238WVN Newsletter #220: Override next year?
- Oct 31, 2007Dear Wayland Voter,
The next fiscal year is shaping up as a steep challenge. Can
Wayland avoid a tax override vote next spring? Current estimates
aren't encouraging. Linda Segal, a former selectman and
present associate member of the Zoning Board of Appeals,
reports below on recent news and pubic meetings concerning
Wayand's finances. Her observations are hers alone and do not
necessarily represent the opinion of any town board.
REMINDER: Special Town Meeting begins at 7:30 p.m. on
Thursday Nov. 8 at the High School field house. Article 2 is of
critical importance because it would make the greatest change
in our government structure in modern times. For background
read the Warrant booklet, see WVN Newsletter #219 and watch a
broadcast of the Oct. 18 public forum on the article held by the
Board of Selectmen. It will be broadcast at noon, 5 p.m. and 8
p.m. on Wednesday Nov. 7 on WayCAM, local cable channel 9.
DESPERATE FOR DOLLARS
FY09 budget picture: Without major spending cuts, voters are
likely to be asked to approve another tax override. And why is
our Moody's Aaa bond rating at risk?
The town's annual budget cycle has begun, and the dreaded "O"
word (override) has emerged again in the never-ending debate
in Town Hall about how to achieve financial stability and avoid
annual overrides. Given slowed economic activity and pesky
budget drivers, it seems a daunting challenge to hold onto a
favorable Aaa bond rating.
"FY09 OVERRIDE IS LIKELY"
In an Oct. 1 memo to town officials and department heads,
Finance Director Michael DiPietro framed the FY09 budget
season by stating, "We anticipate a shortfall for the upcoming
fiscal year. At this point, it is unclear exactly how much that will
be, but our first estimates are in the area of $2.6 million. An
operating override of Proposition 2-1/2 is likely to be needed on
the spring ballot."
$2.6 MILLION BUDGET SHORTFALL EXPLAINED
On Oct. 15 Finance Committee Chair Cherry Karlson made a
presentation (posted on the town's website homepage) of
budget guidelines to a small turnout of invited town officials,
with the following highlights:
Certain budget drivers continue to increase, such as health care,
pension and utilities. Health care costs are estimated to
increase 15% in FY09. That estimated increase of $1,1 million
by itself will eat up the 2-1/2% tax increase allowed without
needing voter permission for an override.
All departments, including the schools, are therefore asked to
tighten their belts 6.5% to attempt to bridge the estimated $2.6
million shortfall, above and beyond those increased healthcare
costs. Revenue estimates for this year have not met
expectations, so unless there is a dramatic reduction in
spending, or a sudden infusion of new dollars in the next few
months, it appears an operational override (tax increase) looms
on the horizon, as was reported in the Wayland Town Crier
newspaper on Oct. 11.
The FinCom presentation includes a status update of various
cost-saving initiatives, some that produced one-time savings
and others, such as adopting Medicare for retirees, that have
annual impact. The successful initiatives show actual dollars
saved or generated; other categories reflect a work in progress
as part of the FinCom's long-range plan. Without numbers, it is
not possible to see actual savings associated with some
so-called "efficiencies" sought.
One potential area for significant savings still seems to elude
us. Back in 2005, the top item on the FY07 ad hoc budget
advisory committee's spreadsheet was health costs, with a
suggestion to re-open existing union contracts to try to control
those cost increases. That strategy then morphed into waiting
for the next round of contract negotiations, which is this year.
Two of the six unions have settled, including the schools, which
usually is the benchmark for other unions. The new school
contract agreement appears to show no change in health care
DECLINING TRENDS IN NEW GROWTH
It's no secret the FinCom has been relying on new growth for the
town's future economic stability, but there is no silver bullet.
Some descriptions of new growth have yet to be realized. Even if
a town center project were to annually net more than $500,000 it
would cover only a small portion of a single override.
