Supplemental Message From Easton First Selectman Bindelglass

**News Release Submitted by Easton First Selectman Bindelglass**

Mill Rate Information

Good morning,

As promised, here is the supplemental post about setting the mill rate. The mill rate is the multiplier applied to the assessed value of your property to calculate your taxes. As I have described earlier, after the budget is approved, the Board of Finance must set a mill rate. One might think that the mill rate would simply go up by the same amount as the budget increase, in this case 2.65%. However, in setting the mill rate, the board also looks at revenue and tax collection estimates. For instance, if revenue might go down, then the amount of taxes needed to fund a given budget would need to be higher than the budget increase.

The town also has an undesignated or rainy-day fund. That fund should be maintained at a high enough level to give us a financial cushion should we need it, and to convince potential lenders to the town that we are financially worthy of obtaining loans. (That calculation by lenders is half of what they look at, the other half being how much debt the town has, which in our case is almost zero.) Too large of a rainy-day fund means that the town is taxing you, holding your money, and earning interest on money that arguably should be yours in the first place. Year over year, that fund grows if we exceed our goals for revenue and/or operational efficiency. That leads to two questions.

First, what is the right amount to hold in the undesignated fund? That question is often debated. We look at the fund balance as a percentage of the total budget, and generally aim broadly for low double digits. Other considerations like economic conditions, anticipated larger expenses, or significant revenue changes are factored in to the thought process as well. For insight into how this was approached this year, I recommend watching the May 6, Board of Finance meeting to understand their thinking on the overall picture.

The second question is how does the undesignated fund affect the mill rate? When the undesignated fund balance is above what the Board of Finance feels is necessary, the board has taken the position that we are holding more of your money than we should be. For a number of years, to compensate for this, the board has taken money from the undesignated fund and allocated it for budgetary expenses which reduces our need to tax you and effectively gives you back this excess money that we collected from you.

This is actually what the board was deciding when they set the mill rate; how much to allocate. Last year the board allocated $2,402,500. This year, after considering some of what I mentioned above, the board allocated $1,975,000. This decrease in allocation, leads to a 4.93% increase in the mill rate, even with a budget increase of only 2.65%. Hopefully, this is helpful, but feel free to reach out to me with any questions. Historic info on mill rates over the decades is available on the town website on the Tax Collector page.

Best,

David