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HomeMy WebLinkAbout2016-01-20 Board Of Selectmen PacketJanuary 13, 2016 To: Reading Boards, Committees and Other Volunteers From: Mark Dockser, Chair, Reading Finance Committee Subject: January 20, 2016 Financial Forum Following up from the discussions at our last Financial Forum held in October 2015, both the Selectmen and FinComm have started discussions about anticipated shortfalls in the town's operating budget starting with FY'l7. We highlighted needs on both the town and school sides and our inability to offer even level services going forward without new sources of revenue, and specifically looking at an operating override. It has been and continues to be our belief that the only long term viable option to provide the level of services that Reading is demanding is an operating override in the near term and that the taxpayers need to be presented with this option soon. FinComm has sponsored a series of meetings focusing on services that the town desires /requires as well as new sources of revenue. Many of these have been implemented and have benefited the town already. But as we look at budgeting for FY'17, an activity that is already in full swing for both Town and Schools, and as we look beyond FY'17, FinComm needs to offer budget guidance to Town Meeting based on available revenues and its impact on the financial status of the Town. In order to frame the discussions for these activities going forward, FinComm suggests that in early 2016, we develop information for the taxpayers of the town to understand the budget situation, to discuss what level of services they will be desiring going forward, and to start a discussion of the options that are available and the recommendations of the town's elected and appointed officials. We have started to think about a "presentation" based on roughly 10 -12 key points that can provide context to taxpayers, present options, and let taxpayers ask questions and make comments about both our needs and our means to pay for those needs. Below is a first pass at the list of items that we think could help present the situation and options. The next financial forum is scheduled for Wednesday January 20, 2016 at 7:30 pm at the Pleasant Street Center. We are asking that each of the members of the various boards and committees as well as all interested taxpayers review these in advance of our meeting so that we can have a very productive discussion at the forum and beyond as we reach out to the entire town. Thank You! Discussion Topics: t. What challenges do our current pay scales present to the Schools and the Town? How have the Schools and Town been able to attract and /or retain employees? In what ways have the Schools and Town not been able to do so? What has caused certain positions to go unfilled? 2. Understanding use of Free Cash and its Impact on the operating budget. FinComm believes it is important to share with and explain to residents our financial situation in terms of the annual operating budget, our capital needs and plans, as well as the reserves that we maintain. Reserves are held to fund specific projects as well as to be available for unanticipated events like heavy snow or litigation and related fees for example. We intend to include a few paragraphs that explain this, highlighting both the need and the prudence to use some free cash to support the operating budget as we have done in the last several years, but that this is not a long term fix for the shortfalls we face in the operating budget. 3. Average tax bill by community chart— taxes vs. assessed value of median home Reading currently is slightly below the trend line for taxes paid for a single family home when compared to peer communities. Taxes Paid vs. Single Family Home Assessed Value: w]$ A,. A17a9 c .d 02,W3 12.890 uuy1M ezo.M 12.191 34000 899550551 41.928 10.936 13M - -- ■ Wn M 622.118 10,$99 12" ■ Npwx $27.699 6146 BIMnd 596A99 a,602 11'� e ■ M R.., 962 620 a 022 10.= L,m.W 5$3$52 8,021 9,000 We O u 382 2.89 am � 96,38559']6 476M ]jag alb, N NNwN WAS' SAN != ftk YS 416011 SAN 6.M0 WakeRetl 116013 56W 5.90D ..M 1 T 9 149 5155 9+md9un 382.1/5 5366 4004 5lnewaaury bt 013 6.0]0 3p1.CW i00,W0 500.000 614.000 )OO.MA bO.OW 900.L00 3.WO.OW Data: Use DOA data from peer Communities north & west of Boston, as defined by independent consultants in the town's last two Pay & Class studies; exclude Burlington, Danvers. Wilmington and Westborough because they have larger commercial tax bases (an 3M+ versus <10%in Reading) Assumption Assessed values of single family homes (SF) serve as a proxy for services provided by town & schools SF property taxes represent the cost of receiving those services Conclusion: Using 2015 data, Reading remained slightly below, the headline in taxes levied for the serves provided Using 2016 data far Readin& values Increased by $35,249 or +7.6% Using estimated 2016 pre Tax Classification data for Reading, taxes increased by $424 or +61% the reason for this large tax increase was the milliner of the Library project debt exclusion It appears that even with the impact of the debt exclusion, Reading will remain below trendline Study the communities above far those most often cited by residents when discussin what quality and quantity ofae,vues they demand 4. Expectation of services In the community. Over the last 4 years, FinComm has sponsored a series of Financial Forums for residents, elected and appointed officials, and town department heads to discuss both the services that they