FY18 BUDGET. Kevin J. Mizikar Town Administrator

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1 In accordance with the Massachusetts General Laws and the Bylaws of the Town of Leicester, the following is a balanced budget proposal for the fiscal year July 1, 2017 to June 30, Kevin J. Mizikar Town Administrator FY18 BUDGET Town of Leicester, Massachusetts

2 FY18 Budget Message March 6, 2017 Dear Members of the Board of Selectmen: I have prepared this message to outline the proposed financial plan of the Town for the ensuing fiscal year in accordance with the Town Administrator Bylaw of the Town of Leicester. This message will layout all expenditures and revenues, describe the important features of the budget, indicate major variations from the current financial plan, summarize the Town s debt position and review the overall financial condition and outlook. This will include a historic perspective with comparative data to help describe Leicester s financial position. In the spring of 2015 the Board of Selectmen held a retreat to develop a vision statement and define goals for the next three-to-five year period. The board set four overarching goals to focus the direction of municipal operations. This was the first formal long term goal setting initiative of the Board. Those goals, which follow below, helped to inform the development of this budget proposal. The budget document for fiscal year 2018 marks the second step of a multiyear process which seeks to provide greater insight into the operation of the Town and how we propose to spend the revenues that are entrusted to us. The budget will evolve from a numbers-based document to a narrative based document that guides interested parties through our spending plan. Goals of the Board of Selectmen Adopted July Bolster the Town s tax base by enabling commercial and residential development - Enhance communication with residents and stakeholders to help ensure insight into the operations of the Town, aid in community involvement and continue to build productive relationships - Develop the infrastructure and services of the Town to improve the quality of life of residents and enable desired development - Continually assess and improve the operations of the Town to ensure the most effective, efficient and modern practices are used in the delivery of services to residents and stakeholders 1

3 GENERAL FINANCIAL CONDITIONS & OUTLOOK In 2016 the Town s AA+ bond rating was affirmed by Standard and Poors (S&P) Rating Services. AA+ is the second highest rating given by S&P. The Town s financial position remains strong, but throughout out the budget development process showed signs of vulnerability. The Town s single largest source of funding, general property taxes, remains a stable source of revenue. This budget proposes accepting all available revenue through this source. However, there are no private development projects that have been permitted which would significantly expand the tax base. Little to no growth of the Town s tax base will inhibit our ability to add any new services in future years. The Town s financial reserves have grown by nearly 50% over what they were one year ago. This marks the third consecutive year of growth in reserves. This is a result of both the timing of the use of one-time revenues and the renewed commitment to rebuilding the financial condition of the Town. The Town s general stabilization has grown by % since June 30, The Town currently has the following reserves on hand: FUND AMOUNT % CHANGE Unobligated Free Cash (from FY16) $1,180,678* % Stabilization $70, % Stabilization - Capital $ % Stabilization Hillcrest $25, % OPEB Trust $35, % TOTAL RESERVES $1,280, % *Total FY16 Certified Free Cash was $1,198,687. $18,009 was appropriated for Vocational Tuition. The reserves represent 4.31% of the total FY18 budget as presented, which is 0.2% less than reserves as a percentage of the FY17 budget. The Board of Selectmen adopted a Free Cash Usage Policy in the fall of This budget cycle marks the first full cycle that we had the opportunity to follow the policy. The policy provides predictability and should help stabilize the total reserves of the Town. However, it is expected that the total reserves will decline in future years since free cash is currently the largest sources of reserves. Free Cash is expected to decline in future years as we are forced to be more aggressive with the use of projected revenues and planned expenditures become more accurate. The operating budget showed some vulnerability throughout of the development of the FY18 plan. The largest source of revenue, property taxes, is constrained under the provisions of Proposition 2 ½. These limitations present difficulties when non-discretionary expenditures, like retirement contributions and health insurance, grow faster than revenues do. This requires core services of the Town to be eroded or at minimum held flat. This often prevents the establishment of new initiatives and services that may be requested by the residents even if some would provide efficiencies in the long term. 2

