BOARD OF FINANCE
DECEMBER 20, 2005
REGULAR MEETING
1. CALL TO ORDER
The Regular meeting of the Board of Finance was called to order at 7:04 P.M. in the Conference Room D-172 at Simsbury High School. The following members were present: Chairman Paul Henault, Peter Askham, Candace Fitzpatrick, Nicholas Mason, Anita Mielert, and Kevin North. Also present were Finance Director/Treasurer, Kevin Kane; BOE Business Manager, David Holden; School Superintendent, Dr. Diane Ullman; First Selectman Tom Vincent; Town Assessor, David Gardner; Director of Administrative Services, Brandon Robertson;
Board of Education Chairman, Richard Hogan; and other interested parties.
Mr. Henault extended a welcome to newly elected Board member, Anita Mielert.
APPROVE MINUTES
Mr. North made a motion to approve the minutes of the November 15, 2005 Regular Meeting and Mr. Askham seconded the motion. The motion passed 4-0 with Mr. Henault and Ms. Mielert abstaining.
Mr. Askham made a motion to approve the minutes of the November 30, 2005 Special Meeting and Ms. Fitzpatrick seconded the motion. The motion passed 5-0 with Ms. Fitzpatrick abstaining.
3. ASSESSOR UPDATE
Mr. Henault asked Mr. Gardner to provide the Board with an update on grand list growth and the next revaluation.
Grand List Growth
Mr. Gardner provided the Board with a memo dated December 20, 2005 regarding the estimated 10/1/05 grand list growth (Addendum I) and the 10/1/07 revaluation timeline (Addendum II), noting that final totals will be known by January 31, 2006.
The total estimated increase in grand list at this point, according to Mr. Gardner, is $35,500,000, or a 1.8% increase over the 2004 grand list.
Revaluation Timeline
Mr. Askham asked if some money had to be reserved for the revaluation and Mr. Gardner indicated that it did. Mr. Henault asked what the cost was for the last revaluation and Mr. Gardner responded that is was $400,000-$450,000, but that the last revaluation involved a physical review and the next revaluation will be a statistical review.
Mr. Fitzpatrick asked if Mr. Gardner knew the difference in cost of the two types of review. Mr. Gardner responded that he thought the statistical review would cost less than half of a full measure review. Mr. Gardner indicated that timeline provided (Addendum II) showed that bids are usually solicited in the spring, but that it might be beneficial to put the request out earlier. Mr. Henault suggested that would be a discussion to have with the First Selectman as to where to put that in the budget.
Mr. Askham inquired as to what the grand list growth was the year before. Mr. Gardner thought that it was about 1.3%. Mr. Askham also asked if there were any more court cases or pending reductions and Mr. Gardner indicated that there was nothing sizeable pending.
Mr. Mason asked what the range involved in Mr. Gardner’s estimate was. Mr. Gardner responded that the personal property figure is currently known, but that more field work is needed to finalize the real estate figure. He felt that his estimate was not ultra conservative, but is probably reasonably accurate, although the range could be 1.7%-1.9%.
Mr. Askham asked how the listing of building permits issued with approximately $24, 0000,000 commercial and $13,000,000 residential reduces down to only a $21,000,000 increase in real estate growth. Mr. Gardner responded that the assessment is at 70% and that there is not always a dollar for dollar increase in assessed value with a renovation.
Mr. Mason wanted to know if Mr. Gardner had any estimate as to how much grand list is not accounted for, as he is under the impression that there are people selling their houses and, in the process of the real estate sale, it is found that there are decks, pools, etc. that are not on the grand list and he was wondering how much the grand list could potentially be understated. Mr. Gardner thought the percentage was small and that much of these omissions were a result of timing. Mr. Henault thought that going to a five year revaluation should help.
Mr. Mason asked if a statistical review meant just doing “drive bys”. Mr. Gardner responded that basically they use the data that they have with some field verification.
Mr. Henault asked Mr. Gardner when he thought he might be comfortable with the final number and Mr. Gardner said it would be in January with an allowance for the Board of Appeals process.
Ms. Mielert asked about the new pattern of revaluation since the state law has changed. Mr. Gardner indicated that the next revaluation after the statistical revaluation would be a full measure revaluation in five years.
Ms. Fitzpatrick made a motion to move Items 3 and 4 on the scheduled agenda involving an Executive Session to happen after Items 7 and 8 on the scheduled agenda. Mr. Mason seconded the motion and the motion passed unanimously.
