Town ofTown of SwampscottSwampscott

Financial Forecast Fiscal Years 2007-2011Financial Forecast Fiscal Years 2007-2011And FY07 Budget OverviewAnd FY07 Budget Overview

Presented to the Board of Selectmen, School Committee and Presented to the Board of Selectmen, School Committee and Finance CommitteeFinance Committee

Andrew Maylor - Town AdministratorAndrew Maylor - Town AdministratorNovember 14, 2005November 14, 2005

Table of ContentsTable of Contents

I. Introduction•Financial Planning Process•Goals and Priority Areas for FY07•Planning for Future Financial Stability

II. Five Year Financial Forecast•Pro Forma Assumptions General Fund•Revenue and Expense Summary and Chart•Town and School Charts

III. Fiscal 2007 Budget

•Revenue Sources and Chart

•Expense Categories and Chart

IV. Water and Sewer Enterprise Funds•FY07 Budget Overview•Pro Forma Assumptions Enterprise Funds •Five Year Forecast and Rate Projections

IntroductionIntroduction Financial Planning ProcessFinancial Planning Process

• Annual Financial Planning Process Mandated by Town Charter.Annual Financial Planning Process Mandated by Town Charter.• The Financial Forecast Outlines the Status of the Town’s The Financial Forecast Outlines the Status of the Town’s

Finances for the Future and Identifies Areas of Need for Further Finances for the Future and Identifies Areas of Need for Further Attention.Attention.

• Coordination and Integration of the Components are Necessary Coordination and Integration of the Components are Necessary to Develop the Financial Plan Required to Maintain the Town’s to Develop the Financial Plan Required to Maintain the Town’s Fiscal Stability.Fiscal Stability.

• Town Administrator will Distribute Budget Packages to Town Administrator will Distribute Budget Packages to Departments by December 9th.Departments by December 9th.

• Budgets will be Due in the Town Accountant’s Office by Budgets will be Due in the Town Accountant’s Office by Monday, January 9, 2006.Monday, January 9, 2006.

• School Committee Must Submit School Budget No Later than School Committee Must Submit School Budget No Later than February 10, 2006.February 10, 2006.

IntroductionIntroduction Financial Planning Process (continued)Financial Planning Process (continued)

• Capital Improvement Committee Shall Recommend a Capital Capital Improvement Committee Shall Recommend a Capital Improvement Program to the Town Administrator by Improvement Program to the Town Administrator by February 1st, Including:February 1st, Including:

- A Clear and Concise Summary of its Contents;A Clear and Concise Summary of its Contents;- Proposed Capital expenditures for the Ensuing Year;Proposed Capital expenditures for the Ensuing Year;- A Five Year Capital Improvement Plan with Supporting Information A Five Year Capital Improvement Plan with Supporting Information

as to the Need, Cost and Method of Financing for Each Projected as to the Need, Cost and Method of Financing for Each Projected Capital ExpenditureCapital Expenditure..

• Town Administrator will Submit Operating Budget to Selectmen Town Administrator will Submit Operating Budget to Selectmen in Accordance with Town Charter for Approval by a Majority in Accordance with Town Charter for Approval by a Majority Vote by March 1Vote by March 1stst..

• Selectmen will Forward Budget to Finance Committee within Selectmen will Forward Budget to Finance Committee within Seven Days.Seven Days.

• Financial Policies have been created and will be used as Financial Policies have been created and will be used as Guideposts to Developing the Financial Plan.Guideposts to Developing the Financial Plan.

IntroductionIntroduction Goals and Priority Areas for FY07Goals and Priority Areas for FY07

» Present a Balanced Budget to the Board of Selectmen and the Present a Balanced Budget to the Board of Selectmen and the Finance Committee.Finance Committee.

» Control Personnel Related Costs and Find Additional Sources Control Personnel Related Costs and Find Additional Sources of Revenue to Offset Out Year Deficits.of Revenue to Offset Out Year Deficits.