At the Oct. 30 Town Center Planning Board hearing, in
describing the phasing provisions of the zoning bylaw, the
developers requested the permit set no time limit for building out
the commercial portion of the project. They also suggested a
window of 10 years for building out the residential, and 10-15
years for the municipal building pad. The developers have
stated that construction of their residential units will depend on
the housing market.
The FinCom anticipated new tax revenue to start rolling in this
year from the Wayland Commons 40B 48 condos approved in
January 2006. Construction seems stalled there as well as at
another property cleared for a 40B project (12 condos on Route
30). Sales of new condos at the Natick Collection and in
Hudson reportedly are lagging.
(The Framingham Planning Board issued the Danforth Farm
housing project special permit in April 2003. National
Development sold the property to Pulte Homes, who continues
the permitting process with no clear revenue dollars in sight.)
WAYLAND Aaa BOND RATING WITH NEGATIVE OUTLOOK
The Oct. 15 FinCom presentation concluded with Ms. Karlson
commenting about the Town's free cash (a.k.a. the town's rainy
day fund) and the challenges we face holding onto our Aaa bond
rating. Moody's expects a town with a Aaa bond rating to
maintain a much higher percentage of free cash than we are
carrying. On page 5 of the 2005 Annual Town Meeting warrant
booklet, the FinCom explained in the last bullet spending $1.9
million of free cash that year to help balance the budget.
The last two times (August 05 and January 07) the Town
borrowed money, our Moody's Aaa bond rating was tagged with
a "negative outlook." WVN has reviewed those two recent
Moody's reports. In Wayland's favor is Moody's view that we are
an affluent community that supports overrides, maintains low
debt burden, and sees multi-million dollar homes being built.
The negative outlook seems a clear warning that unless we
bring our free cash numbers back up to earlier (2003) healthier
levels, we face a possible lowered bond rating and therefore
higher costs of borrowing money.
WAYLAND COMMONS PROJECT REVENUES OVERSTATED
Moody's understanding about our new growth revenues seems
predicated, however, on some questionable information. In
August 2005, which was four months into the ZBA permitting
hearing, Moody's described the Wayland Commons 40B
affordable housing project: "Abutting this (town center) project is
another large residential development with over 100 housing
units, and values starting at $1.3 million more than double the
town's median home value of $600,000."
In January 2007, a year after that permit approval was issued,
Moody's repeated its description with two changes, describing
"over 50 housing units" and "this project is expected to be
completed in 12 months." There was no mention in either report
of the existing deed restriction that affects development of the
northern parcel or that it's an aged-restricted (over 55) housing
project with 25% of the units affordable.
The published financial analysis (December 2005) by the town's
independent 40B consultant showed Wayland Commons'
affordable units were estimated to sell for $159K and the market
rate units from $559K to 599K. Why Moody's has been under the
impression that sale prices would exceed more than a million
dollars each seems incomprehensible.
FALL FINCOM PUBLIC FORUM & MORE INFORMATION
Wayland's tax rate is amongst the highest in the state, but some
of the other towns sharing that dubious distinction have higher
family incomes and house values. Sudbury just decisively
turned down an override for a new police station. Just how much
further can Wayland taxpayers be expected to go?
It seems residents need more detailed information in order to
understand how we plan to meet our long and short term goals
for financial stability. If our Aaa bond rating has been at risk for
the last few years, if hoped-for new revenue sources have not
been reliable, if there are incorrect revenue projections out there,
etc., how do we control spending, maintain what we value, and
keep debt burden low so we can afford to act on major capital
projects on the town's long wish list?
The Finance Committee hosting a well-publicized public hearing
this fall, similar to the well-attended one held in October 2005,
would go a long way towards providing residents the opportunity
to learn more about and discuss our town's finances.
Meanwhile, WVN readers can find financial information on-line
on the town website under "Accounting":
By comparison, here are links to more extensive on-line financial
information neighboring towns provide to their residents:
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Michael Short, Editor