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Finance Committee November 1, 2010

Black text is mostly objective, red text is mostly subjective in nature. I’m in a hurry tonight, and these notes are more “raw” than usual.  Please ask questions in the comments, and I’ll go into more details.

Note that we did not finish our business tonight, and we will meet again on Wednesday at 7:30 in the 2nd floor of Town Hall.  We had a 2.5 hour hearing tonight and didn’t vote on a single article.  I think this points to a 2-night Special Town Meeting.  If FinComm needs 2 nights, Town Meeting probably will too.

Chairman Allan Tosti gave an agenda review.

Article 2 – Budgets – School Committee Chairman Joe Curro opened.  The MASBO report on the illegal expenditure over budget just came this weekend; the School Committee has not reviewed it yet.  The budget subcommittee, Leba Heigham, Kirsi Allison-Ampe, and Jeff Theilman, is reviewing it.  The report was given to FinCom.

Superintendant Bodie reported that School Committee has approved the revised FY11 budget. She spoke about avoiding the problem in the future. One important part is to have better tracking of where we are.

CFO Diane Johnson was next. FY10 was both over expenses and under revenue. Tracking system was insufficient – worked in good days but not in bad. She reviewed the new way of looking at the budget. The first way is by cost center. There were two other ways, but printed copies of the other two views were not available.   The budget summary number was also not available in printed form. (budget detailrevenue detail for FY10 and FY11the presentation given at School Committee)

There was a questions about FY10 actuals. Johnson says that she can’t reconcile FY10 actuals v FY11 budget because of the change in the chart of accounts. There was a question about the FY10 overages and how it is displayed.  I asked about the presentation to Town Meeting.  The presentation has been discussed, but not written.  I’m disappointed, again, by the presentation from the School Department.  The handouts provided were incomplete and confusing. The amount of money being requested was not in writing.  We are two weeks away from Town Meeting, and there is not yet a draft of the presentation to be seen.  The level of preparation was insufficient.  In a situation like this, you’d expect the opposite – over preparation, and certainty that every t was crossed and every i was dotted.  I’m concerned that Town Meeting will be lost in a sea of confusion, and it will take us days to get to a resolution.

There was another, stronger request to see FY10 broken out by category. Again, the school department said that it couldn’t provide it.  Paraphrasing Steve DeCourcey: “You said in the 2010 presentation that you would spend $45 million. You’ve provided a report that details $38 million in expenses from the general fund. There’s another $7 million in grants, fees etc.  How come you can’t show how you spent the other $7 million?”  Steve makes an excellent point.  I’ve talked it over with a few finance professionals, and they all answer the same thing.  “Changing the chart of accounts is hard, but there’s always a way to generate that report.  Even if you have to stay up late with Excel.”  It is incredibly frustrating that 4 months after the fiscal year closed, we still can’t generate good reporting.

Tosti pointed out some of the numbers that may be accurate, but because of the way they are phrased, don’t seem to match. For instance, the School Committee voted a budget, and Town Meeting voted a 2nd budget that was different. The Town Meeting number is the one that matters, it’s the appropriation – so use that one, not the School Committee number.

Johnson reviewed the confidence level in each line of the fees, revenues, and offsets.

When asked how conservative the budget was. Johnson reported that revenue was conservative, but has come in better than expected over the summer. She said the reserves for this year were insufficient. If another few special ed kids move in, we’d notice it and make a change. That might involve cuts.

There was significant discussion about the Powers and Sullivan audit report, and that the School Committee needs to include the recommendations in its deliberation.

Gordon Jamieson via phone to discuss Article 6. He thinks we should have a reserve fund on the order of $1-$1.25 million.  He did not offer a basis for the number.  He thinks we should use the current reserves and appropriate them into a school-wide reserve fund. Despite repeated prodding, he didn’t have a specific suggestion. There was discussion about whether the School Department could make requests against the annual reserve fund. The general opinion was that it could. I’m still confused by what Gordon was trying to accomplish.  There was no proposal, just that we should “assess risks between now and the 15th.”  In the absence of a proposal, there’s not much for us to vote on.

