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Home My WebLink About2012-02-29 Finance Committee PacketThe Town of Reading -Finance Committee - FY13 Budget Meeting http: / /www.readingma.gov/ Pages /ReadingMA_MeetingCal /SO1831 D... Google Search o[ n me Finance Committee - FY13 Budget Meeting Wednesday, February 29, 2012 at 7:30 PM Town Hall conference room Printer - Friendly Version Agenda a FY13 Town Manager's Budget Overview - Peter & Bob Community Services (pages 48 -56) - Jean Town Administration (pages 33 -35) - Peter Accounting & Finance (pages 36-47) - Bob Employee Benefits (pages 10 -13 & 14 -17) - Bob a Minutes February 8, 2012 COMMON CAUSE Town of Reading, Massachusetts 16 Lowell Street, Reading, MA 01867 websile Disclaimer Virtual Towns & Schools Website 1 of 1 2/29/2012 3:52 PM February 29h (@Town Hall Overview — Peter Community Services (pages 48 -56) - Jean Town Administration (pages 33 -35) - Peter Accounting & Finance (pages 36-47) - Bob Employee Benefits (pages 10 -13 & 14 -17) - Bob March 7th(&RMLD Library (pages 57 -61) - Ruth Fire & EMS (pages 62 -65) - Greg Police & Dispatch (pages 66 -73) - Jim Public Works (pages 74 -87) - Jeff Capital & Debt (pages 10 -13 & 18 -30) - Bob Enterprise Funds (pages 88 -113) — Bob March le(a.RMLD Review Warrant — Pete Articles: 4 — amend FY12 -21 Capital Plan 5 — establish OPEB Trust Fund 6 —amend FY12 Budget 7 — approve FY13 -22 Capital Plan 8 — approve prior year's bills 9 — dispose surplus property 10 — establish revolving funds 12 — accept gift Friends of Reading Football 13 — FY13 Budget 14 — authorize Chapter 90 expenses 15 — authorize debt for Poet's corner sewer repairs 18 — affordable housing plan March 21't(&RMLD Schools & Facilities — John March 280h (rilTown Hall Vote FY13 budget Vote FY13 Warrant IN Town of Reading Town Manager's FY13 Budget Finance Committee Budget Meetings FY13 Budget "Blueprint for Investment" February 29, 2012 Recent prudent decisions: • Difficult decisions when they need to be made • Right sizing some of our operations — CS • Refinancing of capital debt • Contain salary and wage costs • Constrained health insurance premiums • Employees doing more with less • Creative methods to provide services • Quality services and strong customer service Q FY13 Budget "Blueprint for Investment' February 29, 2012 Recent prudent decisions (continued): • Rezoning and redevelopment of Smart Growth areas • Performance contracting • Cost containment — energy,SPED • Use reserves appropriately but sparingly • Selling surplus real estate • Creative revenues — Stormwater Management • New revenue sources that do not significantly impact residents - meals tax FY13 Budget "Blueprint for Investment' February 29, 2012 Recent prudent decisions (continued): • Improved and maintained capital infrastructure — school & municipal buildings, roads, water /sewer /storm water, technology • Aggressive pursuit of outside finding — Green Communities as an example • Application for Library construction project • Application for Killam project to MSBA b FY13 Budget "Blueprint for Investment" February 29, 2012 Major proposed investments in FY 2013: $500,000 in a comprehensive strategy of community substance abuse and violence. prevention $400,000 to add 2 modular classrooms Increased investment in School technology • Almost $1.2 million in road improvements • $75,000 in pedestrian improvements • Bring property re- inspections up -to -date • OPEB Trust Fund, $500,000 in 2012, and an additional up to $500,000 in FY 2013 FY13 Budget "Blueprint for Investment" February 29, 2012 Proposed Investment beyond FY 2013: . • Additional OPEB funding • Additional roads for 2 - 3 years • Additional pedestrian improvements 2 - 3 years • Additional capital as real estate is sold • Improvement to the vehicle maintenance facility • Improvement to Cemetery garage • Renovation & addition to Reading Public Library • Partial renovation & addition to the Killam School 6) FY13 Budget "Blueprint for Investment" February 29, 2012 What are we not funding in FY 2013: • Additional Police Officer (November 2013) • Vehicle and Equipment Maintenance Division of the DPW • DPW seasonal labor in Highway & Parks /Forestry • School Department requested budget, it is still slightly short of requested funding levels • Additional Library staff and hours is desirable FYI Budget "Blueprint for Investment' February 29, 2012 Proposed actions: Legislative 2012 Annual Town Meeting • Establish Other Post Employment Benefits (OPEB) Trust and begin to fund it through excess FY12 health insurance budget funds; • Implement first phase of funding various proiects from one -time revenue; • Home Rule petition to amend the Reading Home Rule Charter to reduce the number of members of Representative Town Meeting V FY13 Budget "Blueprint for Investment" February 29, 2012 Proposed actions: Legislative 2012 Subsequent Town Meeting Amend the Reading Home Rule Charter regarding the number of members on the Council on Aging; Amend the Zoning Map because of inconsistencies; • Adopt Zoning Amendments to encourage redevelopment of the ndustrial Zoning District (Ash St.); • Consider Updating portions of the Zoning Bylaw; • Amend Historical Demolition Delay Bylaw. � ' fi FY13 Budget "Blueprint for Investment" February 29, 2012 Proposed actions: Administrative Board of Selectmen • Establish sunset schedules for