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HomeMy WebLinkAbout2016-09-12 Special Town Meeting MinutesSPECIAL TOWN MEETING Reading Memorial High School September 12, 2016 Preforming Arts Center The Precincts listed below met at 7:00 PM to conduct the following business: Precinct 2 - With a Quorum present a vote was taken to appoint Paul McNeice to fill a vacancy until the next election. Precinct 3 - With a Quorum present a vote was taken to appoint Lori Briere to fill a vacancy until the next election. Precinct 6 - With a Quorum present a vote was taken to appoint Al Mosier to fill a vacancy until the next election. The meeting was called to order by the Moderator, Alan E. Foulds, at 7:34 PM, there being a quorum present. The Invocation was given by Philip Pacino, Precinct 5 followed by the Pledge of Allegiance to the Flag. The Warrant was partially read by the Town Clerk, Laura Gemme, when on motion by John Halsey, Board of Selectmen, it was voted to dispense with further reading of the Warrant. Motion made by Kevin Sexton, Board of Selectmen to dispense of the reading of all motions in their entirety. Motion Carried ARTICLE 1: Motion made by Kevin Sexton, Board of Selectmen and Article 1 was tabled ARTICLE 2: Motion made by Kevin Sexton, Board of Selectmen and Article 2 was tabled ARTICLE 3: Move that the Town vote to amend the FY 2017-27 Capital Improvements Program as provided for in Section 7-7 of the Reading Home Rule Charter and as previously amended, by making these changes: General Fund FY17: + $ 26,000 (funded by FINCOM Reserve Funds) + $1,700 Fire: Ambulance purchase (now $ 276,700) $ 24,300 Fire: Ambulance / EMS equipment Debt: Reduce Birch Meadow Phase I Field Lighting from $ 1.0 million to $ 0.1 million FY18: + $ 610,600 $ 462,000 Facilities -Schools: Parker roof repair project (moved up from debt in FY19) $ 350,000 Facilities -Schools: RMHS boilers (new item, replacement for energy efficiency) $ 115,000 Public Schools -Recreation: Replace backstop & infield at Barrows (moved up from FY20 and increased by $ 20k) $ 40,000 Facilities -Gen: F-350 Box Truck (new - replace 2006 model) SPECIAL TOWN MEETING Reading Memorial High School Preforming Arts Center September 12, 2016 $ 40,000 Facilities -Gen: Chevy 250OHD Pickup (new — replace 1999 Chevy 2500) $ 30,000 DPW: Engineering Scanner/Plotter (unknown age) $ 22,000 DPW: Mover SKAG 72" (1998) moved up from FY19 $ 18,000 DPW: Mover SKAG 52" (1995) moved up from FY19 and decreased from $19,000 $ 18,000 DPW: Mover SKAG 52" (2008) moved up from FY19 and increased from $17,500 $ 12,000 DPW: 2GV LeafVac (2000) moved up from FY21 and decreased from $43,600 + $ 1,000 DPW: Dump Truck #24 Parks (2000) - increase from $64k to $65k ($ 10,000) Library: Delete Equipment ($ 14,000) Facilities -Schools: Parker furniture moved to FY17 (below) ($ 26,800) DPW: HW Compressors moved up to FY20 and increased to $50,000 ($ 34,000) DPW: Move Engineering vehicle from FY18 to FY20 ($ 39,500) DPW: Delete HV4 Ford Van (1995) ($ 78,100) Public Schools -Recreation: Move Barrows basketball court repairs to FY19 ($ 125,000) Public Schools -Recreation: Move Barrows tennis court repairs to FY19 ($ 170,000) DPW: Woodsman Chipper (2004) moved from FY18 to FY19 and increased to $195k Note that FY18 debt service reduced by $637,500 including changes to Birch Meadow Phases I and II and the roof project below: Debt: Increase Birch Meadow Phase II from $1.5 million to $2.5 million, add Field Lighting component and move out from FY18 to FY19 Debt: Eliminate $2.7 million School and Town building roof repair projects (fund as capital) Funding Expected to be Proposed for Future FY17 Town Meetings: FY17: + $ 490,000 ($ 365,000 net funding at November Town Meeting) $ 210,000 DPW: Loader JD 624G (2007) move up from FY19 and increase by $ 10,000 $ 125,000 Facilities -Gen: Security Systems Evaluation (reclassified from FY17 expenses) $ 65,000 Facilities -Schools: Furniture increased from $14k in FY18 (Parker as placeholder if code issues) $ 50,000 Facilities -Gen: EMS upgrades to buildings $ 40,000 Facilities -Gen: Plumber's Van Ford E350 FY17: + $ 120,000 (April Town Meeting) $ 75,000 Facilities -Town: West Side Fire Station roof repairs $ 30,000 Facilities -Schools: Wood End Masonry $ 15,000 Facilities -Schools: Parker Masonry Background: This Article is included in every Town Meeting Warrant. The Reading General Bylaw (section 6.1.3) states "... No funds may be appropriated for any capital item unless such item is included in the Capital Improvements Program, and is scheduled for funding in the Fiscal Year in which the appropriation is to be made." Bond ratings agencies also want to ensure that changes to a long-term CIP are adequately described. Because the Department of Revenue is expected to certify the Town's June 30`h Free Cash balance by October 2016, but has not yet done so, FINCOM Reserves must be used to fund the two current requests by the Fire department. The other changes will be requested at November 2016/April 2017 Town Meeting if financial resources are sufficient, or they will be deferred. The FY17 capital plan had allocated $275,000 towards the purchase of a new ambulance. The winning bid, including necessary related equipment, was about $1,700 over budget. In addition, the Fire Department is requesting (1) a new $14,700 power ambulance stretcher, which has become necessary as extrications have become more complex with heavier patients resulting in too many Firefighter injuries; and (2) to replace a $9,600 recently broken CPR compression unit. SPECIAL TOWN MEETING Reading Memorial High School Preforming Arts Center Presentation given by: • Robert LeLacheur - See Attached September 12, 2016 Finance Committee Report — given by Eric Burkhart: At its August 31, 2016 meeting it was voted 7-0-0 in support of the subject matter of this Article. Bylaw Committee Report: No Report Board of Selectmen — given by Dan Ensminger: At its September 6, 2016 meeting it was voted 4- 0 to support the subject matter of this Article Motion Carried ARTICLE 4: Move that the Town vote to amend the vote taken under Article 15 of the May 2010 Annual Town Meeting to further increase the elderly tax exemption specified in Chapter 59, Section 5, Clause 41C of the Massachusetts Genera/ Laws from $750.00 to $1,000.00. Background: This Article increases an outright property tax exemption for elderly taxpayers with very low income and assets, as determined under MGL Chapter 59, Section 5, Clause 41C. Currently about 20 taxpayers qualify for this exemption, which would bring the additional cost to $5,000. This cost is borne by the Overlay under the care of the Board of Assessors. This $1,000 exemption brings the town back up to area community practices, much as was done by Town Meeting in 2010. Finance Committee Report — given by Peter Lvdecker: At its August 31, 2016 meeting it was voted 7-0-0 in support of the subject matter of this Article. Board of Assessors Report — given by Steve Crook: At its August 30, 2016 meeting it was voted 2-0-0 in support of the subject matter of this Article. Bylaw Committee Report: No Report Board of Selectmen — given by Dan Ensminger: At its September 6, 2016 meeting it was voted 4- 0 to support the subject matter of this Article Presentation given by: Robert LeLacheur - See Attached After some discussion Motion Carried ARTICLE 5: Move that the Town will vote to accept the provision of General Laws Chapter 59, Section 5 added by Chapter 181 of the Acts of 1995, which authorizes an annual increase in the amount of the exemption granted to senior citizens, surviving spouses and surviving minors under General Laws Chapter 59, Section 5, Clause 17D, by up to 100% of the percentage increase in the U.S. Department of Labor, Bureau of Labor Statistics, Consumer Price Index (CPI) for the previous year as determined by the Commissioner of Revenue, and to fix that annual increase at 100% of the CPI, to be effective for exemptions granted for any fiscal year beginning on or after July 1, 2017. SPECIAL TOWN MEETING Reading Memorial High School Preforming Arts Center September 12, 2016 Background: This Article annually changes the property tax exemption cited under Article 4 by an area consumer price inflation measure. This will allow the exemption to track local inflation, and perhaps avoid future trips to Town Meeting. Again this nominal cost is borne by the Overlay under the care of the Board of Assessors. Finance Committee Report — given by Anne Johnson Landry: At its August 31, 2016 meeting it was voted 7-0-0 in support of the subject matter of this Article. Board of Selectmen — given by Dan Ensminger: At its September 6, 2016 meeting it was voted 4- 0 to support the subject matter of this Article Board of Assessors Report — given by Steve Crook: At its August 30, 2016 meeting it was voted 2-0-0 in support of the subject matter of this Article. Bylaw Committee Report: No Report Presentation given by: • Robert LeLacheur - See Attached • Victor Santaniello After some discussion Motion Carried ARTICLE 6: Move that the Town vote to reduce the interest rate specified in any tax deferral and recovery agreement to be entered into pursuant to Chapter 59, Section 5, Clause 41A of the Massachusetts Genera/ Laws, for any fiscal year beginning on or after July 1, 2017, from 8% to 4%. Background: Currently state law allows elderly (65 years or older) homeowners that earn a maximum of $40,000 (with no asset test) to defer real estate tax payments while living in their home. Deferred taxes accumulate with simple interest at 8% as a lien on the property until it is sold. If the owner passes away while in the home, the estate is liable for taxes for all deferrals at a higher interest rate. The town may change only the 8% interest rate, and this Article requests a decrease to 4% which is the lowest allowed by the state under this tax policy. Any taxes deferred result in lost revenues for a given year, and eventually those revenues are recouped. Presentation given by: • Robert LeLacheur - See Attached Finance Committee Report — given by Marc Moll: 0 in support of the subject matter of this Article. Board of Selectmen — given by Dan Ensminger: 0 to support the subject matter of this Article Board of Assessors Report — given by Steve Crook: 2-0-0 to recommend this Article. Bylaw Committee Report: No Report At its August 31, 2016 meeting it was voted 7 -0 - At its September 6, 2016 meeting it was voted 4 - At its August 30, 2016 meeting it was voted SPECIAL TOWN MEETING Reading Memorial High School Preforming Arts Center After some discussion Motion Carried September 12, 2016 ARTICLE 7: To see if the Town will vote to authorize the Board of Selectmen, on behalf of the Town, to petition the General Court for passage of a special law substantially as provided below. The Legislature may make clerical or editorial changes in form only to the bill, unless the Board of Selectmen approves amendments to the bill before enactment by the Legislature. The Board of Selectmen is hereby authorized to approve amendments that shall be within the scope of the general public objectives of this petition. AN ACT AUTHORIZING THE TOWN OF READING TO ESTABLISH