HomeMy WebLinkAbout2011-07-25 Finance Committee PacketThe Town of Reading - FINCOM meeting
7
lri d
a
FINCOM meeting
Monday, July 25, 2019 at 7:30 PM
RMHS Superintendent's conference room
Printer-Friendly Version
Brief FINCOM meeting before the 8:00pmjoint meeting with the School Committee begins
1. Bylaw revisions for November 2011 Town Meeting
a) FINCOM reporting to Town Meeting
b) Elections
2. FINCOM orientation/annual cycle
a) FY2013 Budget Calendar
b) Budget Process
3. Assessors Overlay account
4. Approve Minutes from June 29
Google Search
,COMMON CAUSE
co'vi o'N ChusE rry '
Town of Reading, Massachusetts 16 Lowell Street, Reading, MA 01867 Website Disclaimer
Virtual Town Hall Website
\0
http://www.readingma.gov/Pages/ReadingMA MeetingCal/SO1758F8...
~ ars
T..` I j1 r r ~r 1~.';
Homc Residents Businesses
1 of 1 7/25/2011 1:45 PM
3.3.2 Finance Committee
3.3.2.1 Duties
The Finance Committee shall consider all matters of business included within the Articles. of any
warrant which involve the expenditure, appropriation and raising or borrowing of money or which
otherwise impact the town finances.
3.3.2.2 Report to Town Meeting
The Finance Committee shall make a written report on all Articles that it has considered, and the
Town Clerk shall make said written report part of the "Report on the Warrant" available to each
Town Meeting Member. The report will include the recommendation of the majority of the
Committee but may also include a report by a minority of the Committee. The Committee's report
shall also state the total amount of appropriations recommended by it on each Article within the
Warrant.
When in the opinion of the Committee there is insufficient information for a vote to be taken on an
Article, the Committee may include a summary of their deliberations on such Article in the Report
on the Warrant with the notation that "Action on a Finance Committee Recommendation is
Pending". The Committee may vote their recommendation on the Article when such information
becomes available and provide a verbal report on that Article at Town Meeting.
3.3.2 Finance Committee
3.3.2.1 Duties
The Finance Committee shall consider all matters of business included within the Articles of any
warrant which involve the expenditure, appropriation and raising or borrowing of money a~v,~h+sh
otherwise imnont the Trnein's fin°nnee
3.3.2.2 Rec;ommendation Report to Town Meeting
The Finance Committee shall make a written report on all Articles that it has
considered, and the Town Clerk shall make said written FeGGmMeRdat report as part of the
"Report on the Warrant" available to each Town Meeting Member at least seven (7) days prior to
the first business session of the Annual Town Meeting, seven (7) days prior to the second
Monday in November and four (4) days prior to any Special Town Meeting. The said report will
include the recommendations of the maicrit ry of the entire
Committee but the report may also include a report by- a
minority of said the Committee. The Committee's report shall also state the total amount of
appropriations recommended by it on the entire warrant.
When in the opinion of the Committee there has been insufficient information for a
recommendation to be made on an Article in time for inclusion in the "Report on the Warrant", the
Committee may include in the "Report on the Warrant" information summarizing the Committee's
deliberations on such Article, and may include in the report the notation that "Action on a Finance
Committee Recommendation is Pending". The Committee may vote their recommendation on
the Article when such information becomes available and provide a verbal report on that Article at
Town Meeting.
3.3.2.3 Investigation
The Finance Committee, or its duly authorized agents, shall have authority at any time, and upon
the petition of one hundred (100) inhabitants of the Town or a vote of Town Meeting, to
investigate at once the books, accounts, records and management of any official body, and to
employ such expert and other assistants as it may deem advisable for that purpose; and the
books, records and accounts of any department and office of the Town shall be open to the
inspection of the Committee and any person employed by it for that purpose. The Committee
shall have no power to incur any expenses payable by the Town without authority for such
expenses having first been obtained from the Moderator, and such expenses shall be paid from
the Finance Committee Reserve Fund. The Finance Committee shall make a report on every
investigation setting forth its findings and recommendations, and shall transmit such report(s) to
Town Meeting.
3.3.2.4 Cannot Hold another Office
Any member of the Finance Committee, who shall be appointed or elected to any official body,
shall forthwith upon his qualification in such office, cease to be a member of the Finance
Committee. This provision shall not apply to the appointment of a Finance Committee member to
serve as a member of any ad hoc board, commission or committee in the Town of Reading or to
any board, commission or committee upon which a member of the Finance Committee shall
serve in an ex officio capacity.
0
Reading Home Rule Charter
Section 2-12: Establishment of Standing Committees
The Town Meeting may from time to time, by bylaw, establish standing
committees to which shall be referred Warrant Articles for study, review and
report in advance of the sessions of the Town Meeting. In establishing standing
committees, Town Meeting shall also provide for the method of appointment of
members. The method of appointment shall be by an existing multiple-member
body or shall be by a multiple-member appointment committee established for
that purpose.
Finance Committee
There shall be a Finance Committee consisting of nine (9) voters of the Town,
appointed for three year staggered terms so arranged that three (3) terms expire
each year. No member of the Finance Committee shall be an elected or
appointed Town Officer or an employee of the Town. A member of the Finance
Committee may be an elected Town Meeting Member but shall serve on no other
standing committee.
Finance Committee members shall be appointed by an Appointment Committee
chaired by the Moderator, consisting of the Moderator who shall have one vote,
the Chairman of the Board of Selectmen who shall have one vote, and the
Chairman of the Finance Committee who shall have one vote. The terms of
Finance Committee Members shall expire on the first day of July. No Finance
Committee Member shall serve for more than three (3) consecutive terms. Any
vacancy on the committee shall be filled by the Appointment Committee.
The Finance Committee shall have al,l the powers and duties granted to Finance
Committees under the laws of the Commonwealth, Town bylaws, Town Meeting
vote and other applicable laws. In addition to these powers, the Finance
Committee shall have the power to investigate the books, accounts, records and
management of any office, board or committee in Town, and may use agents in
carrying out such investigations. The Finance Committee shall report its findings,
approval or disapproval on all Articles that involve the expenditure of funds in the
Warrant in writing at least seven (7) days before Town Meeting. Such a report
shall not preclude further action or reconsideration by the Finance Committee.
(LAD
Proposed Bylaw Chances
Article 2 - TOWN MEETINGS
2.1 General
2.1.1 Date of Annual Town Meeting
The Annual Town Meeting shall be held on the third Tuesday preceding the fourth
Monday in April of each year for the election of Town Officers and for such other
matters as required by law to be determined by ballot. Notwithstanding the
foregoing, the Board of Selectmen may schedule the commencement of the Annual
Town Meeting for the same date designated as the date to hold any Federal or State
election.
Deleted: ¶
3.3.2. Finance Committe4
1
3.3.2.1 Duties¶
The Finance Committee shall consider all
matters of business included¶ .
within the Articles of any Warrant which
involve the expenditure, appropriation
and raising or borrowing of money or
which otherwise impact the town
finances.¶
9
3.3.2.2 Recommendation to Town
Meeting¶
The Finance Committee shall make a
written recommendation on all Articles
that it has considered, and the Town
Clerk shall make said written
recommendations available to each Town
Meeting Member in the Report on the
Warrant. When sufficient information has
been provided to take a vote, said
recommendations should be arose of a
majority of the entire Committee but,
recommendations may also be made by a
minority of said Committee. The
Committee's recommendation shall
include the total amount of appropriations
that it recommends on each article within
the Warrant. ¶
3.3.2.3 Report of Deliberations¶
When in the opinion of the Committee
there is insufficient information for a vote
to be taken on an Article, the Committee
shall instead provide a written report for
inclusion in the Report on the Warrant
summarizing their deliberations on such
Article. The Committee may vote their
recommendation on the Article when
such information becomes available and
provide a verbal report at Town Meeting.
The Committee's report shall include the
total amount of appropriations
recommended by it on the each article
within the Warrant. ¶
9
3.3.2.4 Form of Report¶
The Finance Committee in making its
report upon any subject referred to¶
it shall arrange the report in clear and
compact form, and shall divide it¶
into separate propositions whenever in its
judgment such divisions may b4
desirable. The Committee shall attach to
each proposition its ownQ
recommendations or a summary of
deliberations, when applicable. ¶
.I
. 3.3.2.5 Failure of Finance Committee to
make recommendation%
The failure ofthe Finance Committee to
consider, recommend and/or report on
any Article in the Warrant shall not affect
the validity of any vote or other action
taken at any Town Meeting. ¶
l./
TOWN OF READING
Finance Committee Liaisons - as of 6/29/2011
Name/Address/Email Telephone Liaison Assi$tnments
Marsie West ('03-12), Chair
781-942-0604 (H)
Board of Selectmen
3 Whitehall Lane
617-382-2865 (W)
Audit Committee.
Marsie.west@bnymellon.com
Schools
David Greenfield ('05-'14), Vice Chair
781-942-2072 (H)
Board of Selectmen
192 Woburn Street
617-662-7210 (W)
Audit Committee
dgreenfield@statestreet.com
Accounting/Finance
Barry Berman ('07-'14)
781-942-7907(H)
Schools
54 Longview Road
781-684-5705(W)
RMLD
bcberman@comcast.net
Mark Dockser ('10- 13)
781- 942-7586(H)
RMLD
110 Beaver Road
Public Works
mdockserggmail.com
Frank Fardy ('10 13` 781 944 2219(14) Community Servers
55 Grand St. Library
ffar-dy(@ve -iz 13et.
Kevin Leyne('09-' 12) 781-249-0965 Community Services
34 Larch Lane Public Safety
Kevin.leyne@veriz6n.net
Paula Perry ('I I -'14)
40 Beaver Road
piperry@comcast.net
Harold S. Torman ('03212)
77 Sunnyside Ave
Hal.Torman@lantheus.com
John Arena ('11-'12)
26 Francis Drive
johniarena@gmail.com
ADMINISTRATION
Peter Hechenbleikner
phechenbleilmer@ci.reading.ma.us
John Doherty
idoherty@reading.kl2.ma.us
Gail LaPointe
elanointe0ci.readina.ma.us
Mary DeLai
mdelai@reading.kl 2.ma.us
Bob LeLacheur
blelach6ur@ci.rqadm'g.ma.us
781-944-8224
781-942-2794 (H)
TBA (H)
942-9043(W)
944-5800(W)
942-6604(W)
Library
Public Works
Economic Development
Schools
Economic Development
Public Safety
Town Manager
Superintendent of Schools
Town Accountant
942-5800(W) Director of Finance & H.R.
(Schools)
942-6636(W) Asst. Town Manager/Finance
942-9805(H) Director (Town)
Q
FINCOM FY12 Schedule
(All meetings are Wednesday at 7:30pm in Town Hall, unless noted)
2011
July 25 regular meeting (Monday at RMHS joint with School Committee)
September 14 regular meeting
Revenue/Cost cutting updates; Capital overview; Public Safety
October 12 Financial Forum (at the Senior Center)
Revenue/Cost cutting; Capital; Economic Development; FY13 budget guidance
November 14 Subsequent Town Meeting begins (Monday at RMHS)
December 14 regular meeting
2012
January 17
Selectmen Town budget meeting (Tuesday 7pm - location TBA)
January 24
Selectmen Town budget meeting (Tuesday 7pm - location TBA)
January 25
Financial Forum II (at the Senior Center)
February 8
regular meeting
March 7
FY 13 Budget Meetings (Town depts.)
March 14
FY 13 Budget Meetings (Town depts.)
March 21
FY13 Budget Meetings (Schools & Facilities)
March 28
FYI 3 Budget Meetings (Vote on Budget & Warrant articles)
April 11
regular meeting
April 23
Annual Town Meeting begins (Monday at RMHS)
June 27
Year-end meeting
0__~
Town of Reading
Finance Committee
July 6, 2009
b~
Introduction - Current Finance Committee information
Section 1 - Mission Statement & FINCOM Policies
Section 2 - Reading Home Rule Charter
Section 3 - Reading General Bylaws
Section 4 - MA DOR/DLS Finance Forum Handbook
Section 5 - RMLD Agreement
Association of Town Finance Committees ~-7
One Winthrop Square, Boston, MA 02110
(617) 426-7272
ATFC Mission Statement
Town Meeting is a centuries-old practice but yet a modern forum for local government legislation in
New England. A local Finance Committee, by tradition and statute, is a select group of citizens that
advise each Town Meeting on the probity, practicality and value of any of the matters before the
Meeting. The Association of Town Finance Committees is a statewide Massachusetts organization
dedicated to enhancing the role of finance committees in local government through professional
standards, education programs and inter-Town networking.
Association of Town Finance Committees
One Winthrop Square, Boston, MA 02110 - (617) 426-7272
l l 1r
The Association of Town Finance Committees was founded in 1934 by
Danforth W. Comins of Brookline, who served as its executive secretary from
1944 to 1959. Stuart DeBard of Hingham served in that role from 1960 to 1994.
e: When the Massachusetts Municipal Association was formed in 1979, the ATFC
joined as an affiliate group. Since 1994, the MMA has provided administrative
and professional support to the ATFC.
The ATFC maintains and publishes The Finance Committee Handbook, organizes at least two annual
educational and professional meetings for finance committee members, and provides through its affiliation
with the Massachusetts Municipal Association an avenue for member towns and their committee members
to influence state government policy that affect local cities and towns. The ATFC Board is the elected body
chartered with implementing the mission of the ATFC for the membership, in association with MMA staff.
The Advisory Committee is appointed by the Board from amongst the membership, and advises the Board
on the interests and needs of the broader ATFC membership.
Membership
ATFC members account for 226 of the state's 301 towns. The ultimate goal of the association is to have all
eligible Massachusetts town finance committees as members. Membership entitles finance committees to
complimentary copies of the Massachusetts Finance Committee Handbook, the ATFC Newsletter, access to
the conference for finance committee members on this Web site, and many other services. Membership can
be obtained by filling out the membership form.
Town of Reading Finance Committee
Mission Statement / Guiding Principles
The Reading F nance Committee 11 use all available authority and resources to advise
Town Meeting on rseal-muter accordance with the Reading Home Rule Charter and
applicable state statutes, recommending the most responsible allocation of funds to
deliver the highest quality municipal services to the citizens of Reading.