standing committees. — ACCCP & EDC decide by 6 -30 -12 if extend to 6 -30 -17 — HRAC, Trails, RFSF amend to sunset on 6- 30 -17; • Establish a policy regarding the responsibilities of the Trust Fund Commissioners; • Establish a process for the acceptance of "Old" Sanborn Lane as a public way; FY13 Budget "Blueprint for Investment' February 29, 2012 Proposed actions: Administrative Board of Selectmen • Enter into discussions with the MWRA on the replacement of the Bear Hill water tank with a larger capacity tank owned and operated by the MWRA; • Recommend to the Board of Health action either approving or not approving a ban on the sale of tobacco products in pharmacies: • Consider action to restrict the use of plastic bags for the bagging of customer purchases in Reading businesses. FINCOM FY13 Budget Meetings February 29th ATown Hall 7:30pm • Overview— Hechenbleikner & LeLacheur • Community Services (pages 48 -56) - Delios • Town Administration (pages 33 -35) - Hechenbleikner • Accounting & Finance (pages 36-47) - LeLacheur • Employee Benefits (pages 10 -13 &.14-17) — LeLacheur March 7th ORMLD 7:30pm • Library (pages 57 -61) - Urell • Fire & EMS (pages 62 -65) - Burns • Police & Dispatch (pages 66 -73) - Cormier • Public Works (pages 74 -87) - Zager • Capital & Debt (pages 10 -13 & 18 -30) - LeLacheur • Enterprise Funds (pages 88 -113) — LeLacheur FINCOM FY13 Budget Meetings March 14th (cDRMLD 7:30pm Review Warrant Articles — Hechenbleikner • 4 —amend FY12 -21 Capital Plan • 5 — establish OPEB Trust Fund • 6 —amend FY12 Budget • 7— approve FY13 -22 Capital Plan • 8 — approve prior year's bills • 9 — dispose surplus property • 10— establish revolving funds • 12 — accept gift Friends of Reading Football • 13 — FY13 Budget • 14 — authorize Chapter 90 expenses • 15 — authorize debt for Poet's corner sewer repairs • 19 — affordable housing trust fund allocation plan FINCOM FY13 Budget Meetings March 21st (EDRMLD 7:30pm • Schools & Facilities— Doherty & DeLai March 28th (cDTown Hall 7:30pm • Vote FY13 Budget • Vote FY13 Warrant FINCOM February 29, 2012 Improved Budget Outlook since October 2011 Over $2 million net positive change • + $ 350,000 Revenues +$325,947 Assessors Overlay $1,774,000 Accommodated Costs - $950,000 Health Insurance Premiums - $515,000 Out of District Special Education - $225,000 Energy Casts -$ 84,000 Vocational Education FINCOM February 29, 2012 Improved Budget Outlook since October 2011 Resulting Changes: $500,000 less free cash used (now $1.0 million) $420,000 OPEB contribution (5% of health ins. premiums) • — $500,000 for Substance Abuse Prevention (details to follow) • $150,000 for School Technology $ 11,028 for Town Health & Conservation — $600,000 split between School & Town Operating Budgets 0 FINCOM February 29, 2012 Improved Budget Outlook since October 2011 Communitv Prioritv for Substance Abuse Prevention $619,940 in funding requests for School and Town budgets: a) $504,557 of funding requests placed in the FY13 budgets • $332,807 Schools (Behavioral Health Program; Health Educ.) • $171,750 Town (Police staffing, % year of RCASA costs); b) $115,383 will be deferred until November 2012 Town Meeting and implemented only if new growth has been certified above the $250,000 budget assumption • $115,383 Town (Police staffing; Y4 year of RCASA costs). FINCOM February 29, 2012 FY13 Revenues (Projected in millions) Pages 6 -9 FY12 FY13 Change Prop. Taxes $52.66 $54.15 +$1.49 Local Revs. $ 5.40 $ 5.58 +$ .18 Intergov't $12.97 $12.76 -$ .23 Trf & Avail $ 4.11 $ 4.63 +$ .52 SUB -TOTAL $75.14 $77.12 +$1.96 ( +2.6 %) Reserves $ 0.86 $ 1.00 +$ .14 TOTAL $76.00 $78.12 + $ 2.52 ( +2.8 %) Pages 6 -9 FINCOM February 29, 2012 Reserves as of January 2012 Free Cash 6/30111 $ 5,499,129 • November Town Meeting, - $ 59,076 • General Stabilization Fund + $1,539,334' • FINCOM Reserves +$ 116.000 = TOTAL RESERVES $ 7,095,387 is 9.6% of estimated $73.8 million FY13 net available revenue and $3.4 million above FINCOM minimum 5% level. 'total excludes funds designated for specific purpose FINCOM February 29, 2012 Operating Budgets +3.6% operating uosts FY12 FY13 MunicipalGo'vtOperaling 14,010,068 14,540,330 3.6% adjustment (FY12 Comm. prior4) 25,000 adjustment (entfunds) 756,069 771,190 2.0% TOTAL Muni Government 14,791,137 15,311,521 3.5% School & Bldgs Operating 30,811,020 32,049,069 3.6% adjustments (comet prior4) 124,375 Schools circuit breaker adjustment for FYI 218,000 TOTAL School & Bldgs 31,153,395 32,049,069 1 2.9% Town Bldgs Operating Target 424,227 439,499 1 3.6% TOTAL Town Bldgs 424,227 439,499 3.6 °A School, Town, Buildings $46,368,759 $47,800,089 3.1% \I%J FINCOM February 29, 2012 FY13 Municipal Gov't Dept. Operating Budgets 1� FY12 FY13 Change Town Admin $ 364,791 $ 368,629 1.1% Accounting $ 158,079. $ 160,809 1.7% Finance $ 1,547,426 $ 1,619,783 4.7% Comm Svc $ 872,479 $ 883,304 1.2% Library $ 1,241,530 $ 1,290,579 4.0% DPW $ 2,645,549 $ 2,692,489 1.8% Public Safety $ 7,961,283 $ 8,298,727 4.2% Police $ 3,795,866 $ 3,963,080 4.4% Fire $ 3,741,872 $ 3,909,707 4.5% Dispatch $ 423,545 $ 425,940 0.6% TOTAL $ 14,791,137 $ 15,314,320 3.5% 1� FINCOM February 29, 2012 FY13 Municipal Gov't Dept. Accommodated Costs FY12 FY13 Change Town Admin P &C Ins $ 316,000 $ 340,000 7.6% FINCOM Reserves $ 150,000 $ 150,000 0.0% Comm Svc Vet's Benefits $ 250,000 $ 250,000 0.0% Health & Cons $ 11,028 100.0% Police