Why is Shutesbury so Obsessed with Saving Money?

There is no doubt that the town of Shutesbury is exceptionally good at bulking up its cash reserves, particularly Free Cash. This is laudable and has placed our town in a financially stable position.

But, we might ask, when is enough, enough? When will town leaders feel comfortable with the cushion we’ve accumulated over the years and begin to wind down its extensive savings program? When will the taxpayers of Shutesbury begin to see the fruits of these labors in the form of a lower tax rate?

Extreme Saving: Shutesbury is the Champ

We’ve already seen how much more money Shutesbury socks away each year than Leverett, but what about other towns?  Using the Division of Local Services data, I did a five-year comparison of Shutesbury to a few other Franklin county towns with similar populations and saw that we are also miles ahead of those communities:

Besides Shutesbury, only Whately consistently appropriates to Free Cash a double-digit percentage of its annual budget. Still, with numbers between 10.48% and 11.97%, Whately’s percentages are much lower than Shutesbury’s, which spanned 17.81% to 19.73% during the same time period. 

The disparity between the dollar amounts saved in any given year is vast, as well. In 2018, the year with the smallest difference, Shutesbury saved $458,000 more than Whately.

As Whately’s budget decreased between the fiscal years 2016 and 2021, the percentage saved as Free Cash also decreased. When Shutesbury’s budget decreased from fiscal years 2020 to 2021, the percentage saved based upon the smaller budget total increased by 0.49%.

A Long-Standing Policy

I once again consulted the Division of Local Services to find out how long this super-saver mentality has existed here in Shutesbury. I looked at the past 12 years, as far back as DLS had consecutive data. What I found is that Shutesbury saved 10.13% of its budget in fiscal year 2010, and bumped up that percentage by 2%+ over the next three years. By 2013, we were saving 18.20% of our operating budget. After 2013, with only two fiscal-year exceptions, Shutesbury never ventured below that percentage again.

What Factors Drive Shutesbury’s Leadership to Stockpile so much Cash?

Shutesbury’s tendency to save pots of money has increased over the years and roots in the town’s Finance Committee policies. The Municipal Finance Guidelines document, available on the FinCom page of Shutesbury.org and promulgated with Franklin Regional Council of Governments financial consultant Joe Markarian, references this issue by saying that the town should bolster Free Cash to maintain levels of 10% or more of its annual budget. General Stabilization should be maintained at 5% of the budget and the town should “build balances” in the Capital Stabilization Fund to meet projected needs.

One problem here is that this document was approved in the fall of 2018--at least eight years after Shutesbury had been saving much, much more than 10% of its annual operating budget to boost its Free Cash fund.

Referring back to FinCom’s pre-Town Meeting forum on June 7, committee member George Arvanitis explained that the Finance Committee decided approximately 10 years ago to avoid swings in the tax rate, ostensibly to help citizens plan their budgets. One way to do this is to build up Free Cash, which could be collected through the tax rate during years when budget expenses were low. When needs arose, this money could be called upon to help defray costs during times when expenses were higher. The tax rate, supposedly, would remain about the same (it hasn’t--it’s gone up year after year).

One way to do this is to continue to collect tax money for debts that have been retired. Mr. Arvanitis discussed this issue again at Town Meeting, because of a question and proposed amendment for a line item for $112,695. These funds, which were the combined debt amount of a fire truck and a dump truck purchased years ago and since paid off, were not identified in the budget but simply listed as a “transfer to Capital Stabilization”. Some taxpayers thought this was disingenuous. 

Probably, the $201,000 the town plans to borrow for the Locks Pond Road culvert will also wind up as “savings” once the debt is paid if FinCom sticks to its current policy.

Has this policy helped Shutesbury avoid debt by paying upfront for projects that would otherwise have required extensive borrowing? Were there specific projects the town had in mind 10 years ago that would require large sums of money? Was there a particular event that sparked this new policy? Is this policy truly in the best interests of Shutesbury taxpayers?

For the next post, I’ll try to find answers to these questions regarding this “borrow to save” strategy.