Board of Finance Minutes-01/17/2013
BOARD OF FINANCE
REGULAR MEETING - 6:00 PM
JANUARY 17, 2013
CALL TO ORDER
Paul Henault, Chairman, called a regular meeting of the Board of Finance to order at 6:00 P.M. on Thursday, January 17, 2013 in the Main Meeting Room at the Town Offices, 933 Hopmeadow Street, Simsbury, CT. The following members were also present: Peter Askham, Jeff Blumenthal, Nicholas Mason, and Barbara Petitjean. Also present were Mary Glassman; First Selectmen, Mary Ann Harris; Finance Director, Matthew Curtis; Superintendent of Schools, Burke LaClair; Board of Education Business Manager, Leslie Faraci; Commissions Clerk and other interested parties.
1. APPROVE MINUTES - November 20, 2012 & December 18, 2012
Mr. Mason made a motion to approve the minutes of the November 20, 2012 Regular Meeting with changes presented. The motion was seconded by Ms. Petitjean and unanimously passed.
Ms. Petitjean made a motion to approve the minutes of the December 18, 2012 Regular Meeting as presented. The motion was seconded by Mr. Askham and unanimously passed.
2. GRAND LIST UPDATE
Mr. Henault referenced a memo from David Gardner, Tax Assessor, which provided key points regarding the revaluation update. Mr. Henault then moved on to the topic of the Grand List Estimate and said they would talk about that number when discussing the Mill Rate later on in the meeting. He then mentioned the application periods for the elderly tax rate and veterans exemption programs. The letter from Mr. Gardner was discussed further and Mr. Henault quoted the new Grand List as approximately $2.2B, which he said would also be discussed later on in the meeting. Ms. Petitjean reminded people of the increased homeowner income limit for the previously mentioned exemptions.
3. ANNUAL AUDIT FY12 RESULTS
Mr. Henault said it is important to answer any questions regarding 2012 finances prior to moving onto the 2013. Mr. Henault asked Ms. Harris about the comments within the "General Ledger Maintenance" section of the letter from BlumShapiro letter (dated December 20,2012) to the Board of Finance, regarding accounting controls and administrative practices, and the bullet points were reviewed and discussed.
(page 16 - Comprehensive Annual Financial Report 6/30/12) Mr. Askham said they should get an opinion from bond council regarding the Sewer Assessment funds, in the amount of $1,274,452, that are not being used. This fund balance was discussed and how the money can be used. When Mr. Mason asked if the debt could be paid off in advance, Ms. Harris said it cannot.
(page 25) Mr. Askham asked about the investment management fees that were broken out under OPEB and asked where those fees are accounted for within Pension. Ms. Harris said it is just lumped into Administrative expenses. These treatment of these expenses were discussed further when calculating investment performance.
(page 36) Mr. Askham asked about three (3) deficit fund balances; Capital Projects Fund, Animal Control Fund and Simsbury Farms Fund. Ms. Harris said the Capital Projects Fund was purely a timing issue, as the bond money had not been raised yet. Ms. Harris spoke about some reasons the Simsbury Farms Fund is a deficit, but said she is not sure why Animal Control Fund is a deficit. Ms. Harris said the might have to transfer funds over in order to close out the Animal Control Fund account. Mr. Blumenthal asked about Simsbury Farms and about the specific allocation of Gerry Toner’s, Director - Culture, Parks & Recreation, salary and his assistant's salary. Ms. Glassman, First Selectmen, spoke about how that salary allocation was determined and said at this point, it seems fair, as most of his time is spent on Simsbury Farms. Ms. Harris spoke about some lost revenue for Simsbury Farms due to construction, weather, etc. that should be regained this coming year, although it is hard to predict.
(page 41) Mr. Askham then spoke about construction allowance numbers and said some of these projects should be closed out in order to accurately evaluate the numbers. In response, Mr. LaClair provided the final close-out numbers for Simsbury High School. Mr. Askham asked if Ms. Harris, at a later meeting, could go through the list with them to determine which projects can be closed out. Mr. Askham asked about the Triangle Land Purchase and Ms. Harris said she would look into that.
(page 50) The contributions were then discussed. The annual required contribution was discussed and Mr. Askham asked why the Board of Education is not gaining ground, regarding the funded ratio, even though they are making their contributions. Mr. LaClair said basically, the actuaries made assumptions based on when people will retire and the recent retirements were maxed-out, meaning they did not meet the assumptions used. Mr. Mason said he expects a big improvement in the near future because changes will be made as a result of the in-depth studies currently being conducted with the sole purpose of finding the correct assumptions. Mr. LaClair did say there were also some investment variables that are affecting that funded ratio, although he is not sure the exact details on why that is happening. This topic was discussed further by the Board members.
Mr. Blumenthal asked Ms. Harris about the topic of Accounting Procedures Manual, as referenced within the letter from BlumShapiro letter (dated December 20,2012), and Ms. Harris said they are in the process of working on it now.