A MEANS TESTED SENIOR CITIZEN PROPERTY TAX EXEMPTION SECTION 1 With respect to each qualifying parcel of real property classified as class one, residential in the town of Reading there shall be an exemption from the property tax in an amount to be set annually by the Board of Selectmen as provided in section 3. The exemption shall be applied to the domicile of the taxpayer only. For the purposes of this act, "parcel" shall be a unit of real property as defined by the Board of Assessors under the deed for the property and shall include a condominium unit. The exemption provided for herein shall be in addition to any and all other exemptions allowed by the General Laws. SECTION 2 The Board of Assessors may deny an application if they find the applicant has excessive assets that place them outside of the intended recipients of the senior exemption created by this act. Real property shall qualify for the exemption under section 1 if all of the following criteria are met: (a) The qualifying real property is owned and occupied by a person whose prior year's income would make the person eligible for the circuit breaker income tax credit under section 6(k) of chapter 62 of the General Laws; (b) The qualifying real property is owned by a single applicant age 65 or older at the close of the previous year or jointly by persons either of whom is age 65 or above at the close of the previous year and if the joint applicant is 60 years of age or older; (c) The qualifying real property is owned and occupied by the applicant or joint applicants as their domicile; (d) The applicant or at least 1 of the joint applicants has been domiciled and owned a home in the town of Reading for at least 10 consecutive years before filing an application for the exemption; (e) The maximum assessed value of the domicile is no greater than the prior year's maximum assessed value for qualification for the circuit breaker income tax credit under Section 6(k) of chapter 62 of the General Laws as adjusted annually by the Department of Revenue; and (f) The Board of Assessors has approved the application. SECTION 3 The Board of Selectmen shall annually set the exemption amount provided for in section 1, provided that the amount of the exemption shall be within a range of fifty per cent to two hundred per cent of the amount of the circuit breaker income tax credit under section 6(k) of chapter 62 of the General Laws for which the applicant qualified in the previous year. The total amount exempted by this act shall be allocated proportionally within the tax levy on all residential taxpayers. SECTION 4 A person who seeks to qualify for the exemption under section 1 shall, before the deadline established by the Board of Assessors, file an application, on a form to be adopted by the Board of Assessors, with the supporting documentation of the applicant's income and assets as described in the application. The application shall be filed each year for which the applicant seeks the exemption. SPECIAL TOWN MEETING Reading Memorial High School Preforming Arts Center September 12, 2016 SECTION 5 No exemption shall be granted under this act until the Department of Revenue certifies a residential tax rate for the applicable tax year where the total exemption amount is raised by a burden shift within the residential tax levy. SECTION 6 This act shall expire after 3 years of implementation of the exemption. Background: In preparation for a future Override, almost two years ago Town Finance staff began researching tax policy that could assist the Reading seniors for which property taxes were a high financial burden. The three previous Articles all assist a very small number of seniors as has been mentioned. However, Town Public Safety and Human / Elder Services staff routinely interact with a much larger senior population, which face both medical and financial challenges to remain in their Reading homes. Many of them have lived in town for decades. No such tools existed in state tax policy to accomplish this assistance. Several months ago we learned of two relatively recent Home Rule Petitions - in Sudbury and in Wayland - that aim to protect senior taxpayers. The Assessing division and the Town Manager began researching these options, asking peer communities, local legislators, and the state Department of Revenue. The research showed that interest was high, but only these two communities had made an effort. The Sudbury model appealed at first, but the two main drawbacks were a tax benefit as high as 50% of the tax bill ($3,600 on an average home in Reading) and the amount of staff labor involved in reviewing applications and applying local rules to determine eligibility. Combining the approaches from both Sudbury and Wayland lowered the potential benefit, as shown below, and significantly reduced the staff workload. Therefore this Article seeks a third -in -the -state' Home Rule Petition to address property tax financial challenges faced by seniors. In a discussion with our peers, this approach may become a model for other communities, and in speaking to our legislators this effort may find its way into state legislation. It is important to note that the state made clear that it would only consider approving a Home Rule Petition with a term of three years or less. Recently Sudbury sought to extend their initial three year term to be permanent, but the state denied their request and allowed a three-year extension. To be eligible for the Reading property tax exemption, the senior: (1) has filed and been deemed eligible for a prior year Schedule Circuit Breaker for the purpose of state income taxes; (2) has owned property in Reading for at least ten previous consecutive years; and (3) applies annually to the Board of Assessors for the exemption. Using the state's Schedule Circuit Breaker takes local government out of the business of determining eligibility. Our Assessing division has been reduced to 1.5 FTEs plus clerical help from 2.7 FTEs plus clerical help five years ago. Placing local eligibility determinants beyond the Schedule Circuit Breaker will require additional staffing - and this needs to be done by full-time town staff due to the confidential nature of the information. In addition, the Circuit Breaker state income tax break serves as the basis for determining the local property tax relief. Annually the Board of Selectmen at their Tax Classification Hearing (usually in November, to be effective the following July), will set the exemption between 50% and 200% of the Schedule Circuit Breaker income tax relief. The exact % multiplier will be determined by how many seniors qualify for the exemption, and the total amount of senior tax relief (discussed below) desired by the Board. Please see the following Table for some examples of possible local property tax relief seen by applicants: Schedule Circuit 50% Local Tax 125% Tax Relief 200% Local Tax Breaker Benefit Relief Relief $1070 Maximum $535 $1,337 $2140 $856 (Average) $428 $1,070 $1,712 SPECIAL TOWN MEETING Reading Memorial High School September 12, 2016 Preforming Arts Center The only data we have from the state from 2014 is that the average Circuit Breaker income tax benefit in Reading was $856, and that 645 local residents qualified. Thus the income tax relief was 645 x $856 = $552,120. We know some of those that qualified under Circuit Breaker rent property and others have not owned property for ten years. Both factors shrink the pool that is eligible for local property tax relief. We don't know how many seniors did not file Schedule Circuit Breaker that might otherwise do so in order to obtain a property tax benefit, however. It is this real lack of data that led the Board to request a wide 50% to 200% variance in terms of setting the local tax relief. If only that 2014 income tax pool were fully eligible, the total local tax relief would be between $276k (at 50%) and $1.1 million (at 200%). In a discussion, the Board indicated a strong desire to set the % figure to keep the total amount under $1 million, and that a reasonable annual goal would be the 125% midpoint, or $0.7 million of tax relief. According to state tax policy, by default only the rest of the residential taxpayers would bear the full cost of this tax relief. However at a recent meeting the Board of Selectmen indicated a unanimous desire to share this tax relief across all classes of property by splitting the tax rate. Here are some examples of what this proposed senior tax relief will cost various taxpayers under that scenario: Single Family Homes % Parcels 500/o Relief - $276k Tax Benefit 125% Relief - $700k Tax Benefit Max Relief - $1.Omil Tax Benefit $700k 13.5% $19 $48 $69 $600k 14.0% $25 $64 $192 $500k 31.4% 32 81 $115 $400k 30.9% $38 $97 $138 300k 10.3% $44 $113 $161 Commercial % Parcels 50% Relief - $276k Tax Benefit 125% Relief - $700k Tax Benefit Max Relief - $1.Omil Tax Benefit <$500k 40.8% $25 $63 $90 $500k-$1mil 29.6% $58 $146 $209 $1-2mil 17.0% $110 $279 $398 $2-3mil 3.9% $183 $464 $663 $3-10mil 5.8% $353 $895 $1,278 $10mil+ 2.9% $1,530 $3,882 $5,545 Here are the qualifications for state income tax relief Schedule Circuit Breaker for 2014: (1) You, or your spouse if married filing jointly, must be at least 65 years of age before January 1, 2015 to qualify for this credit. Also, you must file as single, married filing jointly or head of household to qualify for this credit. If married filing separately, you do not qualify for this credit; (2) The assessed value of principal residence as of January 1, 2014 must be $691,000 or less; (3) Qualifying Income (includes MA Adjusted Gross Income (AGI) + social security benefits + untaxed pensions + miscellaneous income - certain income tax exemptions) is capped at $56,000 (single); $70,000 (head of household); or $84,000 (married filing jointly); and (4) Real estate taxes paid in calendar year 2014 for your principal residence (plus some adjustments, including 50% of water & sewer charges) must exceed 10% of the Qualified Income above. SPECIAL TOWN MEETING Reading Memorial High School September 12, 2016 Preforming Arts Center When reviewing this proposed senior tax relief, Town Meeting members are asked to consider these factors: - The state has extensive data that we do not have, and they have set tax policy for a wide variety of policy issues using this criteria posted above; - Please examine Qualifying Income (above) to see that MA AGI alone is not the basis for income in this calculation; - Any changes to this approach will require additional town staffing, and open up possible perceptions of subjectivity at the local level; - Senior residents must apply annually in order to receive this benefit - they are not required to apply if they do not wish to be considered; - As with all local tax exemption requests, all residents that apply for and either receive or are denied tax relief are a matter of public record, and such lists are published in the town's Annual Report. Finance Committee Report - given by Paul McNeice: At its August 31, 2016 meeting it was voted 7-0-0 in support of the subject matter of this Article. Board of Assessors Report - given by Steve Crook: At its August 30, 2016 meeting it was voted 2-0-0 