While Derry’s Town Councilors agree on the need to reduce taxes, they have a philosophical difference on how to get there.
In a Special Town Council meeting Jan. 26, Councilors heard a presentation from Interim Town Administrator Susan Hickey on four budget scenarios she was asked to create.
What they have to work with
The town portion of the tax rate is currently $9.16 per $1,000. The current working budget is $22,820,287.
In a PowerPoint presentation, Hickey reviewed the projected components and increases of the FY 17 budget:
- Total CIP (Capital Improvement Plan), $3,192,607, .03 cents on tax rate;
- Total Debt Service, $952,963, .04 cents on tax rate;
- Total Transfers, $111,701, zero on tax rate;
- Total Credits/Overlay, $794,800, .03 cents on tax rate.
- Total Operational Costs, $7,553,890, $3.02 on tax rate.
- Total Personnel Costs, $27,014,279, $10.80 on tax rate.
- That comes to a Total Appropriation of $39,620,240 or a $15.84 per thousand town portion of tax rate.
Revenues are anticipated at $15,833,824 or $6.33, making an estimated town portion of $9.51 or a 35-cent increase.
Hickey based her scenarios on a working budget of $23,786,416.
Hickey also reviewed the following four scenarios:
- Cutting the estimated tax rate by 28 cents per $1,000. With $23,786,416 to be raised, this would mean $700,000 in cuts and a 9.23 cent per $1,000 tax rate, or an increase of .07 cents.
- Cutting the estimated tax rate by 35 cents per $1,000, with the same amount of $23,786,416 to be raised, with $875,000 in cuts and the current 9.16 per $1,000 tax rate, with no increase.
- Cutting the estimated tax rate by 43 cents per $1,000, with $23,786,416 to be raised, with $1,080,000 in cuts. This would drop the town portion of the tax rate to 9.08 per $1,000, and a decrease of .08 on the tax rate.
- Cutting the current tax rate by 43 cents, with $23,786,416 to be raised, for a total town tax rate of 8.73 per $1,000. This would require a cut of $1,950,000 to the budget.
In the Jan. 26 meeting Hickey discussed potential savings, including:
- Refinancing two current bonds, a savings of $400,000;
- Recycling income from the new Transfer Station, potential new revenues of $150,000;
- The change to LED lighting, saving $65,000; and
- Auction of tax-deeded properties, a potential income of $500,000. The auction was scheduled for this past Saturday.
Unexpended Fund Balance
In the past budget season, the Council approved taking $700,000 from the Unexpended Fund Balance to help reduce the tax rate.
Hickey reminded them that this is considered a “one-time revenue source,” and that it “complicates” the following year’s budget. “That almost $700,000 now needs to be raised in taxes,” she said.
In previous years the town has placed some of the money from the Unexpended Fund Balance in the Capital Reserve Fund, and it has provided the money for capital expenses, particularly in the Police, Fire and Public Works departments. “That way we have not had to go out to bond,” Hickey explained.
The option of bonding
Hickey said she has sat down with department heads and discussed ways to bring down the budget and thus the tax rate. Bonding was presented as an option for roadway maintenance. Hickey told the Council and audience that the Council could reduce the operating budget by $1.5 million by taking out a 10-year bond for $3 million, and funding paving projects that way.
“The rates are at an historic low of 1.65 percent,” Hickey told the Council.
The total for the first year would be $24,750, interest; $50,000, bonding fees; and $300,000, principal.
The total is $374,750 for the first year and that would save the town a net amount of $1,125,250, Hickey said.
The town has always had a “pay as you go” policy regarding roads, but with interest rates so low, this would be an option, Hickey observed.
“This would get us over the hurdle, and we could maintain the same level of services,” she said.
Councilor Joshua Bourdon asked Hickey how much the bond project would save on the tax rate, and Hickey said it could save up to 50 cents.
“It’s a little bit of interest, one of the lowest bonding rates in history,” Bourdon observed.
How do we get there?
