Challenging Budget Process Ahead for Middletown

It is still early in the town’s process for creating a budget for FY2013 (which begins July 1, 2012), but the challenges are already becoming evident. At a pre-budget consultation workshop with the and recently, Town Administrator Shawn Brown put the local economy in perspective with the state and national scene.

Brown, whose background in finance includes eight years as Middletown’s Finance Director (before becoming Town Administrator in 2008), experience as a Finance Officer in the U.S. Army, and private-sector accounting work, provided a budget message by describing different parts of economy.

Acknowledging the effects of several years of recession, Brown characterized the national economy as “still fragile and spotty,” with recovery delayed until 2013. “Also, now that we’re in an election year, D.C. politics will begin to play havoc, and we’ll feel it here in Middletown with our dependence on federal budgets and defense spending,” said Brown. “As soon as money starts to get tighter, we worry about our defense subcontractors.”

Brown mentioned a number of sources, including Moody’s Report, for data that indicate both the state and local economy are stagnant, and that Rhode Island has a 59% chance of going into a double-dip recession. “In Rhode Island, we are in a difficult regulatory environment, and we have up to eight distressed communities in the state,” noted Brown, who also mentioned that Middletown and Newport have had the two largest losses in population in the state in recent years.

In terms of specific challenges that Middletown faces in this year’s budget process, Brown mentioned stormwater and wastewater management costs that are based on state or federal mandates so there is no flexibility in addressing the issues. “Our wastewater consent agreements have costs in the millions (or hundreds of millions of dollars), and our stormwater consent agreements are underway, and we are paying for them,” said Brown.

He also mentioned labor costs as an issue for Middletown, including “post-employment costs” for people who have retired, as well as the labor contracts that must be negotiated this year with Middletown’s teachers and town employees.

On a bright note, Brown described a number of opportunities for economic development in Middletown, including the Base Realignment and Closure (BRAC) Navy properties the town is pursuing, and the update of the Aquidneck Corporate Park.

For the FY2013 budget, however, the town must deal with flat revenues. “We will see modest increases in restricted grants and aid, but less governmental support, so we end up at ground zero,” said Brown, who noted that a comparison of revenue for 2011, 2012, and 2013 shows flat revenue for all three years.

Although the town has raised taxes in recent years, Brown pointed out that in all years the increase has been below the maximum allowed by law. “There’s a balancing act that is required,” he said. Although the maximum increase allowed, 4%, would give the town an additional $1.6 million for FY2013, Brown acknowledged Town Council’s expressed desire to not increase taxes. “The challenge is to reshuffle priorities while embracing strong financial practices, and the other part of the task is to create opportunities to generate revenue,” said Brown.