to recommend this Article. Board of Selectmen Report - given by Dan Ensminger: The Board voted 4-0 in favor of this proposed Article at their meeting on August 16, 2016. Chairman John Halsey was absent and did not vote, although he expressed his support in a letter to fellow Board members that was read into the record of the meeting. Bylaw Committee Report: No Report Presentation given by: • Robert LeLacheur - See Attached • Victor Santaniello Motion made Ronald D'Addario, Precinct 6 to amend as follows: (d) The applicant or at least 1 of the joint applicants has been domiciled and owned a home in the town of Reading for at least -1-9 5 consecutive years before filing an application for the exemption; Motion Does Not Carry Motion made Jack Russell, Precinct 3 to amend as follows: (d) The applicant or at least 1 of the joint applicants has been domiciled and owned a home in the town of Reading for at least 4-9 15 consecutive years before filing an application for the exemption; Motion Does Not Carry SPECIAL TOWN MEETING Reading Memorial High School September 12, 2016 Preforming Arts Center Motion to move the question made by David Tuttle, Precinct 3 2/3 Vote Required 123 Voted in the affirmative 26 Voted in the negative 163 Town Meeting Members in Attendance Motion Carried After some discussion including non -Town Meeting Members a counted vote was taken: Counted Vote 120 Voted in the affirmative 29 Voted in the negative 163 Town Meeting Members in Attendance Motion Carried as Presented Alan Foulds, Moderator offered and explanation of next steps: Before proceeding the chair offers an explanation of what will be happening with the substance of Article 8. As you all know, the purpose of the town meeting is to enact legislation and to approve the budget. Upon reading article 8 I saw a problem. There was no call to action — no proposed motion. And there really could not be one. The decision on a proposed 2 1/2 override sits squarely with the citizenry as a whole, and not its legislative body. After a meeting with the Chairman of the Board of Selectmen and the Town Manager, I came to understand their desire for transparency for Town Meeting on the updated financial condition of the town, and the Override Election in October 2016. Next spring, Town Meeting will be voting on a budget that will be greatly shaped by the outcome of this Override vote. At the same time I explained my reservations from a purely technical standpoint on bringing this Article to the floor of Town Meeting, and the precedent it might set. This proposed Article 8 is more of a Report to Town Meeting such as is typically made earlier in the meeting, yet at the same time it creates an obvious opportunity for a two-way dialogue. Our Reports at Town Meeting do not allow for such two-way discussion on the floor. My decision, which has the full support of the Chairman of the Selectmen and the Town Manager, is to call for an adjournment of this body without a formal discussion of Article 8. As a legislative body, Town Meeting has no formal role in the Override, though it may have a great interest in the outcome. I will call for a motion to indefinitely postpone the substance of Article 8. Next, we'll deal with any instructional motions under Article 2 then I'll call for a motion to adjourn Town Meeting Sine Die. After adjournment I will turn the meeting over to the John Halsey, Chairman of the Board of Selectmen. The Selectmen's meeting will continue in session, and substance of Article 8 will be discussed as it was designed. I encourage those Town Meeting members who have an interest in the topic to remain - as I will SPECIAL TOWN MEETING Reading Memorial High School Preforming Arts Center September 12, 2016 - in order to facilitate the discussion. This approach will satisfy my technical concerns about Town Meeting and the Selectmen's desire for transparency. Bill Brown, Precinct 8 moved to adjourn the 2016 Special Town Meeting sine die. Motion Does Not Carry ARTICLE 8: Motion made by John Halsey, Board of Selectmen to Indefinitely Postpone Motion to Indefinitely Postpone Carried The information below was provided in the Warrant Report for Article 8: Background: Proposition 2'/2, passed as an Initiative Petition in 1980 and enacted in 1982, caps increases to property taxes in the Commonwealth by 2.5% annually. Proponents would cite the significant decline in property taxes paid as a percent of income over a twenty year period as evidence of its success. Opponents would suggest that a cap does not hold down certain costs outside of a town's control. Both statements are accurate. As Town Meeting members know, we have explicitly cautioned that balancing the budget with increasing amounts of Free Cash was not a good or sustainable practice. As was mentioned last winter, the town is at a crossroads, and must now decide how to balance the financial resources available with the demand for services. Community Listening Meetings In a series of meetings held after the Annual Town Meeting and before the start of summer, the Town invited residents and business owners to hear a brief overview of these crossroads, and to tell us their views. The meetings were heavily attended, and many 'new faces' were in the audience. Participants learned some of the following basic financial facts: (1) Revenues have grown at +3.1% since the last Override: +3.6% Taxes (includes New Growth); +2.7% State Aid (slower lately); +0.1% Local Receipts; and +1.3% Other; (2) Since the last Override, the +3.1% Spending has been divided up as follows: Schools +3.2%; Town +3.1%; Capital and Debt -0.9%; and Shared Costs +5.2%; (3) In FY17 the town had a $2.0 million structural budget deficit requiring the use of Free Cash in order to balance. In FY18 that structural deficit looks to have increased to $3.0 million, and each year thereafter it is forecast to grow by another +$0.7 million; (4) Town and School Operating Budgets, growing at a target rate of +3.5% annually, should be able to maintain and occasionally enhance service levels to the community within future Revenue forecasts, once this structural deficit is repaired; (5) Accommodated Costs are expected to be the source of the +$0.7 million increase to the structural deficit. Since the last Override, staff has worked diligently to wring out inefficiency and add creativity in this area, but there are few ideas on the horizon. SPECIAL TOWN MEETING Reading Memorial High School Preforming Arts Center September 12, 2016 Participants also learned how Reading is either similar to or different from our 25 so-called Peer Communities. On the revenue side, there is a big difference in that Reading is much more residential than an average Peer Community, deriving about $12 million less in tax revenues annually from the Commercial, Industrial and Personal Property (CIP) sectors. As a result, Reading relies more on the other non -tax categories of revenue, which are less predictable and have historically had lower rates of growth, as shown above. Here is a quick summary of the Revenue comparison: Revenues from: Reading Peers Tax Levy 60.5% 66.6% Residential $53.8 mil $54.8 mil CIP $5.0 mil $17.3 mil State Aid 13.7% 11.0% Local Receipts 21.6% 17.5% Other 4.2% 4.9% On the spending side, Reading looks a lot like our Peer Communities. Because of the high residential tax base, Reading has a larger student population. Using 2014-15 MA Department of Education data, Reading has 17.4% of the population of the town in the public school system, compared to 15.8% among Peers (the range is from 22.1% in Westford to 10.7% in Stoneham). Thus while the town spends slightly more than average of the budget allocation on Schools, we also spend a low per -pupil amount. Because of our proximity to the highways, and presence of a lot of commuter 'cut -through' traffic, the town also spends a bit more in Public Works and Public Safety. Because we offer Advanced Life Support, about $800,000 in ambulances fees flow to the general fund each year to be used by the Town and School budgets. This revenue more than offsets the above average spending in Public Safety. The town spends less on Town Hall staffing, and on fixed and other costs. Here is a chart showing the Spending comparison: of Budget Spending Reading Peers Difference Education 39.3% 39.1% +0.2% Fixed Costs and Debt 17.7% 17.8% -0.1% Public Safety 9.2% 8.7% +0.5% Public Works 5.1% 4.9% +0.2% General Government 3.6% 4.3% -0.7% Culture - Recreation - Human Services 2.7% 2.4% +0.3% Other incl Ent Funds 22.4% 22.8% -0.4% A final piece of information presented at the Community Listening Meetings was that the Single Family Home annual property tax burden in Reading is below that of our Peers, when looked at either on an average ($500 below) or regressed against median family income ($700 below). The following chart uses MA Department of Revenue 2015 tax data and Boston Globe 2010-2014 median household income data: SPECIAL TOWN MEETING Reading Memorial High School Preforming Arts Center September 12, 2016 Peer Residential Tax Burden 1.100 •.100 W.000 10.000 100.000 NkbdianFa *VhwxxW While opinions at the Community Listening Meetings certainly varied, there was a strong sense from participants that town and school services needed to be maintained, restored or enhanced, and an understanding that both the town and schools were being good stewards of taxpayer funds. During the past two months, elected Boards and their staff have worked on this issue, reflecting what was heard from the community at these meetings. Following is a deeper analysis of the problem, and a proposed solution. Overview The first question to answer was if the Town and Schools were satisfied with the current budget model that has been in place for about ten years. A set of Accommodated Costs are subtracted from Revenues, and the remainder are divided up in a pro -rata share between the Town and Schools. Due to the shift of the Facilities department last year, that ratio is now approximately 64% Schools and 36% Town. After a discussion between senior management and elected officials, both sides agreed that the budget model has worked well, and has enough built-in flexibility to handle unforeseen circumstances. The first assumption that was discussed by the Superintendent, the Town Accountant and the Town Manager was what figure to use as the right target for an annual operating budget increase for the Town and Schools? We know since the last Override that figure has been about 3.2%, but we also know in recent years that increases of 3.6% have required staffing reductions. We settled on 3.5% as a reasonable long-term target. Prudent annual financial management should allow the Town and Schools to add new services as needed within that framework, and minimize budget reductions. Note that an assumption of how long an Override would need to last is a decision made later in this process. The next set of assumptions involved our expected Revenues and Accommodated Costs. All estimates were done line -by-line by the Town Accountant (Revenues) and Town Manager (Costs) in a bottom-up fashion, though only the summary results are described below. Revenues: Property taxes ($61 million) are straightforward at +2.5% annually plus New Growth. The latter is conservatively estimated at $500,000/year from FY18 through FY21, below the recent $830,000 three- 11.10} +t goo ♦ sin& r.