[0:00] good all right well good evening
everybody I I want to thank you all for
[0:04] coming just to introduce myself my name
is Ben butrick and I am currently the
[0:10] chair of the Essex finance committee
I've been on the finance committee for
[0:15] 7even years uh it's starting to sink
in this is a little uh uh it Municipal
[0:23] Finance is a murky area to dip your toes
in and so um I want to thank you all for
[0:29] coming tonight because I know Municipal
Finance is not necessarily at the top of
[0:35] everybody's excitement list but hey it's
January right
[0:40] so um so thanks for coming out um we
have about an hours worth maybe less of
[0:49] prepared
material um and then we have time for
[0:54] discussion and question and answer and
really want to make this interactive so
[1:00] I'll try and be sequential just in terms
of questions that come up in any
[1:04] discussion but I'm going to be a little
bit relaxed in terms of Robert's rules
[1:08] because I really want this to be
participative uh so
[1:14] um
uh a little bit of background in terms
[1:18] of how this came
about oh sorry oh we should go into
[1:22] session yeah 603 I will call the board
of Select my meeting to
[1:27] order go ahead call you better call us
all right and we should also uh call the
[1:32] finance committee into session uh we may
have four of us which would be a quorum
[1:39] so I'll make a motion to go into session
of the Essex finance committee so moved
[1:44] all in favor I thank you all right so um
the purpose of tonight is to go over
[1:51] some of the basic concepts around
Municipal Finance in terms of how the
[1:58] town operates
uh focusing on things like proposition 2
[2:03] and A2 what is the levy limit how do
assessments work why are my taxes what
[2:09] they are what role do my taxes our taxes
play in terms of the functioning of the
[2:15] town and what are the various
constraints that the town operates under
[2:19] with respect to taxation
um I got my January tax bill uh I think
[2:28] most residents have received their tax
bill and it's kind of an interesting
[2:33] year because um a lot of the assessment
numbers have gone up uh and the um the
[2:43] tax rate has gone down and that's sort
of a curiosity that people have I mean
[2:49] in my particular situation my tax my my
assessment went up by 5 and a
[2:54] half% my tax bill is going up by 1.2
2% uh because of that mill rate
[3:03] interplay with valuation so how does
that work why is that and that's sort of
[3:09] what we're going to talk about tonight
we're also going to cover things like
[3:13] free cash what is free cash uh what is
the difference between operating and
[3:18] capital expenses and we'll try and make
it exciting right so the extent to which
[3:23] we can do that I think is successful so
um those are the objectives the thing I
[3:30] was going to mention is that this is
really designed for Essex residents
[3:33] because as part of our objectives uh for
tonight um let me just uh try and
[3:41] Advance my
slides um so we'll kind of lay out the
[3:48] the laws of the land so basically how M
municipalities work in
[3:53] Massachusetts and then talk about what's
unique about Essex structurally we're
[3:59] really small town relative to other
municipalities in the state so that
[4:04] creates some quirks and some uh
challenges so we'll talk about that um
[4:13] and then it's just you know we'll open
it up for
[4:15] questions so uh this is basically a list
of all the material that we're going to
[4:22] cover tonight and I actually wanted to
kick off this session by just playing a
[4:27] a video uh it's 88es long it's a little
bit hokey it's the division of local
[4:34] Services basically local Finance in
Massachusetts is
[4:39] overseen by the the um Massachusetts uh
division of local services so things
[4:47] like the management of proposition 2 and
a half and uh the assessment process and
[4:54] how tax rates are calculated reporting
Etc all is overseen by the department of
[5:01] local Services they have a whole series
of materials and primers and and that
[5:07] that is sort of the the core of a lot of
what is being used uh tonight um so I
[5:17] will attempt
[5:21] to play the video hopefully it'll
[5:28] work
[5:49] you click the link up there what's that
uh wait I think it's just
[5:54] delayed there we
go all right hopefully this isn't too
[5:59] loud when it comes through
[Music]
[6:06] but like most households and businesses
local governments must manage a stream
[6:11] of Revenue and expenses to ensure that
services are delivered to its
[6:17] constituents Municipal expenses vary by
type and by community and include
[6:22] education Public Safety Public Works and
other
[6:28] costs
to budget for and fund these expenses
[6:32] cities and towns rely on different
revenue streams including property taxes
[6:36] and local receipts such as meal and
motor vehicle excise municipalities also
[6:41] receive local aid from the state and may
use their own Financial reserves for
[6:46] these costs as
[6:50] well property taxes are the most
significant Revenue source for
[6:54] Massachusetts municipalities as they are
the primary revenue source for all
[6:58] cities and towns across the the
[7:05] Commonwealth on average property taxes
account for over 70% of local
[7:12] budgets therefore understanding
proposition 2 and A2 a Statewide law
[7:18] that governs property tax assessment is
a key part of Municipal budgeting and
[7:24] management approved by Massachusetts
voters in 1980 proposition 2 and A2 sets
[7:29] limits on the amount of property tax
that can be collected or levied by a
[7:34] city or town annually it outlines how
new growth in the tax base can be
[7:38] identified and sets guidelines for Levy
limit overrides under rdes and
[7:47] exclusions a detailed walkthrough of
proposition 2 and A2 can be found on
[7:51] dls's Municipal Finance training and
Resource
[7:54] Center since property taxes are the
primary source of revenue for
[7:58] Massachusetts minnes IP
alties the assessor serves as a key
[8:02] member of a community's financial
management team among their other duties
[8:07] the assessor prepares and maintains an
accurate Property database and
[8:12] classifies real estate into four classes
residential commercial industrial and
[8:18] open space they also determine the
valuation of property as of the January
[8:23] 1 assessment date which requires
knowledge of various appraisal
[8:28] methodologies
[8:31] once the municipality's tax rate and
property valuations are approved the
[8:35] assessors also prepare a tax list and
warrant and commit taxes to The
[8:40] Collector they also Grant abatements and
exemptions to taxpayers who must file
[8:45] timely applications with the assessors
and administer motor vehicle and other
[8:49] excise
[8:54] [Music]
[8:58] bills
[Music]
[9:01] the assessor Works closely with the
collector as well as other members of
[9:05] the financial management team as we will
see teamwork amongst local officials is
[9:10] essential to effective financial
management in every
[9:13] Community let's look at just a few of
the responsibilities of other local
[9:19] officials the tax collector is
responsible for billing and collecting
[9:23] all taxes committed by the assessor as
mentioned the collector receives the tax
[9:28] commitment from the assessor sends bills
to taxpayers and collects corresponding
[9:34] payments in some communities The
Collector collects not just taxes but
[9:38] all accounts due to the municipality
such as water and sewer
[9:45] bills once collected funds are turned
over to the
[9:50] treasurer who is the custodian of all
Municipal
[9:54] funds the treasurer is responsible for
the deposit investment and dis
[9:59] dispersement of Municipal funds they
work with the community's financial
[10:02] adviser and bond councel and supervise
the debt issuance
[10:06] process the treasurer also manages the
tax title process once the collector has
[10:11] made a tax taking as the result of an
unpaid
[10:16] Bill the accountant or auditor records
all of the financial transactions of the
[10:22] municipality they use this information
to prepare financial reports like the
[10:26] balance sheet submission in schedule a
for review by the division of local
[10:30] Services the accountant auditor also
prepares interim reports for the
[10:34] community to consider during the fiscal
year to assist in budgeting and also
[10:39] notifies departments monthly of unspent
and unencumbered appropriation balances
[10:44] all bills for payment are approved by
the accountant auditor who monitors
[10:48] spending to assure that Goods have been
delivered and services have been
[10:54] rendered these and other members of the
financial management team worked
[10:59] together with other appointed or elected
officials Who oversee and manage local
[11:03] government but who are these other
elected or appointed
[11:10] officials this depends on whether the
community is a city or a
[11:15] town in most towns an elected select
board serves as the chief executive
[11:20] branch with responsibility for
developing overall policy and
[11:24] coordinating the general operations of
town
[11:27] government the select board appoints
certain officials in the town whether it
[11:31] be in accordance with State Statute a
charter provision or local bylaw the
[11:36] select board issues town meeting
warrants and negotiates collective
[11:40] bargaining agreements for all
departments except schools and approves
[11:44] vendor and payroll warrants for payment
by the
[11:49] treasurer the select board also prepares
or reviews budget proposals for town
[11:54] meeting approval these budget
responsibilities are usually shared with
[11:58] the finance Comm committee a body that
advises town meeting on financial
[12:03] matters the board also plays a role in
tax policy by voting to place a
[12:08] proposition 2 and a half override debt
exclusion or Capital outlay exclusion
[12:13] question on the
ballot the legislative body of a town is
[12:17] town
meeting as the appropriating authority
[12:20] of a town town meeting adopts the budget
and authorizes debt
[12:25] issuances town meeting also has local