Subst Abuse Prev. $ 171,750 100.0% DPW Fuel $ 296,330 $ 280,000 -5.5% Cemetery $ 186,995 $ 181,858 -2.7% Rubbish $ 1,472,159 $ 1,500,000 1.9% Snow &Ice $ 565,000 $ 600,000 6.2% Street Lights $ 203,575 $ 200,000 -1.8% TOTAL $ 3,440,059 $ 3,684,636 7.1% 1� FINCOM February 29, 2012 FY13 Municipal Gov't Dept. Total Budgets FINCOM February 29, 2012 Municipal Gov't Employment (Full Time Equivalents) FY2009 FY12 FY2011 FY13 Change Town Admin $ 680,791 $ 708,629 4.1% Accounting $ 158,079 $ 160,809 1.7% Finance $ 1,547,426 $ 1,619,783 4.7% FINCOM $ 150,000 $ 150,000 0.0% Comm Svc $ 1,122,479 $ 1,144,332 1.9% Library $ 1,241,530 $ 1,290,579 4.0% DPW $ 5,369,608 $ 5,454,347 1.6% Public Safety $ 7,961,283 $ 8,470,477 6.4% Police $ 3,795,866 $ 4,134,830 8.9% Fire $ 3,741,872 $ 3,909,707 4.5% Dispatch $ 423,545 $ 425,940 0.6% TOTAL $ 18,231,196 $ 18,998,956 4.2% FINCOM February 29, 2012 Municipal Gov't Employment (Full Time Equivalents) 1� FY2009 FY2010 FY2011 FY2012 FY2013 5 -year TOWN ADMINISTRATION 2.5 2.4 2.4 2.3 2.3 -7.2% COMMUNITY SERVICES 19.2 17.5 16.9 15.0 15.0 - 21.7%' ACCOUNTING 2.5 2.5 2.5 _ 2.5 2.5 --TOW FINANCE 18.3 19.6 19.6 19.0 18.5 1.1% PUBLIC SAFETY 101.8 101.8 101.8 101.4 103.5 1.7% PUBLIC WORKS 43.5 43.0 43.0 42.0 42.0 3.4% LIBRARY 19.7 19.7 19.7 19.7 19.7 0.0% TOTAL 207.5 206.5 205.9 201.9 203.5 -1.9%' 1� FINCOM February 29, 2012 Department Review: Community Services • All non -union employees receive 2% COLA • No change in staffing (exception: next slide on Reg'I Health) • Lower wage costs due to staff turnover • Small increase in Conservation Administrator hours • Small increase to professional development because of turnover • Grant funding all moved to offset wages only • Increase in Veteran's Service Officer hours in light of demand Pages 48 -56 FINCOM February 29, 2012 Department Review: Community Services Regional Health division with Melrose & Wakefield — Wages — Reading employees • Public Health Nurse 32.5hrs/week • Health Inspector 26hrs /week — Expenses — Melrose employees • Health Director 32% share • Senior Health Inspector 20.%share Health Inspector 151m /week — Organization Chart: %14 \_R org hart.I IN0 )\,I pp1% NOTE CHANGES made on 228/12 from FINCOM budget handout: — P.52 +$2,000 Health Inspector (more Reading employee hours) — P.53 +$7,000Admin Services(addition of20 %of Sr. Inspector) Pages 48 -56 FINCOM February 29, 2012 Department Review: Administration • All non -union employees receive 2% COLA • No change in staffing • Increased OT due to Meeting Minutes • Increased Lease costs for document storage • Reduce legal expenses based on recent trends • P&C Insurance estimated +7.6% Pages 33 -35 FINCOM February 29, 2012 Department Review: Accounting • All non -union employees receive 2% COLA • No change in staffing • No budget adjustments for retirement of Town Accountant • Reduce expenses to bare minimum Pages 36 -37 ow FINCOM February 29, 2012 Department Review: Finance • All non -union employees receive 2% COLA • Reduce clerical hours by 0.5 FTE • Outsource inspections for three years (Assessors) • 74 %increase in Elections wage costs due to one additional election and less state grant funding due to Town cost cutting • Move $21,500 Public Safety software license cost to Technology • Most other expenses level funded Pages 38-47 FINCOM February 29, 2012 Employee Benefits: FINCOM FY13 Insurance.ppt • Up 3.8% but only +0.5% if OPEB funding excluded; • Pension: Funding up 3.5% to make up for prior losses; • OPEB: Included under retirement and funded at 5% of FY13 Health Insurance premium budget; • Health Insurance: Budget reduced as plan changes made after FY12 budget adopted created current savings and FY13 renewal is 0 %; • Unemployment: Reduce budget, low impact of FY12 budget reductions and none planned in FY13. Pages 10 -15 Health Insurance Myth "The Town of Reading is generous to employees by offering health insurance." Health Insurance Fact MGL Chapter 32B sets the requirements the Town must follow in administering health and life insurance programs to eligible employees and retirees and their spouses and dependents. Reading accepted this Chapter on March 4, 1957. �, Background: MGL Chapter 32B • Employees who regularly work 20+ hours /week are eligible for health and life insurance (for school employees it is 20 or more hours /week during the school year); • Employees enrolled in the health insurance program who retire (32+ hours /week except 18 hrs /week for teachers) may continue in the program; • If a retiree passes away, the surviving spouse may continue in the health insurance program; • If an employee is not in the health insurance program at the time of retirement, there are restrictions on when he /she can enroll in the program. I5 Health Insurance Myth "Health Insurance is Free for Public Employees and the cost is borne by the taxpayers." Health Insurance Fact Employees and Retirees pay 29% of the premium costs through payroll deductions. In addition, several plan changes have been made in recent years to reduce the cost of premiums and shift additional out -of- pocket expenses to the employees. Health Insurance Myth "The Town of Reading should change to the State GIC and save a substantial amount of money." Health Insurance Fact FY13 Full Monthly Cost of Comparable PPOs Indiv. Family Medicare Tufts Health Navigator* $626 $1,526 $407 HPHCIndependence* $692 $1,689 $407 Reading (MIIA -BCBS) $608 $1,630 $330 * Consultant estimates for FY13 GIC products ( +6 96) Uq Health Insurance Myth "The Town of Reading should change to the State GIC and save a substantial amount of money." Health Insurance Fact FY13 Municipal Share of Comparable PPOs * Indiv.Family Medicare Tufts Health Navigator $546 $1,332 $355 HPHC Independence $603$11473 $355 Reading (MIIA -BCBS) $432 $1,157 $234 Health Insurance Myth . "Health Insurance Premiums are out of control, and there's nothing we can do." Health Insurance Fact Several plan design changes have been made in the past seven years with the goal to reduce premium costs by avoiding medically unnecessary expenses or shifting some of the costs to the employees /retirees that are the highest health care users: Readina Premiums (annualized FY06 -FY13 HMO +4.0% PPO +0.5% Medex +2.9% Weighted average +2.8% 3 ^ irr� : it1• Reading Health Insurance Recent History Plan design changes (' minor or '• major) to lower premiums. Including the two times out to bid, six of the last seven years have seen significant efforts. Reading Health Insurance Recent History Health Insurance Budget (annualized FY06 -FY13) Premiums +2.8% Enrollment - +2.0% Budget Cost +4.8% Revenue Growth (excludes free cash) +2.0% We are discussing a two -year trial 'opt -out' period with the unions. Employees will be paid to instead enroll on a spouse's plan. While not a solution to the insurance cost problem, this practice is becoming common. 4& HMO PPO Medex of total budget FY13(bid) 0% 0% -1.1% 6 mo. 10.8% FY12 ** +5.9% +3.7% +2.4% 11.3% FYI +9.5% +10.5% +4.9% 10.0% FY10" -2.0% -22% to -27% +1.9% 9.5% FY09' +3.8% +6.1% -0.1% Mdx2 101./0. FY08' +6.4% +6.4% +6.4% 9Mdx3 FY07(bid) +4.9% +4.9% +2.9% 8 Plan design changes (' minor or '• major) to lower premiums. Including the two times out to bid, six of the last seven years have seen significant efforts. Reading Health Insurance Recent History Health Insurance Budget (annualized FY06 -FY13) Premiums +2.8% Enrollment - +2.0% Budget Cost +4.8% Revenue Growth (excludes free cash) +2.0% We are discussing a two -year trial 'opt -out' period with the unions. Employees will be paid to instead enroll on a spouse's plan. While not a solution to the insurance cost problem, this practice is becoming common. 4& �T Health Insurance Myth "Health Insurance is a Municipal budget- buster." Health Insurance Fact This myth is true!! In FY13, Reading will spend over 10% of it's budget on health insurance and the national 9% annual premium increase is not affordable given the Town's revenue constraints. However, we are not alone ... What percent of your FYI budget is health insurance? February 2011 survev by Stoneham Board of Selectmen Peabody 20% Walpole 12% Beverly 17% Canton 12% Wakefield 16% Newburyport 12% Melrose 14.6 %(GIC) Wilmington 10.6% Tewksbury 14% Amesbury 10% Stoneham 13.5 %(GIC) Belmont 10% Saugus 13.5 %(GIC) North Reading 10% Sudbury 13.2% Reading 10.0% North Andover 12.9% Bedford 7.9% Wayland 12% Ipswich 7.9% The average without Reading was 12.6 %, while Reading is 'only' at 10.0 %. If Reading were at the average, we would spend another $1.9 million per year. 5 Life Insurance • Eligible employees can purchase a $5,000 term life insurance policy for $100.20 /year with the Town paying 50% of the cost; • Currently the Town's share is under $40,000 /year; • Employees can purchase additional life insurance for themselves, spouses and dependents, but the Town does not contribute to any of the premiums; • Employees enrolled in the life insurance program who retire can continue in the program with some restrictions; • The Town continues to pay 50% of the premium for the $5,000 policy for retirees. 5 Other Benefits • Dental insurance is available to active eligible employees but the Town does not contribute to the premium; • Disability insurance is available to some School employees through the MTA. There is no disability insurance available to Town employees; • Town and School employees can contribute to deferred compensation plans (403b and 457) to save for retirement; • Paid time off benefits such as sick, vacation, and floating holidays /personal days are available to eligible employees; • Some employees are eligible for sick leave buyback, but caps on the amount and eliminating it for new hires after a certain date is common. For example, in one union contract no one hired after 7 -1 -04 is eligible for sick leave buyback. M Finance Committee Meeting February 8, 2012 DRAFT MINUTES The meeting convened at 7:30 p.m. in the Selectmen's Meeting Room, 16 Lowell Street, Reading, Massachusetts. Present were Finance Committee Chair Marsie West, Vice -Chair David Greenfield, members Barry Berman, Jeanne Borawski, Paula Perry and Hal Torman; Town Manager Peter Hechenbleikner, Assistant Town Manager/Finance Director Bob LeLacheur, RMLD General Manager Vin Cameron, and four members of the RMLD Board: Richard Hahn, Mary Ellen O'Neill, Phil Pacino and Bob Soli. Ms. West said the first item of business would be a discussion with the RMLD General Manager about the recent decision by the RMLD Board to retire RECs. She said since she is a candidate for the RMLD Board she would yield the Chair duties to Vice Chair David Greenfield, and she would recuse herself. RMLD RECs Mr. Greenfield reviewed his understanding of the broad issue that RECs are