-- *IV 11a Ta=me" U00 ♦ y 7.100 _. 6.100 _.. ♦ ♦. • 1.100 •.100 W.000 10.000 100.000 NkbdianFa *VhwxxW While opinions at the Community Listening Meetings certainly varied, there was a strong sense from participants that town and school services needed to be maintained, restored or enhanced, and an understanding that both the town and schools were being good stewards of taxpayer funds. During the past two months, elected Boards and their staff have worked on this issue, reflecting what was heard from the community at these meetings. Following is a deeper analysis of the problem, and a proposed solution. Overview The first question to answer was if the Town and Schools were satisfied with the current budget model that has been in place for about ten years. A set of Accommodated Costs are subtracted from Revenues, and the remainder are divided up in a pro -rata share between the Town and Schools. Due to the shift of the Facilities department last year, that ratio is now approximately 64% Schools and 36% Town. After a discussion between senior management and elected officials, both sides agreed that the budget model has worked well, and has enough built-in flexibility to handle unforeseen circumstances. The first assumption that was discussed by the Superintendent, the Town Accountant and the Town Manager was what figure to use as the right target for an annual operating budget increase for the Town and Schools? We know since the last Override that figure has been about 3.2%, but we also know in recent years that increases of 3.6% have required staffing reductions. We settled on 3.5% as a reasonable long-term target. Prudent annual financial management should allow the Town and Schools to add new services as needed within that framework, and minimize budget reductions. Note that an assumption of how long an Override would need to last is a decision made later in this process. The next set of assumptions involved our expected Revenues and Accommodated Costs. All estimates were done line -by-line by the Town Accountant (Revenues) and Town Manager (Costs) in a bottom-up fashion, though only the summary results are described below. Revenues: Property taxes ($61 million) are straightforward at +2.5% annually plus New Growth. The latter is conservatively estimated at $500,000/year from FY18 through FY21, below the recent $830,000 three- SPECIAL TOWN MEETING Reading Memorial High School Preforming Arts Center September 12, 2016 year average. This figure is then increased to $1,000,000/year gradually by FY24 given staff ground work being done in the commercial development sector. Local Revenues ($6.6 million) were estimated at about +2.5% annually. State Aid ($14 million) was estimated to grow at 2.5% annually. FINCOM has previously supplemented any shortfall with Free Cash. This practice is still plausible because future budgets will plan to use no or low amounts of Free Cash to balance. Operating Transfers and Available funds are projected to increase at less than 2% annually, driven by the RMLD dividend calculation that is CPI -based. All measures of inflation are significantly lower than when that arrangement was decided many years ago. In general, aside from Free Cash usage, Revenues are proiected to increase by between 3.2% and 3.5% using this approach for the foreseeable future. Accommodated Costs: Health Insurance as a driver of Benefits was the first hurdle. National models of about +8% declining over time to +5% annually are typically used in the actuarial community. The predicted reduction from 8% to 5% is generally stated as 'because the nation cannot afford to continue these increases and needs to figure out something'. While we have historically managed the Reading rate of growth in this area reasonably well below national averages, we believed it was important to use +7.5% annually throughout in this model. If someone figures out something - so much the better! Combined with other benefit costs this area is forecast to climb at about 6.4% annually. Note that the Town Accountant and Town Manager strongly believe that future costs should include a stepped-up pension contribution of about $350,000/year in order to fully fund this obligation faster, allowing for an earlier shift of funding towards OPER. That pension increase is within that +6.4% annual forecast above. For now, continuing the FINCOM Policy of 5% towards capital and debt is continued by this model - more on this topic later. Energy costs were forecast at +5% annually, in line with national forecasts. Out of District Special Education costs are also forecast at +5% annually, in line with recent trends. Other accommodated costs were forecast at just below +3% annually. In general, Accommodated Costs are forecast to increase at about 5.4% annually, after a first year increase closer to 7% to allow for that stepped up increase in Pension contributions. Funding Gap As shown below, the squeeze will be on the Operating Budgets for the foreseeable future as Revenue growth (3.2% to 3.5%) is not expected to keep pace with Accommodated Costs (5.4%). That Funding Gap translates to an annual $660,000 budget shortfall - and the effect is cumulative. Table 1 Accommodated Costs Gap Annual Gap Annual Gap FY18 $ 660,000 FY22 $ 3,300,000 FY19 $ 1,320,000 FY23 $ 3,960,000 FY20 $ 1,980,000 FY24 $ 4,620,000 FY21 $ 2,640,000 FY25 $ 5,280,000 By contrast, the Funding Gap is much smaller on the $57 million Operating Budgets growing at +3.5% annually. These differences should easily be made up by conservative revenue assumptions, such as New Growth, and may be ignored: SPECIAL TOWN MEETING Reading Memorial High School Preforming Arts Center Table 2 Operating Budgets Gap Annual Gap Annual Gap FY18 $ 85,000 FY22 $ 425,000 FY19 $ 170,000 FY23 $ 510,000 FY20 $ 255,000 FY24 $ 595,000 FY21 $ 340,000 FY25 $ 680,000 September 12, 2016 These Funding Gaps cause a fundamental structural deficit in the budget, which in recent years has caused an increasing amount of Free Cash to be used in order to balance and not significantly reduce services. Every year that structural deficit is expected to grow - although the town has worked hard on many of the Accommodated Costs during the past several years to keep the Gap smaller. For FY18, given the assumptions above, a structural deficit of $3 million exists ($1.925 million Schools and $1.075 million Town), in order to fund +3.5% Operating budgets. Baseline Override At this point we can begin to discuss the 'for how long?' part of an Override. Each year will add to the $3 million baseline figure because of that Funding Gap. Models looked at the period until FY25 and FY30 as two possible objectives. The shorter 8 -year period coincides with when most of the RMHS and Library excluded debt is fully repaid, theoretically opening up some space in the taxpayer's pockets to consider another Override. The longer 13 -year period is where we are now, compared to the last Override. Anything shorter or longer seemed unrealistic. Here are the somewhat astonishing results, hinted at by Table 1 above: Table 3. Projected Structural Deficit ($ millions) Now FY25 FY30 Stucural Deficit $ 3.0 $ 6.0 $ 13.0 It is this type of analysis that causes actuaries to shrug and say that 'somebody will need to do something'! We revisited the model several times, loosening up a bit on the conservatism. Finally enough was enough, and we chose to focus on the shorter 8 -year period and stand behind all financial assumptions, understanding that they still lean a bit to the conservative side. Therefore a $6 million Override is needed to sustain +3.50/o Operating budgets through FY25. The financial model therefore tells us to request $6 million in the first year and use $3 million to fill the current gap, and to save $3 million for the future. That situation seems unrealistic and almost unbelievable to any rational person not deep into the town's budget situation. So the next step was to find a set of costs that could act to mitigate that funding gap - something that could be budgeted lower each year. The best solution was to change the FINCOM policy on spending 5% annually on capital plus debt. Instead, spend more than 5% in early years, and less than 5% in the later years. Given that the capital plan is showing a strong surplus of funding available after the next five or so years, this seems a plausible approach. This requires that bigger building projects are considered outside the tax levy, as per current FINCOM policy. Also consider the fact that the Town usually has one-time funds available at November Town Meeting to supplement budgeted annual capital spending. RMHS construction litigation We do not know either the final amount or even the final timing of when we will know the final amount. However we must plan to take care of this issue within our normal budget process and model shown above, which means we need some creativity and we need to build in some flexibility. The Town Accountant and the Town Manager agree that some amount of Free Cash should be used as part of any settlement, and the rest needs to be paid by the overall annual budget over as short a period of time as is possible in to minimize borrowing costs. This approach suggested above to increase capital spending in early years may fit well with this potential legal liability. SPECIAL TOWN MEETING Reading Memorial High School September 12, 2016 Preforming Arts Center Thus a baseline $6 million Override could look this way in FY18: $3.0 million structural deficit $2.0 million additional capital $0.7 million to the general stabilization fund (to help fund future budgets) $0.3 million in additional Pension funding Each year thereafter will see an increase in the portion of additional funds devoted to the structural deficit, and reductions to both the additional capital and contributions to a stabilization fund. Property Taxes Today, the $499,500 average Single Family Home (SFH) pays a tax bill of $499,500 x $14.51/$1.000 or $7,247.75 - let's call it $7,250. Here are the components of that tax bill: Tax Bill Tax Lev RMHS Library $7,250 $6,905 $161 $184 The RMHS amount remains about $160 until being fully repaid in FY24; the Library amount declines to about $160 and is fully repaid in FY25. Any Override would be added only to the Tax Levy portion. Therefore over the next ten years, the table below shows the average Single Family Home Tax Bill and annual change assuming no Override, no more Excluded debt or capital, no Senior Tax Relief, the full tax levy is assessed, current tax property classification ratios (92% residential; 8% CIP) are maintained, and the town has a Uniform tax rate. Note the impact in FY25 and FY26 when the RMHS and Library are fully repaid. Over this ten-year period, the SFH tax bill will have increased at an average rate of +2.0% annually. Tax Impact of Baseline Structural Override Over the next ten years, the table below shows that for the same average SFH as described above, a $6 million Override would pay the equivalent of +2.9% annually: FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 SFH $7,418 $7,590 $7,767 $7,947 $8,132 $8,321 $8,516 $8,563 $8,625 $8,840 Rat e +2.31 % +2.33 % +2.33 % +2.32 % +2.32 % +2.32 % +2.35 % +0.55 % +0.72 % +2.50 % Note the impact in FY25 and FY26 when the RMHS and Library are fully repaid. Over this ten-year period, the SFH tax bill will have increased at an average rate of +2.0% annually. Tax Impact of Baseline Structural Override Over the next ten years, the table below shows that for the same average SFH as described above, a $6 million Override would pay the equivalent of +2.9% annually: Override - Additions above a Baseline Structural Amount As has been mentioned, both the Town and Schools have had to pare back budgets, consolidate positions, regionalize with other communities and find creative solutions to keep service levels as high as possible. Each side would agree that the reductions have not allowed for "level service" budgets in a couple of years. One comment we heard clearly from the Community Listening Meetings was the desire to restore some of these budget reductions if we were to request an Override from the community. Over the summer, the School department discussed this issue at length, creating a list of these six challenges: 1. Retaining and Attracting Staff 2. Developing well-balanced and prepared students for college, career, and life 3. Supporting teachers and administrators as we transition to more rigorous standards and curriculum 4. Continuing to improve our special education services and in district programs FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 Rat e +11.67 +2.33 % % +2.33 % +2.32 +2.32 +2.32 +2.35 +0.72 +0.88 +2.50 Override - Additions above a Baseline Structural Amount As has been mentioned, both the Town and Schools have had to pare back budgets, consolidate positions, regionalize with other communities and find creative solutions to keep service levels as high as possible. Each side would agree that the reductions have not allowed for "level service" budgets in a couple of years. One comment we heard clearly from the Community Listening Meetings was the desire to restore some of these budget reductions if we were to request an Override from the community. Over the summer, the School department discussed this issue at length, creating a list of these six challenges: 1. Retaining and Attracting Staff 2. Developing well-balanced and prepared students for college, career, and life 3. Supporting teachers and administrators as we transition to more rigorous standards and curriculum 4. Continuing to improve our special education services and in district programs SPECIAL TOWN MEETING Reading Memorial High School September 12, 2016 Preforming Arts Center 5. Identifying long term space needs to address program changes 6. Remaining comparable and competitive with other towns and school districts In response to five (1-4 and 6) of these challenges, they created two lists that constituted a request for funding. The first was to solve the structural deficit, estimated at 2/3 of $3 million. The second list was an additional $1.925 million that was a mix of add -backs and additions. Following is that entire list, not in priority order: Resources N and Structural Deficit Structural Deficit (FY18) 1. Salary Adjustments 2. Full Day of School on Wednesday at Elementary Level 3. Middle School Health Education 4. High School Program Improvement 5. Additional Supports for Struggling Students (Tutors, BCBA) 6. Maintain School Transformation Grant Funded Positions (Data Analyst/Coach, Administrator for Social Emotional Learning) 7. Curriculum Supervision Leadership S. Special Education Leadership 9. Additional Clerical Support TOTAL - $2,000,000 $360,000 $455,000 $140,000 $220,000 $150,000 $160,000 $285,000 $95,000 $60,000 $3,925,000 The Town conducted a similar exercise and created the following list of restored or additional services for the Board of Selectmen to consider, also not in priority order: Structural Deficit (FY18) 1. Salary Adjustments & Professional Development 2. Public Safety (6.0+ FTE) 3. Library staffing & hours (1.0+ FTE) 4. Support for Volunteer Boards 5. Technology $225,000 $490,000 $100,000 $75,000 $70,000 SPECIAL TOWN MEETING Reading Memorial High School Preforming Arts Center 6. Additional Town Hall Clerical Support (1.5 FTE) 7. Public works (1.0 FTE) S. Facilities TOTAL September 12, 2016 $65,000 $40,000 $15,000 —$2,080,000 In recent years, both the Town and Schools have faced increasing difficulty in attracting and retaining staff. On the Town side, staff is expected to perform at top quartile levels, but average compensation is below Peer averages. Once upon a time, more Town and School employees were perhaps more involved in the community because they were also residents. The following table describes the ability of employees to continue to live in the community: Using the 1990 census as a baseline, in 2010 Reading home values had grown by a factor of 119%; average family income by 88%; and town and school wages by 56%. Thus the challenge as a more mobile generation enters our workforce. Override — How Much? The Board of Selectmen has the sole authority under state law to call for an Override; to determine the language and number of ballot questions; and to determine the funding amount(s) requested. In their discussions they focused on the impact to the taxpayers as well as what funding levels would support various services. For example, the following table shows the impact in FY18 on Single Family Homes at the various assessed value segments. The figures shown are increases in taxes over and above the normal +2.5% cap. Residential 1990 2010 Annual Reading average home values 1.00 2.19 4.0% Reading average family income 1.00 1.88 3.2% Town and School wages 1.00 1.56 2.2% Using the 1990 census as a baseline, in 2010 Reading home values had grown by a factor of 119%; average family income by 88%; and town and school wages by 56%. Thus the challenge as a more mobile generation enters our workforce. Override — How Much? The Board of Selectmen has the sole authority under state law to call for an Override; to determine the language and number of ballot questions; and to determine the funding amount(s) requested. In their discussions they focused on the impact to the taxpayers as well as what funding levels would support various services. For example, the following table shows the impact in FY18 on Single Family Homes at the various assessed value segments. The figures shown are increases in taxes over and above the normal +2.5% cap. Residential $6 mil $7 mil $7.5 mil $8 mil $8.5 mil $9 mil $ $ 300,000 400,000 10% 31% $ $ 398 531 $ $ 464 619 $ $ 497 663 $ $ 530 707 $ $ 563 751 $ $ 596 795 $ 500,000 31% $ 664 $ 774 $ 829 $ 884 $ 939 $ 994 $ $ 600,000 700,000 14% 14% $ $ 797 930 $ $ 929 1,084 $ $ 995 1,161 $ $ 1,061 1,238 $ $ 1,127 1,315 $ $ 1,193 1,392 Over the next ten years, that same average SFH would pay the equivalent of +2.9% annually for a $6.0 million Baseline Structural Override, and +3.4% annually for a $9.0 million Override. The latter takes into consideration the full funding requested by the Schools. For the Commercial property class, here is that same marginal impact in FY18 at the various assessed value segments: SPECIAL TOWN MEETING Reading Memorial High School Preforming Arts Center Commerical Structural Deficit (.7% Budget $6 mil $7 mil $7.5 mil $8 mil $8.5 mil $9 mil $100k -$500k 41% $ 413 $ 481 $ 516 $ 550 $ 584 $ 618 $500k-$1mi1 31% $ 955 $ 1,113 $ 1,192 $ 1,271 $ 1,350 $ 1,429 $1mil - $2mil 17% $ 1,823 $ 2,125 $ 2,276 $ 2,427 $ 2,578 $ 2,730 $2mil - $3mil 4% $ 3,037 $ 3,540 $ 3,792 $ 4,043 $ 4,295 $ 4,547 $3mil - $10mil 6% $ 5,852 $ 6,822 $ 7,307 $ 7,792 $ 8,276 $ 8,761 $10mil + 3% $ 25,391 $ 29,598 $ 31,701 $ 33,804 $ 35,907 $ 38,011 September 12, 2016 At their meeting on August 16th, with representatives from the School Committee and Board of Library Trustees, as well as many other interested parties, present, the Selectmen discussed the Override and decided that one question written generically 'for the operation of the schools and town' was appropriate to simplify to the voter the basic request for more funding. After extensive discussion, the Board voted 4-0 to request $7.5 million in additional funding through an Override of Proposition 21/2. Chair John Halsey was absent from the vote but had a statement of his support for a $7.5 million Override read into the record, after the public discussion and just before the final vote. This amount is meant to cover the $6.0 million structural deficit and add/restore $1.5 million of other items from the lists above. Using the current budget model, the Schools receive $960,000 and the Town receives $540,000 of this additional funding. The School Committee will prioritize their requests at an upcoming meeting and discuss their list with Town Meeting members. Prior to the Override vote by the Board of Selectmen, all parties involved agreed that it was appropriate for the Selectmen not to know such information before they selected an Override amount, as the School Committee has full spending authority over their budget. The Selectmen were also viewing the situation from a taxpayer affordability standpoint as opposed to a budget funding need standpoint. The Town, however, had prioritized their list of additions. The table below shows the Town priorities to be funded: Structural Deficit (.7% Budget N $1,000,000 N $1,000,000 Increase in FY18) 1. Salary Adjustments & Professional $225,000 $200,000 Development 2. Public Safety - School Resource $490,000 $160,000 (Police) Officer & Firefighter/Paramedic 3. Library staffing $100,000 $60,000 4. Support for Volunteer Boards $ 75,000 $25,000 5. Technology (licenses and hardware in $ 70,000 $70,000 year 1) 6. Additional Town Hall Clerical Support $ 65,000 $25,000 (0.5 FTE for Finance department) Reading Memorial High School Preforming Arts Center 7. Public works S. Facilities TOTAL SPECIAL TOWN MEETING $ 40,000 $ 15,000 $2,080,000 September 12, 2016 $1,540,000 What Happens if an Override Does Not Pass? Over one year ago the Town Manager and Superintendent met to discuss employee morale, and the challenging hiring process as has been discussed. The conversation evolved to the timing of a future Override election. The usual April choice would mean that two budgets would need to be created and then presented in public during the preceding winter, which would damage employee morale. A September/October election was a preferable choice, even considering the extra costs involved. During the winter of 2016, an FY17 Town budget that eliminated several positions was presented in public. All but one of those positions could be handled through planned attrition; that one position might be handled the same way depending on an upcoming retirement and promotion. The one employee involved decided not to wait for the promotional process and was hired by another community quickly. Employee morale is difficult to place a financial value on, but it is quite real, as is the high organizational cost of turnover. Given this background, both the Town and Schools are reluctant to lay out exact ramifications of a failed Override