Lyme Approves $14.23 Million Budget, Avoids Tax Increase With Rainy Day Fund

LYME, CT – The Lyme Board of Finance this week approved a $14.23 million proposed 2026-27 budget with no projected tax increase after using $2.5 million from the town’s reserves.

Although the overall budget proposal is up 25.2%, the use of reserves allows the town to hold the tax rate steady.

Finance board members on Tuesday voted unanimously to approve the spending plan, which represents an increase of $2.86 million over the current budget. 

The proposed budget would keep the tax rate at 14.50 mills, but the rate will not be officially set until the budget is approved by voters.

The overall budget increase is driven by a $2.88 million capital spending plan. That’s up $2.35 million from the current year’s “uncharacteristically light” spending, according to finance board Chairman Alan Sheiness. 

Sheiness attributed much of the jump to the $1.7 million Beaver Brook Road culvert replacement project, half of which is expected to be reimbursed in a future budget year. The capital budget also includes funding for two new town trucks in the highway department as well as public safety communications equipment. 

The proposed town operating budget, which includes general government, education and debt service, comes in at $11.34 million. That’s an increase of $506,472, or 4.67%, over current spending. Education costs, which at $7.02 million comprises the largest portion of the town budget, are up 0.83%. 

Excluding education, the spending plan for town operations is up 11.58%. Sheiness attributed roughly one-third of the proposed increase to expenses such as employee raises and inflation. 

The remaining two-thirds reflects factors including the expansion of the finance director position to full-time, higher health insurance costs tied to staffing changes, increased funding for snow and ice removal and federal compliance work to make the town website accessible to people with disabilities.

There is no outstanding town debt in the proposal.

The finance board voted unanimously to endorse the proposed budget based on a plan to use $2.50 million of the town’s $6.11 million general fund balance – also known as a rainy day fund – to absorb the increase. The allocation would bring the fund balance to $3.61 million, or 31.8% of the town’s total operating expenses. 

Healthy reserves help towns qualify for higher bond ratings, which in turn earn favorable interest rates on municipal bonds. Bond agencies generally recommend municipalities keep at least two months of annual operating expenses – or 17 % – in the rainy day fund. 

The amount in Lyme’s general fund based on the proposed budget would cover the town for roughly 4 months. 

Sheiness emphasized the fund balance remains consistent with past years, representing a strong reserve for emergencies or “a bump up” in capital spending like the one seen in the proposed budget. 

He said the town’s healthy reserves contributed to strong bond ratings when the regional school district went out to bond on the district-wide renovation project with an Aa2 rating from Moody’s, and bodes well for interest rates on the renovation of Lyme’s fire stations, which could begin in several years. 

Finance board members also considered a 0.25-mill increase to the tax rate based on urging from Sheiness to evaluate long-range planning needs over the next several years. 

“We wanted everyone looking at all the years,” Sheiness said, emphasizing the importance of planning for future expenses while balancing current impacts on taxpayers.

Board member Steve Mattson during the meeting advocated for keeping the mill rate flat since no large projects are anticipated in the next couple of years. 

“I prefer not to take an increase unless it’s definitely needed,” Mattson said. 

Sheiness said the tax rate has been “essentially flat” since 2019, including a .45-mill reduction in 2023 and a small increase the next year after a townwide property revaluation. The finance board at that time set the rate at 14.5 mills – slightly above the level that would have kept overall tax bills flat – resulting in an effective tax increase of about 1.3%.

The finance board chairman said the budget provides for necessary operating expenses, capital projects and compliance with state and federal requirements.

“And it does it without raising the mill rate, using some general fund money – but not to the degree that drives a general fund (balance) to a point lower than it has been in recent history,” he said. 

The proposed budget will go to a 6:30 p.m. public hearing on Thursday, May 7 at the Town Hall before the annual town budget meeting later that month.