Simsbury, CT - Board of Finance Minutes

The Regular meeting of the Board of Finance was called to order at 6:00pm in the Main Meeting Room of the Simsbury Town Hall. The following members were present: Chairman Paul Henault, Peter Askham, Kevin North, Michael Wade, Nicholas Mason and Candace Fitzpatrick. Also present were Board of Education Business Manager David Holden, Donna Lyons, Charlie Moret, Michael Goman, Richard Hogan, Finance Director Kevin Kane and other interested parties.

Mr. Henault requested changes be made to page 3, second paragraph. It reads “It was stated for the record that the board of finance did have a quorum…”. Mr. Henault requested to have it restated as “It was stated for the record by the chairman that the BOF did have a quorum…”

Mr. Henault prefaced the budget discussions stating that there are a number of factors that drive the budget from an operating standpoint, including expenditures, revenues and debt retirement. He cited the continued reduction of investment income, loss of state aid and the expected reduction of conveyance tax revenues currently allowed by the state legislature for the current fiscal year. He also stated that going into the new budget year, for every 1% increase in the expense budget, the town could expect a 1% tax increase.

Mr. Henault added that last year the BOF adopted an expense cap instead of a guideline and he called for discussion from board members on cap vs. guideline approach in order to give a good indication to the BOS and BOE as to BOF’s intentions. He stated that the boards should keep in mind the critical factors used by the Board of Finance in the budgeting process.

Mr. Hogan stated that the BOE is in the early stages of developing the operating and capital budgets; however, there are a number of sub committees that started working on those budgets. Chairman of the BOE Budget and Finance sub-committee, Charlie Moret, was present to talk about some of the factors that will impact the operating budget for next year. Donna Lyons, Chairwoman of the Building and Grounds sub committee, along with two other members of that committee, Mike Goman and Dave Horowitz, were present to talk about capital needs. Charlie Moret was asked to start off with things that will impact the operating budget next year.

Mr. Moret stated the attempt was made to determine some of the “drivers” to the budget and weigh their importance. One of the key elements is that both the school principals and department heads have not finished the process. They were asked to look at the needs, set priorities and then come up with the budget based on that. The sub-committee is looking closely at the individual budgets and at the programs included, and whether they involve changes to existing programs or the cost of various programs. That process will start in late December and carry on through early January. There are five (5) major issues that were placed in categories. They are the collective bargaining agreements (which are in the second year of a three-year contract), insurance expenses, pension/retirement contributions, outside tuition, and staff additions. (Addendum I)

Mr. Moret continued by saying that the BOE complied with the cap approach during the previous year and made reductions in certain staff positions. They removed 4 positions out of the high school and 2 out of the middle and the grammar schools. Another concern is that class sizes are being impacted. BOF members were asked to refer to the BOE analysis of current class sizes by grade throughout the system. Attention was called to the number of classes that were in excess of the BOE class size guidelines.

Mr. Moret added that due to the growth of several age groups in the past two years, a larger number of classes would exceed the BOE guidelines in the future. For clarification, the guidelines in question are local, not state. He proceeded to introduce the subject of excess cost grants that deals with the cost of educating special needs children when it exceeds the amount mandated. Negotiated and projected salary settlements, based on the contract, are projected to increase the budget by roughly 3.5%. They are followed by insurance and retirement contributions, which are estimated at, between 1.5% and 2.25%. Staffing increases would add 1%, and the operating increase as a result of the SHS additions would be ¾%. An offset would be the certified staff retirements at higher salaries; new replacements would be at a more favorable level because their experience is not as high. That would decrease the budget by ¾%. Combining the above with outside tuition, general inflation and with other increases, the preliminary budget range would be at a 6 to 7.5% increase. This is based on the components, which are driving the budget. There are no new programs included.