4. CALENDAR OF MEETING DATES
The draft Calendar of Meeting Dates was reviewed and several dates and meeting times were edited. The January 17th meeting was changed to January 24th. The scheduled meeting time was changed to 6:30 PM unless otherwise noted. The BOS and BOE budget presentations to the BOF and public hearing on capital projects were all changed to be on March 14th at 5:00 PM, 6:00 PM and 7:30 PM, respectively. Another meeting to approve capital projects was scheduled for March 15th. The April 11th meeting was changed to Wednesday, April 12th. An additional regular meeting was scheduled for January 16, 2007.
Ms. Fitzpatrick made a motion to approve the 2006 Calendar of Meeting Dates as amended and Mr. Mason seconded the motion. The motion passed unanimously.
5. STATUS OF AUDIT
Mr. Askham indicated that he had been at a meeting with the auditors on Thursday. Mr. Kane indicated that the draft report was completed and the financial statements should be issued shortly.
6. AFFORDABILITY OF CAPITAL PROJECTS
Mr. Henault referred to Mr. Kane’s memo dated December 20, 2005 (as revised) on “Affordability on New Capital Projects” (Addendum III). Mr. Kane indicated that the Town six-year plan is an older plan and had not been recently updated, whereas the Board of Education is currently revamping theirs. Also, he pointed out that some items currently under consideration, such as the Ethel Walker property purchase, are not included in the analysis.
Mr. Askham asked if any of the proposed Charter revisions would have an impact on the numbers. Mr. Kane indicated that they would not really alter much. He noted that in the last six years, approximately 40 capital projects went to both Boards for approval and only 3 of them went to referendum. If the threshold were changed from 3% to 2%, the number of projects going to referendum would have been 6 and at 1%, it would have been 8 or 9. But the dollar amounts would not change. Mr. Askham asked about the policy of having the projects allocated a year before they can move forward. Mr. Kane indicated that that would make a difference. Mr. Henault indicated that, as an example, if that policy were currently in place, the Tariffville School project would fall off of the current year’s plan.
Mr. Holden stated that by Charter the Board of Education has to review and approve a plan by January 15th of each year and forward it to the Board of Selectmen and then they, under the Charter, have the ability to consolidate and adopt a plan and that may be different from the one that the Board of Education may have adopted on January 15th. Mr. Henault noted that this very scenario happened to some of the Board of Education’s projects last year and some of them were pushed off as a result.
Mr. Henault confirmed with Mr. Kane that, for the Board of Selectmen, he was working off of last year’s plan and that the BOS will not have this year’s plan in place until February 15th. Mr. Henault also confirmed that, at this point, the Town capital projects for 2006/2007 consist of water and sewer line extensions, Memorial Park improvements and library expansion and the Board of Education projects consist of renovations and addition to Tariffville School, computer technology and system telecommunications and also that Mr. Kane had assumed a ten-year bond and a fifteen-year bond in his analysis.
Mr. North noted that, in the materials that the Board was given, there were two suggested uses of reserves that impact the Board’s flexibility and he felt that it was important to adhere as closely as possible to the 7% debt policy and that it is equally important to not lose sight of the fact that reserve use and capital belong together.
Ms. Mielert asked for some history on the 7% debt policy requirement and whether the goal was to keep the debt at 7% or if perhaps this was too constraining a limit when the full force of the high school payments are now being felt. Mr. North noted that the high school turned out to be not nearly as expensive as was budgeted so the upper limit was not tested and also that it was one project that was diverted from policy in that a fifteen-year rather than a ten-year bond was used. He also reiterated that it would be entirely appropriate to not depart from the 7% debt policy this early in the budget cycle because there are so many competing demands on limited resources.
Mr. Askham pointed out that, before the high school project, capital projects were funded by cash and that debt service bonding was in the 3%-4% range. Now the board is being told how to finance projects. He is hoping to stay with a ten-year bonding guideline, but is willing to use reserves to soften the blow and enable affordability.
Mr. Henault summarized that it appears there is room to do some projects carefully, but to keep in mind that the current plan does not take into account any future land acquisitions or anything that might result from a resolution of the Meadowood case that proves not favorable to the Town.
7. DISCUSSION OF 2006/07 BUDGET
Mr. Henault noted the receipt of a petition regarding the Board of Education budget. The discussion centered on the operating budget estimates to date (Addenda IV and V), capital project needs (Addenda III and VI), and the tax impact (Addendum VII).
Board of Education Operating Budget
Mr. Holden reviewed the preliminary Board of Education budget estimates (Addenda IV and VI). He stated that on December 13th the administration presented to the Board a range of potential operating budget increase from a low of 5.59% to a high of 6.95%. They highlighted a series of significant factors which were impacting them in the development of the budget. He also indicated that four of their five collective bargaining agreements are in place for next year with the custodial/maintenance bargaining unit still to be negotiated this spring. The Town and the Board of Education have received a range of potential health insurance increase between 10% and 12% for next year. With the four union agreements in place, there would be no increase in employee contribution for next
year.