» Develop an Improvement Plan for Public Buildings and Open Develop an Improvement Plan for Public Buildings and Open Space.Space.

» Develop a Program for Roadway Improvements and Develop a Program for Roadway Improvements and Maintenance.Maintenance.

» Voter Acceptance of M.G.L. Ch. 44B, the Community Voter Acceptance of M.G.L. Ch. 44B, the Community Preservation Act. Preservation Act.

» Continue to Review, Evaluate, Alter and Track Policy that Continue to Review, Evaluate, Alter and Track Policy that Maintains and Enhances Town Government.Maintains and Enhances Town Government.

» Improve the Coordination of Municipal Service Delivery.Improve the Coordination of Municipal Service Delivery.» Implement a Fiscal Policy for Future Budgeting.Implement a Fiscal Policy for Future Budgeting.

IntroductionIntroduction Planning for Future Financial StabilityPlanning for Future Financial Stability

» Begin to Increase the Balances in Reserve Funds to Meet Begin to Increase the Balances in Reserve Funds to Meet Nationally Accepted Standards.Nationally Accepted Standards.

» Develop a Long Range Plan for Funding Special Education, Develop a Long Range Plan for Funding Special Education, including Proposing Special Legislation.including Proposing Special Legislation.

» Limit the Use of One Time Revenues to Balance the Budget.Limit the Use of One Time Revenues to Balance the Budget.

» Establish a New Method for Calculating the Funding Establish a New Method for Calculating the Funding Available for Annual Capital Improvements. Available for Annual Capital Improvements.

» Water and Sewer Enterprise Fund Projections are Based Upon Water and Sewer Enterprise Fund Projections are Based Upon Full Cost Recovery, As Required By StatuteFull Cost Recovery, As Required By Statute..

Five Year Financial ForecastFive Year Financial Forecast Pro Forma Assumptions - General Fund RevenuesPro Forma Assumptions - General Fund Revenues

• State Aid is Projected to increase 5% through Fiscal 2011.State Aid is Projected to increase 5% through Fiscal 2011.• Tax Levy and Levy Limit will Grow Approximately by 3% Tax Levy and Levy Limit will Grow Approximately by 3%

Through FY2011.Through FY2011.• Charges, Licenses, Fess and Miscellaneous Revenue Projected Charges, Licenses, Fess and Miscellaneous Revenue Projected

at Either Level Funded or Minimal Increases.at Either Level Funded or Minimal Increases.• Fee Schedule will be Analyzed and Reviewed to Maximize Fee Schedule will be Analyzed and Reviewed to Maximize

Local Receipts.Local Receipts.• The Use of Free Cash is Expected to be approximately The Use of Free Cash is Expected to be approximately

$275,000 for FY2007 with an Incremental Increase Through $275,000 for FY2007 with an Incremental Increase Through FY2011. FY2011.

• Nahant Tuition is Level Funded From FY06 to FY07 and Nahant Tuition is Level Funded From FY06 to FY07 and Through FY2010. Actual Dollar Amount will not be Known Through FY2010. Actual Dollar Amount will not be Known Until January For FY07.Until January For FY07.

• Other Possible Sources of Revenue Include: Enterprise Fund Other Possible Sources of Revenue Include: Enterprise Fund Indirects ($500,000).Indirects ($500,000).

Five Year Financial ForecastFive Year Financial Forecast Pro Forma Assumptions - General Fund ExpensesPro Forma Assumptions - General Fund Expenses

• Salaries and Operating Expenses (Including Schools) Projected to Salaries and Operating Expenses (Including Schools) Projected to Increase 2.5% Annually.Increase 2.5% Annually.

• Health Insurance Costs Projected to Increase By 15% Annually. This is Health Insurance Costs Projected to Increase By 15% Annually. This is Net of Savings From the Town Accepting MGL 32B s18 and Assumes Net of Savings From the Town Accepting MGL 32B s18 and Assumes a Change to the Existing Benefit Mix.a Change to the Existing Benefit Mix.