This will be accomplished by:
® Establishing clear financial policies to provide guidance in the conduct of the
fiscal affairs of the Town
® Recommending and adhering to fiscally sound management practices
® Working collaboratively with Town staff, boards and committees to ensure a
financial planning process that is inclusive of all interests
® Monitoring budget developments and expenditures vigilantly
® Considering longer term fiscal impacts of recommendations on Town finances
Factoring in community priorities and fiscal sustainability of services in
recommending financial positions
® Upholding the Reading Home Rule Charter and By-Laws
,6
The Finance Co Town of Reading will be guided by the following values
adopted by t oard of Selectm n:
Integrity and 'T'ransparency
® Reading municipal government and its employees and officials will be guided by
the highest standards of ethics and integrity.
® Municipal business will be conducted in an open manner with opportunities for
public discussion and input into decisions.
® The community will be kept informed with open communication.
® All official business will be conducted in a civil, professional, and mutually
respectful manner.
Excellence
® Excellence will be the standard for all municipal services, with continuous review
and evaluation of best practices, incorporating new methods and technologies,
striving for efficiency and cost effectiveness.
® Reading municipal government will make decisions based on careful planning
consistent with town-wide goals.
Diversity
® Municipal government will encourage diversity and respect for differences in the
conduct of its business and in recruiting and hiring personnel and in providing
enrichment opportunities for the community.
Community
The following are values that the community holds in high regards:
® Social, Environmental, and Financial Sustainability
® Tolerance, Civility and Cultural Diversity
® Volunteerism and Civic Engagement
® Historic Preservation and Open Space
® Recreational, Cultural, and Educational Opportunities
Page 1 of 1
LeLacheur, Bob
From: LeLacheur, Bob
Sent: Thursday, April 24, 2008 3:52 PM
To: LeLacheur, Bob
Subject: FW: FY09 Town Budget Message #1 for Reading Town Meeting members
Attachments: TMB-1.doc; TMB-1.pdf; TMB-1 FY09 Summary.pdf; TMB-1 FY09 Revenues.pdf
Welcome! This is the first in several emails you will receive that will discuss the Town of Reading's FY09
budget, and describe the process used to build this budget into the format that you see at Town Meeting.
We have numbered the emails (as above, "Town Budget Message #1"). If it seems that you did not receive one,
please first check your SPAM filter. Then call or email us to see if there is a technical reason why the message
did not get through to you. (Full contact information is listed at the bottom of this document).
This first email has attached one Microsoft Word document ("TMB -l.doe") and three PDF files ("TMB -
l.pdf', "FY09 Summary" and "FY09 Revenues"). The Word document version is more useful because you
can use live links to our website. If you do not have MS Word, we also provide the same file in PDF format.
Please print these last two files ("FY09 Summary" and "FY09 Revenues") out now.
They will be useful as a reference as you read through the Budget Message #1 ("TMB -11') document. If you
cannot read or print out the PDF files, first ensure that you have Adobe Acrobat reader installed. If not, free
copies are available here: http://www.adobe.com/p-roducts/acrobat/readste 2p html
(Be careful to uncheck the Google Toolbar option ifyou do not want that.feature).
We hope that this and future Budget Messages will shed more light on the budget process that the Town of
Reading uses. We welcome your comments & suggestions!
Bob
Robert W. LeLacheur, Jr., CFA
Assistant Town Manager/Finance Director
Town of Reading
16 Lowell Street
Reading, MA 01867-2683
(781) 942-6636
(781) 942-9037 fax
finance ci.reading ma.us
7/24/2011
~COv~t, OFREgOi
F
r 7• ~
Grs39. tHcoAQ°Ap
'T'own of Leading
FY09 Budget Message #1
Overview
We have provided two methods of reading through this material and that which follows
in subsequent emails. For those that are interested in summary-level information only,
please read through the portions so labeled. For those that are interested in further details,
please additionally read through those portions.
There are four important terms to distinguish in the overall budget discussion:
Municipal government: consists of the departments for Accounting, Finance, the
Public Library, Town Manager's Office, Community Services, Public'Works, and
Public Safety (Police, Fire and Dispatch).
School Department: All areas of Public Education.
Buildings Maintenance: Facilities group for all Municipal and School Buildings.
Town: The combination of the Municipal government, the School Department,
and the Buildings Maintenance.
Summary: Budget Process
Informally, it is an ongoing year-round continuous process for Town staff to make the
best use of all available resources. The budget is certainly not an annual exercise where
documents are dusted off and updated, and then put away until the next year.
Formally, the budget process has evolved over many years, and drawn upon the
experience of many dedicated and knowledgeable volunteers from the community, as
well as from Town staff. The process works well not because it is a rigid set of perfect
instructions, but because it is an open dialogue that allows for change as times change,
and always draws upon the wisdom of many folks that are involved. Ideas, comments and
suggestions are always most welcome, and are often being implemented.
By Town Charter, the Town Manager must present a balanced budget to the Finance
Committee (please see hqp://www.ci.reading.ma.us/Pages/ReadingMA BComm/finance)
in mid-February. FINCOM reviews the budget through March, and makes its
recommendations to the Annual Town Meeting (in the form of the large budget book that
all Town Meeting members receive). The final vote of Town Meeting in April or May
determines broadly how the resources of the Town are spent for the upcoming fiscal year
that begins on July 1St
The Town Manager seeks input from many groups before submitting the budget to the
FINCOM each February. In the Budget Messages that follow we will outline the process
that occurs between October and January of each year that involves meetings with Town
staff, elected and appointed Boards, Committees and Commissions, and meetings with
the general public. Hopefully you have been tracking the set of many budget meetings
\,k
held by the Selectmen, School Committee, and the Finance Committee via our website at
this link: http://www.ci.reading.ma.us/Pag~es/ReadingMA WebDocs/FY09budget
Summary: September - Revenues
In September, Town staff puts together a forecast of Revenues that will be available for
the upcoming budget year. Some revenues are known with certainty (such as a 2.5%
increase in existing property taxes if the full tax levy is used), some will not be known
until a date later in the budget process (state aid), and some won't be known for another
21 months when the actual year is completed (interest earnings). Thus the forecast of
Revenues is an imperfect estimate - and one that is hopefully just a bit conservatively
lower than what really happens. Extra revenues above the forecast flow directly into free
cash, which can then support savings for a rainy day, or certain one-time expenses (such
as capital).
Summary: October - Financial Forum The forecast of revenues is an important first
step in the budget process that begins each year in the fall. In mid-October, the FINCOM
invites the School Committee, Board of Selectmen, and Library Trustees to hear an
update of revenues. At this point the FINCOM gives preliminary budget guidance to the
Town on what funds will be available. Subsequent Budget Messages will describe the
cost/expense portion of the October meeting in further detail.
Summary: Revenues Update
On the FY09 Summary you have printed out, the top one-third of the page describes
Revenues for the Town of Reading. Actual historical numbers are presented for FY06
and FY07; previously budgeted numbers are shown for the current fiscal year (FY08);
and projections are shown for the next three future fiscal years (FY09-10-11). Other
sections of the FY09 Summary document (such as Accommodated Costs and Operating
Costs) will be explained in subsequent Budget Messages.
General fund revenues are expected to be $72.5 million in FY09. This consists of
property taxes (67%); local revenues (9%); intergovernmental revenues (20%); and
transfers & available funds (4%):
Forecasted Sources of FY09 General
Fund Revenue
4%
20%Q1
9%
67%
Property Taxes ® Other Local Revenues
❑ Intergovernmental Revenues ❑ Transfers & Available
\S
This is an increase of 3.3% when compared with the current fiscal year - a somewhat
typical figure for the Town.
Details: Revenue adjustments for the Budget Process
Two types of revenues cause an adjustment to be made for analytical purposes (this will
be discussed further in subsequent Budget Messages). They include property taxes
received for the Debt Exclusion (largely for Reading Memorial High School) and
reimbursements from the School Building Authority that offset a portion of our debt costs
for previous school building projects. Line A98 on the FY09 Summary shows the effect
of removing these revenues. They are removed because they are earmarked for those very
specific purposes, and not available to be spent at the discretion of the Town for any
different purposes. Thus the figure on line A98 of $68.35 million is what is available for
all other expenses of the general fund used to run the Town. This figure is 3.5% higher
than last year, which is also a somewhat typical number historically.
Another adjustment is made to revenues in line A5 on the FY09 Summary, which is the
use of free cash and savings. November 2007 Town Meeting voted to use free cash in
support of several FY08 budget amendments, including a deposit of $500,000 into the
stabilization fund, and spending funds on various capital projects. Thus line A99
represents the Net Available Revenues for the Town in FY08, a figure of $67.2 million.
This figure called Net Available Revenue will be important in a future Budget Message
discussion about debt and capital.
The projected FY09 budget does not include the use of any free cash as a revenue source.
The Finance Committee has a strict policy on the use of cash reserves. Please see
http://www.ci.reading.ma.us/Pages/ReadingMA Finance/cashreservespoligv for more
details.
Details: Revenues Update
The overall general fund revenue of $72.5 million has changed since it was first forecast
in September, increasing by about $600,000, or about 0.8%. This is a relatively large
change during a budget process, and is almost entirely due to two items:
® The Board of Assessors and the State direct us as to what actual New Growth
happened in the Town during the previous year (FY07). This figure is then rolled
forward through FY08 and FY09 (and increased by 2.5% each time). Finally, it is
compared to an estimate we have been carrying, and the Revenue forecast
modified as needed.
® The Governor's proposed budget included a higher figure for the Town than we
had been forecasting. After some discussion with the School Committee and the
Board of Selectmen, the FINCOM agreed to increase this forecasted revenue by
nearly $300,000 - an amount that does NOT rely on any revenue from casinos.
More Revenues details are available on the FY09 Revenues attachment and will be
described below:
® Property taxes (67%, forecast at +2.9%) consist mostly of the existing tax levy,
known to be $45.8 million in FY09, and the tax levy for the debt exclusion
(primarily for the High School) known to be $2.8 million in FY09. Two smaller
and less certain components round out this category. New Growth is forecast to be
$250,000 for FY09. This is a rough baseline average of the past ten years,
excluding some one-time events such as the development of the landfill. (No new
growth is presumed to happen in FY09 from the former Addison -Wesley site).
Abatements and exemptions are the other relatively small unknown. The Board of
Assessors set aside funds each year to pay for property tax workers (about
$16,000 in total) and in case taxpayers dispute their tax bills. The Town has had
an exceptionally accurate valuation historically, and a large portion of these funds
are released to the general fund in future years as the disputes are resolved.
Other local revenues (9%; forecast at +1.3%) - the list on FY09 Revenues
describes these items. Motor vehicle excise tax comprises over 40% of these
revenues, and is forecast to decline in FY09 as the economy has softened.
Intergovernmental revenue (20%; forecast at +6.6%) is primarily state aid, and
also includes MSBA school project reimbursements. In October 2007, the state
aid figure was forecast at +5%, in line with twenty years of actual data. FINCOM
has a policy that this forecasted state aid figure will be supplemented with free
cash if the actual number comes in below the forecast. This is a rare use of free
cash in the budgeting process, and is done for two reasons: (1) the state aid figure,
which represents about 18% of the total general fund revenues to the Town, is a
very unpredictable amount; and (2) the actual state aid figure is generally not
known until late in the spring (often after Reading's Annual Town Meeting has
approved the Town's budget). In January 2008, this state aid figure was revised
upwards above +5% to reflect the proposed Governor's budget - without
including the portion that would be funded by revenues from casinos.
Transfers & Available Funds (4%; forecast at -2.4%) is a variety of miscellaneous
items. An earnings distribution from RMLD (+2.6% determined annually by a
CPI calculation) is the largest component. Medicare D reimbursement is not
forecast for FY09, pending some possible changes to the Town's health insurance
program as well as the revised expected timing of such reimbursements from the
Federal government.
Summary: FY09 Budget Message #1
This first Budget Message outlines the topic of Revenues for the Town. Except for the
adjustments for the debt exclusion and MSBA reimbursements (if you read the details
above), this is information that Town Meeting has seen for many years. Subsequent
Budget Messages will describe some differences in how the budget process for
costs/expenses works in contrast with what Town Meeting members are used to seeing.
Next: Budget Message #2 - "Accommodated Costs "
0
Town of Reading
4.48%
< wages & expenses>
4.48%1
Budget Summer
Amended
One Year.
One Year
One Year
212810812:26 PM
Actual
Actual
(Fall'07 TM)
Projected "
Changed
Projected
Changes
Projected
Changes
No.
FY - 2006
FY - 2007
FY - 2008
FY - 2009
FY 2009
FY - 2010
FY - 2010
FY - 2011
FY - 2011
Revenues
A
General Fund Revenues $
65,042,199 $
69,789,118
$70,234,615
$ 72,523,475
3.3%i
$ 74,941,663
3.3%
$ 77,456,150
3.4%
Al
Total Property Taxes
43,346,856
45,230,087
46,930,699
48,285,570
2.9%
49,691,668
2.9%
51,112,693
2.9%
A2
Total Other Local Revenues
7,053,929
7,696,152
6,563,025
6,650,000
` 1.3%
6,982,500
5.0%
7,331,625
5.0%
A3
Total Intergov't Revenues
11,953,827
13,503,311
13,877,302
14,793,041
6.6%!
15,462,897
4.5%
16,166,247
4.5%
A4
Total Transfers & Available
2,687,587
3,359,568
2,863,589
2,794,864 '
-2.4%!
2,804,598
0.3W
2,845,586
1.5%
Ear-marked revenues
4,387,436
(4,465,733
4,175,795
4,176,896
' 0.0%
4,195,379
0.4%
4,194,099
0.0%
Debt Exclusion
(2,710,185)
(2,737,196)
(2,779,887)
; (2,780,988)
0.0%
(2,799,471)
0.7%
(2,798,191)
0.0%
MSBA
(1,677,251
1,728,537
1,395,908
: 1,395,908
0.0%
1,395,908
0.0%
(1,395,908
0.0%
A98
Revenues before Cash/Sav. $
60,654,763 $
65,323,385
$66,058,820
! $ 68,346,579
3.5%
$ 70,746,284
3.5%
$ 73,262,051
3.6%
A5
Free Cash & Savings
1,125,115
784,145
1,164,732
0
-100.0%
0
0
A99
Net Available Revenues $
61,779,878 $
66,107,530
$67,223,552
$ 68,346,579
1.7%
$ 70,746,284
3.5%
$ 73,262,051
3.6%
Accommodated Costs
B
Benefits
9,119,755
9,755,134
10,176,440
10,821,903
6.3%'i
11,680,539
7.9%
12,585,728
7.7%
C
Capital
928,052
1,386,000
852,684
644,666
-24.4%
957,484
48.5%
1,057,298
10.4%
D
Debt
2,528,964
2,260,626
2,402,671
2,772,663
15.4%!
