Friday, February 5, 2010
Structural Financial Planning Committee readies final report
Members of the Structural Finance Planning Committee (SFP), many bleary-eyed after attending the FinTeam or Board of Selectmen’s (BOS) meetings the previous day and evening, streamed into the Clark Room at 8 a.m. on January 27 to grapple with ways to decrease the town budget in an effort to offset future tax increases.
The SFP was appointed by the BOS in November of 2009 to look for ways to pare town government expenses. With local revenue and state aid somewhat uncertain and the possibility of two school building projects in the near future, the SFP has been asked to identify areas of town government that could be reduced, restructured or regionalized in an effort to reset the cost base and thereby offset potential future tax increases. The committee’s goal is a long-term reduction of town government expenses of $250,000.
BOS Chair Tim Hult reminded the committee of the project objectives: to identify the required level of budget reductions that would be needed to deliver a levy limit budget for the next three years; to update the long-term financial model to include budget reduction information and the impact of the two school building projects (CCHS and Carlisle); to produce a recommended scenario for FY11 budget reductions including prioritizations; and to produce a set of recommendations for managing the financial impact of the school building projects together with increases in the operating budget.
In terms of the budget process for FY11, Hult said that the Finance Committee (FinCom) guideline was $90,000 under the zero-increase budget, but that it did not include raises, the impact of the new police contract or $150,000 for CCHS. The FinCom will have its anticipated budget ready by February 9 and is expected to address those issues as well as the cost-of-living allowance (COLA) and modifications from the town departments. At that time, the FinCom will determine the most appropriate funding methods which they will then recommend to the BOS. There is a bright side to the town’s financial situation, however. Town Treasurer Larry Barton stated, “There is a healthy balance of free cash. A lot of pressure was relieved by the [Carlisle] School holding the budget down.”
CCHS capital project status
Louis Salemy, of the Carlisle and Regional School Committees, said that the Carlisle School is in good financial shape. COLA expenses are manageable; $170,000 - $180,000 per year will be saved due to management restructuring and there will be savings associated with a change in employee step increases.
Salemy then moved to discussions about the high school, presenting the work of the Concord-Carlisle Regional High School (CCHS) Facility Master Plan Committee. The master plan was funded by Town Meeting last year, and according to Salemy, will be a “roadmap for capital repairs” at the high school (see “CCHS Master Plan focus narrows to one proposal,” page 1). CCHS has been warned of possible loss of accreditation due to the state of the aging facility. The master plan committee’s final report will be available by March 10.
Salemy explained that the next step would be a feasibility study and design plan. A Warrant Article for this study will be presented at Town Meeting. Based on discussions with the MSBA, $1.3 million will be requested to develop options, create the design and complete the schematic design. The feasibility/design study would also include plans for possible phasing of the project. The amount requested is comparable to MSBA-provided data for recent feasibility/design studies at area schools (Methuen: 1900 students, $1.9 million; Wayland: 888 students, $1.1 million). The feasibility/design study is required to be eligible for MSBA reimbursement.
Hult asked what a reasonable vision of the phased cost and the total cost might be. “We need to give the taxpayer a vision of what is before them.” Barton replied that there were still too many questions. “Would the school committee get a single grant from the MSBA or should we anticipate a different payment schedule if it is a phased activity? When would it go before Town Meeting and when would construction begin?” If the town were to approve the design/feasibility study, the regional school committee would most likely appear before Town Meeting in the spring of 2011, after the study is complete.
Although the actual cost of the project is not known, Barton thought that it would be possible to provide taxpayers with an estimate of the expected increase in the average tax bill possibly in the form of “X” dollars per $10 million spent on the project. After the study is completed an accurate cost estimate would be possible.
Budget action items
Hult began a discussion of possible areas of savings or increased revenue, emphasizing the importance of maintaining key services: fire, police, library, schools and DPW. Increasing revenue may be possible by increasing fees in a number of areas, including ALS, Transfer Station and other permits. These revenues, together with regional transportation funds from a possible MBTA assessment may provide a revenue increase of $75,000. Town Administrator Tim Goddard, together with the SFP, will oversee this for FY11. A standing subcommittee will be created to review fees annually.