certificates that allow the holder a legal claim to be `green' — i.e. in favor of renewable energy. This claim is valid in Massachusetts because a Renewable Portfolio Standards set by the state. In the case of RMLD, these RECs have been purchased as part of the package deal to buy actual green power. Mr. Cameron described that RMLDD was involved in two large `green' projects: Swift River where four facilities produces 7 megawatts of power for RMLD, and Concord (NH) Steam biomass, where RMLD purchases 5 megawatts, or about 1/3 of the output. He said that as part of the deal the green renewable energy certificates were acquired. He noted that in Massachusetts that the investor -owned utilities were required by law to buy 7% of green power per year, and these RECS are the proof required of meeting that standard. He said that RECs trade in the open market, and holders therefore have the option to sell or retire the RECS — the latter being simply to let them expire as financially worthless instead of selling them. He,said that the RMLD Board directed RMLD to go green, and that staff agrees with that premise for several reasons, including preparing RMLD for the future which would likely have some requirements for green power for municipal utilities, and that as a matter of policy it is a good idea to lower dependence on fossil fuels. FINCOM member Mr. Mark Dockser joined the meeting. Mr. Greenfield gave a broad overview with his concluding opinion that the RECs themselves were less important than the actual purchase of green power. He understood that by selling them RMLD is effectively allowing someone else that may not be complying with the law by purchasing 7% green power to claim that they are. He said it should not be up to the RMLD ratepayers to be social policemen, and that a fiduciary duty to the ratepayers was a concern to him when the RMLD Board voted to let 15 years worth of RECs expire as financially worthless when a decision to sell the RECs could have either reduced rates or provided re- investment capital for further green energy efforts. Ms. West agreed with this opinion. Mr. Berman asked if the cost of green power was higher, and Mr. Cameron answered that it was. Ms. Borawski asked what the size of the certificate market was, to get a sense of how RMLD's Finance Committee Meeting — January 3, 2012 — page 2 decision might affect the prices. Mr. Cameron indicated that he would determine an answer and respond to FINCOM. The Swift River RECs were worth about $500k -$600k per year, and the Concord Steam RECs were worth about $1.0 to 1.2 million per year, for a total of $1.6 million or so per year. Mr. Greenfield asked if the ratepayer foots the bill for this green power premium cost through the fuel charge, and Mr. Cameron replied that they did pay about $2 /month. Mr. Greenfield cited that the Town is a customer of RMLD. Mr. Dockser asked how many customers signed up for the Green Choice program, and Vin replied that about 250 had of the 28,500 customer base, which generated about $9,000 /year at $3 /month/customer. He said that RMLD has gone out in the market and purchased RECs with these funds. Ms. Perry asked what the negative impact of selling the RECs is since RMLD is not required to retire them. Mr. Cameron said that if the RECs are sold one cannot legally claim to have green and renewable power. Mr. Greenfield inquired if RMLD asked the ratepayers if they wished to hold or sell the RECs. Mr. Cameron said the RMLD did a customer survey several years ago in which about 75% of the replies supported purchasing green power. Mr. Dockser asked that if the RECs were sold, was the remaining net cost of the green power competitive. Mr. Cameron said it would still be a bit more expensive than other sources of power. Mr. Greenfield said that the most important step towards green energy was the contracts signed with the two producers Mr. Cameron mentioned earlier. He said that selling the RECs was entirely a different issue. He said his opinion was to let the state force others to behave, and that he preferred lower electric rates. Mr. Dockser asked what other municipal utilities do. Mr. Cameron said that Concord, Wellesley, Princeton and Ipswich all sell RECs. Mr. Hahn characterized their mission as low and stable rates. He said holding the RECs helped stabilize rates. Mr. Greenfield said that signing the contracts did that, but holding the RECs played no role. Ms. Perry said keeping the RECs seemed designed to be for public relations. Mr. Hahn said this is what the ratepayers want. Mr. Greenfield asked Mr. Cameron if this is what the ratepayers want. Mr. Hahn said that they did through a survey done several years ago, and even if they had not in his view it was the prudent thing to do. Ms. Perry asked why RMLD had to serve as the policeman by keeping the RECs to enforce their beliefs on other utilities. Ms. West question the validity of an old questionnaire that did not specifically ask customers if they were willing to pay a premium for green energy, and further to let certificates that had significant financial value expire as worthless. FINCOM member Mr. John Arena joined the meeting. Mr. Hechenbleikner said that the decision to hold or sell the RECs was not an all -or -none one, and Mr. Cameron agreed. Mr. Berman concluded that this issue is really one for the ratepayer and RMLD to solve, and