2,579,830
-7.0%
2,605,805
1.0%
E Energy
2,226,859.
2,171,115
2,408,103
! 2,505,999
4.1%,
2,693,949
!.b%
Z,tsub,uuo
/.b%
F Financial
389,647
387,403
548,446
549,175
0.1%
594,134
8.2%
640,090
7.7%
G Education - Out of district
3,518,325
3,961,910
3,885,300
3,390,305
-12.7%!
4,020,828
18.6%
4,322,390
7.5%
H Education - Vocational
251,081
245,300
327,500
424,113
29.5%
445,318
5.0%
467,584
5.0%
J Miscellaneous
2,683,011
2,575,685
2,625,079
2,688,617
2.4%';
2,801,358
4.2%
2,865,927
2.3%
K Community Priorities
0
0
36,095
100%
20,000
44.6%
0
L1 Annual Accommodated Costs
$ 21,645,694
$ 22,743,173
$ 23,226,223
$ 23,833,536
2.6%$ 25,793,440
8.2% $ 27,440,817
6.4%
M Extra Capital & Stabilization Fund
$ 1,452,400
0
-100.0%
0
0
L2 Net Accommodated Costs
$ 24,678,623
$ 23,833,536
-3.4%
Operatin Costs
Municipal Government
11,659,939
12,481,850
13,017,551
13,600,737
4.48%! 14,210,050
4.5% 14,846,661
4.5%
School Department - Operatinc
24,830,314
25,956,940
27,225,827
28,445,544
4.48% 29,719,904
4.5% 31,051,356
4.5%
Building Maintenance
2,334,004
3,140,238
2,358,560
2,464,223
4.48%'. 2,574,621
4.5% 2,689,964
4.5%
School, Town, Buildings $ 38,824,257
$ 41,579,028
$42,601,938
$ 44,510,505
4.48°/x! $46,504,575
4.5% $ 48,587,980
4.5%
Municipal Government
30.0%
30.0%
30.6%
30.56%
30.6%
30.6%
School Department -Operatinc
64.0%
62.4%
63.9%
63.91%
63.9%
63.9%
,Building Maintenance
6.0%
7.6%
5.5%
5.54%
5.5%
5.5%
$ 60,469,951
$ 64,322;201
$67,280,561
$ 68,344,041
1.6%! $ 72,298,016
5.8% $ 76,028,798
5.2%
Surplus/(Deficit) $
1,309,927
$ 1,785,329
$ (57,009)
$ 2,538
$ (1,551,732)
$ (2,766,746)
Town of Reading
Revenues - Details
Amended
One Year,
One Year
One Year
2/2810812:27 PM
Actual
Actual
(Fall '07 TM)
Projected
Changes'
Projected
Changes
Projected
Changes
FY - 2006
FY - 2007
FY - 2008
FY - 2009 "
FY - 2009
FY - 2010
FY - 2010
FY - 2011
FY - 2011
Property Taxes
Tax levy (within levy limit)
40,441,305
42,207,949
44,127,125
45,793,028
3.8%'
47,194,104
3.1%
48,630,206
3.0%
New Growth
731,774
842,905
549,000
250,000
' -54.5%i
250,000
0.0%
250,000
0.0%
Tax levy (debt exclusion)
2,710,185
2,737,196
2,779,887
2,780,988
0.0%
2,799,471
0.7%
2,798,191
0.0%
Abatements and exemptions
536,408
557,963
525,313
538,446
2.5%
551,907
2.5%
565,705
2.5%
Total Property Taxes
43,346,856
45,230,087
46,930,699
- 48,285,570
- 2.9%:
49,691,668
2.9%
51,112,693
2.9%
Other Local Revenues
Motor Vehicle Excise
2,835,294
2,756,670
3,045,000
2,850,000
X6.4%
2,992,500
5.0%
3,142,125
5.0%
Penaltiesrnterest on taxes
155,134
157,489
168,000
170,000
1.2%
178,500
5.0%
187,425
5.0%
Payments in lieu of taxes
255,886
272,646
241,500
255,000
5.6%:
267,750
5.0%
281,138
5.0%
Charges for services
1,573,930
1,747,376
1,638,000
1,550,000
-5.4%'
1,627,500
5.0%
1,708,875
5.0%
Licenses & permits
77,586
75,058
78,750
75,000
-4.8%i
78,750
5.0%
82,688
5.0%
Special Assessments
3,654
3,053
5,250
5,000
-4.8%'
5,250
5.0%
5,513
5.0%
Fines
147,498
148,440
162,750
145,000
-10.9%
152,250
5.0%
159,863
5.0%
Interest Earnings
1,443,604
2,013,497
751,275
1,200,000
59.7%,
1,260,000
5.0%
1,323,000
5.0%
Medicaid Reimbursement
520,360
448,636
472,500 !
400,000
-15.3%
420,000
5.0%
441,000
5.0%
Other
40,983
73,287
Total Other Local Revenues
7,053,929
7,696,152
6,563,025
6,650,000
1.3%
6,982,500
5.0%
7,331,625
5.0%
Intergovernmental Revenue
State Aid (Net of offsets)
10,225,394
11,587,502
12,481,394 13,397,133
7.3%
14,066,989
5.0%
14,770,339
5.0%
MSBA
1,677,251
1,728,537
1,395,908
1,395,908
0.0%
1,395,908
0.0%
1,395,908
_ 0.0%
Other state aid -Supplemental Ali
51,182
187,272
Total Inter ov't Revenues
11,953,827
13,503,311
13,877,302
14,793,041
6.6%I
15,462,897
4.5%
16,166,247
4.5%
Operating Transfers and Available Funds
Cemetery sale of lots
48,000
39,666
_ 10,000
37,665
276.7%`
10,000
-73.5%
10,000
0.0%
Sale of real estate funds
375,000
434,410
375,000
350,000
-6.7%'
325,000
-7.1%
300,000
-7.7%
Reading Ice Arena Authority
120,000
120,000
120,000
120,000
0.0%!
120,000
0.0%
120,000
0.0%
RMLD earnings distribution
1,946,870
2,010,991
2,081,376
2,135,532
2.6%
2,199,598
3.0%
2,265,586
3.0%
Overlay surplus
147,717
261,707
169,213
151,667
-10.4%j
150,000
-1.1%
150,000
0.0%
Medicare D Reimbursement
52,794
108,000
-100.0%
Developer Mitigation
50,000
440,000
0
Total Transfers & Available
2,687,587
3,359,568
2,863,589 !
2,794,864
-2.4%'I
2,804,598
0.3%
2,845,586
1.5%
Certified Free Cash
1,125,115
784,145
664,732
Stabilization Fund
500,000
No.
Al
A2
A3
A4
A5 Free Cash & Savings 1,125,115 784,145 1,164,732 0 -100.0%I 0 0
TOTAL REVENUES 66,167,314 70,573,263 71,399,347 72,523,475 1.57%i 74,941,663 3.33% 77,456,150 3.36%
U
Page 1 of 1
LeLacheur, Bob
From: LeLacheur, Bob
Sent: Thursday, April 24, 2008 3:52 PM
To: LeLacheur, Bob
Subject: FW: Budget Message #2 for Town Meeting Members
Attachments: TMB-2.doc; TMB-2.pdf; TMB-1 FY09 Summary.pdf; TMB-2 FY09 Accommodated Costs.pdf
This is the second in a series of several emails you will receive that will discuss the Town of Reading's FY09
budget, and describe the process used to build this budget into the format that you see at Town Meeting.
If it seems that you did not receive one, please first check your SPAM filter. Then call or email us to see if there
is a technical reason why the message did not get through to you. (Full contact information is listed at the
bottom of this document).
This email has attached one Microsoft Word document ("Town Budget Message (TMB)-211) and three PDF
files ("Town Budget Message-2", "FY09 Summary" and "FY09 Accommodated Costs"). The Word
document version is more useful because you can use live links to our website. If you do not have MS Word,
we also provide the same file in PDF format.
Please print these last two files ("FY09 Summary" and "FY09 Accommodated Costs") out now. They will be
useful as a reference as you read through the Budget Message-2 document. If you cannot read or print out the
PDF files, first ensure that you have Adobe Acrobat reader installed. If not, free copies are available here:
http://www.adobe.com/products/acrobat/readstep2.litrnl
(Be careful to uncheck the Google Toolbar option if you do not want that feature).
We hope that this and future Budget Messages will shed more light on the budget process that the Town of
Reading uses. We welcome your comments & suggestions!
Bob
Robert W. LeLacheur, Jr., CFA
Assistant Town Manager/Finance Director
Town of Reading
16 Lowell Street
Reading, MA 01867-2683
(781) 942-6636
(781) 942-9037 fax
finance .ci.reading.ma.us
7/24/2011
9
OF R~
~6s9INCOR4p4p 'T'own of Reading
FY09 Budget Message #2
Overview
In the first Budget Message, we outlined the topic of Revenues for the Town. Except for
the adjustments for the debt exclusion and MSBA reimbursements, this is information
that Town Meeting has seen for many years. In this second Budget Message, we will
describe some differences in how the budget process for costs/expenses works in contrast
with what Town Meeting members are used to seeing. One of the largest differences is in
the concept of Accommodated Costs.
Summary: Accommodated versus Operating Costs
For purposes of the budget process, the Town is divided into three Operating Budgets,
including the Municipal government, the School Department, and Buildings Maintenance
(please see the previous Budget Message #1 for the definitions). Every cost that the Town
encountered could be allocated among these three entities- including such things as debt
service, capital projects and employee benefits.
However, certain costs - such as debt service, capital projects and employee benefits -
have historically been segregated and voted on by Town Meeting separately. In a sense,
this past treatment of costs has served to begin classifying some costs as "Accommodated
Costs", although no one used that term until recently.
Today, every general fund cost that the Town encounters is classified by FINCOM as
either an Accommodated Cost (AC) or an Operating Cost (OC) for the budget process. If
you refer back to the FY09 Summary document (attached again today for your
convenience), you will see that below the Revenue section we already reviewed are two
blocks of costs: AC and OC. Budget Message #2 will explain what these so-called
Accommodated Costs are; why they are important - and if they are so important why
Town Meeting has never seen them before; and how they are impacting the FY09 budget.
Summary: Accommodated Costs - What Are They?
There is no simple one-sentence definition of what constitutes an Accommodated Cost.
Certain costs become classified by FINCOM as Accommodated for a variety of reasons:
® Some costs are `fixed' (debt service; State Assessments, etc...).
® Some costs are `shared' (employee benefits; capital; insurance, etc...).
® Some costs are extremely unpredictable from year-to-year (energy, snow & ice,
out of district special education, etc...).
Summary: Accommodated Costs - Why Are They Important?
Accommodated Costs are fully funded first in the budget process, regardless of the level
of Revenues. Once all of the AC are paid for, remaining funds are directed towards the
three Operating Budgets (the Municipal government, the School Department, and
Buildings Maintenance). These Operating Budgets will be further described in Budget
Message #3.
Table 1 Budget Calendar - Financial Forums
October
January
Revenues
Finalize subject to prior
New Growth being certified
Accommodated Costs
First estimate
Finalize Costs
Operating Budgets*
Preliminary equal allocation
Finalize allocation to the
to funds left to the three
three Operating Budgets
Operating budgets
*Note: Operating Budgets are defined as Revenues minus Accommodated Costs
Estimates for AC (developed by Town staff) are first presented at the October Financial
Forum. In combination with the estimate for Revenues, a forecast of the remaining funds
available for Operations is created, in which all three Operating Budgets are presumed to
share equal percentage changes from the previous year.
As we mentioned, some of the AC (such as debt service) were already segregated in the
budget process. However, many volatile costs were buried in various Operating Budgets,
and would sometimes threaten to distort the cost of the normal ongoing functions of these
budgets. The idea of removing some costs - for analytical budgeting purposes - was two-
fold. First was to obtain a better ongoing cost of the underlying functions of the various
budgets; second was to help shield those underlying functions from the unpredictable
nature of these costs - in a sense to have the entire Town share in the volatility of these
costs, as you will soon see.
Accommodated Costs get a thorough review by Town staff and the FINCOM - the fact
that they are fully funded does not impact the level of scrutiny these costs undergo in the
budget process. All budget participants share information extensively on these costs as
they are updated, since their rate of increase directly impacts the amount of revenues that
will be available to fund the Operating Budgets. At the January Financial Forum, these
AC are finalized, and FINCOM delivers a specific allocation of the remaining funding to
the three Operating Budgets (see Budget Message #3 for further details).
Summarv: Accommodated Costs - How do thev impact the FY09 budget?
The FY09 Summary document shows that we have $68.35 million for FY09 Net
Available Revenues (line A99). In the middle section, it also shows that we have $23.83
million in Accommodated Costs (line L2). Therefore in FY09, we determine that there is
($68.35 - $23.83, or just over $45) million to fund the Operating Budgets.
Table 2 Budget Summary
FY09 (Projected)
% vs FY08
Revenues et Available
$68,346,579
+3.5%
Accommodated Costs
$23,833,536
+2.6%
Available for Operating
$44,510,505
+4.5%
6~~)
Details: Accommodated Costs in the FY09 budget
More Accommodated Cost details are available on the FY09 Accommodated Costs
attachment and will be described below:
Table 3 Accommodated Costs (AC) - Summary
FY09 Costs
% vs FY08
% of AC
Benefits
$10,821,903
+
6.3%
45.4%
Capital
$
644,666
-
24.4%
2.7%
Debt
$
2,772,663
+
15.4%
11.6%
Energy
$
2,505,999
+
4.1%
10.5%
Financial
$
549,175
+
0.1%
2.3%
Education -
out of district
$
3,390,305
-
12.7%
14.2%
Education -
Vocational
$
424,113
+
29.5%
1.8%
Miscellaneous
$
2,688,617
+
2.4%
11.3%
Priorities
$
36,095
New
0.2%
TOTAL
$23,833,536
+
2.6%
® Benefits ($10.82 million; forecast at +6.3%)
o the Town's 70% share of health insurance costs ($724 million) is forecast
to increase 6.5% in price; recent enrollment trends suggest a further
increase in usage
o OPEB - or Other Post Employment Benefits - is the unfunded cost of
future medical benefits for retirees. The amount of this liability will be
know by the summer of 2008; no funding requirement is yet in place
o Workers Compensation ($259k) is forecast to decline, but is difficult to
predict with any certainty
o Police/Fire Indemnification ($50k) is also forecast to decline, but is also
difficult to predict with any certainty
o Contributory Retirement ($2.65 million) is forecast to increase 2.2% as the
Town continues on a path to fully fund the pension obligation slightly
ahead of schedule
o Non-contributory Retirement ($77k) is forecast to decrease
o Medicare/Social Security ($491k) is forecast to increase with current
trends
o Unemployment benefits ($50k) is forecast to increase in line with current
trends
® Capital and Debt ($3.42 million combined)
Recall in Budget Message #1 that we described the two adjustments made to
Revenues for analytical purposes. First was to exclude MSBA payments made to
Reading for prior school capital projects. Second was to exclude revenues associated
with the debt exclusion (mostly for RMl3S). In fact, revenues in both cases are
received by the Town, and are paid out for debt service costs that are approved by
i3
Town Meeting. However, each revenue is. earmarked for a specified purpose (pre-
defined debt service), and not meant to be available for the general operation of the
Town.
