Reading Between the Lines of Your Town's Budget

League of Women Voters^®
of the Upper Valley

Reading Between the Lines of Your Town's Budget

A League Public Policy Forum on January 16, 2008

Lori Hirshfield. Paul Tierney. Ken Niemczyk. Discussion.

Lori Hirshfield - Planner, Hartford, VT

Hartford's Fiscal Year goes from July 1st through June 30th. The budget cycle begins in September with a memo from the Town Manager setting forth the budgetary parameters, cost of living etc. All department directors submit line item budgets to the Town Manager by the end of October. During November, directors meet individually with the Town Manager. In early December, the Town Manager submits to the Selectboard a line item budget for the entire Town with the Department Directors' requests and his recommendations. The Selectboard then has several budget public hearings where the various Department Directors and Town Manager present their budgets. The Selectboard approves the final budget proposal in early January for approval at Town Meeting in early March.
In drafting her department's budget, Hirshfield sorts out priorities that reflect Selectboard and Town Manager directives, Commission/Board/Committee priorities/projects, changes in state law, increased costs, and trends in spending. With all this information, she then projects the budget needs 2 - 3 years out. During the year, each department head tries to track the time and costs to properly allocate to budget line items so that the budget is an accurate reflection of the department's activities.
The Planning Department is responsible for all Town functions related to zoning, land use, historic preservation, conservation, housing, transportation planning, energy, design review, and community and economic development. The Department issues an average of 420 building permits/yr. Roughly 60-100 applications per year go to the full public hearing before the Planning Commission (PC) and/or the Zoning Board of Adjustment (ZBA), requiring public hearings for site plan, conditional use, variance, subdivision approval, and design review.
The Planning Commission also creates a Master Plan as a guide for the next 10-20yrs. Hirshfield considers it a planning tool for every section of town government. It includes budget and Capital Improvement Program (CIP) data for major projects anticipated by departments. Currently, there is a big effort on a downtown revitalization plan for WRJ, about which she shared a handout. Ultimately, the costs to implement this plan will be reflected in several departments.
Hartford has impact fees on new development to cover some of the direct costs on the Town's infrastructure and schools. NOTE: The CIP is a reflection of Master Plan goals. Impact fees can only be imposed if a town has adopted a CIP. In VT, adoption is by the legislative body, after public hearing. In NH, the Planning Board adopts the CIP.
Hirshfield shared the Department's line item budget for '07-'08, which includes several categories: Planning & Development, Housing/Community Development, Design Review Board, Conservation, Forest Management and Historic Preservation. A second sheet gives an explanation of the line items in for each section of the department (but this additional information doesn't appear in the annual report).
Handout: pages from the Hartford Annual Report 2007-2008, Planning Board Budget

Paul Tierney and Irv Thomae, Norwich Finance Committee, VT

The Norwich Finance Committee has a 50-year tradition. It meets about once a month, and reviews both town and school budgets. The committee is advisory, with 3 elected members as well as the 3 town auditors. Finance committee members also serve on Dresden Finance Committee (the bi-state school district). The committee is charged with informing the residents about town expenses and projections. It is sometimes assigned financial studies, and thinks of itself as playing an educational role for citizens. While the committee has no statutory or municipal authority, it can play the role of a "bully pulpit". The committee operates by consensus, and tries to draw conclusions about municipal spending trends; disagreements in the committee are given space in its report to voters.
The Committee tends to look at the "big picture", not details, keeping in mind that the population has only increased by 250 in the past 10 yrs. The Committee had to deal with the shock of numbers from 1996-2007 showing that the cost of living went up 30%, but 1996-2007 the budget went up 110%. Though only ten houses were built per year, property valuation increased by a factor of about three in that period
Early in the budget planning season, the Finance Committee informally recommends to the Select Board that the budget lag inflation rate, but of course the Select Board has other considerations. The committee prepares a statement to recommend the fate of the town's budget, to approve or reject.
Some tips on reading your town's budget: When looking at a budget, consider why there are changes. Changes in the budget may reflect the economy, or new staff - an example was the decision to increase Norwich police department staffing (where budget category went from $240 thousand to $450 thousand in Norwich), or state mandates such as state law on school funding for special education (which have increased at local level by 2.5 times in a recent three-year interval). World events may affect town budget (like price of oil). Some increases in cost may be due to population increases (as say for water/sewer/school expansions). Health care costs are expected to double in the next 8 years. From 1997-2008 the town's school population was flat, but costs rose 110%; school costs are roughly 80% of the town's total expenditures. Ask if the changes are consistent with your own values - for example, an increase in teacher salary is to attract and retain the best teachers. Is the change in operating budget consistent with inflation; if greater, then why? Is this what you want? What is happening short term, and long term (say 5-10 year period). What about values - who will be paying for increases, and is this fair?
The school-funding dilemma: The town's Annual Report includes the School Budget, and some charts show the impact of all municipal costs (local and school). The courts and legislature in Vermont have addressed the difficult topic of school funding over the past ten-year period. According to a 1997 Vermont Supreme Court decision (similar to the Claremont NH decision), it is unfair to have hugely disparate grand list (total valuation) per child ratio to support education. The solution to this problem was the 1997 Act 60, updated by Act 68 in 2003, to equalize property tax rates for towns with similar school per pupil spending, and adjust this tax for income "sensitivity". In 2008, the state's mix of school funding sources paid for all education costs, and it "includes the portion of special education costs not covered by federal aid and the state categorical grant, transportation costs not covered by the state categorical aid, as well as any tuition owed by the district, general payroll and operation costs that do not have specific funding sources" (Overview of Vermont's Education Funding System, Under Act 68 and 130. Dec 2007, VT Department of Education). The base amount is set each year by the legislature and was $7,736 for FY 2008. A portion is raised by local property tax (homestead tax) determined by per pupil spending set by the local district, but it has reductions determined by income level.
Handout: Budget summary pages from Norwich Annual Report 2007-2008

