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BOARD OF FINANCE
SEPTEMBER 23, 2004
SPECIAL MEETING
1. CALL TO ORDER
The Special Meeting of the Board of Finance was called to order at 7:00 PM in the Main Meeting Room at the Simsbury Town Hall. The following members were present: Chairman Paul Henault, Candace Fitzpatrick, Nicholas Mason, and Kevin North. Also present were Finance Director/Treasurer Kevin Kane and other interested parties.
2. APPROVE MINUTES (Part I)
June 15, 2004 Regular Meeting
August 18, 2004 Special Meeting
Mr. Mason moved to table the approval of the minutes from the June 15, 2004 Regular Meeting and the August 18, 2004 Special Meeting. The motion was seconded by Mr. North.
Mr. Henault explained that a quorum is not available of those who had attended those two meetings.
A vote was taken and the motion passed unanimously.
September 9, 2004 Special Meeting
Mr. Mason moved to approve the minutes from the September 9, 2004 Special Meeting. The motion was seconded by Ms. Fitzpatrick and passed with three (3) yes votes and one (1) abstention (Ms. Fitzpatrick).
3. REQUEST TO REIMBURSE A SIMSBURY BUSINESS FROM THE ECONOMIC DEVELOPMENT FUND FOR INFRASTRUCTURE IMPROVEMENTS
Mr. Henault referred to a letter handed out to the Board members at this meeting (Addendum I). The letter was from William Voelker, Director of Community Planning and Development, to Thomas Vincent, First Selectman.
Mr. Mason moved to approve reimbursement to Holloways in the amount of $56,150, as recommended by the Simsbury Planning Commission, for the differential between 30" and 54" drainage pipe installed during the construction of an 8,000 square foot retail building now under construction. The motion was seconded by Ms. Fitzpatrick.
Mr. North stated that he has strong reservations about the fact that this obligation was created, in a sense, ex post facto. The pipe was done, and now the allocation is being presented to the BOF. He thought that it would put the Town in a very difficult position if the BOF did not approve this expenditure. Mr. North noted that they had been presented with a similar request, pertaining to the Maple Tree improvements, and the BOF had requested that they see these projects before hand. They also requested to see some standards by which projects can qualify for these monies. He stated that although he will support the expenditure, he feels the BOF needs to strongly tell the BOS that the BOF won't favorably consider these if they are presented after the fact henceforth.
Ms. Fitzpatrick agreed that the BOF did request a copy of the parameters for the Economic Development Infrastructure Improvements Plan, and she stated that she would like to see them because it would help her evaluate. She added that she has softened, a little bit, her stance on the completion of the improvement and then submitting, because she thinks there may be a communication problem between the business owners and the Town.
Mr. Mason asked if there were a process in place that captures this stuff in the planning process in the beginning. Ms. Fitzpatrick and Mr. Henault agreed that there was not.
Ms. Fitzpatrick stated that the BOF is glad that Holloway's did this and, for the record, the Town Assessor estimates that the new building will increase the grand list by approximately $600,000, which is forward progress and a good thing.
Mr. Henault stated that he would note this again to the First Selectman and to Brandon Robertson, Assistant to the First Selectman, about development of parameters for this program.
A vote was taken, and the motion carried unanimously.
4. UPDATE ON ONGOING CAPITAL PROJECTS
High School Renovation
In the absence of BOE Business Manager, David Holden, Mr. North reported that the claim for the pipe system for the labs has not been resolved and remains outstanding. It has a potential $430,000 impact. The estimated contingency, which would include paying for that entire claim, is down in the $200,000 range which a lot of people are concerned about. Town counsel has been brought in to help the Public Building Committee and the BOE in processing the claim.
Sewer Treatment Plant
There was no discussion on the Sewer Treatment Plant expansion project.
Eno Air Conditioning
Mr. Kane stated that he heard they had started work.
Mr. North reported that there is a major issue surrounding that project about a code review that had to be done. He stated that he was told that the Fire Marshall insisted, before he gave his approval, that a fire code review be done on the entire building (taking into consideration its historic nature). He was also told that the potential cost to bring the building into compliance is quite enormous, perhaps approaching the cost of Phase I of air conditioning. He reiterated that the code review, which was independently done, came back with an enormous number of things.
5. DISCUSSION ON FISCAL YEAR 2004/05 BUDGET PLANNING
Operating Budgets
Mr. Henault noted that in the past two years, the BOF has used a cap. Years prior to that they used a guideline. He stated that he had read in one of the minutes that the BOE, through Rich Hogan, had talked about using a guideline instead of a cap for 05/06 for the new superintendent to have an opportunity to put the budget together.
Ms. Fitzpatrick stated that the economy is still hit pretty hard. She added that she doesn't think the Town is going to be in much of a different situation this year than it's been in the past couple years. She further added that setting a cap gives those people who are preparing their budgets a clear indication of what they need to do.
Mr. North stated that he doesn't believe there is any reason to be particularly optimistic about the Town's investment income nor its grand list growth which are two of the prime drivers on the revenue side. He added that he would continue to strive to get the Town back to a more normalized rate of expense growth and, therefore, tax rate growth. He stated that he thinks it's incumbent upon the BOF, for the health of the Town, that they be fairly conservative in their approach. He added that a cap worked very well in terms of giving guidance to the various budget-makers. He further added that, as much he appreciates the fact that we do have a new superintendent, he thinks a cap would be a good tool for her and her administrative staff to work with.