On the cost/expense side - for budget process analytical purposes - we also exclude
the debt service on the MSBA share and on debt exclusion. The resulting debt figure,
called Net Included Debt, refers to the amount that the Town is paying out of the
General Fund each year that might otherwise be available for other purposes.
FINCOM has a policy that the Town should spend at least 5% of the Net Available
Revenues ($68.35 million in FY09) on the combination of capital and Net Included
Debt. Please see http://www.ci.reading.ma.us/Pages/ReadingNlA Finance/debtpolicy
to read about this FINCOM Policy.
o FINCOM therefore mandates that $3.42 million be set aside as an
Accommodated Cost for combined debt (net of MSBA and the debt
exclusion) and capital.
o For FY09, we expect to pay out $4.45 million in principal (line D 1) and
$2.52 million in interest (line D2) costs, for a total of $6.97 million in
general fund debt service:
® $2.80 million (line D3) is due to the debt exclusion;
® $1.40 million is being paid by the MSBA
® Net Inside Debt for FY09 is therefore ($6.97 - $2.80 - $1.40) $2.77
million (line D99).
® By the 5% FINCOM policy, this leaves about $644k for capital in
FY09 ($3.42 - $2.77 million).
Energy ($2.51 million; forecast at +4.1
o Street lighting $217k
o Heating of Municipal gov't buildings $144k
o Heating of School buildings $962k
o Utilities for Municipal gov't buildings $173k
o Utilities for School buildings $799k
o Fuel for vehicles $21 lk
o Due to a substantial energy conservation effort by the Town, led by the
School and Buildings Maintenance departments, FY08 costs allocated for
some of these energy items above will be lower than budgeted. This will
make annual comparisons on % change a bit less reliable. Savings in the
FY08 budget are generally being reinvested in further energy-saving
measures.
® Financial ($549k; forecast at +0.1%)
o Casualty insurance $354k
o Veteran's assistance $45k
o FINCOM Reserve Fund $150k
4
by
Education - out of district ($3.39 million; forecast at -12.7%)
o Transportation $929k
o Tuition $4.31 million
o Revenue offset "circuitbreaker" $1.5 million
o Expected carry-forward savings from FY08 budget $350k
o This Accommodated Cost plays a major role in why the broad category of
AC is only expected to grow at 2.6% for FY09 - a rate slower than the
projected revenue growth.
® Education - Vocational ($424k; forecast at +29.52/o)
o Second consecutive year of substantial growth in enrollment
® Miscellaneous ($2.69 million; forecast at +2.4%)
o Rubbish collection/disposal $1.45 million
o Snow & Ice control $450k
o State Assessments $600k (not voted by Town Meeting)
o Cemetery $191k (largely self-funded)
Summary: FY09 Budget Message #2
This second Budget Message outlines the topic of Accommodated Costs for the Town.
All costs/expenses of the Town are described as either Accommodated Costs or
Operating Costs for the budget process. This distinction is one that is used to allocate
Revenues - first to all of the Accommodated Costs, and then whatever is left to be
divided between the three Operating budgets.
For the Town Manager's balanced FY09 budget, Revenues (+3.5%) have increased at a
faster rate than the Accommodated Costs (+2.6%), which allow for a larger increase in
the Operating Budgets (+4.5%).
When the final FINCOM budget to Town Meeting is presented, there will be no mention
of these two types of Costs. Some of the Accommodated Costs remain distinct, and are
voted separately by Town Meeting (such as Capital); some are added into other budgets
(such as out-of-district special education) and voted as part of a total.
Next: Budget Message #3 - "Operating Costs "
0
Town of Reading
l
l
Accom Costs - Summary
Amended
One Year'
One Year
One Year
2129108 2:48 PM
Actual
Actual
(Fall'07 TM)
Projected
Changes
Projected
Changes
Projected
Changes
No.
FY - 2006
FY - 2007
FY - 2008
FY -2009
FY - 2009
FY - 2010
FY - 201(
FY - 2011
FY - 2011
B Benefits
9,119,755
9,755,134
10,176,440
10,821,903
6.3%
11,680,539
7.9%
12,585,728
7.7%
C Capital
928,052
1,386,000
852,684
' 644,666
-24.4%!
957,484
48.5%
1,057,298
10.4%
D Debt (net - tax levy)
2,528,964
2,260,626
2,402,671
2,772,663
15.4%
2,579,830
-7.0%
2,605,805
1.0%
E Energy
2,226,859
2,171,115
2,408,103
2,505,999
4.1%
2,693,949
7.5%
2,895,995
7.5%
F Financial
389,647
387,403
548,446
549,175
0.1%
594,134
8.2%
640;090
7.7%
G Education - Out of district
3,518,325
3,961,910
3,885,300
3,390,305
-12.7%
4,020,828
18.6%
4,322,390
7.5%
H Education - Vocational
251,081
245,300
327,500
424,113
29.5%
445,318
5.0%
467,584
5.0%
J Miscellaneous
2,683,011
2,575,685
2,625,079
2,688,617
2.4%
2,801,358
4.2%
2,865,927
2.3%
K Community Priorities
$ 36,095
100%` $
20,000
44.6%
$ -
-100.0%
TOTAL Accommodated COST! $ 21,645,694
$ 22343,173
$23,226,223
$ 23,833,536
2.6%+ $ 25,793,440
8.2% $ 27,440,817
6.4%
Accommodated % of Net Available R
35.0%
34.4%
34:6%!
34.9%
36.5%
37.5%
Remaining for Operating Budgets
40,134,184
43,364,357
43,997,329
44,513,043
44,952,844
45,821,234
Operating %of Net Available Revenu
65.0%
65.6%
65.4%
65.1%
63.5%
62.5%
Accommodated Costs - Detail
B Accommodated Costs - Benefits
B1 Group Health / Life Ins.
5,612,028
6,113,995
6,657,575
7,241,244
8.8%
7,965,368
10.0%
8,761,905
10.0%
OPEB
-
0
0.0%!
15,000
100.0%
0
-100.0%
B2 Workers Compensation
284,939
264,300
278,685
258,897
-7.1%
271,842
5.0%
285,434
5.0%
B3 Police / Fire Indemnification
55,019
65,881
55,000
50,000
-9.1%
52,500
5.0%
55,125
5.0%
B4 Contributory Retirement
2,463,851
2,536,643
2,595,727
2,653;102
2.2%!
2,732,695
3.0%
2,814,676
3.0%
B5 Non-Contrib. Retirement
99,257
100,960
102,681
77,280
-24.7%
79,598
3.0%
81,986
3.0%
B6 Medicare / Social Security
573,934
643,611
446,772
491,380
10.0%
511,035
4.0%
531,477
4.0%
B7 Unemployment Benefits
30,727
29,744
, 40,000
50,000
25.0%
52,500
5.0%
55,125
5.0%
B99 Total Benefits $
9,119,755
$ 9,755,134
$10,176,440
! $ 10,821,903
6.3% $ 11,680,539
7.9%
$ 12,585,728
7.7%
C Accommodated Costs - Capital
C99 Total Capital
928,052
1,386,000
852,684
644,666
-24.4%
957,484
48.57.
1,057,298
10.4%
D Accommodated Costs - Debt (net, inside levy
limit)
D1 Debt Service - Principal
3,885,000
3,910,000
4,034,000
4,450,000
" 10.3%
4,395,000
-1.2%
4,575,200
4.1%
D2 Debt Service - Interest
3,031,400
2,816,359
2,560,457
2,515,154
-1.8%'
2,380,209
-5.4%
2,224,704
-6.5%
D3 Excluded debt
(2,710,185)
(2,737,196)
(2,779,887)
(2,796,583)
-'10.6%
(2,799,471)
0.1%
(2,798,191)
0.0%
D4 MSBA reimbursements
(1,677,251)
(1,728,537)
(1,395,908)
(1,395,908)
0.0%
(1,395,908)
0.0%
(1,395,908)
0.0%
D5 adjustments excluded premium)
15,991
D99 Total Debt $
2,528,964
$ 2,260,626
$ 2,402,671
$ 2,772,663
15.4%$
2,579,830
-7.0% $ 2,605,805
1.0%
C+L Net included debt + capital = 5% of net available revenues 3,417, 329 3,537, 374 3, 663, 703
l6
Town of Reading
lAccom Costs - Detail
Amended
One Year
One Year
One Year
2129108 2:48 PM
Actual
Actual
(Fall '07 TM) !
Projected
Changes'
Projected
Changes
Projected
Changes
No.
FY - 2006
FY - 2007
FY - 2008
` FY - 2009
FY - 2009
FY - 2010
FY - 201(
FY - 2011
FY - 2011
E Accommodated Costs - EnergV
E1 Street Lighting
178,279
171,383
209,000
216,800
3.7%
233,060
7.5%
250,540
7.5%
E2 Heating of Buildings-Town
157,489
144,430
139,721
144,430'
3.4%
155,262
7.5%
166,907
7.5%
E3 Heating of Buildings-Schools
907,374
864,706
1,018,317
962,317
-5.5%'
1,034,491
7.5%
1,112,078
7.5%
E4 Utilities-Town
154,632
149,093
153,743 '
172,948
12.5%
185,919
7.5%
199,863
7.5%
E5 Utilities-Schools
654,548
700,345
697,570
798,714
- 14.5%
8581618
7.5%
923,014
7.5%
E6 Fuel -vehicles in DPW budget)
174,537
141,158
, 189,752
210,790
11.1%`
226,599
7.5%
243,594
7.5%
E99 Total Energy $
2,226,859 $
2,171,115
$ 2,408,103 !
$ 2,505,999
4.1% $
2,693,949
7.5% $
2,895,995
7.5%
F Accommodated Costs - Financial
F1 Casualty Insurance
319,561
326,934
345,446
354,175
2.5%
371,884
5.0%
390,478
5.0%
F2 Veteran's Assistance
70,086
60,469
60,000
45,000
-25,0%
47,250
5.0%
49,613
5.0%
F3 FINCOM Reserve Fund
143,000
150,000
4.9%!
175,000
16.7%
200,000
14.3%
F4 Stabilization Fund
F99 Total Financial $
389,647 $
387,403
$ 548,446
$ 549,175
0.1% $
594,134
8.2% $
640,090
7.7%
G Accommodated Costs - Education Out of district
G1 Out of district SPED transportatir
958,918
943,211
1,010,300
928,825
-8.1%;
998,487
7.5%
1,073,373
7.5%
G2 Out of district SPED tuition
4,006,127
4,227,403
4,275,000
4,311,480
0.9%
4,634,841
7.5%
4,982,454
7.5%
G3 Out of district SPED rev. offsets
(1,446,720)
(1,208,704)
(1,400,000)
(1,500,000)
7.1%!
(1,612,500)
7.5%
(1,733,438)
7.5%
G4 Out of district SPED car forward
350,000
100,0%;
G99 Total Education - Out of distr. $
3,518,325 $
3,961,910
$ 3,885,300
$ 3,390,305
-12.7% $
4,020,828
18.6%1$
4,322,390
7.5%
H Accommodated Costs - Education Vocational School
H1 Vocational School Assessments
251,081
245,300
327,500
424,113
29.5%
445,318
5.0%a
467,584
5.0%
H99 Total Education - yoke $
251,081 $
245,300
$ 327,500
$ 424;113
29.5% $
445,318
5.0% $
467,584
5.0%
J Accommodated Costs - Miscellaneous
J1 Rubbish Collection /Disposal
1,401,588
1,376,887
1,458,805
1,447,963
-0.7%
1,484,162
2.5%
1,521,266
2.5%
J2 Snow and Ice Control
581,636
465,017
400,000
450,000
12,5%!
500,000
11.1%
500,000
0.0%
J3 State Assessments
524,016
550,222
582,481
599,955
3.0%
617,954
3.0%
636,493
3.0%
Cemetery
175,771
183,559
183,793
190,699
18%
199,242
4.5%
208,168
4.5%
J4 Salaries and Wages
118,520
143,539
146,057
151,929
4.0%
158,735
4.5%
165,847
4.5%
J5 Expenses
57,251
40,020
37,736
38i770
2.7%
40,507
4.5%
42,322
4.5%
J99 Total Miscellaneous $
2,683,011 $
2,575,685
$ 2,625,079
$ 2,688,617
2.4%! $
2,801,358
4.2% $
2,865,927
2.3%
Page 1 of 1
LeLacheur, Bob
From: LeLacheur, Bob
Sent: Thursday, April 24, 2008 3:53 PM
To: LeLacheur, Bob
Subject: FW: Town Meeting Budget Message #3
Attachments: TMB-4 Municipal Departments.pdf; TMB-5 Schools & Buildings.pdf; TMB-3.doc; TMB-3.pdf
This is the third in a series of several emails you will receive that will discuss the Town of Reading's FY09
budget, and describe the process used to build this budget into the format that you see at Town Meeting.
If it seems that you did not receive one, please first check your SPAM filter. Then call or email us to see if there
is a technical reason why the message did not get through to you. (Full contact information is listed at the
bottom of this document).
This email has attached one Microsoft Word document ("Town Budget Message
(TMB)-311) and three PDF files ("Town Budget Message (TMB)-3", "TMB-4 Municipal Departments" and
"TMMB-5 Schools & Buildings"). The Word document version is more useful because you can use live links to
our website. If you do not have MS Word, we also provide the same file in PDF format.
