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HomeMy WebLinkAbout2018-01-24 Finance Committee MinutesN UFR Town of Reading Meeting, Minutes r Fri �• s�9+7NCORQ�� Board Committee- Commission - Council: Finance Committee Date: 2018-01-24 Building: -Reading Public Library Address: 64 Middlesex Avenue Purpose:- Financial Forum Attendees: Members - Present: {1{?1c�ed1 i N N9 C �. %RADA G, MA. 2018 FEB 12 AM 9- 34 Time: 7:30 PM. Location:. Community Room Session: Version: Chair Peter Lydecker, Vice -Chair. Paula Perry, Vanessa Alvarado, David Neshat, Mark Dockser, Paul McNeice, Eric Burkhart, Marc Moll, Anne Landry Members - Not Present: Others Present: Board of Selectmen members: John Arena, Barry Berman, Dan Ensminger, John Halsey, and Andy Friedmann, Town Manager Bob LeLacheur, Assistant Town Manager Jean Delios, Town Accountant Sharon Angstom, Administrative Assistant Brendan Sweeney; Superintendent of Schools John Doherty' School Finance Director Gail Dowd, Assistant DPW Director Jane Kinsella, DPW Director Jeff Zager, Fire Chief Greg Burns, Deputy Fire Chief Paul Jackson, Deputy Police Chief David Clark, Facilities Director Joe Huggins, Assistant Facilities Director Kevin Cabuzzi, Patch Reporter Bob Holmes, Barbara Melanson; David Cory, Jill DiGiorgio, Michael DiGiorgio, Erin Gaffen, Todd Merkle; George Kachen, Tim Kirwan, Geoffrey Coram, Michele Sanphy, Chuck Robinson, Elaine Webb, Brian O'Mara, Mary Grimm, Jonathan Barnes; Nick Boivin, Amy Cole, Melissa Murphy, Katy LaPlant, Ashley Quinn, Sean Quinn, Linda Phillips, Sherri VanderAkker, Lisa Carcione, Benjamin Black, Linda Snow Dockser Minutes Respectfully Submitted By: Brendan Sweeney Topics of Discussion: Chairman Peter Lydecker called the meeting to order at 7:34 PM. John Arena called the Board of Selectmen to order at 7:34 PM. Mr. Lydecker began the Financial Forum by welcoming attendees and iterating how the FY19 budget is under immense pressure. He noted how this has been building up for years due to revenue constraints and reductions of state aid, as well as other'factors. The town- has made cuts over the years to cope with this reality, however, we are now in a situation where further cuts will put the town at great risk. Mr. Lydecker noted how impressed he was with the town staff in maintaining the budget up to this point. He additionally . addressed the free cash concern, and noted that it is dangerous to use free cash to supplant budget deficits and that there is, no guarantee that free cash will be available to cover recurring expenses in the future. , He concluded his opening remarks by noting that the reality of the town's financial situation is that the Board of Selectmen has little option other than to go to the town with .an override request to fund the schools and public safety at a sustainable level. Page 1 1 Town Manager Bob LeLacheur spoke next and noted how between his roles as a member of the Finance Committee in the past and now as a town employee that this was the 21St budget in Reading that he's been a part of. He went through an updated breakdown, starting with the revenue number of $95.6 million, and subtracted accommodated costs of $36 million, thus leaving the town with less than $60 million for the schools and town operating budgets. Mr. LeLacheur outlined that the typical .breakdown of this number is 36% to the town and 64% to the schools (in this case $21.3 million for the town, and. $38.3 million for the schools) and noted that this can change, however, even if it were to it wouldn't be by much. After walking through these budget numbers, as well as the accommodated costs budget model in general, Mr. LeLacheur explained why the accommodated costs model is vital to the success of the town. He noted how before the model was adopted everything in the budget was argued over, and capital was often neglected. There was a competition for resources, excessive spending, and high maintenance costs due to outdated 'capital'. Now under the accommodated costs model there is more collaboration, better planning, and greater efficiency overall. In continuing with his. presentation Mr. LeLacheur brought -up -some FY19 projections. He outlined an estimated 3% growth in revenue, 6% rise in accomodated costs, and a 2.5% growth in the operating budget. Additionally he highlighted the changes in the town's approach to the budget. process this year, pushing meetings and budget submission deadlines up a month to allow for greater communication with the town.about specific budget details. After describing the changes in this process Mr. LeLacheur did note that the town is not allowed legally to present an unbalanced budget (unlike the federal government). He also updated the forum on changes in budget numbers since the last financial forum in October; an increase in revenues of about $253,000 that was used to cover capital needs, certain school funding needs, and some energy costs. Town' Accountant Sharon Angstrom then dove into an analysis of the town's reserve funds.. She noted how the current reserve number of $10.3 million puts us at 10.9% of our FY19 budget. To follow up on why it was important to keep these reserve funds strong she noted that Reading's AAA bond rating was driven primarily by the town's strong reserve fund. Mr. LeLacheur moved specifically to the balanced budget conversation, noting the pressing need on the town side of an understaffed public safety department. As of right now the public safety department (police and fire combined) is understaffed by nine positions. He clarified that these are not positions that have been cut over the years, however, but rather ones that were needed yet not added due to the lack of sustainable funding available in the budgets of years past. The recent town manager's balanced budget reflects the exclusion of those nine positions, which is where the $1.5 million cut from the