They are projecting a 10% increase in worker’s compensation insurance and a very modest increase in property, casualty and liability insurance. The high school has not operated for a full year cycle using its additional 100,000 square feet. Also, the final site visit associated with the ongoing New England Association of Schools and Colleges accreditation review is scheduled for next fall and there is a significant cost associated with that site visit.
Special education is always a volatile area within their operating budget. It is impacted in part by the State of Connecticut Excess Cost Grant for placements that in the past have exceeded five times what it costs to educate a regular education youngster. The excess above that is reimbursed to the local school district in the current operating year. Last year the legislature decreased that from 5 times to 4.5 times, but at the same time set a budget overall statewide cap on that grant. Despite the reimbursement rate of 4.5 times, they are projecting that they will only receive 75% of what the district truly would be entitled to.
The retirement contribution for non-certified employees is a significant and known increase from last year. The Board of Education increase has gone up $113,000, or 22%; this amount is fixed and based on an actuarial analysis.
Pupil transportation is a large issue. Although there is no predicted change in overall student enrollment for next year, the diesel and gasoline fuels to operate their vehicles as well as the utility costs of heating and electrical are projected to have between 30% and 40% increases. This year fuel oil was budgeted at $1.50 per gallon and they are actually paying $2.03 per gallon and project a cost of $2.10 per gallon for next year.
They are in the process of meeting with the individual building principals and department supervisors and consolidating the equipment and building maintenance requests, but their ability to utilize the Capital Nonrecurring Fund is an area of concern.
Staffing requests have been received and are in the process of being reviewed and they have presented their best estimate at this time.
Mr. Hogan noted that there are four areas over which the BOE has no control that are going to drive next year’s budget: 1) electricity is projected at 30% more than last year, which will increase their budget by $208,000; 2) fuel oil is projected at a 40% increase at a cost of slightly over $320,000; 3) pension cost is required to increase approximately $113,000; and 4) health insurance, which has driven the budget for the last 4-5 years, will require $700,000 more than last year. If you add up just those four categories which the Board has no control over, an increase of 2.58% in the operating budget is required.
Mr. Hogan asked the Board of Finance, in considering whether they will be instituting a guideline or a cap this year, to seriously consider whether those types of increases can be considered outside the cap. Each year the Board of Education establishes certain goals, such as reducing class size and providing professional development, and they would like to present a budget to the BOF that they consider to be the best budget for the school system and have an opportunity to present that to the public and then make a decision at that time whether to pass it on to the voters to be voted upon. He urged the BOF to adopt a guideline and give the BOE a chance to present a budget that they think does the best thing it can for our school children and let them try to make the case to the BOF as to why it should be
passed on to the voters.
Dr. Ullman added that the BOE is at a place with their staffing where it is having a serious impact on class size, with some approaching 30 at all levels. She thought they made great progress last year in reducing by two-thirds the number of classes that were within the guidelines, but they have some more work to do. Although she is not looking at a serious staffing increase for next year, with the 2.58% increases cited by Mr. Hogan just for accounts that they have no control over, she felt they would be going backwards to make some reductions in the ground that was gained last year if they had a budget similar to last year. They are really struggling at looking at their guidelines, reorganizing, and utilizing resources differently, but they do not see significant increases for staff. The increases
that they are really worried about are the contractual increases and uncontrollable items.
They also for the first time have the principals making proposals to provide support for students who struggle. Historically, this district has done great service to kids who are “high flyers”, who travel through the school system achieving very high levels, but there are about 20% of the current student population who do not currently meet the State of Connecticut standards. She is very concerned about those kids and for the first time the principals feel that they are able to put into their budgets some small amount of tutorial support for those kids who struggle, particularly in mathematics, reading and writing at various grade levels. Given the contractual increases in the four areas of concern, she feels it would be difficult to make any form of progress and she is fearful that they will
backslide.
Board of Selectmen Operating Budget
Kevin Kane referred to his five memoranda dated December 6 and 7, 2005 (Addendum IV) and two dated December 20, 2005 that were received from Superintendent of the Water Pollution Control Authority, Jim Clifton (Addendum VIII). He indicated that Mr. Clifton’s numbers, which were just submitted to the Board immediately prior to the meeting, are much higher than those presented in his prior analyses. He suggested that they have Mr. Clifton present to the Board at a future time so that they can have a better understanding of what is going on at the sewer facility.
