In Canton, an accumulation of financial decisions is forcing the town to dig into its savings to keep the town afloat.

Regularly digging into the fund balance to balance a town budget is similar to relying on your savings account to pay your bills. But this year, Canton is grabbing $616,000 from its fund balance, dragging the amount of the current fund balance down to 19 percent of the town’s total revenue.

The state Local Government Commission recommends that towns keep at least 16 percent of annual revenues in a fund balance.

Canton’s current financial situation is the result of several factors — some preventable, some beyond the town’s control.

The most recent and substantial factor was the revaluation of Evergreen Packaging, formerly Blue Ridge Paper Products — the giant, 100-year-old paper plant that sits in the heart of town. When the property value was assessed in 2003, it lost 20 percent of its value — and Canton lost a huge portion of its tax base.

Aldermen raised taxes by 10 cents in 2007, citing the loss of Blue Ridge Paper tax revenue.

But other decisions made in the years before the Blue Ridge Paper revaluation contributed to the current budget situation.

For instance, the town has a contract to sell water to the town of Clyde that dates back 46 years. For the majority of that time, Canton apparently never raised water rates, though the contract permitted it. As a result, Canton lost thousands of dollars in the deal.

This year, the town is projected to lose $117,000 in water sales to Clyde. In one previous year, that number was close to $300,000; several years ago, the town lost $180,000 on the water contract, according to figures tossed around at a recent town board meeting.

Angry residents demanded to know why the town failed to raise rates to Clyde. Town officials could only say they looked into the problem and began increasing rates last year. They’ll go up 15 percent per year for Clyde residents until Canton is not losing money on water sales.

Alderman Eric Dills expressed amazement with the town’s lack of oversight.

“We should have been bumping Clyde’s rate up for years. If we’d been doing this all along, we wouldn’t be losing money,” said Dills. “Our citizens subsidize their water.”

The town of Canton could also have been accumulating money by upping fees on garbage collection. But it’s been “well over a decade since garbage fees have increased,” said Town Manager Al Matthews.

Garbage fees are currently $2.50 a month, and will increase to $5 per month as of July 1 . Apparently, that’s still a steal for Canton customers, Matthews says. Private garbage collection companies charge between $12 and $18 a month. Still, by only charging $5, the town is operating at a loss.

“Even at $5, we’ll still continue to subsidize that service with tax revenue,” Matthews said.

To make garbage collection pay for itself, rates would need to rise to $8.65.

A 10-cent tax increase passed by the Canton board last year seemed like an answer to the financial woes. Unsurprisingly, it proved wildly unpopular. Residents showed their disapproval by voting three of the four aldermen who approved it out of office. It was a phenomenal upset — each had served for years; one had been in office since 1967.

Challengers ran on a platform of opposition to the increase and promised to do what they could to lower taxes. But the first budget by the new board fails to do that — something many felt was the whole reason they had been elected.

“I understood when we voted for this board that taxes would go down,” said Canton resident Patsy Hagood. “We did not get our taxes lowered. We got our water rate raised and our trash rate raised.”

In defending themselves against residents’ concerns, the current board is laying blame for the town’s situation on the previous board.

“We wouldn’t be in this (situation) if the water and sewer in Clyde had been raised and if the garbage rate had been raised,” said Alderman Dr. Ernest Stines. “If a lot of things over the years had been done, we wouldn’t be where we are right now.”

Matthews maintains the aldermen spent hours in budget work sessions going over expenses line item by line item and figuring out where they could make cuts. It still wasn’t enough to justify lowering taxes.

“You can always cut taxes, but the problem with cutting them right now is that it would create a negative cash flow and would put us in a perilous financial position,” he says.

Matthews says that “the reliance on the fund balance didn’t happen overnight,” and in much the same way, can’t be fixed quickly.

According to Mayor Pat Smathers, the town would have to raise taxes by two to four cents to balance the budget this year without taking money from the fund balance.

To begin replenishing the fund balance is going to require patience, but could happen by the end of the year, said Matthews.

“If we can get revenues up and keep expenses down and keep the current tax rate, I think we can replace (the money),” Smathers says.

In the meantime, it appears some residents will at least try to be understanding.

“You all were dealt a deck of cards, and you have to play them,” Canton resident Al Kline told the board. “And starting July 1, you can start re-arranging things.”