Regionalization may also provide savings. A committee will be formed to investigate possible regionalization of several town boards or programs. This may lead to a savings of $40-50,000 but will not impact the FY11 budget.
A long discussion took place on the possibility of reducing personnel or work hours. The committee examined the possibility of reducing the size of the police force, but did not recommend this, agreeing it was important to maintain full shift coverage. Likewise, reduction in the DPW workforce was rejected since the committee felt that the DPW is already strained to provide services at its current level. The BOS will review town-paid plowing of non-town property. This includes all of the churches and several roads. The BOS will also review a list of roads where police details may not be necessary. The budget impact of these items is expected to be in the range of $8-10,000.
Reduction in Town Hall personnel/hours was less clear. Hult stated, “We are trying to move the base down – to reduce the labor footprint by regionalization or other means.” Barton stated that closing Town Hall every ten days would result in a cost savings of $50-60,000, but that it is really a reduction in employee’s hours. The committee agreed that further work is necessary before any recommendations can be made in this area. Goddard will work with the committee to examine Town Hall functions and efficiencies.
Capital expenditures present yet another area in which savings may be gleaned. The committee feels that restructuring the terms of long-term debt and extending the debt terms for certain assets will have a budget impact of approximately $30,000.
CPA elimination suggested to lighten tax bills
The committee also examined the CPA tax surcharge. Many committee members noted that use of CPA funds has allowed the town to accomplish a number of things that would not otherwise be done, and that even if state matching funds are reduced to 20-25%, it is still an exceptional return on investment. However, the committee agreed that with tax increases likely in the next few years, the voters should be given the opportunity to re-examine participation in the CPA program. Barton stated that the CPA surcharge currently amounts to $150-180 on the average tax bill.
Bending the curve – future budget guidelines
With town expenses projected to increase rapidly over the next ten years as debt service for two school building projects is added to the usual yearly increases, it has become clear that for the tax burden to be sustainable, the base costs of running the town must be adjusted downward before additional capital expenses are added to the mix. According to Hult, the ever-increasing curve that defines the town budget must be flattened by reducing expenses. In order to modify the growth rate, Hult suggested the following six items must be closely monitored: leveraging expenses with population growth, labor/personnel compensation, demographic changes, budget busters, capital budgeting and expansion of government functions.
In terms of leveraging community growth, Hult states that police, DPW, fire, library and most Town Hall functions are at an appropriate scale and should not need functional expansion with community growth.
Personnel expenses constitute more than 70% of the town budget. To maintain equity across departments, a standard non-contractual salary increase that is tied to the consumer price index (CPI) must be established for use across all town functions. Labor negotiations are critical. Wage increases, including all steps, lanes, longevity, etc. must be monitored and related to the CPI if they are to be sustainable. The same analysis should be applied to Town Hall employees, police and school employees.
Changing demographics will affect both the school and town department segments of the budget. School budget growth should be reviewed against changes in student population. An index must be developed such that the percentage of the school budget which accounts for direct student services fluctuates according to a “per-student” cost which is in turn adjusted, according to the inflation rate. At the same time, increased population in the over 65 age group will likely result in necessary increases in COA and fire (ambulance) budgets.
Several items constitute “budget busters” for the town. These include expenses associated with energy costs, special education and pensions/benefits that increase at a much greater rate than the rest of the budget. The SFP will continue to work with the Energy Committee to annually review energy budget items and to target further improvements. It was recommended that a new group should be formed to study the growth of special education costs and to coordinate a strategy to manage costs and to apply that strategy across all schools in Carlisle and Concord. Another suggestion is that a group be asked to review the history of increases in pensions and benefits and to project future budget increases in these areas.
The committee will meet again on February 8 at 8 a.m. to finalize their recommendations for the BOS. ∆
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