Stabilization Funds

Section I - Financial Summary: Stablization Funds

A stabilization fund is a reserve account allowed by state law to set aside monies to be available for future spending purposes, including emergencies or capital expenditures, although it may be appropriated for any lawful purpose. As detailed below, the Town has established two (2) stabilization funds, each of which is accounted for and reported as a trust fund, regardless of authorized use.

General Stabilization

The Town will endeavor to maintain a minimum balance of five percent (5%) of the annual general fund operating budget in its general stabilization fund. Withdrawals from general stabilization should only be used to mitigate emergencies or other unanticipated events that cannot be supported by current general fund appropriations. When possible, withdrawals of funds should be limited to the amount available above the five percent (5%) minimum reserve target level. If any necessary withdrawal drives the balance below the minimum level, the withdrawal should be limited to one-third of the general stabilization fund balance. Further, the Town Administrator will develop a detailed plan to replenish the fund to the minimum level within the next two fiscal years.

Capital Investment [Stabilization]

The Town will annually appropriate available free cash, after current capital needs have been met and consistent with maintaining minimum year end unappropriated free cash balances, and/or at least 25 percent (25%) of new short-term rental revenues effective July 1, 2020 to this fund until the targeted balance of ten percent (10%) of the general fund operating budget is attained. By sustaining a funding balance at these target levels in this reserve, the Town can balance debt with pay-as-you-go practices and protect against unforeseen costs.