Mr. Kane indicated that the wages estimate was based on current staffing. Worker’s compensation is projected with 10% increase. Major medical is up approximately $257,000 and the anticipated pension contribution is up by $165,000, although the final figure may be adjusted slightly up or down by the actuaries. Mr. Kane stated that he was against any inclusion of estimated Meadowood legal fees in the Board of Selectmen’s budget. Energy costs were projected with a 25% increase.
Mr. Kane stated that, when you look at the known numbers and take into account the same areas of concern over which the BOS (like the BOE) also has no control, you are looking at a 3.5% increase in operating budget just to account for those items.
Mr. North asked whether, based on the presentation at the last Board of Finance meeting, either of the preliminary budgets have anticipated any accommodation for the upcoming GASB 43/45 retiree health care costs. Both Mr. Kane and Mr. Holden indicated that they did not. Mr. Henault asked if there was something they would be working on as a plan. Mr. Hogan stated that they are trying to digest all the information that was provided at the last Board of Finance meeting and they are considering setting up a subcommittee on the Board of Education with administrative members to come up with a plan.
Mr. Askham asked, given that the main driver of the budgets has always been salaries and the biggest contract was signed one year ago at 4%, what percent is that of the total budget. Mr. Holden responded that wages and benefits represent 80% of the budget. Mr. Holden indicated that every percent increase of a teacher contract results in a .5% increase in the overall operating budget. Therefore, a 4% settlement increases their operating budget by 2%. He also noted that this is just the teachers; it does not include administrative, clerical, nurses and custodial/maintenance or unaffiliated employees.
Mr. Askham asked about enrollment projections done in connection with the high school project that have turned out to be much higher than what actually happened. Mr. Hogan indicated that at their last Board meeting they received a new report that showed a trend over the next 4-5 years of a slight increase at the high school and a slight decrease at the elementary level. Mr. Askham asked if he thought the enrollment would remain stable for next year and Mr. Hogan indicated that he thought that it would. Mr. Henault indicated that the Chung projection indicated a high of 5,333 and a low of 5,283 so the current enrollment is well under that projection. Dr. Ullman stated that, other than a few class size problems that they are looking at, due to a shifting of student population from level to level,
they can shift their resources from one level to another. The other fortunate thing is that, if the elementary enrollment continues to decrease, it would appear the system would be able to accommodate with redistricting any new students that would be associated with the proposed Meadowood development.
Mr. Askham stated that last year, when the cap was set at 4.5% and the teacher contract was at 4%, it represented most of their budget. But there was a portion of the increase in which the BOF was allowing the BOE to solve some of the overcrowding issues. He asked if they were able to accomplish that. Mr. Hogan indicated that they were able to keep about two-thirds of the classes within the guidelines, but there are still classes that they consider to be too full. Mr. Askham questioned, if 4.5% allowed them to solve some of the problem and take some of the pressure off last year, would 4.5% allow them to solve their problem this year. Mr. Hogan responded that it would not because this year they have the issue of the 2.58% increase in fuel, electricity, etc. and 4.5% would not allow them to
continue to make progress on class sizes. Dr. Ullman added that, if those accounts that they discussed earlier that account for 2.58% were not factors, 4.5% would allow them to make very significant progress and continue to make the improvement that they did last year. She also stated that, in addition to addressing classroom size last year, they were able to provide some social work and psychologist help at the middle and elementary school, where they are seeing some significant emotional problems with students.
Mr. Henault stated that last year the Board made a policy change relative to the special education reimbursement ($431,000) that allowed the BOE to keep the amount and not have it swept back into the General Fund. He asked what they projected to be received this year and Mr. Holden responded that it would be at the same level. He also noted that the policy change allowed them to manage without having to come back to the Board of Finance and request supplemental appropriations.
Mr. Mason asked if the 100,000 square feet of the high school is all up and running. Mr. Holden responded that, typically for every 25,000 square feet, they add an additional custodian. However, they have now added over 100,000 square feet since the project began and have only added two new custodians and they would like to add two more, but given the pressures that they are seeing in other areas, they are looking at different options, such as acquiring additional equipment to make the individuals within this facility more efficient in their ability to maintain the space, which, in part, would be a request to be able to use Capital Nonrecurring to a greater extent than has previously been done. Until the facility is operated for an entire twelve months through the heating season, coupled with the cost of
fuel and electricity simultaneously being driven up, it is very difficult to project.
Mr. North reiterated that, since the impacts of GASB 43/45 are not included in any of the submitted projections, the Board should not lose sight of establishing a plan for digesting the impacts because it is really more than an accounting change, but rather the recognition of a pre-existing huge liability. The Board should be looking to the possibility of there being moving parts of the budget that allow them to be anticipatory. Mr. Henault concurred that this is a huge issue that the Boards are going to have to address, if not this year, then in future years.
