BOARD OF FINANCE
JANUARY 15, 2008
SPECIAL MEETING
1. CALL TO ORDER
A Special Meeting of the Board of Finance was called to order at 7:35 P.M. in the Lower Level Police Conference Room of the Simsbury Town Offices. The following members were present: Paul Henault, Peter Askham, Nicholas Mason, Anita Mielert and Kevin North. Also present was Director of Finance Kevin Kane.
2. APPROVE MINUTES
Mr. North made a motion to approve the minutes of the December 18, 2007 Regular Meeting. Mr. Askham seconded the motion.
Mr. Mason requested that the words "yield differential" be added for clarification on page 2.
The motion to approve the minutes as amended passed unanimously.
3. DISCUSSION ON PROPOSED 2008/09 BUDGETS AND POSSIBLE ACTION
The Board had discussions around Mr. Kane's need to bond for cash and the timing of debt service of BOE capital projects under the new State approval process. Mr. Kane noted that any approvals this year would affect 2011. He felt that upcoming projects should be maintenance-type projects, rather than expansion projects. There are several crucial upcoming BOE maintenance projects involving replacement of an HVAC boiler and two roofs. Mr. Kane stated that there is approximately $7 million in the hopper that will need to be financed over the next three years. He added that there will be an immediate need to bond a minimum of $4 million for cash needs
Mr. Henault stated that the Board of Finance will be getting lists of projects from both the Board of Selectmen and the Board of Education and that he did not want the Board of Finance to be in the position of telling them which to do or not do, but rather favored giving them guidelines and asking each Board to prioritize their projects.
Mr. North thought that, by maintaining the 98% collection rate, there would then be an addition of approximately $1 million to the undesignated fund balance, which could potentially be used to address the life safety and code issues at Eno. Ms. Mielert stated that the sprinkler system is definitely a life safety issue and one of the unknowns is what other items could then be waived architecturally with the addition of a sprinkler system. Ms. Mielert suggested getting a capital needs analysis done for the whole building. Mr. North thought that doing the project in two phases might drive up the cost of the total project. He thought that, if approximately $400,000 would be involved in the sprinkler project, perhaps the remaining $600,000 could be utilized toward other projects such as the Board of Education roof
projects if they are really critical, the rationale being that these projects are highly pressing maintenance and/or life safety issues. All other capital projects would then be deferred. Mr. Mason asked if the Board should suggest to the boards which projects should be prioritized. Mr. North stated that he would rather not, but that perhaps it could be done by allocating undesignated fund balance amounts and letting each of the boards decide how they are going to utilize the amount.
Relative to the operating budgets, Mr. North stated that he would like to see a tax increase as close to the Cost of Living Adjustment (2.3%) as possible. Mr. Henault stated that he wanted any change in taxes to be due to the effects of revaluation and not due to an increase in expenses. Mr. Mason noted that there is much confusion regarding the effects of revaluation. Mr. North commented that, while everyone is focusing on the increase of expenses at the Town level, the expense increase that the taxpayer experiences is the tax increase and, therefore, it is most important to focus on the actual tax increase that the taxpayers will face. Mr. Mason noted that everyone experiences a different inflation rate and, in that regard, using the government inflation number can often be misleading and a bad point of comparison. Mr. Askham stated that he would like to see more realistic estimates from the Board of Education that factor in the decrease in enrollment and retirements and
better insurance projections.
Mr. Henault stated that he favored recommending a 3.5% budget increase to the BOS and BOE and that the Board perhaps make a statement that no capital expenditures will be considered. The open questions were if different budget increase percents should be suggested to each board and whether to establish a cap or a guideline. Ms. Mielert thought that the Board of Education should be asked to pare down their cost estimates on their capital improvement projects as several of them have doubled since they first appeared on their capital plan as, by doing so, it might be feasible to actually fund some of them.
Mr. Askham asked about the CRRA money. Mr. Kane noted that many towns are allocating those funds towards the cost of closing the landfill and suggested that this money should be earmarked for that upcoming expense.
Ms. Mielert stated that Mr. Sennott's comments at the last meeting resonated with her regarding establishing guidelines vs. setting a spending cap. Mr. North stated that he would like to see a firm guideline of 3.5% set. Mr. Mason stated that he favored a guideline. Mr. Henault stated that this year's capital debt service is just paying for what was approved in prior years and noted that it is now at 7.48%. He also noted that the assumption would be that there will be no increase in the Capital Nonrecurring balance of $1 million. Mr. Henault thought that approximately $150,000 might need to be put into the fund balance at year-end. Mr. Mason noted that there is currently a capital plan that does not have all the proposed projects on it and a Town Charter provision that requires it; items that should be
added include Ethel Walker, Meadowood, and capping off the landfill.