Ken Niemczyk, Planner, Lebanon, NH

The Capital Improvement Program (CIP) is a capital budgeting document, must reflect the town's adopted Master Plan, and is meant to project major expenses 5 - 6 yrs in future. The city has had a CIP since 1987, with a formalized procedure adopted in 2003, that currently limits the CIP just to land-use expenses (includes roads or engineering projects >$50,000, land acquisition, buildings or infrastructure costs >$50,000 and planning costs > $25,000 etc). Operational maintenance and improvements (such as road resurfacing) are excluded from the CIP but are included in a capital budget considered by the City Council.
In Lebanon, the Planning Board is charged by the City Council to write the CIP, but the City Council can make changes. A Capital Budget Form is distributed to all city agencies, to be included in the CIP. The priorities listed in the Master Plan are always a part of the process. Funding sources for proposals can come from the city, state or federal government or other private sources (such as gifts and grants). The CIP is a large document with much supporting material; it is boiled down to just a few pages for the capital projects in the current year's city budget.
In addition to the CIP, which covers land-use projects (a policy adopted in 2003) and capital items (ie. large vehicles, fire engines, etc.). The school makes its own CIP, also to cover 6 years which is included in the city's CIP. This helps to avoid any budget spikes for the community.
The CIP subcommittee has 3-5 people with 3 Planning Board members, and holds 3-4 public meetings each year. The proposed document is then passed to the full Planning Board, then to the City Council. It is a fluid instrument and items can be changed as new priorities arise.
The City is studying the use of impact fees, but is worried about the conditions for these fees, which state any collected money that is not spent must be returned after 6 yrs. The town once had impact fees, but found they weren't collecting enough to cover costs. There is also concern about costs to the individual homeowner, since the cost will be passed along to folks who buy new homes. Currently, developers are usually expected to cover costs of improvements needed due to the project (such as improved roads, sidewalks, sewer expansion, etc).
Handout: CIP: Policy & Procedures from the Planning Board - 2003

Discussion Session

Patty Eckels: noted that there are always Capital Reserve Funds in the town/school budgets, where deposits are made to accumulate for anticipated capital expenditures, as is done in Hanover.
Lyme's Town Administrator, Carole Bont (who works on the town's budget) observed several things that increase a town's budget beyond cost-of-living. One example is the increased expectations of residents, such as expecting an effective recycling program and additional hours for the transfer station (as opposed to a window of two hours once per week to make trips to drop off garbage bags for a compactor). She noted in particular, the increased frequency of keeping property tax assessments current, due to the need for a fair and equitable statewide property tax. Traditionally, town-wide revaluations were done only approximately every ten years whereas now towns have a duty to continually tract changes in Property values. These assessments are statistically evaluated annually and may be adjusted almost annually, and fully reassessed about every three-five years, depending on the results of that statistical analysis.
Lori Hirshfield: "Look between the lines of the budget" for the reasons for the cost increases, such as changes in demographics, expectations and state/federal mandates. She also noted that CIP could address other purposes too, such as conservation land purchases. She urged that towns use their Master Plan for this budgeting to set priorities. And she noted that Hartford is thinking about adding a "transportation" impact fee.

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