The Charlestown Town Council will be considering a new fund balance policy on January 10th, in an effort to maintain financial stability and improve long-term recovery from disasters such as hurricanes. If the policy is passed, Charlestown will be among the first towns in the state to have a written fund balance policy. The updated policy aims to protect against financial stress, keep taxation stable, limit debt, support capital expenses and maintain orderly financial actions. The town sets a target range for its undesignated fund balance, historically ranging from 15% to 25% of the previous year’s operating budget.

The Town Council commissioned a risk-based analysis and stress test of the town’s reserve requirements, through the Government Officers Finance Association. The association notes that there are future, unknown risks that the town must be prepared for, in addition to known risks like floods, hurricanes and economic recessions. The analysis ultimately found that the policy provides acceptable and prudent reserves, encourages sustainable uses of reserves, and provides guidance on utilization and replenishment.

The Budget Commission refined the draft and approved the policy on December 3rd. The policy includes a critical base threshold of reserves of $4.3 million, and a target range for the undesignated fund balance of 23% to 33% of the town’s annual operating budget. The policy also provisions for budgeted utilization of the UFB for consistent purposes, with required formal action by the Town Council. The comprehensive policy is recommended to help the town adjust to changing circumstances and plan for a stable future. Bonnie Van Slyke, a member of the Charlestown Town Council, authored this report.

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