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Finance Committee Nov 3, 2010

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

Chairman Allan Tosti opened the meeting and ran through the agenda.

Article 5 – GIC Special Legislation – Deputy Town Manager Adam Chapdelaine explained that significant progress had been made on the GIC negotiations with the unions. He thinks the GIC legislation envisioned in the warrant article would have a negative effect at this point on progress, so he’s looking for a recommendation of no action. If the ongoing negotiations were to get stuck, there is still time to modify the recommendations. On questions, he noted that if the savings are larger than anticipated, the employees and town split the benefit. If the savings are smaller, the town swallows the cost. Moved for no report at this time, and passed unanimously. There’s a bit of subtlety here that FinCom voted no report at this time rather than no action.  If anyone is paying close attention, what we’re saying is that we have an eagle eye on the current negotiations, and we want to keep our options open in case there is a last-minute collapse in negotiations like there was last year.

Article 4 – Stratton Project Adjustments. Since the last town meeting there have been some changes both up and down in cost that largely wash out.  If there was no special town meeting, we’d be asked to approve Phase 2 in April.  Instead, they want to advance the authorization to buy some capital items with long lead times from the summer to the winter, enabling them to get the project going sooner. The actual bonding of the money will still be next year, so the cost is the same; it’s just earlier authorization to get the long leadtime items rolling.  After discussion, approved unanimously.

Article 2 – Revising Budgets Tosti presented a draft motion that accepted the school department’s proposed reduction in budget, thereby resolving the FY10 deficit.  It was discussed that the proposed school committee budget depends upon a 65% increase in non-taxpayer revenue (fees and offsets), $2.8 v $4.6 million; those areas are the same areas that failed to meet budget last year.  It was noted that the proposed budget was actually $777,000 larger than last year.  (See pages 16 an 17 of this PDF from the CFO) It was also noted that there was no built-in reserve for either a failure to meet revenue targets or for managing the volatile special education budget.  Overall, the budget appears to be very aggressive and very fragile – there is no place to adjust if revenue or expenditures miss their targets, and we know from last year that both are hard to predict. Steve DeCourcey moved to reduce the school budget by an aditional $377,000, add that sum to the reserve fund, and strongly suggest the school department create the $400,000 reserve the CFO and Superintendant requested last year.  The motion would have the effect of passing a budget that is the same size the original FY11 budget, plus a $400,000 reserve.  There was an extended discussion about special education and the Bridge the Gap funds.  Paul Bayer moved to reduce the school budget by $177,000 (that is, a budget $177k less than the school committee request, but a budget larger than DeCourcey’s cut of $400k), and put the $177,000 in the reserve fund, and appropriate $200,000 from tip fee stabilization fund to the reserve fund. There was an discussion about the three proposals. At first, I wasn’t in favor of additional cuts to the school budget, but I was partially won over by the discussion.  First of all, it’s clear that the school department has been bad at budgeting and even worse at managing the budget as it proceeds; there is little faith that the newly proposed budget is better than past ones. Second, it seems likely to me that there will be another special education cost shock this year; we’ve seen so many that there is no reason to think this year will be different.  We need to be ready for it.  Third, I agreed that the Finance Committee needed to take leadership in school budgeting to prevent future overruns.  We need a reserve, somewhere, to handle that.  The reserve fund is, was, and will be available to the school department, but we need to increase it in size to be better prepared for special education cost fluctuations. DeCourcey’s motion failed 3-12. Bayer’s motion was approved 12-5. It was noted, half in jest, that this proposal will be unpleasant for both the Superintendent (lower budget) and the Town Manager (use of one-time reserve money).

We discussed the FinCom report to Town meeting  We discussed the Power and Sullivan auditor report. We discussed the school department’s failure to disclose the deficit. We approved a general draft of the recommendations.

Article 3 – Thompson School Land Swap – We discussed the proposal to swap the land at Thompson.  There was discussion of the drastically increased risk of the option.  The unlikeliness of success was discussed.  The increased cost ($2m) was discussed.  In general, the committee would prefer a different third option. Unanimous recommendation of no action.

Article 6 – No action. We think Article 2’s recommendation covers this.

We voted to transfer of $50,349 from the reserve fund to cover the unwelcome increase in payment to the retirement fund, caused by slow action of the state legislature.

Approved minutes of 9/22 and 11/1.

Adjourned.

Comments

Comment from Denise burns
Time: November 4, 2010, 12:59 am

Thanks Dan…the governor has held the tuitions at special ed outplacement schools to zero percent this year in an effort I applaud to reduce the pain of unfunded mandates. I believe the school budget budgeted as if these tuition costs could still go up. That is your reserve.

