TIVERTON — The Town Council has bought out the last 11 months of the town administrator’s contract for $40,000, a little less than a half-year’s salary, according to an agreement released last night between former administrator W. Glenn Steckman and the town.

The council also agreed to pay Steckman’s health and dental insurance premiums in full through Sept. 30.

Council President Louise Durfee said last night that the town will save $20,000 in the current budget in the administrator’s salary account, because the interim administrator, James Goncalo, is already being paid as town treasurer.

Only the cost of the difference between the treasurer’s salary and the administrator’s salary will be taken from the administrator’s account, Durfee said.

Steckman was being paid $83,200. He had completed a little more than two years of a three-year contract before stepping down.

His decision to resign became public Dec. 10, about a week after he and the council negotiated a severance package that both sides agreed would remain confidential until Steckman left the town’s employ. Friday was Steckman’s last day.

The council’s refusal to back Steckman’s attempt to fire Police Chief Thomas Blakey last April marked the sign of growing strains in the relationship between the administrator and his bosses.

Steckman has declined to say whether the Blakey incident influenced his decision to leave early. He has indicated that budgetary constraints have frustrated him on the job.

The settlement agreement says that both Steckman and the council wished to terminate the administrator’s contract, and that the administrator left “for personal and/or family reasons.”

It specifies that Steckman departed “under good terms” and “with satisfactory performance.”

Town Solicitor Andrew Teitz last night declined to release the council’s vote on the separation agreement, nor would he discuss the reasons.

Also last night, the council received a warning from its auditor that the town’s rainy day fund is too low.

Standing at about $1.2 million for the fiscal year that ended last June, the fund represents a reserve of only 4 to 5 percent of budgeted expenses, far less than the 10 to 15 percent fund balance that bonding agencies look for when they rate municipal bonds, according to Paul Dansereau.

Dansereau indicated that the town fund is likely to shrink even further before it gets and bigger, since the current budget relies on $900,000 from the surplus to offset taxes.

The town is planning to discontinue the practice of using the surplus to keep down the tax rate in the budget year beginning July 1.

Dansereau, of the accounting firm of Parmelee, Poirier, and Associates, of Warwick, also said the School Department had a $14,000 deficit in its unrestricted fund last June 30, a shortfall that must be made up.

gmacris@projo.com