Mr. Henault asked Mr. Kane if there were any provisions for computer improvements for the Board of Selectmen. Mr. Kane indicated that there are remaining funds available.
Mr. Henault referred to Mr. Kane’s memorandum dated December 16, 2005 entitled “Projected Mill Rate Worksheet” (Addendum VII). If the Board of Selectmen and Board of Education budgets go up by 4.5% and there is a grand list growth of 1.2%, there would be a mill rate increase (tax) of 4%. Mr. Henault stated that what the Board of Finance needs to focus on is not only expenditures, but also on the mill rate projection and what the resulting tax increase will be to the voters. The significant growth in the mill rate over the last few years has an effect on businesses coming to town, people buying homes and future bond ratings. On a per capita basis, Simsbury is one of the highest in taxation of their residents. Spending towards education has increased the
Town’s standing statewide.
The Board then viewed an overhead projection of a working copy of the “Projected Mill Rate” spreadsheet and reviewed the impacts on the projected mill rate of altering the variable assumptions, such as adding in a provision for GASB 43/45, projected net grand list growth, tax collection rate and budget increase percentages. Mr. Kane indicated that generally one mill is equal to approximately $2 million in budget; therefore, .10 mill would represent a $200,000 change.
Mr. North recalled that the actuary indicated that the Town has effectively three years before it has to digest a $2.1 million number which would be higher in three years if it was put off for three years. Mr. Kane indicated that subtracting the $300,000 current expense, results in a figure of $1.9 million. Mr. North proposed that an undesignated fund be created in order to absorb this amount in thirds over the next three budget years.
Mr. Henault noted that the tax collection rate has been pretty constant. Mr. Kane stated that the receivable rate is quite low; the outstanding taxes as of 2005 were $663,000 and the year prior was $839,000, which represents an all time low number.
Mr. Henault requested that the low-end preliminary budget rate increases as currently presented by the BOS and BOE (5.59%) be added to the spreadsheet along with the $600,000 GASB OPEB provision added, which resulted in a 4.83% tax increase. Mr. Henault then requested that the BOE high-end projection of 6.95% be added to the spreadsheet for both the BOE and BOS operating budgets, which resulted in a 6.25% tax increase.
Mr. Askham recalled that one year after a bad revaluation surplus was used to smooth in the effects of the revaluation and then in subsequent years the Board weaned itself off of the use of surplus for this purpose. He wondered if perhaps the Board should be open to the use of surplus in order to phase in the GASB number with the understanding that the number would go down over time if surplus were used. Mr. Henault noted that in the years that surplus was used in this manner, it was not taken out for other projects.
Mr. North stated that if the GASB problem is not recognized early and is postponed for three years, the Town would have a recurring annual contribution, which is an operating expense, of $2.2 million. He said he did not know how the Board can ever wean itself off of allocations of that magnitude. He is open to the use of reserves for the library project or adjusting CNR or larger contributions to get the debt portion down, but did not think the use of reserves was a good way to address the GASB 43 liability. GASB 43 is the accounting profession’s recognition of all municipalities failing to recognize the true cost of the benefits they are providing their employees. Mr. Henault confirmed with Mr. North that he saw the $600,000 amount as an operating budget item to be split between
the two boards. Ms. Fitzgerald concurred with Mr. North that the Board worked very hard to wean reserve support off the operating budgets and that the use of reserves for capital expenditures in the three provisions that the Board has before it is reasonable. She also stated that rating agencies do not look favorably at the use of reserves for operating and she felt it was a bad way to go.
Mr. Mason stated that he agreed with using the $600,000 number. In addition, he stated that he felt that the 98% tax collection rate being used as an assumption has been way too conservative for a number of years now. A collection rate of 99% could be used and still be somewhat under the current collection rate that the Town has been getting for the last year, which was 99.4%. He felt that in using 98%, a surplus was just being built up.
Ms. Mielert felt that it was just a semantic difference to talk about the 98% collection rate and the revenue it leaves and she did not see a problem with taking something that is collected every year and using it in an operating way, especially to fund something that is coming out of the blue like GASB 43. She also wanted to know how these funds would be segregated this year since a trust fund has not been actually authorized yet by the legislature and could they accrue their own interest. Mr. Kane responded that, although there may be constraints on how the Town can legally invest the funds, a special revenue fund could generate some additional funds. Mr. Askham pointed out that, once the actual trust fund is established, the Town must then recognize the liability for the under funded portion, which in
turn puts up a red flag for the rating agencies. So you do not want to establish an actual trust fund until you are ready to go.
