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12-13-10
The Board of Finance held a regular meeting on Monday, December 13, 2010 in the Council Chamber of the Newtown Municipal Center, 3 Primrose Street, Newtown, CT.  John Kortze called the meeting to order at 7:35pm.

PRESENT:  John Kortze, James Gaston, Joseph Kearney and Harry Waterbury and Michael Portnoy.

ABSENT:  Martin Gersten

ALSO PRESENT: First Selectman E. Patricia Llodra, Finance Director Robert Tait, Public Works Director Fred Hurley, Public Building and Site Commission Chairman Robert Mitchell, Attorney Monte Frank (8:35pm), three members of the public and two members of the press.  

VOTER COMMENTS:  none.

COMMUNICATIONS:  A New York Times story was submitted by Mr. Kortze, from Mr. Portnoy (Att. A). Mr. Kortze submitted an email from the First Selectman regarding the apparent lack of commitment to complete the high school project (Att. B).  An email from Mr. Tait regarding the Board of Education financial audit was submitted (Att. C). An email from B. Walczak regarding impact statements fro the Kevin’s Community Center grant was submitted (Att. D) to be addressed further under the First Selectman report.  Mr. Kortze compared the motions made by the Board of Finance and the Legislative Council regarding the First Selectman’s letter on the space needs study and full day kindergarten.  He clarified any confusion by saying the motions were very similar and do not mention the issue of full day kindergarten but encourage looking at space needs in general.

MINUTES:  Mr. Gaston moved to approve the minutes of November 22, 2010.  Mr. Waterbury seconded.  All in favor

FIRST SELECTMAN REPORT: First Selectman Llodra informed the board of a transfer that does not require action because it is within a department and under $50,000.  Through the work of Bill Halstead the town has received a $78,000 grant to be able to install a generator.  Parks & Recreation did the excavation, the Board of Education plumber and electrician was used; Public Works interacted with Yankee Gas.  We now have a significant generator for the building at a very low cost.  Tim Gunn is the point person from Morganti.  The cost of disruption and the delays on the high school project have been overwhelming.  The certificate of substantial completion has been received.  Significant progress has been made but it is important that they are held accountable for the loss of time in executing this contract.  First Selectman Llodra stated an impact statement would be prepared when the grant is executed and/or the project becomes a live project.  The Kevin’s Community Center grant hasn’t yet been accepted so it is unclear what would be included in an impact statement.  KCC applied for the grant, the town is the recipient of the grant but will not accept it until it is determined if $500,000 is enough money to execute that project.  The initial interpretation of 6-100 Impact Statements is that it is relative to appropriations.  There are no impact statements on any grants as far back as can be researched.  Mr. Gaston said that the impact statements pertain to capital projects proposed by the Board of Selectmen or any department other than the Board of Education.  He doesn’t see an issue at this point with KCC.  The final sentence pertains to capital projects and is not intended to be segmented.  First Selectman Llodra said it would be wise to do an impact statement if and when the grant is accepted.

