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.

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 detail, revenue detail for FY10 and FY11, the 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.

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

Every year at this time FinComm holds an organizational meeting.  They’re generally short and light on content.  This year was much more full as the first topic was the school budget overrun.  I arrived about 5 minutes late, and it had already started.  I noted that 4 school committee members were present, a few people I recognized, a few I didn’t, and even two people who appeared to be reporters.  Reporters at a FinComm meeting!  Wow!

Superintendent Dr. Kathie Bodie was talking, already started as I arrived.  She ran through some of the revenue target and expenditure misses that we were all mostly up to date on, including special ed.  She talked about the difficulties of knowing “where you are” in the budget because of journal entries out of grant funds into the general fund.  They started doing those in late May to understand where the budget was.

She talked about the position control and better accounting methods that are going into place.

She noted that some teachers get paid over just the school year, and some get paid the whole year, by their choice.  To pay that July and August salary, you roll money over from the ending fiscal year to the new year.  That rolled over money is rolled over and co-mingled with the new year (FY11 in this case) and summer school money.  She said that they “knew we were going to be short rolling over.”

They thought that with with belt tightening and projections improvements in FY11, that they could pay for that overage with fy11 money.  The auditor said they can’t do that mechanism, and  that leads to the need to the need for the special town meeting.  “We tried to solve the problem, the mechanism wasn’t acceptable, and so we need the special town meeting.”

School Committee Chair Curro spoke next and said “It was a big surprise to us as well as you.”  He said we worked on fy11, took eye off fy10.  He listed things being done including: process audit, organizational issues, system issues, self-reflection.  Recommendations by October 29

Finance Committee members then started asking questions.

The first question was about the system, and why it had worked in the past and broke this year.

I asked a series of pointy questions about when the problem was discovered. I wanted to know when it was clear there was a deficit, i.e. when they knew that they were using FY11 money to cover FY10.  That was never discussed during our budget meetings, so the timing is important.  Dr. Bodie said she knew that there was going to be “short rolling over” on June 11. But, that fact didn’t become public until August 26th.  I expressed frustration.  This is the part of the story that just can’t be explained away.  There is just no reasonable explanation for why this information took so long to be shared.  There are other parts of this problem, too, but few are as clear-cut.  On June 11th, she should have started a fire drill.  What she actually did was tell Al Tosti that things would be OK.

There was a question/discussion about how we actually know in September how many 12 months teachers there are, but we don’t encumber the money until June.  That has changed.  Discussion of how the practice is to roll over the balance at the end of the year- regardless if it is too much, or in this case too small. Too much is a “good” thing – gives you extra money for the coming year. That extra money is then your buffer.

There were a couple questions about if this Jobs Grant money could be legally used this way.

There were several points about how the FY11 budget is very tight. If we have another $400,000 special ed problem, we don’t have a way to cover it.   If there are shortages, we need to know.

There were discussions about special ed.

We talked about the need for better communications.

There were several questions about the FY10 budget.  There is no meaningful accounting yet of FY10 budget v. actual. Ruth Lewis is working on it. CFO is working on state numbers which is another slice on it. The CFO noted that the last fy10 budget v actual was in October, but discontinued because it did only 80% of the budget.  She went on to say  “and that was remiss. I should have put something in place and I didn’t.”  That was the first apology I’ve heard her say.  It’s a big step, to me.  Up until then, the dialog had all about what was hard and external factors that made it someone else’s fault.

There was a question about the school department’s FAQ that it released saying that the schools needed to “reduce their reliance on funding beyond the Town appropriation.”  We encouraged the school to get more grants, not less.  That FAQ was a head scratcher, for sure, but there were so many other things going wrong that I didn’t focus on it.  The FAQ essentially says, “stop doing grants, and get more money from taxpayers.”  It’s not a well-thought notion.

There were several more questions, but I’ve paraphrased them or linked them to ones above.  My bottom line is this: they knew they were in trouble in the fall of ’09, but didn’t have the wherewithal to track the problem and mitigate the problem.  Then, when the problem finally became more defined, they didn’t share the information in anything close to a timely fashion.  It’s an extremely disappointing performance from the leaders of our school department.