(page 70) Mr. Askham then spoke about on the Capital and Non-reoccurring Expenditures Fund within the Balance Sheet, which was discussed.
(page 89) Ms. Petitjean directed attention to the Principal Taxpayers (comparing 2003 vs. today) and noted the major companies on the list that are no longer in Simsbury and said it something important to keep in mind. The future of The Hartford’s presence in Simsbury was discussed.
Mr. Henault said he does want to discuss the single statements at the next meeting because there is information regarding treatment of grants that he wants to be addressed.
4. BUDGET UPDATE - FY2013
Mr. LaClair said they are at the mid-point in terms of revenues and there is not much change thus far, but fiscal cliff is still something they need to continue to watch in terms of federal money. He said the do expect a positive balance for this year. Mr. LaClair said the biggest variance that he is tracking is related to construction and salaries. Ms. Harris said she provided the Board members a second quarter report and they are on target. She mentioned building permits are up and spoke of other contributing revenue categories. Then Ms. Harris reviewed the expenses side. When asked by Mr. Askham if these numbers seem consistent with last year, Ms. Harris said yes, they are but revenues are up. Ms. Harris said department heads have been on target with their budgets because they have been trained on the Pentamation system which helps keep people on track.
5. SCHOOL SECURITY UPDATE
Matt Curtis, Superintendent of Schools, provided an overview of the steps being taken to secure the students: 1) Step back and recommitment to systems/procedures already in-place (buzzer system, ID badges, lockdown procedures, etc.) 2) Bring in a third-party to conduct a large-scale security audit which will examine all of the facilities and security procedures.
Mr. Curtis said they have reached out to neighboring communities to see if there is any possibility for collaboration on the large-scale study. Mr. Curtis thanked the Police Chief and Ms. Glassman for their efforts to provide increased police presence at the schools since the crises at Sandy Hook. He continued by saying, after the Board of Education meeting, and receiving feedback from teachers, there are some immediate measures that they can take, specifically regarding internal locking mechanisms on classroom doors. He described the current system and the risk associated with the outside locking mechanisms that currently exist. Mr. Curtis said they did an inventory on the doors and put some estimates together on what it would take to create a consistent locking mechanism across the district regarding the doors. Mr. Curtis distributed a sheet outlining "short-term security improvements - cost estimates". Mr. Curtis said this is an area of high priority and he wants to get the thoughts from the Board of Finance on how this can be addressed in a timely manner. When Mr. Askham asked how long it would take to get it done if the money was approved immediately, Mr. LaClair said maybe 90 days from now when considering the bid process and assembly of these custom locks. Ms. Petitjean asked if it is centrally operated or room by room, Mr. Curtis said they are operated room by room. This topic was discussed further. Mr. Askham asked if this will make students safer and Mr. Curtis said yes, this will address something that has been a concern for many years. Mr. Mason asked if Mr. Curtis thinks they have the audio/visual needed and he said they are in good shape regarding surveillance. When asked about security for outdoor spaces by Mr. Blumenthal, Ms. Glassman said that will be examined but it is more of a long-term consideration, whereas the doors are the short-term priority. Mr. Askham said he would have no problem authorizing this money when it comes in front of them. The consensus was that the Board of Finance members want them to continue moving forward on this and they will hold a special meeting to approve if necessary.
6. PENSION GUIDELINES
Mr. Henault made reference to the recommendations made by Milliman and asked Mr. LaClair and Ms. Harris to use 7% in their preliminary budget numbers for discussion purposes. Mr. Henault said he is focusing in on keeping it at 21 years and ideally would like to go to 7% if it does not create too much disruption in the budgets, which will be examined moving forward in this process.
Ms. Glassman said they are not as far along in their budget process as the Board of Education, but when she factored in the 7% number, it resulted in an 4.43% budget increase. Ms. Glassman said she appreciates that they all want to fund pension plans, but that resulting number is not a reasonable outcome. Ms. Petitjean asked how much of that increase is due solely to the pension change and Ms. Glassman said around 2.5% (including insurance increases and OPEB). The numbers were discussed further. Mr. Curtis said their calculations included an assumption of 6.75% rate and resulted in a $286K increase which would be .46% of their overall non-discretionary increases. Mr. Henault said this is the time to take a real close look at this topic in order to decide where they need to be and the effects on budgets that will have.
