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SAUGUS — There are all kinds of benefits to having a healthy supply of free cash, Town Manager Scott Crabtree said last week.
The town received an early Christmas-Eve present Thursday when it found out that the Department of Revenue certified free cash for more than $4.2 million, Crabtree, along with the Board of Selectmen and the Finance Committee said.
“It has been a long-standing financial priority and goal of this administration to have adequate annual free-cash reserves,” said Crabtree.
The biggest benefit of having free cash, or a surplus, is that taxpayers can save millions of dollars in borrowing on capital improvement projects, among them the bonds the town obtained for the middle-high school.
“Having a healthy annual surplus is one of the foundations for maintaining the Town’s S&P AA+/Stable bond rating,” Crabtree said.
The surplus will also allow the town to save money on whatever it borrows to fulfill the district-wide Master Plan, Crabtree said.
“In addition, following these best financial and management practices in having a healthy annual surplus allows flexibility for the town to continue to fund and build its stabilization account (rainy day fund) and pay for snow and ice costs within the year they were incurred.
“These are all sound financial-management practices highlighted in the recent S&P Global bond rating report,” Crabtree said.
Crabtree was first installed as Town Manager in 2012 and, after a short stint on the sidelines, was back in office in 2015. He said it has been a slow climb from fiscal instability.
“After implementing sound financial practices and policies, a goal of having free cash certified between 3-5 percent of the town’s annual budget has been consistent,” he said. “It was this formal financial management-adopted policy that helped the town reach its free cash and financial goals.
“The certified free cash has partially been used to help fund deposits in the town’s stabilization fund and contributed to the town’s bond rating increases, which has boosted the overall financial stability, flexibility, and sustainability of the town.”
Free cash consists of unanticipated revenues, account balances and other miscellaneous receipts that were obtained throughout the previous year. The certified free cash of $4.2 million was obtained from higher-than-projected revenues in the form of permits, excise taxes, tax title revenue, Federal Emergency Management Agency (FEMA) reimbursement from previous years’ storms, and other non-recurring economy driven sources, Crabtree’s office said.
In addition, other strategically-planned contributors to this year’s certified free cash was the rollover of certified free cash from the previous year and a slowdown of discretionary budgetary spending from the operating budget due to the anticipated negative impact of the pandemic on revenues and collections.
“This certified free-cash amount will help to maintain financial stability and flexibility within the town and sustain efforts toward continuing to maintain and potentially upgrade the town’s bond rating,” said Crabtree.
Recently, the bond rating was reaffirmed as the second-highest tier, a AA+/Stable rating, with national rating agency S&P Global Ratings. This ranking, which continues to be the highest in Saugus’ history, is saving the taxpayers and town substantially on current and future borrowing costs,” Crabtree said.
“Our town has obtained and now maintains a healthy and sound financial outlook, thanks to the continued support of those serving our community and working towards a unified vision,” Crabtree said.
Scott Crabtree, left, reports a $4.2 million surplus. (Bridget Turcotte)
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