FINANCE DIRECTOR REPORT:  Mr. Tait supplied the board with the audited financial statements FY ending June 30, 2010.  He also handed out a summary of the amount that was left in the Board of Education budget last year.  Before closing the books the last transaction should have been a request for a transfer tot het capital non-recurring fund, that didn’t happen.  It could still be done now, outside the fund balance policy, in the form of a budget amendment, increasing use of fund balance and increasing our transfer out account to the capital non-recurring fund.  Because the intent was to do it fiscal year end it is outside the fund balance policy.  The budget amendment would transfer $150,000.  Mr. Tait said that journal entries required the signature of the Asst. Finance Director or the Finance Director.  The auditors said that the Finance Directors signature should be on all of them; this year a few journal entries went through without Mr. Tait’s signature.  Journal entries will not be input until his signature is on the form.  The finance department will develop a Policy and Procedure Manual for all accounting functions.  Responses to the audit comments go to the First Selectman and then to the auditors.  The Board of Education comments in draft form go to Mr. Tait and the business director; final recommendations go to Mr. Tait.  He has not yet seen the Board of Education report.  Mr. Kortze and Mr. Tait spoke with the auditor about Mr. Tait’s report, the issues and the BOE side of the audit.  The audit gets filed with the state.  Management letter responses are a function of due diligence and best practices.  The auditor reported that anything being done in terms of transfers is not problematic because it was identified for a period ending last year.  He was clear in indicating the Board of Education needs to reverse the decision made in September to not do transfers; he will attend a BOE meeting to let them know they are in violation; the decision needs to be changed, if it is not it will rise to the level of a finding which is problematic for the town.  The finding would be on financial statements which would indicate that there is a problem.  Mr. Tait has spoken with Mr. Bienkowski on this topic.  Mr. Portnoy asked how to get the Board of Education to follow legal requirements.  Mr. Kortze stated that the Board of Education has been respectful of their process.  Their policies articulate what is required, the auditor’s memo states they are not following statute or their own policy.  They need time and want to meet with the auditor.  The BOE did not vote to change their policy, they voted to do an encumbrance system and forego transfers.  Mr. Gaston stated that the BOE is required to follow the charter with respect to providing financials; they are also required to follow the statute.  If they do not follow the statute and it affects the town negatively financially likely the Board of Selectmen and/or the Legislative Council can seek legal counsel.  Mr. Kortze said it is critical to have an understanding of the moving parts of both sides of the budget.  Should this rise to a finding it becomes an entire community issue.  Mr. Tait said that special appropriations are done for the general fund, the budget, bonding resolutions and for capital non-recurring.  Section A of 6-100 is specific on special appropriations, section C states the Council may by regulation require the Board of Selectmen, the Financial Director and the department requesting an appropriation to be funded in part or wholly by financial assistance from the State or Federal government; they may, by regulation.  Mr. Tait confirmed his understanding with the audit partner, who concurred.  

UNFINISHED BUSINESS:
  •  Liquidated damages resolution:  Mr. Mitchell said that liquidated damages cannot be used as a penalty and is incredibly difficult to enforce; it is very difficult for an owner to win unless it is an egregious fault.  He has found it more beneficial to offer a bonus to finish early; the incentive of getting money is much higher than penalizing for being late.  Liquidated damages take a lot of paperwork, which ads 25%-35% to the project cost.  It is better to have a good project team on site to enforce a schedule.  The high school project did not have full time job supervision.  Mr. Kearney asked what could be done instead of liquidated damages.  Mr. Mitchell recommended hiring an architect with a more in depth view of the project and having a supervisor on site more.  Mr. Hurley agreed it is worth it to spend more money on full time supervision and inspection to compress the schedule of the project.  Mr. Mitchell said that better contractors won’t bid on projects if there is a liquidated damage clause.  Offering a reward will yield a better group of contractors.  The Public Building and Site Commission would decide on incentives and how much supervision is required on a project.  First Selectman Llodra said it became clear two months ago that having such little supervision by the architect on the high school project was causing significant delay.  She suggested documenting the lessons learned from this to have for future large projects.  There are expenses mounting due to the transfer of students for sporting events, practices and the renting of facilities.  Mr. Mitchell said a settlement from Morganti would help resolve that problem and be in their best interest.  Mr. Kortze asked Mr. Tait for the cost incurred.  Attorney Frank’s discussion on liquidated damages was similar to Mr. Mitchell’s.  He said that liquidated damages is hard to establish and there courts disfavor liquidated damages clauses.  The best tact is to withhold payment if there are delays that cause additional costs, but he prefers a bonus incentive for finishing early or on time.
2.  Resolution re: owning plans:  Mr. Mitchell said typically you own the paper but do not own the intellectual property on it; that belongs to the original architect.  You cannot bring the drawings to another architect; it becomes a copyright infringement and a liability to you.  You own the drawings, you own the building; the drawings are an instrument of service.  Mr. Gaston stated the high school was rebid and there was an issue that the plans belonged to the architect and asked if it was possible to buy the copyright.  Mr. Mitchell said you can but you would still be liable if there is an error on the drawings.  The key is to set up, in the beginning, what you have the right to use the drawings for.  Mr. Kearney said if we didn’t want to use an architect we shouldn’t have to lose the entire work product up to that point that we paid for.  He said that the Public Building and Site Commission did a great job short listing the middle school roof architects.  Mr. Mitchell stated they have narrowed it down to two architects.  Atty. Frank said that the architect wants to be part of the process from the plans to the finish of the project; this allows them to catch a mistake before it becomes a problem.

