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HomeMy WebLinkAbout2008-10-15 Finance Committee MinutesOFR£4 x ~ ~a sJS+1HCOAVO The meeting convened at 7:20 Massachusetts. Present were: Financial Forum October 15, 2008 f 'ECEIV D YOwN CLERK READING- t AS 2001P12- QUG 21 p.m. in the Senior Center, 49 Pleasant Street, Reading, FINCOM Chairman George Hines, Vice Chairman Andrew Grimes, Committee members Barry Berman, David Greenfield, Hal Torman, Marsie West and Tom White; Board of Selectmen Chair Steve Goldy, Vice Chairman Ben Tafoya, Board members Camille Anthony and Rick Schubert; School Committee Chair Chuck Robinson and Committee members Chris Caruso, Lisa Gibbs, Karen Janowski and David Michaud; Town Manager Peter Hechenbleikner, Assistant Town Manager/Finance Director Bob LeLacheur, Town Accountant Gail LaPointe, DPW Director Ted McIntire; Town Engineer George Zambouras, DPW Business Manager Jane Kinsella, Fire Chief Greg Burns; Police Chief James Cormier and Library Director Ruth Urell; Superintendent Pat Schettini, Assistant Superintendent John Doherty, Director of Pupil Services Colleen Dolan, School Director of H.R. and Finances Mary DeLai, and members of the Administrative Council including Joseph Finigan, Doug Lyons, Karen Callan, Cathy Giles, and Eric Sprung; Reading legislators Senate Minority Leader Richard Tisei and House Minority Leader Brad Jones; Melissa Russell (Chronicle), residents Paula Perry and Bill Brown. George Hines called the meeting to order at 7:20 p.m. with some introductory remarks. He indicated that the impacts of the current economy and the recent state budget cuts would make for challenging times ahead especially given signs that potential cuts to Local Aid may be forthcoming. Mr. Hines added that Reading has followed budgeting practices that leave us in better shape to deal with possible cuts than many of the neighboring communities but cuts in local aid could add to problems to a budget that is already projected to be short by a million plus. He asked that members of the audience turn up their fiscal conservatism gene, and at the same time remain positive that working together we can solve our challenges. Legislative Overview - State FY09 Budget Senator Richard Tisei described current Massachusetts law that requires the Governor to ascertain by October 15th that the projected revenues can support the budget that was passed for the current fiscal year. Thus earlier today Governor Deval Patrick announced several measures to balance updated revenues to expenses. Tisei pointed out that in his opinion - and others who voted against the budget last summer - the budget was about $1 billion out of balance already, and today's acknowledgement of a $1.4 billion budget deficit before adjustments was certainly not caused exclusively by the recent disruption in the financial markets. Tisei described that under section 9-C the Governor has the authority to adjust about 70% of state budgets. The remaining 30% is the purview of the Legislature, the Judiciary, and various Constitutional Officers. The authority to reduce Local Aid remains with the Legislature, and they have thus far refused the Governor's requests to grant that authority. Representative Brad Jones agreed that the budget as passed had a structural deficit last summer, and that the recent Wall Street crisis had made things worse. He had steadfastly opposed giving the Governor authority under expanded 9-C to reduce FY09 local aid, at the very least until he had seen what the budget facts were and the Governor's plan to correct the situation. Tisei stated that legislators were reluctant to grant this authority to the Governor because when the State is in pain, local communities have shared that pain, but when times improve at the State, local communities have often been left out. Tisei noted that the MWRA debt assistance was eliminated by the Governor, but the MWRA had agreed not to change rates for customers mid year, and would instead find ways to absorb this lost revenue within their budget. Both legislators noted that they had very little detail on the announced budget cuts, but would be sure to advise the Town as the details come out over the next several days. Both legislators agreed that January 3, 2009 was the next key date for state and local officials to be aware of. On that date, the State should have a good read on the status of capital gains. In FY09, $1.7 billion of revenue was assumed for the state's budget, which was a 14% reduction from the assumption used in FY08. Tisei noted that for FYI 0, the lottery portion of State Aid that the Town receives would not be supplemented - only a portion of actual lottery receipts would be passed along. In terms of FY09, that would suggest a reduction of