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Home My WebLink AboutMinutes - AC - 08/28/2018 COHASSET ADVISORY COMMITTEE Regular Meeting—August 28,2018 Cohasset Town Hall MINUTES Chair John Chapman chaired the meeting and called it to order at 7:30 p.m. Attending; John Chapman, Paul Carlson, Michael Dick,Rich Fitzpatrick, Rob Hillman, Leland Jenkins, Helene Lieb Not Present: Tanya Bodell AGENDA 1. Discussion re: Reserve Request Two employees from the Department of Public Works attended and discussed the grounds for a request for a transfer request for the replacement of an engine in the DPW's Ford F-350 truck MOVED: to approve a transfer from the Reserve Fund to the Vehicle Maintenance Fund (Account No. 01-422-5245) in the amount of$18,298.80 for the purpose of funding the repair of the DPW's truck no. 7, Ford F350 to replace the existing, failed engine. Moved by Paul Carson, 2►,d Leland Jenkins,Approved 7—0 2. Discussion of Reserve Request The Town Manager discussed the need for a transfer from the Reserve Fund for the purpose of paying for the emergency replacement of three fire hydrants in North Cohasset. This request was deemed to be a topic that the Chair did not reasonably anticipate for discussion when filing the meeting notice to be posted. MOVED: to approve a transfer from the Reserve Fund in the amount of$11,000 to the Contracted Services Account(No. 01-422-518) for emergency replacement of three fire hydrants in North Cohasset in the amount of half the cost of such hydrants, the balance to be paid by the [Town of Hingham]. Moved by Rich Fitzpatrick, 2nd Paul Carlson,Approved 7 - 0 3. Minutes of August 20, 2018 Meeting With a spelling correction and correction of the time of adjournement— MOVED by Paul Carlson, 2►,d Leland Jenkins, Approved 7 - 0 4. Budget Message Discussion of the FY 2020 Town Budget message. Discussion with the Town Manager concerning sources of funding for OPEB liability,the discussion of a time- line for a report and recommendation from the OPEB/PEB Committee and the effect of these matters on the Advisory Committee's budget message. MOVED—to approve the Advisory Committee's FY 2020 budget message in the form circulated by the Chair dated August 28, 2018, as amended and attached hereto Moved - Rich Fitzpatrick, 2nd Leland Jenkins, Approved 7-0 Minutes by Rob Hillman Page 2 of 2 To: Board of Selectmen From: Advisory Committee Date: August 28, 2018 Subject: Recommendations for FY'20 budget message The Advisory Committee respectfully offers the following observations and recommendations for your consideration as you prepare your budget message for FY'20: 1. Cohasset has benefitted greatly from the development of and adherence to a set of consistent financial management policies and practices. We commend your support for these policies in past messages and recommend that it continue. 2. However, policy and practice have lagged with regard capital planning. The process for vetting and optimizing individual items of capital expenditure for the next immediate fiscal year is well developed, and there is an established schedule for select regular items,such as vehicles for the police department. However, we lack a complete, well socialized long-term capital improvement plan that not only identifies future needs (and wants) but also prioritizes and sequences them in coordination with other planning activities of the Town, and, importantly, includes a financing plan. Each year's capital budget should be based on such a plan. We recommend that you make development of a capital improvement plan a priority for the coming year. 3. We recommend that a plan and funding policy for maintenance and repair of roads be included in the capital improvement plan. 4. The need to adequately fund existing assets is commonly raised in discussions of capital spending, and rightly so. While the facilities department has been strengthened and its budget has been increased in recent years, there is further planning and budget assessment to be done. We recommend that the capital improvement plan be accompanied by a companion plan for maintenance and a policy for its funding. 5. Regarding the financing component of the capital improvement plan,we observe that operating budget appropriations for capital as a percent of the operating budget have been dropping. This is in part because of roll-off of excluded debt, but also because the formula for determining the appropriation for the capital stabilization fund does not account for growth of the operating budget. We recommend that the goal for FY'20 be that the sum of the appropriations for non- excluded debt service and the capital stabilization fund (net of transfers for capital stabilization debt service) be at least 5%of the operating budget,which was the average from FY'14 to FY'17.1 The capital improvement plan when complete may well require commitment to an 1 The accompanying table of capital appropriation history and projections has details. This table was compiled from town reports and the five year plan,with supplemental information from Don Piatt. amount larger than this, but we should take this first step this year. Year-end transfers to the capital stabilization fund are helpful but should not be relied upon as a matter of policy. 