the incremental cost to the Town was not great enough to warrant the FINCOM to be involved any further. Mr. Soli said that the entire North Reading Board of selectmen asked the RMLD Board to reconsider their actions. He gave a brief history of RMLD including some legal actions and subsequent costs in the mid 1980s. Because of this legal issue the Citizen Advisory Board (CAB) was formed. No other municipal utility in the state has such a body. He handed out a one page summary. Mr. Greenfield agreed with Mr. Berman that after this conversation it was clear that the issue did not rise to a level where FINCOM should be further involved. Mr. Arena asked if there were potential long -term costs here over the issue, such as if a 9 Finance Committee Meeting — January 3, 2012 — page 3 Town decided to leave the service territory. Mr. Hahn noted that the CAB voted 4 -1 to retire the RECs. Mr. Pacino said the motion was to retire the RECs for fifteen years, not just for one year. Now the Board has revisited the issue and agreed not to sell /retire any RECs until June 15, 2012. He said he was very distressed that the CAB members did not consult with their communities prior to their vote. Mr. Hechenbleikner agreed that no CAB member got any input from their respective communities. Reserve Fund Transfers Ms. West resumed her role as FINCOM Chair. Mr. LeLacheur reviewed three Reserve Fund transfer requests: 1) $25,000 for Town facilities to replace the security card access system at the Police station; 2) $5,000 for appraisal and cost of selling land; and 3) $4,000 to complete funding for a Town Forest Master Plan. Ms. Perry asked if the first request was for capital or a technology expense, and Mr. LeLacheur replied that it was for Town Facilities capital as it met the criteria of an expected life of three years and a minimum cost of $10,000. FINCOM had a discussion about why the School Department did not build in more reserves for the various buildings as this was one of several requests from the past year or two. Mr. LeLacheur said that they did build in a contingency for each building, and further held back an amount each year for such unexpected circumstances. He stated that these amounts were relatively small however, and could not address $25,000 to $50,000 issues such as 1) above or the recent request for a drainage issue at the Police Station. The committee agreed to hold more discussion with the School Department during their March budget meeting. Mr. Hechenbleikner reviewed the land issue and explained that at Pearl Street two abutters had interest in acquiring a portion of the land, which would still leave a buildable lot for the Town to sell. He explained that for the Lothrop parcel that first the Town would seek a variance from the ZBA because of the 50 -foot frontage for the lot versus the 100 -ft zoning requirement. He said that the Oakland Road issue would take between one and two more years. Mr. Berman asked if the timber and could pay for the third request, and Mr. Hechenbleikner said there were no funds available yet because no timber had been sold. He said once the Master Plan was complete, selective tree cutting and subsequent sales would result. Mr. Arena asked if there should be an advance made from the revolving fund, but then agreed due to the small amount it was not needed. On a motion by Mr. Greenfield seconded by Mr. Berman, FINCOM voted 8 -0 to endorse all three Reserve Fund transfer requests as presented. Budget update Mr. LeLacheur reviewed a budget handout with the FINCOM. Operating budgets are now +3.6% compared to last fall when the outlook was closer to +2 %. This still uses the $1.5 million in free cash, but that amount will be reduced because health insurance bids came in below budget. He said that about $1 million of reserves would be needed in the FY13 budget, assuming level funded state aid. If state aid proved higher as in the Governor's budget, then less free cash would be used. Of the $1 million in, free cash, about half was spent on Community Priorities regarding M Finance Committee Meeting — January 3, 2012 — page 4 substance abuse prevention. These funds would very likely be available from new growth because of some large projects in town, but this fact would not be certified until next fall. The other half is set aside as an OPEB contribution. Mr. Hechenbleikner added that another $500,000 was to be set aside at April 2012 Town Meeting for OPEB, so within a year the balance of the fund (if established and funded by Town Meeting) would be about $1 million. While the current actuarial need is closer to $2 millionlyear, these two deposits were an important beginning to address this long term liability. Mr. LeLacheur said that by setting aside 5% of expected health insurance premiums each year for OPEB, this in effect created a reserve in years where health insurance costs came in above budget. Premiums are estimated in late fall but not established until mid - February when School and Town budgets have already been fully reviewed by constituents. Thus the 5% could be used to offset higher costs, or deposited into OPEB each spring if not needed. Mr. Greenfield agreed with the Community Priorities, but wondered if they could have been funded in part by a reduction in Police details. Ms. West said that the FYI benefits presentation was excellent and that while as much