5 year forecast FY07 by liwenting

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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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