welcome to the finance committee review of the fy2 annual town meeting happening Tuesday May 7th 2024 at the middle school um my name is Steven vudi I'm chair of the finance committee Fred Falkner Vice chair and we're going to just step through all the financial articles that that we're going to see at the town meeting and talk a little about the process that we went through in developing this year's budget which was a little different than what we had experienced previously uh starting in um early in September SE um we asked department heads to submit their budgets um we knew it was going to be a a tough year and what the bus budgets came in at is a $3.3 million deficit now a deficit at that time of year isn't generally a surprising thing it's the level of of the uh deficit that that concerned us a lot usually it's you know1 to2 million but $3.3 million was a bit much to deal with uh assistant Town Administrator Ryan Ferrara and and the finance team did a great job in in going through and presenting the finance committee and select board with first pass of a balanced budget um both boards then made some tweaks to the budgets as we went through the process to refine things but there was some very serious cuts that were done to get us to where we are today and what we'll be presenting at town meeting on the 7th and you can see on on the slide we can thr the slide back up the difference the difference categories that we had these cuts on so we had expense Cuts totaling $2.2 million we used other funds for $1.1 million we actually increased our Revenue assumptions by $217,000 and offset that with some expenses that came in at the last minute for $218,000 and you can see in the pie chart the level of those things 57% of what we did were expense Cuts some of the major things that that um happened in in coming up with these cuts that we did um we were very fortunate that we still had some covid relief funding called ARA funding and we have a million dollars of arpa funding that was hadn't been allocated yet and we have the town's betterment for the SAR that need to be paid it was sitting originally in the town's operating budget we're able to use these Opera funds and apply it that the uh Board of Selectmen select board excuse me select board um voted to apply these Funds 800 $25,000 out of that $3.3 million came right off the table which was a huge uh relief for for us absolutely and and getting that that number down one of the things that we also do um as we come up with with our budget scenarios is to be very conservative in in our revenue forecast and that helps us not only in being ready to fund things that may come up during the year but also it is the biggest contributor to the free cash uh that the town has and the free cash position that we have replenishes our Capital plan each year originally um there was a $730,000 increase in our Revenue assumptions um we knew we couldn't let that much flow into the operating budget um so we were able to reduce that down by some additional expense cuts to offset it down to 217,000 another big thing that we had um in in coming up with these Cuts was to reduce some of the reserves that we had our allocations of reserves our fiscal policy Reserve was reduced by $200,000 Finance committee's Reserve fund was reduced by $50,000 and we're not making contribution to our general Reserve reses this year stabilization funds for $150,000 but one point on that is that we were able to stay with our policy our financial policy even though we cut back so we cut it back to Bare Bones but we stayed within the financial policy that we had created years ago right y okay that that's a very good point so the the financial policy states that the balance of our general stabilization account has to be at least % of the operating budget and with interest rates increasing we're actually earning a lot more than that $150,000 in that that account so it's because of those earnings that we're able to skip the addition from the operating budget this year so it was a a net zero change for us which was very helpful for us we had some changes to our staffing also um the original request was for two new police officers we're able to um add one to the operating budget but unfortunately we had to eliminate a second uh officer position the finance director position in town was also eliminated it's been combined with the assistant Town administrator's position which is a big cost savings for the town um that position is has been going up in salary the position was hotter and hotter to find somebody and unfortunately we had some turnover in that position over the past few years the third thing as far as as salaries and Staffing goes the pox and wck Department asked for the town to fund 100% of the admin staff uh that they have there count currently funds 50% and we had to keep that at 50% so we couldn't uh fund that position at the total 100% that we had um employee benefits was a big redu ction for us also $976,000 our health insurance we had an assumption in there um for a large health insurance increase we're very fortunate that the renewal rate on that was much lower than we anticipated and we saved $300,000 on that we also reduced our OPB in pension funding to the tune of $673,000 both big reductions for the town some other notable reductions um like to thank the school department for their contribution to help solving our budget they were labeled to eliminate $250,000 from their budget uh the fire department we reduced overtime costs and you'll see when we talk about what actually made it into the fire budget um we have three new fire fighters that are coming online this year because of that we had this overtime reduction we're we're able to reduce police overtime uh by $100,000 and our debt service by $369,000 because of the use of some betterment funds that we have for our store department and um some State funding we have uh for our library Debt Service we're able to apply against