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HomeMy WebLinkAbout2014-04-09 Board of Selectmen PacketReading Finance Committee FY 15 Budget Report General Overview Mr. Moderator and Town Meeting members, thank you for allowing the opportunity to update you on the current state of Reading's finances. This budget is a collaborative effort of Town and School leaders as well as community volunteers. We are extremely fortunate in Reading to have such a committed and talented group. This budget process was punctuated with open, frank and transparent discussion over many months and many meetings. Town Meeting, you can be confident in the fact that while this budget may not accomplish all of which some would hope, the process of deliberation was thoughtful and respectful, and will allow Reading to face the financial challenges confronting us in the coming years. Accomplishments and Challenges Through these difficult economic times, our finances continue to be strong. We maintain a strong AA credit rating. Our reserves position, while above the Finance Committee policy of 5% of revenues, faces erosion from the demands of funding basic services. The Finance Committee in June will deliberate increasing the free cash policy requirement to 7 %. A key factor in determining the cost of debt for our approved and proposed building projects, our current free cash policy may be insufficient, and add as much as $100,000 in annual debt service costs for these projects. For the third consecutive year Reading has made a significant contribution from its operating budget to fund its Other Post Employment Benefit (OPEB) obligations. By adhering to this discipline, the Town has reduced its overall obligation by over $27 million in our most recent valuation update. While Finance Committee does not have an official OPEB policy, the Committee will revisit this in the summer, as rating agencies view positively a written policy. Town government undertook its first significant reorganization plan in decades to better deploy resources to address customer service needs. We continue to offer some services regionally and are exploring other opportunities. These efforts can save the Town money, but more importantly, allow us to offer deeper services with current expenditures. Our downtown continues to grow. New businesses, restaurants and activity significantly add to new growth which allows us to fund our operations and capital requirements. The town has invested in software to allow streamlined permitting and a quicker decision process. This needs to be a continuing priority, as new growth is one of the few ways to overcome the constraints of Prop 2 112. The voters have approved a $13.2 million debt exclusion to leverage an additional $5.1 million from the Commonwealth to completely renovate our aging and deteriorating library. When finished this project will be a crown jewel for the Town. However, other projects are looming in the future. The proposed early childhood education center, DPW facility, Killam School renovations, cemetery garage and the water distribution repairs are all competing for financing. The Finance Committee recommends that at the conclusion of Town Meeting a summit of all Boards, Departments and interested citizens convene to plan how these projects can be financed in a responsible manner. FY 15 Budget The deliberations around this budget were among the most trying in years. This budget maintains basic services with very few additions. However, we are balancing the budget with $1.7 million of free cash. In contrast we utilized $1.0 million in FY14. This pace is unsustainable without the immediate influx of new revenue only possible with an operating override. Worth noting is what is not included in this year's budget. This budget funds the schools about $280,000 below the budget voted by the School Committee. Additionally, a combined $1.85 million of budget requests from the Town and Schools went unfunded. These requests were not frivolous or "nice to haves ". They were essential public safety, technology, public works and classroom services. Troubling to the Finance Committee was the fact that Reading ranks 305 out of the 328 school districts in per pupil spending. While the School Department continues to provide a high level of educational services, if this trend continues, Reading will fall behind peer communities and may fail to meet community expectations. Similar challenges confront the Town side of government. FY 16 and beyond The constraints of Proposition 2 1/2 have forced local government to make choices in the service levels provided, and cut services when revenue is insufficient. However the override mechanism exists in order to allow community priorities to be funded above the limits of 2 1/2, when voters so choose. Reading has done its best to manage within the constraints of 2 1/2. We have delivered high quality municipal services in a fiscally responsive manner. We have made painful choices when other towns spent freely. We have maintained and utilized healthy reserves to avoid engaging in huge layoffs. It has been thirteen years since the voters were asked to consider an operational override. The Finance Committee is not endorsing an override at this time but we are strongly urging the Town to begin the discussion on the level of services we want to have and what we are willing to pay. What is clear, is the current service levels that we enjoy are not sustainable under the current budget constraints. The time to begin these discussions is now. Conclusion Reading has achieved a high level of fiscal soundness by taking the long view approach to financial planning. We have done this in an open, transparent