Board of Selectmen Meeting
January 4th, 2010
By Jay Shenk
Budget Issues, approval for light bulbs and paper clips, and taxes
This meeting was quick and to the point, and featured good news/bad news information, provided a glimpse into next year’s budget issues, and also pointed out some problems (and solutions) with the way our current “spending freeze” was set up and continues to operate. The bad news is all about the economy, but the good news is that Westminster is better off than many towns in the Commonwealth, as well as considerably better off than the state government (which isn’t saying much). In fact, the issues that Westminster will encounter in the 2010-2011 budget are exclusively a result of cuts (this year’s plus anticipated cuts) in state aid.
A bit of good news is that thanks to our improved bond rating (S&P raised their rating of our credit-worthiness) we are able to save about $6,600 in interest payments this year on the bonds Westminster issues for the library repair project. Westminster had to borrow $490,000 to fix the library (that is old news but was certainly bad news), and each year we pay off $98,000 of the amount due and issue a new bond for a lesser amount. Since this is our second year paying off the cost of repairing the library, and we paid our $98K last year (the original bond was authorized in February ‘08), when the original bond expires we will issue a new bond for $392K ($490K less the $98K we paid). In February 2011, we’ll issue another bond for $294K and so on, until after 5 years the amount is completely paid off. Our sound fiscal management saved us about $6,600. Note that these bonds Westminster issues are the tax free municipal bonds described in a previous story on taxes.
Next came a spirited debate on the spending freeze that is in place for all town departments. Fire Chief Brent MacAloney was the main person questioning the necessity of keeping this freeze in place, and he was supported by the Police Chief, Sam Albert. Brent’s basic argument was twofold—that the spending freeze causes a tremendous amount of extra work, and that it is no longer necessary since the department budgets have been already been adjusted to reflect the drop in state aid. He stated that he always kept within his budget, and thought that he should be trusted to manage his own department.
From the discussion that took place, some fairly passionate, it became apparent that the main issue that Brent and Sam were dealing with was that the spending freeze was absolute, meaning it covered everything regardless of how little the cost (some recurring expenses are excluded like salaries and contractual obligaions)...if the Fire Chief or Police Chief want to buy a light bulb or a box of paper clips, they have to get permission from Karen Murphy, the Town Coordinator, which I’m sure involves filling out some paperwork forms besides just asking. Typically, in my experience, a spending freeze kicks in at a dollar limit, and it appears that Westminster’s freeze was not set up that way. For instance, to avoid unnecessary work but still keep control, it’s usual to grant flexibility to purchase items that cost below a certain amount, but require permission over a certain amount—this is based on the obvious fact that it’s tough to blow a budget out of the water buying light bulbs (and you can’t work in the dark), but if a spending freeze is necessary, you want to control the bigger dollar ‘discretionary’ items, which can add up much faster.
Virtually everyone was sympathetic to the situation, and Selectman Laila Michaud in particular was surprised (being new and not involved in the original spending freeze) that there was no dollar limit in place, specifically asking, “Is there a dollar limit?” The answer was ‘no’, although Selectman Nick Hay pointed out that there were exceptions for specific types of expenses and John said that ‘routine’ expenses were exempt. Some members of the Advisory Board wanted to eliminate the spending freeze altogether, while John Fairbanks wanted to keep it in place, although modified, in case we get even more surprises in April from the state. John suggested a $250 limit, Laila said how about $500, John replied he was fine with that; but some of the Advisory Board pushed on eliminating the freeze completely, since the budgets were already reset. However, pretty much settling the matter was that the department heads in attendance, Sam Albert and Brent MacAloney, were fine with just raising the limit to $500, which they felt that would cut out 99% of the paperwork involved with day to day operation of their departments regarding purchasing. The issue appears to be continued to the next meeting, although everyone seemed on board with modifying rather than eliminating the spending freeze, going with a practical rather than philosophical approach to whether the spending freeze needs to remain in effect.
Ken Burstall from the Advisory Board presented the next topic, a look at how the recession is affecting Westminster, and a ‘sneak peek” at next fiscal year’s budget.
The unemployment picture in Westminster continues to be grim, with about 25% of our working residents either unemployed or underemployed, according to figures gleaned from the Department of Labor’s website. That’s bad enough, but it doesn’t even include people who are independently employed, such as builders and contractors who aren’t eligible for unemployment insurance—those people are referred to as ‘distressed’ (assuming their income is down a lot), and are in addition to the 25% figure. The exact breakdown of the 25% is a 9.91% unemployment rate, plus an additional 6.47% of workers who have exhausted their unemployment insurance, combining for a 16.38% unemployment rate in town. Getting to the 25% required an assumption that around 300 people in town are employed but making less than they did a year or so ago, and that certainly sounds plausible. The bottom line is that many of us in Westminster are being severely affected by the ongoing recession and the lack of jobs in the recovery that might be happening.
That brought us to the budget, which could have been a lot worse. The town has gone to extraordinary lengths to keep our budget under control which, combined with our landfill revenue, has us short just $300K for the next fiscal year. That number doesn’t include COLA (cost of living adjustments) which will probably add another $40K onto the shortfall (this isn’t definite as there’s an argument that COLA is currently negative). This translates into a probable tax rate increase of perhaps 3% combined with some level of budget cuts. Again, this is all tentative at this point, and is more of a progress report.
For most of this shortfall we have the Commonwealth of Massachusetts to thank, as built into the Advisory Board’s preliminary budget is yet another cut to local aid, which they are ‘conservatively’ estimating at $200K. This estimate isn’t unreasonable, and in my opinion isn’t particularly conservative either—for instance, Governor Patrick just restored regional school transportation funding, but it’s a mystery where that money is coming from as the state doesn’t have extra money. The state’s rainy day fund is nearly exhausted, and last year’s record of state aid is not encouraging—local aid was originally budgeted to be $1.2 MM, was then cut to $900K, and we actually got $700K. Next year we are projecting to receive $500K. It’s a scary thought, but Westminster is considered to be in much better shape than most towns and cities in MA.
The meeting quickly wrapped up with John Fairbanks mentioning an audit that was done of our town’s financial structure by the MA Department of Revenue—it’s an audit we asked them to do. We did quite well on the audit, although some suggestions for improvement were made by the DOR. My only comment here is that I’m not sure why we would get useful recommendations from the DOR, as that particular bureaucracy is not often held up as a paradigm of a well run company or department, but perhaps there will be some good ideas in their report.
John also brought up the subject of stipends, and he thought that this might be a good time to review what they should be, as everyone, including the Selectmen, currently are at $0….no one volunteering their time for the town currently gets a stipend, and even in flush times, the amount paid in stipends was under $25K in total, perhaps as low as $16K, with the largest share, around $4,500, going to the Selectmen, an amount they are now forgoing because of the recession.