In reply to Mr. Askham’s question on enrollment, David Holden stated there are two students more than a year ago. Total enrollment now is 4996 students. To begin creating the budget, the preliminary projection was based on roughly 30 students for next year. There were no changes at the elementary school level. An additional thirty (30) students were projected for the middle school due to the large 6^th grade coming to the middle school. Roughly, a thirty (30) student increase is projected for the high school due to the large 8^th grade coming into the high school, taking the place of a smaller graduating senior class. The enrollment information has been sent to NESDEC to accurately calculate enrollment projections. This information will be available early December.

Mr. Askham questioned the number of professional vs. non-professional staff that would be hired to come up with one percent. Mr. Holden answered a range of four (4) to seven (7) positions, all professional. He added that an additional three (3) to four (4) custodial personnel would be needed due to the 100,000 sq. ft increase at the high school. The projection was based on roughly 25,000 sq. ft. per custodian. The increase in utilities – electrical, fuel, water etc. was also considered. In response to Mr. Askham’s question, Mr. Holden added that $470,000 is equal to 1%. As far as the teachers benefit and health insurance is concerned, the Board projected an increase in the range of 10-15%. In comparison to last year, the HMO/PPO census is relatively the same.

Mr. Askham commented on the teacher contract salary, as a percent, to which Mr. Holden replied roughly 5.69%. This comes down to 3.5% of the total budget. Mr. Holden added that the offset would be .7% by replacing 14 teachers who are presently at max and retiring with 14 new teachers.

Mr. Henault asked if the negotiated projection settlement line was the same as the instruction line that increased by 1.2% last year, to which Mr. Holden stated that it represented all of the salaries. In clarifying, Mr. Henault asked what the total increase was projected for the instruction line. Keeping in mind that it’s preliminary, in preparation looking at the numbers from last year, instruction went up 1.2%. He questioned what was the negotiated projected settlements line composed of, if it wasn’t just instruction.

Mr. Holden reiterated that all the salaries, custodian, clerical, administrative were lumped together and the contract settlements for each of the groups were taken into account. An assumption for the nurses and unaffiliated staff was made to estimate what the potential settlement would be. The settlement for teachers would be 5.69%. The 4 to 7 additional teachers would be added along with 14 new hires at a lower salary level replacing 14 retirees to produce a new number.

Mr. Holden responded to Mr. North’s question that the new janitors were included in the .68% estimate and that any salary increases would be included in the negotiated projected settlements. Mr. North also requested clarification to the phasing in of the use of the high school and the expenses and any additional steps required.

Mr. Holden explained that the major portion of the new construction would be fully operational come September 2004. This includes the new classroom wing in the front of the building and the gymnasium. Portions of the facility will be off line in order to renovate. Once a wing is completed, it will be occupied, allowing other space to be vacated for renovation. All utilities will be operational come September. The question now stands whether the 100,000-sq. ft. in operation would need to be staffed with custodial support. It’s a process that would be phased in. There would be no additional steps but there are potential savings with a phased in approach.

Mr. Askham inquired about budgeting for special education grants with revenues going into other budget lines. Mr. Holden stated that in the outgoing transfer account, $908,000 was budgeted for out of district tuition and projected when developing the budget of $155,000 in excess cost grant revenue coming into the town as general fund revenue. As additional students are placed, that line item would be exceeded due to the additional expenses. Mr. Moret added that the figure given is gross of the total expenditure without the excess cost coming back to the BOE because they hadn’t received approval yet. Therefore, there could be a slight reduction in that increase.

Mr. Holden proceeded to mention alternatives. If the board exceeds that line item in terms of expenditures, then the BOE can go to the BOF and request for supplemental appropriation to the operating budget and the BOF has the authority to grant that out of section 908. Example: If the BOE were over $300,000 this year and the BOF authorized that, in developing the budget for next year the base is still at $900,000. If the BOF says there’s a cap of 4.25%, that $900,000 is the base. Now the BOE would spend approximately $1,000,000. If the BOE projects an increase over that, that imposes and undue hardship on the BOE to stay within the BOF guidelines impacting other programs at the expense of meeting their obligations of the special education. An alternative would be to allow the excess cost revenue to be accounted for as a restricted state and federal grant within the state and federal grant funds and enable those excess expenditures to be matched up with the revenues within the state and federal grant.

