Town of Newbury
Finance Committee Meeting
Tuesday or Wednesday Sep 17, 2008— 7:00 pm, Town Hall
Meeting Summary
In Attendance: Eugene Case, Bill Cooper, Larry Guay, Pete Morse, Dave Newbert, and Frank Remley (Chair)
Ex-Officio: Chuck Kostro, Finance Director
1. July 14, 2008 meeting summary: Approved unanimously without further changes
Recreation Committee Revolving Fund: Warren Manter presented a request to raise the
Recreation Committee’s authorization for its revolving fund from $15,000 to $25,000. According to
an opinion issued via email by Town Counsel in July:
While it is true that the Annual Town Meeting voted to limit expenditures by the Recreation
Committee from their G.L. c. 44, §53E1/2 revolving account to a maximum of $15,000 for
this fiscal year, Section 53E1/2 does contain the following language - - "In any fiscal year
the limit on the amount that may be spent from a revolving fund may increased with the
approval of the . . . selectmen and finance committee . . in a town; provided, however, that
the one percent limit established by clause (4) of the third paragraph is not exceeded."
Clause 4 as referenced says in part that "no board . . . shall be authorized to expend in any
one fiscal year from all revolving funds under its direct control more than one percent of the
amount raised by taxation by the . . . town in the most recent fiscal year for which a tax rate
has been certified . . .” This clause 4 limit would seem to be somewhere in the vicinity of
$150,000. It is my understanding that the Rec. Committee is not seeking an increase
anywhere close to the limit. Thus, it appears that if the Finance Committee and Selectmen
both so vote, the amount requested as a new cap by the Rec. Committee can be legally
increased over the $15,000 cap amount set by Town Meeting.
As a revolving fund, the Recreation Committee can only spend what it raises in revenue up to its
authorized limit. The Committee cannot exceed its authorized limit even if its revenue is greater
than $25,000.
Warren explained that due to some unexpected expenditures as a result of a lightning strike, this
was needed to both provide maintenance reserves as well as begin planned construction on a
storage bldg., which will also serve as a shelter and snack bar. The FinCom unanimously
approved the increase in the budget to $25,000.
2. Harbormaster Request: Frank Remley explained that Brendan Stokes, the
Harbormaster, is seeking authorization to use the revenue in the Waterways Fund to
purchase a small patrol boat. The Harbormaster’s Department needs to replace a small
aluminum boat and is seeking an about $13,000 from the Harbormaster Revolving Fund.
This request has been recorded in writing with the Finance Director. Brendan
unfortunately couldn’t be present to explain this request so the FinCom postponed action
until its next meeting, which is now scheduled for Oct 21.
3. August YTD Revenue and Expense summaries: (Finance Director)
The Finance Director presented the final draft of revenues and expenditures for Fiscal
Year 2008. The un-audited numbers so far appear to show that the town was
approximately $85,000 under budget for the year. However, two line-items, the Street
Lighting expense and the Medicare expense where over-budget by a combined $5,200.00.
The Finance Department has already notified DOR about this matter and this amount will
need to be raised on the Recap Sheet.
The Committee reviewed the Fiscal Year 2009 revenue and expenditure reports. Brief
discussion focused on the Tree Warden Expense line item which is already 95.4%
expended for the year. Since the Tree Warden does not report to a department head, no
explanation was available for this at this time. The Committee also reviewed an added
insurance expense. The Police Department’s employee insurance is renewed every three
years. Neither the Police Department nor the town’s insurance broker notified the Finance
Department that this expense would be due this fiscal year. This will add almost $4,000 to
the Insurance Expense line-item.
There was also additional discussion about the Police Departments Expense line-item.
Approximately $20,000 has been earmarked for this item in the Reserve Fund. This is
due primarily to anticipated fuel increases. There was discussion about why the Police
Department Expense line-item is over-budget every year. It was decided to invite Chief
Reilly to our next meeting to discuss the Police Department’s operation and budget.
Revenues are running slightly behind this same period last year, due primarily to the
intense collection effort last summer to collect back taxes which resulted in high amounts
of prior year real estate tax revenue in FY08.. A good indicator of revenues for this fiscal
year will be the first quarter report available at the end of September. There was
discussion of potential steps if revenues are behind last year, including further cuts in the
budget at a Special Town Meeting.
Chuck presented a list of the top 21 delinquent tax receivables, of which nine have paid,
one partially paid. Nine properties are or will be shortly in tax title. The total assessed
value of the properties in tax title is approximately $3.7 million.
4. Betterment Policy and Procedure: The Finance Director presented a policy statement
regarding how PI Water and Sewer Betterment Reserves should be managed. Initially,
the town’s auditors stated that there needed to be a special fund on the General Ledger
but there did not need to be a separate bank account. This is what the town did in Fiscal
Year 2007 and continues to do today. The Finance Director questioned whether this was
consistent with the authorizing statute and with the DOR guidelines. Town Counsel issued
two opinions at the request of the Finance Director. One stated that the authorizing
statute did not require town meeting appropriation and a second stating that interest need
be credited to the Special Assessment Fund only if the betterment revenues were
separately invested per Massachusetts General Law. In other words, Town Counsel’s
opinions indicated that the town’s manner in handling the betterment revenues was
consistent with the authorizing statute.
In early August, a meeting was called by the Finance Director with Town Counsel, the
town’s auditors, Frank Remley, Pete Morse, Joe Story, the Town Accountant and the
Assessors Office all present. The policy proposed tonight was developed as the
consensus of this meeting.