lawmaking Authority through the
[12:29] enactment of
bylaws most towns have a chief
[12:33] administrative officer that oversees its
day-to-day operations this person is
[12:38] usually referred to as the Town
Administrator or town
[12:41] manager as with other roles the
responsibilities of this individual vary
[12:45] by Community but will typically involve
the coordination of the financial
[12:49] operations of the Town other Duties are
likely to be assigned by the select
[12:54] board as
[12:57] needed in a city the mayor or city
manager is the chief executive officer
[13:02] the mayor or city manager has all the
duties of the select board in towns
[13:07] including a pointing Authority and
oversight of administration and
[13:11] finances in a city however this
individual prepares and submits the
[13:16] budget to the city council which can
then only approve reduce or reject the
[13:21] mayor's budget
proposal the city council is the
[13:26] legislative branch in a city and is the
municipality's appropriating authority
[13:31] which adopts a budget and authorizes
debt it also has law making Authority
[13:37] through the enactment of
ordinances city council plays a role at
[13:41] tax policy by placing proposition 2 and
a half questions on the ballot with the
[13:45] mayor's
approval we've reviewed just some of the
[13:49] responsibilities of local officials who
play an important role in the financial
[13:53] management of their
communities which requires collaboration
[13:57] amongst a financial management
team for more information visit the
[14:02] division of local services website at
mass.gov
[14:07] DLS there you can find the municipal
Finance training and resource center and
[14:11] find more information about roles and
responsibilities of local officials and
[14:15] best practices for municipal financial
management you can also visit dls's
[14:20] YouTube
page all right promise that's the only
[14:25] video we're going to watch
tonight but I just thought it it
[14:29] introduces a lot of the
concepts just uh in a pretty efficient
[14:36] way I mean actually a lot of what was
stated in there does in terms of how
[14:40] towns operate you know it does apply to
Essex in terms of how all the different
[14:46] parties work together and um as well as
the various Concepts revenues
[14:53] expenses uh reserves proposition 2 and
A2 the assessor the the role of the
[14:59] assessor tax rates and that's pretty
much all what we're going to discuss
[15:06] um I wanted to just start this is
actually from the finance committee
[15:11] report that gets generated before town
meeting I wanted to start with revenues
[15:17] um they said in the video that typically
property taxes account for 70% or more
[15:25] of a
municipality's uh income coming revenues
[15:30] that's certainly true in Essex in fact
taxation accounts for More than
[15:37] 70% uh you know as you can see here it's
74% but that's actually just property
[15:43] and personal tax if you factor in excise
tax Motor Vehicles excise tax you factor
[15:51] in meals tax Hotel taxes Etc which show
up in the green slice then we're looking
[15:59] in excess of 80% in terms of Reliance on
taxes uh as a source of Revenue um what
[16:08] what I did here was I separated out
water and sewer water and sewer is its
[16:13] own Enterprise in terms of money coming
in and money going out in terms of their
[16:21] expense structure so if you want to look
at the two together our annual budget is
[16:26] $23 million if you separate out the
water and sewer um we're just under 20
[16:32] million as you can see here um the the
tax levy and I'm going to talk about
[16:38] that in a moment uh and try and Define
some of the terminology that you hear
[16:43] get used but our tax levy as you can see
in terms of uh in terms of property
[16:51] taxes runs about 3/4 of our Revenue so
in fact if you look at our our tax levy
[16:58] number it's under it's between 14 and 15
million right now so it sort of fits in
[17:04] with looking at the revenue picture for
the
[17:10] town all right so now I'm not going to
play the video but I I do want to just
[17:15] delve into proposition two and a half I
think most people understand
[17:22] that when we refer to the tax levy
that's basically the money that's coming
[17:28] in through taxation through property tax
taxation that is a that is a um you know
[17:35] a a single number uh it's in the you
know 14 to 15 million range right now
[17:41] and I'll go specifically through the
exact numbers for
[17:45] Essex um proposition 2 and A2 at its
core and it was set up in 1980 as the
[17:53] video said because there was
Massachusetts had the nickname of
[17:57] taxachusetts and we had sort of a
runaway taxation problem and part of
[18:02] that was at the property tax level
because there was really no uh there was
[18:07] really no check or sealing in terms of
the ability for municipalities to uh to
[18:14] tax residents basically what it did was
it put into place a limit saying you can
[18:20] only increase your tax levy that dollar
amount by 22% per year and that's why
[18:26] it's called proposition 2 and A2
so I think what's confusing is most
[18:31] people think well my tax bill shouldn't
be going up by
[18:35] 25% and there are some quirks about
proposition 2 and a half and that's what
[18:41] I wanted to talk about are what are the
quirks that cause that so the tax levy
[18:46] that we've defined the tax limit is
basically the um that the amount that
[18:54] the municipality has the ability to tax
up to and it's a function of proposition
[19:00] 2 and A2 I'll Define it on the right
there which basically you have the levy
[19:05] the tax levy and the tax and if you take
the prior years limit or the the you
[19:12] know amount up to which you can tax
proposition 2 and A2 says well you can
[19:18] grow it by
22% as a
[19:21] Baseline and then you are allowed
something called New Growth which I'll
[19:27] Define on the next slide but it's
basically new building new developments
[19:32] anything that hasn't been assessed or
part of the tax levy that's
[19:38] introduced then that's considered New
Growth that's part of the role of the
[19:42] assessor is to Define what that new
growth is
[19:48] um the the other thing the other sort of
Quirk about proposition 2 and A2 is you
[19:53] can go up by more than 22% plus New
Growth if you think about that sort of
[19:58] as the Baseline by doing something
called an override and I think we all
[20:03] hear these terms we we you know we we
had our own override experience last
[20:08] spring so the override basically
requires voter approval as an exception
[20:16] to the proposition 2 and a half rules
the
[20:18] 22% plus new growth and so that's
basically how proposition 2 and a half
[20:25] works we operate under a 25% model um
part of the issue is when we plan our
[20:35] budgets each year and there's a
seasonality to our budget process we
[20:41] typically plan
our annual operating budget for each
[20:45] fiscal year starting now and basically
running through the spring and coming up
[20:52] we have fiscal 25 so right now we are in
fiscal 24 fiscal 24 actually starts July
[20:58] 1st of the prior year and um we don't
actually know what that new growth is
[21:05] going to be when we're planning for that
next year so that's one of the quirks
[21:11] about proposition 2 and a half is you
can sort of guess at what you think your
[21:16] new growth is going to be based on what
it is but you don't actually have those
[21:20] numbers when you're doing the budget
work from year to year so um new growth
[21:28] overrides we've talked about that and
then here's the really sort of tricky
[21:33] part there's this term
called excess capacity or Levy capacity
[21:39] so what happens is a
municipality doesn't have to tax up to
[21:45] what that Levy limit is and a lot of
times
[21:50] municipalities um in the desire to be
conservative will uh will tax up to a
[21:57] certain level and leave a little bit of
that of excess capacity and also you
[22:02] don't know what the new growth is going
to be in advance right so you find out
[22:06] about that after the fact the extent to
which you don't tax up to the the full
[22:14] Levy limit you can actually carry that
forward to the next year and then you
[22:22] can do that again the next year and
carry it forward to the following year
[22:27] and we've gone for a whole string of
years in
[22:31] Essex carrying forward our excess
capacity so when we had the override for
[22:38] the district last spring and it didn't
pass we were able to use that excess
[22:45] Levy
capacity and so what happens is that
[22:50] means that our taxes have gone up by
more than
[22:54] 25% plus New Growth our taxes have gone
G up
[22:59] 25% plus New Growth plus the override
did pass for the tech it did not pass
[23:05] for the district so there was a small
override that did pass and then we had
[23:11] this this excess Levy capacity so the
average taxpayer in Essex likely saw
[23:19] about 7% of an increase and that's been
triggering questions because people were
[23:26] like well how can that be didn't past
the override and we operate under
[23:30] proposition 2 and A2 because we had a
whole string of years with which we had
[23:34] that carry forward Levy capacity and so
that's one of the factors at play
[23:43] um uh I also took the definition of New
Growth this is from the DLS I it's
[23:49] pretty much what I said it's new
development that um uh it could be condo
[23:56] conversions or something that is is
basically either wasn't subject to tax
[24:01] during the prior assessment or was taxed
in a different sort of way and it gets
[24:06] kind of technical but I think for our
purposes tonight that's basically all we
[24:10] need to to know um what I wanted to do
is to lay out the numbers uh for Essex
[24:19] so our Levy
limit uh was our for fiscal 23 remember
[24:26] we're now in fiscal 24 so this was last
year's Levy limit we were at
[24:32] 14.02
million you get the 25% growth so it
[24:37] grows by
350,000 we have the override for Essex
[24:42] Tech which was passed which is another
56,000 and then we assumed new growth of