4 This is also the second consecutive budget cycle that the net new aid from the State has grown at less than ½ of one percent. State Aid is 41% of all operating revenues for FY18. Meaning that with the exception of new funds raised through the debt exclusion process, revenues have only increased by 2.29% year-over-year. BUDGET IN BRIEF The Fiscal Year 2018 budget proposal is balanced. We project $29,704,103 in revenues and propose a plan to spend $29,702,072. This leaves a slight balance of $2,031 leaving limited room for flexibility leading up to the Annual Town Meeting scheduled for May 2, As proposed the FY18 budget is 3.05% greater than the FY17 budget. The anticipated revenues are based on projections of available revenue under the guidelines of sound financial practices and the limits of Proposition 2 ½. The primary sources of revenue include general property taxes, Aid from the Commonwealth of Massachusetts, and Local Receipts such as fees, excise taxes, interest earned on deposited funds and known reimbursements. Expenditures are proposed to maintain the level of services currently provided with two exceptions. The first exception are the operating costs planned for the new Fire & EMS Headquarters. Second, additional sworn officers and civilian staff are requested to augment the under-resourced Police Department. Expenditures can be broken out into the four main categories of General Government (Town), Education (Leicester Public Schools and other), Inter- Government expenditures which benefit both of the previous categories, and charges from the Commonwealth of Massachusetts. The planned expenditures are summarized below with corresponding changes in comparison to fiscal year Proposed Fiscal Year 2018 Expenditures General Government $ 5,206, % Education $17,375, % Inter-Governmental* $ 5,662, % State Charges and Offsets $ 1,219, % TOTAL $29,702, % *Includes Debt Service REVENUE The Town s revenue projections include property taxes (49.84%), State Aid (40.98%), Local Receipts (7.63%), Ambulance Fees & Charges (1.40%) and miscellaneous revenues (0.15%). In total, revenues are projected to be $29,704,103 or $877,860 (3.04%) greater than FY17. Continuing with the trend that started in FY15, the Town is relying more upon local revenue sources than external sources like State Aid. This is a healthy sign for the future financial position of the Town because reductions in State Aid, which are beyond the control of local officials, will have less of an impact on Town operations. 3

Additional new growth of $120,000 and $218,542 in new property taxes for debt excluded from the provisions of Proposition 2 ½ for the new Fire and EMS Headquarters is projected.

5 FY18 REVENUE Local Receipts 7.63% Ambulance Fees 1.40% Misc. Revenue 0.15% Property Tax (within limit) 46.88% State Aid 40.98% Property Tax (excluded) 2.96% Property Tax The increase allowed under Proposition 2½ will provide $336,727 in new revenue for FY18. Additional new growth of $120,000 and $218,542 in new property taxes for debt excluded from the provisions of Proposition 2 ½ for the new Fire and EMS Headquarters is projected. The total revenue to be raised through property taxes $14,806,516. This represents a net increase of $675,269 (4.78%) over FY17. The property tax rate for 2017 is $15.48 per $1,000 of assessed value. This is an increase of $0.58 over the 2016 tax rate. The total assessed valuation for the Town increased by $12,997,007 (1.44%) to $912,569,179. The average assessed value for a single family home in Leicester is $216,100. This means that the property taxes paid on the average single family home is $3,345, which is $89 more than the previous year. State Aid (Cherry Sheet) The gross State Aid for FY18, is proposed at $12,171,422. This is the amount of aid proposed by the Governor in his budget, and represents a $80,515 gross increase in comparison to FY17 State Aid. Local Receipts Estimated local receipts are projected to increase by $164,600 in FY18. Local receipts include revenue collected from vehicle excise taxes, permits and licenses, and other local fees. The total 4

6 revenue to be raised through local receipts is $2,266,700. This represents a increase of 7.83% over FY17. Ambulance Charges & Fees The costs of Ambulance Services are funded from revenues generated from charges and fees for the services provided. Historically, on an annual basis the department has raised sufficient funds to cover its operating costs. This budget proposes to use $416,000 in ambulance receipts which is a 12.98% year-over-year increase making it the largest increase in any revenue category. The increase is attributed to a more effective fee collection model that will be in place late in FY17. EXPENDITURES This year s spending plan is proposed at $29,702,072 which is $877,999 greater than the current FY17 plan. This represents a 3.05% increase. Departments, boards and commissions were directed to request funding to provide the same level of services as FY17. This means that departments, boards and commissions were requested to submit budgets which provide the same staffing levels, programs and services provided in FY17. With the exception to the increases noted in the Public Safety Category this is a level service budget. FY17 FY18 $ % BUDGET CATEGORY BUDGET TOWN ADMIN CHANGE CHANGE GENERAL GOVERNMENT 1,282,921 1,372,549 89, % PUBLIC SAFETY 2,615,715 2,723, , % PUBLIC WORKS 908, ,507-15, % HEALTH & HUMAN SERVICES 199, ,979-15, % CULTURE & RECREATION 189, ,850 7, % EDUCATION 16,855,800 17,375, , % INTERGOVERNMENTAL 4,411,105 4,418,138 7, % DEBT SERVICE 1,051,799 1,244, , % Misc. Charges & Offsets 1,264,505 1,291,977 27, % Town Meeting Articles 45,540 2,991-42, % Total Expend. & Charges 28,824,073 29,702, , % INTERGOVERNMENTAL, 14.87% DEBT SERVICE, 4.19% GENERAL GOVERNMENT, 4.62% PUBLIC SAFETY, 9.17% PUBLIC WORKS, 3.00% HEALTH & HUMAN SERVICES, 0.62% CULTURE & RECREATION, 0.66% EDUCATION, 58.50% 5

