Simsbury, CT - February 28, 2006

The Regular meeting of the Board of Finance was called to order at 6.30 P.M. in the Conference Room D-172 at Simsbury High School. The following members were present: Chairman Paul Henault, Peter Askham, Candace Fitzpatrick, Nicholas Mason, Anita Mielert, and Kevin North. Also present were Finance Director/Treasurer, Kevin Kane; First Selectman Tom Vincent; BOE Business Manager, David Holden; School Superintendent, Dr. Diane Ullman; Board of Education Chairman, Richard Hogan; Library Director Susan Bullock; and other interested parties.

Mr. Vincent presented the Board with the approved Board of Selectmen FY 07 Operating Budget and Six-Year Capital Improvement Plan (Addendum I). He noted that the proposed budget represented an increase over the prior year’s budget of $817,683, for a total of $16,398,646. He also noted that approximately 34.42% is attributable to an increase in salaries and wages, which represents an approximately 3.14% increase over the FY 05-06 budget. Relative to employee group insurance, he stated that the Benefits Consultant, Lindberg & Ripple, is projecting an 11% increase in the CIGNA PPO plan and a 6% increase in the Connecticare HMO plan. He noted that the overall increase in pension funding was 16.69% and that energy costs were projected to increase by 22%.

Mr. Vincent also presented the debt service budget, four special revenue budgets (Sewer Use, Residential Rental Properties, Animal Control and Simsbury Farms), and appropriations for the Capital Non-Recurring Expenditures Fund (Addendum I). He noted that three of the special revenue funds adhere to the Board of Finance spending guideline of 5.6% and the FY 07 operating budget represents a 5.25% increase over the FY 06 operating budget.

Mr. North stated that, although the salary and wages amount are increasing by an amount that approximates general inflation, benefits are going up at a rate that exceeds inflation about 6 or 7 times. He wondered if any thought was being given in the longer term towards migrating these plans to the type of plans that are increasingly seen in the private sector, such as defined contribution plans on the retirement side and employment health savings accounts on the health benefits side. Mr. Vincent replied that he could only speak generally, as there are current negotiations going on, but that they are trying to implement some changes in health coverages and how the health product is delivered to the employee. Also, employees’ contributions have gone up in previous negotiations and they will strive to continue in that direction. Mr. North asked if he was aware of any peer towns considering any policy changes. Mr. Vincent thought that the change in what is offered to the employee is what some are trying to do.

Mr. Henault asked if the issue of the $600,000 being set aside to fund the OPEB benefits per GASB 45 has been brought up in any of the union negotiations, as that is a benefit. He also suggested to both the BOS and BOE that they have all the union representatives from all the various bargaining units in to a Board of Finance meeting and have either the auditor or the actuary make the GASB 45 presentation again so that they can see what impact this is having on the Town, but also across the entire U.S. Mr. Vincent replied that the GASB 45 issue has been introduced in the negotiations.

Mr. North stated that what has not yet been done is an actual allocation of this amount to the respective BOS/BOE operating budgets, such that the actual increases are understated. Mr. Kane indicated that either at the Public Hearing or the Town Meeting, once a better number is obtained from the actuary, the Board of Finance could zero out their hypothetical budget of $600,000 and amend the BOS/BOE budgets to include this amount, but, since the numbers were still being reviewed, it would be best to wait until the numbers are more definite to do an allocation.

Ms. Fitzpatrick wondered if, once the OPEB monies are started being accounted for in good preparation, the GASB rules require the Town to conform. Mr. Kane replied that they are trying to obtain clarification on this issue and that, even if they could set up a trust, this whole process takes time. In the interim, a special revenue fund could be set aside that earns interest. Ms. Fitzpatrick’s concern was that she did not want the Town to be penalized for good planning.

Ms. Mielert confirmed with both the BOE and BOS that they were done with the indemnity plan. She asked what was causing the large increase in pension funding. Mr. Kane responded that it has to do with the state of the assets over the last five years. There is a stated minimum rate of funding (for example, 6% of an employee’s salary), but also ground has to be made up for gains and losses. At one point, the assets of the plan had such a high return, that the Town was only required to fund 3%, but the Board of Finance felt that the minimum 6% should be maintained. The actuary amortizes the gains and losses over a five-year period and there are a couple of bad return years that should fall off next year and it is Mr. Kane’s understanding that next year the required funding could either not increase or actually decrease. Mr. Kane stated that overall Simsbury is doing well in terms of gradually making up the previous bad years’ losses.

