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238WVN Newsletter #220: Override next year?

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  • waylandvoters1
    Oct 31, 2007
      Dear 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.


      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.


      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."


      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


      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.)


      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.


      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.


      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:

      Sudbury: http://sudbury.ma.us/services/all_documents.asp

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      Wayland Voters Network
      Michael Short, Editor