Councilor David Fischer was leery of setting an arbitrary goal for reduction. “If I’ve learned anything this past year, it’s that putting down a particular number doesn’t work,” he said, pointing to the Council’s original directive to former Administrator Galen Stearns to reduce the tax rate by $2.50. When that proved unworkable, they gave a directive of $2 per $1,000, and when community members objected, they ended up cutting $1.21 from the tax rate, a decision that was reversed in the Oct. 13 Special Election.
“To come up with a specific amount, 8 cents, 35 cents, 43 cents, is not something I think is wise,” Fischer said.
“No specific number will be the answer to the budget challenge,” Fischer said. Instead, he urged fellow Councilors to use the recent town survey as a guide.
While respondents cited safety as a priority they also wanted lower taxes, Fischer reminded the group. He suggested, “I would ask the Administrator to be responsive to the people and see how we can lower the tax rate. By how much? That’s not the point. We need to be responsive.”
He recommended having the Administrator lower the tax rate from the current $9.16 per $1,000 with the goal of retaining services, maintaining safety and moving the town forward.
Hickey reminded the Council that the four goals were given to her in order to create the scenarios.
“Your goal should be simply to decrease the tax rate,” Fischer said.
Councilor Mark Osborne scrutinized the overtime line, asking Hickey, “Do you anticipate an increase or a decrease in the overtime line?”
“It is going to go up,” Hickey responded.
“How much?” Osborne asked, to which Hickey replied, “I don’t know.”
The majority of the overtime is in Police, Fire and Public Works and is projected as $200,052 for 2017, according to Hickey’s worksheets.
“This is based on the October vote and on the level of overtime department heads think they need,” Hickey said.
Fischer said that when the money was reinstated, some of the positions were filled, and he questioned why overtime went up.
Hickey reminded the Council that not all the cut positions were filled after the vote.
“Also,” she said, “the people we hire are going to want to take time off.”
Fire Chief Michael Gagnon took the microphone to review his staffing situation, with five and “soon to be six” positions to fill. He is interviewing this month for four paramedic and five firefighter positions. But, he said, several of the candidates expressed concern.
“They wondered what was happening in next year’s budget,” he said. “Are they going to be safe?”
Police Chief Edward Garone weighed in, noting that he has eight positions open, but finds it difficult to recruit officers. “It’s a local, state and national problem,” he said.
Fifty-five people showed up for a recent initial exam, Garone said, and after both the written and physical tests, that should yield four or five appropriate candidates. First-time officers still need to attend the Police Academy in Concord and do field training, so “an officer we hire today will not benefit Derry for six months,” Garone said.
Garone differentiated between the overtime coverage he needs and what may be considered overtime in a non-safety job. His overtime is not staying late to finish a project, he said. “We have to have a certain number of officers in place every day,” Garone said.
Line by line?
One of the scenarios presented by Hickey was level-funding the current budget, an idea that doesn’t work for Councilor Al Dimmock. “If we level-fund, I don’t believe we as Councilors can say, ‘I did my job,’” he said.
Though he didn’t think an arbitrary number would help, Fischer was also not in favor of Councilors going line by line through the budget. “The Council charge should be the ‘what,’ and the Administrator’s charge should be the ‘how,’” he said.
Through his experience the past year Fischer said, “I believe strongly that we should have communication, and the opportunity to ask questions of our department heads. We are all capable people.”
He questioned the efficiency of the “budget workshop” meetings, saying instead he would rather talk directly with department heads.
Bourdon said he saw the value of “line by line.” “It allows us to ask questions, to really dig in,” he said.
Council Chair Tom Cardon agreed with Fischer. “Going line by line in a $40 million budget is a waste of time,” he said. “It’s a great idea to get the department heads up here, and allow us to ask them questions.” Cardon said he would be open to 15-minute presentations by each department head.
As in past years, the working budget for 2017 will be delivered to the Council by April 1. Hickey is scheduled to drop the Interim Town Administrator role by Feb. 1, with an official on loan from Municipal Resources Inc. to take the job on a temporary basis (see related story page 1).
The budget will be “workshopped” by Councilors for three meetings in April, with a public hearing April 28 and a decision expected to be made in the May 17 meeting.