NEW BUSINESS:
Discussion and possible action:
  • Transfer:  $1,050:  Mr. Gaston moved the transfer of $1,050 from Contingency to the Tick Borne Disease Action Committee.  Mr. Waterbury seconded.  All in favor
  • Transfer:  $2,025:  Mr. Gaston moved the transfer of $2,025 from Contingency to Technology Maintenance.  Mr. Waterbury seconded.  All in favor.
  • Update on Revenue Expectations:  First Selectman Llodra discussed the State of the State/State of the Town (Att. F).  The general conversation is that municipalities should be prepared for a 15% reduction in state revenue.  A breakdown of revenues the town receives from the state was shared (Att. G).  The town is on a good path, tax collections are at or above last years level (Att. H), and town clerk fees are up.  A letter to Jon Chew of HVCEO from P. Llodra (Att. I), legislative proposals adopted by the CCM Legislative Committee (Att. J) and the HVCEO Legislative Agenda (Att. K) were submitted.  The Superintendents Organization has also asked the legislatures to delay implementation of Public Act No. 10-111.
  • BOE funds returned to town as a result of final audit:  Item discussed under Finance Director Report.

  • Resolution: A RESOLUTION AMENDING A RESOLUTION    APPROPRIATING $1,000,000 FOR ARCHITECTURAL AND ENGINEERING SERVICES FOR THE PLANNING AND DESIGN OF A PARK AND RECREATION COMMUNITY CENTER/SENIOR CENTER AND AUTHORIZING THE ISSUANCE OF $1,000,000 BONDS OF THE TOWN TO MEET SAID APPROPRIATION AND PENDING THE ISSUANCE THEREOF THE MAKING OF TEMPORARY BORROWINGS FOR SUCH PURPOSE:  Mr. Tait said that the resolution restates the old resolution and section 1 explains how much the original resolution has been amended by.  There was no action taken on this item due to concerns about the warning of the resolution.  Mr. Hurley noted the issue was the additional costs involved in waiting.  Mr. Hurley explained that asbestos was found in Litchfield Hall.  Surveys were done on all the buildings on the campus; there was no reason to anticipate there would be asbestos in the sills.  The cost to abate exceeded the cost of the project. Another contractor was found to do the additional remediation for a fraction of what the general contractor was charging.  First Selectman Llodra said that there was no owner of the Litchfield Hall project, each project stood alone and not vetted separately.  The demolition was grossly underestimated.  The building is currently partially demolished; it has to be abated to continue the project.  The resolution was presented as per the recommendation of the bonding counsel.  Making this a separate resolution for $400,000 would make it a separate project that would have to go on the CIP with an impact statement.  The current resolution is already part of the CIP, this is just amending it.  Mr. Kortze will contact the bonding counsel for clarity.  First Selectman Llodra said the Legislative Council has the option to send it back to the Board of Selectmen with a recommendation of a Town Meeting.  

ANNOUNCEMENTS:  Feb. 17, Feb. 24, Feb. 28, Mar. 3 and Mar. 8 were mentioned as possible dates for the Public Hearing and budget deliberations.

ADJOURNMENT:
Having no further business the Board of Finance adjourned their regular meeting at 9:55p.m.


     _______________________________
Susan Marcinek, Clerk

Att. A:  NY Times story
Att. B:  P. Llodra email re:  high school project
Att. C:  R. Tait email re:  BOE Financial Audit
Att. D:  B. Walczak email re:  Impact Statement
Att. E:   BOE positive budget variance for 2009-2010
Att. F:   State of the State/State of the Town
Att. G:   Revenue breakdown
Att. H:   Tax Collections Comparisons 2009-2010
Att. I:     P. Llodra memo to J. Chew
Att. J:    Legislative proposals adopted by the CCM Leg. Comm.
Att. K:   HVCEO Legislative Agenda