[24:49] 100K again at the time we didn't know
actually what that new growth would be
[24:54] so our Levy limit went from 14 14 up to
14520 so if you do if you just take a
[25:03] percentage increase from
14 14.02 million to
[25:11] 14.531 then that's an increase of
3.62 but then we had the
[25:18] 435,000 of excess capacity which was
also applied and that brings us up to
[25:26] closer to a 7%
number for the town and so I'm and I'm
[25:32] going to talk about the assessment
process because all we're talking about
[25:36] is the whole
bucket all the properties in the town
[25:40] basically this is the levy this is
what's collected from all the different
[25:44] properties in the town everyone's
individual experience is going to be
[25:49] different and I'll explain that but I
should probably pause cuz this is pretty
[25:54] Technical and uh even though we have
time for for Q&A I just want to see if
[26:00] anybody has any questions about any of
these definitions or how proposition 2
[26:05] and a half actually
[26:10] works Brian
Bri so oh sorry up um so you said it but
[26:17] you Brian wrestler 30 Jo you said it but
you didn't quite say it that so I think
[26:22] my question to you is two and a half is
is a arbitrary number would you agree
[26:28] with the statement is an arbitrary
number that allows that that creates a
[26:32] line of the stand against which a voter
check occurs and is not tied to any real
[26:36] world metric or like inflation or
anything like that so it's just a it has
[26:40] nothing to do with with with with actual
finance and how much things cost it only
[26:44] has to do with we had to pick a number
somewhere where we say before this you
[26:49] we don't need voter input after this we
don't we need vo input yes I agree with
[26:53] that it is a hardcoded number which is a
little bit curious because uh I mean
[26:59] this law was enacted at a time when
inflation rates were really high in the
[27:04] early 1980s and we've been in a period
of
[27:09] disinflation since then looking on a
long-term multi-decade macro basis we've
[27:14] been in a period of disinflation you
know up until 2021 late 21 into 22 when
[27:22] we saw the spike in inflation so it's a
little bit of a it's a tricky time
[27:27] period right now in terms of operating
under this constraint so it'll be it'll
[27:34] be interesting Sorry's keep going that
would explain why you'd been able to car
[27:37] some excess capacity for years until you
you hit a point where where some of your
[27:41] other costs might have gone up relative
to inflation and now and now you're
[27:44] reading into that that's right and I
would also say and we'll kind of get
[27:48] into the town expenses too we we've been
pretty conservative in terms of our
[27:52] budget assumptions around uh Town
expenses which I'll I'll talk about but
[27:57] it has allowed the flexibility you know
which actually was helpful uh this past
[28:03] spring I think I think the takeaway from
this is that you should always assume 2
[28:10] and a half% is sort of the framework
that we're operating under
[28:16] plus anywhere from a half to a
percentage point on top of that so you
[28:22] know if we have new growth it could be
we're looking at 3 and a
[28:26] half% as uh it's you know we just we
don't know that in advance of that
[28:31] happening so from a budget planning
standpoint we usually don't factor in
[28:35] New Growth because at the time of the
planning it's an unknown so uh and then
[28:40] you all know about overrides and heard
about you like you understand the idea
[28:44] of overrides in
concept uh overrides can be for both
[28:50] operating purposes and then debt
overrides which um are another type of
[28:56] exclusion to prop two and a half uh but
I I'm not going to get into debt right
[29:00] now but there's just different types of
overrides uh but I think the excess Levy
[29:06] capacity is probably the most heads
scratching concept for most people so I
[29:11] just wanted to uh be clear about that
um all right
[29:19] so the board of assessors is responsible
for uh for doing valuation assessments
[29:27] on property each year that valuation is
published it was just published uh and
[29:33] you can look it up by
address and that there's a whole
[29:38] framework with which assessments get
done and there's a whole sort of uh
[29:44] playbook for how you actually handle
assessments and uh it's it's not across
[29:50] the board obviously it depends on the
type of property um one of the things
[29:54] that can impact assessments are things
like additions to a house um anything
[30:00] that's going to uh you know require a
homeowner investment uh to add value to
[30:07] the property um theoretically would be
subject to uh to you know increasing the
[30:15] assessment um so I don't want to get
into the intricacies of how assessments
[30:21] are done other than just knowing that
it's it varies by individual
[30:28] uh individual property
owner um and then this sort of gets into
[30:36] defining what the tax rate is or What's
called the mill rate uh this is another
[30:42] area of real confusion for people uh
when people see their tax bills going up
[30:49] but then they see the mill rate going
down it doesn't mean that the town's tax
[30:55] levy is going down with a lower mill
rate it's a mathematical quirk in terms
[31:02] of how the the tax rate the mill rate
actually gets defined so what happens is
[31:09] you have the tax levy that you know the
whole bucket which is under the the
[31:15] control of the rules around proposition
2 and a half in terms of how that Levy
[31:21] can grow so if if you assume no new
growth no overrides no exess capacity
[31:29] you know the levy Grows by 2 and
1.5% right but property values
[31:33] particularly in the last few years like
in some cases property values have been
[31:37] going up 10 15 20% over the last few
years so how does that get reconciled
[31:45] the what happens is the tax levy can go
can can go up by 2 and a half% but
[31:52] assessments could go up by
15% and what that means is that your tax
[31:59] rate is going to be lower because the
tax rate is simply mathematically taking
[32:03] the tax levy and dividing by the total
assessment of the
[32:09] town uh and the the tax rate basically
is the the total assessment divided by a
[32:15] th000 because it's calculated as the
amount of tax per
[32:20] $1,000 so this is tricky I'm not
expecting you to understand that just in
[32:25] terms of giving a definition so I did a
little um illustration here this is a
[32:31] pretend town with three houses and you
can see the three houses are stacked up
[32:38] there if you add up the the assessment
of those three houses you get a million
[32:46] 875 you have a tax levy and don't read
into the interplay between these numbers
[32:51] this is just our starting point the tax
levy is
[32:55] 225 so if you take take
$22,500 and you divide it by the total
[33:01] valuation divided by a th000 so you take
225 and you divide it by
[33:10] 1,875 you're going to get
$12 that's the mill rate so if we go to
[33:17] year two tax levy goes up by
25% and just to keep this illustration
[33:24] simple subject to the rules of
proposition 2 and A2 we now have those
[33:29] three houses the house at the top went
up by 10% worth
[33:34] 550 the house in the middle went up by
less than 10% went up by
[33:40] 25,000 in the bottom house went up by
25,000 you total all of those up you get
[33:49] a
m975 so the total has gone up by
[33:53] 100,000 if you take the tax levy
and you divide by the total valuation of
[34:00] those
houses divided by a th of the total
[34:05] valuation divided by th000 you get a tax
rate of
[34:10] 11.78 oh sorry 11.68 so does everybody
understand that math basically it's the
[34:17] the tax levy is kind of separately
managed the whole bucket and then the
[34:22] assessments are done through a whole
methodology to assess values
[34:27] the tax rate is just a mathematical the
result of a mathematical equation and
[34:34] so
um year two is kind of simple year three
[34:41] we've introduced some new growth we've
added a house to our town so that brings
[34:47] the total valuation you know it jumps it
jumps way up by
[34:55] 450,000 the tax levy went up by
22% plus some new growth which was
[35:02] allowed under the rules around the
assessment or um under the rules around
[35:07] proposition 2 and a half as a result of
the assessment
[35:11] process the tax levy spiked
up but the tax rate went down even
[35:19] though the community was growing so um
and it's the same math all the way
[35:25] through so literally um jod had sent me
the Essex uh the page that you know has
[35:33] the total valuations of the town and the
tax
[35:37] levy and I did the same calculation
divided it got our new tax rate which is
[35:44] 1332 so it's just it's just math
basically that determines the TA tax
[35:50] rate if the tax if the mill ratees going
up or down doesn't make any difference
[35:56] really really because every individual
taxpayer based on their assessment
[36:01] experience and their home value is going
to have a slightly different
[36:06] experience um I think that is confusing
to a lot of people
[36:13] so yeah
[36:20] questions oh my gosh this is
great I feel like I've crack that nut
[36:28] hopefully this won't take an hour to get
through um all right so I just wanted to
[36:33] get on to expenditures of the Town um so
we have that we have that money coming
[36:41] in um that money coming in is largely
through taxation as we just talked about
[36:47] and then local receipts that slice of
the pie we also have money coming in
[36:53] from other sources uh state aid ALS Al
if we do a bond issue there'll be some
[36:59] money coming in although that that's
usually for uh Capital
[37:04] expenditures um but we have to pay the
debt service and that shows up on the
[37:10] slice here but I don't think Essex is
all that different from many towns in
[37:17] Massachusetts if you look at the
breakdown of where money gets spent uh
[37:23] Far and Away education is the top
expenditure for the town um biggest
[37:30] slice there and then Public Safety which
rolls up fire police um uh emergency
