Loading...
HomeMy WebLinkAbout2012-04-11 Finance Committee Minutes Finance Committee Meeting April 11, 2012 The meeting convened at 7:30 p.m. in the Town Hall Conference Room, 16 Lowell Street, Reading, Massachusetts. Present were Chairman David Greenfield, Vice Chairman Barry Berman, FinCom members Jeanne Borawski, Paula Perry, and Hal Torman, Town Manager Peter Hechenbleikner, assistant Town Manager/Finance Director Bob LeLacheur, DPW Director Jeff Zager, DPW Business Administrator Jane Kinsella. Water and Sewer update Mr. LeLacheur reviewed the April 10, 2012 presentation given to the Board of Selectman concerning the financial status of the Water and Sewer enterprise funds at their public hearing to set FY13 rates. He pointed out that four items determine rates: budgets, other assumptions, usage and reserves. He mentioned that FINCOM had already voted budgets although he would shortly ask the Selectmen to reconsider. He added the MWRA forecast for the next four years, and how it would put upward pressure on local enterprise fund budgets. He mentioned that the other assumptions in FY13 would add 1.3% to rates because less late payments (penalties & interest) were a result of increased reminders from the Town to pay on time. He reviewed usage in some detail, beginning with a historic view. One year ago it seemed that the Town had hit a bottom in terms of ongoing conservation since FY11 usage was up from prior years. In setting the FY12 rates an assumption of usage was the prior four-year average of 705,000 hundred cubic feet (HCF) per year. Actual usage in the first quarter of FY12 was above that assumption, but usage dropped sharply in the second quarter. If the third and fourth quarters rebounded to the pattern shown in the first quarter then the annual forecast would have held, but last week the figures for the third quarter showed ongoing conservation efforts slightly below the four-year average. Presuming this to be the case in the fourth quarter, actual usage for FY12 will be around 680,300 HCF. This drop in water sales will result in an approximate revenue deficit in both water and sewer of $200,000 each for the fiscal year. There is not enough expense reductions available for the remainder of the year, so at April Town Meeting there will be a request to transfer in $200,000 from reserves to both the water and sewer budgets. It is expected that this will avoid a revenue deficit. In addition, the rate setting for FY13 as decided the previous night will be pegged at 650,000 HCF. This level assumes a further 5% reduction in usage for FY13. A steeper reduction may cause expense cutting or further use of reserves; less of a reduction will allow reserves to grow and be used to offset rates in future years. Mr. Berman and Mr. Greenfield pointed out that this was a self-policing situation. If usage was too high then extra reserves would help future rates, if usage were too low then reserves would be used up. Therefore there was no long-term way to avoid paying the correct price for actual water usage in the system. For FY13 Mr. LeLacheur indicated that the Board of Selectman voted sewer rates that used $150,000 of reserves to support the budget that FINCOM had approved and sent along to Town Meeting. However they voted water rates that also used $150,000 of reserves and supported a budget that is $350,000 lower than the budget FINCOM approved and sent to Town Meeting. They suggested that a $350,000 capital project (water main repairs to H. St. loop/Ivy St) be Finance Committee Minutes – April 11, 2012 – page 2 deferred to FY14 instead. To steady future rates a few other changes were made to FY14 and FY15 water capital. Mr. LeLacheur reviewed how the Board analyzed both FY13 and the next several years in their deliberations. He mentioned that in general it would not be a surprise if local capital spending in both funds would slow down as further conservation occurred – or costs climbed – in order to have a somewhat steady rate increase, albeit at relatively high 9% to 11% levels over the next few years. A motion by Mr. Greenfield seconded by Ms. Perry to reconsider Articles 4, 6, 13 and 14 was approved by a vote of 5-0-0 . Article 4 – Mr. LeLacheur reviewed the specific changes to the water capital plan suggested by the vote on rates by the Board of Selectman last night. The key item was removing the $350,000 capital expense from the FY13 budget as previously described. Mr. Hechenbleikner reviewed the discussion with DEP that may allow the Town to abandon the wells in the Ipswich river basin, and therefore allowed a well upgrade planned for FY14 to be removed. He also mentioned that one benefit of moving the Bear Hill tank maintenance project out from FY14 to FY15 was to allow further discussion with the MWRA about having a larger storage tank run by the MWRA on Bear Hill. He mentioned that in all cases the capital that was being moved out a year did not pose any health or safety issues, the projects needed to be done but were not urgent. A motion by Mr. Berman seconded by Mr. Torman to recommend the subject matter of Article 4 as presented was approved by a vote of 5-0-0. Article 6 – Mr. LeLacheur reviewed the addition of the Enterprise Fund section to the FY12 budget amendments. This would allow $200,000 of reserves from both water and sewer to be used, but there were no changes to the current budgets. This action would cover the expected revenue deficit. Mr. Zager mentioned that about 30-35 communities across the state were experiencing these deficits, and that most communities were in a position to cover with reserves but some had to raise rates mid-year. A motion by Mr. Torman seconded by Mr. Greenfield to recommend the subject matter of Article 6 as presented was approved by a vote of 5-0-0. Article 13 – Mr. LeLacheur reviewed the change to the voted Water budget – a $350,000 reduction from $5,417,954 to $5,067,954 in line W99. A motion by Mr. Greenfield seconded by Mr. Berman to recommend the subject matter of Article 13, Line W99 at $5,067,954 was approved by a vote of 5-0-0. Article 14 – Mr. Hechenbleikner showed the updated figure from the House of $603,012 for Chapter 90 (Road) funds for FY13. He said the Senate was scheduled to vote on the number tomorrow. FINCOM had previously voted to support an unknown amount of funds expected to be approximately $600,000. A motion by Ms. Perry seconded by Mr. Greenfield to recommend the subject matter of Article 14 Chapter 90- funds at $603,012 was approved by a vote of 5-0-0. Finance Committee Minutes – April 11, 2012 – page 3 Mr. Greenfield discussed the need to meet in the second week of May, and the Committee decided to have the meeting posted and decide during Town Meeting whether a meeting was needed. They asked what the progress was on filling the empty FINCOM seats, and both Mr. LeLacheur and Mr. Hechenbleikner said that had not checked to see if there were any applicants. Mr. Greenfield said he had been approached by a few people that might be interested but did not know if they had yet formally applied. Given the FINCOM meeting schedule, the best time for these seats to be filled is July 1, 2012. A motion by Mr. Berman seconded by Mr. Torman to adjourn the meeting at 8:20 p.m. was approved by a vote of 5-0-0. Respectfully submitted, Secretary