Simsbury, CT - Finance Special Meeting

The Special Meeting of the Board of Finance was called to order at 6:00 P.M. in the Main Meeting 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 Board of Education Business Manager David Holden, Finance Director Kevin Kane, Assistant to the First Selectman Brandon Robertson and other interested parties.

Mr. North stated that he felt there were too many deficiencies in these minutes to be approved. As an example, he noted that Compensation History was discussed at some length, but there was no reference to it in the minutes at all. It was decided that the members would confer with tonight's clerk after adjournment to see how the minutes could be reworked to properly reflect the meeting's content.

Mr. Kane provided explanations in response to questions from the Board members. Mr. Mason expressed the desire to budget for legal fees in future budgets. Mr. Askham asked about the self-insurance fund, and Mr. Kane stated that he feels they will end up pretty close to a break-even, but they won't know for sure until August. Mr. Henault added that they may not have to dip into Reserves.

Mr. Kane reviewed his 7/16/04 memo to the BOF, "Preliminary Fiscal Year 2003/04 Financial Results". He stated that the numbers aren't audited. He added that they are projecting revenues, Surplus, of approximately $1.2 million over the budget.

Mr. Kane then handed out his 7/21/04 memo, "Fiscal Year 2003/04 Transfers From RESERVES," which recapped the transfers at approximately $900,535. Mr. Askham asked if there were any unusual items they anticipated coming in. Mr. Kane stated that World Skate did not make a full payment last year and that $75,000 is outstanding. He added that they are delinquent and that the lease agreement is quite specific as to when payments are due. A brief discussion followed about Westminster's yearly payment in lieu of taxes. It was noted that there is no written agreement between the Town and Westminster.

Mr. North requested a periodic delinquency report on lessees who have obligations to the Town, the lessor. Mr. Henault questioned whether or not it was the responsibility of the First Selectman's office to follow up on delinquents. Mr. North stated that he thinks the practice is a little too loose regarding legal obligations or arrangements that create financial obligations to the Town. Mr. Henault countered that he doesn't think that the practice has created a problem in the past for the Town. He added, though, that he does think a report of outstanding leases is a reasonable request. Ms. Fitzpatrick agreed that it is appropriate that the BOF look at rental and lease past due accounts. She added that it would be appropriate now for the BOF to send a memo to the First Selectman as to how the World Skate delinquency will be handled. Mr. Henault agreed to send the memo.

Mr. Henault referred to Mr. Kane's worksheet, . . . BOS "Employee Compensation in Comparison to Actual Expenditures . . . ", in varying forms from 1998/99 - 2004/05. Mr. Holden had handed out his similar worksheet for the BOE. These worksheets had been requested by Mr. North at the prior BOF meeting. Mr. North stated that compensation (salary expenditures and benefit expenditures) is perhaps as much as 70% or 75% of the total budget, and he was curious to understand the growth rate. He stated that it seems that when they get to the actual budget deliberations every year, they are arguing about the 30% that's left over and is theoretically discretionary and ignoring the much larger portion. He added that he is interested in understanding whether his fellow Board members share any sympathy for trying to significantly slow down the growth of this very significant part of the budget.

Mr. Askham suggested modeling in order to look at an average increase as a percent and see how it would impact the budget going forward. Mr. Henault clarified that they were looking for the percent of increase for the last three contracts, not merely the last three years.

Mr. Henault stated that the BOF has a request to get together with the BOE on August 17^th, the date of the next BOF meeting, to go through preparations for the negotiations. He stated that, well prior to August 17^th, the BOF should have the modeling figures.

Mr. Henault summarized that the BOF is requesting 1.) the last three contracts with the percentages, 2.) consolidation of the two budgets into one and 3.) modeling moving forward. Mr. North added that the growth rate for each of the components and the combined components ought to be calculated.