Ms Fitzpatrick stated that, although she would support some increase, you do not want to bump up the tax collection rate too much and certainly not to the current collection rate.
Mr. North wanted to know what the ten-year history of the collection rate was and Mr. Kane responded that the low year was 98.73% and the high year was 99.42%. Mr. Kane stated that he thought going with a 99% collection rate was too high, but that the Board could consider a 98.75% rate.
Mr. North asked to adjust the working spreadsheet to the expense increase percentages as originally submitted, but with an adjusted tax collection rate, which resulted in a 4.26% tax increase. Ms. Fitzpatrick asked to see what raising the rate of increase for the BOS to 7% would do. Mr. Henault confirmed with Mr. Hogan that what he was hearing from him is that he wanted them to issue a guideline, but no cap and allow the BOE some time to put together their budget projections.
Mr. Henault stated that the Board could take action this evening. They had been presented with tax increase options ranging from 3.98% to 6.5%. Mr. Askham asked about overall economic factors. Mr. Henault thought that cost of living was approximately at 4.1% and the unemployment rate remains low at the state level and Simsbury’s unemployment rate is lower than that. However, some of the same things that are affecting the BOE and BOS budgets, such as cost of electricity, fuel and health care, are also affecting the voters. Businesses in town are also experiencing these pressures.
Mr. North noted that the civilian labor wage increase is still in the 3.5% range and that this is the revenue side for matching these increases. He also noted that Simsbury is substantially higher than neighboring towns with regards to mill rate and that, although perhaps anecdotal, there is information out there that suggests the rate of home appreciation in Simsbury has not kept pace. Mr. Henault suggested that perhaps the issue is the mill rate. Mr. North concurred that the mill rate could be one of the reasons.
Ms. Mielert stated that, while Simsbury is not building as many new homes as neighboring communities are, it is also not experiencing the enrollment increases that they are. She noted that Avon really got a big surprise last week.
Mr. Henault indicated that the Board could deliberate the issue until the next meeting on January 24th or it could take action this evening by issuing either a cap or a guideline for the Boards or it could settle on a livable tax increase and back into it.
Ms. Fitzpatrick said that she could be persuaded to act, but would like to find out the staffing needs as personnel is the largest expense and the custodial amount is unknown at this time. She would like some discussion around setting a budget increase for the BOS different from the BOE due to the proportional difference of the two budgets. She felt it is prudent to include the GASB provision as it makes for a proactive approach which has served well in the past. She would not mind increasing the collection rate to 98.5% but would not support a rate higher than that. Also, she felt that a 6.25% tax increase following last year’s 3.53% increase was too high.
Mr. Mason stated that he wanted to keep the mill rate increase under 4%. He suggested a 3.63% BOS budget increase, which he felt translated to a 4.5% increase in actual spending since he also felt that the $15.5 million 05/06 budget figure being used is inflated. Last year (04/05) came in with an actual figure of $14,786,000. If that number is increased to get to get a projection for this year of $15.5 million and do a budget increase off of that, you come up to $16.16. He thought that on average there were four positions not filled for the whole year and that was responsible for the number being inflated. Therefore, he proposed an increase for the BOE that is higher than the BOS. Finally, he stated that he liked using a 98.5% collection rate. He said he was indifferent as to
whether action was taken this evening or not.
Mr. Askham stated that before last year tax increases were relatively higher over the expenditure increases due to decreases in revenue. He felt the Board owed it to the voters to keep the mill rate under the expenditure increase. He was hoping originally to get it under the prior year’s level, but certain factors, such as post-retirement benefits, prohibit that. He felt the Board needed to be frugal with expenditure increases and keep an eye on the tax increase and that under 4% would be a reasonable number. He stated that he would be willing to wait until next month to take action.
Mr. North stated that keeping the tax increase under 4% would be an admirable achievement if the GASB provision is going to be accommodated over the next three years. He is not in agreement with Mr. Mason, based on information received at prior meetings, relative to the test case Mr. Mason put forth about the Board of Selectmen. If indeed the positions are to remain permanently vacant, then he is happy with Mr. Mason’s scenario. However, any explanations that have been received in the past indicate that the vacancies were an anomaly and those positions will ultimately get filled. He was not aware of any authorized positions being eliminated. Mr. Kane concurred that you can not budget based economies from temporarily unfilled positions.
Mr. Vincent stated to the Board that the following open positions have been filled: Executive Secretary in the Selectman’s office, Assistant Finance Director, Receptionist, Payroll Clerk/Secretary-Finance Dept., Library administration. He also indicated that there had been various retirements in the Police Dept. and all of those positions were filled and that the Public Works Director position is still open. Mr. North asked if any cost efficiencies were realized when someone retires and a new hire comes on. Mr. Kane stated that they are. Mr. Holden noted that, due to several staff retirements, the BOE noted roughly $25,000 per person in savings.