At that point the school people left (except Kathie Bodie, who stuck around) and most of the audience left, and the reporters left.  Which is kinda funny, because they walked out just before we talked about the pending $48 million deficit in the next 5 years, which really is much much worse.

Town Manager reviewed the pending 5-year outlook.  I took notes, but I’m too tired to copy them here.  See the FinComm booth on Saturday at Town Day, and we’ll give you a copy of the outlook.  I’m working the booth from 1:30 to 3.

We set the next meeting for November 1 and 3 in advance of the Special Town Meeting.

We re-elected chair Al Tosti,  vice-chairs Foskett, Fanning, and Jones, and secretary Peter Howard.

We have vacancies: pct 6, 11, 17.

We prepared for Town Day.

We talked briefly about Minuteman’s regional agreement.

We adjourned.

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

Our meeting for 2/10 was canceled by the snow-storm-that-missed-us.  Today was mostly about the Town Meeting warrant articles, with a few extras.

Our first hearing was the Vision 2020 (Jane Howard et al) and the DPW (Teresa DeBenedictis) asking for $15,000 for treatment for water bodies.  Back in 2006, Town Meeting (via home rule legislation in Article 24) created a special fund to manage water body expenditures.  The expenses are irregular – every 3-5 years there is a big sum.  Since then, the town has allocated $15,000 each year.  This year, they plan on expending $55,000 which would entirely drain the fund.  It was noted that the  Upper Mystic and Menotomy Park pond are done with private dollars; the $15,000 doesn’t cover all 7 water bodies.  After reviewing the details, the request was closer to $18,000.   There is unpredictability in the annual expense – but is there enough data to predict on the long term?  Yes on Spy Pond, but not enough data for the Res.  $150,000 every 10 years on Spy Pond is the rough number.  Donations were discussed, evidently received from all over town, with a cluster around Spy Pond.  Later in the meeting, we discussed and unanimously approved $15,000 for recommendation to Town Meeting. I was originally opposed to this special fund back in 2006, but it has exceeded my expectations.  I voted in favor of this recommendation.

The second hearing of the night was on an Uncle Sam market study.  Laurence McKinney spoke for several minutes.  He is asking for $2500 to do graphics and make some prototypes to put in stores.  Promises money back in 2 years with profit.  Did not have a budget or outline of how the money would be spent.  He was asked if he went to the Chamber of Commerce – he had not.  There was a later discussion about coordination of the various town tourist activities, and the article was tabled. I expect that I’ll be voting against any money in this area.  The pitch was all about seed money for tchotchkes.  Find a private investor!  If there’s profit here, great.  The town isn’t in the business of seeding businesses.

The third hearing was on restoration of trees on Summer Street by the rink.  Jeanne Leary spoke and provided before and after pictures of the trees.  Summer St reconstruction took the trees down.  Cut down 1000 treas in 2 days.  Now there is no barrier between rink/fields and neighbors.  She complained of two lit fields during spring/summer until 10pm and later, hockey rink until 1am. She reported multiple police complaints.  She has tried Sens. Havern, Marzilli, and Donnelly.  Rep Garballey tried and almost got $100,000.  She found $46,000 in trees that the contractor missed, but Park and Rec put them in McClennan instead of at the rink.  Some money has come from the Town Manager and DPW, but not enough.  CDBG said no.  So they are trying warrant article.  Town took the trees down – not state – so we can’t go after them.  We discussed this and there was hesitancy to set the precedent of FinComm involvement at this level.  We agreed to talk to the DPW and Town Manager, consider funding sources, and tabled it for now.

Al Tosti reported on community budget meetings.

Feb 22nd is next Budget and Revenue Task Force meeting.

Al reported there is a 5 year plan draft coming.  I was surprised to hear this.  This will be tough to do without a real plan to get into the GIC.  I’d been assuming that we’d do FY11 without a 5-year plan, and try again next year.