[37:37] response Etc uh and then um Debt Service
is is showing up as 11% that's actually
[37:46] coming down because I'm going to show
you the debt schedule shortly as debt
[37:50] rolls off The Debt Service until you
have a new bond issue Debt Service will
[37:55] typically come come down over time um
and then you can sort of see the rest of
[38:01] the expenses one of the things that I
was just going to mention that is the
[38:04] role of the finance committee is this
looks very simple in terms of the the
[38:11] rollups but we look at um literally
hundreds of line items so all of the
[38:17] different departments have individual
line items that are typically either
[38:23] Personnel related or their expense
related
[38:27] uh meaning you know supplies non sort of
human costs so um that's our town you
[38:34] can see the
expenditures basically we're
[38:37] municipality right so the expenditures
generally have to match up with our
[38:44] revenues
um uh but the extent to which they don't
[38:50] is uh is free cash and I'll talk about
that in a moment um
[38:57] so uh just a quick delve into operating
versus Capital
[39:04] expense um I had referenced before sort
of the seasonality the annual budget
[39:11] that we go
through in planning for each year is
[39:17] those are recurring expenses to the town
so those just those those recur over
[39:24] time Capital expenses are items
that are uh sort of one-time expenses
[39:33] even though the debt service will
require you know ongoing that will that
[39:38] will be part of our annual
expenses uh onetime generally speaking
[39:44] one-time expenses are capital and
typically invol involve borrowing or
[39:51] could be funded through use of
reserves um versus operating which is
[39:58] generally recurring again these are DLS
definitions up here so um I just thought
[40:05] it would be helpful to to reference
that uh free
[40:11] cash
so when our uh when our expenditures at
[40:18] the end of on June 30th of each at the
end of each fiscal year when we go
[40:23] through what are the expenditures What
would the outlays for the Town versus
[40:29] the money that came
in uh whatever that difference is gets
[40:35] qualified and has to be certified by the
is it the Department of Revenue uh that
[40:40] does this yeah that has to be sort of
certified free
[40:43] cash um our free cash has been running
fairly High uh and
[40:51] one the it gets back to conservatively
managed managing budgets but a lot of
[40:58] that also is we don't always know what
the revenue is going to be coming in
[41:03] again until after the fact so things
like meals tax hotel tax we um we we
[41:13] can't assume we have to be very
conservative in terms of our assumptions
[41:18] for Revenue coming in and then we can
also manage our budgets and so that in
[41:23] recent years has resulted in a fairly uh
sizable amount of free cash but free
[41:29] cash is basically just the
differential
[41:34] um freecash is basically like the
savings right at the you know the the
[41:40] amount that you've uh accumulated during
the course of the year that free cash
[41:45] can be deployed and that is typically
typically we do that in the fall because
[41:50] we know what that free cash number is it
gets certified in either
[41:55] October sometimes times it gets kind of
close to town meeting and we just sort
[41:58] of we're guessing what we think our free
cash is and then that money gets
[42:03] deployed typically that get money gets
deployed for
[42:08] things like for example a new fir Tru as
was the case uh this um this past
[42:15] November um we also put it we make
annual contributions into something
[42:21] called OPB which is uh it's other
post-employment benefits I.E healthc
[42:29] care for retired workers uh retired Town
workers and basically we have to fund
[42:36] that liability from the town so we put
money away and that money is to cover
[42:44] that future liability we have some
discretion in terms of what we can put
[42:48] in each year our OPB fund is actually
very well-funded in terms of relative to
[42:57] other municipalities which is great
because if it's not then it's a little
[43:02] bit of a ticking Time Bomb because once
that liability has to be paid out you
[43:06] need to have the money there it's also
one of the few parts of our budget that
[43:11] can actually be invested in stocks and
bonds generally speaking Municipal
[43:16] budgets are very limited in terms of
where the money can be invested it has
[43:20] to be in conservative cash uh cash
equivalent instruments uh maybe some
[43:26] short-term treasuries but you know we
can't be speculating with Municipal
[43:31] dollars uh and so most of our funds and
I'm going to talk about reserves in a
[43:36] moment sit in just interest bearing uh
interest bearing accounts uh so they've
[43:42] started to learn earn a little bit more
interest recently as interest rates have
[43:46] gone up um but uh so you know one of the
question I know this came up in terms of
[43:55] wanting to use free fre cash for
operating
[43:59] expenses and uh it's not prohibited it's
not considered a best practice and
[44:07] um I'm I put a little illustration
together here because annual
[44:14] budgets grow they're recurring costs and
so they're always going to go up over
[44:21] time if you fund that from a source of
savings either you through any of our
[44:26] Reserve funds including free cash then
you have to fund it each year so um the
[44:36] only time that it's really appropriate
to do that is if you imminently know
[44:40] that you're going to have a source of
new Revenue coming online and so
[44:44] therefore you're kind of you using it in
kind of a uh an interim or sort of a
[44:50] one-off basis to cover that future
recurring expense but um uh generally
[44:56] speaking the budget gets covered through
taxation which is allowed to grow pretty
[45:02] much with as expenses grow uh although
sometimes you get some
[45:09] mismatches all right reserves our town
is kind kind of unique um a lot of towns
[45:18] might have three or four different
Reserve funds we have like a dozen or
[45:23] more um Jo referred to it as what is it
called the envelope the envelope method
[45:29] the envelope method of you know you
you're stuffing an envelope in terms of
[45:34] putting putting money away for different
purposes and so what I did was I took
[45:39] all of our Reserve balances it may be
kind of hard to see what those numbers
[45:44] are but they this shows the the balance
of our
[45:49] reserves um the bar chart is as of SE
September
[45:56] 30th but the data labels are
actually after town meeting because we
[46:03] appropriated funds in town meetings so
for example you can look at the bar
[46:07] chart for free cash which is the fifth
one from the left and you can see it was
[46:12] you know 2.4 million the data label says
7 almost
[46:19] 750,000 which is the green part of the
bar so the the orange part is basically
[46:24] money that we that we allocated from
free cash and so we make these moves at
[46:31] town meeting you can see you know such
and such as being funded you know from
[46:35] from free cash or going from one fund to
a certain
[46:40] expense uh the OPB trust fund I think we
funded at
[46:46] 175,000 so that's actually negative the
little orange bar because it went uh
[46:51] money went in uh but these are the these
are of the balances all the way down to
[46:57] you know weeded a climate change fund
they're just little buckets for
[47:01] different purposes basically and um
Brendan uh some of these
[47:08] require 2third vote to use some require
simple majority is that right is there a
[47:14] determinant in terms of what it um the
it was just a change in rules that allow
[47:23] it used to be majority vote to put and
2/3 vote to take out it was just a
[47:29] change where some of the funds can now
be voted on majority to take
[47:34] out and um that's new we haven't dealt
with that yet because it'll be for an
[47:39] upcoming cycle um but it has been uh
harder to take the money out and spend
[47:45] it than it is to put it in that'll help
because um but uh so this still taking
[47:54] money out of the these Reserve funds
requires a vote like in that video it
[47:59] talks about town the town residents as
the legislative body for the town we
[48:04] still need to vote to actually pull
money out of these funds so
[48:10] um and and I know it's easy to say well
you know Essex has 10 million Essex is
[48:16] sitting on 10 million worth of reserves
or whatever that number is if you go
[48:21] down it um but you know things like the
bigger ones like OPB were restricted it
[48:28] can only be used for uh healthc care
benefits of
[48:32] retirees um the sale of real estate is
specific to real estate related
[48:39] expenses uh sewer free cash is part of
the Enterprise there stabilization fund
[48:44] really is kind of a rainy day fund uh so
I mean it is more kind of General use um
[48:52] there's also uh in here uh uh let's see
this this thing called Reserve fund
[48:58] which has a little over a 100,000 that
the finance committee has discretion of
[49:03] using that Reserve fund for like we need
a new pump or something down at the you
[49:07] know water plant and kind of like money
needs is needed in a pinch the fincom
[49:12] can appropriate funds to be used from
that Reserve fund we just replenish that
[49:17] each year um but these are all sort of
pretty specific purposes I don't know if
[49:24] anybody has any questions or want to
make any comments on any of
[49:31] this okay
[49:36] oh Brank r with 30 CH I just wanted you
said it right but I wanted to repeat it
[49:41] because it's one of those things that
get said wrong a lot and I think it's
[49:44] worth saying again that often times you
hear people say you can't use reserves
[49:47] for operating funds and and the answer
is you that you it's just not a good
[49:52] idea right and and and I and you even as
recently as FY 23 Brandon we were using
[49:58] it for healthcare cost um and and we've
been weaning ourselves off of that yeah
[50:03] in the past we actually used it to a
greater extent we got it down to zero
