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WVN Newsletter #132: Attacking Budget Shortfall

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  • waylandvoters1
    Dear Wayland voter, As you begin a new year, probably with your latest property tax bill in your to pay file, the Finance Committee continues to address
    Message 1 of 1 , Jan 3, 2006
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      Dear Wayland voter,

      As you begin a new year, probably with your latest property tax bill
      in your "to pay" file, the Finance Committee continues to address
      Wayland's fiscal problems. Though ranked second only to
      Weston in a recent Boston Globe survey of per-capita municipal
      expenditures, Wayland faces the same challenges as many
      other cities and towns.

      The Finance Committee's forum on Dec. 15 clarified some of the
      problems. In case you missed it, Molly Upton has this summary.

      CONFRONTING A $3.3 MILLION SHORTFALL

      The Finance Committee gave a thorough explanation of the
      town's current finances. Topics covered included replenishing
      free cash, the $3.3 million budget shortfall, reduced state aid,
      rising health care costs, requirements to fund pension
      obligations and accounting for health care obligations.

      To address some of the larger issues, the Fincom is
      contemplating investigating other groups for health care and a
      different pension plan administrator.

      Details at:
      http://www.wayland.ma.us/accounting/FINCOM%202007%20bud
      get%20info%20forum%20
      12_05.pdf.

      Other recommended reading regarding the plight of towns and
      cities can be
      found at the Mass Municipal Association report
      http://www.mma.org/news_and_resources/news_files/local_fina
      nce_news/revenue_
      sharing_rpt.pdf

      The first issue addressed was the reduced amount of free cash
      (aka "rainy day" fund) and the need to show the bond rating firm
      Moody's that the town is making progress to raise the
      percentage of free cash from the current 2.5% of town budget to
      5% in order to maintain the AAA rating which enables borrowing
      at a reduced rate. "In the past 5 years, it has been raining," and
      the town has spent $4.5 million from free cash to reduce
      operating deficits and to eliminate or reduce overrides, the
      audience was told. Now free cash is $1 million vs. $5 million
      five or six years ago.

      Chairman Chris Riley noted that if state aid had continued at the
      same rate as in 2003 ($5.2 million) the town would have $3.3
      million more in free cash.

      In October, the Fincom asked all departments for two budget
      scenarios: a level service budget for Fiscal year 2007 (allowing
      for some increases in utilities and contractual negotiations), and
      an 8% reduction from the level- service FY `07 budget. The
      Fincom said this 8% potentially could be ameliorated somewhat
      by the work of the ad hoc budget advisory committee.

      The town receives nearly 80% of its revenues from property
      taxes, 9% from the state, and 8% from local receipts (which
      includes such things as excise taxes on cars). Although the
      town will receive an estimated additional $600,000 from
      "reserves" such as property taxes from new homes and major
      renovations (and ambulance receipts), it also has $800,000 less
      in funds than last year because the town is dedicating $300,000
      to replenish free cash and is without last year's transfer of
      $500,000 from the water department budget.

      For FY '07, the Fincom estimates a 7.5% or $3.9 million increase
      in expenses. Thus $3.9 million less the $600,000 in reserves
      equals a $3.3 million shortfall.

      The items consuming most of the town budget are: salaries,
      60%; employee/retiree benefits, 13%; other expenses, 17%; and
      debt payments, 7%. Other factors include offsets, such as fees
      in the schools and Park & Recreation, 2%; and insurance, 1%.

      The good news is the town is on schedule to fully fund the
      pension for municipal employees by 2028. The bad news is the
      FY `07 amount is $2.3 million, an increase of $315,000
      compared with 2006. There is a bill pending in the legislature to
      have cost of living (COLA) adjustments affect the first $16,000 in
      benefits per person, up from the current $12,000. Part of the
      problem is that prior to the mid `70s, employees contributed 5%
      of salaries to their pension. All employees hired since then pay
      9% of their salary (excluding overtime), and 11% of salaries over
      $30,000.

      The state is requiring towns to actuarially list their obligations for
      health care costs. Chairman Riley observed that this
      requirement should lead towns to think carefully about adding
      employees and examine outsourcing as an alternative.

