Auditor tells Chester board the town tax is ‘artificially low’ 'You're lean and mean, but you've got no money'

By Shawn Cunningham
©2026 Telegraph Publishing LLC

You’re lean and mean but you’ve got no money,” said auditor Ron Smith at the June 17 Chester Select Board meeting. “But we’re not in the hole,” replied Town Manager Julie Hance. Smith agreed, but reiterated that the town does not have enough money sufficient for cash flow or to weather unforeseen circumstances like storms.

“Mother nature wipes out your infrastructure and you’ve got to rebuild it – where you gonna get the money from?” asked Smith. And so began an hour long dissection of Chester’s financial position and a prescription for a stronger balance sheet.

“That’s why people build up capital reserves, emergency reserves and tax stabilization reserves,” said Smith. “That’s how many municipalities (pay for) Acts of God or other unforeseen circumstances that need to be paid for.”

Chester, on the other hand, has to borrow, which increases the cost to taxpayers, Smith said. Tax stabilization reserves help the town to keep tax rates stable when either unexpected expenses or drops in revenue happen. The reserves also allow the town to avoid borrowing.

Smith says the way to do this is to build up the “unassigned fund balance” within the town’s general fund.

“I’m not going to be popular for saying this, but you’ve got to think about raising taxes,” said Smith who maintains that the municipal tax is artificially low.

“Gambling that we won’t need it in the future even though we know we’ll need in the future,” said board member Lauren Fierman.

“And mother nature called your hand,” said Smith, referring to the flooding of July 2023.

Smith told the board that the target for companies such such as Moody’s or Standard & Poors whose bond ratings affect the interest that borrowers pay is between 30 and 90 days of operating cash as “unassigned” in the general fund. For Chester, that would be between $466,000 and $1.45 million, according to Smith who says that will take time to build. He estimated that shooting for 15 days of operating funds in the reserve and then 30 days would take three to four years. A 30 day reserve would be about $466,000 or about $115,000 per year to build according to the presentation.

Hance told The Telegraph that the Select Board would be looking at Smith’s suggestions and that Smith would attend the Sept. 2 meeting to answer questions and talk about next steps. One such step, said Hance, would be to write policies regulating the use of the town’s general fund balance and the reserve fund that was created by a vote at Town Meeting in March 2019. That fund never received an allocation until last year, when $40,000 was added to it. There is also $40,000 for that reserve fund in the budget for this year.

The board response to Smith’s suggestions may become part of the town budget created this coming fall and voted from the floor in March 2027

Calendar year vs. school fiscal year

Recently, the town learned that the Smith’s auditing firm had concluded that the town had run a budget deficit for 2024. At that time, Hance told the board she doubted there was a deficit — or at least a substantial shortfall  — and that the auditors would be looking into the question this spring. Smith told the board that the appearance of a deficit was due to the way the town pays the Green Mountain Unified School District the education tax that the town collects. His firm has since revised the accounts.

The property tax that goes to the state’s education fund is collected by each town and must be disbursed to the schools within a set amount of time. But delinquent taxes – which must be paid by the town whether collected or not – are due on June 30 of the school year. Chester’s books are on a calendar year while the school district’s run July to June.

The ‘deficit’ was due to the town having to collect and disburse the education money to the schools in two different years. The problem, according to Smith, was that the town made the accounting mistake of recognizing the unpaid delinquent funds as paid, which threw the accounts out of balance.

Smith suggests going to a July through June fiscal year with multiple tax collection dates rather than the one in September. Doing that would put the town in the same fiscal year as the school and also ease cash flow and lessen the need for borrowing in anticipation of taxes. Currently the town uses a line of credit called a tax anticipation note to fill in revenue until taxes are due on September 14.

Saying that making the switch “truly isn’t that hard,” Smith called it more a matter of “public awareness.”

Smith is also talking with members of the Vermont Legislature about changing the Town Meeting day to June to align with the schools’ calendar for what he said would be better financial decision making.

Board opts to keep reservoir dam, expand spillway to cope with heavy rains

The town’s old reservoir dam was damaged by flooding in July 2023 leading to a state-required inspection which resulted in an “unsatisfactory” rating. In May, the engineering firm of Fuss and O’Neill presented three options for dealing with the problem.  At the time it was thought that FEMA would only pay for dam removal to fix the situation. Since then, Hance told the board, the agency has said it would fund the least expensive solution which is lowering the level of the spillway and widening it.

Recognizing the recreational value of the reservoir the board voted to go ahead with that plan and the engineers will begin preliminary design for the project.