Mr. Askham stated that he noticed that a large amount was lost in the Insurance Fund last year and Mr. Kane indicated this was due to a mistake in the prior year when the BOE erroneously funded too much for their retirees. Mr. Holden stated that as of December the plan’s claims/premiums ratio is good and that no large flux is anticipated at this time.

Ms. Mielert asked if the Board received regular reports from the Pension Committee and Mr. Henault replied that they provide them when asked and also that Mr. Mason concurrently sits on the Pension Committee and, as such, acts as a liaison. Mr. Kane noted that page 57 of the audit report summarizes how the Town has funded the pension plan over the past five years.

Mr. Henault asked if the Board of Finance budget that shows a 9.92% increase could be changed to 5.6%. He asked if the Town was planning on filling the full-time position of Director of Public Works that had been removed at any time during the year and Mr. Vincent replied that they would not be filling that position, but rather have made the Sewer Plant Superintendent, the Buildings & Grounds Supervisor, and Highway Superintendent direct reports to the First Selectman on a daily basis. Mr. Vincent also indicated that one new police officer was hired yesterday and that an additional one was expected to be hired in the next few weeks. He also expected a hiring decision to be made for the vacant position of Director of Community Planning & Development prior to March 15^th.

Mr. Henault asked what was causing the $25,000 increase in supplies and Mr. Kane replied that it was gasoline. Mr. Henault asked if the purchase of police cruisers was still on a regular schedule and Mr. Kane replied that, although there was a slight decrease in their request from last year, they are continuing to move forward. Mr. Henault asked if the increase in supplies under Cultural, Parks and Recreation was also due to fuel and Mr. Kane replied that it was due to a combination of increases in electricity, gasoline, fuel, agricultural supplies and equipment, but that at least one-half of the increase was due to heating costs.

Mr. Mason asked why a budget line item is continually added for commissions that historically do not use up their budgets. Mr. Kane replied that the budgeting for the commissions or departments fall back on the department and are not done centrally. They may know they have a conference coming up, so that, although the funds are not expended in the first six months, they fully intend to expend the amount budgeted.

Mr. Askham asked if the revenue budget reflected the Governor’s budget and Mr. Kane replied that it did. Mr. Kane referred the Board to this memorandum entitled “Governor’s Car Tax Proposal” (Addendum II) and worksheet entitled “Projected Mill Rate” (Addendum III), which analyzed the impact of the Governor’s car tax proposal on the Town’s projected revenues. Mr. Henault noted that the projected loss of revenue due to the car tax proposal would result in an increase of 35.2 mills to 36.7 mills, or a 4.3% tax increase vs. a 3.98% increase.

Ms. Mielert asked if the Meadowood legal fees for the current year were budgeted or were there going to be extraordinary amounts transferred. Mr. Kane stated that the current legal fees are less than the prior year without Meadowood, but it is unclear how much Meadowood will impact those amounts.

Mr. Hogan stated that the Board of Education was putting forth three capital improvement projects, the total cost of which was $7,070,000. The first major project is the Tariffville School addition and renovation, costing $6.2 million. There has been no significant work on Tariffville School for over twenty years and the educational program has been impacted by the inadequate space. For example, the kindergarten has been displaced to Central School for three years now. The anticipation of the Meadowood project will add students to the schools. Due to the age of the building, temperatures regularly reach into the 90’s during the spring and fall because of the inefficient windows and inadequate ventilation.

In looking at the Tariffville project, the proposed Meadowood project was taken into consideration. Looking at projected enrollments by grade configuration, they see a drop off in the elementary population by approximately 300 students over the next five years and they would be in the position to accommodate 300 additional students without having to build a new elementary school if that project were to happen over the next five years. They would still need to do the Tariffville School and Latimer Lane renovation project during that time period. The other background consideration was that the Board of Education is asking the administration to look into changes of the configuration of the schools and going to a 5/6 school in addition to the elementary schools.

The scope of the project consists of replacing the modular classrooms which were installed in 1984 with permanent construction, add one regular classroom, add special education and tutorial space, add boys’ and girls’ bathrooms, enclose the courtyard, renovate and expand the main office and the nurse’s office, replace the windows and improve the ventilation, install a new sprinkler system and correct any code violations.

