TOWN OF LYME
BUDGET COMMITTEE
LYME TOWN OFFICES
38 UNION STREET
LYME, NH 03768
MEETING OF SEPTEMBER 10, 2003
7:00 PM
Approved as Amended: November 19, 2003
Present at the Meeting:
Budget Committee Members: Barney L. Brannen, III, (Chair), Stuart V. (Mike) Smith, Jr., George W. (Jeff) Lehmann, Gibbons G. (Gibb) Cornwell, III, Joshua Kilham, and Earl F. Strout, and Freda T. Swan.
Members of the Board of Selectmen: Richard G. (Dick) Jones (Selectmen’s representative to the Budget Committee).
Staff: Carole A. Bont, Administrative Assistant and Scribe
Public: Laszlo Bardos, Chair of the Lyme School Board
1. The meeting was called to order at 7:06 PM by Chair Barney Brannen.
2. Chair Brannen suggested and the budget committee agreed to the following budget meeting schedule:
a. Wednesday, November 5, 2003, Departments present their budgets to the budget committee.
b. Wednesday, November 19, 2003, Board of Selectmen presents the first part of its budget to the budget committee.
c. Wednesday, December 10, 2003, Board of Selectmen presents the second part of its budget to the budget committee.
d. Wednesday, December 17, 2003, Selectmen finish presenting their budget to the budget committee, if necessary, and Department Heads get a chance for rebuttal to the Selectmen’s proposed budget.
e. Wednesday, January 7, 2004, School Board presents its proposed budget to the budget committee.
f. Wednesday, January 14, 2004, School Board presents its proposed budget to the budget committee.
g. Wednesday, January 21, 2004, first public hearing on Budget Committee’s proposed budget.
h. Wednesday, January 28, 2004, second public hearing on Budget Committee’s proposed budget, if necessary.
i. Tuesday, February 4, 2004, Petitioned Warrant Articles are due.
j. Wednesday, February 11, 2004, Public Hearing on Petitioned Warrant Articles if they involve the expenditure of monies.
k. Tuesday, March 9, 2004, Town Meeting
3. The Budget Committee reviewed the minutes of April 16, 2003. Chair Brannen moved to make the following amendments: Paragraph 4d - add “of winter expenses are incurred” after “60%”. The spelling of Laszlo Bardos’ name was corrected in paragraphs 4.k. and 4.p. The minutes were approved with amendments (7 in favor, 1 abstention - Freda Swan was not present for the 4/16/2003 meeting).
4. Selectmen Jones interjected that although repairs to highway trucks required as a result of two recent incidences far exceeded the $2,052.90 left in the Emergency Equipment Rebuilding Trust Fund, our insurance policy picked up all but the deductible for each incident.
5. Chair Brannen explained that the primary purpose of the budget committee meeting this evening was to let Department Heads know ahead of time how much money might be available as a workable increase in their operating budgets.
6. Chair Brannen asked School Board Chair, Laszlo Bardos, to discuss the projected financial situation of the school budget for the 2004-2005 budget season, as best he could.
7. School Board Chair Bardos handed out a work sheet entitled “Executive Summary” (attached to these minutes) and explained it.
a. The good news: First, the school ran a $77,000 surplus for its fiscal year ended 6/30/03, primarily due to unexpected savings in the special education costs. Bardos reminded the Budget Committee that last year they added a warrant article on the school warrant to put surplus up to $100,000 into a trust account for high school tuition. Second, there were some expenses for which funds were encumbered for projects started, but not finished last year. Those expenses were able to be paid out of last year’s budget.
b. The bad news: A large influx of new students. First, 5 new high school students moved into Lyme this year. Second, there were 20 new elementary school students who entered the Lyme Elementary School. Twenty new students represent a 10% increase in the number of elementary school students in one year. Furthermore, the new students are in the “wrong” grades (i.e., already crowded grades). For example, they only have 9 students in the first grade and could have accommodated more students, but there are no new students for that grade. In the third grade with new students they now have 27 or 28 students.