[50:07] then it came back in a in a in a small
amount and what that's known as is a
[50:12] structural deficit right you've got
something in your budget that you have
[50:16] no real Revenue source for and you're
using one-time money for a recurring
[50:19] cost no no yeah yes it can be done but
it is not good practice totally agree
[50:25] and totally agree that it's not good
practice I just think people sometimes
[50:27] get into a they you hear out loud that
somebody repeats through the game of
[50:31] telephone that you can't and I just want
to make sure we said that again so that
[50:34] people were one of those no thank you
for saying that I mean it's like there's
[50:39] no absolutes in this world of Municipal
Finance like there's asterisks
[50:43] everywhere and so I think a lot of times
people just want you know like
[50:47] definitives like you either use free
cash or you don't and it is uh it's a
[50:52] little bit more nuanced than that so
um that's right uh all right we have a
[50:59] slide here just I we talked about the
players involved or at least that was
[51:04] introduced in the video in terms of the
uh uh the various boards the structure
[51:11] um this is the Essex structure uh and um
most of the financial operations and
[51:21] decisions do roll up to the board of
Selectmen in terms of approval of
[51:27] budgets but also
overseeing Brendan who then is managing
[51:33] some of the financial functions that
show up on this chart so in terms of the
[51:37] org chart this is basically uh these are
all the different people that are
[51:42] involved in the financial decision
making for the town um you know
[51:49] notably uh the tax collection function
as part of the um Town's staff on the
[51:57] left finance committee Board of
assessors rolling up to the board of
[52:03] Selectmen
um the uh this is kind of interesting
[52:08] and sort of Bren and I were sort of
going back and forth in terms of the
[52:12] town uh there's 32 full-time
employees uh working um in the town of
[52:22] Essex
um a lot lot of those are actually so a
[52:28] lot of the so there's 32 full-time
employees there's actually about 125
[52:34] total employees because so many of the
employees are
[52:41] part-time and so a lot of the functions
of the Town actually are covered
[52:48] by a fraction of a full-time equivalent
basically right and you and you also
[52:54] need to consider that there's about 50
um called firefighters in the fire
[52:59] department who may not work at all in a
given week um so that's a large part of
[53:04] that 125 right there that's about 50
right yeah about 50 and then you take
[53:09] out the 32 full-time and there's various
and Sundry um part-time employees that
[53:15] cover different
things and then one of the things that
[53:20] uh um I'll say this about Brendan is
that he owns a lot of the functions that
[53:27] in other towns would typically be
full-time employees like HR
[53:33] it uh grants and uh what am I missing
facilities purchasing so he wears
[53:41] multiple hats um and so if you take him
as an FTE it would probably add up to
[53:48] three realistically but it's uh you know
that on on a chart like this it shows up
[53:55] as you know that you would break out his
role as sort of functionally
[53:59] encompassing a number of things so um I
mean that's one of the challenges in our
[54:06] town right I mean and we see this with
the police department there's a heavy
[54:10] Reliance on part-time officers versus
full-time officers you know you take a
[54:15] community like Beverly where they're
going to have a whole slew of full-time
[54:19] officers and um we just don't have a lot
of flexibility being a small town
[54:25] in terms of our Personnel so basically
the flexibility comes through a
[54:32] part-time employee structure to a great
for many of the different roles needed
[54:38] to run the
town so I don't know if anybody wants to
[54:41] add
[54:44] anything and I'll I'll mention um that
that change on the
[54:49] um stabilization fund where it's now a
majority vote to take out that was just
[54:55] passed on December 4th so even the fall
town meeting that we held on November
[55:00] 13th will still beholden to a two-thirds
vote on a stabilization fund um it is
[55:06] still a two-thirds vote to create a
stabilization fund but then it's
[55:11] majority vote to put money in and it
used to be 2third to take money out but
[55:16] it is now majority to take money out
again brand new so that would be
[55:21] extenuating circumstances basically with
which we would
[55:25] pull from that the I don't recall taking
money out of it in the last no well all
[55:31] of these are but all of these Min funds
are forms of stabilization fund oh I see
[55:36] and that that talking about the no no
well that new law does apply to the
[55:40] general stabilization fund but also all
those small funds okay whereas in just a
[55:45] few months ago it would have been a
two-thirds vote to take any money out of
[55:49] any of those funds got it thank
you
[55:57] all right I wanted to quickly cover the
town's debt schedule um this is this is
[56:04] The Debt Service the annual Debt Service
of the town over time going out to 2050
[56:12] and you can see the different uh the
different um uses of debt for the town
[56:20] in the different colors so I don't know
if you can read this but the lighter
[56:25] blue is the town hall re
Renovations that actually drops off in
[56:30] fiscal 23 so we have a bit of a drop uh
that uh in starting in fiscal
[56:37] 34 uh we also have a drop that's going
to be happening um as the sewer project
[56:44] rolls off uh and that is going to be
happening in fiscal
[56:49] 27 um and then the uh Memorial
Elementary which is looking out a
[56:55] distance is you know 2050 so there are
kind of three key dates in which we see
[57:03] a drop but you can see the general I
mean we pay the debt service we're
[57:07] paying off principal and interest each
year it's a little bit like your
[57:11] mortgage where your overall indebtedness
goes down over time and that's what you
[57:17] see in this debt schedule so I think
when we're making decisions particularly
[57:23] Capital decisions about spending it's
helpful to be aware of this uh and sort
[57:30] of is there optimal timing to actually
start projects uh and what's the impact
[57:36] going to be um
so uh I just thought I wanted to
[57:41] illustrate that I also wanted to
illustrate how does Essex compare to
[57:45] other towns in terms of our debt service
and um there's a lot of numbers in here
[57:53] but it's quite interesting we we are in
terms of our indebtedness we're
[57:57] basically in the bottom
third of uh the county of Essex County
[58:04] if you look at all the different
municipalities um I wouldn't read a
[58:09] whole lot into this I mean I I do think
we are pretty conservative in terms of
[58:14] our use of debt we've had some
flexibility through the sale of real
[58:17] estate fund and we've utilized that for
things like offsetting the public safety
[58:22] building which you know was a way to
limit the amount of debt that had to be
[58:27] issued for that different towns are at
different points on their cycle in terms
[58:32] of having to make Capital uh you know
Capital Improvements to their physical
[58:39] assets I mean our you know our uh public
safety building dated from the 1950s so
[58:46] that was you know that was long overdue
other towns uh you know you look at some
[58:52] you look at IP switch where their their
debt actually just spiked up um other
[58:57] towns uh like Marblehead you know you
you typically don't see a town don't you
[59:03] you don't generally exceed 15% in terms
of your debt service relative to your
[59:08] budget because that just sort of spirals
you toward uh a difficult situation but
[59:15] you can see kind of Essex is not really
unusual um there you know Manchester is
[59:22] lower Hamilton and wenam are lower I
think Manchester has some capital
[59:27] projects that they need to embark on so
that number will probably go up in the
[59:32] next few years I think one of the good
things is that a lot of our projects are
[59:37] actually in the rearview mirror in terms
of the upgrades not to say we aren't
[59:40] going to need to spend money we are
going to need to spend money I think we
[59:43] all know the next big outlay is going to
be um Essex
[59:48] Elementary uh so um but I think this is
just a helpful I I think it's always
[59:55] helpful to compare where a town stands
relative to other
[1:00:01] towns
um and that's it so that's that's the
[1:00:06] prepared material happy to kind of
engage and talk about any aspect of town
[1:00:13] finance um hopefully this was helpful
can um we don't have I don't think we
[1:00:18] have many people on uh online there's a
question what what are the pros of
[1:00:24] having so
many Reserve accounts I think Reserve
[1:00:28] funds Frozen cons Frozen cons see in the
chat yep I see it um that's that's a
[1:00:35] good question I think that question
sorry the question is what are the pros
[1:00:40] and cons of having so many different
funds um and I think that uh it's a form
[1:00:50] of instilling discipline I think that's
the pro so that you
[1:00:55] have you're you're earmarking specific
funds for specific purposes and we know
[1:01:00] particularly like um uh things that go
through a cycle like Vehicles emergency
[1:01:05] vehicles you know we we fund our own
ambulance we have an ambulance fund
[1:01:10] which is one of those that um it it it's
a reminder each year that we have to
[1:01:17] acrw for that liability that's
periodically going to come up our
[1:01:22] preference would be to not have to issue
debt in order to be able to fund that
[1:01:27] purchase and I I mean I think it's great
that we were able to pay for a firet Tru
[1:01:31] without having to pay for any you know
financing costs because at this point in
[1:01:37] time you have you know with interest
rates higher you'd end up paying a
[1:01:42] pretty hefty premium to the cost of that
outlay
[1:01:47] but um you know it makes it more
confusing I think that's I think I can
[1:01:53] add to it as well in the past we've seen