Regarding the self-insurance health fund, Mr. Henault stated that over the last 3 years the BOF has moved $300,000, $600,000 and $400,000 from reserves to subsidize the self-insurance fund. He asked Mr. Holden if the BOF had made special excess funds received from the state available instead of putting them in the undesignated fund balance, would the BOE still expect the BOF to subsidize the self-insurance health fund or would the BOE be able to handle that within the budget by moving money around?

Mr. Holden stated that their efforts try to match up the expenditures associated with special education with the excess cost grant revenues received and not to try to address any other issues. On a dollar for dollar basis, Mr. Holden noted there is very little discretion in terms of what is expended. By setting aside the most volatile account where expenditures are matched up with revenues, the remaining budget process would be simplified.

Closing discussion on the BOE’s operating budget, Mr. Henault noted that in addition to the 6.1% to 7.63% BOE request which drives much of the town’s budget, the BOS budget and debt retirement is also part of the total amount. It appears that the combined budgets would generate a 6% to 7% tax increase.

Chairwoman of the BOE Building & Grounds sub committee, Donna Lyons stated that on December 1^st, 2003, the committee will present proposals to the BOE for the 2004-2005 school year based on discussions within the committee on capital improvement projects. (Addendum II & III). The full year plan will be presented at a December 9^th, 2003 meeting. The following are the four major projects currently under consideration, keeping in mind that the Special Education and Tariffville renovation projects are eligible for partial state construction grant participation.

Computer Technology improvements include additional replacement network servers, hardware (in keeping with the long-range technology plan), training and security issues. The BOE has approved this plan which is to be submitted to the state on December 5^th, 2003. The technology committee presented a two-year overview and provided anticipated costs for the next two years.

The site and location for Special Education/Space Additions is yet to be determined and is under discussion to meet the growing space needs for the preschool and special education programming. Discussions continue on location and other needs for the special education classes, which will expand significantly between 2004 and 2006. Director of Special Services Greg Little provided the committee with information outlining the space needs for special education classes.

There is an identified need to renovate and expand Tariffville School. Currently, there are 13 classrooms to meet the needs of 14 classes. In addition, under discussion and consideration is the fact that the modular classrooms are over 25 years old. The initial review was to replace the existing modular classrooms with hard construction to increase capacity within the facility. As stated by Mr. Holden, this includes two additional regular classrooms, a special education space and tutorial space that is currently carved out of the existing cafeteria.

The last item is the replacement of the High School track with improvements to the inner field. The core of the discussion focused on the feasibility of incorporating an artificial infield within the track for a number of reasons. These include the safe usage of the field by all teams, yearly maintenance, cost reductions, and community use (i.e. other teams as well as individuals). Because of the construction restrictions of adding an artificial infield once the new track is in place, it is cost prohibitive to not do both at the same time. The track would have to be destroyed before the artificial field could be put in place.

Mrs. Lyons reported on the maintenance projects totaling $1,712,500 with some grant participation by the state. This includes replacement of the slate roof section of Central School, upgrading Simsbury High School auditorium with air conditioning, new or refurbished seating, updated electrical panels, telecommunications, HVAC upgrades, boiler replacements for four schools and interior/exterior lighting upgrades at four of the schools.

Discussion on the track/field project brought up whether stadium lights were included in the costs. Mrs. Lyons clarified that seating is included as part of the project, but the lighting was not. Mr. Holden gave details on the project. It includes improved visitor bleachers for 600 people; $40,000 worth of code upgrades to the existing bleachers on the home team side; an expanded track from 6 cinder stone dust lanes to an 8 lane artificial track, and an enlarged interior field that would accommodate football, soccer, lacrosse, and field hockey. The inner field would be a grass type surface with sand and rubber pellets that has an 8-year warrantee and is expected to last between 10 –12 years. Mr. Holden added they’re looking for private donations to fund the lighting.