7 The most significant changes in each budget category are discussed below. General Government $1,282,921 $1,372,549 $89, % The General Government category includes the core administrative operations of the municipality. There are a lot of changes in the General Government budget category. The most significant changes include increase in personnel costs within Board of Selectmen/Town Administrator s Office ($27,885) and upgrading critical information technology equipment, IT Department ($17,835). Additionally a new General Government Expenses budgetary department has been created Note: The operating budget Intergovernmental Category contains both School & Municipal expenses ($77,868). These expenses are attributed to most Departments within the General Government category. In prior years they were located within individual departments; mainly the Board of Selectmen. The net impact of all of the changes provides for a 6.99% net increase in this budget category. Public Safety $2,615,715 $2,723,636 $107, % The Public Safety category includes the mission areas of police, fire, emergency management, animal control and building inspections. Several significant changes are proposed for departments within the public safety category. Personnel increases for this category account for just over $81,000 of the total increase. It should be noted that in reviewing the departments under this category one position was removed and reallocated to the General Government category reducing the funding in this category by $36,668. This budget adds two full time officers to the Police Department. The new Fire & EMS Headquarters will open in FY18. This requires an increase of over $48,146 over fiscal year 2017 s budget. These additional expenses can be found within the Fire and Ambulance Department budgets. Public Works $908,175 $892,507 -$15, % The Public Works category includes the mission areas related to roadway maintenance and safety. The Highway Department will see a net reduction in funding which is a result of the ongoing lower 6

8 fuel costs (-$16,500) in comparison to several years ago. The Highway budget provides for all the Town s gasoline and diesel fuel expenses. Health and Human Services $199,058 $183,979 -$15, % The Health and Human Services category is primarily made up of the Council on Aging and Veterans Services Departments. The primary reduction in this budget category is a reduction in Veteran s Benefits of $12,500, due to less demand. Culture & Recreation FY17 BUDGET FY17 TOWN ADMIN $ CHANGE % CHANGE $189,455 $196,850 $7, % Over 95% of this budget category is allocated to the Public Library. The proposed cost increase in this category is a result of performance increases for Library staff ($9,245) with modest reductions in other expense line items. Education $16,855,800 $17,375,000 $519, % The funds dedicated directly to education are split into two categories: education provided by the Leicester Public Schools and education provided through vocational technical high schools that Leicester residents attend. The Leicester Public Schools spending plan for fiscal year 2018 is $16,315,000, an increase of $199,679, and the vocational tuition is $1,060,000, an increase of $95,000. Additional details of the Leicester Public Schools budget can be found on the Finance and Operations page of their website Inter-Governmental $4,411,105 $4,418,138 $7, % The Inter-Governmental category includes operating funds that benefit and support both municipal and school operations. Examples include liability insurance, workers compensation insurance, and employee benefits like health insurance. The net increase in this budget category is the smallest year-to-year increase of the FY18 budget. This is a result of significant plan design changes for employee health insurance for fiscal year There has been a net reduction in the number of employees taking health insurance through the Town s plan. Debt Service 7

9 $1,051,799 $1,244,445 $192, % Debt Service technically falls under the Inter-Governmental category but it has been broken out to provide greater detail. This category funds all principal and interest payments for the debt that Town and Schools have incurred. As proposed, this category has the largest percentage increase over the previous year. The FY18 budget contains the first year reflecting the total debt service impact for the new Fire and EMS Headquarters Facility. SUMMARY This financial plan includes spending $29,702,072 which is $977,999 greater than FY17. This represents an increase of 3.05%. Revenues are expected to modestly increase taking into account the allowances of Proposition 2 ½, a strong growth trend in local revenues, and the Governor s State Aid proposal. This budget plan remains flexible to deal with any changes in the final State budget and other estimates that are currently being used. I would like to sincerely thank and recognize the Finance Team: Allison Lawrence, Accountant; John Prescott, Assessor; Amy Perkins, Treasurer/Collector, and Kristen Forsberg, Assistant to the Town Administrator for their support and efforts in this process. This message is just the beginning of the formal adoption process for the FY18 Operating Budget. I look forward to working with the Board of Selectmen, the Finance Advisory Committee, and Town Meeting throughout the balance of the process. Regards, Kevin J. Mizikar Town Administrator 8

Town Budget Presentation Fiscal Year 2019

Town Budget Presentation Fiscal Year 2019 1 GFOA BUDGET Proud to submit a budget document that meets the requirements for the Distinguished Budget Presentation Award granted by the Government Finance Officers