vote at this time. In so doing, we are keenly aware that the public has less transparency than they might desire, and hope that the public understands our thought process. Each side has publicly stated that positions and services will be eliminated in FY18 without an Override. The Schools have a higher proportion of their budget spent on labor costs, and have indicated that up to 30 positions could be in jeopardy. The Town with less labor costs relative to expenses could need to eliminate up to 8 positions. The Town has also built in some one-time budget costs, such as technology purchases, and has an option to eliminate some of these in order to minimize any FY18 staffing reduction. Over the past year or more, the Town has stated that in order to balance a budget without an Override, services will need to be eliminated or curtailed. Past budget cuts have focused on Town Hall, but future ones will need to be expanded to include Public Safety and the Public Library, which have been exempt from recent staffing reductions. At a minimum, one Police Officer and one Firefighter will be eliminated in each subsequent year without an Override, and frankly the cuts may need to go deeper. It is impossible to avoid this conclusion, given that Public Safety constitutes over 60% of the Town's wage budget. The Library Trustees have discussed lowering FY18 costs through attrition and expense reductions and then FY19 costs through a reduction in Hours of Service. Public Works, once staffed at 120 employees and now staffed with about 45 employees, may need to cut back on some services and staffing provided to the community. As is mentioned in every annual budget message, we will all strive to meet the expectations of the community with whatever level of resources that are made available. Regardless of the path ahead, Reading remains a very special place in which to work - and to live. Point of Order by Richard Coco, Precinct 4 of a concern that Town Meeting members are not being asked to vote on taking the Proposition 21/2 Override to the Voters, It was noted that is it the Board of Selectmen that makes that decision. SPECIAL TOWN MEETING Reading Memorial High School Preforming Arts Center September 12, 2016 ARTICLE 2: To choose all other necessary Town Officers and Boards or Committees and determine what instructions shall be given Town Officers and Boards or Committees, and to see what sum the Town will vote to appropriate by borrowing or transfer from available funds, or otherwise, for the purpose of funding Town Officers and Boards or Committees to carry out the instructions given to them. Instructional Motion Presented by Barry Berman, Precinct 4 and member of Board of Selectmen: In the event the Home Rule Petition outlined in Article 7 in enacted by the Legislature, Town Meeting advises the Board of Selectman at its earliest tax rate setting meeting after enactment, to implement a Classification factor such that the cost of senior tax relief is borne 75% by the residential class and 25% by the CIP class. After some discussion a counted vote was taken: Counted Vote 86 Voted in the affirmative 53 Voted in the negative 163 Town Meeting Members in Attendance Motion Carried Instructional Motion Presented by Ron D'Addario, Precinct 6: To ask Town Finance to begin researching tax policy that could assist Reading residents of all ages for whom property taxes might become an overwhelming burden. Motion Did Not Carry On motion by John Halsey, Board of Selectmen, it was voted that this Special Town Meeting stand adjourned sine die. Meeting adjourned sine die at 9:56 PM with 163 Town Meeting Members in attendance. Motion Carried Board of Selectmen: At 7:15 PM the Chair John Halsey called a Board of Selectmen meeting to order, the board then conducted business and went into recess to join the Special Town Meeting at 7:25 PM. At 9:56 PM Chair John Halsey called the Board of Selectmen back into session to present information to Town Meeting Members of the Proposition 21/2 Override called by the Board of Selectmen. After giving a few remarks John Halsey asked Alan Foulds the Town Moderator to moderate the meeting. A Presentation was given by Robert LeLacheur and John Doherty. There was some discussion among Town Meeting Members with comments from the following: Paul Sylvester, Precinct 3 Thomas O'Rourke, Precinct 2 Mark Dockser, Finance Committee SPECIAL TOWN MEETING Reading Memorial High School Preforming Arts Center Erin K Calvo-Bacci, Precinct 5 Gary Phillips, Precinct 7 Kendra JG Cooper, Precinct 8 September 12, 2016 After closing comments by John Halsey a motion was made by John Arena to adjourn Board of Selectmen at 11:20 PM Motion to Adiourn Carried SPECIAL TOWN MEETING Reading Memorial High School Preforming Arts Center Erin K Calvo-Bacci, Precinct 5 Gary Phillips, Precinct 7 Kendra JG Cooper, Precinct 8 September 12, 2016 After closing comments by John Halsey a motion was made by John Arena to adjourn Board of Selectmen at 11:20 PM Motion to Adiourn Carried A true copy Att st: A44z'xv� Laura A Gemme Town Clerk Special Town Meeting September 12, 2016 1. Retaining and Attracting Staff 2. Developing well balanced and prepared students for college, career, and life 3. Supporting teachers and administrators as we transition to more rigorous standards and curriculum 4. Continuing to improve our special education services and indistrict programs 5. Identifying long term space needs to address program changes 6. Remaining comparable and competitive with area schools 4/13/2017 1 4/13/2017 Special Town Meeting September 12, 2016 Needed Addresses Structural Deficit (TMuTIncrease in F1 18) Toget address gap between available revenue and level $2,000,000 service budget Salary Adjustments Staff salary $360,000 1,6 Curriculum Supervision Leadership 2.0 FTE PreK-8 Curriculum Coordinators $195,000 3,4,6 Additional Supports for Struggling Students 4.0 FTE Academic Tutors $107,000 2,6 (Tutors, BCBA) .5 FTE Board Certified Behavior Analyst or Equivalent Special Education Leadership .5 FTE Assistant Director for Student Services $48,000 1,4 Middle School Health Education 2.5 FTE Health/PE Teachers at Parker and Coolidge $140,000 2,6 High School Program Improvement 2.0 FTE Teachers for AP and Electives $110,000 2,6 School Transformation Grant Funded Positions 1.0 FTE Data Analyst 0 2,3,4 (Funded through FY19) 1.0 FTE Administrator for Social and Emotional Learning Total $2,960,000 Challenges 1. Retaining and Attracting Staff 4. Continuing to improve our special education services and in 2. Developing well balanced and prepared students for college and career district programs 3. Supporting teachers and administrators as we transition to more rigorous 5. Identifying long term space needs to address program changes standards and curriculum 6. Remaining competitive with area schools Special Town Meeting September 12, 2016 For example: FY18 School department budget (estimated) • Wages $35.78 million • Expenses $ 7.15 million CUTS: $ 1,950,083 Expenses by Cost Center (in millions) • $0.21 Administration (legal, audit, employee physicals, licensing) • $1.25 Regular Day (text and materials, supplies, pd, classroom technology) • $4.81 Special Education (transportation, Out of District Tuitions, adaptive text and materials) • $0.38 School Facilities (Contracted cleaning services and supplies) • $0.50 Districtwide Programs (Health, extra curricular, athletics, technology infrastructure) • 41h Year in a Row of Making Reductions to Level Service Budget • Approximately $2,000,000 in reductions • Majority of Reductions (85%) will be personnel • Non -Personnel expenses would be one time cut for FY18 and would need to be restored the following year. • Potential list is in general terms of the types of cuts that would be necessary to reach $2,000,000 in reductions to the FY18 budget • 30-35 FTE in Personnel (5% of the total staff in the district) • Any reductions of this magnitude will have an impact on student outcomes and on students 4/13/2017 3 4/13/2017 Scope of Reductions if Override is not Approved ReductionLevel .. 4 5 FTE Classroom Teacher Reductions at this level for second year in a row • • Classroom • Increase in class sizes at some grade levels in some schools to up to 26 students in Grades K-2 and 28 Teachers students in Grades 3-5 (Based on current classroom projections) the recently updated Massachusetts Curriculum Framework for Science Et • Would not be able to conform to School Committee class sizes guidelines established in 2005. 12-13 FTE • Elimination of non -mandated classroom personnel or support staff. • • Support Staff • Level of support currently being provided to both teachers and students would be significantly Town Meeting's support of Free Cash allocation decreased. • • 10-11 FTE • Increase in class sizes • • Classroom • Elimination of programs and/or course offerings Teachers • Would cause a change in the middle school interdisciplinary model and impact vertical course instructional practices aligned with new curriculum. opportunities/ pathways as students enter high school 3-4 FTE • Classroom teacher reductions at this level for second year in a row Classroom • Increase in class sizes Teachers • Elimination of specific programs and/or courses (for instance AP offerings and/or electives). • Impact on current RMHS Graduation requirements • Reduced course access for some students • Potential negative impact on college acceptances Scope of Reductions if Override is not Approved_ �y Ye 1-2 FTE . Reduced support for administrators, teachers, and families District • Further increase the workload of the building principals and school -level staff Curriculum • Impact on continuing implementation of the Science curriculum and alignment with funding the recently updated Massachusetts Curriculum Framework for Science Et Technology/ Engineering • Years 2 and 3 of Science/ Engineering implementation will depend on FinCom and Town Meeting's support of Free Cash allocation Building per . pupil budgets . Reduction of materials and supplies for classrooms and teachers. Professional • Less training for teachers and a delay in professional development plans for development instructional practices aligned with new curriculum. Technology • Delayed replacement of computers and less availability of technology for students in Grades K-12 ng Term Challenges That Need To Be Addressed Challenges Retaining and Attracting Staff Developing well balanced and prepared students for college and career Supporting teachers and administrators as we transition to more rigorous standards and curriculum 4. Continuing to improve our special education services and in district programs 5. Identifying tong term space needs to address program changes 6. Remaining competitive with area schools 4/13/2017 Finance Committee Chair Comments Town Meeting and subsequent meetings September 12, 2016 FinComm Review of Budget • Annual Budget Review • Structural deficit exists and requires action for FY'18 • No new revenues strong cuts • Override is only vehicle that can strongly impact level of services 4/13/2017 1 Free Cash • What is it? • "Rainy day fund" • Good for 1x expenditures • As of July 2015, balance was —10% of