To answer Mr. North’s question on the reliability of the figures, Mr. Holden assured that the maintenance projects are good firm figures, but the Tariffville/Special Education projects need additional study and refinement. This would be done before January 15^th, 2004 when the board is required to adopt a capital plan. The cost associated with the track and stadium field is more than likely lower. The highest figure was used as “worst case scenario”. The cost associated with Computer Tech is a firm number.

Addressing Special Education and Preschool spacing needs, Mr. Holden stated the town was not in violation of state mandates; however, they are currently maximizing the spaces out placed to private preschool agencies within the town. Those agencies will no longer accept additional special education students. The town lacks adequate space to educate special education students properly. He added that one possibility is to build additional classrooms at Tariffville, which would not necessarily be special education classrooms, but would free up additional space somewhere else in the system for that purpose.

Mr. Henault suggested a discussion about using a “cap” vs. a “guideline”, prior to entertaining a motion. Mrs. Fitzpatrick stated she had received positive feed back from the community and from certain elected officials that they were very pleased with the cap (during the past budget year). The guideline doesn’t give clear direction and leads to last minute cuts. She did not have any number in mind for the cap, but thought it provides clear direction for everyone to know what that number is at the beginning of their budget processes. Mr. Askham concurred with a cap.

Mr. North echoed the sentiment for a cap. He noted that taxpayers had been generous in the past six years as evidenced by their willingness to fund town wide tax increases, which averaged 5.3%. This compares to a thirteen-year average of 3.8%. He stated his belief that the Board needed to strive to bring the increases back in line with the long-term average, particularly since the recent experience substantially outpaced inflation. COLA increase, and private sector increases – all measures of taxpayers’ ability to meet these increasing tax burdens. Further, with Simsbury tax burdens already considerably higher for its homeowners than other Valley towns, the slowdown is necessary to keep Simsbury attractive for economic development, particularly of the commercial type, as well as to retain a broad economic and age spectrum of residents.

In closing the discussion of the BOE 2004/05 budget review, Mr. Henault stated he had asked for a special meeting to decide what to do, and, if a number were to be set, what would it be. He agreed with Mr. Mason that the BOF would have to balance revenues and expenditures. Then, ultimately, the voters would decide. As the budget making authority for the town, the BOF has to make a reasonable recommendation.

Mr. Askham asked if the BOS had discussed whether Simsbury Farms could reimburse the general fund for the capital. Kevin Kane reported that it was not possible due to revenues being down. Expenditures are within budget and Simsbury Farms might meet its budget; however, due to a poor weather year, their revenues are down. He added that it would be important to bring the expenditure level lower than the revenues in order to keep the fund going.

Mr. Mason asked if the Farms could be put on a paying basis. Mr. Henault stated that it’s not just the golf course, there are other programs as well. In order for Farms to be on a fully funded basis, the cost of the other programs would become unaffordable to the public and would have to end. He added that he would fully support a study by management on privatization of this facility.

In closing the BOS budget review discussions, Mr. Henault stated if the BOF moved forward with a cap, it would affect both boards. Therefore, the BOS should provide preliminary numbers on capital to see if there is consistency between last year’s proposed projects on capital and this year.

Mr. Henault suggested since there was a consensus of the board for a cap, the BOF should look for acceptable dates for all three boards to have a workshop prior to the next BOF meeting date of December 16, 2003. There would be a special meeting at the end of the workshop to discuss capital and operating issues. At that meeting, the BOF would hear from the BOE/BOS, hold an open meeting, and either take action or leave it for the December 16^th, 2003 meeting, if there’s no consensus on the cap.