Mr. Mason asked how many unfilled positions exist in the Town right now. Mr. Robertson responded that the Director of Public Works position was open, the Director of Community Development position is open and its listing just closed on November 30th, an Administrative Secretary position at the Library is open and applicants are being tested next week. Also there have been two very recent retirements and one resignation in the Police Department and all those positions will be refilled. Mr. Mason asked if that kind of turnover was fairly normal. Mr. Robertson stated that last year was abnormal.
Mr. Henault asked Mr. North to resume and summarize his position. Mr. North stated that he was not comfortable with a lower rate being set for the BOS. He also stated that a mill rate increase of 4.26% while digesting $600,000 of health care retiree benefits that previously was not on the radar screen is a pretty admirable outcome. However, if the extraordinary circumstance of GASB 45 were not there, he would have no appetite for any increase above 4% and would be fiscally set towards replicating what was done last year. He said he would be happy to make a motion this evening.
Ms. Mielert stated that she liked the idea of starting with an acceptable tax increase percentage and then working backwards. She felt that 3.5% was not feasible, but wanted to see something under 4%. If an exception was made relative to the $600,000 and it was deferred to next year, she was concerned as to what next year’s number would be.
Mr. Henault then asked Mr. Vincent and Dr. Ullman or Mr. Hogan to make their comments on the previous discussion. Dr. Ullman stated that 5.95%, which is the low range of the preliminary BOE budget, would allow them to roll forward their current program with some very modest increases and would allow them to take care of the class size issues and perhaps address some of the psychologist needs at a couple of the schools. Mr. Vincent stated that anything below 7.2% would result in cutting positions.
Mr. Askham asked what the budget impact would be if the Board were to put money in the Capital Nonrecurring Fund from reserves and if it would take any pressure off the operating budget. Mr. Holden responded that it would give them much greater flexibility in that they have some school bus, vehicle and other major equipment replacements that were postponed due to the cap. It would provide them the opportunity to look at providing additional equipment to make the staff more efficient as opposed to adding bodies.
Ms. Mielert continued that she supports using a 98.5% collection rate as being realistic and conservative. She noted that setting the budget increases at 5.3% is what is required to keep a 4% tax increase and that this percentage is under the lowest amount requested by both the BOE and BOS. She stated that she understood the pressure that was on all the Boards, but that she has to think about all the people who have approached her since she has been elected asking that the Board take it easy on the tax increases. She stated that there has to be a comfort level with a lot more voters here. She indicated that she would prefer playing with the numbers some more and delaying an action.
Mr. Henault summarized that there are a tremendous amount of pressures on the two Boards. In past years, their budgets had to be curtailed due to lack of grand list growth, lack of investment income, and preparing for the high school modernization. This year there is a bit of grand list growth, investment income is increasing slightly, and the big item of $600,000 in OPEB has to be absorbed, cannot be ignored, and has to be planned for in order to avoid Draconian changes in three years.
Mr. Henault stated that he would be comfortable justifying to the voters at a Town Meeting a rate of 5.6% due to the pressures that the Boards, as well as the voters, have to deal with, such as electricity, pension, medical, etc.,. He would not feel comfortable going above or below that rate. He did not feel it was necessary to give the Boards a cap or hard number this evening. He pointed out to the Boards that, by seeing these numbers, they have enough to work with. He felt that not including Meadowood in the BOS operating budget would allow for more flexibility. He felt the situation should be presented to the voters at the Town Meeting and referendum. A negative voter response would provide a clear picture as to where the Board should go.
Capital and Nonrecurring Fund (Addendum IX)
Mr. Askham inquired if it would be procedurally possible to make a decision this evening relative to moving money into the Capital and Nonrecurring Fund. Mr. Kane indicated that it would require a Town Meeting.
Mr. North stated that it is imperative that the Board instruct the BOS and BOE to plan on budgeting for their GASB 45 contributions next year, since the rates being discussed this evening result in effectively a 6.25% cap were the $300,000 GASB portion to be factored out of each of the budgets.
Ms. Fitzpatrick made a motion to adjourn at 10:00 PM for a five minute break. Mr. Askham seconded the motion and it passed unanimously.
8. EXECUTIVE SESSION
The meeting reconvened at 10:07 PM. Mr. North made a motion to adjourn to Executive Session pursuant to Connecticut General Statutes section 1-200(6)(8) to discuss the settlement of a claim. Ms. Fitzpatrick seconded the motion and it passed unanimously.