detail may not be needed this year, she requested that last year's material be made available to FINCOM. Town Accountant Screening Committee Ms. West said the FINCOM was to appoint one member of this ad hoc committee, and Ms. Ferrari (absent) member) was mentioned because of her experience in School budgets. Mr. Berman made a motion to nominate Marie Ferrari but further discussion ensued before this was seconded. Ms. Borawski gave some of her qualifications and background and volunteered to serve as the FINCOM representative, and Mr. Berman withdrew his motion. On a motion by Ms. Perry and seconded by Mr. Greenfield, FINCOM selected Jeanne Borawski to serve on the ad hoc Town Accountant screening committee by a vote of 8 -0. On a motion by Mr. Arena, seconded by Ms. Perry, FINCOM approved the Minutes of October 12, 2011 by a vote of 7 -0 -1 (Ms. Borawski abstained). On a motion by Mr. Berman seconded by Mr. Dockser, FINCOM approved the Minutes of October 19, 2011 by a vote of 7 -0 71 (Ms. Borawski abstained). On a motion by Ms. Perry, seconded by Mr. Greenfield, FINCOM approved the Minutes of November 14, 2011 by a vote of 7 -0 -1 (Ms. Borawski abstained). On a motion by Mr. Torman, seconded by Ms. Perry, FINCOM approved the Minutes of January 3, 2012 by a vote of 6 -0 -2 (Mr. Torman and Ms. Borawski abstained). On a motion by Mr. Torman seconded by Mr. Berman, FINCOM voted 8 -0 to adjourn at 10:10pm Respectfully submitted, Secretary `li� FY 2013 Town Manager's Budget Presentation FINCOM Meeting 2 -29 -12 Town of Reading MA What I am going to outline for you this evening is a "blueprint for investment" in Reading which will build on the strong foundations of our recent financial past, and which will provide the framework for a strong future. Recent prudent decisions by the community — some financial and some not financially based but which are financially advantageous —' make it possible for Reading to move forward and make significant further investments in a number of aspects of the community. To remind us all, the following is a partial list of the major activities which have placed us in the position of being able to make these investment decisions: ♦ Making difficult decisions when they need to be made ♦ Difficult decisions in right sizing some of our operations — largely in Community Services ♦ Refinancing of capital debt to take advantage of favorable interest rates ♦ Partnership with employees to contain salary and wage costs ♦ Constrained health insurance ♦ Employees doing more with less— internal cross - training for multiple responsibilities & backup ♦ Creativity with methods of provision of services — external regionalization ♦ Commitment to quality services and strong customer service ♦ Rezoning and redevelopment of Smart Growth areas ♦ Performance contracting ♦ Cost containment — energy, SPED ♦ Willingness to use reserves appropriately but sparingly ♦ Selling surplus real estate ♦ Willingness to be creative with revenues — Stormwater Management enterprise system; ♦ Willingness to establish new revenue sources that do not significantly impact residents - meals tax ♦ Commitment to improve and maintain our capital infrastructure — school buildings, municipal buildings, roads, water /sewer /storm water, technology ♦ Aggressive pursuit of outside finding — Green Communities as an example ♦ Application for Library construction project ♦ Application for Killam project to MSBA All of these efforts and many more in the day to day operation of the Town Departments and School Department make the Town of Reading poised to implement major advancements in the investment in the community. This is the blueprint — and the Departments will outline for you all the details of their individual parts of the whole. In order to balance the FY 2013 budget the Finance Committee has authorized the use of up to $1,500,000 in free cash. Because the use of cash reserves is not sustainable over the long run, the budget as presented utilizes $1,000,000 in free cash at this point, and if State Aid comes in at a higher level, the use of free cash will be reduced below $1,000,000. The expense budget for all Town Departments is largely unchanged, but the current level and quality of services will be maintained in FY 2013. The somewhat painful reductions made in FY 2012 are implemented, and we are able to manage within those constraints. In broad strokes, this blueprint provides for the following major investments in FY 2013: ♦ Investment of over $500,000 in a comprehensive strategy of community substance abuse and violence prevention including additional law enforcement, educational, and counseling efforts as well as retaining the core of the RCASA efforts in the face of possible elimination of Federal grant funding for the RCASA program 1 FY 2013 Town Manager's Budget Presentation ♦ Investment of $400,000 to add 2 modular classrooms to handle increasing demand for pre - school and all day kindergarten ♦ Significant increased investment in School technology ♦ Increased investment in road improvements, with total funding in 2013 of almost $1.2 million (depending on continuation of State Chapter 90 funding at last year's levels) ♦ Investment of $75,000 on pedestrian improvements ♦ Establishment of an OPEB Trust Fund, and funding of approximately $500,000 of this long term liability in 2012, and an additional up to $500,000 