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Home My WebLink About2024-09-18 Finance Committee Minutesor '.CUEiVED Town of Reading TOWN CLERK ? ;,I Meeting Minutes RW-ADI''J,—. MA. 0�� 2024 OCT i 0 AM 7: 36 Board - committee - Commission - Council: Finance Committee Date: 2024-09-18 Time: 7:00 PM Building: Reading Town Hall Address: 16 Lowell Street Purpose: Financial Forum Attendees: Members - Present: Location: Select Board Meeting Room Session: Open Session Version: Final Chair Joe Carnahan, Vice Chair Marianne McLaughlin -Downing (7:34 pm), Geoffrey Coram, Joe McDonagh (remote), Ed Ross, John Sullivan, Mark Zarrow Members - Not Present: Endri Kume, Emily Sisson Others Present: Town Manager Matt Kraunelis, Chief Financial Officer Sharon Angstrom (remote), School Superintendent Thomas Mllaschewski (remote), Tom Wise, Carla Nazzaro, Karen Herrick, Tara Gregory, Chris Haley (remote), Mark Dockser (remote), Carlo Bacci (remote 7:11 pm), Erin Gaffen (remote 7:38 pm), John Sasso (remote 7:48 pm) Minutes Respectfully Submitted By: Jacquelyn LaVerde Topics of Discussion: This meting was held in-person in the Town Hall Select Board Meeting Room and remotely via Zoom. Welcome and Introduction Chair Joe Carnahan called the meeting to order at 7:01 pm. Roll call: Joe McDonagh (remote), Geoffrey Coram, Ed Ross, John Sullivan, Mark Zarrow, Joe Carnahan. Select Board Vice Chair Karen Herrick called the Select Board to order at 7:04 pm. Roll call: Mark Dockser (remote), Chris Haley (remote), Karen Herrick. Public Comment Mark Dockser suggested using $4 million to $5 million of Free Cash as a financing mechanism toward capital projects. Review of the Town's current financial position Chief Financial Officer Sharon Angstrom stated that she estimates Free Cash will go up by $600,000. She also reviewed the financial forecast and projected a 3.5% increase to the operating budget, and the estimated amount of free cash needed to support the budget. Based on free cash regeneration over the past few years, and forecasted use, she wanted to make the Committee aware that there may be a potential need for an override in the next several years. Select Board member Carlo Bacci joined the meeting at 7:11 pm. Page 1 1 Ms. Angstrom presented the projected revenues from FY24 through FY26. In FY24 revenues increased 3.96% before free cash use, and in FY25 increased 3.22% due to excluded debt decreasing by 50%. FY26 revenue is projected at 2.43%, as the final debt payment on the Library will be paid off, and there will be no more excluded debt. Property taxes are projected to increase 2.2%, other local revenues projected to increase 4.5%, state aid projected to increase 2.5%, other available revenues increase 3.7%, and free cash is to be determined. Free cash is not yet certified, but Ms. Angstrom estimated that free cash will come out at $20,075,351. General Stabilization is currently $1.9 million, and FINCOM reserves are $200,000. The total reserve is at $22.22 million, or approximately 18.1% of projected revenues for FY26. FY24 revenues came in at $4.58 million over budget, $2.8 million of which was solely from investment income. FY24 expenses came in $2.43 million under budget, yielding a total FY24 regeneration of $7.1 million. Current balances on other available funds include: $47,541 for Sale of Real Estate, which is used to purchase land or capital purchases; $489,201 from the Reading Ice Arena, for which there are no restrictions to use the funds; $1,940,114 in the Stabilization Fund, with no restrictions on the funds; $195,726 in the Smart Growth Stabilization Fund, which can only be used for capital; and $385,163 in the Special Education Stabilization Fund, for unanticipated SPED costs. Accommodated costs increase 3.4% in FY26, and 5.7% in FY27. Retirement increases 8.3% each year, and Health Insurance is projected to have a 7-10% Increase. Ms. Angstrom reviewed potential free cash usage for FY26, and shared an interactive spreadsheet that FINCOM members can use to see how free cash usage scenarios would impact future budgets. Discuss Finance Committee Policies Policy on cash reserves The Committee reviewed the Polity on Cash Reserves. Ed Ross asked what process was used when the policy was adopted, such as work by a subcommittee. Geoffrey Coram asked If the bond agencies recommended 7% back in 2016 when this policy was established, and what the bond rating agencies are recommending now. Chief Financial Officer Sharon Angstrom stated that bond agencies will not advise on what percentage they think is healthy, but auditors mostly suggest 30% or more. She will ask the auditors what they think is a range for a good reserve position. The Committee discussed how the policy was last established, researching how bond agencies make their decisions, and what the next steps should be, such as creating a subcommittee to review the policy, or continuing to review it as a committee. Mark Dockser noted that it would be helpful to hear what the auditors say. School Committee Chair Tom Wise noted that the School Committee established a subcommittee to review policies, which has been more productive working through policy changes. The Finance Committee will continue their discussion at future meetings. Policy on debt and capital Over the last four years, 5.5% of revenue was dedicated to Capital, Instead of 5% according to the Debt & Capital Policy. Mr. Carnahan asked if the policy should be updated to reflect that, given Increased costs and inflation, and how much free cash support is needed. Ms. Angstrom noted that Interest rates are coming down, so costs might start to normalize, and cautioned that dedicating 5.5% toward capital could increase pressure on the operating budget, increase the need for free cash, and lead to an override faster. Page 1 2 The Committee briefly discussed the policy's recommendation to consider exclusion from the tax levy for capital projects over $5 million, and whether that figure should be adjusted. Ms. Angstrom cautioned that the larger the number is, the more difficult it would be to get capital done within the operating budget. Mr. Carnahan noted that if the Community Preservation Act is adopted, it could also help alleviate pressure on the capital part of the budget for small capital projects. The consensus of the Committee was to leave the Debt & Capital policy unchanged. OPEB policy Chief Financial Officer Sharon Angstrom explained the budget for Other Post -Employment Benefits (OPEB) is used as sort of a hedge. There is $500,000 budgeted for OPEB, but it is not transferred to the trust fund until April. That way it can act as a buffer for health insurance, as when the budget is built, enrollment, rate increases, and other variables are unknown. Peer community benchmarking guidelines The Committee reviewed and discussed the peer community guidelines adopted in 2013. The list of peer communities was created by a consultant based on various statistical comparisons. School Committee Chair Tom Wise advised reviewing the list of peer communities ahead of the next round of contract negotiations. Karen Herrick left the meeting at 9:02 pm. As it was unknown when Carlo Bacci left the meeting, and Mark Dockser and Chris Haley were the only remaining members, the Select Board was adjourned de facto. Carla Nazzaro, Chair of the Killam School Building Committee, rose to answer a question posed earlier in the meeting and explained that the total Killam feasibility study project cost to date is $548,532, with eligible costs of $252,005, or 45.95% reimbursement rate. That will not be the reimbursement rate later on. Chief Financial Officer Sharon Angstrom noted that any funds leftover from the feasibility study can go towards the total project. The reimbursed funds do not go to the general fund, rather to a separate fund for the Killam feasibility study. Discuss Possible use of free cash to support the FY26 budaet The Committee had discussed Free Cash earlier in the meeting, but Geoffrey Coram emphasized the need to know how much is needed to support labor contracts before knowing how much free cash will be needed. Future meetings and agendas The next meeting is scheduled for October 9 to review the November Town Meeting warrant and vote on Free Cash recommendations to support the FY26 operating budget. The second Financial Forum is scheduled for October 30, where the Committee will hear updates on the upcoming Killam School and Reading Center for Active Living (ReCAL) capital building projects. Select Finance Committee member to participate in School Department Screening Committee School Superintendent Thomas Milaschewski stated that School Director of Finance and Operations, Dr. Derek Pinto, has transitioned to his new role at Lowell Public Schools. The Reading Public School Department is now In the process of searching for Its next Director of Finance, or Director of Finance and Operations. The School Department is asking for a representative from the Finance Committee to serve on its Selection Committee. Geoffrey Coram expressed his interest to volunteer for this Screening Committee and was appointed by consensus of the Finance Committee. Liaison reports John Sullivan shared that the Community Planning and Development Committee (CPDC) discussed presenting two MBTA Communities options to Town Meeting. Marianne Page 1 3 McLaughlin -Downing added that CPDC Is having another MBTA Communities public hearing tomorrow evening, and they would like to have a primary proposal and a backup proposal. Marianne McLaughlin -Downing recapped highlights from the Select Board meeting Including the $8 million lower Haven Street project coming to Town Meeting, and a new light manufacturing business making whiskey coming to General Way, whose next stop will be before the Select Board. Joe Carnahan shared that the Community Preservation Act (CPA) Study Committee met last night to go over slides to be presented to the Select Board next week asking to extend the CPA Study Committee's charge. Review and approve prior meeting minutes On a motion by Ed Ross, seconded by Marianne McLaughlin -Downing, the Finance Committee voted 5-0-2 to approve the meeting minutes of August 21, 2024 as presented, with Joe McDonagh and Mark Zarrow abstaining, as they were not present at that meeting. Roll call vote: Joe McDonagh - Abstain, Geoffrey Coram - Yes, Ed Ross - Yes, John Sullivan - Yes, Mark Zarrow - Abstain, Marianne McLaughlin -Downing - Yes, Joe Carnahan - Yes. On a motion by Ed Ross, seconded by Mark Zarrow, the Finance Committee voted 7-0-0 to adjourn at 9:26 pm. Roll call vote: Joe McDonagh - Yes, Geoffrey Coram - Yes, Ed Ross - Yes, John Sullivan - Yes, Mark Zarrow - Yes, Marianne McLaughlin -Downing - Yes, Joe Carnahan - Yes. 'age 4