Joint Meeting on Town Finances

1
Joint Meeting on Town Finances

• Board of Selectmen
• Finance Committee
• School Committee
• October 3, 2007

2
Agenda

• Review of Financial Responsibilities
• Presentation of 5-Year Forecast
• School Department Budget Concerns
• General Government Budget Concerns
• Next Steps

3
Financial Responsibilities
4
Financial Responsibilities
5
Financial Responsibilities
6
Financial Responsibilities
7
Timeline for Financial Plan

• September review trends update 5-Year Forecast
• October first Joint Board Meeting Capital
  Budget Documents distributed Fall Town Meeting
  to make budget adjustments
• November CIP requests due Operating Budget
  Documents distributed Tax Recap is prepared
• December CIP Budget is developed Town Manager
  reviews operating requests Tax Rate is set

8
Timeline for Financial Plan

• January Town Manager finalizes Operating
  Budget both Operating Capital Budgets are
  presented to BOS and Finance Committee
• February/ March Finance Committee reviews
  Operating Capital Budgets through public
  hearings
• April Proposed Operating Capital Budgets
  presented to Town Meeting

9
Timeline for Financial Plan

• June/ July State Budget typically passed with
  Final State Aid numbers (cherry sheet) New
  Fiscal Year begins on July 1

10
Review Trends-Evaluating Financial Condition

• Make use of a nationally recognized model- ICMAs
  Evaluating Financial Condition
• Review of historical data- FY2002 2006
• Revenue/ Expense Reports Audit Schedule A
• Adjust for inflation

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Review Trends-Evaluating Financial Condition

• Cash Solvency
• Budgetary Solvency
• Long-Run Solvency
• Service Level Solvency
• A government lacking service-level solvency may
  in all other respects be financially sound, but
  cant provide adequate levels of a service (i.e.
  fire or police protection, classroom size)
  without causing a budgetary problem.

12
Evaluating Financial Condition-Obstacles to
Measurement

• The nature of a public entity
• Profit is not a motive
• Efficiencies is only one of many objectives
• Objective can only be measured subjectively
• The state of municipal financial analysis
• Generally focuses on cash budgetary solvency
• Lack of normative standards (peer groups are
  fluid)
• The character of municipal accounting practices
• Systems stress legal compliance audit-ability
• Financial Statements track cash in out rather
  than cost of service as a whole.

13
Revenue Trends

• Revenues per Capita
• State Aid per Capita
• Local Receipts per Capita
• Uncollected Property Taxes
• Revenue Surplus/ Shortfall
• Noteworthy
• Uncollected Property Taxes have increased
  slightly
• Revenue Surplus is marginal at best

14
Revenue Trends
15
Revenue Trends
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Expenditure Trends

• Expenditures per Capita
• General Government Expenditures
• School Expenditures
• Employee Benefits Expenditures
• Debt Service Expenditures
• Noteworthy
• Per Capita Expenditures are constant however,
  both General Government and School Expenditures
  are decreasing (per capita)

17
Expenditure Trends
18
Expenditure Trends
19
Expenditure Trends
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Expenditure Trends
21
Operating Position Trends
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Operating Position Trends
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Trends Analysis- Conclusions

• Obviously nothing surprising in the data
• Revenue estimates are pushed to the limit
• Budgets are tight departments are expending a
  greater percentage of budget leaving little room
  to generate Free Cash
• Employee Benefits now consume over 15 of the
  Operating Budget, compared to 10 in FY2002
• Reserve Levels dropped 71 during this 5-year
  period

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Reserves

• Free Cash roughly equal to unreserved fund
  balance
• Stabilization Fund separate fund established by
  Town Meeting withdrawals require a 2/3 vote

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State of Free Cash Stabilization Fund
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Stabilization Fund
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Stabilization Fund
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Expenditure Summary- prior period
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Expenditures Summary5 yr Comparison FY08 vs FY03
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Financial Forecast-FY2009 - 2013

• Revenue Assumptions
• New Growth 900K in FY2009
• Ch.70 increase- assume 5-year phase in of target
  aid 50 per student thereafter assume declining
  enrollment
• No increase in Additional Assistance 2.5
  increase in Lottery
• 0 2 increase in all other State Aid
• 5.5 decrease in permit receipts based on current
  trend
• 5.5 decrease in Motor Vehicle Excise for FY09,
  then increasing 1 per year thereafter
• 2 increase in all other Local Receipts
• No draw on Stabilization Fund
• Sewer Enterprise continues to be self supporting