      Health care costs are rising by 17% or $1.1 million and will
      exceed $5 million in FY '07. In the last five years, health care
      costs have risen 25%. From 2004 to 2007, the health care bill
      has risen $6 million. Two factors contributing to the increase
      were a state law allowing teachers to retire early, and the
      addition of a number of families joining the plan in the last year.
      This would seem to indicate that Wayland's plan is more
      generous than those offered by private industry.

      Wayland's contributions to the health care coverage are within
      range of its peer towns for active employees and at the high end
      for retirees. For active employees, Wayland contributes 69% of
      monthly premiums, while other towns contribute on average
      70-90%. However, for retirees, Wayland pays about 65% of
      monthly premiums compared with other towns' average of about
      50%.

      One quarter of the total health care costs is consumed by
      retirees. Wayland could save substantial sums if it is able to
      convert eligible retirees to Medicare. Many employers require
      retirees to pay for Medicare B (non-hospital) coverage.)

      One unanswered question is why the Massachusetts Teachers
      Association does not offer a health care plan, given its size and
      presumed leverage with health care providers.

      State law requires Wayland to offer coverage to employees
      (including teachers) working more than 20 hours per week and
      the town can make changes only within the collective bargaining
      process. However, some towns are trying to separate health
      coverage from collective bargaining; the state can change its
      health care coverage at will, but the towns cannot.

      The ad hoc budget advisory committee hopes to reduce the
      shortfall and to make recommendations that have long-term
      benefits. It has identified about $400,000 in possible savings to
      date, and is investigating other major items such as 1) selling
      town-owned land, 2) other health care options for consideration
      in FY '08 collective bargaining, and 3) being reimbursed for
      using material to cap the landfill. Other possibilities:

      -- Creating a public works department, consolidating functions
      between the town and school department such as maintenance
      and accounting/finance.

      -- Encouraging the legislature to change the retirement plan
      administrator (currently Middlesex Retirement).

      -- Looking for areas to outsource.

      GOAL: AVOID OVERRIDES

      The Fincom wants to avoid overrides for fiscal '08, '09, and '10
      while maintaining appropriate levels of service, balancing
      service vs. affordability; protecting town property values;
      incorporating long-term capital spending; and maintaining the
      AAA bond rating. If the 9% property tax increase authorized by last
      year's override becomes the norm, taxes will double every eight
      years.

      The committee is looking at peer towns and working to establish
      financial targets for key revenue and expense-drivers.

      As one example of cost cutting, the Town Building will be closed
      on Thursday nights; meetings may be held in the Public Safety
      Building conference room.

      AD HOC COMMITTEE TO DISSOLVE

      At one of the last meetings of the ad hoc budget advisory
      committee on Dec. 20, many items were turned over to the town
      administrator to carry out or study further. The committee said it
      expects a one-time cash inflow of $300,000 from back taxes. In
      addition, a potentially large one-time inflow might come from
      using Big Dig waste material for capping the old landfill.

      A couple of items were deemed not cost effective to pursue,
      including closing of Station 2 and eliminating town-owned
      vehicles. The town will proceed with an energy audit of the Town
      Building, with an expected payback within two years.

      Regarding school expenses, Superintendent Gary Burton said
      the teachers' union declined to renegotiate scheduled wages.
      He said he did not know if the union had explained the issue to
      the members of the union. Fincom members expressed their
      disappointment that such an important issue might not have
      been taken to the union membership.

      Burton did divulge that providing only the required busing
      (grades K-6 living more than 2 miles away from a student's
      school) would save the town $133,000 annually. He said his
      staff had not investigated what revenue the town could receive by
      charging a fee for busing grades 7-12 and/or offering paid
      busing to those living within 2 miles of the student's school. He
      was asked to prepare an estimate for fee-based busing.

      Background: Years ago the town decided not to offer busing to
      students within 2 miles of schools in order to avoid an override.
      Busing is still provided for K-12.

      Several peer towns already have fee-based busing. In a
      conversation with the Sudbury elementary schools, WVN learned
      Sudbury offers fee-based busing for those living within 2 miles of
      a school and for grades 7-8. (The regional high school is run by
      a separate committee). The fees are $225 for the first
      child, $125 for the second child, and the maximum per family is
      $350.

      Thank you for reading this WVN newsletter. Please forward it to
      your friends and neighbors in Wayland. If they want to receive
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      waylandvoters@... and they will be signed up for the
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      Wayland Voters Network
      Michael Short, Editor
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