That number of students in third grade is pushing the limits of what the Board feels is acceptable. They are going to try to get an aide in that classroom with monies from this year’s budget to help in that grade, rather than splitting the grade into two classes. Finally, the already big 8th grade added 6 new students. Next year, just as those numerous eighth graders join the existing high school students (including the five new students added this year), the deal with the Hanover School District will kick in and tuition is expected to jump by as much as 15%. The School Board expects tuition at Hanover to increase from $11,700 to $13,900 per student. School Board Chair Bardos clarified that this tuition sum includes the payments for Lyme’s portion of the capital building expenses at the Hanover High School. There is no longer any uncertainty about whether kids will be able to attend Hanover High School,
but now we are looking at an additional cost of $280,000. The School Board is proposing drawing $190,000 out of the tuition trust fund to pay for this. Even with the additional draw from the trust fund, the school will need to raise about $110,000 from taxes to meet the increased high school tuition burden.
c. Good news/Bad news: The state adequacy grant for this year will be $275,000, rather than the expected $180,000. The bad news is that the money is coming in this year when the money will really be needed next year. This will cause this year’s tax rate to be artificially low and next year’s tax rate to take an unpleasant spike upwards. School Board Chair Bardos said he would speak with Superintendent Gordon Schnare to see whether the school district might be able to obtain permission from NH DRA to hold over at least the unexpected $95,000 as “surplus” to offset additional expenses in calendar 2004. That
would shift the tax effect to the appropriate year. After speaking with Superintendent Schnare, if additional assistance is needed, AA Bont will check with Lyme’s DRA Municipal Auditor, Bob Anderson.
d. Known factors: We are in the first year of the three year teacher contract. We are now speaking of budgeting for the second year of the teacher contract. Based on the terms of the contract, we are looking at about $32,000 in increased salary costs, of which $25,000 is in the instruction line item.
e. Unknown factors: Health insurance costs could increase by any amount from $20,000 to $30,000. We have no way of knowing at this point. The special education expenses are always hard to predict. The trust fund helps. Thetford Academy’s high school tuition is less than we expected because they pushed back their proposed construction project, however, they are getting stretched to the limit with approximately 25 new high school students in the last two years.
f. School Board Chair Bardos explained that it appeared that for all of the budget items shown the anticipated budget indicated only a small increase of approximately $25,000 (ignoring the potential tax rate impacts of the additional, unexpected adequacy grant funds); however, he felt these numbers were too conservative because we are expecting a 9% increase in the expense budget due to high school tuition alone. Members of the budget committee agreed and thought he should be looking at $50,000 instead of $25,000. Looking at the 2004-2005 budget over the 2003-2004 budget the numbers indicate that there should be a much more significant increase in
taxes; however, as discussed above, the increased state adequacy grant skews that picture.
g. Chair Brannen informed the committee that he spoke with Superintendent Schnare and Schnare thinks it is reasonable to expect the state adequacy grant will remain at $275,000 for 2004. If you add kids then the adequacy funding increases.
h. Mike Smith advised the school board to check very carefully on the residency of high school tuition students. He knew of some he was concerned about. A discussion followed about how to check on the residency of high school students. The budget committee members recommended that the School Board look at other towns’ policies in this regard. They advised the School Board to “send out the police cars if necessary” to check on where the kids are when they wake up and leave the house for school.
i. Jeff Lehman asked about the status of the teacher contracts. School Board Chair Bardos explained that we are in year one of a three year contract. The present teacher contract calls for a 3% increase per year which is greater than the rate of inflation. He spoke with the teachers’ negotiator for Hanover. The Hanover teachers have been holding onto what is essentially a cost of living increase for the last few years. This time around they are expected to be asking to move up again. Bardos is hoping that the next time around the Lyme teachers will be willing to hold onto cost of living increases. The teachers are
presently feeling “loved and appreciated.”
