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By ANDREW MARTIN
The Hopkinton Town Council voted 4-0 to authorize borrowing $500,000 to offset upcoming deficits in the general fund balance.
Town Finance Director James Lathrop explained that the town will face cash flow problems in the months of September 2008 and March 2009. During the months, there are estimated deficits of $346,137 and $489,263, respectively.
The shortfalls stem from the fact that those months feature more bill payments than any others. For example, in September only, the town has $54,000 to pay for workers’ compensation on top of all its other bills.
The biggest payment, however, is to the Chariho Regional School District. Although the town receives state aid to cover a third of the Chariho bill, Hopkinton gets that reimbursement at the end of the month. But that money comes only days before another payment is due to the district.
To counteract these impending deficits, Lathrop proposed borrowing $500,000, which would meet the town’s obligations for the full year. The money would be spread across a minimum of seven months to a maximum of nine months.
“It’s a small amount for the short-term … but it’s not money that we should have to spend,” Lathrop said. He suggested that the town borrow the money and then put any remaining funds in the bank to off-set the cost. Lathrop said the net cost to Hopkinton would be under or around $10,000.
Another reason for this cash flow problem is the town’s fund balance is only $3 million, according to Lathrop. In order to raise that amount, would mean higher taxes, Lathrop added.
Before coming to the council looking for $500,000, Lathrop first proposed a change in the schedule for making payments to Chariho. His plan would allow Hopkinton to pay just 5 percent of its Chariho bill across four months, as the town does now in July and August, with the remainder of the money to be made up during the rest of the fiscal year.
This issue first came up at the School Committee’s April 8 meeting, when it approved a one-year pilot change to the payment schedule. If the pilot succeeded, an amendment would subsequently be made to the Chariho Act to change the payment schedule. The catch, however, was that all three towns in the district had to approve. If one town declined, then the change would not happen.
And on May 12, Charlestown effectively shut down the proposal. The council unanimously rejected Hopkinton’s request based on learning that Richmond would not support the change either. Also, both Richmond and Charlestown wanted to focus on other issues such as the three-part $25 million bond for construction and repairs at Chariho’s Switch Road Campus.
Councilor Sylvia K. Thompson asked what would happen if Hopkinton delayed its payments to Chariho.
“And breach our contract?” Town Solicitor Patricia Buckley asked, referring to the Chariho Act.
Lathrop said he understood Thompson’s view, but he thought it would set a bad precedent. A resident, he added, could see it as, “If the town doesn’t pay, then why should I?”
Council President Vincenzo Cordone agreed with the finance director. “We had a solution and [the other towns] said no so we’ll have to make due with that. Not paying should not be an option,” he said.
Councilor Beverly Kenney was not in attendance.
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