7. FY2014 BUDGET DISCUSSION & POSSIBLE ACTION
Mr. Henault said when factoring in the budget projections he has received from the boards (but not considering what they would like to do regarding the pension funds), there would probably be a mill rate change of approximately 4.76%+. Mr. Henault noted that number does not factor in any change in the grand list. If however, Mr. Henault continued, they factor in the expected change in the grand list, there would be an increase of 6.41 mills (again not taking into consideration the pension fund changes). Alternative numbers/scenarios were plugged into Ms. Harris’ model and discussed. The Board members reviewed the historical Mill Rate numbers. The idea of partially funding the pensions out of Reserves was discussed. The result of a mill rate change was discussed as well as the potential effects of a cut to State Aid. When speaking about State Aid, Ms. Glassman said there is not a lot to take away from Simsbury in terms of aid because we don’t receive that much in the first place. She did say where it could potentially hurt Simsbury is in with regards to road maintenance. The Board asked Mr. Curtis to speak further regarding his budget scenarios. Mr. Curtis said his low-end-range budget would not allow Simsbury Schools to work towards Connecticut’s Common Core State Standards. He said the higher-end budget would allow them to responsibly respond to the reform efforts. These numbers were discussed by Mr. Curtis, Mr. LaClair and the Board members. Ms. Glassman spoke of some factors that will effect her budget this year, but said she does not have all of the details yet. Ms. Harris provided some information regarding the changes made with their retirees’ plans. Mr. Blumenthal asked about the last negotiated employee contract and the resulting contribution changes, which was discussed.
Mr. Henault returned the conversation back to the pension numbers. Ms. Harris spoke about the assumptions she used when doing her numbers. Mr. LaClair spoke about his preliminary budget and the assumptions used (pension, declining enrollment, etc) to reach his presented numbers. Mr. Curtis said the pension changes alone accounts for a .46% increase and the percentage increase for salary is 1.43%. He also spoke about the Board of Education’s response to declining enrollment, including the elimination of eleven positions. The Board of Education budget numbers were discussed further.
Mr. Henault asked the Board of Finance members for their thoughts on split guidelines for the Board of Education and Board of Selectmen. Mr. Mason said he does not think it is necessary. Ms. Petitjean said she would support it, but she doesn't know enough about the Board of Selectmen budget yet to make that decision. Mr. Askham said he doesn’t like splitting it, but if there are compelling reasons, he will listen. Mr. Blumenthal said he would want to know more about the Board of Selectmen budget as well. Ms. Petitjean noted that the Board of Selectmen does not benefit from declining enrollment, so it might make sense to split the guidelines. Mr. Henault said he would consider providing the Boards with a guideline and then hold them harmless regarding the increase of pension money. The potential guidelines were discussed by the Board members. Mr. Mason suggested setting the guideline at 1.5% (taking the pensions out of the equation) for both Boards and then would like to hear compelling arguments as to why that number wouldn’t work. Ms. Glassman said she could present that and then show what is being sacrificed in order to stay within that guideline, but there will be a lot unfunded at that percentage increase.
Mr. Mason then spoke about his concern regarding public reaction to a potential 20% increase in the mill rate in order to accommodate the drop in the Grand List. He said there are some homeowners that are seeing an increase in their assessment that will be astounded by the change in their tax bill, plus the increase in the auto tax.
Mr. Blumenthal said he is comfortable with the 1.5%, knowing the Boards will present what would have to be cut in order to meet that guideline.
When asked, Ms. Glassman said she doesn't see a problem with the 6-year capital plan and Mr. Curtis agreed. She said they are working on the numbers now and will present those to the Board.
Mr. Henault said he thinks the consensus is a 1.5% guideline, budgeting for the existing 7.75% rate and then if the rate gets dropped, the Board of Finance will hold the Boards harmless of that amount. This was discussed further in order to clarify the Board of Education numbers.
8. CALENDAR UPDATE
Ms. Harris said the March 25th Board of Selectmen presentation has to be moved to Wednesday, March 27th at 5:30. She said that presentation will cover: Board of Selectmen Operating, CNR, & Capital Improvements.
Ms. Glassman asked the Board of Finance if there will be flexibility on CNR, which was discussed briefly. Ms. Glassman said the generator might be a logical project to fund out of Reserves, although it is still in the Capital Improvement Plan.
9. CORRESPONDENCE
Mr. Henault had no correspondence to discuss.
10. REQUEST FOR SPECIAL REVENUE FUND - TRANSFER REQUEST
Mr. Blumenthal made a motion to create a special revenue fund for the Incentive Housing Zone (Home Connecticut) Grant from the State of Connecticut OPM in order to receive the remaining balance of the originally approved grant amount. The motion was seconded by Ms. Petitjean and was unanimously approved.
Mr. Blumenthal made a motion to amend the agenda in order to act on the authorization request regarding the America the Beautiful Grant. The motion was seconded by Mr. Mason and was unanimously approved.
Mr. Blumenthal made a motion (as outlined in the January 15th memorandum from Tom Roy, Director of Public Works) to authorize the transfer of grant funds, in the amount of $1,092.67, from General Fund Reserves to the Parks Department, allowing the grant funding to be shown as a receivable. The motion was seconded by Mr. Askham and was unanimously approved.
ADJOURNMENT
Mr. Blumenthal moved to adjourn the Regular Meeting of the Board of Finance at 8:38 PM. The motion was seconded by Mr. Mason and passed unanimously.
Respectfully submitted,
___________________ _________________________
Paul Henault, Chairman Leslie U. Faraci, Commissions Clerk