about $300,000 for Reading. Both legislators agreed that Question One in the upcoming November election would result in grave consequences for the State and local governments. The State would lose 40% of annual revenue; it is unclear how much State Aid would be reduced. Jones stated that his voting record suggests that he is not a fan of taxes, but he does not support Question. One. If voters want to send a message, there must be a better way than to eliminate many of the services they have come to expect. Pat Schettini said it appeared that the circuit breaker account was reduced, and the legislators agreed that it was. Bob LeLacheur asked if any grants or earmarks awarded prior to FY09 would be impacted, and the legislators replied that they did not think so. George Hines asked if legislative action was required to enact Question One in the event that it passed, and the legislators explained that it did not require any action on their part, it would become law on January 1, 2009. Chuck Robinson asked if more cuts after January 3~d would be a certainty, and the legislators could not be 100% certain. David Greenfield asked if a reduction in the capital gains tax receipts was presumed in the budget changes today, and the legislators replied that they believed the budget deficit might still be $500 million more than was corrected today. Barry Berman asked if we would hear more about casinos, and the response in part depended on the results of Question Three, which seeks to eliminate greyhound racing. Jones pointed out that the Wampanoags had applied for a federal ruling which may well give them permission to pursue gambling in the State, and it would be wise for the State to participate in some of the revenue sharing from such an endeavor. All three Committees led applause and gave thanks for the contributions of legislators Senate Minority Leader Richard Tisei and House Minority Leader Brad Jones. In turn, the legislators complimented the Town as being exceptionally well managed, and very proactive on financial matters. Local FY09 and FY10 Budgets Bob LeLacheur gave a PowerPoint presentation describing the current budget status in the Town of Reading. The next Financial Forum has been scheduled for November 19, 2008 at which time specific budget guidance will be given to the Schools & Town by the Finance Committee. Additional meetings will be announced then, in time to meet the Town Charter's January 30th requirement for the Town Manager to have budgets from everyone to balance against expected revenues (as needed) for FINCOM. FY08 revenues came in $1.37 million over forecast. This was the first full year since. revenue forecasting methods changed to become as accurate as possible. A total of $1.35 million of the surplus revenue was from two sources: a $350,000 payment from the state for. Smart Growth at the proposed Addison Wesley site; $1 million in interest earnings, generated by having very high unexpected cash balances from slow capital projects primarily from RMLD and RMHS. All other revenues generated only a $16,000 net surplus - and over $200,000 of that was due to a one-time payment from the recreation revolving fund. FY09 revenues are thought to be on target thus far. Forecasts for declining excise taxes have been accurate thus far. Net new growth will be somewhat higher. Collections are running at typical historic paces, although discussions with residents are becoming more commonplace. Cash balances are higher than forecast due to continued slowdowns in capital projects, which may lead to better interest earnings. State Aid was fully utilized in the FY09 forecast - any reduction will need to be funded or spending reduced. FY10 revenues look to be $750,000 higher than in FY09, a modest increase of 1.1%. Property taxes should rise by $1.4 million, but local receipts should decline by $0.6 million. This assumes no change in State Aid for FY09 levels. Accommodated Costs are forecast to be $26 million for FY10, a $2.25 million increase versus FY09. Some details include benefits +9%; energy +12%; financial +4%; out of district SPED +5% prices, unclear if there will be a $350,000 carry-forward next year, so none is assumed; vocational education +4%; miscellaneous +6%. Changes to the health insurance plan may modify this projection, which assumes a June 1st renewal at +10% in prices - the current industry forecast. FY10 Budget Summary - A $0.75 million increase in revenues combined with a $2.25 million increase in Accommodated Costs means that the Operating budgets face a $1.5 million decline, or a 3.5% reduction. Reserves - In FY08 $2.3 million of free cash was generated because of a combination of the previously mentioned $1.37 million in surplus revenues and a $930,000 reduction in