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Finance Committee – First Meeting FY11

Black text is mostly objective, red text is mostly subjective in nature.

Tonight was the annual organizational meeting of the Finance Committee.  It’s often an interesting meeting because you get to hear updates on everything that has happened since Town Meeting – a digest of the last 4 or 5 months.

Town Manager Brian Sullivan and Deputy Town Manager Nancy Galkowski reviewed the five-year budget projections.  The revenue for FY11 (the fiscal year that starts in July 2010) is projected to be $2 million (1.8%) lower than the current fiscal year. The biggest revenue decrease is the savings account from the 5-year plan.  The 5-year plan included $2.7 million from that savings account for FY10, the fifth year of the plan.  That’s a structural deficit that carries into FY11, and there’s only $1.3 million left in the bank, meaning a $1.4 million drop in revenue.the next biggest chunk is a forecasted decrease in state aid ($1.2 million).  This is an excellent time to remember that the town lost a million dollars from the savings account because the Treasurer invested the money in the stock market.  Wouldn’t it be nice if he’d followed basic financial prudence and invested that money in something safer?  Wouldn’t it be nice if the town’s revenue drop was 50% smaller?  I’m reminding you now, and I’ll keep reminding you as we go forward.

The next biggest decrease is in unencumbered funds, aka free cash; that is a result of a tighter budget in FY09 that were spent to their max, leaving less money turned back to the town at the end of the year ($900,000).  The end of the federal stimulus money is the next biggest at $469,000.  The regular property tax increase of $2.1 million is not sufficient to cover all the decreases mentioned, and the result is $2.0 million in lower revenue.

We then reviewed the anticipated appropriations for FY11.  General expenses were anticipated to increase at 4%.  There was no general salary increase included, but there are the usual steps and longevity increases, for a 4% increase.  Insurance (including health care) is expected to increase 8% (the bids for half of the year are already in, so that’s a fairly solid number)  After a bunch of other relatively minor changes, the result is a 2.19% ($2.5 million) increase in expenses.

If you’re quick with the math, you can see that is a $4.5 million deficit.  The town has to balance the budget.  The manager also provided a version that closed the deficit by reducing the town and school budgets by 2.85% (a swing of 6.85%, from +4 to -2.85).  He took the money out of salaries, meaning layoffs.  The manager said that was a layoff of 100 people, but I think that is a bit exaggerated – by my math it’s closer to 70.  Still, a very big number.

Two key questions in the budget are pensions and the GIC.  The retirement board has seen huge losses in the fund; they could drastically increase the amount the town must pay and the town will have no choice but to pay.  The manager is waiting for a state commission’s report in November.  That will help the retirement board judge its options.  The GIC is the state health care system.  If the town and the unions can agree to enter the GIC, that could be a large decrease in health insurance ($2-3 million).  The deadline is December 1st.

After the budget, the manager answered a number of questions.

  • The Symmes property may be sold shortly.  The deal involves both JPI and the bank taking losses and selling to Tremont Capital.  We should know in a month or so if that goes through, and maybe even some foundations being poured this year.
  • The Brighams property is under study by a developer with an option to buy.  They are looking at residential uses.  The town initially wanted commercial, but they’ve since received advice that grouping commercial properties is best, and the Brighams property is too far from other commercial areas.
  • CVS project is moving.
  • The next step in the Mass Ave project is a state hearing.
  • The Mugar property is being reviewed by a developer who has an option on it.  The developer is doing site study that might demonstrate that parts of the land are above the flood plain.  The plan might include putting some buildings on stilts.  The analysis is ongoing.
  • There have been some regionalization talks, particularly around the health department.
  • There is a draft report on the Parmenter and Crosby schools.  There should be more public information in a month.
  • The police department is managing the 8 vacancies brought by the change in retirement plans.  The hiring freeze is still in effect.  The manager is considering hiring for 2 or so of the 8 vacancies.  The town did not get the federal grants hoped for during the spring budget meetings.

The manager left and we moved to the Special Town Meeting scheduled for November 16.

The first question is whether the town should accept the local option and increase the meals tax by .75%.  The result would be about $200,000 in revenue.  Somerville, Cambridge, and Boston have already done the increase and Winchester, Lexington, and Burlington are likely to do so.  Al Tosti strongly endorsed it, saying that state lawmakers were likely to not give more money if the towns don’t do the tax increase.  I argued against it, saying that the state has mis-managed the revenue from the beginning.  I did  not want to give those lawmakers the political cover they were looking for.  FinComm endorsed the new tax 14-1.

The hotel tax was next, an increase from 4% to 6% for $70k in revenue.  Also approved 14-1.

A few more items were discussed:

  • The special town meeting has 2 alcohol votes and a change to the town reorganization committee.
  • If there’s going to be an override, it has to come from the selectmen.  There is still information and outcomes to wait for (like the GIC). Pay-as-you-throw is also sure to come up when the DPW reports.  A five-year-plan style override would be more than $9 million, more than 50% bigger than the last one.
  • Minuteman High wants renovation money.  I pointed out that we are at a key point to ask for changes to the organizational structure for the school.
  • The schools will look at a draft budget in November, earlier than usual.
  • The question of how to choose a new superintendent is in flux.
  • With the pension reform bill, only assessors currently qualify for pension benefits.  If their pay is dropped from $5200 to $4999 they are no longer eligible.
  • The town reorganization meeting was discussed.

The Finance Committee discussed changes to the vacation policy so that it can no longer be accumulated  indefinitely.

We re-elected our same officers, with Al Tosti as chair, Charlie Foskett, Alan Jones, and Dick Fanning as vice-chairs, and Pete Howard as secretary.

We have vacancies in Precincts 6 and 11.