Please print these last two files ("TMB-4 Municipal Departments" and "TMB-5 Schools & Buildings") out
now. They will be useful as a reference as you read through the Budget Message #3 document, and also for the
next, two Budget Messages. If you cannot read or print out the PDF files, first ensure that you have Adobe
Acrobat reader installed. If not, free copies are available here:
http://www.adobe.comiproducts/acrobaVreadstep2.htn-A
(Be careful to uncheck the Google Toolbar option if you do not want that feature).
We hope that this and future Budget Messages will shed more light on the budget process that the Town of
Reading uses. We welcome your comments & suggestions!
Bob
Robert W. LeLacheur, Jr., CFA
Assistant Town Manager/Finance Director
Town of Reading
16 Lowell Street
Reading, MA 01867-2683
(781) 9,42-6636
(781) 942-9037 fax
finance _ci.reading.ma.us.
7/24/2011
2g
OFRFgo'Y
0,639'INCOR4~¢PO Town of ending
FY09 Budget Message #3
Overview
In the first Budget Message, we outlined the topic of Revenues for the Town, and in the
second Budget message we described one way the revenues are spent - on
Accommodated Costs. In this third Budget Message we will describe where the rest of
the revenues go - to the three Operating Budgets - and how FINCOM allocates fluids
between these budgets.
Again, these Budget Messages may be read as a brief summary only by reviewing the
sections labeled as Summary. For those interested in more detail - often about the Town
Manager's FY09 Budget that has been submitted to FINCOM for deliberation - please
also read the sections labeled Detail.
Summary: Operating Costs
For purposes of the budget process, the Town is divided into three Operating Budgets
(please see the previous Budget Message #1 for the definitions):
the Municipal government;
the School Department;
Buildings Maintenance.
If an expense of the General Fund is not classified as an Accommodated Cost (see
Budget Message #2), it therefore belongs to one of these three Operating Budgets. In
FY09, a total of $44,510,505 is available to fund the three Operating Budgets, after
subtracting all of the Accommodated Costs from the Revenues. If these funds were
divided equally in the same ratio as the previous FY08 Operating Budgets, all three of the
FY09 Operating Budgets would increase by 4.48%.
Details: Two Philosophical Approaches
FINCOM requests that a Baseline Budget is built for the three Operating Budgets. This
reflects the cost of rehiring the exact same staff as of the October Financial Forum, and
capping expenses across each of the Operating Budgets at a 2% increase. FINCOM
recognizes that the exact same staff and a 2% expense increase may not provide the same
level of service, in any area where the demands for service have changed during the past
year. They also recognize that this budget will probably not reflect the actual budget
priorities. Instead, this mechanical exercise is done for reasons that will be explained
below.
FINCOM then examines two philosophies in determining how to allocate the $44.5
million among the three Operating Budgets:
a First is the equal allocation (+4.48%) method described above, where each
Operating Budget receives the same proportional amount of funding. This method
presumes that the Accommodated Costs essentially give the Operating Budgets a
method to have their most volatile costs paid for first, and that what is left in all
Operating Budgets is roughly comparable. (FINCOM has a category of
Accommodated Costs called Community Priorities (section `K') to deal with
times when they are not roughly comparable. In FY09, the Finance Department
will begin to pay an annual licensing fee for the new financial software system
that will be used by all three Operating Budgets. Because the Finance.Department
could not pay for this new expense within the normal expense cap guidelines, as
an Accommodated Cost it is paid for first out of revenues, before Operating funds
are allocated).
Second is the method that includes the Baseline Budgets. If one of the three
Operating Budgets has some significant non-Accommodated cost rising at a fast
(slow) rate, this method allows extra funding to be directed towards (away from)
that purpose. If the same cost misbehaves for a period of time (and pays for an
essential service), the FINCOM would consider adding it to the list of
Accommodated Costs. Again, although Baseline Budgets may not reflect actual
budget priorities, they do serve as another measure of `financial need'.
FINCOM combines these two approaches (using a 50% weighting to each one) in order
to arrive at the final allocation for the Operating Budgets. At the January Financial
Forum, FINCOM voted the following increases for the FY09 Operating budgets:
® the Municipal government $13,588,893 +4.39%
® the School Department $28,424,291 +4.40%
® Buildings Maintenance $ 2,497,321 +5.88%
One can see that the Buildings Maintenance budget required some additional funding
because of its higher Baseline costs. This extra funding came about in equal proportions
from the other two Operating Budgets, which displayed nearly equal FY09 Baseline
Budget increases.
Summary: Budgets that look more familiar to Town MMeetin
For presentation to Town Meeting, budgets are reassembled according to budgetary
authority. We will demonstrate this in a rather large Table below. In some cases,
Accommodated Costs are voted & reviewed individually, in some cases they are voted
individually but reviewed as part of a specific budget; and in some cases they are simply
rolled into another budget which is then voted by Town meeting.
The best way to view Table 1 below is to begin at the top of one of the columns, and read
straight down the list to see how the budgets are reassembled. The columns represent:
® Other Budgets (Accommodated Costs voted individually);
® The Municipal Government Departmental budgets (combinations of
Accommodated & Operating Costs, voted sometimes as line items and sometimes
as Departmental totals);
® the School Budget (combinations of Accommodated & Operating Costs, voted as
one grand total); and
® the Town Building maintenance budget (also combinations of Accommodated &
Operating Costs voted as one grand total).
2 30
Table 1 Recipe for Building Town Meeting Budgets
Other
Bud ets
Municipal
Gov't De ts.
Schools .
Town Building
Maintenance
Operating Budgets
Municipal Gov't
Start.- add this
School Department
Start - add this
Building Maintenance
Extract & add
School
Buildings
Extract & add
Town Buildings
Other
Municipal
Schools
Town Building
Budgets
Gov't Depts.
Maintenance
Accommodated Costs
B99: Benefits
Vote as
C99: Capital
separate
D99: Debt
(VS) line
items
El: Street lighting
VS in DPW
E2: Heat Town bldgs
Add this
E3: Heat School bldgs
Add this
E4:"Utilities Town bldg
Add this
E5: Utilities Schl bldg
Add this
E6: Fuel
Add to DPW
Fl: Casualty Insurance
Add to Town
Manager
172: Veteran's
Add to Comm.
Assistance
Services
F3: FINCOM Reserves
Add to Finance
G99: Out of district
Add this
Special Education
Hl: Vocational Ed.
VS
JI: Rubbish
VS in DPW
J2:8now & Ice
VS in DPW
J3: State Assessment
TM does
not vote
J4 & J5:
Add to DPW
K: Community
Add to Finance
Priorities (MUNIS)
Details: FY09 Operating Budgets
For FY09, the Town Manager's balanced budget submitted to the FINCOM for
deliberation included Operating Budget figures identical to those suggested by FINCOM
at the January Financial Forum:
® the Municipal government $13,588,893 +4.39%
® the School Department $28,424,291 +4.40%
® Buildings Maintenance $ 2,497,321 +5.88%
Please see attachment `TMB-4 Municipal Departments' and `TMB-5 Schools &
Buildings' for a complete but quick overview of these Operating Budgets, which will be
the topics of the next two Budget Messages.
The total increase in the Municipal Government Operating Budget was 4.39%, including
a proposed $25,000 increase in fire fees. This budget matched the allocation suggested by
FINCOM. Municipal wages increased by 4.5% (including hiring two new public safety
officers). Municipal expenses increased by 2.5%. Please see `TMB-4 Municipal
Departments' for more summary-level details. Budget Message 94 will describe all of
the components of this budget in greater detail.
The School Department budget is more difficult to compare FY08 and FY09 in
individual categories. Please see a complete explanation on this in the `TMB-5 Schools
& Build'ings' document. In total, the School Committee voted a budget that was
$381,664 higher in the Operating Budget (+5.80%) than the figure suggested by
FINCOM (+4.40%). The Town Manager's Budget matches the FINCOM figure.
Similarly, for Buildings Maintenance the School Committee voted a budget that was
$11,661 higher in the Operating Budget (+6.38%) than the figure suggested by FINCOM
(+5.88%). The Town Manager's Budget also matches the FINCOM figure.
Budget Message #5' will describe all of the components of the School Department and
Buildings Maintenance budgets in greater detail. For clarity, recall that the total School
Budget voted at Town Meeting consists of the School Department budget plus the School
Buildings Maintenance budget, as shown in Table 1 above.
Summary: FY09 Budget Messalze #3
This third Budget Message outlines the topic of Operating Costs for the Town. All
costs/expenses of the Town are described as either Accommodated Costs or Operating
Costs for the budget process. This distinction is one that is used to allocate Revenues -
first to all of the Accommodated Costs, and then whatever is left to be divided between
the three Operating budgets.
For the Town Manager's balanced FY09 budget, Revenues (+3.5%) have increased at a
faster rate than the Accommodated Costs (+2.6%), which allow for a larger increase in
the Operating Budgets (+4.5%).
4
3ti
FINCOM combines two methods to allocate the remaining funds to the three Operating
Budgets. As a group, they received a +4.48% increase. The Municipal Government was
allocated +4.39%; the School Department was allocated +4.40%; and the Buildings
Maintenance was allocated +5.88% for FY09.
When the final FINCOM budget to Town Meeting is presented, none of these figures
above will be apparent. Many budgets are a combination of Accommodated Costs and the
above Operating Costs, as described in Table 1 above.
Next: Budget Message 44 - "The Municipal Government Departmental Budgets"
(5
Tag- L/
Town of Reading
Muni. Gov't Summary
Amended
Baseline
One Year,
3/7108 3:52 PM
Actual
Actual
(Fall '07 TM)
Budget
Changes
FY - 2006
FY - 2007
FY - 2008
FY - 2009
FY - 2009`
TOTAL OPERATING BUDGET
Total Accounting
$
127,528
$
116,940
$ - 133,027
$
124,189
-6.64%
Total Finance
$
987,563
$
1,100,713
$ 1,134,522
$
1,186,864
4.61%
Total Library
$
951,427
$
1,049,056
$ 1,127,881
$
1,165,227
3.31%
Town Manager's Office
$
299,324.
$
303,715
$ 333,820
$
338,643
1.44%
Total Community Services
$
695,201
$
764,067
$ 842,792
$
867,231
2.90%
Total Public Works
$
1,992,634
$
2,151,818
$ 2,184,864
$
2,262,160
3.54%
Total Public Safety
$
6,606,262
$
6,995,541
$ 7,260,645
$
7,630,579
5.10%
Benefits surcharge'
$
39,000
+2 FTEs
Total Municipal Gov't
$ 11,659,939
$ 12,481,850
$13,017,551
! $ 13,613,893
4.58%i
FINCOM auidance
$
13,588,893
4.39%
Town Manaqer Balanced
difference is a proposed $25,000 increase in fire fees. $ (25,000);
"note: the extra cost the Operatinq budget must bear for new employees above the Baseline Budget
WAGE BUDGET(FTEs)
191.4
201.6
203.7
205.6
0.9%
Total Accounting
$
126,948
$
115,712
$
131,755
$
122,917
-6.7%
Total Finance
$
680,334
$
790,175
$
801,724
$
-848,496
5.8%
Total Library
$
749,744
$
816,913
$
872,976
$
905,376
3.7%
Town Manager's Office
$
167,600
$
173,616
$
175,170
$
180,643
3.1%
Total Community Services
$
612,647
$
659,226
$
755,177
$
" 777,956
3.0%
Total Public Works
$
1,524,946
$
1,584,417
$
1,753,192
$
1,829,995
4.4%
Total Public Safe
$
6,308,234
$
6,679,492
$ 6,919,597
$
7,262,019
4.9%
Total Municipal Gov't
$ 10,170,453
$ 10,819,551.
$11,409,591
$ 11,927,402 -
4.54%
EXPENSE BUDGET
Total Accounting
$
580
$
1,228
$
1,272
! $
1,272
0.0%
Total Finance
$
307,229
$
310,538
$
332,798
$
338,368
1.7%
Total Library
$
201,683
$
232,143
$
254,905
$
259,851
1.9%
Town Manager's Office
$
131,724
$
130,099
$
158,650
$
158,000
-0.4%
Total Community Services
$
82,554
$
104,841
$
87,615
$
.89,275
1.9%
Total Public Works
$
467,688
$
567,401
$
431,672
! $
432,165
0.1%
Total Public Safety
$
298,028
$
316,049
$
341,048
$
368,560
` 8.1%
Total Municipal Gov't
$
1,489,486
$
1,662,299
$ 1,607,960
$
1,647,491
2.46%
+2 FTEs
ADDITIONAL REQUESTS NOT FUNDED
$ 263,758 wages & expenses
$ 24,000 benefits surcharge for add`/
police officer
$ 287,758 total additional requests
+1 FTE police officer & +1 FTE firefighter
' ~1
-~2 ,,sue
l
Town of Reading
School Dept. Summa
School Department - I
Administration
Regular Day
Special Education
Other
Amended
Baseline
One Year
Actual
Actual
(Fall '07 TM)
Budget
Changes'
FY - 2006
FY - 2007
FY - 2008
FY - 2009
FY - 2009
585,560
604,641
505,933,
631,181
5.91%
17,098,923
17,422,487
19,434,253 '
19,487,059
0.27%
3,750,300
4,262,205
4,310,259
4,777,220
10.83%
594,554
820,493
806,057
1,139,615
41.38%,
School Salaries and Wages $ 22,029,337 $ 23,109,826 $25,146,502 $ 26,035,075 3:53%0
Administration 290,998 320,226 314,981 229,914 -27.01%
Regular Day 1,895,405 1,784,714 1,114,502 1,795,239 61.08%
Special Education (non-accomm.) 347,645 363,534 397,878 429,489 7.94%.
Other 266,929 378,640 251,964 316,238 25.51%
School ex enses $ 2,800,977 $ 2,847,114 $ 2,079,325 $ 2,770,880 33.26%
Total School $ 24,830,314 $ 25,956,940 $27,225,827 $ 28,805,955 5.80%
School Committee Voted Budget $ 28,805,955 5.80%
FINCOM guidance $ 28,424,291 4.40% (381,664) difference
Town Manager Balanced Budget $ 28,424,291 4.40% (381,664) difference
School FTEs 473.2 481.8 482.5 504.4 FY09 -School Committee Voted Bud et
Administration 8.5 8.5 8.6 8.6
Regular Day 333.6 337.0 337.0 342.6
Special Education 121.1 126.3 126.9 137.7
Other 10.0 10.0 10.0 15.5
FY09 numbers are based on a different chart of accounts; many costs have been re-distributed from one area of the budget to
another (e.g., technology expenses used to be in several areas of the budget and has now been separated and placed in the
Undistributed/Other section of the budget). In addition, some transfers have been made between salaries and expenses in the
special education budget. A total of $287,000 in additional circuit breaker offset was used in FY08. As a result, in some
cases, the percentage comparisons are not based on comparable items.