planned spending. The latter came from the municipal government $360,000; Schools (including vocational) $100,000; benefits $125,000; FINCOM reserves $110,000; and $235,000 in one-time items. The reserve position as of September 2008 is $4.9 million in free cash (excluding the $350,000 Smart Growth payment); $1.4 million in the stabilization fund; and $127,000 in FINCOM reserves for a total of $6.5 million. Town & School Approaches to FY09 Budgets Town Manager Hechenbleikner and Superintendent Schettini described their mutual approach to FY09 budgets. Each was asking staff to provide information about what FY09 funding was not absolutely essential to spend, and if it was not spent what the consequences would be for the community. Every dollar not spent built a lower base for FYI 0, and would contribute to our free cash `savings account' at year end. Municipal Building Committee Steve Goldy and Camille Anthony reviewed previous Board of Selectmen discussion on this topic. Peter Hechenbleikner added that this was a strategic level set of discussions, and not an operational one. George Hines described some previous FINCOM discussions about a `capital committee', and thought the two concepts may well meld into one. Tom White asked about current proposed land acquisitions, and if they would fit into this dialogue. Hechenbleikner stated that the moot would likely be rendered moot since the state grants from the Main St. parcels would probably no longer be available. Barry Berman thought this topic was an extension of discussions from the World Cafe. Ben Tafoya added that the Oakland Road land issue was one that the Town needed to decide if we need the land before we design & implement any process to sell it. Camille Anthony contacted other Towns with standing municipal building committees, but none were set up to be policy oriented in a long-term comprehensive manner. Each was geared towards specific building projects identified and funded by the Towns. Question One George Hines outlined his belief that the Town residents may benefit from a joint statement from the three boards and committees in attendance. He mentioned that if any of the groups did wish to advocate on a ballot question, strict rules including no use of Town staff or resources must be followed. He asked for each group to caucus for ten minutes. Finance Committee: Following a discussion on Question 1 Chairman Hines made a motion that: "The Reading Finance Committee onnose Ballot Ouestion No. 1 regarding the repeal of the Massachusetts State Income Tax and loin with other Reading Boards or Committee who take a similar position in issuing a public statement of the opposition to the tax repeal listing the potential impacts to the Town of Reading and it's citizens." The Motion was seconded by Andrew Grimes, and passed 7-0-0. Board of Selectmen: The Board of Selectmen discussed in a caucus held as part of the open meeting whether or not to take a position on Question 1. The Board determined that they would not take a position at this time, but that they would have further discussion on this matter at their October 21 meeting when a full Board is expected to be present. Board members all indicated that they were personally opposed to Question 1, but questioned whether it was appropriate for an elected body of the Town to tell its residents how to vote on any issue. The Board members did feel that it would be appropriate to educate the community on what the impact of Question 1 would be on the community. School Committee: In an open meeting caucus of the School Committee, Mr. Caruso moved to oppose Ballot Question One. Seconded by Mrs. Gibbs, the motion was approved 5-0. George Hines said the FINCOM was unanimous 7-0-0 as both a Committee and as individuals to say NO to Question One. They expressed interest in warning residents what the impacts of a YES vote would be in terms of local services. Steve Goldy added that the Board of Selectmen did not vote on any motion, as they did not wish to instruct voters how to vote. They did state that it was appropriate to fully inform the residents of the consequences of a YES vote. Chuck Robinson said the School Committee voted 5-0-0 to say NO to Question One. He stated it was their intention to both inform the community and advocate for a NO position. Discussion ensued between those in attendance and the Selectmen to clarify their intentions and opinions. Steve Goldy said he would take the matter up next Tuesday with the full Board.. FINCOM meeting The Finance Committee remained in session after the other Boards and Committees left the Financial Forum, in order to complete their review of the November Town Meeting ( Warrant report. Article 4 - FYY09 budget On a motion by Hal Torman, seconded by David