and collaborative manner. This culture will continue to serve us well. A fresh set of challenges will confront a newly minted Board of Selectmen, School Committee, Finance Committee and a second year Town Manager. We strongly urge these groups to quickly convene after Town Meeting to plot a path forward and consider financing options for the myriad of capital projects, as well as convene a town wide discussion on the choices surrounding the operating budget. Before I close I want to acknowledge and thank David Greenfield who will be leaving Finance Committee in June after nine years of service. David has provided sage wisdom and steady guidance to the Committee during his tenure. On a personal note I also want to thank Town Meeting and my Finance Committee colleagues for the opportunity to serve you during the past years. My term is also expiring and I will be stepping down in June as well. So given the challenges heard here, there are two open seats waiting to be filled. Given Reading's strong culture of volunteerism, I am sure two of you or someone you know will grab the gauntlet. Together we will continue to make the right choices. Respectfully submitted, Reading Finance Committee Barry Berman, Chair Mark Dockser, Vice Chair David Greenfield Karen Herrick Peter Lydecker Craig Merry Paul McNeice Jeff Perkins Paula Perry Town Manager's Recommended FY15 Budget The following document constitutes the Town Manager's recommended FYI 5 Budget for the Town of Reading for the Fiscal Year beginning July 1, 2014, as amended by the Finance Committee during their review process. This Budget combines conservative fiscal planning caused by the constraints of Proposition 2 -112 with a higher dose of free cash than has been typical in recent years. The strong desire to provide the community service levels against the backdrop of what is sustainably affordable is a challenge that will require ongoing community dialogue. Following are the highlights of the FY15 Town Manager's Budget: Revenues Revenue for FY15 is forecast at $80.6 million (plus an additional $1.7 million in free cash used), with the four largest categories of revenue types shown in the chart below (in 000s): $57,799 n Taxes 72% ■ Locai 7% State Aid 16% ■ Other 5% r Before looking further ahead, it is instructive to look back at historical sources of revenues. Below is chart showing FY03, FY04 and FY15 sources of revenue for comparison. These years are chosen to show the context surrounding the last Operating Override of Proposition 2 -112 which occurred between the FY03 and FY04 budgets: What is clear from this chart is that communities are increasingly more self - reliant on local sources of revenue instead of state aid. Note that given the recent success of the Library debt exclusion, the above FY15 figures would barely budge, as that new debt service will only increase taxes from 71.7% to 72.3% share of revenues. The forecast for FY15 is for a 2.7% increase in total revenue growth (the Revenue section will explain some technicalities as to why it looks about 1% smaller). This rate of increase is closer to the previous historic average growth of between 3% and 4 %. Two key assumptions in forecasting FYI 5 revenues are the use of a high $1.7 million of free cash and a disappointing +0.8% increase in state aid as proposed in the Governor's Budget, which comes against a backdrop of a forecasted FY15 state revenue growth of about 5 %. While the state FY15 budget is not yet passed, an Early Aid Resolution adds very little hope for further FY15 growth in State Aid for Reading. FYl5 FY04 FY03 Property Taxes 72% 68% 62% Local Charges 7% 9% 9% State Aid 16% 19% 24% Other 5% 4% 5% What is clear from this chart is that communities are increasingly more self - reliant on local sources of revenue instead of state aid. Note that given the recent success of the Library debt exclusion, the above FY15 figures would barely budge, as that new debt service will only increase taxes from 71.7% to 72.3% share of revenues. The forecast for FY15 is for a 2.7% increase in total revenue growth (the Revenue section will explain some technicalities as to why it looks about 1% smaller). This rate of increase is closer to the previous historic average growth of between 3% and 4 %. Two key assumptions in forecasting FYI 5 revenues are the use of a high $1.7 million of free cash and a disappointing +0.8% increase in state aid as proposed in the Governor's Budget, which comes against a backdrop of a forecasted FY15 state revenue growth of about 5 %. While the state FY15 budget is not yet passed, an Early Aid Resolution adds very little hope for further FY15 growth in State Aid for Reading. The local revenue toolbox includes (1) motor vehicle excise taxes ($3 million) at rates set by the state; (2) a variety of local license and permit fees for services ($2.5 million) set by the Board of Selectmen; (3) a dividend payment from the Light Department ($2.4 million) that is adjusted annually based on the Boston - Brockton- Nashua CPI; and (4) the meals tax ($0.35 million) approved by Town Meeting at rates set by the state. As the previous table shows, these local revenues have not even kept up with property tax growth, let alone fill in for any relative decline in state aid. Revenue growth is a challenge in local municipal finance in the Commonwealth, simply because of the lack of options. In September 2010 FINCOM held a workshop that generated revenue ideas including the following highly ranked ones: sale of Oakland Road (on hold pending school Early Education space needs); cell towers (some prospects ahead); advertising/billboards (met with community opposition); rental of existing municipal space (the Schools do an exceptional job); economic development/publicity (see further comments below); parking fee at depot (discussed but no action, not a significant source); naming rights (schools have adopted but with no financial angle) and wind/solar power generation and sell back (studied and discarded as impractical with current technology). We have seen a great deal of business development in Reading over the past few years, and are the envy of many of our neighbors who have remained stagnant. This is terrific, yet as a practical matter new growth this year is `only' $741,000 compared to a $54 million tax base. Revenue growth looks to have settled in at or near the 3% level through FY18, and there are no obvious new sources of any significance on the horizon. The best hope is that an even stronger economic rebound increases state aid that is passed back to the community. .S~. Accommodated Costs These shared costs are forecast to be extremely well behaved during FY15. Part of that is an optical illusion relating to lower debt service paid with MSBA funds, but employee /retiree benefits are forecast at `only' +4.6% and energy costs are expected to decrease by 2.1 %. Town Meeting's agreement to conduct significant performance contracting efforts and pay for them with debt service has been a complete success, reducing annual pressure on operating costs even more than had been forecast. The outlook for these costs looks to be about +4% annually through FY18, not a back - breaking increase but still above the forecasted revenue growth. Given the available revenues and modest accommodated costs, there is enough funding for +3.5% town and school operating budgets. In March 2014 the FINCOM voted to add $200,000 to the School department and $5,000 to the Library (funded by Free Cash) which improved those increases. Town Department Budgets The following chart depicts the Town Manager's FY15 budget for Town departments, with a 3.3% overall increase from FYI 4: Town Total Budgets FY14 FY15 Change Admin. Services $2,168,090 $2,290,550 +5.6% Community Services $1,422,211 $1,411,825 -0.7% Finance $720,970 $712,425 -1.2% Police $4,334,190 $4,501,506 +3.9% Dispatch $431,726 $447,010 +3.5% Fire & EMS $4,074,852 $4,313,925 +5.9% Public Works $5,464,966 $5,547,625 +1.5% Public Library* $1,330,338 1 $1,381,885 +3.9% Total $19,947,343 1 $24,606,751 +3.3% *includes FINCOM adjustment hereafter Budget sections that follow will describe each department in detail. 1 Ln Town Department Budget Process The Town annual budget process begins in late summer with a series of meetings with Department Heads and some staff members, in order to review the past and plan for the future. This proactive and collaborative planning has, for example, placed two additional Police Officers in position as new commercial and large scale residential growth has occurred. A lack of planning would have instead reacted after community issues developed. The process this year began with two requests from the Town Manager for all Town departments, in response to the first two of thirty -one formal Town Manager FYI Goals adopted by the Board of Selectmen on July 9, 2013: 1. Design optimal Town department/division structure, regardless of current set -up or specific personnel, including the role of the Assistant Town Manager. Describe detailed transition plan from current status to such an optimal model, including specific personnel. 2. Establish optimal professional development (PD) and training levels across all departments. Devise multi -year process to transition from current status to desired outcome. Focus on tracking compliance with PD job requirements as well as optional PD for advancement. The opportunity to re- organize town departments spurred a lot of excellent forward looking organizational thinking. November 2013 Subsequent Town Meeting approved changes in Town department structure, designed to improve internal communication and efficiency through centralization. Department Heads as well as the elected Library Trustees and Board of Assessors followed those changes by submitting requests for FY15 funding (see the Table below) that would have produced in total a +6.6% Town department budget instead of the +3.3% budget that is affordable. The unfunded requests had the following components: ➢ $504,405 in additional staffing. This is a combination of no position eliminations, increased hours for part- timers, overtime and some new positions, for +2.5% of the total +3.3% requested; ➢ $92,519 in additional raises for existing staff as recent COLAs have lagged area inflation, or +0.4% of the total requested; ➢ $87,270 of miscellaneous items, such as training/professional development, or +0.4% of the total requested. Total Budget Unfunded Requests Unfnd Re % Add'1 Hours Add'l COLA Misc. Admin. Services $2,290,550 $126,196 5.5% $76,538 $4,358 $45,300 Community Services $1,411,825 $87,884 6.2% $77,227 $9,657 $1,000 Finance $712,425 $12,902 1.8% $4,000 $2,602 $6,300 Police $4,501,506 $21,430 0.5% 1 $2,060 $19,370 $0 Dispatch $447,010 $78,473 17.6% $77,587 $286 $600 Fire & EMS $4,313,925 $176,648 4.1% $156,826 $19,822 $0 Public Works $5,547,625 $79,495 1.4% $54,782 $10,213 $14,500 Public Library $1,381,885 $101,167 7.3% $55,585 $26,212 $19,570 Total $20,606,751 $684,195 3.3% $504,405 $92,519 $87,270 Unfunded Town Government FY15 Requests It is important for Town Meeting to understand what this budget does NOT include, and some of the departmental long -term planning and thinking behind these requests. Note that with a newly elected Board of Selectmen, planning for the FY16 budgets will begin in May 2014 with a Retreat with all Town department heads. The lists below