Article 3 – Thompson Land Swap – Jeff Theilman went through the Thompson rebuild presentation. He reviewed the MSBA process. The School Committee is seeking to keep a land swap at Thompson as an option. There were rough estimates of cost of the three options: $32M on option 1 – addition w/renovation (total back $14.9M). $32.9 option 2 – tear down and rebuild, same place (total back of $15M). $33.9M on option 3 – build on the fields, then tear down and rebuild a park, (with $15.3 back). On and 1 and 2, tack on $500k+ for relocation of students.

There were sharp questions about whether this really is a viable option – it’s expensive and more risky. There were questions about drainage.  I asked what happens if Town Meeting votes no.  The answer isn’t clear.  After further questions, they probably go to the MSBA with a weakened third choice.

I asked for the actual language of the vote – it was not yet available.  We need it in order to vote on Wednesday.

On Wednesday we’ll discuss Articles 4 and 5.

Comments

Comment from Susan Maltz
Time: November 4, 2010, 8:21 am

No comment except to say I was delighted to read these notes, both red and black, so clearly presented. Thanks!
Sue

Comment from Andy
Time: November 4, 2010, 9:22 am

You might find this useful. I googled “MASBO” and “Arlington” and found this link which contains the MASBO report. Interesting reading!

Comment from Gordon Jamieson
Time: November 5, 2010, 4:46 am

Dan

First off .. As I noted during the hearing Art 6 was submitted to (as I noted Monday) to insure the maximum flexibility for town meeting members on the 15th

Second .. You (and apparently others) clearly misheard my recommendation .. I recommended (I believe more than once) that we need to have a reserve fund $1M larger than the one voted last spring to insure that we do not have a budget issue in the spring when we expect to be prosecuting and override

Third .. This was based upon facts which I related to fincom during the call/hearing .. The recommendation was based upon the simple fact that SpEd costs have increased at a rate ca. $1.25M per year greater than was provided by the 5yr plan rate of 4% .. And this as you probably realize has greatly impacted RegEd services

I expect a similar increases in SpEd this year above those permitted using 5yr plan logic .. In that the school dept has (to my understanding) effectively drawn down any remaining reserves to zero the risk for a Springtime deficit is real

So given the lack of reserves, the SpEd cost increase issue et al I noted (I thought clearly) that just simply resolving the issue and acting like all was good was most inappropriate

Hence my request to increase the reserve fund by ca. $1M to $1.6M

Next .. As for a source of funds for the $1M .. The tip fund is a logical place given that the town side has over six years used ca. $1.5M more from that reserve than was originally proposed by the Lyons plan

Since the schools did not benefit in a similar fashion (see V2020 FRTG report and presentation that I provided to you at most recent BRTF) then it seems only fair for that to be the source of the $1M of additional funds to be placed in the FY11 ‘Fincom’ Reserve Fund

Lastly .. As for something to vote on there was hope expressed by Al and others (beforehand) that something could be worked out within the context Art 2 .. I ‘left’ the hearing with the hope that fincom would vote to increase the reserve fund by the $1M (to $1.6M) which I proposed within the constraints suggest by John Deyst and which I had endorsed before signing off

That did not happen .. I feel that fincom lost sight of the important issue during its discussion of the articles of insuring that this does not happen again while we are prosecuting an override and instead felt that fincom acted in my opinion defensively (i.e. defensively of fincoms failure to identify the impending shortfall .. which could have been readily identified over 6 months ago if anyone was doing some trend analysis .. and not budgetarily defensively as they should have)

The net result was that fincom (at least some members) felt a need to extract a pound of flesh vs. focusing on the problem beyond what happens on the 15th

In summary, had the fincom motion been to increase the reserve fund by $400K (tip fund) then I would have been more supportive of the final motion reported out of fincom despite it still being insufficient in my opinion

So as it stands I see the action as (i) insufficient and (ii) forces yet another reduction of services mid-year after a huge reduction in force year to year between FY10 and FY11

Gordon