No, this isn't the National Enquirer!

BACKGROUND: In the Fall of 2007, the town boards were planning on using much more of the reserves on various pet projects. The Finance Committe objected and at the March 10, 2008 ALG meeting, a compromise was reached.

But prior to that time, in February 2008, there was much talk of capital overrides in FY10 or FY11, and whether or not the public should be told. The issue was not discussed in March and we do not think a capital override was mentioned during Town Meeting. (So much for informing the public about the 3-year plan.)

Using reserves to fund operations was also a hot topic. You will find it amusing that a couple of the ALG participants argued that "Free Cash" was a recurring source of revenue, an assertion that is clearly wrong, according to the Department of Revenue (CLICK HERE for DOR INFO on "recurring revenue.")

After the compromise was accepted, it was noted that FY11 would need $2.5 million in reserves to balance the budget. Since then, the plan has been updated through FY12 and the current plan needs about $4.4 million to balance. As you can see, the operating deficit continue to grow until the reserves run out, and then it is override time.

Enjoy!

As of 9-17-08, the ALG Plan has been further revised and somehow the $4.4 million deficit has been reduced to $2.4 million for FY12. We aren't sure how the town managed to save $2 million, but there is plenty of time in the coming months to review this further.

EXCERPTS FROM ALG minutes of 2/11/08, 7:30 AM.

Participants: Dore' Hunter, John Murray, Steve Barrett, Steve Noone, Lauren Rosenzweig, Jonathan Chinitz, Pat Clifford, Marie Altieri, Sharon Smith McManus, Bill Ryan, facilitator Bart Wendell, minute-taker Jo-Ann Berry.

2) Does a consensus still exist as to the building blocks of the FY09 Financial Plan?

CLIFFORD: No. Finance Committee believes this is not a sustainable projection for 3 years. In the fall we were working on a different set of activities using a large amount of free cash despite good revenue projections. Only way to sustain this version is to drain the NESWC fund, therefore, it is not sustainable.

WENDELL: Is there agreement on the reserve amounts? YES

MURRAY: Assumes that we're wiping out the entire NESWC fund balance, $1 mill would be left.

SMITH MCMANUS: So that means we would use $7.3 mill as the total.

CHINITZ: Thus moving the percentage used up to approx 45%.

MURRAY: The town budget is sustainable as the recurrent costs have recurrent revenue. Capital is funded by NESWC.

CLIFFORD: Do you consider free cash recurring revenue?

MURRAY: Yes. The $1.2 mill used may not regenerate at that amount, but it will regenerate.

CHINITZ: Free cash is a recurring source of revenue. It depends on how we use it, events, etc. Large use will regenerate slower -- 3 years ago we used most of it and now we have $3 mill.

NOONE: Understand regeneration, depends on how we use it. Hiring employees will not allow regeneration.

MURRAY: When the town moved to spend NESWC for capital from bonding, bonding not sustainable within town budget.

CHINITZ: Concur. Timing and list has precluded debt exclusion. Should consider override in next 2 years (FY10 or FY11) Don't have funds to sustain long term.

HUNTER: Very nervous about plan that goes outside of 2 1/2 after a year or two. Citizens will have questions. We can't count on getting the votes for an override. What's your fall back? Bonding must be paid, so other things might have to be cut.

CLIFFORD: Agree with Chinitz. Quite struck when Ryan and Murray believe that this type of bonding needs to go outside 2 1/2. Can still pull back on free cash. If we had to go back to town meeting, we can appropriate free cash, but if we use it, can't use NESWC. We would have to tell the voters that we mismanaged funds....

ROSENZWEIG: Where does recurring revenue come from?

MURRAY: Outside of 2 1/2, NESEC, or the unlikely "perfect storm of good news."

CHINITZ: Concur. Not knowing what will happen with the economy, how do we finance the 2nd part of the schools' capital plan? Discussion of override will cause us to look at our budget and if we were to swap free cash for NESWC, might be some other creative ways to address the need.

Proposal: To swap free cash for NESWC in the amount of $2.1 mill for capital projects of the schools and town. Going forward revenue outside the operating budget will be needed to fund capital debt for the town....

WENDELL: Are those around the table committed to support this proposal unless there are new conditions of information? YES

CLIFFORD: Money will be used for capital so that it can be explained to town meeting.

ROSENZWEIG: Town capital is different that [sic] school capital-- agreement that capital is something for which you get something back, but not every year, and is a one-time cost.

NOONE: Philosophical problem with moving capital outside 2 1/2 and the definition of operating budgets....

CHINITZ: If we did not have the constraints of 2 1/2 would agree, but conditions allow us to take items outside the limit. If items are small enough can keep in budget. Our projects are too big now, too onerous to stick inside 2 1/2. 2 1/2 is a safety valve that we don't use too often. Plus our situation is different than it was a few months ago.

NOONE: Concerned about the precedent we're setting.

