Letter To The Editor: Finance Committee Budget Article

This is the first in a series of articles written by the Wrentham Finance Committee.  It provides information regarding the budget process towards the development of the Fiscal Year 2012 Wrentham Operating Budget.

INTRODUCTION

Budget season always presents two great challenges.  The first challenge is to find the equilibrium between what services the citizens want and what we can afford.  The second challenge is to provide the communication necessary regarding the budget process so that citizens can make an informed decision when voting on the budget.

This year, our budget process has a few more moving parts than usual.  This affects both challenges.  So we thought that it might be beneficial to provide a series of articles that explains our budget development process and perhaps more importantly provides information regarding key dates, key numbers, and the details related to those dates and numbers.

THE GAP CHALLENGE

The budget we recommend at Town Meeting has to be a balanced budget – our projected expenses cannot exceed our projected revenues.  During the early months of the process, there is always a gap between expenses and revenues.  It’s just the nature of the process.  It’s not unusual for our gap to be in the range of $1 million at the beginning of budget season.  Inevitably, we close that gap by overturning rocks, identifying trade-offs and recommending reductions.  This year has been a little bit different because our initial gap was $2.1 million.  Over the last several weeks of our process, the gap has been whittled down to approximately $1 million.  If our normal process closes a $1 million gap, then this year we have to do that twice, which highlights this year’s challenge.

The Finance Committee’s role in the process is to coordinate, add a level of due diligence and make recommendations.  To respond to our challenge, we are coordinating with the Board of Selectmen (BOS), the finance director and the town administrator in developing three options to close the gap.  The following provides a brief introduction to each option.  Our subsequent entries will provide more detailed information regarding each option.

Option #1:  Debt Exclusion.  Within Wrentham we have a number of long-term debt projects.  These are primarily related to new buildings (Public Safety Building, Town Hall, schools).  This debt is paid off by one of two methods – it’s either inside the tax levy or outside the tax levy.  "Inside the levy" means it is paid for as an operational expense using our normal annual revenue, just as is done with the budgets for any of our town departments (police, fire, schools).  This is called non-excluded debt.  For FY 2012, we have non-excluded debt payments of $1.8 million.

Debt for projects outside the tax levy is appropriated by approval of a special election.  This is called excluded debt.  It raises our taxes above the Proposition 2 ½ limits.  Unlike the more familiar operational override, the increase is not forever — it is only for the amount and duration necessary to pay off the debt, as was done several years ago to fund the reconstruction of the two King Philip school buildings.  The increase in taxes gradually declines until the debt is paid off.

Under this option, we would move all or some appropriate portion of our debt currently being paid inside the levy (the $1.8 million), such that it would become excluded debt, paid outside the levy.  To do this requires at least four of five selectmen to first approve a special election, and then a majority of voting citizens to approve the proposal at the special election.   

If we did this, the amount approved at a special election could only be used towards the debt, but it would have the effect of freeing up that same sum of money within the operational budget and it could be applied toward the gap.  

If this were to occur, the cost to homeowners will depend on how much of the debt was excluded.  If it was the whole $1.8 million, the cost would be approximately an additional $395 in the first year to the average property tax bill.  If it was only $1 million, the cost would be approximately $218.  This cost would gradually decrease each year as the debt is paid off and would be eliminated in about 14 years.

Option #2:  Trash Fee.  For FY 2012, our projected cost to pay for residential trash removal within the budget is $772,000.  By instituting a trash fee, this cost could be covered by fees paid by homeowners, instead of by property taxes.  This in effect frees up $772,000 within the budget that can be applied to other operational requirements defined within the gap.  Instituting a trash fee only requires a majority vote by the BOS.  The cost of this option to homeowners would be approximately $250 each year.  It would remain in effect permanently unless a future vote by the BOS overturned it.

Option #3:  Budget Reductions.  Simply put, we would eliminate the gap by reductions throughout the budget to current projected expenses.  This sounds painless and cost-free, but it won’t be.  This would require departments to be funded at a level below what they are funded this year.  There are significant impacts to doing this, and contrary to common perceptions, the impacts are not to just the schools.  As mentioned earlier, we will provide more detail to this in our future entries.

KEY DATES

The following are important dates to keep in mind as we move through the budget season:

April 11 – FINCOM Meeting.  The FINCOM will meet with the BOS to review BOS department budgets and discuss the options (7pm in the Roderick School library)

April 19 – BOS Meeting.  The BOS have scheduled a discussion and potential vote regarding the Debt Exclusion special election (7pm in Town Hall)

April 26 – Town Meeting.  The Annual Town Meeting commences.  It will include a Special Town Meeting as well.  Most FY 2012 budget items will be tabled until the June continuation.  But other important budget and financial items will be addressed (7:30pm in the high school auditorium).

Week of May 23 – If the BOS votes to conduct a Debt Exclusion special election, it will likely occur during this week.  (The actual date will be specified at the April 19 BOS meeting.)

June 13 – Town Meeting.  The continuation of the Annual Town Meeting will be conducted.  Registered voters will vote on the FY 2012 budget.  Our recommended budget will be based on one or more of the options.

We hope that this provides a foundation for understanding our FY 2012 budget challenges.  We intend to submit future entries to coincide with the key events and to provide communication regarding the following:

• Revenue and Expense Challenges:  Why This Year’s Gap Started So Big
• Rational and Ramifications of the Three Potential Options:  Key Numbers
• FY 2012 Budget Proposal and Recommendations:  Outcomes and Info for Voting at Town Meeting

If you have any questions regarding the budget process, please feel free to e-mail our committee chairman, Jerry McGovern at mcgovernjj@comcast.net.  We can’t promise that he will be able to answer all e-mails, but we will endeavor to respond to all questions within the context of our future entries.  As a primer, please check out our FINCOM Procedures and Policies that have recently been posted on the Town’s web site under the Finance Committee link.

-Wrentham Finance Committee

Jerry McGovern, Chairman

Sue Kost, Secretary

Ken Arnold

Mark Keilen

Charles Kennedy

Arthur Robison

Kelly Williams