that debt that we've already placed by $169,000 okay the uh sources of our funds you know where does the money come from uh as you can see on this pie chart the vast majority excuse me um come from property taxes approximately 70% uh and we excuse me uh we receive state aid to the tune of about $6.5 million uh in local receipts to tune of about $4 million uh excise tax um hotel tax meals tax that building permits that kind of thing adds up to around $4 million uh and those are sort of the the ongoing funds that uh we have and then sort of one-time funds uh we have undesignated fund balance or what often times is called free cash uh we're using a significant amount of that this year uh and uh the transfers from other funds uh We've uh are using some of the stabilization funds and money we've put away uh that you'll see in when we talk about the Articles um for uh things like uh renovating Indian Hill we go to the next slide well we're still on that um things like the use of of this the free cash allocation the undesignated fund balance and us transfers from stabilization these are all planned things that the town does um the the use of our undesignated fund balance has been funding our Capital program I went back and I looked at it's the past 20 years um that we've been using free cash position and capital stabilization to fund our Capital plan um those are the things that that have helped us get to the point where we are financially today with our AAA Bond rating were just a affirmed once again by by standing in pause for a AAA rating um that's very important for the town because it's reducing the interest costs that we pay the more that we don't have to pay an interest cost to investors the more we can keep in town the more we can apply to the operating budget to pay the salaries and benefits of the employees who provide the services to the town and that's that's what's important for us good point okay the uses of the funds um Town budget uh is about 23% uh school budget plus uh technical school or nooba Tech budget is about 36% uh and if you add in the employee benefits all towed uh told with uh Debt Service which is sort of the the operating side of of the budget it's about 80% of our spending all rolled together uh the capital and capital planning and warrant articles this year is about $7 million uh State assessments you know the state giveth and the state taketh away it's about $1.9 million and eight additions to stabilization accounts are a little over a million dollars this year so uh you know the first slide showed sort of where do the money come from this shot this slide uh shows you know where the money goes a lot of things that that we've talked about so far and touched on you received a a town meeting booklet in the mail um fincom report starts on page four and it goes into a lot of the detail that we've just talked about as far as where we started with the budget and what we're going to be looking at uh moving forward we get to article four and again this is exactly um what is going to be presented at town meeting um I talked about the town operating budgets if we look to separate that out Town increase of $700,000 of 4.45% we've added three new firefighters inside this budget and one new police officer those are the big staff additions that we've had school department and the show bch an increase of $1.1 million of 4.57% that's even with the reduction that the school department had for that $250,000 one of the big things that was we seeing now and we will see over the next few years is an increase in the town's Debt Service we have a lot of projects going on right now and the two that are listed here the senior center construction and the Indian Hill building purchase are just two of the things that that are ongoing one of the things that's really missing here that is debt service but doesn't show up on the town's operating budget as Debt Service is the SAR Department we are still the only user of the sore and while constructions going on the town is footing the bill for for The Debt Service that we're paying for these construction costs as the only user in in of the source system in town it's our responsibility this year that's and we'll see this in a couple of slides it's it's around $650,000 in in debt service payments that are made were off offsetting a little of it with the betterment that we're using but next year that's is is with the the big pieces of that increase are going to be seen so not only in FY 26 are we're going to see um the senior center probably bonded at that point so those costs will go up Indian Hill will be bonded those costs will go up and we'll also have the sour SYM so Debt Service is going to be a big piece of our operating budget moving forward right the uh sewer for example next year um in the FY 26 budget will increase by another million dollars over what we're paying this year so just to give you a bit of scale of what we're going to be looking at next year uh is it's it's pretty sizable with the the two construction projects plus the sewer Debt Service uh it'll be a significant rise in debt service and one of the things that that we intend to do uh in front of before a town meeting when we open up this finance committee is going to be doing a report touching on um some of these things that we're talking about today but also looking forward and presenting what we're seeing happening over the next two or three years down the road and that's going to be very important Article 4 highlights and you can see on on this slide um at the the the graph and you can see the last three years 23 24 and 25 just the increases that happen between town schools and other other being employee benefits and Debt Service being the the two big components of it the total budget increase of $3.4 million or 5.92% over FY 24 and you saw the breakouts between those things um what we plan on doing right now is taking a quick walk through the the warrant articles any of