The Board reconvened from Executive Session at 10:32 PM
9. ACTION ON EXECUTIVE SESSION ITEM/TRANSFER FROM RESERVES
Ms .Fitzpatrick made the following motion:
Be it hereby resolved that the Board of Finance recommends a supplemental appropriation in an amount not to exceed $35,000 to settle the claim of the Hayes Landing Condominium Association for expenses incurred due to a storm water backup on October 14th and 15th 2005. These funds are to be provided as a full and final settlement for any claims that the Hayes Landing Condominium Association may have in the future with respect to claims related to this event. In addition, the Hayes Landing Condominium Association is to install all improvements as recommended by the Water Pollution Control Authority.
Mr. Mason seconded the motion. The motion passed unanimously.
10. AMENDED POLICIES AND PROCEDURES TO SIMSBURY BAND SHELL FUND, SPECIAL REVENUE FUND
Mr. Henault referred to the item submitted to the Board entitled “Policies and Procedures to Govern the Simsbury Meadows Performing Arts Center Facility Maintenance and Operating Fund” (Addendum X). Mr. Robertson indicated that the initial goal of the fund was construction of the band shell facility. The amended procedures being submitted to the Board expands the definition of what funds may be accepted into the fund and what the funds can be used for.
Mr. Askham asked if the intent of the fund was to continue to do fundraising. Mr. Vincent indicated that continuation of the fundraising would be part of its function.
Ms. Fitzpatrick asked if the existing special revenue fund had been closed. Mr. Kane responded that there was approximately $1,300 cash balance left that would be cleared out with the payment of an outstanding bill. He also indicated that there are additional funds that have since been received that are sitting in the Pass-Through Account in the General Fund’s Balance Sheet that have not been transferred out (approximately $23,000).
Ms. Fitzpatrick asked if Mr. Kane was comfortable with the terms from a fiscal management and reporting side and Mr. Kane indicated that he was.
Ms. Mielert asked if profits, such as rent, made from the use of the site would go into this fund as there is no mention of it in the policy. She wondered who is using the facility and how are the rates for using the facility determined. Mr. Vincent responded that the BOS authorizes who uses the facility and sets contracted fees with the user.
Mr. Askham asked if the selectmen have authorized this document and Mr. Vincent indicated that they had.
Ms. Fitzpatrick stated that she agreed with Ms. Mielert that, while the policy addresses many of the purposes of the fund and answers the immediate need of where to park the pass-through monies, it is a special revenue fund and really needs to be governed by a plan.
Mr. Mason asked if there was a set of policies and procedures as to how to manage the band shell. Mr. Vincent stated that, as it was Town land, the Board of Selectman governs its use, much the same as they would Memorial Field, for example.
Mr. Askham asked for confirmation that this policy would not commit the Board to any deficit spending. Mr. Henault stated that it was up to the Board of Selectmen to determine what they wanted to do with the facility and that the Board of Finance did not need to get into that issue in this evening’s meeting.
Ms. Fitzpatrick proposed adding any revenue generated from the facility to the policy as “facility maintenance fees” are a specific description of revenue. Mr. Kane agreed that the description of revenue was an issue, but understood that what the BOS was attempting to do right now was provide a short-term vehicle to take fees in and put that revenue back into the facility.
Mr. Henault asked what was meant by “Chapter 100” under Item 5. Mr. Robertson responded that Chapter 100 was the gift policy.
Ms. Fitzpatrick made a motion to approve the “Policies and Procedures to Govern the Simsbury Meadows Performing Arts Center Facility Maintenance and Operating Fund” as presented with the amendment that section B.1.a)(2) would now read “the proceeds from facility maintenance fees or other fees collected on the Town’s behalf by users of the Simsbury Meadows Performing Arts Center”. Mr. Askham seconded the motion.
Ms. Mielert asked when the Board would be able to see the annual evaluation referred to in Item 3.e). Mr. Kane indicated that it could be provided at any time and would be in the audit report.
The motion passed 5-1 (Ms. Mielert voted “no”).
11. OTHER BUSINESS
Ms. Fitzpatrick indicated that she attended the BOS last night and spoke in public audience as an individual about her perspective, which she felt was reflective of the letter that was sent to the Charter Revision Commission by the Board. The upshot of the meeting was that the request was sent back to the Charter Revision Commission with the request that they make some changes. Ms. Mielert indicated that she was present at that meeting as well as a representative of the Charter Revision Commission.
12. AJOURNMENT
Ms. Fitzpatrick made a motion to adjourn the meeting at 10:53 PM. Mr. North seconded the motion and it passed unanimously.
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Paul Henault, Chairman Debra L. Sweeney, Clerk
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