Community Corner

Letter To The Editor: Finance Committee On Debt-Exclusion Vote

The Wrentham Finance Committee on the effects of the debt-exclusion vote in June.

This is the third in a series of articles written by the Wrentham Finance Committee regarding the development of the Fiscal Year 2012 Wrentham Operating Budget.

The Debt Exclusion vote scheduled for June 4 has generated a lot of increased attention and questions in the past week.

While the questions have a fairly broad range, the fulcrum seems to be “What’s the impact if the vote passes or doesn’t pass?” This third article will answer that question, and we will seek to answer as many of the others as possible in this space.

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Before we address the impacts, a short update is necessary in order to provide context to how the potential cuts were apportioned.

At the end of April, we began actions to develop a budget that would reflect a "no" vote to the debt exclusion. This budget would require an overall reduction of approximately 4 percent to departmental budgets. Departments received instruction to begin developing a list of impacts that would cover the range of possibilities – from a straight, singular percentage cut to all departments to a far range of 12 percent if no cuts were assigned to the schools.

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The challenge in this is to find space that can absorb deep enough cuts to completely close the gap. As shown in the  enclosed figure, almost 30 percent of our budget is fixed costs. These are things to which we cannot assign cuts, such as solid waste, snow and ice, insurance, debt and our state assessment. Of the space that can be reduced, 86 percent of it is taken up by two functions: education and public safety.

FIXED COSTS

Working with the Board of Selectmen (BOS), the Finance Committee (FINCOM) developed a total of five options for assigning cuts. The option eventually chosen employed several variables, and was chosen because it provided the best fit based on the graph depicted in the enclosed graph and the circumstances of each department.

At the beginning of May, another variable entered the equation: the King Philip School Committee amended their budget. Their new budget decreased the town’s assessment by $293,862. This was the budget that Norfolk approved at their Town Meeting. Because the KP budget requires the approval of at least two of the three towns, this action practically assures that our new, lower assessment will not change. Equally importantly to our assignment of cuts, it reduces our gap by $293,862.

THE IMPACTS

The assignment of the budget cuts affects nearly every department in town. The only departments that were not assigned cuts were ones that had already taken cuts in their original budget submissions. The converse to this is that if the debt exclusion passes, it will provide relief to almost every department. In other words, the debt exclusion is not just about the elementary school or public safety, though they have the largest budgets and therefore the largest stake in the outcome.

One of our objectives in assigning cuts is to avoid, to the extent possible, personnel cuts that would then require unemployment compensation. Because of extended benefits, we would have to lay off two employees to realize the net savings of one in most instances.

Our assigned cuts are:

  • $244,555 reduction to Wrentham Elementary – This cuts, by half, the School Committee’s requested budget increase to maintain level service. It does enable that budget to increaseby 2.8 percent after two years of level-funded or below level-funded budgets. (The amended KP budget has a 3.1 percent increase, although Wrentham’s assessment only increases 1.1 percent.) As described in our previous article, even a 2.8 percent increase in funding requires a cut in services.The Wrentham School Committee has determined that the most appropriate way to address this and avoid personnel cuts is to reduce the school’s transportation costs by cutting six buses. The effect of this is that busing will no longer be provided to students that live within two miles of the school.
  • $147,488 reduction to police and fire – This reduces their budgets by 3.5 percent and 4.6 percent, respectively, from this year. After going through the operational challenges that resulted in adding two new personnel for each department during the course of this year, the last thing we want to do is to make those hirings so tenuous. A cut this size would normally result in laying off of at least one person from each department, along with other expense cuts. As of the writing of this article, it is our understanding that these departments will seek to manage these cuts without layoffs. This likely requires avoiding the use of overtime expenses in many instances that would normally require it in order to maintain full shift staffing. Each department already cut their OT budget in response to new staffing. These cuts are on top of the previously taken cuts. The impact is that there will be an as-yet undetermined number of shifts where, if a vacancy occurs due to illness, injury or vacation, the vacancy will not be filled.
  • $80,000 reduction to Department of Public Works – this results in the DPW budget being $112,000 (or 9.5 percent) below FY2011’s budget. They will meet this in part by not replacing one employee who recently left and it may require an additional layoff. DPW has absorbed manyof our reductions over the past several years, in part because over half if its budget is allocated to expenses, whereas most others are 70 to 80 percent allocated to salary. The DPW expenses are largely what take care of our infrastructure. These past reductions are showing in the conditions of our roads, sidewalks and other infrastructure. Further reductions will only exacerbate their condition.
  • Reduction of one Public Health Nurse – the town currently has two Public Health Nurses. One will retire this summer. Without the debt exclusion, we will not budget for her replacement.
  • Reduction to Board of Health – The BOH has one full-time employee, who will also be retiring this year. Without the debt exclusion, we will budget for a replacement at half time.
  • Smaller departments – for the smaller departments, the dollar figure of the cuts is relatively small, because their budgets are so small. (If the Town completely eliminated the Board of Health, Public Health Nurses, Library, Recreation, Council On Aging/Senior Center, and theConservation Commission, we would almost save enough to cover the gap.) Without the debt exclusion:

o We will consolidate personnel and expenses among the Conservation Commission, Planning Department, and Zoning Board of Appeals
o We will further reduce the two part-time secretaries in the Building Inspection Department (who together only provide the equivalent of one half-time employee due to previous cuts).
o Athletic user fees will rise - Our Recreation Department maintains two recreation complexes at a cost of $125,000 per year. Approximately 90 percent of this cost is paid by user fees, which have risen to $40 per player. Their reduction will likely add another $10-$15 to each player’s fee.
o The Library will see a reduction in book purchases, a reduction in circulation staff hours, and will need to solicit private funding for SAILS dues.

The debt exclusion has no impact to the KP budget because of the action already described regarding their amended budget. Additionally, any remaining available free cash will be impacted. Free cash will not offset any of the cuts listed above, but it may avoid deeper cuts. However, any free cash utilized for this purpose will not be available to apply for capital requirements in the fall.

CONCLUSIONS

A common accompanying question to the impacts of the debt exclusion is whether this is a short or long-term solution. The answer is that it’s both. By itself, it is a short-term tactical solution. With careful management of its results, it allows for the maintenance of current services for the next year and perhaps a few years beyond that. By itself it is not a long-term solution, but it needs to be the first step in a long term strategy.

Wrentham has now undergone three years of declining revenue. The level of cuts required to respond to that decline has reached a point where further cuts affect some critical services.

We don’t see this as a one-year fix — rather it needs to be one part of the long-term solution. The debt exclusion provides an opportunity to avoid the most critical cuts without a permanent increase to taxes. It acts as a bridge to long term solutions. Perhaps the greatest value to the debt exclusion may be in acting as an impetus to energize our strategic planning and develop solutions that address the long term.

In 2007, the FINCOM wrote that a decline in revenues was already evident and was beginning to impact our long-term fiscal health, but we did not foresee the eventsof 2008 which accelerated the downward trend.

This is not a case of our expenses outpacing our revenue. Our revenue streams cannot keep up and maintain level service (as we discussed in our previous articles). Increasing revenue has begun to receive increased attention and is the linchpin to any long-term solution, but it is not the only factor. A long-term strategy needs to take a three pronged approach that includes:

  • Economic development and revenue streams
  • Modernized business practices
  • Compensation and benefits

It will have to factor in declining state aid that is not likely to ever return to provide the percentage of our budget that it was only a few years ago. It will have to include accelerated consolidations and shared services (Wrentham is moving that way with emergency dispatching). It will have to address compensation and benefits, and may also need to include the elimination of certain services. The debt exclusion can be not just the bridge but the forcing function.

Finally, with regard to the decrease in the gap resulting from KP’s amended budget, we intend to husband that amount if the debt exclusion passes. We can do this one of two ways. We could appropriate it at the June Town Meeting into the stabilization account. This would make it available to support budgets beyond FY2012. Or we could simply not appropriate it at all. Voters can decide this at Town Meeting. Then, when the tax rate is set in December, it will be based on a levy that does not include the $293,862.

SUMMARY

  • The cuts and reductions that will go into effect if the debt exclusion does not pass will be across the board.
  • If the debt exclusion passes, the Finance Committee will recommend that all of the cuts listed above will be restored.
  • Approval of the debt exclusion does not add anything new to the operating budget. It does not add personnel or allow for any new expense items. Even with the debt exclusion, there will be cuts and reductions to municipal budgets.
  • With the debt exclusion, our operating budget will have a 1.28 percent increase from FY2011.

The enclosed table depicts the effect of a debt exclusion that covers the Public Safety Building and Town Hall. For FY2012 (which begins July 1, 2011) the debt for these two buildingsis $1,005,943. This is the amount of additional taxes that a debt exclusion would raise.

From FY2013 to FY2018, the debt payments drop gradually each year, going from $979,935 to $842,950. After 2018, the Public Safety building is paid off. There will be one remaining year to pay off the Town Hall debt, at $243,800. That is the last year of the debt exclusion. (These increases only cover the debt exclusion and do include tax increases resulting from the 2.5 percent levyincrease that happens regardless of the outcome of the special election.)

o Line A shows the total debt to be excluded for the duration of the exclusion, ending in 2019.

o Line B shows the tax rate increase per $1000 of assessed value for each year of the exclusion.

o Line C shows the range of costs to property owners for each year of the exclusion as an annual cost.

o Line D converts the range of costs to property owners for each year of the exclusion to a monthly cost.




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