A hand-out was distributed, "Policies & Procedures To Govern The 'Simsbury Meadows Band Shell' Special Revenue Fund" (Addendum II), prepared by Mr. Robertson. Mr. Kane stated that the project needs the approval of both the BOS and the BOF. Mr. Askham questioned the amount in Item 3c: "Estimated expenditure dollars-Up to $1,500,000." Ms. Fitzpatrick stated that she is uncomfortable with Item 3c in that this is an account to receive. Mr. Robertson explained that the State grant would be $500,000 and that donations should total up to about $1 million. He added that no contracts would be entered into until there are sufficient funds to complete some incarnation of the bandshell whether or not it's the more elaborate model at $1.2 or $1.3 million, or the less elaborate model at $500,000 plus.

Ms. Fitzpatrick moved that the BOF approve the Policies and Procedures to Govern the "Simsbury Meadows Band Shell Special Revenue Fund" with two qualifiers. One is that 3c be stricken, and two is that the BOS approves it at their July 26^th meeting. The motion was seconded by Mr. Askham.

Mr. Mason stated that he would like to see what the total Simsbury Meadows project looks like at this point. If there is a $2 or $3 or $4 million project going, the BOF has never seen it, and he has no understanding of what they're committing the voters to. He added that it seems they've been funding the project on a piecemeal basis over the past few years.

Mr. Henault referred to the packet of information compiled by Mr. Kane including a letter from the Town's Consulting Actuary, Althea Schwartz, of Milliman USA. In her letter she writes, " . . . an 8% investment return assumption is well within the range of expected returns for your portfolio over the pension plan's horizon."

Mr. North, who had requested this updated information, stated that for some time now he has held that our investment return assumption for our pension fund is too high. He argued that the actuary's document confirms, rather than rebuts, his position. He presented an oral detailed forecast breakdown which Ms. Fitzpatrick said she appreciated. Mr. Kane joined the Board members in a lengthy discussion. Mr. North asked if it weren't fair to say that if we assume an inordinately high return, 8% vrs. 7.5%, and the contributions by the Town and the employees are predicated upon that assumed return, to deliver the contractual benefit at the end, that if it turns out to be 7.5%, that the shortfall is owned exclusively by the Town. Mr. Kane stated that this was correct. Mr. North added that effectively the Town is guaranteeing the investment return. The Board agreed.

Ms. Fitzpatrick suggested forwarding this to the Pension Committee to look at it again since the last time they did was about a year and a half ago. Mr. North stated that he would choose to encourage them to use an outside, independent consultant. Mr. Henault thought both were good ideas. Ms. Fitzpatrick added that the Pension Committee should be told that the BOF discussed an outside opinion.

Mr. Robertson stated that they have a pre-construction meeting tomorrow. He will find out then what the construction schedule is. He expected that, barring any complications, they're looking at late summer or early fall.

Mr. Holden stated that the main and upper levels of the classroom addition won't be turned over to them until mid-October, a change from August 25^th. Then they'll begin renovating one of the existing classroom wings currently science classrooms. They're going to turn over the first floor, which includes the new media center, prior to the start of school, but the new media center won't be fully occupied until mid-October.

The issue of the acid waste piping is all now 4" and installed. About a week's time was lost as a result of that. The issue in terms of cost related to that is with the Town attorney. Mr. North stated that the scope of the dispute relating to this acid pipe waste system is approaching $500,000. He added that he doesn't believe, from what he's heard, that the Town has any liability. He hopes that the Town attorney will be successful in achieving the outcome that he just alluded to.

Mr. North stated that, with a project that's supposed to go through December 30, 2005, a contingency of $250,000 is alarmingly low, particularly when we haven't really entered the heavy duty renovation phases of the project. Mr. Holden stated that the Public Building Committee is preparing a document to share with the BOF around that issue.

Mr. Henault stated that they got the bonding for it. Mr. Robertson added that the lowest responsive bid for the construction contract expires mid-August, so we're beginning to run into an issue with the timeline for that. They want to lock that in because steel prices are rapidly escalating.

Mr. Henault stated that he is going to be out of town the week including August 17^th. He further stated that he has a memo from the new superintendent, Diane Ullman, asking for a joint meeting between the BOE and BOF to comply with the requirements of the State that the BOE must meet and confer with the financial authority of the Town regarding negotiations within 30 days prior to the statutory commencement date. Mr. Holden said that this would be between July 17^th and August 18^th and that the negotiations are actually starting on August 24^th.