The second project is systems telecommunications/security lighting upgrades for $420,000. The significant components of that project include updating the Squadron Line School phone, voicemail and alarm system; improving the exterior lighting at Tariffville and Latimer Lane Schools, and interior lighting in the gym corridors and emergency lighting at Henry James. It would also include security upgrades at all schools by incorporating security cameras, monitors, and infrastructure.

The third project is computer technology upgrades for $450,000. The significant components of that plan involve making changes to inter-building fiber optic system by changing from the current T-1 connection, which allows transmission of data at a maximum speed of 1.15 megabytes per second, to a transmission speed of 1 gigabyte per second, which is a significant expansion of information flow between the schools. To do this, there will also be funding from the State in the amount of $112,000, which is expected in March 2006. Other major components of the project are updating the network system’s battery backups, updating the network monitoring equipment, and adding additional network servers and switches.

Ms. Fitzpatrick asked why the State money that would go towards the computer technology was not reflected on the six-year capital plan. Mr. Holden replied that a unique opportunity came up this year in that a new Director of Systems Technology put in a grant request for something that the Town of Simsbury does not normally qualify and they were notified in late December that they qualified for $112,000, which they will receive in March 2006 and must expend prior to June 30^th. The $112,000, paired with a portion of the $450,000, will be used to provide the fiber optic connection between Town Hall, Central School, Henry James, and Simsbury High School, which serves as a hub of the Town’s infrastructure. Ms. Fitzpatrick asked when the speed of the infrastructure had last been increased and Mr. Holden replied that we had never done so and were using the original point to point T-1 connections.

Ms. Fitzpatrick asked how different the proposed Tariffville renovation project was now from the last version that was brought before the Board and when that was. Mr. Hogan replied that it is essentially the same plan, but with the addition of a sprinkler system and code improvements. Mr. Holden stated that the project was initially brought before the Board in 1998 and then pulled back in 2000/2001 so that the Simsbury High School project could move forward and in recognition of not knowing where the proposed Meadowood project was going.

Mr. Mason confirmed with Mr. Holden that the previous plan’s cost estimate was $4.7 million. Mr. North asked if the addition of a sprinkler system would cause major renovations. Mr. Holden said that the water and electrical services must be upgraded; he noted that at this point in time they have not yet retained an architect or gone through significant design development. Mr. Holden also stated that the professional cost estimates have taken a start time of 2008 into account.

Mr. Henault stated that the Board of Selectmen, as part of moving their capital plan for 2006/07 forward, moved a number of projects back so that future years complied with the Board of Finance guideline as discussed at the previous meeting and he wanted the Board of Education to confirm that they were in agreement with this understanding. Mr. Hogan stated that, although the Board of Education understands the guideline, they are concerned about overcrowding at Latimer Lane and the security set-up at Henry James. He understood that the Board expected there to be no capital spending next year, but wanted to leave the door open as they may have to come back to the Board even if it is likely that they will not get approval.

Mr. Mason asked if the future projects that Mr. Hogan mentioned would involve the same time offset and Mr. Hogan confirmed that, although the Latimer Lane project would be submitted in the 2007/08 fiscal year, the project would not commence until 2009, which is part of the reason he wanted to “keep the door open”. However, Mr. Kane indicated that this two-year offset would not change the impact.

Relative to the technology upgrade, Mr. Askham asked if the library had a need in this area and if so, was anyone coordinating it. Ms. Bullock responded that the Connecticut Education Network, which is funded by the State of Connecticut, is in the process of connecting all public libraries to the fiber optic system that runs down Route 10 and that the Simsbury Library is scheduled to be installed in Wave 4 (late fall 2006). As part of the proposed library renovation, the data cable wiring will be upgraded to accommodate this connection.

Ms. Mielert asked if there was an itemization of the $450,000 amount designated as “Park Improvements” for fiscal 2006/07. Mr. Vincent responded that it was primarily for playground equipment and repairs at Weatogue Park, Tariffville Park, Meadow Pond and Curtis Park; parking lot improvements for Tariffville Park, Meadow Park and Simsbury Meadows; field lighting for Town Forest; a small building restoration at Simsbury Meadows; irrigation; and legal and bonding expenses, but there were not precise numbers on the lighting issues as CL&P had not yet gotten quotes back to them.

