By Drew M. Bailey, Community Reporter
Northborough – A preliminary Free Cash Policy for 2013 fiscal year (FY) 2013 was discussed at the Oct. 17 Board of Selectmen meeting. The plan is still under development, and no votes were cast. The final plan will require approval from the Board of Selectmen, the Appropriations Committee and the Financial Planning Committee.
The town adopted the Free Cash Policy in November 2010. The Free Cash account collects revenue that exceeds estimated receipts and expenditures that come in under budget, and applies them to one-time expenses – such as repairs to municipal buildings, the replacement of the town's vehicle fleet, and other equipment purchases – that would otherwise require borrowing.
According to Town Manager John W. Corderre, this policy gives Northborough financial flexibility and stability by removing one-time expenditures from the town's operating budget. This policy of prioritized spending allows for the establishment of financial reserves, reduces additional costs associated with financing, and positions the town to more effectively face unstable economic conditions.
The town's Free Cash Policy resulted in a surplus of $1,865,000 for FY 2011. The preliminary FY 2013 plan proposes that $150,000 of this be applied to the Appropriation Committee's Reserve Fund, used for the funding of emergency expenditures; $500,000 as a subsidy to the town's operating budget; $715,000 to fund capital projects that would otherwise require borrowing; and $500,000 available as free cash to potentially be used in FY 2014.
No money was allocated to the Stabilization Fund, an emergency savings account for the town for FY 2013. Historically this fund has received a stipend of $100,000, but according to Corderre, in the current economic environment it is more important to apply any excess to Capital Project expenditures, which if ignored, result in higher costs down the road.