have two parts; (1) specific dollar figures indicate requests not funded in FY15 and (2) * indicates near term needs that were put in the `planning list' category. The Selectmen and department heads will weigh all of these items against both the quality and amount of current services offered by the Town. Choices will need to be made unless other revenues appear on the horizon. There is a wide -range of unmet needs in the community and only a long -term planning process that involves significant community dialogue will be able to map the best path forward. Note some figures below do not exactly match the preceding Table because some clerical hours were subsequently rearranged between departments. Unfunded Additional Hours: Administrative Services $69,712 one business administrator position eliminated $11,500 additional hours for Operations Specialist $ 5,500 technology & operations OT * 1.0 FTE Technician *2.0 FTE Help Desk for Town software systems * 1.0 FTE additional HR assistance As will be described during the Administrative Services department budget discussion, one of the two Business Administrator (BA) positions is eliminated in FY15. A lower grade Business Analyst position will assume many of the tasks. r A part-time Operations Specialist is included in the FY15 budget, although funded at fewer hours than desired. The retired Town Accountant, who was instrumental in implementing the new financial system that serves the Town, Schools and RMLD (the latter for payroll only), has agreed to take this temporary position in order to assess and create a long term strategic technology plan. This is vital to all parts of the organization at this time. Changes in technology have changed nearly every job, and made training obsolete faster. While the Town hardware environment is outstanding, integrating the various software systems has been challenging. The recent introduction of mobile devices (tablets, smartphones) for Town employees out in the field has added a level of complexity. User training has lagged, serving to underutilize these powerful tools and systems. We would like to hire another Technician to allow more user training, but instead will hope to do so in future budgets. Later this spring, we will unveil a tool to the general public that will allow service requests to be easily placed using mobile technology (such as smartphones). These requests and our response time will be able to be seen and tracked online by everyone — for example, oh there may be one or two potholes to fill after this difficult winter. A resident will be able to send in a photo of a pothole fill request, and we will know the location from the phone's GPS. As this technology rolls out to the public, so too does the training and technology help needed for the staff. A request to hire a Help desk for this function — as is done in many communities that offer this service — was not affordable in FY15, but will be re- evaluated next year. Our Human Resources Administrator is retiring at the end of FY14, and we know it will be very challenging to replace her ability to serve the Town, School and Light departments, and cover a wide variety of HR areas. Community Services $49,225 Community Health Administrator $ 5,000 additional staff OT for projects $11,082 additional Elder/Human Services hours *0.5 FTE social worker (make a position full time) A Community Health Administrator position would best fulfill one of the Town Manager's FY 14 Goals from the Board of Selectmen, which is listed below: 17. Focus Public Health, School, Substance Abuse, and other resources on a Healthy Community model with an initial focus on obesity prevention. Find ways to encourage walking, cycling, and other activities. These efforts may involve many departments, with efforts led by the Health Division. Promote healthy eating. Include reminders of area Farmers Markets in addition to Reading. Work with food establishments on menu options that are healthy. For now, we attempt to take best practices from our shared staff with Melrose and Wakefield. For example, a subtle change to broadening the use of the Health Revolving Fund seeks to have a significant impact in this area. This change would allow, for instance, a reduced cost bicycle helmet distribution program for residents, as is very successful in Melrose. Additional OT funding would be helpful for more forward progress in projects such as document scanning and the new permits system. As was discussed with FINCOM, the Town has seen a steady increase in outreach efforts needed to many portions of the Reading community. Factors include the demographics of an aging population in town, the recent economic dislocation that continues to affect many of our individual residents, and increases in both mental health and substance abuse issues that are prevalent in society. We do the best we can for our residents. Staff often meets those in need off site in order to offer privacy not found in shared space at Town Hall, and sometimes works unscheduled hours (and even uses their own funds) when a difficult situation warrants an immediate response. This challenge will only grow as the Town's population ages, and increased hours for the social worker as well as other part-time elder/human services staff would be ideal. We will monitor community needs and respond as best we are able in future budgets. Finance $4,000 additional staff OT for projects The re- organized Finance department is evaluating their staffing needs, and for now the situation is fine. The Board of Selectmen has discussed a possible change towards monthly billing for the Enterprise Funds - this would not be possible without the addition of clerical help, however. Next