problem came with the river cleanup project earlier in the year. According to Cox, the town had to tap funds from an investment account and the project ran over on cost. The overage threw the town’s cash flow into a cycle it has been difficult to recover from, Cox said.

The problem continued to swell as more town departments began running into overtime during the busy summer months.

Mayor Ed Glode said in his understanding, the problem stems from delayed cash flow in the town’s general operating accounts. Enterprise funds, accounts that are specific to departments are cash flowing themselves, but the general fund is not replacing funds fast enough.

“The problem is with short-term cash flows,” Glode said, adding the town has had to cash in assets in order to maintain positive cash flows in some accounts. Glode said he was not aware of any enterprise funds that had hit zero or negative balance over the year.

Reductions in revenue have not played as significant a part in the situation Cox said, adding that reductions in revenues were expected and accounted for during the budgeting process for the year.

“Revenues are down and we knew it was going to be,” she said. “Revenues are coming in pretty much where we anticipated they would be and some of them are going to be better than we expected.”

Glode said one issue the town is facing is a reduction in revenues from sales and use tax which had dropped off sharply for the year, despite signs of a recovering economy in the state.

“We’re not less busy than we were last year (in terms of commerce within the town) but we’re receiving less sales and use tax,” Glode said. “That’s a big question right now; why are these revenues falling off?”

Cox stressed the memo was not a forecast of doom, but rather was intended to serve as a warning that the situation could become dire if spending is not curtailed in a way to allow the cash flow to catch up.

I really try to guard the investment accounts and our reserve because they’re critical, and so when you have to tap into those sometimes ... you don’t ever find an opportunity to put them back,” Cox said.

In that respect, Cox said, a town like Saratoga is no different than a family; sometimes unexpected expenses crop up that need to get paid and doing so sets cash flow behind for a period of time.

For now, there are no projects in town in jeopardy of not being completed. Two major projects, the runway improvement at the airport and the upgrades to the town’s sewage lagoon are being mostly paid for by grants, Cox said.

“The one thing we’re cautioning about is just watching the purchasing and overtime, she said. “The police department had a lot of overtime because they were shorthanded with an officer in the academy.”

Glode said there were some accounting projects he has been hoping to get off the ground to better understand the town’s finances, but he had not yet had the opportunity to put his plans into action.

“We’re hoping that within a couple or three months we’ll be able to look at this a lot better,” Cox said.

For now, her advice for the town is pretty simple: “Careful planning and keeping costs down.”

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