DOVER-FOXCROFT – Selectmen were told Monday that the town was in good financial shape but that less reliance should be placed on the surplus account because it has become harder to replace the funds.

The town had $356,880 in uncommitted surplus funds in the bank as of June 30, according to the latest town audit, an amount slightly more than the recommended amount a town should have for surplus.

The rule of thumb is that a surplus account should represent 8.3 percent of a town’s annual operating expenses, and in Dover-Foxcroft’s case, that would be $340,806, according to Town Manager Owen Pratt.

Historically, the town’s surplus account has been tight, Pratt said.

“We can’t continue to take as much from it because we are not able to replace it,” he said.

In 1975, the town’s surplus account was in the negative and the town had to borrow funds in anticipation of taxes. “We don’t want that to happen,” Pratt said.

Selectmen were presented with a history of the surplus account. In 1994, the town had $358,000 in surplus, of which $165,000 was used to defray taxes.

The surplus account grew to $588,000 in 1995 and 1996, when amounts of $95,000 and $229,000 respectively were used to reduce the budget.

The surplus account then dwindled in 1997 and 1998 to $533,000 and in 1999 to $432,000. Even with the dwindling funds, town officials used more from surplus than in previous years to help lower the tax burden. In addition, town officials have used the funds to pay off firetruck debt, for homecoming festivities and other programs.

“We’ve got to back off substantially on surplus,” Pratt said Monday. “This is a thing to be cautious about in this fiscal year.”

Pratt said some departments did not spend all the money in their budgeted accounts in 1999, leaving about $25,000 to lapse into the surplus account. “That’s one way to replace the surplus is to not spend all the money,” he said.

Other red flags raised by the latest audit are the amount of outstanding taxes and the amount of abatements granted last year. Pratt said the amount of outstanding taxes as of June 30 was $173,000, compared to $158,000 in 1999.

In other business Monday, selectmen voted to sign a credit enhancement agreement, the last step in the process for a tax increment financing, or TIF, district created for Pleasant River Lumber Co. The company has a $7 million expansion project under way financed in part by Fleet Securities.

In a 6-1 vote with Elwood Edgerly the sole dissenter, selectmen voted to give full-time and permanent part-time municipal employees a “floating” holiday. These town employees, who currently have 10 holidays per year, had requested an additional day off to bring them more in line with the holidays given to employees in surrounding communities.

Selectmen also voted 4-3 to accept a $12,205 federal grant obtained by the police department for the purchase of mobile computers, software and a digital camera. The local match for the grant is $1,356, which will be used toward the purchases.

Some board members appeared concerned that the department will be required to pay $600 per unit per year for maintenance of the computers after 2004.