CHINITZ: In fairness to where we are -- there is some degree of trepidation around borrowing millions without sustainable source to fund it. Can predict use of current NESWC balance for x years based on amount. Something has to give between NESWC and free cash. Within the next 12-24 months we will need a debt exclusion override or the schools won't propose the second half of the capital plan. 8 months ago there was no reason to alert voters to such a plan, since the plan was different.

HUNTER: We need to be up front. As we started this process things looked different. It takes time to work through these things. The Governor's unsustainable budget is a factor. We ought to go outside 2 1/2 sooner rather than later. Need to tell voters to plan on override.

MURRAY: The town is planning to use $1.4 mill in addition to the $1.2 that will be used in place of free cash.

ROSENZWEIG: Future debt service could not be from operating budget.

EXCERPTS FROM ALG minutes of 2/25/08.

A break indicates discussion in between quotes. FC = Finance Committee. Minutes by Ann Chang. Meeting adjoured at 8:47 AM.

Present: Bart Wendell, facilitator; Dore Hunter & Lauren Rosenzweig, BoS; Jon Chinitz & Sharon McManus, SC; Pat Clifford & Steve Noone, FC; John, Steve Ledoux, Bill Ryan & Marie Altieri, Staff.

The minutes of February 11th were accepted.

2. Feedback on new consensus statement:

"Consensus: to swap free cash for NESWC in the amount of $1.2M for capital projects of the schools and town. Going forward revenue outside the operating budget will be needed to fund capital debt for the town. The $1.2 M included in this proposal is exclusive of other uses of NESWC funds to be used by the town. The same split as for free cash will be used."

BART WENDELL asked if all agreed & if there had been agreement among the boards. The FC was the only board that had met & they agreed.

STEVE NOONE: There is a high probability that we will be going outside 2.5.

BART WENDELL: will this be prone to cause problems next year? There will be a differrent complexion to the group next year and it is not in the ground rules.

BILL RYAN: $800k is not all one-time expense some of it is leasing, some technology purchases that will occur next year.

DORE HUNTER: If the money is fungible--we agreed as a group to get access. I thought that was the whole purpose--now we seem to be back tracking & putting the money into blocks. BILL RYAN: That's correct we have been speaking out of both sides of our collective mouths with regard to capital--Douglas heat is not one time.

BART WENDELL: Should we remove the words "one time"

PAT CLIFFORD: Using free cash for things that are not one time is what the FC does not want. We have to ask: what is sustainable in the budget.

JON CHINITZ: This presupposes that free cash cannot be used for operating expenses--but this has always happened. We have bottom line budgets and a more aggressive use of free cash is one way to restrict the use for capital.

BART WENDELL: The implications is that the FC is saying this should be an ongoing item

MARIE ALTIERI: We have to find out what is reoccuring rather than one time--in our $800k some are not one time JON CHINITZ: I'm not sure what we can do other than retire inside debt earlier.

3. Three-year ALG plan

JON CHINITZ: Part of the consensus is -- taking on all this debt inside the operating budgets may sustain the tax bills but it will not sustain operations. We will re-evaluate the debt in 2010.

SHARON MCMANUS: We need to do the re-evaluation early in the year & have an answer by October so there are no surprises if we are consider a debt exclusion override.

ALG Meeting of March 10, 2008, 7:30 AM.

Present: Marie Altieri, Bill Ryan, Jonathan Chinitz, Dore Hunter, Lauren Rosenzweig, John Murray, Steve Ledoux, Pat Clifford, Steve Noone, Sharon Smith McManus, facilitator Bart Wendell. Minute taker Jo-Ann Bery.

Minutes of Feb. 25 were approved. Bill Ryan had one correction already sent in.

Spreadsheets developed by Peter Ashton and Pat Clifford were distributed. Multi-Year Plan and Revenue Sharing Proposal.

HUNTER: THe Board of Selectmen voter [sic] to adopt the Ashton spreadsheet / compromise at its meeting on Saturday, March 8.

ROSENZWEIG: This is a good compromise based on the economic projections though there are concerns that cuts not get too deep.

Request for explanation of spreadsheet. Peter Ashton was recognized.

ASHTON: Finance Committee had strong reservations about spending of reserves, projected at $9 M over 3 years, coupled with significant change in the economic climate caused rethinking of the budget situation. Worked with Pat to craft a solution, informally floated it over last week and by the end of the week agreement was reached.

The changes from the prior plan are listed in the right hand column of the revenue sharing proposal.

• Shift in split from 31.25% to 31.67% to municipal
• Cap on use of NESWC to total $750K for capital items
• $500k to municipal
• 250K to schools
• Allocate free cash at $450K entirely for schools
• Share of shared reserves (free cash and NESWC) 42% town, 58% schools
• Town gets $380K additional: $255K from shift in split, $125K in reserves
• Schools will have to cut $380K Acton dollars.

Depending on how revenues materialize, the 3 year lookout update shows we can still balance at increases assumed with $2.5M in reserves in FY11 -- it seems sustainable.