year, we will implement the new Water and Sewer rates three months later, effective for the December 2014 billing. Hopefully this will reduce the high volume of customer service needed when summer water usage was combined with new rates in the past. Last fall the Board of Selectmen renewed for one year- the agreement to share the Appraiser position with Wakefield. Pending state legislation caused a simple renewal rather than a longer term formal arrangement — things are working out very well. This new model requires more outsourcing of work, especially in revaluation years. The Accounting division is working closely with centralized procurement in the Administrative Services department, and staffing levels seem adequate for that change. Public Safety — Police * 1.0 to 3.0 FTE police officers * 1.0 FTE substance abuse prevention Proactive staffing changes and a November 2013 change to senior staffing (previously planned but never implemented) has left the department in excellent shape to deal with a rapidly changing society and a very challenging public safety environment. Additional staff would always be helpful, of course. Prosecutions of certain types of alleged crimes continue to become more complex and demand more Police officer time away from the community. The RCASA substance abuse prevention effort works closely with the Schools. An additional School Resource Officer shared by the middle schools would be desirable as issues previously seen in High School are appearing earlier. Public Safety — Dispatch $77,587 for 2.0 FTE additional dispatchers for overnight shift Funding for two additional staff in Dispatch would be ideal, and leave the coverage for all shifts at the two- person level. As medical technology evolves, and additional legal procedural steps are imposed by the state, the job is difficult to accomplish with only one staff member on certain regularly scheduled shifts. Police officers in the building assist in an emergency as they are needed, but this solution is not ideal as demands on their time could also occur during such a situation. Once the regional solution to dispatch is decided, this issue will re- appear in a near -term budget request. Public Safety — Fire/EMS $78,143 Training Officer $78,143 EMS Officer *3.0 FTE additional firefighters to reduce OT (these positions may overlap with two unfunded positions requested above) CIO Fire OT is very difficult to predict or to manage, because of minimum manning needed for safety and a string of recent serious firefighter injuries. Hiring three additional firefighters would clearly reduce department OT, though not enough to pay the cost of those hires. Formal budget requests for a full time Training Officer and an EMS Officer may help solve this issue, depending if the positions are allowed to count against required manning levels. The Executive Officer position was unfunded until the Board of Selectmen voted in February 2014 to increase ambulance fees to cover this cost. Any further discussion of these issues is deferred as they are subject to collective bargaining negotiations, which are ongoing. Public Works $16,000 a second new Engineering Co -op student $38,782 additional Mechanic *2.0 FTE seasonal workers as needed The Engineering function is staffed at high levels in Reading compared to other communities, and we use less outsourced work as a result. In the past, co- operative education students from area colleges have helped bolster internal staffing levels to avoid outsourcing, and only one of two requested was restored in this budget. The Public Works department is currently evaluating their space needs. Options under consideration include relocating several functions within the existing DPW yard, including Cemetery staff and equipment. In the past when equipment capital funding was not sufficient, the vehicle maintenance effort needed was significant, and budget overruns of over $100,000 annually were common. Consideration was given to adding a second work shift in order to prevent outsourcing the work needed, given limited facility space at the yard. Until this space solution is known, no changes in staffing levels are anticipated. Additional part-time seasonal help for the department is always needed. Over the past many years, this department has seen a reduction in staff from over 140 to approximately 40 employees. Changes in equipment have allowed and encouraged improvements in productivity, but certain annual tasks require manual labor. Public Library $55,585 Digital Services Librarian As described previously to FINCOM, the Library is also changing significantly in their use of technology. Hard copy material continues to decline as a percentage of total materials, and this trend is unlikely to reverse for the foreseeable future. Significant staff training is needed and available to adapt to this new environment. A Digital Services Librarian would assist in this transition process for both staff and the public. We expect the work of the Administrative Services part-time Operations Specialist to serve as a path forward towards using the technology of the Town, though admittedly this work will leave out a portion of the Library- specific technology, such as the NOBLE network. As the Library gets closer to occupying their newly renovated space, this position will be given serious consideration. FY15 Budget - Conclusions The Town and Schools have, since the passage of Proposition 2- 1/2, been asked to do more with less. In the private sector, this mission is a daily one of survival in the face of competitive pressures from the marketplace, so it is hardly something new. However, unlike the private sector the Town cannot invent new