31
New Growth

• FY03 945,590
• FY04 851,197
• FY05 1,303,988
• FY06 1,471,243
• FY07 1,150,432
• FY08 1,100,000 (original estimate)
• FY08 1,050,000 (revised estimate)

32
Permit Revenue

• FY03 896,936
• FY04 802,742
• FY05 1,058,206
• FY06 871,441
• FY07 629,960
• FY08 900,000 (Budget)

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Motor Vehicle Excise Tax

• FY03 4,194,853
• FY04 3,992,040
• FY05 3,948,418
• FY06 4,781,801
• FY07 4,173,753
• FY08 4,650,000 (Budget)

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Financial Forecast-FY2009 - 2013

• Expenditure Assumptions- Fixed Costs Debt
• MRS assessment 9 increase per year, plus cost of
  ERI- 300K entrance into PRIT should help
• Health Insurance 10 per year
• Medicare Tax 4
• General Liability Workers Compensation 10
• Debt Service in accordance with existing
  schedules

35
Middlesex Retirement System

• FY04 2,894,333
• FY05 3,348,100
• FY06 3,869,473
• FY07 4,353,071
• FY08 4,760,613
• Five Year Growth 1,866,280 (64.48)

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Health Insurance

• FY03 5,112,450
• FY04 5,576,640
• FY05 6,401,752
• FY06 8,369,443
• FY07 8,979,794
• FY08 9,638,061 (budget)

37
Financial Forecast-FY2009 - 2013

• Expenditure Assumptions- Non Appropriated
• 10 increase in Charter School Assessment based
  upon enrollment trends
• Financial Audit cost increase plus need for every
  other year OPEB valuation
• Increase Overlay Account by 100K in Revaluation
  years

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Tuition Assessments

• FY04 731,164
• FY05 868,303
• FY06 801,534
• FY07 1,051,872
• FY08 1,319,211
• Comprised of Charter School, School Choice
  Essex County

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Financial Forecast-FY2009 - 2013

• Level Services General Assumptions
• General Government Personnel Costs increased by
  4 to cover both COLA and step and longevity
  adjustments per contracts
• General Government Expenditures increased by 2
• School Personnel Expenditures increased by a
  total of 8.65

40
Financial Forecast-FY2009 - 2013

• Exceptions to Assumptions
• 3 increase in legal costs
• 5 increase in Snow Ice costs
• 5 increase in Solid Waste costs
• 5 increase to all utilities, multi-year
  contracts expire at the end of FY09

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Forecast Summary
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Forecast Summary- Revenues
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Forecast Summary- Expenditures
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Forecast Summary- Expenditures
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Forecast- Expenditures
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Bottom Line

• FY09 Estimated additional recurring revenue
  of 2.5 million
• Level Service budget recurring
• expenditures of 4.5 million
• Shortfall of 2.0 million
• Does not include needs
• FY10 FY13 Deficit grows

47
School Department Budget concerns
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General Government Budget concerns

• Level Services falls short
• Fire Stations closed on a rotating basis for part
  of the year
• Not living up to Municipal Facilities agreement-
  3 positions
• No funding for seasonal help to maintain fields
  buildings
• DPW down 2 FTEs

49
General Government Budget concerns

• Department needs are not being met
• Police Department needs an additional 5 officers
  3 dispatchers to meet standards (179K)
• Board of Health needs 10 additional nursing hours
  per week to provide adequate service (10K)
• Veterans Benefits needs additional funding to
  aid veterans awaiting federal assistance to
  cover benefits for widows (70K)

50
General Government Budget concerns

• Department needs are not being met
• Library needs funding for computer replacement
  (25K)
• DPW needs additional funding for road salt (53K)
• Council on Aging funds 3 essential staff through
  a grant which is no longer available for that
  purpose also need a full-time social worker
  respite care coordinator (150K)

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Summary

• Projected deficit of 2,035,000 minimum
• Reserve levels at lowest point since 1995
• Service Levels in FY2008 are already below prior
  years
• No obvious places to make reductions
• Programs and services will need to be eliminated
• School/ Non-School consolidation needs to be
  re-evaluated
• No additional consolidation possible on
  Non-School side without significant investment in
  infrastructure
• Employee Benefit Costs continue to consume all
  revenue growth

52
Next Steps-The cost of providing level services
eats up all new tax dollars
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Next Steps
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Next Steps- Debt Service Peaks in FY2008
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Chelmsford Average Single Family Property Tax Bill