Mr. North made a motion that the Board of Finance pass on to the Board of Selectmen and the Board of Education, respectively, a firm guideline that there be an operating expense target of 3.5%. Mr. Mason seconded the motion and it passed unanimously.
Mr. Mason made a motion that the Capital Nonrecurring fund should remain at $1 million with $635,000 allocated to the Board of Education and $365,000 allocated for the Town. Mr. North seconded the motion and it passed unanimously.
Mr. North made a motion that the Board of Finance suggest to the Board of Selectmen and the Board of Education that the capital projects that this board will consider this year would be the three capital projects outlined under maintenance for the Board of Education (the HVAC boiler replacement, the Latimer Lane roof replacement and the Tootin' Hills roof replacement) and, for the Board of Selectmen, that this board will favorably look at up to $500,000 of capital expenditures to facilitate the Eno Hall improvements, including the sprinkler project. Mr. Askham seconded the motion and it passed unanimously.
3. DISCUSSION AND POSSIBLE ACTION ON AUDITING SERVICES
The Board considered the proposal that was submitted by Blum Shapiro to continue providing auditing services to the Town for the next three years. Mr. Askham stated that a decision needs to be made to either accept the proposal or go out for bid, although it was noted that there are not that many firms available. Mr. North thought that the proposal was reasonable and the contract should be renewed. Mr. Kane stated that Simsbury currently pays less for these services than other surrounding towns.
Mr. Mason expressed his concern that there is no internal audit process and that policies and procedures need to be reviewed and some of these items have not been noted in past management letters. Mr. North and Mr. Askham thought a separate contract regarding recommendations for controls and operations would be involved. Mr. Henault said that these concerns have been discussed with the First Selectman and, given Mr. Askham's experience in the auditing arena, that he be the liaison for addressing these concerns with her.
Mr. Askham made a motion to accept the proposal as outlined by Blum Shapiro in their letter dated December 4, 2007 to continue to provide auditing services to the Town. Mr. North seconded the motion and it passed unanimously.
4. JUNE 30, 2007 CAFR
The Board deferred discussion until its next meeting. Mr. Henault asked the Board members to review the report and pass on any questions that they may have to him. He asked Mr. Kane to schedule Vanessa Rossitto of Blum Shapiro to attend the Board's February meeting.
5. FINANCIAL REPORTS
Discussion deferred to the February meeting.
6. UPDATE ON REVALUATION
Addressed in discussion under Item 2.
7. INVESTMENT POLICY
Addressed in discussion under Item 2.
8. PROPOSED 2008 FINANCING
Addressed in discussion under Item 2.
9. UPDATE ON PRIORITY OF OPEN SPACE ACQUISITIONS
Mr. Henault noted that the Open Space Committee has listed their priorities as Ethel Walker Parcel B & C, the Griffin Land "triangle" (part of the Meadowood settlement), Tulmeadow Farm Forest land, and the Gersten-Laurel Hill property in Tariffville. He noted that they also had made a motion to move money from the grant in the Hall and Christensen properties to be deposited in the Open Space Fund. He noted that such a motion was not binding on the Board of Finance.
Ms. Mielert stated that she attended the Open Space meeting and that they are trying to leverage what can be done with the Land Trust and the grants that were promised from the State. She said that there is enormous frustration that $650,000 has not yet been received from the State and would actually be enough to cover several purchases. Mr. Askham asked if the obstacles to obtaining the money had been identified. Ms. Mielert thought that certain maps had not been filed. Mr. Henault thought that the issue was public access, as the parcel can not be land locked.
Mr. North thought, if grant funds are moved into the Open Space Fund, it would in effect increase the Town cost to the prior projects. Mr. Kane replied that, relative to the Hall property, the capital project was approved and, since the Board of Finance has a debt policy of 7% and the new money never came forward, he actually paid it down from direct pay-downs so that the capital project is whole at this time. So if the Hall grant was actually obtained, he would deposit it in the General Fund. Relative to the Flamig Farm property, the project is short and the grant would have to go back on the capital projects list as only the Town portion was bonded.
Ms. Mielert indicated that the State is beginning to change its attitude regarding "reimbursement funds" and, in the future, may actually bring a check to the closing so that the Town will not have to front the money and then be reimbursed. Mr. North stated that the Open Space Committee's action confused him as it seemed to violate the spirit and policies under which each of these policies have been approved so that the Town would only bear the net cost, not added financing costs.
10. ADJOURNMENT
Mr. North made a motion to adjourn the meeting at 9:10 PM. Mr. Mason seconded the motion and it passed unanimously.
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Paul Henault, Chairman Debra L. Sweeney, Clerk
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