Westport News

Editor's note: This Report of the Finance Committee of the Town of Westport, MA
April 20, 2006 is available in PDF format (Acrobat Reader) and can be downloaded by clicking here.


The responsibility of the Finance Committee (Fincom) is to present a balanced budget to the Town Meeting and to make recommendations on Warrant articles that have a financial impact. In coming to our recommendations for the FY07 balanced budget shown in the Warrant, we have taken a conservative stance in estimating revenues, as well as in our estimates of what to recommend for expenditures.  Town Departments continue to be frugal, and we found very little in their requests to quarrel with.  We would be remiss if we were not to inform you that there remain important items (in particular maintenance and capital needs) that could not be funded under the proposed FY07 operating budget.

FY 2007 Revenues Forecast
The conservative forecast for our Town’s revenues shows an increase for FY07 that will be hard to duplicate in future years. Overall, total revenues should grow by 7.2%, generating about $1,864,000 additional dollars for use by the Town.  The past three years revenues have increased by 6.1%, 5.4% and 2.0%, working backwards. It doesn’t get much better than FY07!

Table 1:  FY06-07 Revenues

              FY06    FY07         %          FY07

    Plan     increase    increase    Plan

Property tax                            15,837    979         6.2%    16,816
State aid                                5,500      550        10.0%    6,050
Local receipts                          3,328      388        11.7%    3,716
Overlay release                        135        65          200
Debt exclusion                         720        -106        614
Free cash                                500        -85         415
Other                                     0            73         73
Total receipts                           26,020    1,864      7.2%      27,884

Property tax revenues in FY07 account for about 60% of total revenues and should grow over our FY06 plan by 6.2%. This is because FY06 actuals (which constitute the base for FY07) will come in better than plan, mainly because new growth in FY06 was greater than expected. Normally we expect property tax revenues to increase year to year in the range of 4-4.5%, 2 .5 % is the statutory increase and roughly 2-2.5 % for new growth. With the advice of our Representative Mike Rodrigues, we forecast that FY07 state aid will grow 10% over the FY06 plan, partly because we actually received more FY06 aid than planned and partly because FY07 will be a very good year for the Commonwealth. Local receipts should grow by 11.7%, again in part due to conservative forecasting for 2006 and in part due to our favorable economic conditions (e.g., leading many of us to buy new cars). Excise taxes usually provide about 50% of all local receipts, although it is hard to forecast what will come in the door in any given year because excise bills are not issued by the Commonwealth at predictable times of the calendar.



FY 2007 Expenses Forecast
There are two types of expenditure forecasts for FY07  – those that are mandated and those over which the Town has more discretion.  Table 2 below summarizes our calculations.  Increases in mandated expenses will take about 36% or about $679,000 of the increased revenue. We had a large step up from the FY06 plan in our share of the costs of Diman Regional Technical School. Employee benefits will rise 12.8%, which should surprise no one.  That will leave only about $1.14 million of the increase to be distributed over the rest of planned expenditures, including reserves, all other departments, and warrant articles.







Table 2:  FY06-07 Expenditures
                                        FY06    FY07        %            FY07
                                        Plan     Increase    increase    Plan
Diman, Bristol Ag                  480      266         55.4%      746
State, county assessments       436       83         19.0%       519
Employee benefits                3317      423         12.8%     3,740
Debt service                        732       -93                         639
A.  Total mandated                4,965    679                      5,644
                
B.  For all else (Reserves,  
           Depts, & Warrants)    21,101    1,138                   22,239
                
  Property tax reserve            300            50                       350
  Fincom reserve                   125            25                       150
  Stabilization increase              0            95                        95
  Restore  Pension res.              0            100                      100
               subtotal                 425          270                      695
                
  Departments                    20,635          841    4.1%         21,476
  Warrant articles                      41           27                          68
C.  Total                           26,066        1,817                    27,883


Of the remaining roughly $1.14 million of increased revenues, the Fincom voted to recommend investing $270,000 in our reserves. We should put away in sunny days for the stormy days that will come. Some Fincom members wanted to put away more, but the majority reasoned that the requests/increases were all legitimate, on the whole, and preferred to fund the departments rather than the reserves. The increase of $95,000 in our Stabilization Fund will bring it to just over $1.1 million, which compares to a prudent level of $1.3 million (5% of expenses). Bond rating companies like to see prudent reserves. The Stabilization Fund is our ultimate money in the mattress.

We have recommended approval of about $68,000 in Warrant Articles. That leaves about $841,000 to apply to the nearly $1.1 million of requested increases from our departments.

The major changes in Departmental Discretionary Budgets recommended by Fincom are summarized in Table 3 below.  The table shows totals by each major grouping of departments for FY06 Plan, FY07 Plan, and the recommended increase.  Under each major grouping are listed the most significant factors accounting for the overall increase for that group of departments.  Shown separately is a tally of energy expenses (heat, electricity, gasoline) aggregated for all departments, which shows that energy price increases account for about $180,000 of that $841,000.



 
A Final Note of Caution
There is something new and concerning on our fiscal horizon. It is called GASB 45. It is an accounting requirement that all municipalities reflect the unfunded portion of their retirement health promises on their balance sheet. Westport will have to do this by June 30, 2007. We have no idea what could be the present value of our commitments to cover the Town’s share of healthcare premiums to our retirees and their families. GASB doesn’t say that we must start funding this unfunded liability, but bond rating houses will. We don’t know what amount Westport will have to start setting aside. One estimate is that it might be several million dollars per year!  We’ll know better in twelve months when an actuarial study is made.  Stay tuned.