streams of revenue, or increase existing streams through clever design or marketing efforts. Nor can it arbitrarily discontinue less profitable divisions, as the main mission is one of service to the community. Further, examined through a corporate lens, most of our organization is a 'loss leader' by design. SJ By reputation, Reading delivers both a high quality and volume of services given the funding that is available. We understand the daily challenge of improving, and if that was not ingrained upon the passage of Prop 2 -1/2, it sure is now. We use an extensive planning process for both the Town and the Schools that looks ahead several years. We adapt to the rapidly changing present carefully and thoughtfully. The planning process combined with prudent reactions allows us to deliver good value for those revenue streams available. Everyone involved - elected and appointed officials, volunteers and employees that see the needs first hand - would like to do better, and do more for the community. While improvements at the margin are always possible, we are at the point where maintaining services has become extremely challenging, without sacrificing the quality or amount of existing services. The Town of Reading should be proud at how the Town and School organizations responded to the economic downturn seen in recent years. Financial reserves are at an all -time high (NOT to be confused with sustainable revenue, which remains quite constrained). Significant ongoing investment in capital and infrastructure has greatly improved the condition of buildings and equipment over the past decade, which has in turn lowered operating costs. Employees and retirees have contributed significantly with increased out of pocket expenses and healthier lifestyles in order to keep health insurance premium increases lower. Wage growth has been very modest, not keeping pace with inflation. These savings in turn led to fewer layoffs, which allowed strong service levels at a time when the community demand for services actually increased (as is typical in the municipal sector during an economic downturn). Staff responded well, and measures of customer satisfaction remain very high. In September 2010 FINCOM also requested community input on controlling costs, and not one single person was willing to give up a Town or School service that they currently used. The Town of Reading is nearing a significant decision point. For the past year, several community -wide discussions about the imbalance between the quality and amount of services desired versus what is sustainably affordable have resulted in high levels of frustration. This frustration is most easily seen with our elected and appointed officials, who hear from friends and neighbors about this imbalance. However it is the Town and School employees who have chosen public service as their full - time occupation that see the frustration daily, and often take extraordinary steps to do what they can to bridge this gap. It is both a pleasure and an honor to work among such dedicated colleagues. In Reading we have often chosen to bring widely varied interests together in order to collaboratively find solutions to our common problems. This year a very high level of one -time Free Cash is being used to balance the FYI 5 budget and stimulate the discussion about an Operating Override. While I both understand and live daily the frustration involved in this decision, I caution that quickly spending down one -time cash reserves on ongoing budget costs is a departure from the past decade of conservative planning that has left us in better shape than other communities. Higher budgets that address the very apparent needs in the community coupled with a failed future Override effort would be both a financial and operational disaster for the entire community, resulting in decreased service levels very quickly. O We live in very challenging times. It is said that the Industrial Revolution was the Age of Machines - a focus on physical manufacturing which ultimately placed new tools in the hands of workers that increased their productivity. A Second Industrial Revolution might be said to be the Age of Information — a focus on technology which ultimately has and will continue to replace those workers. The Town government in Reading is open to all new ideas, but does not have as much to gain from this Age of Information as the private sector does. We are mindful that high levels of direct personal `hands on' service on local issues are important to our elected officials, volunteers, residents and businesses. We will sustainably provide those direct service levels only with creative long term planning, constant two -way community communication, and a dedicated and well trained staff. As always, we will strive to meet the expectations of the community with whatever level of resources that are made available. On behalf of the entire Town government, thank you for the opportunity to make the Town of Reading a very special place to work — and to live. Respectfully submitted, Robert W. LeLacheur, Jr. CFA Town Manager FY15 Revenues Summary of Revenues — The total FY15 estimated revenues for general government will be $82.3 million, a 2.4% increase from FY14. However without the use of free cash in either year revenues are projected to increase 1.6% to $80.6 million. Over the last twenty years, annual increases in revenues have averaged between +3.0% and +4.0 %. These modest revenue increases are misleading because in FY14 the MSBA made a final debt payment — adjusting for this fact adds another 1% growth to real revenues in FY15. Property Taxes — The FY 2015 tax levy includes a 2.5% increase over the combined FY 2014 