Town of Reading
Buildings Maint. Summary
Building Maintenance
School Buildings
Salaries and Wages
Net SBM Expenses
Total School Buildinqs
Town Buildinqs
Salaries and Wages
Net TBM Expenses
Total Town Buildin
Actual Actual
FY - 2006
FY - 2007
1,162, 680
1,222,354
824,564
1,124,209
$ 1,987,244
$ 2,346,563
144,340
159,951
202,420
633,724
$ 346,760
$ 793,6751
Amended*
One Year*
(Fall'07 TM) :
Projected
Changes
FY - 2008
FY - 2009
FY - 2009'.
$ 1,153,865
1,224,023
6.08%
806,656
893,361
10.75%!
$ 1,960,521
$ 2,117,384
8.00%
145,522
152,147
4.55%
252,517 !
239,451
-5.17%
$ 398,039
$ _ 391,598
-1.62%
Total Building Maintenance $
2,334,004 $ 3,140,238
$ 2,358,560 $
- 2,508,982
6.38%,
School Committee Voted Budget
$
2,508,982
6.38%
FINCOM guidance
$
2,497,321
5.88% (11,661) difference
Town Manager Balanced Budqet
$
2,497,321
5.88% (11,661) difference
Building Maintenance FTEs 35.2 30.0 30.0F--7777557 FY09 - School Committee Voted Bud et
Custodial 32.2 27.0 27.0 27.0
Town Custodial 3.0 3.0 3.0 3.0
FY09 numbers are based on a different chart of accounts; many costs have been re-distributed from one area of the budget to
another (e.g., technology expenses used to be in several areas of the budget and has now been separated and placed in the
Undistributed/Other section of the budget). In addition, some transfers have been made between salaries and expenses in the
special education budget. A total of $287,000 in additional circuit breaker offset was used in FY08. As a result, in some
cases, the percentage comparisons are not based on comparable items.
OFR
r _ ~a
~'sJ9r1~C0RQ~~~ Town of Reading
FY09 Budget Message #4
Overview
In the first Budget Message, we outlined the topic of Revenues for the Town. In both the
second and third Budget Messages we described how the revenues are spent - on
Accommodated Costs and on the three Operating Budgets (Municipal Government,
School Department, and Buildings Maintenance). These three Budget Messages relied
upon the balanced budget submitted.by the Town Manager, with the guidance of the
Finance Committee.
This fourth Budget Message will review changes that the Finance Committee (FINCOM)
has voted during their review of the Town Manager's Budget. A Budget Summary -
which is attached to this email (and available online), will update the Revenues and the
various Expenditures for the FY09 FINCOM budget that will be presented to Town
Meeting later this month.
Again, these Budget Messages may be read as a brief summary only by reviewing the
sections labeled as Summary. For those interested in more detail - now updated to be
about the FINCOM's FY09 Budget that will be submitted Town Meeting - please also
read the sections labeled Detail.
These Budget messages can now be found on the Town's website at:
hqp://www.ci.reading.ma.us/Paizes/ReadingNIA FinanceBudgets/FY09%20Index
Budget Messages #5 (today) and #6 (next week) will follow, and will describe the School
and Municipal Government budgets in more detail. This is a slight change in publication
plans, dictated by actions taken by the FINCOM over the past month.
Detail: Revenues
State Aid historically has been one of the most unpredictable sources of revenue for the
Town of Reading. The final number was sometimes not available until after the fiscal
year had already started. FINCOM had to finally adopt a policy that said a historical
average would be used for determining State Aid for the budget process. Any actual
variance from that average used would either flow into or out of free cash for the year,
and adjustments would be made for subsequent years. If the variances were large enough,
the FINCOM, School Committee and Board of Selectmen would confer and plan a course
of action.
This year for the FY09 budget process, an average of +5% was used for the FY09 State
Aid assumption. In the fall, with the backdrop of a softening economy, the 5%
assumption was feared to be too high - but the cash position of the Town was considered
adequate to supplement any shortfall less than $500,000. In January 2008, the Governor's
budget was released, with some good news for the Town. The increase would be at least
$290,000 above a +5% increase - and possibly even more if casino gambling was
T3)1
approved. At the January Financial Forum, the three Boards listed above voted
unanimously to use the additional $290,000 in the FY09 budget process.
In March 2008, the Town received some more good news. An additional $330,000 in
State Aid would be available to the Town - and would not be contingent upon casino
gambling. This was communicated by the Massachusetts Senate and House in a Joint
FY09 Local Aid resolution: http://www.mass. og v/legis/fy09localaid.pdf.
The Board of Selectmen voted unanimously to use none of the $330,000 in the operating
budget, instead using it to supplement possible revenue shortfalls due to declining excise
tax collections state-wide, and drops in interest earnings. The School Committee
indicated a desire to use all of the additional $330,000 in the FY09 budgets.
At a meeting on March 26, one member of FINCOM voted to use all of the additional
State Aid to only supplement revenues, and pass along none to the FY09 Operating
budgets. Two members voted to pass along $100,000 to the Operating budgets. A
majority of five of the eight FINCOM members voted to pass along $200,000 to the
Operating budgets, and use the remaining $130,000 to reduce expected interest rate
earnings.
The $200,000 was divided up between the three Operating budgets, with $128,000 to the
Schools (they would use $25,000 for benefits and $103,000 in their own budget); $61,000
to the Municipal Government budget, and the remaining $11,000 for the School and
Town Buildings budgets. In addition, FINCOM voted to use $75,000 in free cash for the
FY09 School budget as a one-time payment. This reflects a refund from a previous
overpayment for water usage in FY07.
Please see page three of this document for the updated details on FY09 Revenues:
http://www.ci.reading.ma.us/Pages/ReadingN4A FinanceBudgets/FY09/Summar /y 2009
%20budget%20summary%20FINCOM.pdf
Summary: FY09 Operating Budgets
For FY09, the Town Manager's budget submitted to the FINCOM for deliberation
included Operating Budget figures identical to those suggested by FINCOM at the
January Financial Forum:
® the Municipal government $13,588,893 +4.4%
® the School Department $28,424,291 +4.4%
® Buildings Maintenance $ 2,497,321 +5.9%
For FY09, the FINCOM budget submitted to the Town Meeting for deliberation included
these Operating Budget figures (see page one of the above document, just above the line
`AA3'):
the.Municipal government
the School Department
Buildings Maintenance
$13,603,975 +4.6%
$28,527,291 +4.8%
$ 2,508,321 +6.4%
33
It should be noted that some of the $200,000 allocated went into Accommodated Costs
on behalf of the various Operating entities (benefits for new hires; curbside leaf pick-up),
causing slight differences in Operating budget increases.
Summary: FY09 Budizet
The FINCOM budget that will be submitted to Town Meeting will include $72.8 million
in expenditures, balanced against $72.8 million available in revenues. Please refer to this
Budget Summary document - pages one and two - for this discussion:
http://www.ci.reading.ma.us/Pages/ReadingMA FinanceBudgets/FY09/Summary/2009
%20budget%20summary%20FINCOM.pddf,
The $72.8 million in general fund expenditures for FY09 includes $15.3 million for
Accommodated costs that are not part of any Operating entities (primarily benefits,
capital and debt service). This is only a 0.3% increase when compared to the FY08 voted
budgets.
However, one point to make clear is that this FY08 figure includes the substantial use of
free cash at November 2007 for additional capital items and debt (for a ladder truck and
Birch Meadow tennis courts). Ignoring the actions by November Town Meeting which
added to FY08 expenditures, the increase of these Accommodated costs that are not part
of any Operating entities would have been +7.0%. This distinction will be important
when discussing budget sustainability for the future.
The $72.8 million in general fund expenditures for FY09 also includes $4.2 million for
debt service that is paid for by earmarked revenues, including the debt exclusion and
MSBA reimbursements for prior school building projects. This figure is unchanged from
the prior year.
The $53.3 million remainder of the $72.8 million will be spent on the Operating entities:
® $44.6 million will be spent on the Operating budgets (as shown in the chart above,
with the Municipal Government and School budgets up about 4.7%, and the
Buildings Maintenance budgets up 6.4%). The annual increase for these budgets
is +4.8%.
® $8.7 million will be spent on Accommodated costs related to these Operating
entities. This is an annual decrease of 2.4%. The decrease was largely driven by
cost reductions in out of district Special Education and Energy. This point will be
another key element in discussing budget sustainability for the future.
Summary: FY10 and Beyond - Budget Sustainability
On page two of the Budget Summary document is a brief glimpse at what the future
might hold. Two scenarios are presented, one for the Optimists in the crowd, and one for
the Pessimists in the crowd. These scenarios are not meant to be in depth analysis
conducted in a scientific manner. One could well do that, of course, and have results that
are not any more valid.
0
The Optimistic scenario shows 4% Revenue growth for the next two years. If a 7.5%
annual increase in both State Aid and in Local Revenues happens - and all other revenues
behave as they have historically - then this is possible: Recall that in FY09 we have a
+10% increase in State Aid, but a 0% increase in Local Revenues.
Optimists will also believe that the Accommodated costs that are not part of any
Operating entities will increase at a 4%o rate, as opposed to the 7% rate this year (which
ignores using extra money for capital, as described above).
They will finally tell you that the Accommodated Costs shared by the Operating entities
will rise at 4% a year. This is a figure well below the historic average, but more in line
with the recent 2.4% reduction last year. In fact, these costs might well decrease next year
also.
Optimists will be left with enough funding to allow the Operating budgets to grow at
about 4.4% for the next two years given these assumptions. And they will believe that
things may well work out even better than that, so the 4.8% increase this year becomes an
annual event - one to be surpassed in fact.
The Pessimistic scenario shows 2.75% Revenue growth for the next two years..If a 2.5%
annual increase in both State Aid and in Local Revenues happens - and all other revenues
behave as they have historically - then this is possible. Over a twenty-year period, these
figures have increased at about 5% annually - but just as the Optimists used +7.5%, the
Pessimists use +2.5%. And they will add that in the current economy, any increase may
not be possible.
Pessimists will also believe that the Accommodated costs that are not part of any
Operating entities will increase at an 8% rate, as opposed to the 7% rate this year (which
ignores using extra money for capital, as described above). They will worry about double
digit increases in health care costs that make things even worse.
They will finally tell you that the Accommodated Costs shared by the Operating entities
will rise at 8% a year. This is a figure is more in line with the historic average. They will
point to FY09 as an anomaly.
Pessimists will be left with enough to level fund the Operating budgets for the next two
years given. these assumptions. Due to contractual obligations, this will lead to reductions
in services they will say. The Pessimists will believe that things may well work out even
worse than that, so the 4.8% increase this year quickly becomes the Good Olde Days.
Of course, reality might be in between these possibilities
Or it might be to either side of them.
Next: Budget Message #5- "The School Budget" and Budget Message #6 "The
Municipal Government Budget".
6~)
Administrative Offices
82 Oakland Road
Reading, MA 01867
781 944-5800
READING SCHOOL COMMITTEE
Lisa F. Gibbs, Chair
David C. Michaud, Vice-Chair
Christopher Caruso
Karen Janowski
Charles R. Robinson
Elaine L. Webb
Patrick A. Schettini, Jr., J.D.
Superintendent of Schools
Town of Reading
Schools and Buildings
FY09.Budget Message #5
The School Department began its budget presentations in January. Based on the School District's
Mission and District Improvement Plan the administration submitted to the Reading School Committee a
"Baseline Budget" (2.6% increase over FY08), as requested by the Reading FINCOM, and a
"Superintendent's Recommended Budget" (4.8% increase over FY08) that, in addition to the "Baseline
Budget", included positions aimed at improving our schools.
Two items contained in the "Baseline Budget" to bring to your attention are the level funding of Special
Education out of district placements and the level funding of natural gas for heating all the School and
Town buildings. These two items are both contained in the "Accommodated Costs" section of the budget
model and; therefore, the positive impact of no budget increases in these areas is helpful to both the Town
and Schools.
The "Baseline Budget" for the most part had the same level of staffing as this year (FY08) and 2.3%
increase in all the non-personnel lines. The "Recommended Budget" contained the following positions
over the "Baseline Budget":
HS Science/Engineering Teacher
0.9 HS Music/Drama Teacher
HS Health Wellness Teacher
Middle School Reading Specialist
HS Mathematics Teacher
Technology Support Person
STEM Curriculum Specialist K-8
0.5 HS Technology Integration Specialist
4.0 FTE Teachers K-12 to Address Class Size, Enrollment and
programmatic issues,
Elementary Academic Support
HS Guidance Counselor
$50,000
$45,000
$50,000
$50,000
$50,000
$35,000
$75,000
$30,000
$200,000
$50,000
$50,000
The School Committee, after numerous meetings on the budget topic, on January 30th voted a budget
increase of 3.7% for FY09 (1.1% over Baseline). This budget contained the following positions:
RMHS Health Wellness Teacher
$50,000
0.2 RMHS Technology Integration Specialist
$12,000
RMHS Technology Support Person
$35,000
0.9 Middle School Reading Specialist
$45,000
Elementary Academic Support
$47,500
0.9 RMHS Music/Drama Teacher
$45,000
1.0 FTE RMHS Science/Engineering/Math
Teacher
$50,000
RMHS Guidance Counselor
$50,000
1.0 FTE Teachers K-12 for Class Size, Enrollment,
Programming
$50,000
Additionally, the School Committee developed a strategy to fund a portion of the above request by
increasing offsets and utilizing savings in the '07 and '08 budgets due to sound fiscal management and
oversight. When asking for more funds the School Committee felt it was extremely important to come up.
with ways to contribute, at minimum, a portion of the financial solution.
