Town Administrator: Templeton has hit 'bottom'
Robert T. MarkelInterim Town Administrator
To The Editor:
The financial situation in Templeton is very grim. When the Selectmen learned that the Fiscal 2014 budget was $505,000 out of balance, they ordered all departments to implement a 5% reduction in spending on January 27.
When I arrived in February, the selectmen and I agreed on a strategy to balance the budget — which I will call Strategy #1.
The plan was to close the budget gap by utilizing the $150,000 from the 5% budget cuts and then add “free cash” and, if necessary, some funds from the town’s reserves (Stabilization Fund) to bring the budget into balance.
Free cash represents the accumulated spending and revenue surpluses from the prior years, and it must be certified by the state Department of Revenue. It is not good policy to use free cash to balance the operating budget, but in this emergency, it was necessary.
The town’s financial management system was in disarray, and as a result, the town had not been able to close out Fiscal Year 2013, which ended on June 30, 2013. The Department of Revenue would not allow the town to close out FY’13 until accurate and reliable financial data was presented.
The importance of closing FY’13 was to get the DOR to certify “free cash.” Once certified, free cash is available for any purpose determined by the town. The town’s free cash had been abundant in recent years, going above $800,000 in 2010.
Financial management was reorganized in February. In mid-March, the town supplied accurate data to the Department of Revenue to close out Fiscal 2013. We waited for free cash to be certified and scheduled a Special Town Meeting for March 29 to close the budget gap.
On March 28, the DOR notified the town that no free cash could be certified and, in fact, there was a free cash deficit of $26,000. Strategy #1 could not work.
At the March 29 Special Town Meeting, the Selectmen proposed and the Town Meeting adopted Strategy #2: A request to the voters for a $505,000 general override of the Proposition 2 1/2. An override ballot question was added to the annual election warrant for May 5.
As a backup plan, Strategy #3 was put into effect. The Department of Revenue was asked to prepare special legislation to permit the town to borrow $505,000 from the state in exchange for a pay back over five years.
It was understood that deficit legislation and a loan would be accompanied by state control of the town’s finances for the five year period. The DOR prepared the legislation, and Strategy #3 was ready in case the override failed.
At the town election on May 5, the override was defeated by a vote of 789-to-666. Almost simultaneously, a new and very threatening crisis emerged that undermined Strategy #3.
I was informed by the Town Accountant that a severe cash flow problem was on the horizon. He said that he had done an analysis and that the town would run out of cash to pay bills, meet payroll and service debt as of June 13.
Without a balanced budget, the DOR would not allow the town to set a tax rate and send out tax bills. Estimated bills had been sent out for the first and second quarters, but bills for the third and fourth quarters could not be legally sent.
Anticipating a cash flow problem in January, the town had issued a short-term note for $2.65 million. The note will be rolled over on May 15, but that will not be enough to get through the end of the fiscal year, and we cannot increase the borrowing.
The prospect of a new crisis more serious than the budget deficit – the inability to meet payroll, pay vendors and most importantly, the possibility of defaulting on a June 15 bond payment – now looms.
Strategy #4.
In a telephone call with the head of the Bureau of Accounts in Boston, it was recommended that the town consider abandoning Strategy #3 because the legislative process would require too much time.
With the prospect of running out of money to pay bills in June, it is critically important to balance the budget, get DOR approval for a tax rate and send out bills without delay. The town must bring tax dollars into the Treasury to avoid defaulting on our obligations.
We now have little choice but to close the budget gap by making deep cuts in the budgets of all town departments. A budget that cuts $505,000 from departmental budgets was put before the Board of Selectmen on May 8 and adopted unanimously. These cuts will result in layoffs, and town services will be almost entirely eliminated for the next seven weeks.
I did not come to Templeton to lay off employees and slash services, but now there is no other sensible or acceptable alternative. The town must accept these painful reductions, or we will face an even worse crisis.
This is the bottom.
On July 1, we start a new fiscal year with a very austere budget. However, some of the services and employees cut on May 8 will be restored, and the town will begin the process of recovery.
Please attend the Annual town meeting on Saturday. There will be babysitting provided.
ReplyDeleteThis path that Bob Markel explains is probably the best course, but it will hurt. My opinion of the town borrowing the $505,000.00 from the state is much like a house hold taking out another loan to pay off credit card balances and all you end up with in most cases is another bill that you have to pay. There would have been another $100,000.00 coming out of the tax levy. I believe the last time town services were cut this bad was in 2002 or 2003 and the situation was fixed in a few months by a vote of the town. Good to see selectmen voting to put a regionalization agreement in place (animal control) that saves even more this time, hopefully this is not the last of such agreements or moves to change how the town does business to save taxpayer money where possible. A few thousand here and a few thousand there and you can quickly get to $500,000.00.
ReplyDeleteWhile at town meeting and yes, please go and please pay attention to line 146 of the town charges paper ( the green sheet) where you will see tow fulltime fire/ems salaries in the amount of $128,800.00. This is the opening of the door to additional PEB or post employment benefits like health insurance and retirement. These are the forever bills or costs that continue after the employee is no longer working and they do nothing but grow as in these two retire and two take their place and now the costs double and it goes on and on, the larger you build the government, the larger the costs. If you do any research, you will find the one financial crisis facing every city and town and even states are the costs of PEB. They continue to grow and almost impossible to put enough money away to fund them in the future. One way in my opinion is to have more contract services or less in house. Yes it may cost more up front to do this, but down the road, you do not have these PEB or forever costs. Example; town buys a sweeper for $125,000.00 and spends say $20,000.00 a year to pay it off, about 5 years it is paid for. Now you have to have a man to run it, fuel it and maintain it and eventually replace it. Someday the man that runs it retires now you have to pay that employee's health insurance and retirement cost and you have to hire another employee to run the sweeper. If you contract out the sweeping and it costs $5,000.00 per year, that is the cost and that is that. Remember, a $100,000.00 sweeper does only one job, one thing and that is a lot of money to have tied up. So please pay attention to the budget at town meeting and remember, you the voter have the power to change those numbers by saying hold when each line is read, you have that right.
ReplyDeleteLooking at the advisory board budget with no override, Templeton may be operating a building inspector and health agent on a per diem basis, the way they do it in the town of Barre, MA (their 2012 ATR shows Phil Leger as the town pay as you go health agent) This arrangement should be no problem for the town nor should there be problems with scheduling because apparently Phil Leger has been a fulltime health agent in Templeton and doing the food inspections along with septic systems and all the associated duties of a fulltime town employee and he is able to do all those things for the town of Barre, MA at the same time. Perhaps Phil can show the scheduling to the Templeton BOH and this move will not only save taxpayer money, it will make the change smooth.
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