tax levy plus new growth. We are conservatively estimating only $500,000 in new growth based on historical averages (5yr $500k and 10yr $600k). In FY14 new growth was over $700,000 and there remains strong activity in both the housing and commercial sectors. New Growth (S 000s) `14 `13 `12 `11 `10 `09 `08 `07 `06 741 579 325 363 553 556 .549 843 732 After a discussion with the Board of Assessors in FY12 the abatements and exemptions overlay account was increased to $600,000 due to increased large -scale commercial activity and has increased by 2.5% annually, to a $646,134 figure in FY15. The actual amount may vary from the budgeted amount when the final calculation of the tax rate is made by the Town Accountant. If the overlay account is not used for abatements, it is released in future years and used to support the budget. (See" Operating transfers /Available Funds" below.) Local Revenues from sources other than property taxes — Ten years ago we used very conservative estimates for increasing local receipts and noticed that operating budgets were built relying on the fact there really was more revenue available. Several years ago we transitioned into an approach that would be more realistic by using a long -term average, and the Finance Committee agreed that in the years that this method causes a revenue deficit, the difference would be made up with an appropriation of Free Cash. In recent years as the economy was sluggish, we toned down long- term averages to allow for possible declines and only encountered one year of minor local revenue deficits. For FY15 we forecast a 4.6% increase, driven by a change in ambulance fees described below and higher than forecast actual levels of collections in FY14. MOTOR VEHICLE EXCISE — This revenue source is difficult to forecast, as we have been over and under budget by $100,000+ in recent years, although the average has been in line. For next year we forecast a 5.2% increase to $3 million as FY14 collections are ahead of projections. Several years ago we would have expected this figure to be well over $3 million by FY15, but purchases of new cars had slowed during the difficult economic times. INTEREST — The town earns interest on the cash it is holding until it has to pay the bills for the town. Sometimes the Town holds large cash balances for temporary purposes (such as construction projects) and we are careful to only budget recurring interest revenues. Rates remain very low and estimated earnings are reduced to $100,000 for next year. These rates are attractive when the Town borrows however. CHARGES FOR SERVICES: In February 2014 the Board of Selectmen voted to raise ambulance fees effective March 2014. Fees had fallen relative to area averages over the last several years, and the new higher fees will still be about 10% below area averages. Note that as in the past, this fee increase in the first year will be directed towards a community priority — a new Executive Officer in the Fire department. Intergovernmental Revenue — State tax collections are very strong through the first half of the FY14, but the Governor's FY15 budget proposed a very modest 0.8% increase to local aid for Reading, which is used as a conservative assumption for revenues. An Early Aid resolution from the Legislature does not change that outlook significantly. Operating Transfers /Available Funds — The amount of money available from cemetery of lots has remained constant. Sale of real estate funds from the landfill will be available for debt and capital expenses, but are reduced again by $50,000 to $150,000. This is consistent with the Capital Improvements Program which will make these funds last for a bit more than ten years from FY2005 to FY2017. Recent land sales by the Town of about $500,000 are being set aside from this program in case they are needed for land acquisition. The earnings distribution from the Light Department has been increased 2.0% based on the CPI through December 2013. The Board of Assessors released $350,000 from the overlay surplus last year and will do the same thing this year. A high figure of $1.7 million is being used from Free Cash in order to balance the FY2015 budget. The Chart on the right shows an updated Free Cash balance estimate, which excludes any regeneration that might occur as FY14 is closed out. Recent regeneration suggests that between $0.75 and $1.25 million would be added, although Annual Town Meeting will use $0.5 million of that surplus in FY14 to balance other current year deficits, such as snow & ice. Figures are shown in (000s): $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Fiscal Year Respectfully submitted, Sharon Angstrom Town Accountant DRAFT 2014 Special Town Meeting Monday April 28, 2014 WARRANT OUTLINE REVISED 04/01/2014 Art. Mover/ Moderator # Article Description Sponsor Comment Notes 4/1/2014 1 Ij 1 COMMONWEALTH OF MASSACHUSETTS Middlesex, ss. Officer's Return, Reading: By virtue of this Warrant, I, on notified and warned the inhabitants of the Town of Reading, qualified to vote on Town affairs, to meet at the place and at the time specified by posting attested copies of this Town Meeting Warrant in the following public places within the Town of Reading: Precinct 1 J. Warren Killam School, 333 Charles Street Precinct 2 Reading Police Station, 15 Union Street Precinct 3 Reading Municipal Light Department, 230 Ash Street Precinct 4 Joshua Eaton School, 365 Summer Avenue Precinct 5 Reading Library, Local History Room, 64 Middlesex Avenue Precinct 6 Barrows School, 16 Edgemont Avenue Precinct 7 Birch Meadow School, 27 Arthur B Lord Drive Precinct 8 Wood End School, 85 Sunset Rock Lane Town Hall, 16 Lowell Street The date of posting being