• State and County Charges and Cherry Sheet Offsets are Expected to State and County Charges and Cherry Sheet Offsets are Expected to Increase by 2.5% Each Fiscal Year. Increase by 2.5% Each Fiscal Year.

• Special Education Costs are Expected to Increase on the Average of Special Education Costs are Expected to Increase on the Average of 10% Each Fiscal Year Through FY2011.10% Each Fiscal Year Through FY2011.

• Debt Service Based Upon Current and Future Capital Improvement Debt Service Based Upon Current and Future Capital Improvement Programs Cost Expected to Remain at approximately 5% of the Tax Programs Cost Expected to Remain at approximately 5% of the Tax Levy Through FY2011 Exclusive of School Construction.Levy Through FY2011 Exclusive of School Construction.

• Includes Sewer Debt Exclusion.Includes Sewer Debt Exclusion.• Uncompensated Balance Account has a $58,914 Balance. This Uncompensated Balance Account has a $58,914 Balance. This

Appropriation will be Gradually Reduced.Appropriation will be Gradually Reduced.

Five Year Financial ForecastFive Year Financial ForecastRevenue and Expenditure SummaryRevenue and Expenditure Summary

General FundGeneral FundFY06-ACT FY07-EST FY08-EST FY09-EST FY10-EST FY11-EST

Property Taxes 30,792,489 31,795,507 32,744,145 33,716,498 34,713,161 35,734,740

New Growth 227,518 150,000 150,000 150,000 150,000 150,000

Debt Exclusion 1,098,855 1,108,561 1,117,717 1,130,103 1,141,753 1,154,884

Total Tax Revenue 32,118,862$ 33,054,068$ 34,011,862$ 34,996,601$ 36,004,914$ 37,039,624$

Local Receipts- 4,201,696 4,201,696 4,201,696 4,201,696 4,201,696 4,201,696

State Aid 3,848,944 4,041,391 4,243,461 4,455,634 4,678,415 4,912,336

Free Cash - 275,000 300,000 325,000 350,000 375,000

Other Available Funds 815,000 500,000 500,000 500,000 500,000 500,000

40,984,502$ 42,072,155$ 43,257,019$ 44,478,931$ 45,735,025$ 47,028,656$

Base Operating Expense 25,223,005$ 25,853,580$ 26,499,920$ 27,162,418$ 27,841,478$ 28,537,515$

Group Health 3,775,000 4,341,250 4,992,438 5,741,303 6,602,499 7,592,873

Other Personnel Benefits 2,720,056 2,872,293 3,015,908 3,166,703 3,325,038 3,491,290

Special Education 5,424,469 5,641,448 5,867,106 6,101,790 6,345,861 6,599,696

Debt Service - CIP 1,811,805 1,900,000 1,700,593 1,749,830 1,800,246 1,851,981

Sewer Debt 1,098,855 1,108,561 1,117,717 1,130,103 1,141,753 1,154,884

Non- Appropriated Exp. 906,392 856,392 877,802 899,747 922,241 945,297

40,959,582$ 42,573,524$ 44,071,482$ 45,951,894$ 47,979,116$ 50,173,536$

SURPLUS (DEFICIT)- 24,920$ (501,369)$ (814,464)$ (1,472,962)$ (2,244,090)$ (3,144,880)$

EXPENSES

REVENUES

TOTAL REVENUE

TOTAL EXPENSES

Five Year Financial ForecastFive Year Financial ForecastRevenue and Expenditure GapRevenue and Expenditure Gap

$0$5,000,000

$10,000,000$15,000,000$20,000,000$25,000,000$30,000,000$35,000,000$40,000,000$45,000,000$50,000,000

FY07 FY08 FY09 FY10 FY11

Total RevenueTotal Expenses

School Department SpendingSchool Department SpendingFY2005FY2005

(FY2005 Schedule 19)(FY2005 Schedule 19)

