Simsbury, CT - Board of Finance Minutes

The Special Meeting of the Board of Finance was called to order at 6:02 P.M. in the Board of Education Conference Room at the Simsbury Town Hall. The following members were present: Chairman Paul Henault, Peter Askham, Candace Fitzpatrick, Nicholas Mason, Kevin North and Michael Wade. Also present were Finance Director Kevin Kane, Board of Education Business Manager David Holden and other interested parties.

Mr. Henault invited Mr. Holden to speak on the November 12, 2002 memo from Dr. Townsley, "Preliminary Discussion of 2003-04 Operating Budget" (Addendum I) which was presented to the BOE at their meeting the night before. He noted that the meetings with the principals and department heads are not finished yet. He added that three of the five collective bargaining agreements are in place, that ten teachers are retiring and that they are expecting a flat enrollment picture. The memo shows a projected budget increase of 4.65% - 6.50%. Mr. Holden noted that health insurance claims, consolidated with the Town, have come in below projection in each of the first three months of the fiscal year. He stated that enrollment projections will be discussed at the first BOE meeting in December.

Mr. Mason asked Mr. Holden the process for determining the BOE budget and whether it is zero-based budgeting. Mr. Holden stated that this year they are limiting the principals and department heads in a number of areas. If equipment is requested, they are asked to give it in order of priority. Another area where they are being limited is staffing requests. The requests come from the principals and department heads and are given to Dr. Townsley and Mr. Holden who then make cuts, reductions or modifications. They then give the principals and department heads an opportunity to reprioritize prior to the first BOE Budget and Finance Sub-committee meeting in January. In February the budget is brought to the full BOE and then to the BOF in March.

Mr. Kane then spoke on the BOS budget. He stated that projected wages, both settled and unsettled, range between 2.6% and 3%. On health, there will be a 1.2% - 1.8% hit to the budget. He stated that he has been in touch with the actuary about pension, and he was told to expect a large increase in the pension fund. He added that there will probably be a .3% increase. Legal will probably have an increase as well. Just based on these things, there will probably be an increase of between a 4.6% and 6.5%.

Mr. Mason asked if Meadowood would be budgeted for in 2003/04. Mr. Kane answered that he can't say what the BOS might bring forward to the BOF. He added that his recommendation would be to not budget for Meadowood. He noted that the First Selectman and the BOS will do what they feel is best, and he reminded the members that the BOF is the budget-making authority.

Mr. Henault introduced four scenarios provided by PFM (Public Financial Management), the Town's Financial Advisor (Addenda II - V). Mr. Mason summarized that the whole thing is a function of how much pain the Town wants to incur in the early years as opposed to stretching the pain out over the later years.

Mr. North stated that the high school master schedule indicates that the project will be bid on May 20, 2003. Two of the scenarios anticipate a bonding in January, 2003, and Mr. North felt that this was unrealistic. He recommended considering a single bond issue issued on June 1, 2003.

Mr. Askham noted that there has been talk of the project coming in at less than originally planned. He added that the Town may not be bonding $34 million. If there are savings, the bonding may be for only $30 million.

Mr. Kane stated that there is a slight risk that the bond issue could turn taxable if the Town does not start spending it within a certain period of time. Mr. North stated that the Town should know its reimbursement rate by February 3, 2003. Mr. Kane recommended bonding 80% of the project at first and then bonding the remainder, along with some other projects, a couple years down the road.

Mr. Kane stated that he spoke with Bond Counsel, Ted See, regarding who has authority on this project. It was determined that the BOS, not the Public Building Committee, has the authority to approve or disapprove any changes. Mr. Henault assured the Board members that Dick Ostop is in agreement with that concept, that the Public Building Committee is not going to broaden the scope of the project, if there is a savings, without coming back to the BOS.

Mr. Askham asked if a AAA rating will help the Town. (See Addendum VI, PFM's "Peer Comparisons".) Mr. Kane answered that it would be difficult to arrange a rating agency presentation for a January issue. He suggested doing several rating agency presentations if the bond issue is for June or July. A AAA rating may help by a couple basis points. Mr. Mason reminded the Board that, according to PFM, while Simsbury may be AA1 we may be getting AAA pricing anyway.

Mr. North revisited the idea of waiting to bond until the bids and the State reimbursement number were in, on or about June 1st. He added that waiting until July may delay the bid award. The Town goes to bid the end of March, and the contract is supposed to be awarded, ideally, by May 20th. Then construction could start immediately after school closes for the summer.

Mr. Kane stated that he is comfortable with a June or July bond issue. He discussed a July issue so that the debt service would be a little lower in year one and higher in year two. He added that he would like to see the principle payment made the second half of the year. He stated that the Board needs to discuss whether there should be level principle or level debt service. Level principle is the most conservative way and would give the best rate and lower debt service over 20 years. Level debt service increases the interest cost. Mr. North stated that there is a $2.2 million difference in total cost between level principle and level debt service. Both Mr. North and Mr. Kane stated that their preference would be to do one bond issue rather than two.

Ms. Fitzpatrick asked Mr. Kane if it would be possible for him to add Meadowood legal into the 10-year average of actual legal expenditures to find what that number would be. Then they would be comparing apples to apples. He said he would. Ms. Fitzpatrick suggested that the BOF put in writing a request to the Selectman's office to request from Robinson & Cole a harder copy of projected expenses. Mr. Henault said that he would.

Mr. Askham asked what impact there would be on the sewer users this budget cycle with the Sewer Project. Mr. Kane answered that there would be very little impact on the sewer users. He stated that he understands there will probably be a $30.00 increase next year.

Ms. Fitzpatrick expressed concern about the possibility of future scope changes on the high school project. Mr. North agreed and stated that there has been talk of putting an all-weather surface on the track and air conditioning the auditorium. He offered a personal opinion that the public is entitled to help set the priorities on where any savings get spent. Mr. Henault said that that would be putting it back into the capital process, and there would have to be a Town Meeting. Ms. Fitzpatrick recommended communicating with the BOS that they need to be on top of the scope changes. Mr. Henault agreed to write a letter.

Ms. Fitzpatrick stated that she feels the BOF and Town have compelling reasons for setting a cap this year. Mr. North noted that the last three years' tax increases averaged 6.5% and that the Town can't continue on that course. He agreed there should be a cap. Mr. Askham stated that he thinks a cap might be appropriate. Mr. Mason stated that he favors the idea of using a cap. Mr. Wade stated that he does not have a problem with a cap. He wondered if the BOF will be telling the other Boards to cut back.

Mr. North stated that he has read the Simsbury Town Charter and the State Statute about Boards of Finance. He stated that he thinks by issuing a guideline and then having that guideline violated or exceeded in some significant way last year, that this BOF did not do the job that either the Charter or State Statutes charge it with doing. Mr. Henault disagreed in that there were compelling reasons for prior decisions by the BOF.

Mr. Mason raised the issue that the budgeting that was done last year by the BOE was done from the previous year's approved budget. He questioned that they were not using actual dollars. Mr. North agreed and wondered why the BOE is starting with last year's budget amounts when some of the expenditures never materialized. Mr. Mason added that the Town should be able to capture the savings from last year's lower enrollment.

Mr. Askham asked if pricing of houses has started for Revaluation. Mr. Henault asked if they could get a sampling from the Assessor, David Gardner. He asked for something in writing from him at least a week before the next BOF meeting so that the members would have a chance to read it. Mr. Kane said he will address the question with Mr. Gardner.