Harwich Awash In Free Cash

By: William F. Galvin

Harwich is awash in free cash. PIXABAY PHOTO

Selectmen Weigh Spending $7.4 Million

HARWICH – The town’s free cash is at a record-high level and selectmen are examining how to spend it.

For fiscal 2022, which ended July 1, free cash was certified at $7,488.155. That money is available to spend this year.

“There is considerable interest in free cash given the eye-popping numbers we received,” Town Administrator Joseph Powers said last week.

“There are a lot of questions on how we got to $7.5 million,” said Board of Selectmen Chair Michael MacAskill.

Finance Director Ann Marie Ellis presented selectmen with an in-depth review of the town’s free cash history over the past decade. The numbers have varied greatly. In fiscal 2014 free cash was at $445,804. In several years the figures varied from $1.4 million to $4 million. Where it gets interesting is in 2019, when the number was $3,492,074. It dropped with the onset of COVID-19 to $1,446,115 in 2020, then jumped during the pandemic to $6,302,898 in 2021 and $7,488,155 in 2022.

Free cash is a revenue source resulting from the calculation, as of July 1, of a community’s unrestricted funds left over from the previous fiscal year. It typically includes actual receipts in excess of revenue estimates and unspent amounts from departmental budgets, plus unexpended free cash from the previous year, according to the Massachusetts Department of Revenue’s Division of Local Services.

Ellis said the board of selectmen has free cash policies that set a target as a percentage of the general fund. The town goal is to retain no less than 7 to 8 percent of general fund expenditures as free cash.

“Everybody agrees, from the auditors to the Division of Local Services, that there should be some sort of free cash carried forward, and it’s up to each individual town on how much they want to do that,” Ellis said.

Powers said the town has a sound policy on spending free cash, which is restricted to paying one-time expenses, funding capital projects and replenishing reserves.

“It’s something we have done and something we will do going forward,” he said. “We will not rely on free cash to prop up the operating budget. We are meeting what auditors and sound financial practices dictate.”

Powers said he has examined other Cape towns and some off Cape communities of similar size to Harwich and many are also experiencing larger free cash numbers. Nine towns on the Cape have had fiscal 2022 figures certified, he said, and in every instance the towns are seeing the largest free cash figures ever, either this year or in the previous year.

Harwich was sixth of nine towns in the percentage of free cash at 9.69 percent of the operating budget, he said. The first five communities were well over 10 percent and a couple were close to 15 percent. Growth during the pandemic has been driving revenues, Powers said. The town’s revenue estimates during the pandemic were much lower than the actual revenues generated over that period.

We haven’t seen exponential growth relative to our peers. What we’re seeing is middle to the back of the pack growth.” said Powers.

The town has retained its AAA bond rating, only given with sound financial practice, he said. The most recent bond rating report praised the town’s creation of special purpose stabilization funds, such as using the increase in the short-term rental tax for housing and wastewater projects. The bond company liked the town using non-traditional revenue sources to fund important things, he said.

The free cash level is the confluence of what is happening in the economy and the world,” said Powers.

Selectman Larry Ballantine said there has been discussion about free cash being bad, but he disagreed. Ballantine said to some extent it is “very good,” because it allows spending in the following year without the need for borrowing. Powers agreed.

So how will the free cash be spent? Selectman Julie Kavanagh suggested using the one-time pot of money to address programs on the board’s want list, such as workforce housing, and funding early childhood education programs. She said the town could use $500,000 to purchase a duplex to secure needed housing. Realtor Richard Waystack said the cheapest house on the market in Harwich costs $500,000; he suggested creating a buy-down program, providing $100,000 for five families looking to buy homes here.

Selectmen are looking at using free cash to fund the majority of the $5.4 million in requests in this year’s capital plan. The board is also considering using $1 million to reduce the town’s financial obligation to the Other Post-employment Benefits for retired employees, and putting $1 million in the stabilization fund.