Instruction82%

Administration3%

Payments to Non-public Schools

8%

Operations & Maintenance

5%

Pupil Transportation

2%

School Department Funding Summary

Excluding Indirect Costs

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

FY02 FY03 FY04 FY05 FY06

Town Appropriation

Chapter 70

Fiscal 2007 BudgetFiscal 2007 Budget Revenue Sources Revenue Sources

Revenues Projected for the FY07 Operating Budget Total $42,072,155Revenues Projected for the FY07 Operating Budget Total $42,072,155Revenues are Derived From The Following Sources:Revenues are Derived From The Following Sources:

• Taxes - $33,054,068Taxes - $33,054,068• Nahant Tuition - $1,231,696Nahant Tuition - $1,231,696• Motor Vehicle Excise - $1,850,000Motor Vehicle Excise - $1,850,000• Licenses and Permits – $160,000Licenses and Permits – $160,000• Fines and Forfeits - $95,000Fines and Forfeits - $95,000• State Aid- $4,041,391State Aid- $4,041,391• Local Receipts - $865,000Local Receipts - $865,000

Note- Revenue Detail Does Not Include Free Cash or Other Available Funds Note- Revenue Detail Does Not Include Free Cash or Other Available Funds Which Total $775,000Which Total $775,000

Fiscal 2007 Budget General Fund Revenue Sources FY 2007

Taxes84%

Motor Vehicle Excise5%

Other Revenue2%

Licenses, Permits & Fines

0%

Intergovernmental Aid9%

Grand Total - $42,072,155

Fiscal 2007 BudgetFiscal 2007 Budget Expense CategoriesExpense Categories

For Presentation Purposes FY07 Expenses are Detailed in the For Presentation Purposes FY07 Expenses are Detailed in the Following Categories:Following Categories:

• General Government -$5,165,812General Government -$5,165,812

• School Department - $20,915,202School Department - $20,915,202

• Public Safety- $5,414,014Public Safety- $5,414,014

• Pensions- $2,872,293Pensions- $2,872,293

• Insurances- $4,341,250Insurances- $4,341,250

• Debt Service- $3,008,561Debt Service- $3,008,561

• Non-Appropriated- $856,392Non-Appropriated- $856,392

Fiscal 2007 Budget Fiscal 2007 Budget General Fund Expenditure Categories FY 2007General Fund Expenditure Categories FY 2007

Grand Total - $42,573,524

Non-Appropriated2%

School Department49%

Public Safety13%

Pensions7%

Insurances10%

Debt Service7%

General Government12%

Water and Sewer Enterprise FundsWater and Sewer Enterprise Funds FY07 Budget OverviewFY07 Budget Overview

• The Town’s water/sewer system infrastructure requires yearly The Town’s water/sewer system infrastructure requires yearly maintenance and upgrades. With the assistance of $565,000 provided maintenance and upgrades. With the assistance of $565,000 provided by the MWRA through an interest free loan, the DPW was able to re-by the MWRA through an interest free loan, the DPW was able to re-line and replace three miles of water main. line and replace three miles of water main.

• Over the past several years, the Department has contracted out the re-Over the past several years, the Department has contracted out the re-lining or replacement of close to eight miles of water main. This total lining or replacement of close to eight miles of water main. This total represents about sixteen percent of the Town’s overall infrastructure. represents about sixteen percent of the Town’s overall infrastructure.

• Obsolete water mains present the Town with significant losses in Obsolete water mains present the Town with significant losses in water pressure, as well as, considerable water discoloration problems. water pressure, as well as, considerable water discoloration problems.

• The installation of new waters meters is virtually complete with less The installation of new waters meters is virtually complete with less than 100 of the 5,000 old meters remaining unchanged. This will than 100 of the 5,000 old meters remaining unchanged. This will greatly reduce the amount of unaccounted for water consumption. greatly reduce the amount of unaccounted for water consumption.

• The new meters are equipped with radio read technology, which will The new meters are equipped with radio read technology, which will ensure accurate and timely reading of usage and allow the town to ensure accurate and timely reading of usage and allow the town to institute quarterly billing in FY07. institute quarterly billing in FY07.