The resulting "School Committee's Recommended Budget" and the proposed financing strategy was
presented to FINCOM on March 12, 2008. Based on increased revenue from the State and an updated
School Committee financing strategy, on March 26, 2008 the FINCOM voted unanimously to increase the
initial "Baseline Budget" amount for the Schools by $128,000. This. amount plus the above mentioned
changes to the budget allow the School Committee to include in its resulting FINCOM approved
"Baseline Budget" the following positions:
RMHS Health Wellness Teacher $50,000
0.2 RMHS Technology Integration Specialist $12,000
RMHS Technology Support Person $35,000
0.9 RMHS Music/Drama Teacher $45,000
1.0 FTE RMHS Science/Engineering/Math
Teacher $50,000
During the 2006-2007 school year the School Department overpaid its water bill due to a faulty meter.
This issue was resolved but since the $75,000 overpayment cannot be credited to the School Department
water account as it would in a residential home, the FINCOM at its March 26th meeting voted
unanimously to allocate to the School. Department the amount of $75,000 to be used in FY09 but not to be
added to the "Baseline Budget" moving forward into FY10. This was a portion of the above mentioned
savings indentified by the School Committee. This $75,000 will allow the School Committee for the
school year 2008-2009 to add a 0.5 reading teacher at the Parker Middle School and Academic Support
Tutoring to each of the elementary schools.
~o`a OFR~~i
,sS9~fKC044~¢P
Town of Leading
FY09 Budget Message #6
Overview
In this final Budget Message for FY09, we will summarize the Municipal Government
budgets. To review, the previous five Budget Messages were:
a Revenues for the Town;
® Accommodated Costs;
® The three Operating Budgets (Municipal Government, School
Department, and Buildings Maintenance);
o FINCOM changes to Town Manager's budget;
® School Department & Buildings Maintenance
Summary: Municipal Government FY09 Budget
Taken as a whole, the Municipal Government budget is increased by 4.60% for FY09
when compared to FY08. We will slice this increase several ways: by Department; by
Wages/Expenses; by Accommodated/Operating costs; and by Ongoing/Restored/Non-
Recurring costs.
Detail: Department FY09 Budgets
The changes since last year range from Finance and the Library each at over +6.5% to the
Town Manager's Office +2% and Accounting -6.6%. The largest drivers for all of these
changes include a retirement payment in FY08 (Accounting) that does not recur in FY09;
a significant increase in the number of elections in FY09 as well as annual maintenance
on a new financial software system (Finance); increased FY09 hours in of operation for
the Library (October through May from 2-5pm); and adding two new Public Safety
positions in the FY09 budget.
Town of Reading
Actual
Actual
(Fall'07 TM)
One Year
Muni. Gov't Summary
FY - 2006
FY - 2007
FY - 2008.
FINCOM
Changes
TOTAL BUDGET
FY - 2009
FY - 2009
Accounting
$
127,528
$
116,940
$ 133,027
$
124,189
-6.64%
Finance
$
987,563
$
1,100,713
$ 1,284,522
$
1,372,459
-6.85%
Library
$
951,427
$
1,049,056
$ 1,127,881
$
1,203,906
6.74%
Town Manager's Office
$
618,885
$
630,649
$ 679,266
$
692,818
2.00%
Community Services
$
765,287
$
824,536
$ 902,792
$
927,231
2.71%
Public Works
$
4,514,694
$
4,499,141
$ 4,635,719
$
4,807,030
3.70%
Public Safety
$
6,596,012
$
6,986,222
$ 7,251,130
$
7,622,882
5.13%
FINCOM voted budgets
$ 14,561,396
$ 15,207,257
$16,014,337
$16,750,515
4.60%
Detail: Departments FY09 Wages & Expenses
Again, taken as a whole, the Municipal Government wage budgets are increased by
4.88% for FY09 when compared to FY08. About 1.2% of this cost was due to adding
extra Library hours and the two new Public Safety positions being added to the FY09
budget (a police officer and a firefighter). The remaining 3.68% reflects the increased
9
FY09 wages paid, with this note: Union wages in all Departments for FY09 reflect the
expected settlements of negotiations on labor contracts that will run, through June 30,
2010. Assumptions about wage costs for FY08 were made a year ago before these
settlements were reached. One-year wage percentage changes shown below actually
represent differences in both FY09 versus FY08 plus differences between FY08 and prior
assumptions:
Town of Reading
.
One Year
Muni Gov't by Wages & Exp
Actual
Actual
(Fall '07 TM)
FINCOM
Changes
FY - 2006
FY - 2007
FY - 2008
FY - 2009
FY - 2009
WAGE BUDGET(FTEs)
195.9
207.4
209.5
211.4
0.9%
Accounting
$
126,948
$
115,712
$
131,755
$
122,917
-6.7%
Finance
$
680,334
$
790,175
$
801,724
$
848,496
5.8%
Library
$
749,744
$
816,913
$
872,976
$
944,055
8.1%
Town Manager's Office
$
167,600
$
173,616
$
175,170
$
180,643
3.1%0
Community Services
$
612,647
$
659,226
$
755,177
, $
777,956
3.0%
Public Works
$
1,643,466
$
1,727,956
$
1,899,249
$
1,981,924
4.4%
Public Safety
$
6,308,234.
$
6,679,492
$
6,919,597
$
7,264,027
5.0%
FINCOM voted budgets
$10,288,973
$
10,963,090
$
11,555,648
$
12,120,018
4.88°/a
EXPENSE BUDGET
Accounting
$
580
$
1,228
$
1,272
$
1,272
0.0%
Finance
$
307,229
$
310,538
$
482,798
$
523,963
8.5%
Library
$
201,683
$
232,143
$
254,905
$
259,851
1,9%
Town Manager's Office
$
451,285
$
457,033
$
504,096
$
512,175
1.6%
Community Services
$
152,640
$
165,310
$
147,615
$
149,275
1.1%
Public Works
$
699,476
$
748,579
$
659,160
$
680,325
3.2%
Public Safety
$
2,459,530
$
2,329,336
$
2,408,843
$
2,503,636
3.9%
IFINCOM voted budgets $ 4,272,423 $ 4,244,167 $ 4,458,689 1 $ 4,630,497 3.85%1
Overall, Expenses climbed 3.85% for FY09. An overall target of a 2% increase was used
for all Departments, and met by most of them. The three that exceeded this amount were
given specific additional funding either through Accommodated Costs early in the budget
process, or by the additional FINCOM funding late in the budget process.
Detail: Departments FY09 Operatins & Accommodated Costs
FY09 Municipal Government Operating Costs ($13.6 million) are up 4.58% in FY09, and
Accommodated Costs ($3.1 million) are up a similar 4.66%. Some of the items listed
under Accommodated Costs explain unusual increases in some of the budgets. For
example, Finance has an 8.5% expense increase in FY09. Excluding the new software
license, the increase becomes just below I% for FY09. For the Operating budgets, the
increased Library hours are evident here with a 6.74% increase:
2
U~
Town of Reading
One Year
Muni. Gov't by Oper & ACC
Actual
Actual
(Fall'07 TM)
FINCOM,
Changes
TOTAL OPERATING BUDGET
FY - 2006
FY - 2007
FY - 2008
FY - 2009
FY - 2009
Accounting
$
127,528
$
116,940
$
133,027
$
124,189
-6.64%
Finance
$
987,563
$
1,100,713
$
1,134,522
$
1,186,364
4.57%
Library
$
951,427
$
1,049,056
$
1,127,881
$
1,203,906
6:74%
Town Manager's Office
$
299,324
$
303,715
$
333,820
$
338,643
' 1.44%
Community Services
$
695,201
$
764,067
$
842,792
$
867,231
2.90%
Public Works
$
1,992,634
$
2,151,818
$
2,184,864
$
2,260,760
3.47%
Public Safety
$
6,596,012
$
6,986,222
$
7,251,130
$
7,622,882
5.13%
FINCOM voted budqets
$11,649,689
$12,472,531
$
13,008,036
$
13,603,975
4.58%
TOTAL ACCOMMODATED COSTS
Accounting
Finance
FINCOM Reserves
$
150,000
$
150,000
0.00%
Fin 7 Systems license
$
36,095
100.00%
Library
Town Manager's Office
P&CInsurance
$
319,561
$
326,934
$
345,446
$
354,175
2,53%
Community Services
Veteran' Assistance
$
70,086
$
60,469
$
60,000
$
60,000
0.0%
Public Works
Fuel - vehicles
174,537
141,158
189,752
210,790
11.1%
Street Lighting
$
188,528
$
180,702
$
218,505
$
226,505
3.66%
Rubbish Collection/ Disposal
$
1,401,588
$
1,376,887
$
1,458,805
$
1,468,276
0.65%
Snow and Ice Control
$
581,636
$
465,017
$
400,000
$
450,000
12.50%
Cemetery Wages
$
118,520
$
143,539
$
146,057
$
151,929
4.02%
Cemetery Expenses
57,251
40,020
37,736
38,770
2.74%
FINCOM voted budgets
2,911,707
2,734,726
3,006,301
3,146,540
4.66%
Detail: Departments FY09 Budget Sustainability
A constant question while Municipal Government budgets are built is that of
sustainability. When there is some doubt, we instead to prefer to a) save the money; or b)
spend it on non-recurring costs (especially those that will save money in the future). In
either case, future ongoing budgets will therefore not be negatively impacted.
For FY09, the 4.60% increase consists of three parts: 3.3% is for ongoing costs of
operation; 1% is for restored or additional services; and 0.3% is for one-time expenses:
FY 2009 Municipal government budget increase
$736,178
+4.60%
Operating costs
$523,886
+3.27%
Restored/additional services
$156,492
+0.98%
Significant non-recurring expenses
$ 55,800
+0.35%
Restored/additional services $156,492 increase (plus $39,000 in benefits budget)
o Additional police officer $51,500 (plus $20,600 benefits).
o Additional firefighter $46,000 (plus $18,400 benefits).
3
o Restored Sunday Library hours $38,679
o Restored curbside leaf collections $20,313
Significant non-recurring expenses $55,800 increase
o Increase to fund snow & ice expense $50,000
o Increased elections costs $35,000
o Increase Fire & Police expenses $12,300
o Professional development $25,000
o Discontinued/decreased items from previous year -$66,500
We cannot expect to have an FY10 decrease in non-recurring expenses, based on our
knowledge today. To maintain existing service for the FY10 Municipal Government
Operating Budget, it appears that an increase of between 3.5% and 4% will be needed.
When overall revenues are expected to grow at about 3.5%, and Accommodated Costs
usually have exceeded the rate of revenue growth, one cannot readily presume that the
FYI 0 Municipal Government Operating Budget will be easy to balance.
Conclusion:
We hope that these series of six Budget Messages have added some insight as to how the
budget process in the Town of Reading operates each year. In a typical season, the public
process begins in October at a Financial Forum, and ends at April Town Meeting. In fact,
staff planning not only occurs throughout the year, but also well beyond the current
budget under discussion.
For those that are interested in further details about the FY09 budget, we remind you that
they are available online at:
http://www.ci.reading.ma.us/Pages/ReadingN4A Finance/Budgets/FY09%20Index
The Town of Reading has been very fortunate when compared to virtually all of our
neighboring communities when it comes to financial matters. Disagreements between
local Boards and Committees are on how much money to spend, and where to spend it.
Virtually all of our neighbors debate on how much to cut, and where to cut it.
Last year the Town was rewarded with an upgrade to our bond rating from a national
agency. They commented that although our cash reserves were not as good as other
highly-rated communities, our financial management & practices were very strong.
If we want to continue to have disagreements on how to spend money, it will remain
important to spend it prudently - with as many eyes on the future as on the present.
Thank you for your kind feedback from these Budget Messages. Any further ideas for
improvements and suggestions are welcome - throughout the year.
Bob LeLacheur
Assistant Town Manager/Finance Director
finance@ci.reading.ma.us
4
C~~
Massachusetts Department of Revenue Division ofLocal Services
Na jeet K. Bal, Commissioner Robert G. Nunes, Deputy Commissioner& Director ofMunlapalAlfairs
Informational Guideline Release
0V
Bureau of Accounts
Informational Guideline Release (IGR) No. 11-101
June 2011
Supersedes IGR 85-102, 86-204, 88-215 and 88-234 and Inconsistent Prior Written Statements
OVERLAY AND OVERLAY SURPLUS
(G.L. c. 59, 25 and 70A)
This Informational Guideline Release (IGR) explains the statutory standard for maintaining
an adequate overlay and the actions the Commissioner of Revenue may take to ensure compliance
with that standard.
Topical Index Key:
Accounting Policies and Procedures
Special Funds
Distribution:
Assessors
Collectors
Treasurers
Accountants/Auditors
Selectmen/Mayors
City/Town Managers/Administrators
Finance Directors
Finance Committees
City/Town Councils
The Division ofLocal Services is responsible foroversight ofand assistance to cities and towns in achieving equitable properly lexabon and efficient fiscalmanagement. The Division
regularlypublishes IGRs (Informational Guideline Releases detailing legal and administrative procedures) and the Bulletin (announcements and useful information) for local officials and
others interested in municipal finance.
Post Office Box 9569, Boston, MA 02119-9569, Tel. 617-626.2300,• Fax: 617-626.2330 http llwww.massgov/dls
61
Informational Guideline Release (IGR) No. 11-101
June 2011
Supersedes IGR 85-102, 86-204, 88-215 and 88-234 and Inconsistent Prior Written Statements
OVERLAY AND OVERLAY SURPLUS
(G.L. c. 59, 25 and 70A)
SUMMARY:
The Allowance for Abatements and Exemptions (overlay) is an annual account to cover
anticipated abatements and exemptions of committed real and personal property taxes for that
fiscal year. The overlay amount is determined by the board of assessors (assessors) and may be
raised in the tax rate without appropriation. Excess overlay is determined, certified and transferred
by vote of the assessors to a Fund Balance Reserved for Overlay Released by the Assessors for
Expenditures (overlay surplus). Overlay surplus may then be appropriated by the legislative, body
for any lawful purpose until the end of the fiscal year, i.e., June 30. Overlay surplus not
appropriated by year end is closed to the general fund undesignated fund balance.
These guidelines explain the statutory standard for maintaining an adequate overlay and the
actions the Commissioner of Revenue (Commissioner) may take when approving a tax rate or
determining available funds (free cash) to ensure compliance with that standard. The guidelines
are in effect and supersede Informational Guideline Releases No. 85-102, Use of Overlay Surplus,.
86-204, Overlay Surplus, 88-215, Overlay Reserve and 88-234, Overlay Surplus, and any
inconsistent prior written statements or documents. .