the financial articles that we have things that the the finance committee has voted on one way or the other um we talked to article four already um the operating budget um there there are so many things that that go into that operating budget please read the town report be well versed in those departmental budgets there is really Bare Bones in there um our our department heads did a fantastic job in coming up and and being able to work with the cuts that were going to be happening they've all been um sat down and and and made their presentations to both the finance committee and board of Selectmen and they realized that that the position that the the town's in not to say that the town's finances aren't aren't solid the town's finances are probably more solid than than they have been in years it's trying to keep that going trying to keep the increases that we're seeing to a manageable level until some of the revenue stream that we're expecting with some of the renovations going on in town are going to be able to come to fruition and that's going to be a ways down the road um so some of the Articles we can just go back and forth on these things article two bills a prior year this will probably on the consent agenda a lot of these articles may be on the consent agenda but they're still important to to know article two is 1 Point $1,100 in legal fees from FY 23 I'll do article three because there's nothing there that article three line item transfers that there will be nothing presented for that article for this year Article Five is the water Enterprise budget it's an increase of $471,000 over fy4 and the thing that's different from this year than other years is they're actually utilizing $60,000 of water betterment revenues that they received from um when they sent water over to the point um so now they're able to start using some of that Revenue stream to do other improvements and to offset that's some of their operating budget article six is an amendment to the FY 24 water budget and the only thing that's changed there is they've moved some of the $1.9 million from the Capital outlay Improvements line item to a separate special purpose appropriation um it's just allowing them to use those funds over several fiscal years it's not closed out at the end of a fiscal year so it's something that they can be using ongoing just gives them a little more flexibility in their project planning okay the sewer Enterprise fund uh this this coming year will be about $900,000 including $650,000 in debt service and as Steve mentioned as the town is the only user at this point uh we're footing the entire Bill uh this utilizes about 200 $200,000 in uh sewer betterment revenues and he also mentioned that we paid about $800,000 in betterment money through arpa um and that's 200,000 of it basically coming back to this operating budget uh the FY 26 expected Debt Service and operations covered by the town uh will be more like $1.8 million so the $650,000 is going up by over a million dollars next year and we know that's there because it's debt so we've already got a big nut to try to figure out how to cover uh next year article 8 uh is the purchase of the Webster property uh the new appraisal uh came in for the property at $730,000 for the purchase of 365 Acres um as we've done for the past oh 12 or 15 years when we purchase property for conservation purposes uh we use CPA funds which we've all been paying into for the last again 12 to 15 years um and if the purchase price is less than or equal to the appr raised value for 362 Acres then we would support purchasing the property you only through the use of CPA funds uh article 9ine is the CPC Blended fund transfers from Free Cash There's 287,000 in total to provide funding for various projects uh this increases the base amount eligible for state matching funds uh and traditionally the state matching has been in the 20 to 30% um of basically free money from the state if you put it into CPC they will match it and then CPC can authorize it to come out um with town meeting vote to be used on the various projects and one of the thing with this this contribution into the CPA funds um that 287,000 is basically a three4 right now we pay a 1% sech charge on our tax bills for this um CPA funding this is an extra 3/4 of 1% that's going over um there was there was uh something that was brought forward um the CPC actually wanted to increase that that sear Char charge to 2% and what we did when we we discussed this to try and keep the tax BAS taxes lower um because we know what's coming up with Cher Lane is to try and and use some of the town's available funds to make contributions to pay for some of these projects um there's no way that we can come up with the full 3% um that the state allows to get there but every little bit helps when you're when you're getting a 10 10 to 15% State match on those funds so this 287,000 go a long way and it's divvied up into those same four or five buckets that the CPC controls Y in article 10 is uh in your booklet uh and it's basically the list of projects uh to be funded this year by CPC funds as it's uh approved uh by the CPC next slide article 12 the funding for 36 King King Street Rehabilitation this is the Indian Hill building so a couple of town meetings ago we actually purchased that property was a special town meeting in February of last year I believe MH um we purchased the building for $3.5 Million last May um there was a warrant article on the warrant to do some of the renovations to that property uh the finance committee at that point um kicked back a little bit um on the the need for that article at that point in time and the select board agreed and that article was pulled and never made a to town meeting and what this this is doing is and we gave um the Town Administrator at the time um kind of his marching orders basically to go out to bid let's get bids in hand and then go back back to town meeting with a definite amount instead