Town buildings before we uh renovated
[1:01:59] this building and built a new uh public
safety
[1:02:04] building there would be a lot of
deferred maintenance because the town
[1:02:08] okay well we built it but we really
can't afford to to do that right now and
[1:02:12] moved on from the beginning of the
either the renovation of a building or
[1:02:18] the um building of the the construction
of the new public safety building for
[1:02:22] example we've tried to get these funds
in place and periodically put money in
[1:02:27] so that when that next thing comes um
there's money there and it's not it's
[1:02:31] not a shock it came out of some previous
year and it's waiting to to address the
[1:02:36] need as opposed to just deferred
maintenance that just keeps going and
[1:02:41] and actually becomes a larger cost
because you did deal with a with an
[1:02:45] issue when it would have been easier and
and more cost effective to do
[1:02:50] so yep thank you and I will also say
it's sort of precedes my time it's just
[1:02:56] it's one of those things about essics we
always have we've always had all of
[1:02:59] these funds I don't know when that it
actually started but
[1:03:03] uh um yeah Brian sorry Brian gressler 30
CH I've got a couple of questions so um
[1:03:10] in a lot of these overall Town budget
discussions we've talked about
[1:03:15] distressed communities and trying to
protect distressed communities so uh I
[1:03:19] think one of my first questions is a
purely technical one so we have an
[1:03:22] annual Town survey and we know we know
what properties get taxed so have we
[1:03:26] ever done a a legitimate analysis or an
understanding of where even within how
[1:03:31] demographically our tax income or tax
revenue breaks out amongst um certain
[1:03:37] demographic groups and that's a lead in
to a question about uh tax deferral and
[1:03:43] abatement programs and ways to help
those distressed communities but first
[1:03:46] we need to understand what they actually
are and how many there actually are no
[1:03:50] we've never done a formal study of that
nature okay so I mean I think think that
[1:03:54] would be useful because we often we talk
about helping these groups but then we
[1:03:57] had one thing on annual town meeting um
and we we tabled it uh there are other
[1:04:03] programs there are deferral programs and
other things like that that aren't
[1:04:06] necessarily funded by the state and
require seed funding internally uh
[1:04:10] within you know but are are worth
looking at and I think as part of an
[1:04:14] overall discussion about the whole of
the budget and where expenses are I
[1:04:18] think this is equally kind of important
to make sure that if we think this is a
[1:04:23] problem then let's Act L look at ways to
at least address it and then bring that
[1:04:26] to the town and see if we're willing to
to to cover the cost of that um so I
[1:04:31] think if you then roll that back
into uh override discussions right so
[1:04:38] Ben we were at the a public hearing and
the the Town Administrator from
[1:04:41] Manchester talked about kind of setting
up
[1:04:44] a uh a more steady understand you know
planned override series of small
[1:04:50] overrides right getting to a point and
then and then knowing that you know
[1:04:53] every X to X to Y years 3 to 5 or
whatever it was you're going to do a
[1:04:58] series of smaller overrides in order to
better manage kind of the fluctuations
[1:05:03] of budgets uh we haven't done an
operational override since 2003 or a
[1:05:06] school one since 2006 right so I think
of that I'm kind of curious at the time
[1:05:11] you kind of you you nodded your head and
and and had a discussion with him you
[1:05:15] know that you that wasn't a horrible
idea so I'm kind of curious what we
[1:05:19] think about that approach versus the
approach we've been taking yeah he he's
[1:05:24] mentioned that actually a number of
times in you know different forums
[1:05:29] collaboration uh I think it might be
easier to implement that in a town like
[1:05:35] Manchester than in Essex because to your
as you just stated we don't have a great
[1:05:39] track record around override so uh so
that could be difficult but I also think
[1:05:45] from an expectations management you know
there's probably an upside there uh you
[1:05:52] know to doing it that way but I would
invite others on that uh question if if
[1:05:58] people want to opine because this is a
discussion and it's not overly
[1:06:08] formal we Canna start you want to say
something R well I think Brian when you
[1:06:14] talk about a series of small overrides
that was mentioned by Town Administrator
[1:06:17] fetish B and Manchester
that's very specific to the school in
[1:06:23] the oper ating budget of the school and
I think tonight from the town's
[1:06:27] perspective we're talking about the town
of Essex and how we manage our funds I
[1:06:32] think in doing a lot of research about
our town in general we've found that
[1:06:38] some of our departments aren't keeping
Pace with the wage and salary scale of
[1:06:41] other communities if we were going to be
looking at an operational override I
[1:06:44] think we need to look with within our
own departments first I think I could
[1:06:49] very comfortably tell you that we have a
board of health administrator that's
[1:06:53] probably underpaid
we have a police department where you
[1:06:57] know many of them may be underpaid we
have a clerk and a treasure collector
[1:07:02] that are far below where they need to be
so I think that we want to make sure
[1:07:07] that we're talking about everything as a
whole and not just specifically about
[1:07:11] little overrides to fund our school
that's not what I'm talking about I'm
[1:07:15] talking about everything as a whole
because I did say that we hadn't done it
[1:07:17] on operational override for the town
since 2003 so so I do think that my
[1:07:21] question was meant as a general
thought about that philosophy be it
[1:07:28] school town operating expenses or
otherwise is that uh you know because we
[1:07:32] are currently using an the opposite
model what are the thoughts of of this
[1:07:36] group of of that operation operational
model since it's come up in discussion
[1:07:40] oh I apologize I thought you were Greg's
comment was specifically for the school
[1:07:44] no in general right because it's been
just as long and I think there are
[1:07:47] internal problems and I think you could
theoretically I'm not sure if you can do
[1:07:51] it with the regional district but I know
that that towns with that a regional
[1:07:54] District have have lumped overrides that
combine operations and schools into one
[1:07:58] override too so so I would also comment
that naturally overrides are done
[1:08:03] through town meeting and when overrides
are brought forward it's the town's
[1:08:07] people that have the opportunity to vote
on that and when we brought them forward
[1:08:11] you know they either pass or fail so
that's not any of your elected officials
[1:08:16] that make that decision ultimately we
can bring it forward but it's your
[1:08:19] Town's people that vote but we we
haven't I I don't think we' brought an
[1:08:22] oper a town operational one forward
since the last one passed in
[1:08:25] 2003 I think it was 2005 somewhere
around there I think it was 20 I'm I
[1:08:30] look the DLS I think it's it's been
quite a few years correct so so we're we
[1:08:34] are making a conscious decision to not
bring them forward I guess is my point
[1:08:37] that that was my philosophy question
that's fine
[1:08:41] um I think my last one was there there
is a there's a risk that that we get to
[1:08:48] a and this one is specific to the
schools that we get to a super town
[1:08:51] meeting uh that occurs after after
Spring Town meeting here and when funds
[1:08:55] are already allocated and that results
in an expense to an unplanned expense to
[1:09:00] the town what are we doing to plan for
and mitigate that risk where would the
[1:09:05] funds come from if that were the if that
if that if a if all of a sudden there
[1:09:09] was a in August an unexpected bill after
Springtown meeting where would the funds
[1:09:13] come from and what are we doing now to
mitigate the risk of having those funds
[1:09:17] available should that risk be realized
yeah that I can actually speak to
[1:09:21] because at our last Finance committee we
talked about the need to have a
[1:09:25] bifurcated budget in terms of uh as we
it as we embark on our liaison R roles
[1:09:36] in terms of talking to different town
departments we basically have to figure
[1:09:40] out how to make a budget work that is
going to uh could be under sort of a
[1:09:46] normal circumstance or you know where
we're looking at a a school budget that
[1:09:52] would be you know along the lines of
what's been proposed in the preliminary
[1:09:57] budget or I realize that those are still
fluid right now but if this ends up
[1:10:02] going to a super town meeting and we end
up having to pay for something it's our
[1:10:08] responsibility as a finance committee to
make sure that we know how we're going
[1:10:12] to actually be able to address that that
liability or that cost and it's going to
[1:10:19] mean making tough decisions and so we
need to we're going to need to agree on
[1:10:25] like where do those tough decisions need
to be and I think so the lens with which
[1:10:29] we look at each department needs to be
under the under that scenario that you
[1:10:38] of the super town meeting I mean but can
I guess you know so is it even possible
[1:10:42] to pull out of stabilization if we were
in that if we were at that point and
[1:10:45] things like that I you know well yeah
yeah and that may actually bring back
[1:10:49] the question of the override because the
unintended consequence is if you end up
[1:10:54] you know squeezing the sponge so tightly
that you know we can't attract and
[1:10:59] retain employees at the town because you
know we can't pay people because of you
[1:11:05] know like as we just talked about we may
need to have a broader override just to
[1:11:10] kind of keep the town uh competitive uh
as an as an entity so um you know I
