HomeMy WebLinkAbout2020 Report of the Budget Task Force4 i.44
Report for the 2020 Budget Taskforce
January 26, 2005
Overview of Proceedings
Taskforce Membership: George Burnell, Pat Costello, Gillian Emmons, Peter Enrich,
Mollie Garberg, Tom Griffiths, Paul Hamburger, Margaret Heitz, Jeanne Krieger, Paul
Lapointe, Robert Lew, Patrick Mehr, Bob Rieth, Deborah Strod, Jessica Steigerwald,
Madeline Quinn
The taskforce was chartered to evaluate and then propose improvements in Lexington's
approach to budget creation in the areas of process, analytics and communication.
Group meetings focused on understanding the process and perceived limitations in the
current budget process. The taskforce divided into three sub -groups to address each key
area:
Process: Enrich, Lapointe, Quinn, Rieth
Communications: Garberg, Heitz, Lew
Analytics: Emmons, Hamburger, Steigerwald, Strod
The taskforce also looked at other communities to identify alternative approaches and
potential best practices. The group developed a list of questions (Appendix A) for other
communities in each key area of concern and assigned individuals to each town. Answers
came from two sources: budget documents of other communities and face-to-face
interviews (when possible) with finance professionals in surrounding metro -west
communities including Brookline, Andover, Newton and Concord.
Process Discussion & Recommendations
1) Create a Financial Policy Review Committee (FPRC)
The taskforce surveyed several communities that were similar to Lexington in size and
other parameters. One of the common features of several of the communities was the
existence of financial guidelines which supported and steered the budget process. These
guidelines, while not etched in stone, are a serious and necessary component of good and
responsible financial planning. Such a set of guidelines seemed to provide long term
stability to the budget process as well as consistency in year over year financial planning.
The financial guidelines seemed particularly well done by the town of Brookline, which
developed a set of guidelines in 1994 and updated them in 2004. To review the guidelines
last year, Brookline formed a committee of citizens who had held senior executive
positions in federal, state, and local governments as well as people with diverse
backgrounds with experience spanning general management to accounting and finance.
The taskforce recommends that the Board of Selectmen convene a Financial Policy
Review Committee (FPRC). This committee would consist of up to 12 citizens with
backgrounds in finance. The committee would not be a standing committee, but rather
would be charged to assess the then -current state of the Town's finances and make
2020 Budget Taskforce Report 5/13/2005 Pg. 1
recommendations regarding Lexington financial policies, including appropriate levels of
"free cash" and other reserves, funding for capital improvements, and debt levels.
The FPRC would certainly review and'assess fiscal policies recommended by the
Appropriation and Capital Expenditures Committees and implemented by the Board of
Selectmen. The task force anticipates lively dialogue between the FPRC and these
entities, but does not see any conflict in the charge to the FPRC and the statutory
responsibilities of the financial committees.
The following are examples of financial policies that the FPRC would consider:
A. Reserve Policies
■ Budget Reserves
As a % or an amount of prior year revenue?
As a % or an amount from property tax revenues?
As a % or an amount of Free Cash?
• Stabilization Fund
What % of prior year revenue?
When can it be used?
How much can be withdrawn in any fiscal year?
How is it replenished?
• Liability/Catastrophe Fund
Needed? If so, how to determine appropriate funding level?
• Overlay Reserve
What procedures govern the use of this reserve?
B. Free Cash Policies
■ What are limitations on use of Free Cash?
• What is Free Cash policy for funding reserves?
• What is Free Cash policy for capital projects?
C. Capital Improvement Projects Policies
• What defines a Capital Improvement Project?
• What projects should be included in the capital budget?
• How far into the future should the capital budget reach?
• How is the capital budget evaluated? How are priorities established?
• What are the financing policies?
D. Debt Management Policies
• What are debt management policies?
• What priority should be placed on retaining a Moody's Aaa rating?
2020 Budget Taskforce Report 5/13/2005 Pg. 2
■ Under what circumstances should the town issue bond anticipation notes?
• What should be the Town's ratio of debt to town assessed values?
• What is an appropriate level of annual tax levy debt service to the total tax levy?
In answering these questions, the FPRC should focus on statutory requirements, the
specifics of Lexington's financial circumstances, and on policies and practices in other
well-managed communities (e.g., Brookline).
The task force acknowledges that implementing policies concerning reserve levels and
capital expenditures can have a profound short and long-term effect on the operating
budget. However, the task force believes that the FPRC can serve the community well by
providing an analytical, objective, and apolitical review of and recommendations for
financial policies. Further, implementation of such policies will in the long run provide
greater stability to the budget process.