in FY 2013. ♦ Invest in bringing our property re- inspections up -to -date in the assessor's office' Beyond FY 2013, this blueprint calls for the following major investments: ♦ Additional OPEB funding on an annual basis to the extent that employee /retiree health insurance costs , come in below budgeted levels ♦ Additional investment in roads for a 2 to 3 year period as 40R payments from the Reading Common's development become available ♦ Additional investment in pedestrian improvements for a 2 to 3 year period as 40R payments from the Reading Common's development become available ♦ Additional capital improvements over the next 2 to 3 years as parcels of real estate are sold ♦ Investment in improvement to the vehicle maintenance facility and in a Cemetery garage over the next 2 to 3 years ♦ Complete renovation and a modest addition to the Reading Public Library, when the Town's application for funding cycles through to priority funding (during the next year or 2). This project will require a Proposition 2 '/z debt exclusion for the Town's share of the project. ♦ Partial renovation and a small addition to the Killam School when the Town's application to the MSBA is given the go ahead by the state (hopefully during the next year or 2). This project will require Proposition 2'/: debt exclusion for the Town's share of the project. What are we not doing /funding in FY 2013 that we would like to do: ♦ Additional Police Officer, which, depending on new growth from the Pulte Development in the fall, we may ask Town Meeting to fund in November 2013 ♦ Evolution towards a stand alone Vehicle and Equipment Maintenance Division of the DPW as capital investment and other personnel actions make this feasible ♦ Restoration of DPW seasonal labor in Highway and Parks /Forestry ♦ While the budget comes close to funding the School Department requested budget, it is still slightly short of requested funding levels. ♦ Funding for additional Library staff and hours is desirable. In addition to the budget proposals, there are a number of recommended legislative and administrative actions that I am recommending for FY 2013. These are summarized on the slides and some have been detailed in my previous remarks. While Reading will always have a limited ability to fund all of the programs and needs of the community, the shared sacrifices to date have resulted in a situation where the Town can make these important and needed investments in our services and facilities. As a community, we need to continue to be prudent in our use of public funds that our residents and businesses work so hard to provide. We appreciate the trust placed in the Town and all of its officials and employees, and we expect to continue to earn that trust. Peter I. Hechenbleikner Town Manager Robert W. LeLacheur Assistant Town Manager / Finance Director FY 2013 Town Manager's Budget Presentation Page 1 of 1 LeLacheur, Bob From: Cameron, VinA Sent: Wednesday, February 29, 2012 11:58 AM To: LeLacheur, Bob; Hechenbleikner, Peter Cc: Jane Parenteau; William Seldon; Richard Hahn; Jeanne Foti Subject: RMLD Renewable Energy Certificate Question Attachments: Fincom Info Request.xls At the FINCOM meeting on 2/7/12 there was discussion of the Reading Municipal Light Department's (RMLD) Renewable Energy Certificate (REC) issue. During this discussion, I was asked by a FINCOM member what the effect of either retiring and selling the RMLD's RECs would have of the REC market. Attached is an analysis of what I beleive the effect the RMLD RECs would have on the New Engand REC market. The attached analysis shows the estimated sales for the electric utilities in states that are under and Renewable Portfolio Standard (RPS). An RPS is law and governs how many RECs need to be purchased annually by electric utilities in support of renewable energy in New England. The 2011 Estimated Retail Sales are based on the actual sales for 2010 escalated 1.1 %, which was the electric sales growth for New England in 2011 per the ISO -NE Regional System Plan. The RMLD then estimated the RPS Requirement for each state based on the states RPS percentage requirement of kWh sales, which totals 4,916,409. Further down on the sheet the RMLD then calculated the RECs related to the Swift River and Concord Steam generating projects. In the right hand column is the percentage of the RMLD's RECs from these projects as a total of the RECs required for all the electric utilities in New England. The result shows that the RMLD's RECS represent about 1.25% of the total required RECs to be purchased by New England electric utilities in 2011. This analysis is for illustrative purposes only since the Concord Steam plant will not be on line until 2013 . However, the analysis shows that the RECs the RMLD will receive from these two projects is a very small amount as compared to the total RECs estimated to be purchased by electric utilities in 2011. 2/29/2012 RPS Percentage 7.00% 3.00% 2.00% 3.00 % 5.00% 4.00% f RECs Analysis. State Massachusetts Maine New Hampshire Contecticutt Vermont Rhode Island Total RMLD RECs Swift River Concord Steam Total RMLD RECs 0 2011 Est. Retail Sales MWhs 37,662,592 12,524,000 15,198,480 36,562,000 5,548,940 5,650,781 113,146,793 RECs in MWhs 24,000 37,320 61,320 2011 Est. RPS Req. MWhs 2,636,381 375,720 303,970 1,096,860 277,447 226,031 4,916,409 % of Total RECs 0.49% 0.76% 1.25%