of an estimate of what the cost is going to be for this project that's what happened we have bids in hand right now for $2,981 47 um last town meeting we put away $4 million for this project um in our Capital stabilization account so we'll be withdrawing this $2.9 million from that 4 Mill ion the remainder of that money stays in the capital uh stabilization fund to be used for future projects that the town has F future Capital needs that we have um we need to get this building occupied it's deteriorating with nobody's nobody in there this is the opportunity to do this renovation to get it done to get the school department and park parks and wck Department into that building and get some Vitality in that part of town mhm article 14 the approval of town revolving funds is a standard annual article it just sets the uh amount that can be expended from those revolving funds for the different uh Town departments Article 15 the use of The Prudent investor rule okay um I'll take this one on this year's chair chair of the trust fund commission and the uh prudent investor rule is just allows uh the uh flexibility allows the trustees in town Treasurer uh some flexibility in the investment strategies that uh we can use for the town's trust funds uh We've uh been working with uh a trust fund manager or a fund manager along with the uh treasurer for a number of years now uh and have uh done pretty well um and that just as an aside uh this past January we voted to the trust fund Commissioners and Treasurer uh voted to distribute about approximately $150,000 of uh income that we made over the last the previous 12 months uh with the trust fund so it it is a vital source of revenue for uh uh activities in the town approximately $100,000 is going to scholarship funds for kids uh from Littleton uh about $40,000 is going to the school project which we'll talk to in a few minutes um and the rest is being distributed to things like lum uh and the uh EHS Department uh is uh also managing a small fund as well so uh this just gives the uh trustees a little more leeway and flexibility on our investment strategies uh article 16 trust fund dispersements as I mentioned uh earlier $40,000 is going to uh Russell Street mindfulness room it's a dedic ated space within the school to provide a calming and sensory Rich environment for students with autism in complex needs if a child is just having a really tough time in a classroom uh there is uh a specific space where they can go and sort of reather themselves under supervision uh and then come back to the classroom uh the second uh article uh the second piece of the article is $44,000 uh which will be managed by the EHS Department uh for animal assistance and Care Program uh and that's uh defined uh by the trust that the money comes from it is to go to care and betterment of animals in the town and we feel this is a a good way to handle it uh the EHS group if they have people who are having trouble paying the veterinary bills or whatever they they have some funds for some assistance okay article 17 is an amendment to a previous article it's Amendment to the oakill stabilization account it's just simply adding language to uh make some funds available for maintaining conservation land article 18 on the next slide is $20,000 transfer from the oakill stabilization from to the conservation uh Department uh for maintenance projects on conservation land Article 19 is the fy2 capital purchases um it's 1.4 almost $1.5 million in capital purchases coming from free cash again I went back and I looked the last time Fred I don't know if you remember this but we were both on fincom uh the last time that we actually bonded a piece of capital was 20 years ago yep in two fy4 right um it's been a long time we have been paying cash for our capital and that has saved the town so much in interest cost ton of interest and especially with that AAA rating we're paying a little less of an interest rate on those funds um the complete list of of capital purchases starts on page 52 of the town meeting booklet uh big items refurbishing engine one for the fire department for $175,000 DPW street sweeper for $300,000 um three police cruisers for $200,000 those are annual articles for the police cruisers as we take two or three uh cruises each year out of their um Fleet and replace them because they get a lot of not only mileage but wear and tear on their engines and numerous articles for the uh school department um yeah the school articles add up to about 385,000 of the 1.5 million so it's a it's a pretty big chunk going to support school projects article 20 also uses free cash uh to pay for some other items uh non uh Capital items basically uh taking $25,000 to pay for a grant writer a consultant uh to help write some grants for some departments in town so we can see if we can can bring some funds into town whether it the state grants federal grants or whatever is out there to try and offset some of the costs that we have um looking to update the classification plan for non-union employees for $45,000 transferred from the into the special injury leave Indemnity fund for $125,000 this is a fund that was set up back at special town meeting May 7th of 2018 and it put aside $350,000 to pay the salaries of injured uh firefighters and and police officers and we've currently been paying salary out of that fund and we need to replenish that those that fund back up to the 350 level article 21 article 21 amends again a previous article that was voted the May 2nd 2022 annual town meeting article 20 is the first article for the senior center that was presented it allocated $1.5 million in borrowings to design the building the cost to design the building was a lot less than the 1.5 million so this article simply asked to amend it to include design in construction so we can use those dollars to also help with the construction side of the buildings this does not add any additional funds to the project it is what it is