2004-12-02-AC-min - Laserfiche WebLink

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December 2, 2004 - RE asked whether this will be sufficient – coming up with a 4-year plan – to satisfy Moody’s. S. English replied that 3 years is about all you can reasonably present. - AL was looking to see a series of policy statements, very general. We can’t decide tonight what the budgets will be for the next 3 years. - EM asked if PH’s framework will satisfy Moody’s. S. English said this is all an excellent start, but for Moody’s we need to answer the questions she presented before (document present to BOS and to the Budget Collaboration Group). For instance, need to answer the question about whether we have a reserve policy. DB said yes, we have an existing free cash policy whose goal is to achieve free cash level of 5% of tax levy. PH asked if “reserves” as Moody’s defines it includes stabilization fund. S. English said no. PH reminded S. English that AC would like to see a list of what “reserves” includes. S. English said she’ll get that for us. b. DB’s memo: Started by describing positive steps that have been taken to address the Moody’s issues – no use of free cash for FY05 budget, no second year of pension holiday, monies appropriated to stabilization for FY05. Also several positive circumstances – override passed, expecting SBA reimbursement, free cash certified as of July 1, 2004 at approximately $1M more than we anticipated. Now how do we address the fundamental issues? DB reviewed her purposefully simplistic description of the structural problem with our budget. ?? The problem: We've had a structural budget problem for a number of years now and we've thus far dealt with it in a patchwork fashion. Would describe the problem simply as: (1) On the revenue side, Prop 2-1/2 limit on tax revenues combined with reduction in state aid, flat local receipts, and community desire to restrict commercial tax base growth. (2) On the expense side, average wage growth most years greater than 2.5%, plus health benefit cost increases 10-15%, school enrollment increases, and recently, huge increases in utility costs. This is a "structural" budget problem because without overrides, the annual growth in the cost of providing level service (same staff) far outpaces annual growth in revenues. ?? Possible solutions: 1) More frequent (i.e., annual or every-other-year) overrides. Let there be an annual referendum on the budget. 2) Regular reduction in expenses/services. This will naturally occur under solution (1) every time an override vote fails, but it's also accomplished by not presenting an override option and simply cutting services. Probably this is what will happen this year since the prevailing view seems to be that this is a non-override year. But that means that we'll be cutting services without the benefit of a community-wide dialogue. 3) Increase other revenue sources. Primary one that comes to mind is re-thinking of the community's approach to commercial development. Seems like it is time for a community-wide dialogue about this in the context of the budget discussion. Page 5 of 8