GUIDELINES:
1. BUDGETING OVERLAY
A. Assessors' Determination
Cities, towns and tax levying improvement districts must budget an adequate overlay to
fund anticipated property tax abatements and exemptions each fiscal year. The assessors
determine the amount needed and may raise it in the municipal or district tax rate without
appropriation. G.L. c. 59, § 25. Assessors should provide the amount they intend to raise
to their local budget officials during the annual budget process.
Appropriation into any fiscal year's overlay is not recommended.except to fund an
anticipated overlay deficit. See Section III-F below.
BUREAU OF ACCOUNTS GERARD D. PERRY, DIRECTOR
4`~
-2-
B. Commissioner's Approval
In order to approve the annual tax rate, the Commissioner must determine that the overlay
budgeted for the fiscal year is reasonable, i.e., adequate to fund anticipated abatements and
exemptions. G.L. c. 59, § 25. The reasonableness of any year's overlay will be judged
based on the following factors:
® The 3-year average of granted abatements and exemptions.
® Whether local assessments are scheduled for review and certification by the
Department of Revenue. G.L: c. 40, § 56.
® The potential abatement liability in cases pending before, or on appeal from, the
Appellate Tax Board (ATB).
® Other significant assessment factors known to the Commissioner.
H. PROCESSING ABATEMENTS
A. Overlay Charges
The overlay for a fiscal year is charged for the following:
Abatements of real and personal property taxes assessed and committed under G.L.
c. 59. Property taxes include omitted assessments under G.L. c. 59, § 75, revised
assessments under G.L. c. 59, § 76, supplemental assessments under G.L. c. 59, §
2D, pro rata pro forma assessments under G.L. c. 59, § 2C and annual taxes
assessed on land classified under G.L. c. 61 (forest), c. 61A (agricultural and
horticultural) and c. 61B (recreational).
Exemptions from real and personal property taxes assessed and committed under
G.L. c. 59.
Municipal share of federal Social Security and Medicare taxes on real property tax
abatements earned by seniors in a community that has adopted the senior work-off
abatement program under G.L. c. 59, § 5K and has not budgeted those taxes.
Abatements or exemptions of other taxes, including motor vehicle, boat and farm animal
excises, roll-back and conveyance taxes assessed under G.L. c. 61, 61A and 61B,
community preservation surcharges, betterments and special assessments, are treated as
adjustments to the revenue account. Revenue is also adjusted to account for any amount by
which the real and personal property tax levy for the fiscal year exceeds the tax.
commitment.
B. Overlay Deficits
If abatements and exemptions charged to the overlay exceed the account balance for that
fiscal year as of any June 30, the resulting deficit must be raised in the next annual tax rate
unless otherwise funded by appropriation from overlay surplus or other financing source.
See Section III-F below.
0
-3-
C. Interest
Abatements or exemptions of paid taxes refunded to a taxpayer must include interest at
eight percent per year on the overpayment. If the assessors grant the abatement or
exemption, interest is calculated from the due date or actual date of the payment that
resulted in the tax, as abated, being paid, whichever is later, to the refund date. G.L. c. 59,
§ 69. If the ATB orders the abatement or exemption, the interest is calculated from the
actual payment date. G.L. c. 58A, § 13 and c. 59, § 64.
Interest due the taxpayer is charged to an appropriation for that purpose, such as a short-
term interest or treasurer's general expense appropriation. Interest expenditures may
exceed the appropriation and must be raised in the next annual tax rate unless otherwise
funded. G.L. c. 59, § 23.
III. DETERMINING OVERLAY SURPLUS
The overlay for a fiscal year remains open until it is exhausted or the assessors transfer
excess no longer needed to cover potential abatements, exemptions and uncollectible taxes
to overlay surplus.
A. Calculation of Excess Overlay
1. Statutory Definition
Excess overlay is the amount of overlay remaining for a particular fiscal year that exceeds:
a. Property Tax Receivables - The total real and personal property taxes, including
omitted and revised assessments, still outstanding against the collector's warrant
(property tax receivables) for that fiscal year. Outstanding real property taxes
secured by a tax title need not be included, except for the amount, if any, the
assessors estimate may be abated as uncollectible after tax title disclaimer.
PLUS
b. Potential Abatements - The assessors' estimate of the amount of potential
abatements and exemptions of paid property taxes.
Example 1. The overlay balance for FYI is $100,000. All outstanding real estate
taxes for the year have been moved into tax title. Outstanding personal property
taxes are $10,000. All FYI abatement and exemption applications have been
processed and only one appeal to the ATB was timely filed. That case could result
in an abatement of up to $100,000 if the taxpayer prevails. Based on historical
data, the assessors also expect to abate $5,000 in real estate taxes as uncollectible.
No excess overlay exists because the $100,000 overlay balance is less than property
tax receivables ($15,000) plus potential abatements ($100,000).
-4-
Example 2. One year later, the ATB orders an abatement of $75,000 in the
pending case and no appeal is taken. The overlay balance is now $25,000 as a
result of the abatement. All other facts are the same as in Example 1. There is now
excess overlay of $10,000 [$25,000 overlay balance - $15,000 ($15,000 receivables
+ 0 potential abatements.)]
2. Use of Records
In making their determination, the assessors must use the overlay balances and property tax
receivables that appear in the accounting officer's records. The accounting officer is the
city auditor, town accountant or other officer having similar duties in the city, town or
district.
a. Overlay Balance - If there is a variance in the overlay balance between the
assessors' and accounting officer's records, the assessors must use the lesser of the
two amounts.
b. Property Tax Receivables - If there is a variance in the property tax receivables
between the collector's and accounting officer's records, the assessors must use the
neater of the two amounts.
B. Timing of Determination
The amount of excess overlay, if any, for all or particular years may be determined by the
assessors on their own motion at any time and must be determined by them within 10 days
of a written request by the community's chief executive officer. The chief executive
officer is the manager in any city having a manager and in a town having a city form of
government, the mayor in any other city, the board of selectmen in any other town and the
district commissioners, prudential committee or other officer or body designated to perform
the function in a district.
C. Transfer to Overlay Surplus
Whenever the assessors determine there is excess overlay for any fiscal year, they must
vote to certify the amount to be transferred to overlay surplus and must notify the
accounting officer in writing of their vote. If the determination is made after the chief
executive officer's written request, the assessors must also take the vote within 10 days of
the request and so notify the chief executive in writing.
D. Verification of Transferred Amount
Before recording any voted transfer, the accounting officer must verify that the amount
voted by the assessors is excess overlay under G.L. c. 59, § 25. See Section III-A-1 and 2
above. If the accounting officer determines that the amount voted is greater than excess'
overlay, the assessors' action is not effective to the extent of that portion of the amount
51
-5-
voted that is greater. The accounting officer may not record a transfer of the ineffective
amount to overlay surplus and must so notify the assessors, and chief executive officer if
the assessors' vote was made after a written request of the officer, in writing immediately.
E. Sanctions for Excessive Transfers
The Commissioner may take any of the following actions where the assessors certify and
the accounting officer records a transfer from overlay to overlay surplus greater than excess
overlay under G.L. c. 59, § 25:
® Reduce certified free cash by the excessive transfer.
® Treat any appropriation from overlay surplus as an appropriation from free cash.
• 'Require local action to remedy the excessive transfer before approving the tax rate.
F. Use of Overlay Surplus
A city, town, or district may appropriate overlay surplus for any lawful purpose, including
funding any known or anticipated overlay deficit for any fiscal year. Any amount not
appropriated by June 30 closes to undesignated fund balance in the general fund. In the
normal course of events, this will increase certified free cash.
G. Management of Overlay Accounts
Excess overlay may be declared, for any fiscal year whenever the statutory standard
explained in Section III-A- I and 2 above is met. However, communities are encouraged to
manage their overlay accounts in a prudent manner in order to avoid having to raise
significant overlay deficits in the tax levy. They might consider, for example, a general
policy of using excess overlay to fund potential overlay deficits in other fiscal years before
making it available for operating or other spending purposes, i.e., analyzing all overlay
balances to see whether they can reasonably cover their property tax receivables and
abatement exposure for other years. This practice would maintain adequate overlay to
cover potential deficits.
Or fep,
Finance Committee Meeting
~~~L1 June 29, 2011
~a'63 o¢P~w~
lNCOR4 Conference Room, Reading Town Mall
' 9•
The meeting convened at 7:30 PM in the Conference Room at Town Hall.
FINCOM Members Present: Chair Marsie West, Vice Chair David Greenfield, John Arena, Barry Berman,
Mark Dockser, Paula Perry and Hal Torman.
Members Absent: Francis Fardy and Kevin Leyne.
Also Present: Assistant Town Manager/Finance Director Bob LeLacheur and Fire Chief Greg Burns.
There being a quorum the FINCOM meeting was called to order at 7:35 PM.
Mr. LeLacheur gave an overview of the Fire department's request for a $50,000 reserve fund transfer for
FY11 wages. Chief Burns gave more details, explaining some of the long-term injuries and medical issues,
and especially what happened since April to cause this recent request. Mr. Berman stated that he knew
injuries were all part of the job, but wondered if adding an additional firefighter would be paid for by OT
savings. Chief Burns reviewed a suivey of nearby communities from last winter that showed Reading was
about in the middle. He added that not all communities had EMS training as a requirement that is funded by
OT. He doubted that an additional firefighter would reliably be paid for by a corresponding decrease in OT.
Ms. Perry asked if the training could be timed, and Chief Burns said that it was scheduled when there was no
vacation times listed, and that the 19 EMTs were split in half for the every two-year requirement to further
minimize OT. He added that there is currently a two per group maximum for scheduled vacation.
On a motion by Mr. Torman, seconded by Mr. Berman, FINCOM voted 7-0-0 to approve a transfer
from FINCOM Reserves to the Public Safety (Fire) OT Wage line item for FYll.
Chief Burns left the meeting after thanking the FINCOM. Mr. Greenfield asked Ms. West if this was an
appropriate time to discuss Public Safety OT costs, and she agreed. Mr. Greenfield and others had a brief
discussion about the causes of OT and details in both Fire and Police, and agreed to defer further discussion
until both Chiefs could attend a meeting. They asked Mr. LeLacheur to schedule that for their first meeting
in September.
Mr. LeLacheur took over the FINCOM meeting and asked for nominations for the position of Chair. Mr.
Greenfield asked Ms. West if she would remain as Chair, and she indicated that she would if there was no
other interest. .
On a motion by Mr. Greenfield, seconded by Mr. Berman, the name of Marsie West was nominated as
Chair. On a motion by Mr. Greenfield, seconded by Mr. Berman the nominations were closed. On a
motion by Mr. Greenfield, seconded by Mr. Berman, Ms. West was approved to be Chair by a vote of
7-0-0.
Ms. West took over the FINCOM meeting and asked for nominations for the position of Vice Chair. Mr.
Torman asked Mr. Greenfield if he would remain as Vice Chair, and he indicated that she would if there was
no other interest.
On a motion by Mr. Berman, seconded by Ms. Perry, the name of David Greenfield was nominated as
Vice Chair. On a motion by Mr. Berman, seconded by Ms. Perry the nominations were closed. On a
motion by Mr. Berman, seconded by Ms Perry, Mr. Greenfield was approved to be Vice Chair by a
vote of 7-0-0.
On a motion by Mr. Greenfield, seconded by Ms. Perry, Ms. West was appointed to be one of
FINCOM's representatives on the Audit Committee by a vote of 7-0-0.
Mr. LeLacheur reviewed the FINCOM liaison assignments, and asked new member John Arena as well as
other members to please forward their interest to Ms. West before the next FINCOM meeting. He also
reviewed a proposed FY12 meeting schedule beginning with a Monday July 25 joint meeting at RMHS with
the School Committee for the purpose of reviewing the recent financial mismanagement news at a Special
Education Collaborative (not one used by Reading) as well as a Reserve Fund transfer request for repairs to
the Veteran's Memorial Wall at RMHS.
Ms. West requested that a regular meeting in September be held with the two Chiefs, and that only one
Financial Forum be held this fall - in mid October. Mr. Dockser asked that a review of revenue enhancement
efforts as well as expense reductions be discussed. Mr. Berman stated that the expenses were well known at
this point and he was most interested in a review of revenues. Ms. West added a FY13 revenue outlook,
FYI 3 budget guidance, and an update on Economic Development activities - especially as they relate to both
one-time and recurring revenues and expenses.
Ms. West asked how the one-week requirement for a FINCOM vote before Town Meeting could be changed,
and Mr. LeLacheur told her to see the Bylaw Committee as soon as possible as they were re-codifying the
bylaws in time for a presentation to November Town Meeting. Mr. LeLacheur reviewed the attached
FINCOM Mission Statement and Guiding Principles; the FINCOM policies on Debt/Capital as well as Cash
Reserves; and the relevant sections of the local Bylaws and Town Charter than describe the responsibilities
of the FINCOM. Mr. Greenfield asked if the typical budget process could be written up, and Mr. LeLacheur
agreed to prepare that in time for the September FINCOM meeting and suggested they adopt it as a Budget
Policy. A September review will give Town and School staff an opportunity to review the proposed policy
and make corrections or suggestions. Mr. LeLacheur reviewed that recent $74,680.92 quarterly meals tax
payment, and stated that this implied the.projected FY12 revenue of $150,000 was now looking a bit
conservative.
On a motion by Mr. Greenfield, seconded by Mr. Berman, FINCOM voted to approve the Minutes of
April 13, 2011 as written by a vote of 5-0-2 (Mr. Arena and Mr. Dockser abstaining).
On a motion by Mr. Torman, seconded by Mr. Greenfield, FINCOM voted 7-0-0 to adjourn at
9:35pm.
Respectfully submitted,
Recording Secretary
2
0
The Town of Reading - FINCOM-School Committee Meeting http://www.readingma.gov/Pages/ReadingMA MeetingCal/SO174A8F...
fir; ~~1, r;Sr i
10,
oi~
1 l - -
_ ;''riom~ Residents Businesses
FINCOM-School Committee Meeting
Monday, July 25, 2011 at 8:00 PM
RMHS Superintendent Conf Room
Printer-Friendly Version
Joint meeting with School Committee
1. Report from Special Education Collaboratives
2. Award of Memorial Wall Replacement Contract
3. Update on Contract Negotiation
4. FINCOM adjourn while School Committee continues with other business
I
Google Search
COMMON CAUSE
C1hiM[ON CAUSl
Town of Reading, Massachusetts 16 Lowell Street, Reading, MA 01867 Website Disclaimer
Virtual Town Hall Website
Iof1
055
7/25/2011 12:47 PN