Mr. North stated that before having a meeting, the BOS should provide preliminary figures on the capital budget to see consistency between last year’s proposed projects and this year. He added that he heard a consensus amongst the board that a cap was in order and that, by definition, is a top down approach.

David Holden reported on the BOE budget. After four (4) months, Mr. Holden is projecting a $147,640 deficit for the operating budget. He included up-to-date figures. He is projecting five (5) major accounts with surpluses and a deficit for the out-of-district tuition. He anticipates that excess cost grant revenue will offset the potential deficit.

Reporting on the BOS financials, Kevin Kane stated that the expenditure percentage was higher than expended at this time last year. The Meadowood project legal expenses are the largest variance due to appeals. In terms of staffing, all positions are filled, with the exception of one position in the police department due to retirement.

a. Mr. Kevin Kane provided a memo on Special Education Excess Cost Grants (Addendum VI). Mr. Henault introduced the question of how the board accounts for the grants. He added that they are added to the undesignated fund balance as they come in. The BOE spends special education funds but doesn’t have access to the excess reimbursements unless a transfer is approved. Charlie Moret sent the BOF a letter requesting a change to the accounting, effective Jan. 1, 2004. By making the change, the BOE would have receipt of the initial excess cost grant payments in this year’s budget.

Mr. Holden explained the intention of the BOE is to have access only to the difference greater than the $155,000 that was already budgeted as general fund revenue. The excess cost grant revenue for this year is projected to be $300,000. The BOE wants access of $145,000 excess. The BOE budgeted for $155,000 of excess cost grant revenue, which are accounted for in the general fund. This was based upon $908,000 of operating budget expenditures for special education. The BOE is projecting a deficit for the special education expenses and they are requesting the excess reimbursement to defray the variance.

Mr. Holden continued by stating that the purpose of the accounting change is to alleviate the annual requests to the BOF for a supplemental appropriation. In the past, the BOE has requested additional funds when the total operating budget was running in a deficit. Under the charter mechanism that exists now, the BOE can make a request every time a particular account is running a deficit. The challenge that Mr. Holden believes exists is that if a $200,000 placement comes through for tuition, the BOE has to satisfy the special education need within the restrictions of the expense cap. Other educational programs suffer as a result of the required expense reductions. With a direct offset of excess special grant revenues with special education expenses, the problem of supplemental appropriations would be alleviated.

b. Nick Mason reported on the subject of credit card payments as an alternative method to pay taxes. (Addendum VII) Mr. Mason, Mrs. Fitzpatrick and Kathy Hayes, Town Tax Collector, came to an agreement that credit card payments would not be accepted at this time. The demand for the service is not large. Fleet Bank offers the service but the discount fee would negatively impact the town’s cash receipts and budget. In addition, there would be additional paper work and security issues maintaining credit card information.

c. Mr. Henault reported that the new Annual Report for 2001-2002 is now available in Town Hall and in the schools. Mr. Mason volunteered to assist Mr. Henault and Mrs. Fitzpatrick with the next annual report. Mr. Henault stated that, by charter, the BOF has to produce the report. As chairman of the board, Mr. Henault has always deferred it to after the budget season because of time commitments and getting financial reports from all boards and commissions.

d. Mr. Holden reported on that the order for steel for the high school construction was delayed two weeks. However, delivery was a month earlier than what was anticipated. Mr. North added that the overall schedule is two weeks behind. There are two projects that need refinement: the sprinkler system and unsuitable soil beneath the gym. The construction manager was directed to get a better estimate since the price ($108,000) was based on unit prices and not something more reasonable. Mr. Holden provided an updated progress report on the High School.

f. Mr. Henault reported on the Blue Ribbon Commission on Property Tax Burdens and Smart Growth Incentives. He stated the report relates to equalizing educational funding for towns and cities; however. it implies that wealth really hasn’t been a factor previously and should become a factor in how state aid is distributed.