desire as well as to look for opportunities to cut costs as well as enhance revenue. Many of these suggestions have been implemented by town officials resulting in higher efficiency as well as improved revenues. This has offered a start, but one that must be expanded. Reading is at a crossroads regarding the services the community expects and their cost. We are a community recognized for excellent schools, strong community services and for being well managed. We are enjoying higher property values and residents that are and want to age in place. We are also facing challenges in our operating budget that require either higher revenues to support the services that we offer or cuts in those services. FinComm believes that it will be critical and helpful to speak with residents to better understand their needs and desires for services in the future as well as their willingness to pay for those services. 5. Prop 2 112— Over the years since its enactment, Proposition 2'% has constrained the growth in spending at the local level as was the original intent. Unfortunately, many changes have occurred since it was originally approved by voters in 1980. • On the revenue side, constraints have come from the limitation on increases in property tax rates, coupled with the decrease in state aid to local cities and towns. In addition, Reading has a very limited amount of commercial and industrial property which makes us more reliant on residential property taxes than many of our peer communities. • On the spending side, costs that are outside the control of the town -- predominately healthcare, the need to fund pensions, the growing liability for OPEB - other post employment retirement benefits, as well as funding for Chapter 766 [out-of-district special education placements] and other state and federally mandated programs — continue to rise at a higher rate than revenue. The result is a squeeze on Reading's operating budget, making It more and more difficult to provide existing services, let alone fund additional services demanded by an aging population 6. What budget would be required for FY'17 to achieve level services for Town and Schools? What percentage increase over the FY'16 budget would be necessary? 7. Details of a potential override Building from the earlier questions above, if we are to maintain services at a level similar to what is currently offered or if we are to offer a higher level of services, the Town needs additional revenue to pay for these services. At 2014 and 2105 Town Meetings, recent meetings of the Selectmen, meetings of the Finance Committee, and at recent Financial Forums, discussion of a proposed operating override has been an important topic of discussion. FinComm believes it is critical to review both short term and long terms needs if the town is to propose an override. Questions of how large of an override, when it should be proposed, how long of a period should it cover our anticipated needs for, and are there any specific capital needs that should be included in the proposal all need to be discussed thoroughly and in a timely manner. 8. Other options for raising sustainable revenue to support operating budgets In earlier Financial Forums, the attendees looked for other ways to fill the revenue gap and many ideas were put forth such as increases in user fees. But even if they were all able to be implemented, they would do little to offset the increases in expenditures and additional services that are being demanded of the town. The additional revenue demands are of a magnitude such that the small stopgap solutions will not be able to make up the shortfall. 9. Absent an Influx of new revenue to support level services, what budget cuts can and will be proposed in the budgets for the Schools and the Town? The School and Town budgets are being presented to the School Committee and Board of Selectman now for comment, review and then voting. 10. Long term town plans— economic development, capital, other Town and school officials and volunteers have been very actively translating their long term vision for the Town of Reading into a long term plan for our town. These plans require support of townspeople in the form of time and as tax revenue. What are the operating as well as capital budget implications to support the long term plan? 11. Importance of good schools to sustaln and grow property values There is a direct correlation between school performance and maintaining growth in property values. In a 2013 Realtor.com survey of 1,000 home buyers, they found that found that half of the home - buying population is willing to pay more than their intended budget to get into the right school district, and more than half would give up other amenities. One out of five of those surveyed said they would pay between six and ten percent more for a home — and one out of ten people surveyed said they'd go even higher, paying up to 20 percent more for a home with access to good schools. 12. What is the best way to get more people In the community aware and Involved in this discussion of the need for additional funds to support the operating budget vs. cuts In services that will be required. This documenttpresentation is one of the ways we discussed. How do we get this out to the community? In order to raise community awareness, we need to reach the community groups affected by our services — schools, elder services, fire and safety, library, and maintenance of town roads and facilities among others. Need to brainstorm on how to share the information and proposals.