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Town of Swampscott Financial Forecast Fiscal Years 2007-2011 And FY07 Budget Overview Presented to the Board of Selectmen, School Committee and Finance Committee Andrew Maylor - Town Administrator November 14, 2005 Table 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 Introduction Financial Planning Process • Annual Financial Planning Process Mandated by Town Charter. • The Financial Forecast Outlines the Status of the Town’s Finances for the Future and Identifies Areas of Need for Further Attention. • Coordination and Integration of the Components are Necessary to Develop the Financial Plan Required to Maintain the Town’s Fiscal Stability. • Town Administrator will Distribute Budget Packages to Departments by December 9th. • Budgets will be Due in the Town Accountant’s Office by Monday, January 9, 2006. • School Committee Must Submit School Budget No Later than February 10, 2006. Introduction Financial Planning Process (continued) • Capital Improvement Committee Shall Recommend a Capital Improvement Program to the Town Administrator by February 1st, Including: - A Clear and Concise Summary of its Contents; - Proposed Capital expenditures for the Ensuing Year; - A Five Year Capital Improvement Plan with Supporting Information as to the Need, Cost and Method of Financing for Each Projected Capital Expenditure. • Town Administrator will Submit Operating Budget to Selectmen in Accordance with Town Charter for Approval by a Majority Vote by March 1st. • Selectmen will Forward Budget to Finance Committee within Seven Days. • Financial Policies have been created and will be used as Guideposts to Developing the Financial Plan. Introduction Goals and Priority Areas for FY07 » Present a Balanced Budget to the Board of Selectmen and the Finance Committee. » Control Personnel Related Costs and Find Additional Sources of Revenue to Offset Out Year Deficits. » Develop an Improvement Plan for Public Buildings and Open Space. » Develop a Program for Roadway Improvements and Maintenance. » Voter Acceptance of M.G.L. Ch. 44B, the Community Preservation Act. » Continue to Review, Evaluate, Alter and Track Policy that Maintains and Enhances Town Government. » Improve the Coordination of Municipal Service Delivery. » Implement a Fiscal Policy for Future Budgeting. Introduction Planning for Future Financial Stability » Begin to Increase the Balances in Reserve Funds to Meet Nationally Accepted Standards. » Develop a Long Range Plan for Funding Special Education, including Proposing Special Legislation. » Limit the Use of One Time Revenues to Balance the Budget. » Establish a New Method for Calculating the Funding Available for Annual Capital Improvements. » Water and Sewer Enterprise Fund Projections are Based Upon Full Cost Recovery, As Required By Statute. Five Year Financial Forecast Pro Forma Assumptions - General Fund Revenues • State Aid is Projected to increase 5% through Fiscal 2011. • Tax Levy and Levy Limit will Grow Approximately by 3% Through FY2011. • Charges, Licenses, Fess and Miscellaneous Revenue Projected at Either Level Funded or Minimal Increases. • Fee Schedule will be Analyzed and Reviewed to Maximize Local Receipts. • The Use of Free Cash is Expected to be approximately $275,000 for FY2007 with an Incremental Increase Through FY2011. • Nahant Tuition is Level Funded From FY06 to FY07 and Through FY2010. Actual Dollar Amount will not be Known Until January For FY07. • Other Possible Sources of Revenue Include: Enterprise Fund Indirects ($500,000). Five Year Financial Forecast Pro Forma Assumptions - General Fund Expenses • Salaries and Operating Expenses (Including Schools) Projected to Increase 2.5% Annually. • Health Insurance Costs Projected to Increase By 15% Annually. This is Net of Savings From the Town Accepting MGL 32B s18 and Assumes a Change to the Existing Benefit Mix. • State and County Charges and Cherry Sheet Offsets are Expected to Increase by 2.5% Each Fiscal Year. • Special Education Costs are Expected to Increase on the Average of 10% Each Fiscal Year Through FY2011. • Debt Service Based Upon Current and Future Capital Improvement Programs Cost Expected to Remain at approximately 5% of the Tax Levy Through FY2011 Exclusive of School Construction. • Includes Sewer Debt Exclusion. • Uncompensated Balance Account has a $58,914 Balance. This Appropriation will be Gradually Reduced. Five Year Financial Forecast Revenue and Expenditure Summary General Fund FY06-ACT FY07-EST FY08-EST FY09-EST FY10-EST FY11-EST REVENUES 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 TOTAL REVENUE $ 40,984,502 $ 42,072,155 $ 43,257,019 $ 44,478,931 $ 45,735,025 $ 47,028,656 EXPENSES 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 TOTAL EXPENSES $ 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) Five Year Financial Forecast Revenue and Expenditure Gap $50,000,000 $45,000,000 $40,000,000 $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 FY07 FY08 FY09 FY10 FY11 Total Revenue Total Expenses School Department Spending FY2005 (FY2005 Schedule 19) Pupil Transportation 2% Operations & Maintenance Instruction 5% 82% Payments to Non- public Schools 8% Administration 3% School Department Funding Summary Excluding Indirect Costs Town Appropriation Chapter 70 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 0 FY02 FY03 FY04 FY05 FY06 Fiscal 2007 Budget Revenue Sources Revenues Projected for the FY07 Operating Budget Total $42,072,155 Revenues are Derived From The Following Sources: • Taxes - $33,054,068 • Nahant Tuition - $1,231,696 • Motor Vehicle Excise - $1,850,000 • Licenses and Permits – $160,000 • Fines and Forfeits - $95,000 • State Aid- $4,041,391 • Local Receipts - $865,000 Note- Revenue Detail Does Not Include Free Cash or Other Available Funds Which Total $775,000 Fiscal 2007 Budget General Fund Revenue Sources FY 2007 Intergovernmental Aid Licenses, Permits & 9% Other Revenue Fines 2% 0% Motor Vehicle Excise 5% Taxes 84% Grand Total - $42,072,155 Fiscal 2007 Budget Expense Categories For Presentation Purposes FY07 Expenses are Detailed in the Following Categories: • General Government -$5,165,812 • School Department - $20,915,202 • Public Safety- $5,414,014 • Pensions- $2,872,293 • Insurances- $4,341,250 • Debt Service- $3,008,561 • Non-Appropriated- $856,392 Fiscal 2007 Budget General Fund Expenditure Categories FY 2007 Non-Appropriated Debt Service 2% 7% General Government 12% Insurances 10% Pensions 7% Public Safety 13% School Department 49% Grand Total - $42,573,524 Water and Sewer Enterprise Funds FY07 Budget Overview • The Town’s water/sewer system infrastructure requires yearly maintenance and upgrades. With the assistance of $565,000 provided by the MWRA through an interest free loan, the DPW was able to re-line and replace three miles of water main. • 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 represents about sixteen percent of the Town’s overall infrastructure. • Obsolete water mains present the Town with significant losses in water pressure, as well as, considerable water discoloration problems. • The installation of new waters meters is virtually complete with less than 100 of the 5,000 old meters remaining unchanged. This will greatly reduce the amount of unaccounted for water consumption. • The new meters are equipped with radio read technology, which will ensure accurate and timely reading of usage and allow the town to institute quarterly billing in FY07. Water and Sewer Enterprise Funds FY07 Budget Overview (cont.) • 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 treatment. The sewer system infrastructure is in very poor condition. • Many of the existing mains are over one hundred years old, and are constructed of brick or clay. Both these materials have become obsolete, and contribute significantly to the infiltration and inflow into the Town’s sewer system. • During periods of heavy precipitation, the total daily flow to Lynn is increased by as much as 500%, significantly increasing the Town’s costs for treatment. • As the City of Lynn continues to remove infiltration and inflow from its own sewer system, the resulting percent of costs for Swampscott could rise sharply if our system is not upgraded as well. • Through a low interest loan from the DEP, the Town is currently working with a consultant, engineering firm, to implement a plan to reduce infiltration and inflow into the Town’s sanitary sewer system. Water and Sewer Enterprise Funds Pro Forma Assumptions - Enterprise Funds • Water Debt will Increase by $56,000 Each of the Next Few Years. This Represents the Additional Commitments to the Zero Interest Loan Program Conducted Through the MWRA. • Debt Service Includes $189,890 to Pay for Replacement of All Meters and the Installation of Radio Read Devices. • The General Fund Continues to Pay the Debt Service on Bonds Required for the Connection to the Lynn SWC. This represents $1,108,561 for FY 2007 the impact on rates would have been $2.11. • For Projection Purposes, the MWRA and Lynn WSC Assessments have been Increased by Ten Percent Each Year. The MWRA has Projected a Double Digit Increase for FY2007, and the Lynn WSC Fees Should also be in This Range. • Direct Expenses were Increased by 2.5 % per year and indirect costs are level funded. Water and Sewer Enterprise Funds Five Year Forecast and Rate Projections ENTERPRISE FUND Projected Projected Projected Projected Projected FY 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/Miscellaneous Total Revenues 4,729,794 5,036,602 5,370,436 5,733,857 6,129,678 Expenditures 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 EXPECT FiscalReality Solutions Implemented to Date Goals The Fiscal Realty Fiscal 2002 – Fiscal 2006 Estimates State Aid has decreased by $482,866. Health insurance costs have increased by $1,499,585. The Town’s retirement appropriation has increased by $478,935. The School department’s special education budget has increased by $1,805,575. Property and casualty increases $170,000. Solutions Implemented to Date Partial List Expense reductions – Renegotiated the ambulance contract - savings $135,000 annually. – Negotiated a new Trash contract - savings $80,000. – Purchased streetlights – savings $35,000 annually. – Adopted M.G.L. Chap. 32B, Section 18, re: Medicare provision – savings $25,000 annually. – Reorganized town hall staff – savings $20,000 annually. Revenue enhancement – 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. – Entered into the town’s first towing contract - $6,000. – Increased town’s inspectional services fees - $25,000 annually. – Appropriated unspent article balances - $600,000. – Sold surplus town owned land - $585,000. Goals Close the Fiscal 2006 budget gap – State aid increase possible. – Additional use of Overlay Surplus. – Health Insurance premium increase less than expected. – Reduce spending without impacting service delivery. Looking ahead – Reduce long-term debt as a percentage of budget. – Find additional sources of revenue. – Reduce the dependency on one-time revenue. – Adopt a Financial Reserve Policy.
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