Greenfield FINCOM took the following votes to recommend for approval to Town Meeting: • B99 voted 7-0-0 to reduce Health Insurance; The Finance Committee supports making this excess revenue available for other needs. • N15 voted 6-1-0 to add Technician (Hines opposed); The Department Heads made a strong case for the need for this position to improve efficiency in all departments. The implementation of technology has created a demand for technology assistance beyond the capacity of current staff to deal with it adequately. The minority vote felt that this is an inappropriate time to add staff. • N16 voted 7-0-0 to reduce H.R. expenses; The Finance Committee supports making this excess revenue available for other needs. • S19 voted 6-1 to fund overlap for DPW Administrator (Hines opposed); The Finance Committee believes this is a prudent move to provide assimilation of institutional knowledge by a new Department Head. The minority vote felt that the current economic climate makes this an unaffordable luxury. • T8 voted 7-0-0 to fund Police Academy expenses; The Finance Committee supports this item as revenue neutral housekeeping move.. initial The Finance Committee felt that the verbal report of the results of the study and management indicates a need to increase grades to promote employee retention, and was sufficient to justify beginning to implement improvements in the pay grades since it is a modest beginning that represents approximately 20% of what would actually be needed. The details of the report had not been released at the time of the vote. The minority vote felt that a mid-year adjustment at a time of unclear financial future is not justified. FINCOM tools the following votes to recommend for approval to Town Meeting: 7-0-0 on line C2 to fund School Building Improvements (after removing $10,000); The Finance Committee is committed to maintaining an appropriate level of Capital spending but felt that given the current uncertain financial picture, some items should be deferred. In approving this item, a reduction was made to the total request. Hines moved to amend the amount to remove $10,000 for G group West and seconded by Berman, FINCOM voted 6-1-0 Finance Committee approved this purchase based on the staff insistence that this piece of equipment would seriously inhibit the capability of DPW especially during snow removal. The minority vote felt additional service could be achieved by the current equipment. The Finance Committee feels additional effort is required to maintain roadway improvement, and this is a modest addition to the current level of effort. The minority vote felt that the current financial situation requires restraint on new spending until the impact of the down economy becomes clearer. Line D99 was voted at a previous FINCOM meeting. • On a motion by Grimes and seconded by West, FINCOM voted 7-0-0 on lines W5, X5 and Y5 to use reserves from Water & Sewer as proposed. Article 12 - land acquisition (Grimes will present) • On a motion by Greenfield and seconded by Berman, FINCOM voted 3=4-0 to not recommend these land acquisitions. FINCOM recognizes the important opportunity the acquisition of this property presents for preserving open space and adding to the recreation opportunities for the community. However, on a close vote, a majority concluded that due to the unfortunate timing of this occurring during the current economic climate, they could not recommend the investment at this time. Article 13 - personal property (Torman will present) • On a motion by Torman and seconded by West, FINCOM voted 7-0-0 to recommend this Article. FINCOM was convinced by the analysis presented that this action will result in a net savings to the Town. Article 14 - Baldwin Lane Extension (Greenfield will present) • On a motion by West, and seconded by Torman, FINCOM voted 7-0-0 to recommend this Article. This has virtually no impact on Town finances. Article 16 - Fairchild Drive (Greenfield will present) ( On a motion by West and seconded by Grimes, FINCOM voted 7-0-0 to recommend this Article. This has virtually no impact on. Town finances. Article 17 -Veterans FINCOM declined to take a position on this Article as it has no financial impact on Town finances. Article 20 - Demand (late) fees (Torman will present) • On a motion by Grimes and seconded by West, FINCOM voted 5-2-0 to recommend this Article (Hines and White opposed). The majority believed an increase from $5 to an amount as high as $25 for late payments was appropriate in order to pay for additional notification for residents. The minority felt that the timing of this increase was not appropriate. On a motion by West seconded by Berman the meeting was adiourned at 11:10 PM on a vote of 7-0-0 Respectfully submitted, Secretary