Dumfries is nearly out of cash

The town of Dumfries is just about broke.

Its monthly expenses are greater than the revenue it is taking in. So, for the last few months, it’s been dipping into its reserve fund to pay the bills.

Now the reserve fund is almost gone.

Without some drastic measures, the town will be completely out of money before the end of the year.

The Dumfries Town Council held a special meeting Wednesday night to try to solve its budget crisis.

Town Manager Kim Alexander recommended the town seek a short-term loan to keep it afloat, as well as ask residents to pay more in taxes.

The council unanimously agreed.

A public hearing on the proposed new tax rate of 41.7 cents of $100 assessed value — up from 28.7 cents — is set for Oct. 6.

Additionally, Alexander recommended cutting about $219,000 from the budget. Part of this would be done by furloughing town employees at a savings of about $72,000.

A substantial drop in town real estate values — 40 percent — coupled with the timing of its tax bills largely contributed to the cash flow problem.

Additionally, the revenue it anticipated from business license taxes was far less than projected. “The [actual amounts] came in tens of thousands of dollars less than was estimated,” Alexander said.

Dumfries sends out its tax bills in June and in December.

Since the town does not adopt its budget and set its tax rate for the upcoming fiscal year until July, the June tax bills reflect the rate of the previous year.

For fiscal 2010, the town had increased its tax rate from 18 cents to 28.7 cents to make up for the drop in property values.

The new tax rate was not reflected in the June bills since it did not take effect until July 1. About $350,000 in revenue was lost because of this, Alexander said.

Alexander said she will soon recommend to council that in the future it set its tax rate before the June bills are sent out and before its new fiscal budget goes into affect in July.

To solve the immediate cash flow prolem, the town will hire a financial advisor to seek a $675,000 Revenue Anticipation Note — a short-term loan.

“The only way that the town will be able to afford repayment of this note and still have operating funds available would be to increase the real estate tax rate,” Alexander said.

The new tax rate would also allow the town to replenish its emergency reserve fund by $520,000.

While some council members thought further cuts to the budget could be made, many of their comments and concerns were about the employees.

“If I had an option as an employee of losing a couple of dollars or losing a job, I’d rather lose a couple of dollars,” said Vice Mayor Clyde Washington.

The town employs 31 people and many of them attended the Wednesday meeting. Under Alexander’s plan, all would be required to take furlough days. The number of days required would be based on their salary range.

The six employees making less than $35,000 would have to take one unpaid furlough day; the 10 making between $35,001 to $49,999, six days; the eight making between $50,000 to $65,000, 10 days; the three making between $66,000 to $81,999, 13 days; the three making between $82,000 to $99,999, 16 days; and Alexander, who makes more than $100,000, would take 21 days.