revenues • Past few years, FinComm recommended use of $1.5-2MM of Free Cash to supplement operating budget • Hid the structural deficit/delayed its impact • Did not allow level services, but minimized impacts Where we are now... • Using free cash use not recommended going forward—not sustainable • Operating budget expenses continue each year ... free cash as a source does not • FinComm updated policy-- target 7% of revenues Old policy was 5% ... variances/needs larger now than they once were • 7% more consistent with peer communities • If balance falls to 5%, reason for additional scrutiny • FY'18 budget requires either strong cuts or new revenues 4/13/2017 6 FinComm review of Override materials • Reviewed model that has been used by Town with expectations of revenues and costs • Assumptions seem reasonable • Recent history on revenues/expenses incorporated • Likelihood of "good surprises" now lower • Believe that structural deficit reasonably represented as $6MM in this timeframe • Selectman's proposal for $7.5MM override and usage expressed by Town and Schools represent financially responsible way to fund these priorities 4/13/2017 3 Town of Reading RPS GUEST WiFi password: none Special Town Meeting September 12, 2016 4/13/2017 H 2016 Special Town Meeting Article 2 - Instructions ► None are known in advance 2016 Special Town Meeting Article 3 - Capital Plan FY17-FY27 ► Extensive changes (see pages 3-4); does not authorize funding ► FYI +$26,000 for Fire department capital already funded by FINCOM ► FYI +$610,600 moved from various years, or added as new; note that debt service in FYI is now projected $637,500 lower because of changes to the Birch Meadow phase I Field lighting and changing $2.7 million town & school roof projects from debt to capital ► FYI (November) expect $490,000 requests; the $210,000 DPW loader is urgent - a replacement is being leased for $1 5,000/month ► FYI 7 (April) expect $120,000 Capital Plan is in excellent shape 4/13/2017 N 2016 Special Town Meeting Article 4 - Senior Tax Relief #1 ► Increases an existing tax exemption from $750 to $1,000 under MGL Ch 59 Sec 5 Clause 41 C ► State eligibility guidelines are strict: 65+ single $20,000 income; $40,000 assets (excludes home) 65+ married $30,000 income; $55,000 assets (excludes home) ► About 20 seniors qualify, and this is tax revenue lost to the town 20 x $250 additional = $5,000 increased tax loss ► May 2010 Town Meeting had increased this from $500 based on area community survey ► Currently $1,000 Melrose, Stoneham, Wakefield, Woburn; $750 Lynnfield; $500 Wilmington 2016 Special Town Meeting Article 5 - Senior Tax Relief #2 ► Indexes the previous exemption to a cost -of -living benchmark ► Very low cost to the town, may save future Town Meeting action 4/13/2017 K3 4/13/2017 2016 Special Town Meeting Article 6 - Senior Tax Relief #3 ► Currently eligible seniors may defer property tax payment Age 65+; $40,000 maximum income; no asset limit ► When the taxes are ultimately paid, the current deferral interest is 8%. If the senior passes before paying these taxes, the estate is responsible for this tax payment as a first lien, and the interest rate increases to 16% per state law on the date of death ► This article would reduce the 8% to 4% with the other terms above remaining in place ► Under the interest rate situation for the past several years, 4% is well above what the town earns on cash balances ► No tax payments are currently deferred under this program; a recent high enrollment was 3 seniors 2016 Special Town Meeting Article 7 - Senior Tax Relief #4 ► Previous tax relief measures have a meaningful but limited applicability in Reading ► There are both medical and financial challenges for our seniors to remain in their homes, or 'age in place' ► Seniors represent the fastest growing segment of our community - extensive town planning efforts have been underway in areas ranging from construction projects to changes in bylaws (such as 'inlaw' apartments by right) ► This seems like the morally right thing to do, but additionally seniors are less expensive than students in terms of cost of local services ► State tax law does not provide any tools to offer more protection 2016 Special Town Meeting Article 7 - Senior Tax Relief #4 ► This article is a Home Rule Petition requesting additional tax relief - and if approved would be the third one in the state ► The town cannot afford to simply forgo the tax income, estimated at $500,000 to $700,000 annually, that would be granted under this senior tax relief - other taxpayers will pick up that cost ► After examining many options, the Town preferred a choice that was easy to understand and administer, ie a'no-cost' operational budget impact to the town. The previous senior tax relief articles require extensive staff work, but for a very small pool of eligible seniors 2016 Special Town Meeting Article 7 - Senior Tax Relief #4 ► Proposed eligibility criteria: Applicant has filed & received a prior year Schedule CB state income tax relief benefit; Applicant has owned property in Reading for at least the prior ten consecutive years; Applicant applies annually to the Board of Assessors (in August) ► Advantage: very easy to understand and administer ► Proposed tax benefits: Between 50% and 200% of the CB income tax relief received above, as determined annually by the Board of Selectmen. That benefit is graduated by income, with a current maximum of just over 51,000 (so the local benefit could be $500 to $2,000) ► Advantage: very flexible since no one knows what the pool of eligible applicants will look like as the program starts 4/13/2017 5 2016 Special Town Meeting Article 7 - Senior Tax Relief #4 Schedule CB eligibility (2014): Age 65 or older; must file as single/married jointly/head of household; If homeowner, assessed value $691 ,000 or less; Income qualifications (maximum) • Single $56,000; Head of Household $70,000; Married jointlyS84,000 Income defined as MA Adjusted Gross Income PLUS Social Security PLUS untaxed (by state) retirement income PLUS some MA exclusions (Form 1 lines 2b -2d) added back in to income Tax credit (max $1,050) only if Real estate taxes paid plus 50% of water/sewer charges paid are greater than 10% of the income calculated above 2016 Special Town Meeting Article 7 - Senior Tax Relief #4 ► What we know (2014 CB data): 645 residents qualified; average income tax benefit was $856 ► What we don't know: How many of the 645 were renters and therefore ineligible How many homeowners have not been so for 10+ years Did anyone eligible for CB not file, but they might What is the data distribution of that income tax relief ► What we must therefore do as we gather local data: Build in flexibility: a wide property tax relief range of 50% to 200% ► Targeted tax benefit/ Estimated cost: Maximum $1,300 & Average $1,000; Total at 125% $700,000 4/13/2017 M 2016 Special Town Meeting Article 7 - Senior Tax Relief #4 The Selectmen indicated a desire to share the cost of this tax relief among all taxpayers. As we do not have good data on how large the qualified applicant pool will be, that 50% to 200% range will allow the Board to target $700,000 (125%) of tax relief in total to be reallocated (with a policy maximum of $1 million). Residential $ 300,000 10% $ 48 $ 400,000 31% $ 64 $ 500,000 31% $ 81 S 600,000 14% $ 97 $ 700,000 14% $ 113 Commerdal $100k -$500k 41% $ 63 $500k-$imil 30% $ 146 $lmil-$2mil 17% $ 279 $2mil-$3mil 4% $ 464 $3mil - $10mil 6% $ 895 $10mil+ 3% $ 3,882 2016 Special Town Meeting Article 8 - Financial Condition of Town Review of Public Discussions since Annual Town Meeting 3 Community Listening Sessions June 1 @ Coolidge MS; June 7 @ Sr. Ctr.; June 16 @ Parker MS 18 Public Meetings to discuss what we heard from the community Board of Selectmen (7); School Committee (7) and FINCOM (3) Meetings Community Financial Forum September 1 @ RMHS PAC Next Steps: Monday September 1 2th Special Town Meeting Tuesday October 18th Special Election 4/13/2017 7 Town of Reading Revenues compared to before last Override ' Includes $4.5 mil. Override plus annual +2.5% plus new growth z Lost $3 mil. annually - if State Aid had risen at only 2.5% 3 Lost $1 mil. annually - decline in Fed. Payments; lower int. earnings Town of Reading Revenues - compared to after last Override FY17 FY06 t% z% s% ' ®Property Taxes Al •Propertysaxes ■ Local Fees Local Fees 7%�. State Aid State Aid ■ Other •cher ■ Rainy Day Fund { Average annual growth +3.1%, but slower id continues to lag: we need to b, "" 4/13/2017 Property Taxes' $61.1 mil $32.5 mil +4.6% State Aide $13.9 mil $12.0 mil. +1.1% Local & Other Sources3 $10.4 mil. $ 7.1 mil. +2.8% ' Includes $4.5 mil. Override plus annual +2.5% plus new growth z Lost $3 mil. annually - if State Aid had risen at only 2.5% 3 Lost $1 mil. annually - decline in Fed. Payments; lower int. earnings Town of Reading Revenues - compared to after last Override FY17 FY06 t% z% s% ' ®Property Taxes Al •Propertysaxes ■ Local Fees Local Fees 7%�. State Aid State Aid ■ Other •cher ■ Rainy Day Fund { Average annual growth +3.1%, but slower id continues to lag: we need to b, "" 4/13/2017 Town of Reading Budget model in Reading $90.2 million Revenues (current year FY1 7) First take care of these: $33.2 million Accommodated Costs {Benefits, Capital, Debt, Energy, Financial, Vocational Education; Out of district SPED; Miscellaneous} Then this is leftover (current split Schools 64% Town 36%) $57.0 million School/Town Operating budgets Town of Reading Recent History FYI 8* +3.0% +5.9% -1.7% Free Cash use FYI 2-17 +2.5% +1.8% +2.7% increased to S2mil FYI +2.9% +1.7% +3.40% Cut in capital FYI +2.5% +1.7% +3.60% spending; layoffs; more Free Cash FYI +2.9% +3.4% +2.75% Cut in capital spending; layoffs FYI +2.7% +0.8% +3.50% Free Cash use increased to S2mil FYI +2.8% +1.5% +3.75% FYI +2.5% +1.7% +3.60% Free Cash use increased to S 1.5 mil FYI 2 +1.2% +1.6% -0.50% Layoffs & wage freezes Ja r�dgets ated,-1.7%assumes no free Cash 0. 