not less than fourteen (14) days prior to April 28, 2014 the date set for the Town Meeting in this Warrant. I also caused a posting of this Warrant to be published on the Town of Reading website on A true copy Attest: Laura Gemme, Town Clerk , Constable 16a TOWN WARRANT O� OF$fgo' y Y � r INCOPQ0 COMMONWEALTH OF MASSACHUSETTS Middlesex, ss. To any of the Constables of the Town of Reading, Greetings: In the name of the Commonwealth of Massachusetts, you are hereby required to notify and warn the inhabitants of the Town of Reading, qualified to vote in elections and Town affairs, to meet at the Reading Memorial High School Performing Arts Center, 62 Oakland Road, in said Reading, on Monday, April 28, 2014, at eight - thirty o'clock in the evening, at which time and place the following articles are to be acted upon and determined exclusively by Town Meeting Members in accordance with the provisions of the Reading Home Rule Charter. ARTICLE 1 To hear and act on the reports of the Board of Selectmen, Town Accountant, Treasurer - Collector, Board of Assessors, Director of Public Works, Town Clerk, Tree Warden, Board of Health, School Committee, Contributory Retirement Board, Library Trustees, Municipal Light Board, Finance Committee, Cemetery Trustees, Community Planning & Development Commission, Conservation Commission, Town Manager and any other Board or Special Committee. Board of Selectmen Background: This article appears on the Warrant for all Town Meetings. At this Special Town Meeting, no report(s) are anticipated. Finance Committee Report No report. Bylaw Committee Report: No report. ARTICLE 2 To choose all other necessary Town Officers and Special Committees and determine what instructions shall be given Town Officers and Special Committees, and to see what sum the Town will raise by borrowing or transfer from available funds, or otherwise, and appropriate for the purpose of funding Town Officers and Special Committees to carry out the instructions given to them, or take any other action with respect thereto. Board of Selectmen Background: This Article appears on the Warrant of all Town Meetings. There are no known Instructional Motions at this time. The Town Moderator requires that all proposed Instructional Motions be submitted to the Town Clerk in advance so that Town Meeting Members may be "warned" as to the subject of an Instructional Motion in advance of the motion being made. Instructional Motions are normally held until the end of all other business at Town Meeting. `8 Finance Committee Report: No report. Bylaw Committee Report: No report. ARTICLE 3 To see if the Town will vote to amend the FY2014 - FY2023 Capital Improvements Program as provided for in Section 7 -7 of the Reading Home Rule Charter, or take any other action with respect thereto. Board of Selectmen Background: The following amendments are proposed to the FY2014 — FY2023 Capital Improvements Program (CIP) as previously approved at Annual Town Meeting in April 2013 and amended at both Subsequent Town Meeting in November 2013 and Special Town Meeting in February 2014. These amendments need to be included in the CIP in order for Town Meeting to consider funding them under Article 4 later at this Special Town Meeting. The blue pages showing these Capital Improvement Plans are included in this Warrant Report. General Fund FY14: +$485,000 ♦ $485,000 School schematic design (Early Childhood Center project) FYI 5: ♦ No changes made FY16 to FY23: ♦ No changes made Finance Committee Report: The Finance Committee recommends all of the proposed amendments to the FY 2014 - 2023 Capital Improvements Program by a vote of xx -xx -xx at their meeting on April 9, 2014. Placing items in the Capital Improvement Program is a prerequisite but in itself does not authorize spending funds towards these items. Bylaw Committee Report: No report. ARTICLE 4 To see what additional sum the Town will raise by borrowing or transfer from available funds, or otherwise, and appropriate for the purpose of School schematic design for an Early Education Center Building Project, including the costs of consulting services, audits, plans, documents, cost estimates, bidding services and all related expenses incidental thereto and necessary in connection therewith, said sum to be expended by and under the direction of the School Committee and the Town Manager; and to see if the Town will authorize the School Committee, Board of Selectmen, Town Manager, or any other agency of the Town, to apply for a grant or grants to be used to defray the cost of all, or any part of, said improvements; and to authorize the School Committee and /or the Town Manager to enter into any and all contracts and agreements as may be necessary to carry out the purposes of this Article. or take any other action with respect thereto. Board of Selectmen 6� Background: due from Schools Finance Committee Report: The Finance Committee recommends the subject matter of Article 4 by a vote of xx -xx -xx at their meeting on April 9, 2014. Bylaw Committee Report: No report \d5 and you are directed to serve this Warrant by posting an attested copy thereof in at least one (1) public place in each precinct of the Town not less than fourteen (14) days prior to February 13, 2014, or providing in a manner such as electronic submission, holding for pickup or mailing, an attested copy of said Warrant to each Town Meeting Member. Hereof fail not and make due return of this Warrant with your doings thereon to the Town Clerk at or before the time appointed for said meeting. Given under our hands this 9th day of April, 2014. John Arena Dan Ensminger John R. Halsey Kevin M. Sexton Marsie West SELECTMEN OF READING , Constable � Al