department head requested budget comes from. Superintendent of Schools John Doherty then honed in on the schools' budget situation. He noted how the combination of accommodated costs .rising by 12.1% as well as reductions in state aid has put the schools in a tough position. As a result, due to factors such as COLA increases and inflation, among others, the schools were unable to fund level services, and cuts in the regular day category,(essentially the classrooms), as well as a few service cuts, will be required to present a balanced budget without an override. Mr. Lydecker then opened the forum up for questions. Mr. Burkhart of the Finance Committee spoke first, asking Mr. Doherty if it is his understanding that compounded years of cuts has led to this tight financial scenario rather than just_ the cuts of last year. Mr. Doherty affirmed this and, noted that it is the five straight years of funding below level services (thus requiring cuts) that have led to the override number that the schools had brought forth during their January budget meetings. Ms. Perry then inquired if a more definitive trend in the reduction of state aid over the last ten years could be outlined. Mr. LeLacheur responded that he did not have exact numbers, but that the number has hovered around 1% recently. He did, however, note the specifics Page 1 2 behind the reason for this number: at the state level as health care spending has gone up and continued to consume a larger and larger portion of the state spending the money that used to. be available for local governments just simply isn't.there anymore. Had this not been the case the town likely would not be in the position where an override request is necessary. Elaine Webb, 309 Pearl Street, asked Mr. LeLacheur to identify whether or not bumping the budget process up a month has had negative consequences with regards to planning. He noted that the risk of information being imperfect is greater, however, not by much and regardless -of the advanced process the town always has to deal with this risk. Mr. Lydecker noted that the free cash reserves are available to offset potential risk in this area. Ms. Landry asked Mr. LeLacheur if he could clarify the role of Town Meeting in the allocation of funds. He noted that schools are one line item, on the town side there are a handful of line items that Town Meeting votes on. However, at the end of the day it is the Town Manager who has to figure out the nifty -gritty of the allocation details. Michael DiGiorgio, 55 Curtis Street, then inquired about the. specificities behind Proposition 2 1/2 restrictions. He asked whether the town had a way to raise the levy without a divisive override vote and whether or not an override can specifically earmark funds for the long term. He also inquired whether or not the town could divide up the burden of school costs among those taxpayers who currently have children in the school systems. Mr. LeLacheur noted the strict legal restrictions that Proposition 2 1/2 imposes, and that the override vote process is the only way around the levy restrictions and that it is up to Town Meeting to determine where the funds go. Theoretically they could put some of those funds in reserve for future years, but the ballot vote cannot bind Town Meeting to do so. He then elaborated on the best alternative forms of revenue for the town, notably new growth through, economic development. Additionally budgeting practices, such as moving capital expenditures off of the operating budget, help alleviate the burden. Mr. Dockser noted that fees are another way that the town can raise revenue for various services. Mr. Berman then expanded on Mr. LeLacheur's point about new growth, identifying further the constraints of Reading being. a primarily residential community with little commercial -and industrial land. He noted that these constraints are why the Board of Selectmen have put such a strong emphasis on the -need for Economic Development and how the town's investment in this endeavor should alleviate the need for constant override requests. Mr. LeLacheur did interject that there are costs of new growth (ex: new condos bring in schoolchildren) and noted that the town must be strategic when pursuing its options. Jonathan Barnes, 41 Pratt Street, asked whether or not the town had considered using other revenue sources, such as funds from the community preservation: act, a local restaurant tax, or marijuana manufacturing revenue. Mr. LeLacheur responded by noting that the town. has explored these potential revenue sources, and jokingly added that Reading did implement a hotel tax but unfortunately has no hotels. Todd Merkle, 182 Sanborn Lane, then spoke to the perception around town of a divided Board of Selectmen, some wholeheartedly supporting the need for an override and others doing so begrudgingly. He noted that at this. point the override need is vital, and that the Board of Selectmen, must do what is right for the town rather than what is perceived to be popular at the time. He emphasized that we cannot just take the easiest path and that taking the safe route now will only hurt the town in the long run. Mr. Lydecker responded to this by noting that the worst case scenario is asking for too large -ah override and having the vote fail, and that this potential scenario must be kept in mind when determining the override request number. Ms. Landry implored residents to contact their legislators about the reduction of local aid from the state, however, clarified that the town should not expect a windfall from the state. Page 13 Mr. Doherty and Mr. LeLacheur then clarified the reality of overwhelmingly residential communities needing overrides, citing 25 peer communities. Most of our peer communities have asked for, and passed, overrides since the last successful override vote in Reading in 2003. Mr. LeLacheur noted that this