Water and Sewer Enterprise FundsWater and Sewer Enterprise Funds FY07 Budget Overview (cont.)FY07 Budget Overview (cont.)

• Through an inter-municipal agreement signed with the City of Lynn in Through an inter-municipal agreement signed with the City of Lynn in 1989, the Town of Swampscott sends all its raw sewage to Lynn for 1989, the Town of Swampscott sends all its raw sewage to Lynn for treatment. The sewer system infrastructure is in very poor condition. treatment. The sewer system infrastructure is in very poor condition.

• Many of the existing mains are over one hundred years old, and are Many of the existing mains are over one hundred years old, and are constructed of brick or clay. Both these materials have become constructed of brick or clay. Both these materials have become obsolete, and contribute significantly to the infiltration and inflow into obsolete, and contribute significantly to the infiltration and inflow into the Town’s sewer system.the Town’s sewer system.

• During periods of heavy precipitation, the total daily flow to Lynn is During periods of heavy precipitation, the total daily flow to Lynn is increased by as much as 500%, significantly increasing the Town’s increased by as much as 500%, significantly increasing the Town’s costs for treatment. costs for treatment.

• As the City of Lynn continues to remove infiltration and inflow from As the City of Lynn continues to remove infiltration and inflow from its own sewer system, the resulting percent of costs for Swampscott its own sewer system, the resulting percent of costs for Swampscott could rise sharply if our system is not upgraded as well. could rise sharply if our system is not upgraded as well.

• Through a low interest loan from the DEP, the Town is currently Through a low interest loan from the DEP, the Town is currently working with a consultant, engineering firm, to implement a plan to working with a consultant, engineering firm, to implement a plan to reduce infiltration and inflow into the Town’s sanitary sewer system.reduce infiltration and inflow into the Town’s sanitary sewer system.

Water and Sewer Enterprise FundsWater and Sewer Enterprise Funds Pro Forma Assumptions - Enterprise FundsPro Forma Assumptions - Enterprise Funds

• Water Debt will Increase by $56,000 Each of the Next Few Water Debt will Increase by $56,000 Each of the Next Few Years. This Represents the Additional Commitments to the Years. This Represents the Additional Commitments to the Zero Interest Loan Program Conducted Through the MWRA.Zero Interest Loan Program Conducted Through the MWRA.

• Debt Service Includes $189,890 to Pay for Replacement of All Debt Service Includes $189,890 to Pay for Replacement of All Meters and the Installation of Radio Read Devices.Meters and the Installation of Radio Read Devices.

• The General Fund Continues to Pay the Debt Service on Bonds The General Fund Continues to Pay the Debt Service on Bonds Required for the Connection to the Lynn SWC. This represents Required for the Connection to the Lynn SWC. This represents $1,108,561 for FY 2007 the impact on rates would have been $1,108,561 for FY 2007 the impact on rates would have been $2.11.$2.11.

• For Projection Purposes, the MWRA and Lynn WSC For Projection Purposes, the MWRA and Lynn WSC Assessments have been Increased by Ten Percent Each Year. Assessments have been Increased by Ten Percent Each Year. The MWRA has Projected a Double Digit Increase for The MWRA has Projected a Double Digit Increase for FY2007, and the Lynn WSC Fees Should also be in This FY2007, and the Lynn WSC Fees Should also be in This Range. Range.

• Direct Expenses were Increased by 2.5 % per year and indirect Direct Expenses were Increased by 2.5 % per year and indirect costs are level fundedcosts are level funded..

