Use Of Interest From Borrowed Money In Nauset Budget Questioned

by Ryan Bray
Nauset School Superintendent Brooke Clenchy discusses the regional school district budget for fiscal 2025 with members of the Orleans select board and finance committee March 27.  RYAN BRAY PHOTO Nauset School Superintendent Brooke Clenchy discusses the regional school district budget for fiscal 2025 with members of the Orleans select board and finance committee March 27. RYAN BRAY PHOTO

ORLEANS – Plans to use interest garnered through money borrowed for the Nauset Regional High School construction project as part of the regional school district operating budget for the new fiscal year raised eyebrows during a joint meeting between Nauset officials and the town’s select board and finance committee last week.

The Nauset Regional School District’s $29.2 million operating budget for fiscal 2025 includes $1.2 million in estimated receipts, a figure that’s up $919,000 from the current fiscal year.

“What’s driving that number?” asked Kevin Galligan of the select board March 27.

Giovanna Venditti, the regional school district’s business director, said the district netted the additional revenue through interest on $38.2 million that was borrowed at the start of the project’s construction. The funding was invested with the Massachusetts Municipal Depository Trust, or MMDT, at an interest rate of 5.6 percent, she said.

But select board and finance members had questions and concerns with using the money as part of the district’s operating budget. The additional revenue represents a one-time supplement to the budget, leaving officials to question how to make up for the approximate $900,000 shortfall that would be left in its wake next year.

Nauset School Superintendent Brooke Clency said earlier in the evening that salaries and contractual obligations “always” leave school officials starting with a deficit when it comes time to prepare the budget for the new fiscal year. As Mark Mathison of the select board saw it, using the interest would only compound that deficit.

“Are we going to start next year with a $900,000 shortfall, right from the get go, compounding the rest of the budgetary problems and processes?” he said.

The district is counting on “excess and deficiency,” or E&D, funds from fiscal 2025 to cover the shortfall for FY26, according to Chris Easley, who chairs the Nauset Regional School Committee. E&D are surplus funds that are certified by the state at the end of each fiscal year, similar to what towns certify as free cash.

Easley said E&D funding will be “robust” for FY25, coming in somewhere between $700,000 and $1 million.

“So I think we have a cushion for a few years here,” he said.

But Venditti said that use of E&D annually to help balance the operating budget is not sustainable in the long term, leading town officials to again question the one-time use of the interest.

Town Manager Kim Newman said with more than a month still to go before the May 13 annual town meeting, where voters will weigh in on the town’s $8.3 million share of the regional school budget, there’s still time to explore other options for funding the $1.2 million, even if it’s by way of a Proposition 2½ override.

“We have an opportunity right now in the next couple of weeks to make this budget whole at the number that you need,” she said. “We still have those options available, whether it’s an override or something else, to not use this so we don’t create [the $900,000 deficit].”

Others on March 27 questioned the legality of using the interest as part of the operating budget. Lynn Bruneau of the finance committee said a member of the finance committee in Brewster raised concerns to her, saying that any interest derived from money borrowed for the high school project would have to be reinvested into the project itself.

“My concern is what’s the integrity of this number in holding up this budget? Because if this $1.2 million is not a good number, then this overall budget is not solid,” she said.

“We asked the question, because we need to know how these funds can be utilized,” Easley said. “And we were told this is the correct method for utilizing it.”

Newman said depending on how the money was borrowed, it’s possible that the interest could be used for purposes other than the high school project. She said that the town and the regional school district are seeking additional legal advice regarding how the interest can be used.

Clenchy, meanwhile, said Nauset officials would explore other funding options for the $1.2 million apart from using the interest as part of the budget.

“We’ll go back and take another look to see if there’s a different level of specificity that we can arrive at and bring it forward to see if there’s something out that’s doable out there.” she said.

Cape Cod Tech Presents $17.4 Million Budget

The select board and finance committee were also presented with Cape Cod Regional Technical High School’s proposed budget for the new fiscal year, which currently sits at $17,484,000.

The new budget represents a 4.3 percent increase from the current fiscal year. Orleans’ overall share of the assessment is $434,610.

Erin Orcutt, business administrator for Cape Cod Tech, said inflation had a heavy hand in the new budget, driving up costs in areas including transportation, health insurance and supplies and materials.

“We really have tried to do as much as we can to drive down the assessments to our member towns,” she said.

Projected student enrollment at the school is down two students to 662. But the number of students attending the school from Orleans is up one from 14 to 15, Orcutt said.

“I’m just so happy with the stability you’re able to bring to us,” Galligan said. “We appreciate that.”

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