Simsbury, CT - Board of Finance - January 15, 2008

A Special Joint Meeting of the Board of Finance, Board of Selectmen and Board of Education was called to order at 6:00 P.M. in the Board of Education Conference Room at the Simsbury Town Hall, 933 Hopmeadow Street, Simsbury, Connecticut.

Mr. Henault stated that the purpose of this meeting was to have a discussion around the operating and capital budgets for the upcoming year. He distributed to the attendees a copy of Moody's report in which Simsbury's AA-1 rating was re-affirmed, which "reflects the Town's solid financial performance with fund balances that are expected to diminish but remain adequate as the Town uses the reserves for land purchases." The Moody's report also positively commented that the Town has already identified its Other Post-Employment Benefits liabilities.

Mr. Henault stated that, at the Board of Finance's Special Meeting which was held last meeting, many residents spoke about revaluation, which is a big concern, as well as their concerns regarding expenditures. He added that the state of the economy, interest rates, the COLA adjustment, an increasing rate of inflation, and the fact that the Board of Finance's debt policy of 7% is currently being exceeded are all additional concerns. A primary goal will be how to improve Simsbury's equalized mill rate ranking as it is currently the 14th highest tax rate in the State; one way to accomplish this goal would be to have an increase in the mill rate that is lower than last year's increase, which was 2.79%. Mr. Henault asked for input from the other boards and what they are hearing from residents.

Ms. Glassman stated that today is the deadline for the various department heads to submit their respective budgets. Projections that she has received from Mr. Kane indicate that salary and wages, which comprise 75% of the Town's budget, will require a minimum 3% increase to stay stable. Any less would require reduction in staff or layoffs. She also noted that insurance, fuel and energy costs are increasing and, only after addressing these issues, would there be anything left to address initiatives. Without any new initiatives or new staff, she thought that the Town would be looking at a 4.5% increase.

Ms. Glassman noted that there are $2 million of improvements which have been needed at Eno Hall since 2004. The Public Safety Committee is having a meeting on Thursday to address what must be done. This item is not on the capital projects list, but must be done due to safety issues. Another item not on the capital projects list is $2.7 million for the purchase of the Meadowood property. Additionally, the Board of Selectmen obtained a $350,000 grant for purchase of the Gersten property and, if the property is going to be purchased, it must be this year and a $350,000 appropriation will need to be made. Finally, there is a $65,000 request from the Simsbury Land Trust to purchase the Tulmeadow triangle; there have been representations that the Town would fund this request, but it is not anywhere in the budget and no money has been appropriated.

Mr. Long thought that there should be some funding for accumulated vacation time. Mr. Kane indicated that these amounts are in the Town's financial statements. The total liability at 6/30/07 on the Town's side was approximately $800,000 and about $200,000 of that would be considered not current.

Mr. Sennott asked for a summary of the statistics on revaluation. Mr. Kane stated that he could provide this information, adding that the average residential increase was 33% and the average commercial increase was 32%.

Mr. Sennott stated that the Board of Education is trying to identify the key drivers of their budget and have a budget cycle of greater than 12 months by focusing on long-term initiatives. He noted that there is a projected enrollment decline for next year of approximately 55 students, adding that the potential variables that could impact that number are Meadowood, home sales to families with children, and River Oaks. One factor that mitigates the enrollment decline is when the decrease is distributed unevenly in the schools and subsequently enrollment declines do not necessarily result in FTE equivalent savings as people costs are what drive the BOE budget.

Mr. Sennott stated that the settlements have been made for both teachers' and administrators' salaries, which represented about 70% of the budget, and those costs are projected to increase by 4.6%. Insurance costs are projected to increase by 10% and declining interest rates are a concern relative to pension costs. He noted that two-thirds of the technology gap has been funded. Utilities, which represent most of the remaining 30% of the budget, are anticipated to increase by 10%.

Mr. Sennott noted initiatives that are being addressed by the BOE, such as the class size problem, which has been addressed over the last few years. To cut staff will regenerate the problem, according to Mr. Sennott. Also security has become a major issue due to some high profile issues that happened at schools in the past year. In the 5/6 study which evaluated whether to go from a K-6 system to a K-4 system and put all the fifth and sixth graders in one building with the idea of offering more and enhancing the curriculum, the parents indicated that they did not want to lose the elementary schools, but favored the curriculum enhancements. Finally, a Dean of Students position is being considered relative to providing a student support system.

Ms. Glassman asked about any projected increases from the Fire District. Mr. North indicated that the Fire District does not anticipate any revenue increase and that no operating expense increases will be passed through in the form of net new tax.

Mr. Henault asked if the Eno project could be broken out to reflect the absolute public safety issues and Ms. Glassman indicated that this is currently being done. Mr. Henault showed via overhead projector the interactive mill rate worksheet that the Board of Finance uses to project the effects of various levels of budget increases on the mill rate. He demonstrated the projected effect of a 4.5% Board of Selectmen budget increase and a 5.34% Board of Education budget increase with no changes in capital expenditures and no effect from revaluation, which would be a tax increase of 4.34% and a mill rate of 38.5. He also demonstrated the effects of revaluation on last year's mill rate, if all other factors were held stable and the mill rate would drop to 28.6 (from last year's 36.9 rate).

Mr. Henault stated that sentiments expressed by the attendees at last night's Board of Finance meeting indicate that there is a concern about expenditures and a 2.79% increase in the mill rate (last year's increase) is too high.

Mr. Sennott requested that the Board of Finance ask the boards to work off of guidelines in setting their budgets rather than setting a cap. He also expressed concern about approving no capital projects as, due to the new State rules that require local approval prior to obtaining State approval in the next year, any project that is approved in the current year would be three years out to actual completion. Mr. Kane distributed a summary of current bonded debt which showed a small decrease in debt service over the next few years.

Mr. Kane also suggested that the Meadowood settlement be funded from reserves and not bonding. Mr. North clarified that the Meadowood land purchase is not a settlement, but rather an option that is part of the settlement and that a decision to spend $2.7 million on Meadowood, given the debt policy, may be a decision not to spend $2.7 million on something else. Before assuming that the purchase is going to happen, he thought that the Board should first examine the fiscal impact. He said that the Town did indeed spend a lot of money on behalf of the citizens and others that were opposed to Meadowood to arrive at the settlement and the return in those legal costs was a huge reduction in the original proposed density of the project whether or not the land purchase option is exercised.

Ms. Glassman stated that Town Counsel advised the Board of Selectmen at their meeting last night that the option does not have to be sent to referendum. Mr. North stated that he would like to see a cash flow analysis done that identifies the costs associated with financing the purchase vs. the revenue and cost implications to the Town if the land were to be developed. Dr. Ullman stated that the ratio to be used in such an analysis for Meadowood would be 1.14 students per household.

Mr. Mason agreed and stated that such a study would merely identify the trade-offs associated with exercising or not exercising the option. Mr. North added that he is not singling out the Meadowood project in this regard and felt that every single project should be subjected to this kind of rigor; choices must be made and not every project can be done without destroying the fiscal health of the Town as there are not unlimited resources.

Mr. North stated that the equalized mill rate is the biggest red flag out there and the only way to improve the ranking is to either increase new revenue or taxes or decrease expenses or at least moderate both so that the ranking drops over a period of time. Mr. Henault reiterated the need to target an increase that is less than last year's.

Mr. Long commented that, while looking at such analyses, it should be remembered that the Town is not a business and, as a government, needs to consider the people who want things and who don't want things and it must strive for a balance of being fiscally responsible, but also serve the needs of the citizens of the community and wants and what they are willing to pay for.