Town’s Finances Are Robust, Review Finds

HARWICH – Interim Finance Director Jennifer Mince told the select board last week that a review of the just-completed fiscal 2025 budget shows that the town is financially healthy, with responsible budget practices and careful planning. 

 The review of the previous town budget is a practice that select board members welcomed.

 “It’s history, but history can inform the future,” Acting Town Administrator Tony Schiavi said. 

 “Harwich is in great shape,” Mince said. The town’s AAA bond rating from Standard and Poor's was reaffirmed, and represents “an important validation” of Harwich’s financial practices. “It’s no small feat,” she added. The top bond rating means that Harwich will pay less to borrow money for major projects. 

The town had a combined operating budget of $77.8 million in fiscal 2025, with $45.7 allocated to town operations and the rest for the schools. That represents a balanced approach that supports essential services while maintaining long-term sustainability, she said. 

 On the revenue side of the ledger, Harwich budgeted for just over $80 million, with revenues coming in at $82.7 million. More than 70 percent of that revenue comes from property taxes, with another 22 percent coming from local receipts like excise taxes, hotel/motel and meals taxes and fees. Those local receipts showed “a pretty healthy bounce-back, post-pandemic,” Mince said, and new growth — tax revenues from new construction and renovations — has remained relatively steady.

 Schiavi noted that the town has consistently taken a very conservative approach to estimating revenue.

 “This is an area where we need to focus and better refine our estimating skills,” he said. The town has often been ultra-conservative in estimating revenue “when we want to be conservative.” 

 Mince agreed with that approach, “keeping a keen eye on the fact that we don’t want to go too far with that.”

 On the expense side of the ledger in fiscal 2025, the $79.2 million general fund budget was up 6 percent from the previous year’s spending plan. School assessments accounted for 42 percent of the budget, with public safety making up 15 percent, and public works accounting for 9 percent. 

 At the close of the budget year, about $2.2 million in revenue remained unspent. Half of that was unused salary allocations, largely from vacant positions; the rest was because of conservative spending on the part of town departments. Most notably, the highway department returned $453,000, the police department turned back $329,000, the fire department returned $243,000, and group insurance cost $124,000 less than expected.

 Debt service, the money the town pays in borrowing for big projects, stood at $5.7 million in fiscal 2025, with $3.5 million in town projects, $1.5 million for Monomoy school projects, and $660,000 in borrowing for the Cape Tech school building project. Debt service is projected to increase through fiscal 2028 but then gradually declines as various bonds are paid off; this debt drop-off makes room for additional borrowing as needed. The goal, Schiavi said, is to smooth some of the spikes in debt service from year to year.

 Board member Pete Piekarski noted that whether the underestimation of local receipts is too conservative is “up for debate,” but said he’s heard a rule of thumb that budgets for one year’s receipts should be based on an estimate of 90 percent of the previous year’s receipts. Is that too conservative?

 “I want to take a more analytical approach to it,” Schiavi said. Estimating receipts is not an exact science, but data is available to provide a more detailed projection. “So those are sort of conservative practices, but there are times when you break the practice because you have information, and smart people that are looking at it are saying, ‘No, we can do this.’” 

 “To me, it’s a conservative approach,” Piekarski said. “We have no idea what the hell the future brings, right? So you don’t want to just assume that the glory days are always going to be glory.”

 Free cash, comprising budget turn-backs and new growth, was certified at $5.82 million last January, an amount equal to 12.7 percent of the town’s operating budget. That meets the town’s policy benchmark of having no less than 10 percent of the operating budget held in free cash, with a goal of 15 percent.

 “What is your opinion on the free cash number?” select board member Jeffrey Handler asked Mince.

 “It’s a conservative approach that gives us room in our budgets,” she said. “But on the flip side, it gives us that available pool of money to accomplish very important work.” It makes sense to keep free cash conservatively high, but Mince says she agrees with Schiavi that it’s important to budget based on available information “and what the trends are telling you, with that conservative buffer built in.” Ten percent isn’t a bad number, she said.

 “How the town chooses to use its free cash is a whole other conversation,” Handler said. 

 Schiavi said the town has to be careful about letting a number drive the budget to the point that it “drives us into a situation where we artificially cause stress and constraint on ourselves. And free cash can do that,” he said. If the free cash goal is too high, it can lead to unnecessary budget cutbacks or even layoffs, he said. Striking a balance is key, the town administrator said.

 Select board Chair Donald Howell said he opposes using free cash for recurrent expenses, saying it’s best for one-time purchases. Rather than funding a too-high target for free cash, the revenue might be put to better use funding operational expenses. “It shouldn’t just be sitting there as an annual clearance sale,” he said. But with the town currently reliant on using free cash to fund capital projects, reducing free cash requires making sure there’s adequate budgeting for those big-ticket projects, Howell said.

 The select board, finance committee and capital outlay committee will continue the dialogue with town staff, using insights from the fiscal 2025 budget to inform the next spending plan, which will go before voters at the spring town meeting.