The Committee discussed its reservations about not placing the betterment revenues in a
separate fund. The Committee felt uncomfortable with Town Counsel’s opinion and it was
indicated that Newburyport had a letter from the DOR stating that the revenues must be
kept in a separate bank account and interest credited to the Special Assessment Fund. A
copy of this letter will be obtained and provided to the Finance Director.
While aware of the cash flow issues and potential borrowing costs, the Finance Committee
felt, that it was better to put the betterment revenues in a separate bank account. A final
determination will be made after review of the letter from Newburyport.
5. Reserve Fund Update: (Finance Director) A projection of potential reserve fund
transfers was presented showing nearly all $70,000 nearly spoken for already (see
attachment 1). The Finance Director also presented a draft memorandum outlining a
process regarding commitment of reserve funds. After some discussion about wording, it
was decided to table this policy statement pending further clarification of language and
intent.
6. Cash Management Policies: (Finance Director) The Finance Director presented a
listing of current cash on hand and bank summaries, including interest rates on deposits.
He explained that the rates vary, and although accrued interest has improved substantially
in the last year, he felt that we were still not earning nearly what we should be on cash
reserves. He also raised the question about the safety of bank deposits in light of recent
press regarding bank failures. A letter from Eastern Bank explained basically that their
reserves were more than adequate, although deposits are only insured by the FDIC up to
$100,000. He asked for ideas on how we might improve earnings on our cash reserves,
which are currently over $3.3 million. There was some discussion that over $2.5 million
was deposited in the Eastern Bank, but very few funds were deposited in the Newburyport
Five, even though the bank just donated $20,000 to Newbury for a new cruiser. As there
were no immediate ideas, this discussion was tabled for further review.
7. Review of DLS July Report: The FinCom felt that this was a helpful report. The
Finance Director pointed out that a major conclusion was that under a Town
Administration form of government, the same individual should not be serving as treasurer
along with the broader duties of Town Administrator and Finance Director. Combining
these functions eliminates the checks and balances required by law and expose the
person holding these titles to an undue amount of potential liability. The Finance Director
is working on a transition plan which will require the hiring of full-time Treasurer-Collector.
8. Review of GASB 45 study results: The recently submitted GASB 45 actuarial report
by the outside firm of Primoris concludes that Newbury’s unfunded liability for health,
dental and life insurance for retirees is $3.791 million. Under GASB 45, we must amortize
the accrued benefits in place at its adoption over no more than 30 years. The study
concludes that our current “pay-as-you-go” approach to budgeting for these costs each
year leaves Newbury short in its current annual budget by $341,145. The FinCom agreed
to propose a small group to study this issue and determine options to addressing the
funding shortfall. Questions to be researched include current policy for retiree insurance,
applicable laws, eligibility, insurance cost per person, co-pays and other cost drivers.
Gene Case agreed to lead this review, and it was agreed that a representative of the
Personnel Board, our general counsel, and possibly one or two others should be part of
the review group. It was also agreed that options and recommendations should be ready
by next spring in time for budget finalization and preparations for the Spring Town
meeting.
9. Update from Capital Planning Committee: Dave Newbert explained that a meeting
was scheduled for the CPC and only one member along with himself, Anna Tenaglia, and
Frank Remley (ex-Officio) could attend. Since then he has met with Mike Reilly, and ???.
Frank Remley will help with the DPW. He also noted that Anna Tenaglia, now Director of
Capital Planning for MassPort, advised that any capital plans should include estimates of
maintenance and operating cost, if in excess of normal maintenance expenses.
10. Other: FY09 TRSD Budget Process update: A meeting was held on Sept. 4 among
selectmen and financial representatives for Newbury, Rowley and Salisbury to address the
TRSD budget cycle for FY 2010. Chuck Kostro, Vince Russo and Larry Guay attended.
Chuck presented a 5-year revenue forecast for Newbury. The group decided to advise the
School Committee in advance of our combined financial outlook and what is affordable in
terms of an Ed cost increases for next year. As of now, a single person representing all
three towns at the October School Committee Meeting will present a forecast.
11. Next Meeting: Tuesday Oct. 21. The Finance Committee decided that it will
typically meet on the third Tuesday of the month going forward.
ATTACHMENT 1
FY09 RESERVE FUND TRACKING
ITEM AMOUNT DESCRIPTION
Reserve Fund Budget $
70,000.00
Transfers Completed
Finance Committee Expenses $
(23.00)
Cover increase in annual
membership dues.
Present Available Balance $
69,977.00
Potential Transfers Required
ITEM AMOUNT
Police Insurance Coverage ($3,781.00) Premium paid every three
years. Not included in FY09
budget.
Medicare Deficit ($12,000.00) Trending to 18% increase
over FY08.
Street Lighting ($5,000.00) Based on actual expenses
incurred in FY08. Need to audit
bills.
Newbury Fire Protection #2 Wages ($5,000.00) Coverage issues
unavoidable. May result in wage
item deficit.
Police Expenses ($20,000.00) Trending to be over
budget. Potential fuel increases.
Public Building Maintenance
Expense (BCAC)
($5,000.00) Town assumes cost of
maintaining the Yellow School.
Tree Warden Expense ($5,000.00) 95% of line-item already
expended.
Selectmen's Expense ($1,000.00) Trending to be over
budget.
Veteran's Benefits ($12,000.00) Increased approved
applications for veterans in need.
Estimated Balance Remaining $1,196.00
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