20 November, 2010
The Board of Selectmen, in consultation with Town Manager Norman Khumalo, agreed on budget guidelines for FY2012 after a lengthy discussion at their November 9th meeting. The message for FY2012 is clear; 1) level funded operational expenses at FY2011 dollars, 2) additional increases in fixed costs to be funded through the tax levy subject to the maximum levy not to exceed Prop 2.5 plus the excess levy capacity of approximately $900,000 over a two year period.
Prior to beginning their discussion, Chairman RJ Dourney talked about what had been accomplished in the last two years and how Hopkinton was able to be fiscally conservative and still protect town services.
“The importance of protecting services is what it is all about,” said Dourney, “but we have outside forces, such as reductions in state aid, that we have to contend with.”
Town Manager Norman Khumalo opened the discussion by saying that town departments are still looking for ways to increase efficiency and to contain costs, but that some programs are now at risk.
“We are committed to building this town’s financial resilience,” said Khumalo.
Finance Director Heidi Kriger presented five different tax levy options to the board for consideration, with each scenario representing a different tax levy amount. Option 1 raised taxes by 2.5% and also used roughly $900,000 of excess capacity available from not taxing up to the Prop 2.5 level for the past two years. Options 2 and 3 raised taxes by 2.5% and also tapped into the excess capacity, but spread the $900,000 over 2 and 5 year periods, respectively. Option 4 only increased the levy by 2.5% and Option 5 represented no increase at all. Under all options except for the first, the town was left with a budget deficit.
Driving the deficit is an increase in fixed costs, with costs for FY2012 projected at $1,557,000 over last year. Contractual labor, debt and employee benefits, which increased by 15%, make up the bulk of fixed costs.
The tax impacts for the average household for each scenario were also presented, with amounts ranging for $0 up to $346 per household.
Appropriations Chairman Ron Eldridge presented his committee’s recommendation of raising taxes no higher than 2.5%, preferring to save the $900,000 of excess capacity as a cushion in case the cuts in state aid are higher than expected.
“Nothing has changed in the economy,” said Eldridge. “There isn’t going to be a lot of money.”
Eldridge also said that he hadn’t heard a lot of yelling about decreases in service and that fixed costs need to be addressed.
“Conservatism should reign,” said Eldridge. “Level funding is where we should be.”
Selectman Todd Cestari felt that the decision about the tax levy did not need to be made at this point, but agreed that level funding was appropriate.
Khumalo agreed with most of the recommendations made by the Appropriations Committee, but said that tapping into the excess capacity does not invite a spending spree. Instead, Khumalo said using the excess would help to ensure the financial stability of the town. Khumalo recommended a budget message that is sensitive to tax impacts, doesn’t create an unmanageable debt burden and is sustainable over the long run, but said that protecting services should be a priority.
After lots of discussion and some disagreement, the board managed to come to a consensus and voted unanimously to level fund budgets and to fund additional increases in fixed costs through the levy subject to a “not to exceed” amount. Option 2 was where they ended up; a 2.5% increase plus the $900,000 of excess capacity over a two year period. Under this scenario, as presented by Kriger, the tax impact on the average household was estimated at $257 and the budget deficit at $215,000.
As the meeting represented the kick-off of the FY2012 budget season, this leaves room for future discussions about how best to fund fixed costs and any strategic initiatives. Khumalo felt that the public should be forewarned that they might be asked to pay for any projects that the board decides to move forward on, or that are already underway since no other sources of revenue are available.
“The only option is taxes at this point,” said Khumalo.