[1:11:19] think we we it would have to be a
combination of stock Gap and behavior
[1:11:24] change in terms of what we actually see
uh but so the the short answer to your
[1:11:32] question is yes and that is um that adds
a different complexion to this year's
[1:11:38] budget season than past years all right
I think I'm good I think I think just in
[1:11:42] in summary right I think what I was
trying to get to as a in that in that
[1:11:45] whole Arc was you
know I'd like to kind of dig deeper into
[1:11:52] you know that we dig deeper into some of
those ways to help the distress
[1:11:54] communities we keep talking about uh and
Beyond just the one thing that was on on
[1:11:58] annual town meeting um and there are
potential implication for that that that
[1:12:02] other parts of the you know of the tax
base might have to cover the cost of
[1:12:05] that uh and you know and that's I think
that's a question for the taxpayers but
[1:12:11] um I think though you know it's hard to
talk about about you
[1:12:16] know all of these things without you
know individually right they go together
[1:12:20] if we care about those distress
communities but we also care about
[1:12:23] paying the fair wage to the police
officers then I think both of those
[1:12:26] conversations have to go on no
understood understood thank you thank
[1:12:32] you Jake Jake Foster uh School Street
want to follow up on a couple of Brian's
[1:12:38] uh questions about uh proposition two
and a half and kind of the uh philosophy
[1:12:43] of how we operationalize that I think
one of the challenges that we have is
[1:12:47] that we often talk it about as as a kind
of a hard limit and we use that limit
[1:12:52] language a lot
and particularly given the history of
[1:12:56] not having BR overrides right people
kind of view it in that frame of mind as
[1:13:01] an extraordinary thing to
pass another way of looking at operation
[1:13:07] of two proposition two and a half is to
view it as a way to manage
[1:13:13] inflation particularly as we get into
years you know like we're experiencing
[1:13:17] now where inflation all around us is
going up well over 2 and a
[1:13:21] half and I was wondering how you all as
a board and a committee think about
[1:13:29] proposition two and half do you think of
it more as a limit or is a process to
[1:13:33] manage inflation or when might you apply
one thinking versus
[1:13:39] another I think I think of proposition
two and a half actually as a framework
[1:13:45] or a discipline that um allows
for uh coordination among different
[1:13:53] different players as far as expectations
around how the budget actually gets
[1:13:57] managed so it creates sort of a
universal
[1:14:01] language um uh and it is a way to
particularly as people are feeling
[1:14:07] squeezed because of inflation it's a
it's a way to um you know have have keep
[1:14:16] that somewhat in check in terms of at
least the tax part of it but it's an
[1:14:21] interesting question just in terms of
thinking about it I just think about it
[1:14:25] as a framework and you know operating
within that
[1:14:32] framework but I invite
others I my short answer is I think of
[1:14:39] it as a guardrail I think of it as a
Target that we shoot for we try to
[1:14:43] operate within it and it helps us if we
can fall below it great if we have to
[1:14:49] exceed it we bring it to town meeting so
I'm not opposed to overrides or small
[1:14:54] overrides on a regular basis I just
don't want to make that the Habit
[1:14:58] because I think overrides traditionally
have been difficult to pass and it's the
[1:15:02] same thing is trying to it's it's like
trying to assume the number for free
[1:15:07] cash or for what excess capacity is or
New Growth it's a guess so I don't want
[1:15:12] to budget based on in unknown I would
rather base it on Prop two and a half
[1:15:18] and then if we have to look forward
we're not destabilizing our community by
[1:15:22] using stabilization so back to another
point that I didn't answer um using
[1:15:26] stabilization is certainly something we
can do if we end up at a supertown
[1:15:30] meeting and we are forced into that
situation of having to fund something
[1:15:35] that we didn't vote for in an override
situation we would have to look at
[1:15:38] stabilization accounts realizing that
those are savings accounts they are not
[1:15:43] refunded automatically so it's the same
thing as using free cash and you are
[1:15:48] going to deplete it in the next year you
are going to need that money plus
[1:15:52] whatever the growth of of the school
budget is essentially destabilizing the
[1:15:56] econ your own local economy so I think
of prop two and a half is guardrails and
[1:16:02] it's a Target to shoot for in my opinion
it's kind of the short the short long
[1:16:05] answer and I also think it's an
opportunity too because if you think
[1:16:09] about that formula and you think about
the new growth and I think and and jod
[1:16:13] may have actually have something to say
about this just based on her experience
[1:16:16] from the economic development committee
is like what do we need to do in Essex
[1:16:21] to actually you know to to get our our
new growth number higher I mean we know
[1:16:27] we have limitations just we have a lot
of conservation land we don't have a lot
[1:16:32] of you know
buildable land uh like other towns do so
[1:16:39] you know are there are there things we
could be doing that you know to to bump
[1:16:43] up the growth equation so that's the
opportunity part of it I think the two
[1:16:48] and a half percent and then our historic
struggle around overrides that may be
[1:16:54] the more limiting or constraining part
of the equation so I think I start with
[1:16:59] 2 and half% and then plus opportunities
and
[1:17:04] limits well I I I also think though that
last year I think the town demonstrated
[1:17:10] you know we were all in with our uh all
of our excess capacity I think we left
[1:17:15] 20,000 on the table um before we got to
the override scenario so that was seven
[1:17:21] I think seven or eight years worth of
excess capacity that again you know the
[1:17:25] taxpayers weren't taxed on that over
those seven or eight years but in order
[1:17:29] to bridge that Gap we were willing to
use the the whole kitten Kaboodle for
[1:17:36] one year where I think when I joined
fincom Ben was actually looking at that
[1:17:42] excess capacity to hopefully get us to
this you know
[1:17:47] structural uh you know override or a
smoothing of you know this structural
[1:17:53] issue uh that you know we use the entire
thing in one year I also think about
[1:18:00] inflation you know not just from uh Town
departments but I look at it from the
[1:18:05] taxpayers they're all suffering from
inflation as well so it's really hard to
[1:18:11] squeeze you know both ends especially
when you have um used your excess
[1:18:16] capacity as far as new revenue for the
town part of uh what we're waiting for
[1:18:21] is the zoning project Pro to to progress
uh Essex has a lot of capacity issues we
[1:18:28] have a um call fire department that a
lot of people in who live in this town
[1:18:35] who have moved here in the last 10 years
are shocked to learn that they think we
[1:18:39] have a full-time Fire Department in fact
Manchester fincom members were shocked
[1:18:44] to hear that we didn't have a full-time
fire department we have limited sewer
[1:18:48] capacity we live on the marsh we um have
a lot of Green Space which you know in a
[1:18:56] conversation in the um assessor uh
Department I was told when I was doing
[1:19:01] my tour uh for EDC that green space
could literally bankrupt our town as you
[1:19:08] take more and more of that those um
Parcels off the tax rolls we're
[1:19:13] shrinking that that tax base so it's
going up for the rest of us we're in a
[1:19:18] very unique situation with a very tiny
town government um so it we have I think
[1:19:25] we have extraordinary challenges and
we're old Yankees so we like to pay for
[1:19:29] things right we like to pay cash for
that that fire Tru we own our equipment
[1:19:35] we do not lease things we buy things we
do not borrow if we do not have to we
[1:19:40] tuck away year over-year until we can
actually afford things and I don't think
[1:19:44] I think it's been a great model for
Essex and Jake you mentioned the 2 and a
[1:19:49] half% as an inflationary Point Mike
because we're live and recording you
[1:19:54] have to get to the microphone as an the
2 and a half% if you go back to where it
[1:19:57] came from that was the longterm goal for
inflation in America has been two 2% so
[1:20:03] it's 2% inflationary plus a little half
percent for growth so you get into
[1:20:09] trouble when you're in the three four 5%
above that so again the rationale was to
[1:20:15] keep level with long-term inflation and
allow a little bit of that half percent
[1:20:19] for growth so it is an interesting
perspective the way bring it up thank
[1:20:24] you all yeah thanks Jake thanks
Jake I procedurally can I ask a question
[1:20:29] as a community oh yeah you're part of
the T So Nina just do your name and
[1:20:33] address because we are recorded Nina
McKinnon Lil land farm so I had a
[1:20:38] question and I think it's coming up
because we're hearing about the override
[1:20:42] that did not pass but um we did see the
slide that our taxes on average people
[1:20:48] saw 7% increase of their taxes offand do
we we can anyone remember if the
[1:20:55] override had
passed what people's taxes would
[1:21:00] be the override didn't pass we have to
remember you probably wouldn't have used
[1:21:05] all that Levy capacity so there would be
some offset it might not be that
[1:21:09] different okay and so from that I guess
my other followup and I should disclose
[1:21:14] I'm on the finance committee so to Ben
seven years I have three and a half
[1:21:18] years some know some of these terms more
so what are the consequences and I I'm
[1:21:22] say asking this more from the public
standpoint to understand what are the
[1:21:26] consequences or impact the fact that
we've used up all our Levy limit in the