Mr. Mason stated that a month ago the BOF talked about whether it would be useful to have a cap in light of the negotiations that were going on for the teachers' contract but that they concluded it would be detrimental to the process. He added that, fundamentally, he doesn't have a problem with using a cap, but he expressed concern that the timing may a little off. He wondered if it would be better to see where the teacher negotiations are going before the BOF starts trying to do something that implies that they are trying to put their stamp on that process.
Mr. Henault stated that he was glad to see in the last two years that the BOF decided to go with a cap and noted that it was higher than the guidelines had been in previous years. He added that they have to be careful where they set the cap at because if they're not, they then denigrate the whole process.
Ms. Fitzpatrick stated that she thinks the BOF has demonstrated their fiscal responsibility in where they've set the cap in the last couple years and that they don't have to identify that number just yet in the process.
Mr. North stated that the BOE negotiating committee is mindful that the BOF has had a cap for the last two years, and they have every expectation that the BOF is going to do that again. He added that he thinks that will be a very important signal to the community that the BOF's intention is to balance the needs of some of these operating departments and personnel costs with the capacity of the community to pay. He suggested that the negotiators should keep in mind that if they settle on a number that consumes the Town's resources, then the consequences of that action will have to be born.
Capital Projects
Mr. Henault stated that while the Operating Budget is certainly going to be an issue as it always is, he thinks that Capital is going to be as vocal an issue as it has been over the last couple years.
Mr. North stated that he thinks it would be important to let the various budget-makers know that it is the BOF's intention to stick with their debt service policy. He added that if the General Fund Reserve is going to be tapped at all, it probably should be tapped for only Capital projects because if they get it into the base on the Operating side, it's almost impossible to get it out again. Mr. Mason expressed concern in that he would like to see some flexibility as they go forward.
6. DISCUSSION ON PENSION CONTRIBUTIONS
Mr. Henault introduced the item by stating that the Town's actuary says that the Town should still be using 8% as opposed to what the actual investment returns may currently be.
Mr. North clarified that it is the assumption that leads to either an excess or an under-funded situation in terms of contributions. He added that this is an issue that is surfacing nationwide for public plans and private plans. He stated that he thinks the BOF would be well-served to have an independent assessment of that. He added that he firmly believes that the investment return portion of these calculations is not an appropriate actuarial responsibility; it is the responsibility of an investment professional. He noted that being off by 50 basis points can lead to as much as a $400,000 or $500,000 difference in the contributions in the plan. An aggressive assumption on the Town's part means that the liability for the under-funding rests totally in the Town's lap because after the first
year, any losses are not contributory.
Ms. Fitzpatrick asked what an outside consultant would charge the Town to look at that. Mr. North answered that it would be pretty minimal. Mr. Mason said he would like to see scenarios run at 6&1/2%, 7%, 7&1/2% & 8%. Mr. Kane stated that he ran it last year. Mr. Mason and Ms. Fitzpatrick noted that the last time this was raised with the Pension Committee, they said that they had utilized the Town's professional consultants [the actuaries] and agreed with their assumptions. Mr. Henault stated that the BOF has to continue to say that they believe those assumptions tend to be a little aggressive. He wondered if it would be prudent, over a period of 2 - 4 years, to start backing those down from 8%. Mr. North stated that all he's been interested in, vis-à-vis the
research he has done, is seeing it move from 8% to 7&1/2%. He continued that 7&1/2% is the right number for a portfolio that's composed of 60% stocks and 40% bonds.
Mr. Henault asked Mr. Kane to send the BOF members a copy of the actuary's "Town Contributions for Fiscal Year 2003-2004" worksheet prepared in February, 2003. Mr. Kane stated that the Pension Committee is meeting in November to discuss this, and they have asked Althea Schwartz to attend. He felt that, out of respect to the Pension Committee, the BOF should not discuss with them a possible change of assumption percentage before their November meeting. He offered to send the BOF members any information Althea Schwartz prepares for the November Pension Committee meeting.
7. CALENDAR
The Board discussed changing the times of the October 19, 2004, and November 16, 2004, BOF meetings from 6:00 PM to 7:00 PM since Ms. Fitzpatrick will be attending school on those dates and won't be able to make it to the meetings at the regular time. The Clerk was asked to check on the time change with the two Board members not present this evening: Peter Askham and Michael Wade.
Ms. Fitzpatrick told the Board members that she appreciated their flexibility.
8. SET UP A COMMITTEE OF TWO BOARD OF FINANCE MEMBERS TO WORK WITH THE BOARD OF EDUCATION REGARDING TEACHER NEGOTIATIONS.
Mr. Henault remembered from a previous meeting that Mr. Askham was interested in being on this committee. Mr. North also expressed his interest. The clerk was asked to procure a teacher negotiation meeting calendar from the BOE.
Ms. Fitzpatrick made a motion that Peter Askham and Kevin North be a Board of Finance committee to work with the Board of Education regarding teacher negotiations. The motion was seconded by Mr. Mason and carried unanimously.
9. APPROVE MINUTES (Part II)
Agenda Item 1 was revisited to discuss the "Open Action Items", a part of each meeting's minutes. Several of the open action items were determined to have been completed, and the clerk was directed to move them to the running "Closed Action Items" list.
10. ADJOURNMENT
Mr. North moved to adjourn the meeting at 8:00 PM. The motion was seconded by Ms. Fitzpatrick and carried unanimously.
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Paul Henault, Chairman Roxanne Farrell, Clerk
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