Water and Sewer Enterprise FundsWater and Sewer Enterprise FundsFive Year Forecast and Rate ProjectionsFive Year Forecast and Rate Projections

ENTERPRISE FUND Projected Projected Projected Projected ProjectedFY 2007 FY 2008 FY 2009 FY 2010 FY2011

Revenues Water and Sewer Fees 4,729,794 5,036,602 5,370,436 5,733,857 6,129,678 Interest Liens/MiscellaneousTotal Revenues 4,729,794 5,036,602 5,370,436 5,733,857 6,129,678Expenditures Direct Expenses 882,294$ 904,352$ 926,961$ 950,135$ 973,888$ MWRA Assessment 1,677,500$ 1,845,250$ 2,029,775$ 2,232,753$ 2,456,028$ Lynn WSC Assessment 770,000$ 847,000$ 931,700$ 1,024,870$ 1,127,357$ Debt Service 800,000 840,000 882,000 926,100 972,405 Additions to Reserves 100,000 100,000 100,000 100,000 100,000 Indirect Expenses 500,000$ 500,000$ 500,000$ 500,000$ 500,000$ Total Expenditures 4,729,794 5,036,602 5,370,436 5,733,857 6,129,678

Combined Rate 8.99$ 9.17$ 9.35$ 9.54$ 9.73$

Percent Change -0.01% 2.0% 2.0% 2.0% 2.0%

WHAT TO EXPECTWHAT TO EXPECT

Fiscal RealityFiscal RealitySolutions Implemented to DateSolutions Implemented to Date

GoalsGoals

The Fiscal RealtyThe Fiscal RealtyFiscal 2002 – Fiscal 2006Fiscal 2002 – Fiscal 2006

EstimatesEstimates

State Aid has decreased by $482,866. State Aid has decreased by $482,866. Health insurance costs have increased by Health insurance costs have increased by

$1,499,585.$1,499,585. The Town’s retirement appropriation has The Town’s retirement appropriation has

increased by $478,935.increased by $478,935. The School department’s special education budget The School department’s special education budget

has increased by $1,805,575. has increased by $1,805,575. Property and casualty increases $170,000.Property and casualty increases $170,000.

Solutions Implemented to DateSolutions Implemented to DatePartial ListPartial List

Expense reductionsExpense reductions– Renegotiated the ambulance contract - savings $135,000 annually.Renegotiated the ambulance contract - savings $135,000 annually.

– Negotiated a new Trash contract - savings $80,000.Negotiated a new Trash contract - savings $80,000.

– Purchased streetlights – savings $35,000 annually.Purchased streetlights – savings $35,000 annually.

– Adopted M.G.L. Chap. 32B, Section 18, re: Medicare provision – savings $25,000 annually.Adopted M.G.L. Chap. 32B, Section 18, re: Medicare provision – savings $25,000 annually.

– Reorganized town hall staff – savings $20,000 annually.Reorganized town hall staff – savings $20,000 annually.

Revenue enhancementRevenue enhancement– Bid cell tower placement increasing revenue by at least $30,000 annually.Bid cell tower placement increasing revenue by at least $30,000 annually.

– Adopted M.G.L. Chap. 59, Section 2A to capture additional new growth - $100,000.Adopted M.G.L. Chap. 59, Section 2A to capture additional new growth - $100,000.

– Entered into the town’s first towing contract - $6,000.Entered into the town’s first towing contract - $6,000.

– Increased town’s inspectional services fees - $25,000 annually.Increased town’s inspectional services fees - $25,000 annually.

– Appropriated unspent article balances - $600,000.Appropriated unspent article balances - $600,000.

– Sold surplus town owned land - $585,000. Sold surplus town owned land - $585,000.

GoalsGoals

Close the Fiscal 2006 budget gapClose the Fiscal 2006 budget gap– State aid increase possible.State aid increase possible.

– Additional use of Overlay Surplus.Additional use of Overlay Surplus.

– Health Insurance premium increase less than expected.Health Insurance premium increase less than expected.

– Reduce spending without impacting service delivery.Reduce spending without impacting service delivery.

Looking aheadLooking ahead– Reduce long-term debt as a percentage of budget.Reduce long-term debt as a percentage of budget.

– Find additional sources of revenue.Find additional sources of revenue.

– Reduce the dependency on one-time revenue.Reduce the dependency on one-time revenue.

– Adopt a Financial Reserve PolicyAdopt a Financial Reserve Policy..