override number is projected to be sustainable for two to three years and that the sustainability ofany override request has been a key factor in both Mr. LeLacheur's and Mr. Doherty's budgets. Many speakers from the audience, including: Jennifer Hillery, 183 High Street, Andy Friedmann, Board of Selectmen, Michele Sanphy, 75 Glenmere Circle, George Kachen, 66 Colburn Road, Linda Snow Dockser, 110 Beaver Road, Elaine Webb, 309 Pearl Street, and Nick Boivin, 3 Estate Lane, expressed just how crucial the override is to keeping Reading the great town that it is. They noted that it is not only beneficial to the schools, but for the well-being of the town as a whole and most notably property values. They all .highlighted that without it we simply cannot sustain the many services in town that have given Reading such a great reputation. In commonality they all urged the Board of Selectmen to put forth an override request number that will sustain the values and services of the.town going forward. . During those speakers' presentations the subject of the senior tax exemption program was brought up. Mr. LeLacheur clarified that we are one of the few communities in the state that provides a program like this, where qualifying seniors can apply for relief on their property taxes. He noted that this burden was then shared by the rest of the town, however. Additionally Mr. LeLacheur identified that the program was green -lit initially for three years, but is likely to continue on past then pending decisions from the state. In addition to these speakers. Mr. Dockser had inquired whether Mr. Doherty and Mr. LeLacheur had the specific numbers driving the total override request number. Although they did not have them at the time, both Mr. Doherty and Mr. 'LeLacheur noted that this was information discussed at previous meetings and that all of this information could be found online. Mr. Dockser then continued to make his general point, which was that the override request when broken down shows that it is the funding needed to bring our services up to par, and that the only reason the request is being made is because there is nowhere else to go for the funding. He noted the hard work that has gone into balancing the budget by the town staff; however, the circumstances in this instance are just too much to bear without an override. David Cory, 16 Mt. Vernon Street, then spoke to a concern that he and many other residents share: how to respond when people ask "if the town can't handle my money well, why then should I give them more?" Mr. LeLacheur responded to this by highlighting again that Reading is one of the most well run communities in the state, as identified by peer communities, and that the overly residential nature of Reading handcuffs our flexibility with revenues regardless. Mr. Berman chimed in as well and noted.that Wall Street bond rating agencies, who really have no bias when it comes to rating local governments, gave Reading an AAA bond rating. In turn this AAA bond rating allows Reading the ability to sell debt at a much lower interest rate than other communities. Mr. Burkhart, chimed in again to note that before he was on the Finance Committee he too shared a pessimistic outlook of government that many in Reading possess now. He stated that FINCOM, with nothing to gain politically or by virtue of job security, has gone through all of Reading's budget numbers and practices and the reality is that Reading is an extremely well run community, yet still all of FINCOM agrees that the situation has forced the town's hand and that there is no other choice but to make an override request. Ms. Landry affirmed that she feels the same way. Mr. Arena then provided some closing remarks, thanking.the FINCOM and town staff for their tireless efforts. He noted that this is a contentious issue and that passions are running high, yet we still need to remember that we are a community and that we tackle these -issues together. He noted that there is no lack of will on this matter by the Board of Selectmen, and that he looks forward to the meeting on January30th where the Selectmen Page 14 will further discuss the override and potentially put forth a number for a formal request to the town. ' 1 ' At this time the Board of Selectmen adjourned their meeting (9:26 PM). Mr. Lydecker called a recess for the Finance Committee at this time (9:26 PM) Mr. Lydecker called the Finance Committee back into session at 9:32 PM. On a motion by Ms. Perry, seconded by Mr. McNeice, the Finance Committee voted to approve the meeting minutes from October 11, 2017 by a vote of 7-0-2 On a motion by Ms. Perry, seconded by Mr. McNeice, the Finance Committee voted to approve the meeting minutes from December 12, 2017 by a vote of 6-0-3 On a motion by Ms. Perry, seconded by Mr. McNeice, the Finance. Committee voted to aparove the meetina minutes from December 13, 2017 by a vote of 7-0-2 On a motion by Ms. Perry, seconded by Mr. McNeice, the Finance Committee voted to approve the meeting minutes from December 19, 2017 by a vote of 5-0-4 The Finance Committee then began to briefly summarize data that has been discussed over the last two months Leading to the upcoming Board of Selectmen meeting regarding a definitive override request. They noted areas ,where additional detail could be helpful, such as with the schools and the whole debate on.cuts to athletics as opposed to in -classroom cuts and vice versa. Additionally members thought that data highlighting the quantitative cuts and the accompanying consequences would be helpful. The committee also discussed how to educate the public once the free cash reserve numbers are inevitably worked Into the conversation about the override request number. On a motion by Ms. Perry, seconded by Mr. Moll, the Finance Committee voted 9-0- 0 to adiourn the meetina at 9:47 PM. Respectfully Submitted, Secretary Page 1 5