Comment from Len
Time: November 4, 2010, 10:48 pm

The school budget cut really makes no sense. Where do you expect the schools to find this $177k? They are going to need to make painful mid-year budget cuts now to put money into a reserve which is very unlikely to be used. There needs to be a reserve fund, but it should not come out of this year’s school budget.

Comment from dunster
Time: November 4, 2010, 11:02 pm

@Denise – I’m not sure about those tuition details. I’ll definitely inquire.

@Len – thanks for the comment. I agree that the mid-year budget cuts will be painful. However, they’re necessary – it has become clear that the school department made poor budget predictions last year, and there are strong indications that this year has the same errors. That makes the budget cuts necessary. You’re right that they’re painful – but they’re required if we’re going to avoid a repeat of last year’s failures.

Also, your suggestion that the reserve fund is unlikely to be used is contradicted by history. In the history of lean budget years, that reserve fund is regularly spent down to the bottom.

Last year the school department experienced $800,000 in unexpected special ed spending. The $377,000 in reserve funds created last night only blunts the anticipated problem. It doesn’t resolve it.

Comment from Michael Ruderman
Time: November 5, 2010, 3:22 pm

“Article 3 – Thompson School Land Swap…There was discussion of the drastically increased risk of the option. ”

Dan, while I wasn’t at your FinCom meeting, I’ve been working on the Thompson rebuild issue since 2005. I don’t see the land-swap option as inherently more risky than the other construction schemes. In particular, it’s a means of avoiding having to cram one school’s population into the “resource spaces” (gym, music and art rooms, libraries) of others, with detriments to the curricula of all.

Do you have notes on what struck the FinCom as “drastically increased risk”? With thanks,

Comment from dunster
Time: November 5, 2010, 3:33 pm

Hey Michael – the risk was two things, both related to digging. 1) We’ll have to dig up the fields, and the experience is that whenever you dig, you find very expensive things that have to be cleaned and 2) We’ll have to make the Thompson plot of land clean enough to be a playground, and we know that whenever we dig we find expensive things. In specific, we know that Thompson had an oil spill. We fear we’ll have to go 8 feet deep in order to clean it good enough to become a playground.

Comment from Jane Connor
Time: November 5, 2010, 4:26 pm

Dan, Thanks for your always useful notes. Another question or two (ok, three) (well, maybe 2 plus a practice rant!) about the Thompson swap: (1) Do we have any reason to think something unfriendly is under the field? Or are we just assuming worst case? (2) Isn’t it fairly simple, and even rather quick, to do some core samples (or whatever they’re called, digging up tubes of dirt to see what’s there)? (3) Our kids (my daughter!) is currently going to school on top of that oil spill. If it were, oh, say, some other school, wouldn’t the spill have already been remediated? (Sorry for that last bit of irrational rant, but as a Thompson parent, I get tired of my kid and her friends having gotten the short end…. You should hear what they say when, after a soccer game, they get to play on the cool equipment at the Bishop playground…. There’s a lot more just under the surface of this than gunky dirt.) We Thompson parents have become a cranky bunch 🙂 That third option is crucial. Without it, our kids will get bussed for two years, and the other schools will not have their art, music, gym for two years. Surely no one wants that to happen?

Comment from dunster
Time: November 5, 2010, 5:25 pm

Hello Jane,

1) No specific reason to think there is something under the field. However, our building experience is that it is common – more often than not, and on, I think, every school we’ve dug up.
2) I’m not an expert, but I understand that the sampling reduces your risk, but isn’t accurate enough for anyone to be sure.
3) There’s more than one thing under your #3 😉 I don’t think it’s true that another school would have different treatment in regards to the oil spill. There’s always a risk involved in digging up bad things, and you avoid it if you can. When you’re renovating/rebuilding that’s the time that you really have to do it.

I totally agree we need a third option, and I totally agree that Thompson should be fixed. What I’m not convinced is that we’ve got the right three options on the table. In balance, I’d rather wait a few more months and spend $40,000 on a better third option than spend extra millions on a bad option. (And, really, it’s not a valid option – it will simply never get the approvals it needs, it’s more than a long shot).

I don’t WANT your kids to be bussed, but I’m also sensitive to the costs of the rebuild. The bussing worked for the other schools, and it seems like it should work for Thompson.

I’ll repeat what I said before, just because I’m saying some unpopular things: I agree, we need to fix Thompson. I know that the things I’m saying will make that fix happen farther in the future, and I know that is frustrating. I regret that.

Comment from dunster
Time: November 7, 2010, 3:59 pm

In private email, I was reminded of another risk of the land swap that was discussed: there’s the risk of spending money on the 3rd option, to have the land swap be vetoed by the “Article 97” money, the state/federal approval. It’s possible that Town Meeting could say yes, the MASB would want the land swap option, and then the land swap fail. Arlington could be left holding that planning bill, but still have no improved school.