We reviewed the warrant in detail and identified articles that we wanted to have hearings.  Articles that might have interesting hearings:

• Asking for home rule legislation to help get the unions to agree to the GIC
• State law changes on pension funding might have big impact
• Sale of schools – depends on School Committee.  It was noted that some people want to sell the schools and use the money to pay for this year’s operations.  That sounds totally insane to me – you just don’t use capital to fund expenses!  I hope that was just bad information.
• We agreed to hear about changes to the dog rules.
• We agreed to have a hearing about proposed changes to Selectman compensation
• Vacation rollover.  If you need a vacation extension, who would approve it?  Maybe FinComm.
• Minuteman.  There are many questions about the capital proposals.

We voted 5 committees and commissions – level funded.  Asked for more info on recycling.

We discussed the annual vote to increase pensions to 50% of the current position.  There are several questions about this that haven’t been raised in past years, and we’re investigating further.

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

Monday was the Arlington Budget and Revenue Task Force meeting; tonight was the first Finance Committee of the year. I have a notes from both here.

At Monday’s meeting, it started with better-than-usual news that the Governor’s proposed budget had more money for Arlington than originally anticipated, and a couple other numbers had updated in the right direction. In total, the town is $2.5M better off next year than it thought. That’s still a bad year, but not as bad.

The most interesting part of the meeting was watching the Town Manager and Annie LaCourt grill the state legislators (all four were there) about how they’d help Arlington get into the GIC. The Manager is proposing a home-rule petition that will force the unions into the GIC if certain conditions are met, specifically if we get an actuary to certify that the employees are actually getting benefit at the end of the day. If we get the actuary to say that the deal is a financial win for employees, we’d force them into the GIC. Annie asked them yes or no if they’d help us. Will Brownsberger said yes – not an ounce of ambiguity. Kaufman and Garballey both said a lot of words that might have been yes, but there was a lot of “no” in them too. Donnelly thinks there should be an arbitrator – a death knell if there ever was one. When pressed, he agreed to the Manager’s home rule proposal. I frankly doubt he knew what he was saying. Given his past statements on the issue, I would be shocked if he actually agreed.

The second most interesting part of the meeting on Monday was the school department. They said that their deficit was reduced from $6.8 to $4 million. At that level, they might lay off 25% of the teachers. Other members of the task force pressed for more detail, specifically around snow removal costs, substitute teachers, grant money, and declines in fee revenue. The details were unavailable. My read on this is that the school numbers are weak. Very soft. Not on solid ground. Example: they say that the snow removal costs will cause cuts in ’11, but are unable to say how much they paid for snow removal in ’09. Really? It just started snowing this year? I’m betting that it’s always been paid for, they just haven’t figure out which bucket it came out of. The question then becomes, why are they circulating such weak numbers? I think there’s a few things going on. First off, it’s a brand-new CFO, and she’d rather be more conservative than not. Second, it’s an interim Superintendant, same conservative bias. In that case you’d hope the School Committee would call them to task and ask them to be more realistic in their predictions. Sadly, the school committee is paralyzed by other issues and doesn’t have the political will to challenge the numbers. The result is some very scary numbers that I think will not be sustained in future, more detailed budgeting.

For the last several years I’ve been pushing to change the way budgeting is done in Arlington. I’d like to explain my proposal, argue why it is a better process than the one we have today, and make some points about why now is a very good time to make the change.  (This is only about budgeting expenditures, not revenues.)

First, let’s look at the current town budget, in rough numbers. For the sake of example, if the budget was under $1 million, it got lumped into another budget. (You can see a much more detailed version of the FY10 budget here).

Those two last line items are not like the others. I know what the DPW does.  I know what schools do.  I know that the capital budget buys buildings and trucks, and I know the MBTA runs buses in town.  But pensions and insurance are different. They’re not a department, or a service, or a town activity. These two line items are different because they are an aggregation of costs that are incurred in other budgets. The insurance is the cost of providing a current health insurance benefit to our town employees and retirees. The pension is a combination of current and future obligation to provide a retirement benefit for our town employees.Pensions and insurance are related to all of the other line items, but they are secondary, not primary, to a town function.

So what drives the size of pensions and insurance?  Basically, it’s the number of town employees, and the amount of money they earn in wages. The town spends a bit more more than $50 million in wages. That $50 million number can’t be determined from the budget information I posted above; I did a back-of-the-envelope calculation from the various departments’ budget details.

