ATHOL — Athol Town Manager Shaun Suhoski met with the Finance and Warrant Advisory Committee on Dec. 12 to work on amending the town’s fiscal management policies in hopes of further improving the town’s overall financial health, while also enhancing its future bond rating.

The last time the policies were updated was in October 2014. Town officials at the meeting decided that a policy addressing leases for capital items, such as dump trucks and other vehicles, should be added at a later date.

The examination of the fiscal policies comes in the wake of November’s meeting between the FWAC, the Selectboard, and UniBank Senior Financial Adviser Lynne Foster-Welsh. Foster-Welsh told the town officials that the fiscal policies should be tightened up to better illustrate the town’s commitment to sound financial management. That would help in improving Athol’s bond rating, which, according to Standard & Poor’s, is currently AA-/Stable.

Among the amendments suggested was setting the combined balance of free cash and stabilization account monies at between 15 and 20 percent of the town’s annual general budget. The policy approved in 2014 set that amount at a specific minimum of 16.7%.

“For purposes of discussion,” said Suhoski, “for a small community you want to be at the high end of that (15-20 percent) range, because a million-dollar problem is a million-dollar problem in a small town. In a bigger city, where they have access to more funding sources, it might be at the lower end of that range. We’re kind of in the middle. So, I’m trying to capture the minimum from the GFOA (Government Finance Officers Association) and her target range — she said 15 to 20 percent. I like the minimum target because it ties into an industry standard.”

Another amendment set the target for the Capital Improvement Plan Fund at a minimum of 4% of the general operating budget. The written policy had that figure set at 6%, which Suhoski and FWAC members believed was incorrect. FWAC chairman Ken Duffy said discussions several years ago increased the minimum target from 2% to 4%, with a goal of 6%, but did not set the minimum at the higher number.

Four percent of the town’s FY24 budget of $27.1 million would amount nearly $1.1 million.

Suhoski and committee members agreed to increase deposits to the town’s OPEB (other post-employment benefits) Trust Fund. The policy established nine years ago called for the town to add either $10,000 or 2% of free cash, whichever was greater, to the fund each fiscal year. At Suhoski’s suggestion, the committee agreed to increase the contribution to 5% of free cash, while eliminating the $10,000 minimum. Even with the increase, it’s estimated the town’s pension liability won’t be fully funded until 2036.

Referring to the manual’s section on CIP (Capital Improvement Plan) Policies, committee member Ben Feldman observed, “I see nothing on leases for funding purposes. Now, I know we need trucks, but there’s nothing — be it short-term leases or long-term leases, whether the payout at the end of the lease is a dollar and we own the piece of equipment. There’s nothing in here about leases that I can see. Really, isn’t that another form of debt that we’re obligated to pay for?”

“No, there really isn’t anything in here as far as guidelines,” said Gary Deyo, who also sits on the Capital Programs Committee.

“That’s kind of a new thing over the last five years,” committee chair Ken Duffy interjected.

“Last year under the purchase of trucks,” said Deyo, “it was under a lease program because the trucks were like 350 ($350,000) per, and we bought two under a lease program. That’s $700,000 in debt, but it doesn’t show up anywhere here.”

Suhoski added that Foster-Welsh did inform town officials that all leases had to be reported as debt. “A lease really is a kind of loan,” he said. In response to a question, Suhoski said leases are not approved individually at Town Meeting the way loans are. They are, however, presented as part of the overall capital plan considered by town meeting voters. Money to pay for leases, he explained, comes out of the capital plan, which is funded by free cash.

“I think (Foster-Welsh) pretty much said the state is starting to clamp down on how you report your leases, and what’s required with all that,” said Duffy. “If the town approves so many leases in a given year, you need to really have funding in place for the second and third year.”

Committee members agreed with a suggestion from Suhoski that the issue of leases be put aside until the policy manual, as amended at last week’s meeting, is approved by the Selectboard. “We could then look at leasing,” said Suhoski, “with everybody involved.”

The Selectboard will consider its approval of the town’s fiscal management policies manual sometime after the first of the new year.