7574-R1_LGP_MechanicFalls_AnnualReport_2021_Text_4C_Web

49 accounts or the general fund so far as our undesignated fund balance maintains a healthy level. These funds represent a majority (or 80.7%) of our total revenue, are strictly within our means to control, and are collected locally. State Funding includes our local portion of State Revenue Sharing and Local Road Assistance Program (LRAP). Revenue Sharing is set within the Governor’s budget and has historically been substantially higher. Currently municipalities are receiving 3.75% of all state collected income tax and sales tax revenue These funds are distributed to each municipality based on the revenue sharing program set by the legislature. Traditionally our share has been approximately $300k. At the time of writing this we are being told the percentage rate will remain the same but to expect total state collected funds to increase from $138mil in the current fiscal year to $144mil in the upcoming year as retail spending resumes post lockdown. LRAP funding is only approx. $20k each year and is based on the amount of state roads which we plow and maintain. In all, state funding makes up only 11.2% of our total revenue. Lastly Internally Generated/State Reimbursed funds consist of tax exemptions created by the Legislature which would otherwise be included within the Internally Generated category. In order to make up for these funds the State compensates us for a portion of this lost revenue. Homestead exemptions account for a majority of these funds, with BETE (or taxes on commercial equipment) making up the remainder. At the time of writing this, and hopefully unchanged by the next legislature, we expect to receive 70% of lost revenues from homestead exemptions to be paid by the state (Paradoxically, these tax exemptions are funded by the portion of income and sales tax not shared with the municipalities through the Revenue Sharing program). These funds represent the last 8.1% of our total revenue. As the numbers affirm, the level of external funding sources is proportionately small, accounting for only 11% of our budget (or $335k in aggregate). If we compare this amount to our Total Fund Balance (designated and undesignated) as of January 2021 (a balance of $1.3mil) we can note that we have reached a sum comfortably above the numbers we rely on from external sources. The general recommendation for government accounting practices is to retain three months of total expenditures putting Mechanic Falls’ minimum threshold at $750k in cash on hand. This further indicates our ability to cover any potential revenue sharing shortfalls or delays. The outside world can impact our ability to generate local revenue to meet the needs of our residents. One tool used to attest to the carrying capacity of a population is an excise tax trend analysis. Excise Tax is a value- added tax paid each time someone registers their vehicle(s). This tax is based on the MSRP of a new vehicle and how its value depreciates over time. An economic indicator of increasing trends in excise tax generation from people registering more or higher value vehicles suggests not a downturn in the means of town residents but instead an increase in private net worth. As the data shows we have been averaging a steady $20k annual increase in excise tax collection. In response to office closures and Executive Orders waiving vehicle registration requirements many towns expected or actualized losses in excise taxes. For us, the Year-to-Date comparison between the current year and where we found ourselves on Feb. 10, 2020, before the Covid19 inspired global contraction began, we find ourselves $44,500 ahead in collections. This means that despite the job losses, travel restrictions and work-from-home reality in which we find ourselves, more and higher valued vehicles are being registered at record rates. Regardless of what we are being told to expect we have instead more than doubled our annual growth rate for excise tax collection within the first seven months of the current fiscal year. The data continues to speak to a core stability which comes from a modest standard of living and a self-reliant approach to local government.