[1:21:32] one year I think Jody you just said we
have 20,000 remaining as we look
[1:21:39] forward I I would say that it
um
[1:21:44] it I don't want to put a negative spin
on it but it's just another constraint
[1:21:49] that we're operating under in terms of
uh uh evaluating budgets going forward I
[1:21:55] mean the other thing that I didn't
mention before if you take the
[1:22:00] town's cost structure and uh you know
most entities fin uh Municipal entities
[1:22:07] are like this the school I don't think
is any different you you look at the uh
[1:22:12] you look at the structure of those costs
you
[1:22:15] have human expenses you know you have
personnel and then you have uh other
[1:22:22] expenses
and the Personnel costs are collective
[1:22:26] bargaining they're contractual costs so
we know you know we know that we have
[1:22:31] built in to a certain layer of our
budget a 2% increase and uh so then you
[1:22:39] you don't really have levers on those
things that have been collectively
[1:22:43] bargained so you're you're looking at
the the other expenses uh in terms of of
[1:22:48] belt tightening so it is um uh you kind
of have to to look at the whole picture
[1:22:56] without having that I mean the thing is
historically we haven't really used Levy
[1:23:01] capacity other than extenuating
circumstances like a failed override so
[1:23:07] just in terms of an annual budget
process it's not hugely different but I
[1:23:11] mean it is uh uh we've just lost a layer
of flexibility that's all right and
[1:23:19] there was a there was a year where the
town of Manchester did have to go to for
[1:23:24] an
override around the school and the town
[1:23:27] didn't and it was because there was Levy
capacity um at the time we should also
[1:23:33] mention that there are a number of
things that over time have been kind of
[1:23:37] entrained into the budget so when the
canal Point leases were a new thing and
[1:23:44] we went from about
$110,000 a year to $500,000 a year on on
[1:23:50] only onethird of the property by the way
away that was a new source of Revenue
[1:23:55] when we went from our running our own
Regional uh our own
[1:24:00] dispatch to the regional Dispatch Center
that was saving like $300,000 a year um
[1:24:09] all of those things over time have have
have been put to bear on increasing
[1:24:15] costs in addition to Levy capacity that
we managed to save from year to year but
[1:24:22] if you look at the inflationary
environment that is most times well
[1:24:27] beyond 2 and a half% those are just some
other things that we've been able to use
[1:24:32] but they've kind of all run their course
now they're all in trained fully and
[1:24:36] they're not going up anymore um they're
fully counted on so you know it's is
[1:24:42] definitely going to be um quite an
important discussion as we head into
[1:24:47] what we're doing now this 25
budget
[1:24:56] any other thoughts
questions
[1:25:01] comments well um feel free to reach out
individually uh and um I appreciate
[1:25:08] everybody coming here uh do we have
another question uh Teresa has a
[1:25:12] question oh Teresa uh you can either can
we take an audio stream or do you want
[1:25:19] to type it in can you hear me yes yes
I'll turn my volume down so it doesn't
[1:25:25] mess up with you is that
better you're good we can we can hear
[1:25:30] you yep we can hear um my question I I
just have a couple um specific questions
[1:25:35] what was the percentage of the total
budget last year that um that was free
[1:25:39] cash that came
back well I think our our free cash
[1:25:45] number was 2.4 million yeah so that's
around
[1:25:49] 10% rough rough numbers right not on
right on the on the basically on the 23
[1:25:56] on the 20 million
yeah 2.4 on the 20 so a little over 10%
[1:26:05] right free cash okay um question about
OPB when do you are you using from it
[1:26:12] now are you still funding and at what
point do you think you're going to get
[1:26:14] to a point of um meter so that you can
actually be using from it yeah that
[1:26:20] there's actually I think it gets every 3
years there is uh uh an
[1:26:27] Actuarial uh report that gets updated
which has the um liability date I want
[1:26:34] to say that it sort of starts in the
2030s uh in yeah and I mean up until
[1:26:41] this point it's been pay pay as you go
so we've always had to pay for retiree
[1:26:47] health insurance cost but we're paying
as we go cash every year the goal is is
[1:26:52] knowing that people are going to live
longer so there'll be theoretically more
[1:26:55] retirees alive to pay um if you can
amass a certain amount of principle then
[1:27:02] that money the interest that comes from
that goes to pay what is going to be a
[1:27:07] growing cost of the town and that was
recognized many years ago and so it's
[1:27:14] it's like doubly beneficial because a
the cost is going up and B we have a way
[1:27:20] to pay that larger cost with without
actually hitting current year funds so
[1:27:25] OPB when we get there and I think that's
why Theresa is asking about it will be a
[1:27:30] way to relieve a portion of costs that
the town is paying year to year but
[1:27:36] until it matures to a certain point and
we haven't gotten there yet um we need I
[1:27:40] think we need to talk to our actuary
about about the and our financial
[1:27:44] adviser about recommendations around
that we're in a we're in a um a growing
[1:27:49] phase not in a using phase but there
will be a time fairly soon that we need
[1:27:54] to we need to understand um what what
would be prudent in that area right
[1:27:58] because then we have the Ben once so um
right now it's about 50% funded give or
[1:28:05] give or take I think when when I started
on the fcom it was about 25% funded but
[1:28:11] we've been sort of putting that a
portion of the free cast free cash each
[1:28:16] year has been going into OPB sometimes
more and right now the interest
[1:28:20] generated rolls into the fund to help
get to the goal so if you start using it
[1:28:25] prematurely you're not going to get to
the goal as quickly right but when we do
[1:28:28] get to the goal rather and it becomes
self-funding for what that liabil that
[1:28:34] future liability is going to be we have
the added advantage of not having to
[1:28:39] keep shoveling money into it so that
that's why we've been trying to use the
[1:28:43] free cash that's going to be the
analysis like do you keep growing and
[1:28:46] rolling in and getting there does that
make more sense and does that ultimately
[1:28:51] save you more money than to take a
little bit out now but not reach the
[1:28:55] full self funding status that we're
trying to achieve which is actually the
[1:29:01] uh the accounting standard is is pushing
us to achieve
[1:29:05] it do we do we have any employees that
are drawing from it now for former or
[1:29:10] retired employees Brandon do you know no
the town is still paying as we go so
[1:29:15] there's there's always a cost so retired
employees if they're on the HMO retire
[1:29:21] product the town is funding 25 uh 75% of
that they're paying 25% of that if
[1:29:27] they're on the PO or the more uh
generous uh product the um Town pays 60%
[1:29:36] I don't think we have anyone on I see
what you're saying that just comes out
[1:29:38] in our benefits year to year pay as you
go the goal is to have so much money in
[1:29:43] that account that no matter how big over
it takes over there's no more current
[1:29:47] your money going in to pay for that cost
we always have had the cost we always
[1:29:51] will have the cost
the standard is about getting it so that
[1:29:54] self funding right got it Teresa did you
have another question I do so just to
[1:30:00] clarify though we don't have a Target
date for when that plan is to take place
[1:30:04] you're just reevaluating every few years
not yet because the um amount of money
[1:30:09] that the town is able to put in there on
a year-to-year basis varies widely and
[1:30:14] so it's hard to predict because if you
look at our contribution over the years
[1:30:19] it's kind of noisy not a
contri a mandated you know that you've
[1:30:26] agreed to in any way I'm sorry I
couldn't hear you on that one I'm sorry
[1:30:30] so you don't have a planned out like a
dedicated specified contribution that
[1:30:34] you need to make based on no while we're
ahead of like like Ben said we're we're
[1:30:39] ahead of the curve as compared to a lot
of other
[1:30:42] towns it's not possible to always say
this much is going to go in so there
[1:30:46] would have been more that went in this
year but we bought a fir TR because that
[1:30:50] had to happen um
and it's been that way all along we have
[1:30:55] made great progress but it's not not
entirely predictable yeah I just had one
[1:31:00] other question thank you for that um
regarding the levy capacity I was
[1:31:04] surprised to hear how far back it went I
know we used excess capacity so when was
[1:31:08] the last year that we you that we um
that established a levy at 2 and a
[1:31:14] half%
um
[1:31:17] well I'm not sure I under so the
question was when was the last year that
[1:31:22] it established the levy at 22% in other
words when's the last year that we fully
[1:31:26] levied what we were oh I see what you're
saying able to Levy you know um Teresa
[1:31:31] I'm going to have to take that as a
followup because I think we'll that'll
[1:31:34] be either CH I don't know off hand but
we'd have to look at each year and and
[1:31:39] add that up I can take it take that down
right that's okay I it's it's it's a
[1:31:44] specific one I had heard Jody had
mentioned I think that uh it it dates
[1:31:48] back but we can we can get like that's a
factual question so we can get an answer
[1:31:53] for that thanks for that
[1:31:58] yep any others any
[1:32:02] others well thank you all and like I
said feel free to ask any questions I
[1:32:08] think we need to close out right orj I
will entertain I will make a motion to
[1:32:12] adjourn all those in favor I all right
and I'll make a motion to adjourn the
[1:32:19] the finance committee second all in
favor I
[1:32:22] thank you thanks everybody thanks
everybody thank
[1:32:26] you