6. Despite recent progress in funding Post-Employment Benefits, particularly with the establishment and funding of the OPEB trust fund, much remains to be done. We commend your recognition of this in the establishment of the PEB Committee. 7. Regarding OPEB, our actuaries have reported that in order to be on a path to fully funding the OPEB liability under current benefits and assumptions over thirty years, the Town should (as of FY'172) be allocating $2.65 million annually to our retiree health insurance obligations. In FY'17 we paid about$1.6 million for current retirees, so to meet the funding requirement we should have contributed over a million dollars to the OPEB trust fund. We actually contributed $475 thousand, a shortfall of$600 thousand. In FY'18 the OPEB trust fund contribution was only $350,000 so the shortfall likely was larger. We do not recommend an immediate increase to full funding, which would put a severe strain on the rest of the budget, but do recommend the following: • Estimate the new liability per employee accrued each year, and separately report this amount for each proposed FTE addition. • Include in the budget book and in the town report a table of current year changes in OPEB liabilities under the budget as proposed, like exhibits 1.3 and 4.1 in the most recent actuarial valuation. • A substantially larger initial appropriation for the OPEB trust fund than the $100,000 in the current projection. • Amend the financial management policies to establish a target for OPEB funding and a timeline to reach that target. This should reflect any recommendations of the PEB committee to reduce future liability. 2 These amounts are for FY'17 from the most recent OPEB valuation report;values for FY'20 are likely higher. Town of Cohassset Capital appropriations in context of revenue Four year history and projection 20-Aug-18 Actual per Annual Reports Ap rop,per budget books Projected FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY-2 2 FY 23 Total Revenue(excl.transfers) 38,309,672 40,037,160 42,156,567 43,014,003 44,271,706 45,591,667 47,009,092 48,398,354 49,623,788 51,154,545 Less amount from levy for excluded debt 36,307,960 38,068,767 40,237,193 41,150,633 42,496,229 44,201,441 45,748,879 47,245,019 48,777,725 50,347,907 Annual increase(less excl debt) 4.8% 5.7% 2.3% 3.3% 4.0% 3.5% 3.3% 3.2% 3.2% Transfer to capital stabilization-Annual budget 694,782 1,000,000 1,020,000 1,070,000 1,070,000 1,125,697 1,324,024 1,598,471 1,895,580 1,908,470 --Fall addition 947,752 - 50,000 721,000 250,000 Non-excluded debt service appropriation (EXCL tfr from cap stab) 1,014,395 989,571 955,510 980,701 807,521 704,732 586,890 503,443 206,024 195,884 --Capital stabilization P&I/Tfr from capital stabilization 234,456 235,842 218,668 276,070 435,520 476,737 396,252 205,252 205,562 202,812 Excluded debt service 2,142,050 2,033,731 1,978,343 1,935,076 1,840,814 1,455,563 1,325,550 1,218,672 911,400 871,975 Sub-total capital apppropriation 4,798,979 4,023,302 4,003,853 4,706,777 3,968,335 3,285,992 3,236,464 3,320,586 3,013,004 2,976,329 Sub-total capital less excluded debt service 2,656,929 1,989,571 2,025,510 2,771,701 2,127,521 1,830,429 1,910,914 2,101,914 2,101,604 2,104,354 Sub-total less fall adjustments 1,709,177 1,989,571 1,975,510 2,050,701 1,877,521 1,830,429 1,910,914 2,101,914 2,101,604 2,104,354 Roads-TM Articles 100,000 250,000 230,000 225,000 325,000 212,000 150,000 150,000 150,000 150,000 Annual CH90 Apportionments 210,296 314,440 210,380 213,060 213,871 214,873 Facilities Dept appropriation* 658,025 675,777 801,523 876,193 939,026 961,761 Other non-capital facllitiy expenditures(e.g.special projects) 100,000 150,000 80,000 50,000 20,000 - Appropriated capital as percent of revenue Total(With excluded debt) 12.5% 10.0% 9.5% 10.9% 9.0% 7.2% 6.9% 6.9% 6.1% 5.8% Less excluded debt 7.3% 5.2% 5.0% 6.7% 5.0% 4.1% 4.2% 4.4% 4.3% 4.2% Less excluded debt and fall additions to capital stabilization 4.7% 5.2% 4.9% 5.0% 4.4% 4.1% 4.2% 4.4% 4.3% 4.2% (i.e.,annual budget appropriations only *Some of recent growth is due to reorganization and addition of Senior Center: Y16-$125,746(18.6%)Increase--$60,046 increase in personnel budget(added a FT facilities employee and PT custodian)and$65,700 increase in expense budget($40,000 contingency line item for CEA/Senior FY17-$74,670(9.3%)Increase--$35,320 increase in personnel budget(increased hours for some employees/increase in pay rates)and$39,350 in expense budget($20,000 Senior Ctr electricity and$20,000 FY18-$62,833(7.2%)Increase--$29,133 increase in personnel budget(added a PT custodian and increases in OT and temporary EE's)and$33,700 increase in expense budget($11,000 electricity budgets,$6,750