By Suzanne Hodgson
Staff Writer

“Your town is in financially good shape,” said Ron Smith, managing partner for RHR Smith, a public accounting firm from Buxton.
Smith was speaking to the Kennebunkport Board of Selectmen on the town’s financial future during the annual budget audit report at the Dec. 17 meeting. Town codes require the annual audit.
“They keep us on our toes and we appreciate that,” said Town Manager Larry Mead. “It helps us do a better job, it truly does.”
The town finished the year $100,000 above projected budgets for the fiscal year ending June 30, according to Smith. But not all the news was positive.
“Overall your town is very healthy, but it needs a fund balance policy [a policy to govern the use of undesignated funds]. A community of your size and oceanfront, it doesn’t take one phone call to go through a million dollars. Roads gets washed away,” Smith said.
Kennebunkport currently has $3.77 million in undesignated funds, but no capital reserve account  for unanticipated expenses.
According to Mead the town “set aside $40,000 a year for fire apparatus reserve. Essentially it is a capital fund.”
Mead said he will move money saved for new fire equipment into a capital fund in the near future and look to expand the fund in other areas.
Smith suggested a capital fund for departments equal to approximately 10 percent of the operating budget for each department.
Most grants require at least a 10 percent matching requirement and the capital fund would allow  the ability to apply for more grants while spreading out debt in the future, Mead said.
Mead said the town had done a good job in the last year stabilizing the budget in hard economic times, but Kennebunkport was placing short term tax relief ahead of long term planning.
 “The town has made a choice to take $400,000 and offset property taxes each year. Essentially what we’re doing instead of putting it aside for capital needs, we’re lowering the tax rate,” Mead said.
Mead said the money to stabilize the tax rate is taken from town revenue and used to subsidize revenue coming into the town through taxes.   Essentially this practice is taking money away from the town twice, but Mead added he is working to wean the town off that practice.
“In FY [fiscal year] 2010, we did a great job as a town. We cut by 15 percent, cut the amount into the fund balance to stabilize tax rates from $400,000 to $300,00 while lowering total tax commitment. Those three things were extraordinary,” Mead said.
Selectmen will review the findings and suggestions from RHR Smith and consider setting up a capital fund in the near future.

Staff Writer Suzanne Hodgson can be reached at 282-4337, ext. 233.