Chatham Officials Hold Annual Budget Summit; Free Cash, Water Rates Areas Of Concern

CHATHAM – Department heads are being told to “stay the course” and provide a level-services budget for next year.

 During the annual budget summit Oct. 22, select board and finance committee members flagged several areas they want to keep tabs on or get more information about, including free cash levels and water rates.

 Operating and capital budgets are due to be submitted to the town manager by Nov. 15. The spending plan for fiscal 2026 will focus on protecting core service and community priorities, Finance Director Carrie Mazerolle said.

 “For 2026, Chatham will continue to adhere to principles of resilience and sustainability,” she said. “We will ensure a balanced budget that will provide essential goods and services to all community members.”

 Preliminary forecasts anticipate a total budget of $54.8 million, a 6.44 percent increase from the current year. The figure includes town operating and capital budgets, the water and sewer department, education funding and debt service costs. The figure is based on budgets for the past three years, Mazerolle said, and anticipates increases in insurance, debt service and other areas.

 One area that officials focused on was the water department, which has seen a 10.7 percent increase in spending over the past three years. Last year, the department exceeded its budget, and the deficit had to be made up by dipping into its retained earnings account, Mazerolle said. That fund contains about $400,000. 

 “If we don’t see the revenue start to increase and cover expenses in [fiscal] 2025, we will be using our retained earnings again” to cover the budget, she said.

 Traditionally, revenue from water customers has covered the department’s operating budget and debt costs. It’s time to look at raising water rates so that can continue, said Select Board member Jeff Dykens. Board member Dean Nicastro added that developing a new drinking water well, as the board has recommended, would add to the department’s costs.

 “We are looking at the rates currently,” Mazerolle said. “That’s in progress.” Town Manager Jill Goldsmith said recommendations on rates will first go to the water and sewer advisory committee, and then to the select board for adoption. The water department’s fiscal 2026 operating budget is projected to be $2.9 million, with another $1.7 million in debt costs.

 An area the finance committee is concerned about is free cash, which currently sits at $11 million. That’s significantly higher than the target of 3 to 5 percent of the budget, noted committee chair Stephen Daniel. Even the past several years’ free cash levels of $7.5 million in 2023 and $8.6 million in 2022 exceeded that goal.

 “Having guidelines that are routinely and consistently ignored is a bad practice,” Daniel said. “We would readily and happily have a chat about this.” Free cash typically includes money remaining unspent at the end of the fiscal year, and is usually used to fund the town’s capital budget.

 Last year’s free cash was more in line with the goal at $2.6 million. Mazerolle said that the current high level of free cash is due to $5 million that should have been credited to the account last year, but was not certified for inclusion by the state department of revenue until after the previous fiscal year closed. Had that amount been credited to last year’s free cash, it would have totalled $7.6 million, not $2.6 million, Mazerolle said. 

 “It’s not an error or anything, it’s a timing issue to close out the books,” said Goldsmith.

 Dykens said he was concerned that taxpayers would get worked up over such a large “war chest.” Nicastro agreed, suggesting that some of that money should go back to taxpayers.

 Goldsmith said she will be discussing with department heads not only current and future service needs, but also looking back to determine if there are services that are no longer needed.

 “We seem to be adding on new initiatives, which is fine, but we’re also maintaining initiatives that we had from 20 years ago,” she said.

 Along with current issues such as housing, drinking water and educational needs, other “macro” issues also need to be kept in mind, Dykens said. Erosion carving out large swatches of Morris Island is an example; down the road, that could impact not only private property but town land and roads.

 “We’ve got to pay attention, because we have a rapidly changing coastal environment here in town,” he said. “I think we need to keep thinking about what that means to the town financially and what kind of commitment we’re going to make to coastal resiliency. It could be a big one.”

 Sustaining a thriving year-round community rather than a summer resort also needs attention, said Select Board member Shareen Davis. “It should be a priority for us,” she said. “We can be spending all kinds of money on beautiful things, but if we don’t have a sustainable community, then we don’t have anything.”

 Education is one area that contributes to a thriving year-round community, and Chatham Elementary School — which the town is responsible for maintaining and operating — is in need of a new roof and carpeting. Monomoy Regional School District Superintendent Scott Carpenter said school officials should know by the end of the month if the $2.4 million roof replacement will qualify for state funding.

 Carpenter said enrollment at CES is “holding level,” with just two fewer students this year than last. The school budget is due to be delivered to the town manager on Jan. 15.

 On Jan. 21 Goldsmith will forward her budget recommendations to the select board and finance committee. On Feb. 25, the select board will send its approved budget to the finance committee, which must make its recommendations by March 11. The final budget will be voted at the May annual town meeting; a date for that session has not yet been set.