To put it another way: for every dollar the town budgets for wages, it must also budget another $.50. For the purposes of this proposal, I’ll call those numbers “salaries” and “overhead.”

This is the root of why I don’t like the current budget process. Say you’re the Police Chief, and you’re looking a tough budget with unpleasant choices. You’d like to hire an additional patrolman, and you manage to scrape $50,000 out of your expenses budget in order to make it happen. That didn’t leave any budget for the $25,000 in overhead. A different example: say you’re the school Superintendent, and you’re trying to find a way to keep class sizes small in your biggest elementary class. You can’t fire any kids, but you can hire a couple more teachers – you forgo some text books, delay a network upgrade, and find the $100,000 in your budget to hire those teachers. Again, that didn’t leave any budget for the $50,000 in overhead for those new teachers.

I know we hire smart administrators in Arlington. I am certain that the people making these hiring decisions know that the employee benefits cost money. Still, the current budget process doesn’t provide any incentive for them to account for it. Their professionalism keeps them from taking advantage of the system. But when the toughest decisions are being made in the wee hours of the morning, when the edge cases are being decided, they have the luxury of making the overhead cost someone else’s problem. I’ve been on the Finance Committee for five years now, and I know that it happens. I interview the budget writers, I quiz them on their decision process, and I know that it happens. This statement is not meant to blame the town’s administrators. “You get what you measure” is one of my favorite aphorisms. We measure our administrators to deliver services on a limited budget, and we can’t hold it against them when they do that with some creativity.  With our current budget process, the cost of that creativity is hiring decisions that don’t account for the full cost of the employee.

So here’s the alternative. Reshuffle the budgets such that overhead is included in each departmental budget. Apply the cost of the health care and pension at the same place that it is incurred, right with the salary. Here’s what my new budget would look like, roughly (the by-department overhead budgets are very rough estimates):

Some key points about the model:

• It’s a net zero-budget change. This doesn’t make any changes in service levels, doesn’t move money from one department to another, and doesn’t save any money (at least not in and of itself).
• A few people I shared this idea with were concerned that it would be a health privacy (HIPAA) violation to print what insurance various employees are getting. I’m not suggesting that we do that. I’m suggesting we use average healthcare and pension costs, based only on salary and other already-public information. Departments don’t get charged for their individual employee health care decisions. They get charged for the average cost, multiplied by the number of employees.
• Computationally this is pretty easy. At the start of every budget cycle the Town Manager (or Comptroller or Treasurer or whomever) would publish that year’s overhead rate, and every department would get it in their budget spreadsheet.
• The insurance budget is always a difficult one to predict, not least because the town sets the rates in December, halfway through the budget cycle. This plan doesn’t help or hurt that risk. It still needs to be managed.
• No overhead is charged when there is no salary paid.  That’s why budgets like the capital budget would be unaffected.

There’s another interesting side-benefit to this method.  The town’s labor contracts are negotiated in two chunks, one by the Town Manager and the other by the school Superintendent.  The current system doesn’t really reward a specific budget when there is a negotiated health care savings.  The new method would permit the parties to come to an agreement that is more specific to the union in question.  If the firefighter’s union wishes to trade higher salary for a smaller health benefit, the new budget system would be able to accommodate that.  Likewise, if the teacher’s union wishes to negotiate a lower salary for a larger health benefit, that isn’t difficult to place into the budget.  This idea isn’t core to my proposal, but it’s worth mentioning.

I’d also like to make the case that now is a better time than any other to make this change:

• We’re going into the next year without a five-year plan. If we change the budgetary rules in the middle of a planned period, we’d also have to update the plan, and that is contentious. By making this change now, we get to tackle the challenges separately.
• The town is already in an introspective period. The Town Reorganization Committee is already meeting, and this is a perfect topic for it to consider.
• The town’s budget process is already changing. Nancy Galkowski has been the budget’s shepherd for a long time, and she has moved on to a different job. The process is certain to change as a new cat herder is brought to the process.

This overhead-based budget process brings the true costs of hiring closer to the hiring decision. Our town budget makers will be reminded of the actual cost of hiring at the time they make their budget. Armed with that information, they can make the best, most-informed decision in the town’s best interests. Now is the right time to make the change.

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.