Mr. Hogan stated that the Board of Education has met with the Board of Selectmen and the Library Board and that all three boards plan to work together to promote all of the capital projects this year. To that end, they plan on having a taped session on SCTV that talks about the two projects moving forward this year.

Mr. Henault stated that he belongs to the Connecticut Municipal Consortium for Fiscal Responsibility, which is comprised basically of the Chairmen of the Boards of Finance of various towns. Mr. North attended their last meeting on his behalf. One of the issues they deal with is asking for modifications in binding arbitration. Simsbury is one of the towns where only the Board of Finance has endorsed their mission statement. In many towns, the municipal, education and finance boards have all endorsed that mission statement. The more boards that endorse the Consortium, the more weight it will have at the State Capitol.

Mr. Henault indicated that the Board of Finance wanted to pass a letter on to the Board of Selectmen and the Board of Education asking them to also endorse the Consortium. He stated that the general feeling is that, if we do not act together as towns, we will continue to be put upon by the State with respect to unfunded mandates and binding arbitration that can not be controlled. Mr. North added that the collective group of towns all wrestle with difficulties, which are, in large measure, precipitated by regulations. Any moves toward relief in State policies would provide more operating room for the local boards. He also passed on a Model Resolution to be considered by the other boards and encouraged their careful consideration and ultimate support.

Mr. Kane stated that it appears the Governor’s proposal will probably go through and that it is advisable to carry the budget forward with that assumption. Mr. North stated that, if the Town is really going to face the revenue shortfall as outlined in Mr. Kane’s memo (Addendum II), the Board ought to be, at a minimum, urging the State legislators to oppose this initiative. However, he noted that earlier in the evening it was stated that other adjustments had been made to the mill rate worksheet (Addendum III) which mitigated the negative effect of the proposal and he felt it was important to keep all other factors on the prior mill rate worksheet the same because moving other things around could be masking the gravity of the impact of the car tax change. If the other items were kept the same, he wanted to know what the effect of the car tax proposal alone would be and Mr. Kane thought that the tax increase would then be approximately 4.8%. Mr. North felt that, as a pure analytical construct, that number is important and that the Board could feasibly draft a letter saying that a preliminary analysis indicates that we will have to increase our taxes by .4 mills, or 1% due to this proposal.

Mr. Askham asked if the numbers were accurate and Mr. Kane indicated that the Town Assessor was still fine tuning numbers, but the correlation would still remain that the State will return approximately 94% of what would have been collected, which for the Town of Simsbury represents an $800,000-$1,000,000 loss of revenue. Mr. Henault stated that the Town of Avon’s preliminary calculation of loss of revenue was approximately $650,000. Mr. Kane noted that the Town of West Hartford expected to lose approximately $2 million in revenue.

Mr. Henault wondered if the individual taxpayer would ultimately benefit by losing the tax on their car, but having a higher mill rate on their house. Mr. Mason felt it would depend on the type of cars being driven. Mr. North thought that, based on the demographics of Simsbury, most residents would lose the $400 State Tax Credit for the property taxes they pay. Ms. Mielert was concerned that the people that would be impacted the worst would be the elderly who have an older car, own their own home and pay a small income tax.

Mr. North reiterated that, if the Town has analyzed that the proposal could have a negative impact on the revenue and mill rate, it should be conveyed by letter to the legislators. Mr. Askham concurred as long as we are sure of our facts. Mr. Kane stated that the $800,000 estimate is within reason. Mr. Henault stated that if the 10/1/05 grand list were to be used, it could be a mitigating factor.

Mr. North stated that he did not want to dismiss the car tax proposal too quickly and that it was the Board’s responsibility as elected officials looking out for the residents of Simsbury to make their concerns known to the State legislators. Mr. Henault agreed and felt the Board would agree that the analysis should be shared with Mr. Heagney and ask for his comments. Mr. Kane stated that it is clear that the towns will not be made whole and that the Governor was aware of this; only other communities that do not have the favorable tax collection rate Simsbury does will be made whole. Mr. Askham suggested that an analysis be done as to the impact of this proposal on the individual in Simsbury rather than the Town as a whole. Mr. Henault suggested that the Town Assessor could pull out a sampling of ten residents on an anonymous basis and do such an analysis.