633%_ Sl mil Free Cash used, O, require +3.5% minimum annual -vel service 4/13/2017 0 Town of Reading Structural Deficit: $3 million today FYI total budget: $2.15 million out of balance FYI estimated total budget: 3 million out of balance Current Structural deficit breakdown: School budget $1.92 million Town budget $1.08 million Town of Reading Structural Deficit: future - forecast to be worse In the future, our revenues "60ware projected to roughly cover the +3.5% operating budget 1.5W0 target - to the right these two lines are almost identical 1.4000 However forecast 1.3000 Accommodated costs are 1.200D clearly a challenge - they add $0.7 million annually to the 1.1000 structural deficit 1.00W -Revenues -Ac Costs--Oper Target 1 2 3 4 5 6 7 8 4/13/2017 10 Override An initiative petition was passed in 1980 and implemented in 1982 that limited the total property tax (the tax levy) increase in MA communities to +2.5% (plus any New Growth). Because of annual changes in assessed values, individual tax bills go up by various amounts, but are limited to +2.5% for the tax levy. An Override seeks to permanently increase the tax levy by a specified dollar amount. After that, annual increases are again limited to +2.5% Note that capital or debt exclusions, such as Reading has for both the High School and Library projects, may be added on top of this +2.5% limit, when approved by the voters. These exclusions are temporary - for a specified amount of time - and when the projects are paid for this part of the tax bill vanishes. More on this later. Town of Reading Structural Deficit: Why $6 million? In 8 years this annual funding gap is 0.0 therefore forecast as an additional $5.6 mil. to be a total of $8.6 million (1.0) An Override by state law must be a lump (2.0) sum; we really need $3 mil. plus $0.7 mil more each year (3.0) (4.0) Solution: $3 mil. to fix the current deficit; then an additional $3 mil. to fix this (s.o) annual gap as shown on the right (6.0) 1 2 3 4 5 6 7 8 save 4/13/2017 11 Town of Reading Structural Deficit: let's not make it worse FY18 $3.0 mil. current structural deficit $0.3 mil. pension funding $2.0 mil. additional capital* $0.7 mil. Savings* 0.0 2 3 lb) 4 5 6 7 8 ( (z.0) (3.0) (4.0) (5.0) (6.0) Beyond FY18 Spend more on capital in early years, then spend less in later years. The capital plan is in solid shape and can withstand a lower future baseline of spending. This will reduce the amount of 'savings' needed to shift into future 'spending' Peer Communities wnaw VF 4/13/2017 12 4/13/2017 Peer Revenues Tax Levy Residential -�idential CIP CIP State Aid Local Receipts Other - Source: MA Dn', 60.5% 66,6% 91,4% 76.9% $53"3rmi, $54,8nul 8.6% 23.1% $5.0mil. $17,3mil. 13.7% 11.0% 21.6% 17.5% 4.2% 4.9% Peer Expenses Public Safety 9.2% Culture & 2. Recreation -0.1% Education 39.3'A DPW 5.1:', Human Service 0.6% Fixed Costs & 17.7% Debt Other (Ent Funds) 22.4% Gen'l Gov't 3.6% 8.7% +0.5% 1.7,Y: +0.4/ 3 9, 1 X, +0,2% 4.9'X; +0.27, 0.7% -0.1% 17.8% -0.1% 22.8% -0.4% 4.3% -0.7% Source.' MA MA;D20R -budgets include Enterprise Funds .1. Peer, �,t mil.; Peers average is S108 mil. Peer Education Expenses Peer average is 15.8% enrollments/population; Reading is higher at 17.4% Town of Reading Residential Taxpayer View - current Average $500,000 single family home (SFH) tax bill: Taxpayers will have completed repaying excluded debt for the High School project in FY24 and for the Library project in FY25, leading to tax increases below the annual +2.5% levy ceiling as shown below: This translates into an average 20.%annual tax bill increase over the ten year period 4/13/2017 14 Pop. Enroll % Enroll % Budget Pop. Enroll % Enroll % Budget Westford 23,265 5,139 22.1% 45.0% North Andover 29,217 4,795 16.4% 41.0% Lexington 32,650 61785 20.8% 36.0% Walpole 24,818 3,946 15.9% 41.9% Winchester 22,079 4,505 20.4% 36.8% Natick 35,214 5,368 15.296 34.2% Westborough 18,630 3,624 19.5% 44.4% Canton 22,221 3,326 15.0% 35.8% Bedford 13,975 2,522 18.0% 39.7% Wilmington 23,147 3,448 14.9% 44,0% Lynnfield 12,395 2,205 17.8% 43.9% Milton 27,270 4,011 14.7% 38.3% Andover 34,477 6,076 17.6% 42.3% Burlington 25,463 3,499 13.7% 39.7% Mansfield 23,566 4,144 17.6% 44.9% Wakefield 26,080 3,439 13.2% 31.7% Reading 25,327 4,407 17.4% 39.3% Danvers 27,483 3,588 13.1% 31.9% Belmont 25,332 4,283 16.9% 34.2% Tewksbury 30,107 3,658 12.1% 36.3% Marshfield 25,509 4,267 16.7% 44.4% Dedham 25,299 2,776 11.0% 31.5% North Reading 15,377 2,556 16.6% 38.8% Concord 19,285 2,114 11.0% 50.2% Shrewsbury 36,309 6,016 16.6% 43.4% Stoneham 21,734 2,317 10.7% 35.2% Town of Reading Residential Taxpayer View - current Average $500,000 single family home (SFH) tax bill: Taxpayers will have completed repaying excluded debt for the High School project in FY24 and for the Library project in FY25, leading to tax increases below the annual +2.5% levy ceiling as shown below: This translates into an average 20.%annual tax bill increase over the ten year period 4/13/2017 14 Overrides - what do our Peers do? Sorted by reliance on Residential Tax Base: Town of Reading Structural Deficit - History Previous Override: $4.5 million • Equivalent as % of taxes to $8.5 million Override in FYI 8 • No financial modelling looking towards the future • "Hope this lasts for 8-10 years" Why did the previous Override last for so long? i 4/13/2017 15 TOT Most Recent YES Res% SPILT TOT Most Recent YES Res% $PUT Mdton 8 2009 YES 6/o9 96 1 161 Wakefield 1 1990YES 3/90 84 9 2 02 Winchester 102035 NO 3/07 95.0 0.94 Westford 212006 NO 3/99 84.7 1.01 Belmont 62015 YES 4/15 94.4 1.0 Tewksbury 22007 NO 81.8 169 Marshfield IS 2008YES/NO 4/07 921 1.0 Dedham 0, 80.5 2 14 READING 52003 YES 4/03 91.4 1.0 Andowr 22003 NO 802 1.65 Concord 22 2006 YES 4/06 91 0 1.0 Bedford 0 78.6 2 20 Stoneham 6 2011 NO 88.9 1.70 Canton 2 2008 YES 5/08 77.4 2 06 Lexington 192007 YES 6/o7 876 1.96 Natick 42008 YES 3/08 77.4 1.0 North Reading 142009 NO 2/05 87.3 1.0 Mansfield 22000 YES 4/00 765 134 Lynnheld 4 2011 YES 6/11 87.2 1 19 Wilmington 3 1995 NO 764 2 28 North Andover 82007 YES 6/07 87.2 141 Danvers 0 74.0 1.44 Shrewsbury 6 2014 YES 6/14 87.0 1,0 Westborough p 64.5 1.0 Walpole 4 2012 YES 6/12 864 1.33 Burti gtott p 62.7 2 59 Town of Reading Structural Deficit - History Previous Override: $4.5 million • Equivalent as % of taxes to $8.5 million Override in FYI 8 • No financial modelling looking towards the future • "Hope this lasts for 8-10 years" Why did the previous Override last for so long? i 4/13/2017 15 Town of Reading Structural Deficit - History Efficiencies - the list is quite long, but here are some highlights Spend money to save money: Performance contracting; some out of district SPED brought in -district; opt -out Health Insurance payments Spend money to generate revenues: Fire Dept. Advanced Life Support Operational efficiencies: capital spending; rubbish/recycle; technology Restructuring large departments and single positions Financial planning (next slide) emphasized Fees & Revolving Funds increased There will always be room for improveme ip r but we are running out of ideas Town of Reading Financial Planning: Example In FYI 7, the Town will spend 2.1% of the general fund budget on debt service inside the tax lew, and 80% of those funds are for 'productive' principal payments, repaid for needed capital expenditures that were financed by debt. In FY06, the Town spent 6.8% on debt service, and almost 40% of that was on 'unproductive' interest payments. If FY06 practices were continued, FYI 7 School and Town budgets would need to be cut by over $4 million 4/13/2017 16 Debt $4.15 $1.84 -$2.31 Prin $2.58 $1.54 -$1.04 Int $1.57 $0.30 -$1.27 In FYI 7, the Town will spend 2.1% of the general fund budget on debt service inside the tax lew, and 80% of those funds are for 'productive' principal payments, repaid for needed capital expenditures that were financed by debt. In FY06, the Town spent 6.8% on debt service, and almost 40% of that was on 'unproductive' interest payments. If FY06 practices were continued, FYI 7 School and Town budgets would need to be cut by over $4 million 4/13/2017 16 Town of Reading Override = Structural Deficit + How Much More? During the summer 2016 both the School Committee and Selectmen and their respective staffs debated what services they should seek to restore or add as new to their budgets in the event an Override was requested of the voters. MIF1 Structural $6.Om $6.Om $6.Om $6.0m S6.0m S6.0m Schools $640k $960k $1.28m $1.60m S1.92m Town $360k $540k S720k $900k S1.08m The Schools requested $1.925 million and the Town requested up to $1.08 million - or a combined $3 million of additional funding. Town of Reading Taxpayer Impact - Override For the same average SFH tax bill, a $6.0 million Override to remedy the current structural deficit for 8 years will cost $664 above the +2.5% limit as shown below. Over the same ten-year period, this translates into a 2.9% annual increase. Costs for additional Operating budget funding are also shown below, with a $9.0 million Override translating to a 3.4% annual increase: Residential $6mil $7 mil $7.5 mil $8 61 $8,Smil $9d1 $ 300,000 $ 400,000 $ 398 $ 531 $ 464 $ 619 $ 497 $ 663 $ 530 $ 707 $ 563 $ 751 $ 596 $ 795 $ 500,000 $ 664 $ 774 $ 829 $ 884 $ 939 $ 994 $ 600,000 $ 700,000 $ 797 $ 930 $ 929 $ 1,084 S 995 5 1,161 S 1,061 S 1,238 S 1,127 S 1,315 S 1,193 S 1,392 4/13/2017 17 Town of Reading Residential Taxpayer View After extended discussion, the Board of Selectmen selected a $7.5 million Override to request from the voters. This figure would be able to restore or add half of what had been requested, plus fund the structural deficit. Here is the tax bill impact: Average $500,000 single family home (SFH) tax bill with a $7.5 million Override Single Family Home Taxes` This translates into a +3.1%annual increase Peer Residential Tax Burden 13,500 --- 12,500 ♦ 11,500 10,500 9,500 8,500 Ito 7,500 6,500 5,500 4Median e** 4,500 60,000 80,000 100,000 120,000 140,000 160,000 L eading is taxed $600 to $700 below Peers; aillion Override brings Reading to $100 above Peers - ntil such time as they pass future Overrides Sources. * DOR 2015 *'Boston Globe 2010-20/4 4/13/2017 18 4/13/2017 Town of Reading Structural Deficit - Future The financial model will allow future Town and School leaders to track annual financial reality versus what we have guessed might happen. Don't forget that today we have two projects on the horizon as excluded debt - Killam School and the DPW Garage/Cemetery building. In a perfect world we'd wait until other excluded debt projects are paid off. We DO NOT want to fall back into spending Operatingbudget funds on projects of this size, as we did for Barrows and Wood End. The rest of the Capital Plan was then largely ignored, and debt serviced ballooned inside the tax levy. Town of Reading Structural Deficit - Future The town is actively engaged in efforts to promote more commercial development that could add as much as $2 million of New Growth to our annual revenues. These efforts will require another five years, but if successful delay the need for any future Override. Commercial p prop % prop Avg Val % C tax Taxes Avg Tax $100k - $500k 84 41% $ 311,010 8.6% $ 379,092 $ 4,513 $500k-$1mi1 61 300/6 $ 719,956 14.4% $ 637,267 $ 10,447 $1mil-$2mil 35 17% $ 1,373,140 15.8% $ 697,340 $ 19,924 $2miI-$3mi1 8 4% $ 2,287,475 6.0% $ 265,528 $ 33,191 $3mil - $10mil 12 6% $ 4,407,367 17.41/6 $ 767,412 $ 63,951 $10mi1 + 6 3% $ 19,120,333 37.7% $ 1,664,616 $ 277,436 206 $ 1,475,788 $ 4,411,255 $ 21,414 Walker's Brook contributes about $2 million of the above Town of Reading Impacts of a Yes Override Vote Town government - Additions of $540,000 $200,000 Retaining and attracting staff $ 85,000 School Resource (Police) Officer $ 75,000 Firefighter/ paramedic $ 70,000 Technology equip. (yr 1) then staffing $ 60,000 Library staffing $ 25,000 Town Accountant staffing (PT) $ 25,000 Volunteer Board support (will change each year) 4/13/2017 W Town of Reading Impacts of a No Override Vote Admin Svc $2.76m possible $100k Theoretical 1.0 FTE Public Svc 1.62m 60k 0.8 FTE Finance 0.78m 30k 0.3 FTE Pub Safety 9.95m 4001< 4.0 FTE Pub Works 5.61 m 225k 2.5 FTE Pub Library 1.49m 60k 1.0 FTE Facilities 3.14m 125k 1.5 FTE $25.4mil $1.0mil 11 FTEs The Town Manager has issued a hiring freeze tha at present leaves open 3 Public Safety and 1 DPW G that are now or through retirement expected to be 4/13/2017 21