and they are they are well aware of the budget that they have absolutely okay we have uh article 22 uh which is the lctv operating budget uh it the budget is $458,000 to fund the FY 25 salaries and operations for lctv the funds are spent from the public education and government or Peg access cable related fund uh article 23 is the uh FY 25 compensation grid it shows a 2.5% Cola increase in compensation for non-union employees uh that's been well vetted through all of the Departments and various committees article 24 just one second on on the compensation grid the cost article 23 shows what the salaries will be the costs of those increase are already included in article 4 so it doesn't add any additional dollars outside of what's sitting in article 4 already article uh 24 is a capital stabilization deposit basically 1 and a half million do from pref cash and this is to fund C uh future capital projects uh and as Steve mentioned before uh we try to avoid borrowing as much as we can for these projects and by putting money into the stabilization fund on an annual basis we so far have been able to keep up with that um one one of the things that that that uh is key with with the rating agencies and and standing a pause um who has given us our AAA Bond rating is the level of reserves if the town has a plan to use those reserves and the ability to replace replenish those reserves and that's what article 24 is doing it's replenishing those reserves it's putting extra money in there for future Capital needs and we've demonstrated over the past 10 years that we've had a AAA rating that we have the ability to do that okay in article 25 we're actually uh using some of what we have in capital stabilization uh to draw down the amount that we would have to bond or borrow for 36 King Street um so this is an an example right after we're putting some money in we're taking some money out to uh actually lower how much we're going to have to bond in an in a rising interest rate environment so it's really important for us to manage these funds in this manner and those funds were specifically put into Capital stabilization back in last year's town meeting for this purpose because we knew we would be bonding during fy2 article 26 um is the creation of the school building stabilization fund um we're taking $1.1 million from free cash in setting up the stabilization account specifically for school projects such as the sholan building we know something is going to happen with shakan right now we don't know what that's going to be whether it's going to be a renovation of the existing building new construction or a combination of the two where we renovate the existing building and put an addition on we don't know what that's going to look like all we know is that that bill no matter what it is is going to be large if it's a new construction we can be safe to say that it will probably be the largest project that the town has ever done and we're talking about you know we just are doing a sewer system we did a water treatment plant uh we've built a high school a while ago now but we've built a high school this has the potential to dwarf um the cost of those projects finance committee and we'll say this over and over again finance committee will be looking for debt exclusion over override for this project um so anything that we can put aside into the stabilization account over these next couple of years until construction goes on try to minimize the going to try and minimize the effect on the taxpayer and that's what we intend to do as best we can and speaking of minimizing the effects of the taxpayer as the Dole 27 uses the debt exclusion stabilization fund this is the fund that was first done in fy17 um deposits are made into that out out of available funds that we have notably free cash and then it's applied to the excluded debt on existing excluded items such as um Russell Street and the middle school and the police station were three projects that were done by debt exclusion overrides um so far since fy17 we've been able to put $2.6 million of technically inside Levy money to help pay outside Levy Debt Service and that helped decrease the amount of the taxes that the taxpayer has to pay it doesn't sound like much but last year it saved a 17 cents on the tax rate which is a few hundred for everybody Article 28 is another big article it's um appropriating $264 from revenues that were receive from Uber and lift for rides that originate in the town of Li Littleton I think we receive like 10 cents per ride um that's done and that's going to be um sent over to the DPW for some Road related projects excuse me article 29 is simply a placeholder right now for for collective bargaining agreements we are in discussions with four unions um right now um DPW dispatch fire and police um we don't have agreements with any of those unions right now but in case something does happen before town meeting there is a placeholder and we'll have some dollar amounts for those um agreements and finally article 30 is the withdrawal from of the town from the nooba associated Boards of Health this is providing nooba with the one-year advanced notice of our withdrawal from uh the service we have a new health director that we've hired um and the plan is to transition that Health Department Service inhouse uh work in tandem with with nooba during this year of of transition to get the person up to speed as to what the local services are all about and then in two in right one year after this is to totally uh bring that service in house and all the fees that are related to that would come into the general fund those are all the financial articles uh again we ask that you please read the finance committee's report starts on page four of of the book um there's a lot of good information in that um do I have anything else to add NOP to see you on Tuesday the 7th of May at Town Meeting thank you very much 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