8. Chair Brannen then handed out a “2004 Town Operating Budget – Projected Worksheet dated 9/10/2003 (attached to these minutes).
a. Line 1 “Increase in property tax revenue due to new construction”. By Brannen’s calculations, based on an assumed estimated increase in the tax base due to new construction of approximately $4,600,000 the approximate increase in property tax revenues for 2004 would be $115,000.
b. Line 2 “Increase in property tax revenue total increased rate*”: Brannen postulated that for every 1% increase in the property tax rate it increases revenues by $45,000. This is based upon an assumed town-wide, taxable assessed valuation of approximately $178,000,000, as of April 1, 2004, and an assumed tax rate this year (11/03) of $25.00 per $1,000 of assessed value. Brannen suggested that we shoot for a 2% increase in the tax rate, which would translate into an increase of $90,000. The increased property tax revenues due to an increased property tax rate would be $90,000.
c. Line 3 “Total available for 2004 budget”: $115,000 + $90,000 = $205,000 which would be the total increased funds available from taxes.
d. Line 4 is for Non-recurring/unusual expenses from 2003. After some discussion, the budget committee left this line blank.
e. Line 5 “Total available for 2004 budget”: $205,000 + $0 = $205,000.
f. Line 6 “Increase in tax funding for school”: $50,000
g. Line 7 “Total available for 2004 town budget”: $155,000.
h. Line 8: Under Committed 2004 Expenditures (for the town), “Salary Adjustment – Step 2” (This was the recommended wage and salary increase proposed by the Board of Selectmen in 2002 for 2003 based on the wage and benefits analysis of town employees performed by the NHMA-PLIT. Last year the budget committee decided to implement the adjustments over a two year period instead of all at once.) The second phase of this implementation was estimated by Selectmen Jones to be $15,100.
i. Line 9 “Benefits increase – estimated”: Selectmen Jones estimated the increase based on yesterday’s Wall Street Journal report that the medical insurance costs for 2004 were going to rise by 13.9% on average. The increase was estimated at $17,000.
j. Line 10 “COLA” (Cost of Living Adjustment): Selectmen Jones assumed a 2% cost of living adjustment for next year at a cost of $11,150.
k. Line 11 “Highway Facility – Debt Service/other costs”: Mike Smith and Freda Swan, members of the Public Works Facility Building Committee, presented the gross cost of the highway facility to be a maximum of $500,000. The facility would be paid for by borrowing $500,000. The annual payback for that money is $50,000 per year. However, for next year they only have to budget for ½ year. The Town’s fiscal year is the calendar year – from January to December. Town Meeting is not until March. They do not expect to have the legal documents and federal approval until about July 1st. They would not expect to make a payment until December 31st. The payment due December 31st would be $25,000. There was discussion about whether some of the money from the Public Works Facility Trust Fund should be used for this project. Selectmen Jones reminded the committee that there were a number of other Public Works Facility projects that needed to be completed within the next 10 years,
including the transfer station.
l. Line 12 “Transfer Station Costs”: Selectmen Jones updated the budget committee on the status of the Transfer Station Costs. The Transfer Station Study Committee has just barely been appointed. They have not met yet. They have until November to make a report to the Selectmen. The Selectmen have no idea whether the committee will recommend that the Town go to curbside pickup or some other form of solid waste removal involving a new facility with purchased land. The cost of a new facility at this time is completely unknown. If we go to curbside pickup, Mike Smith is of the opinion that curbside pickup would be
cheaper than the present system of recycling and trash pickup. That would come out of the operating budget and have no impact on the figures in this worksheet. They left this line blank.
m. Line 13 “Road Materials”: The budget committee decided to change this line to “Fuel and Utilities” based on conversations with Selectmen Jones about the substantial increases in cost for these items. They put $5,000 in this line.
n. Line 14 “Fire Department gear/other expenses”: After much discussion the budget committee decided to change this to “Emergency Services Equipment”. They put $25,000 in this line. At this point they do not know if the Fire Chief will be looking to buy 25 sets of turnout gear at one time or whether he will want to buy 5 sets per year for the next five years. There is a grant application for turnout gear pending, however, there is some preliminary word that Lyme is too wealthy a town to qualify for this grant. However, Mike Smith urged the fire department to speak to Senator Gregg. The budget committee
discussed Fire Chief Hinsley’s proposal that they do a lease-buy financing of the fire truck a year early. However, a number of members of the budget committee spoke out against a lease-buy arrangement. This would represent a tremendous shift in policy. We use capital reserve funds and trust funds to make our major purchases. We do not want to get into financing of vehicles and equipment.
o. Line 15 “Emergency Major Equipment Rebuilding Fund”: Selectman Jones recommended putting $10,000 in this fund to build it back up again. The budget committee recommended putting in $5,000 in this line this year.
p. Line 16 “Other”: The budget committee changed this to “Other-Capital Reserve Funds”. First, based on the resignation of Diana Calder as the assessor, Selectmen Jones estimates the cost of her replacement to increase by $10,000. Second, the town has failed to put additional funds into the bridge account for some time. Some major bridge work has to be undertaken over the next few years. Work has to be done fairly immediately on the Edgell Bridge (the covered bridge). Our estimate from the state for the repairs to the Edgell Bridge is $27,000. Selectmen Jones recommended putting at least another
$5,000 in the Bridge Capital Reserve Fund. The budget committee decided to put $25,000 in this line.
q. Line 17 “Total committed Expenditures”: Sum of lines 8-16 is $128,250.
r. Line 18 “Remainder available for town operating budget increases”: The total of lines 7-17 is $26,750. This is EXCLUSIVE of salary and benefit costs as that is already figured into the projected costs in the worksheet above entitled “Committed 2004 Expenditures”. This represents an increase of 1.8% in the operating budget for all of the departments together. Obviously, one department might end up getting the whole 1.8%. Selectmen Jones did not see this as giving each department the ability to increase the discretionary portions of their budgets by 1.8%. Freda Swan voiced her concern that that increase
would always end up going to the bigger dollar departments (i.e., highway and fire) and all of the other departments would be left out. Selectmen Jones stressed his desire that all of the departments should compete for the left over increase and present their requests with a strong presentation of a justification for it. The departments only control so much. They really have no control over salaries and benefits which are more or less already committed. The Board of Selectmen will prepare a memo to the departments heads to give them guidance so the department heads can begin to aim for that not more than a town-wide overall 1.8% target increase when they start their budget preparations for this next year.
s. Line 19. “Average available % increase for town operating budgets”: This line is the 1.8% increase described above.
9. Members of the budget committee reminded each other to look at a 5 year horizon instead of a 2 year horizon in looking for ballooning expenditures that might arise.
10. Earl Strout offered: The rise in the town value will take care of nondiscretionary items. His committee (Earl Strout, Jeff Lehman, and Gibb Cornwell) came up with roughly the same numbers (i.e., that discretionary spending is only about $25,000.
11. However, Earl Strout and his committee also wished to discuss some more basic philosophical issues.
a. First, they would like to challenge the basic assumption based on older studies that every new house costs us money. They think that when retirement-age people come into town with no school age children and build million dollar homes for just two people the result is an increase in our tax base without a corresponding increase in the cost of services. These homes do not have children in them who will attend school and, therefore, the demand for services costs a lot less. He urged “someone” to look into it. Freda Swan and Chair Brannen indicated that they believed that you would have to live in a $500,000 home to have your
taxes fully compensate the town for the sole cost of sending a child to high school for one year. (If your home is assessed at $500,000, your 2002 property tax bill was $11,895. This is a little more than the amount of last year’s tuition for one Hanover high school student - $11,700.)
b. Second, they would like the community (planning board) to look at the conservation easements that have been accumulating over the years. We need a good town plan for allowing conservation easements in town. We should not be doing this “piecemeal”. We may be doing something that is not in our children’s or future generations’ best interests. By making land less available for development, we are precluding people from living here. Other members of the budget committee argued that whether or not to grant a conservation easement is up to the individual land owner, precluding the kind of planning Strout was
advocating. They also argued that the value of developable and developed land in Lyme is high because so much of the surrounding land is conserved that people are assured that the rural character of the community will remain intact.
c. Third, they are not sure that the zoning ordinance is in the town’s best interests by being so restrictive of development.
12. At 9:01 PM Mike Smith made a motion to adjourn. The motion was seconded. Motion to adjourn was voted unanimously in favor.
Respectfully submitted,
Carole A. Bont
Administrative Assistant & Scribe
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