Some on the task force felt a review of town goals and objectives should either precede or
accompany the FPRC's work. One member of the taskforce advocated for a long range or
strategic planning taskforce that would provide historical analysis of financial drivers and
address broader questions of structural financial trends affecting town finances. Some on
the taskforce recommended that the FPRC be directed to develop acceptable ranges rather
than specific targets to allow for flexibility during times of prosperity and adverse
economic conditions.
2) Improve the Collaborative Budget Development Process
The taskforce felt that delays in the Selectmen's vote on a recommended budget reduce
and compress the time available for public understanding and comment. Additionally,
with budget decisions delayed to February or March, the proposed budget can not be a
campaign issue for candidates running for the Board of Selectmen, School Committee, or
Town Meeting.
For these reasons, the task force proposes changes in the schedule and objectives of the
Budget Collaboration Group (Board of Selectmen, School Committee, Appropriation
Committee, and Capital Expenditures Committee) to improve the collaborative budget
development process. The task force proposes that the Budget Collaboration Group
conduct three public "milestone" meetings as outlined below, and that the Board of
Selectmen and School Committee act to ensure publication by February 1 of the
recommended budget for the fiscal year beginning July 1.
The task force proposes the following schedule and objectives for each "milestone"
meeting of the Budget Collaboration Group.
• Fiscal Policies and Budget Guidelines: Meeting No Later Than October 15
✓ Review prior year fiscal results, revenue and expense estimates for current
year, and projections for budget year.
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✓ Confirm fiscal policies regarding reserves, use of free cash, funding for
capital improvements, etc.
✓ Articulate the shared frameworks, guidelines, and assumptions for
preparing the school and municipal operating and capital budgets.
✓ Confirm schedule for remaining Budget Collaboration Group meetings.
• Proposed Budget Presentations: Meeting No Later Than December 15
✓ School Committee and Board of Selectmen present proposed operating
and capital budgets developed within frameworks previously agreed to.
✓ Update revenue estimates and changes in non -discretionary budget items,
as necessary.
• Recommended Budget Presentation: No Later Than January 15
✓ Selectmen present proposed operating and capital budget.
✓ Consensus reached by Board of Selectmen and School Committee on
recommended budget.
• Board of Selectmen and School Committee Budget Votes: No Later Than
January 22
• Voted Budget Published and Circulated with Town Meeting Warrant: No
Later Than February 1
The budget process committee initially proposed that available funds be allocated to the
schools and municipal sectors at the October milestone meeting. This proposal provoked
lively debate. Advocates suggested that doing so would allow for preparing realistic
proposed budgets, enable professional staff to focus on the challenges posed by likely
resource constraints, and minimize the stress of prolonged consideration of programs that
would very likely have to be reduced or eliminated. Others expressed concern that the
early allocation of funds would undermine the current collaborative process, prevent
appropriate prioritizing of school and municipal needs in balancing the budget, and
unduly tax school staff in September and October shortly after the schools open. A
member further suggested that the interim budgets in place on February ls` are adequate
for the purpose proposed, are the means for dialog, and a budget published closer to town
meeting better reflects the results of said dialog.
Communication Discussion & Recommendations
Implementation of a Comprehensive Budget Communication Plan for the Town
The taskforce felt that a more easily accessed, timely, accurate and pertinent set of budget
documents and a plan to disseminate budget information might mitigate potential
divisiveness among and between budget committees and constituents. Over the past
several years, barriers to communication have resulted in perceived drops in government
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accountability and increased levels of distrust for government and the budget process
among Lexington citizens.
Therefore the task force proposes the implementation of a comprehensive
communications plan for the town to disseminate budget information in a timely and
relevant fashion continuously and not just in override years. This plan would ultimately
be the responsibility of the Board of Selectmen who would in turn establish on-going,
operational ownership.
The taskforce recognizes that some of the items on this list may require funding and will
compete with other services for resources. However, the majority of the taskforce
believes that a comprehensive, on-going communications plan forms the foundation for
community trust and involvement in government and places the town in a stronger
position to forward override votes as warranted.
This communication plan should include:
A. Undergoing an extensive revamp of the website. On-going ownership should be
established with an eye to insuring the website's continued importance relative to
other duties and to afford the website requisite attention.
Examples of design improvements include but are not limited to a website design that
reflects the needs of the end user. There might be different click -through for
residential users versus commercial users for example. The website could also serve
as a repository for questions and answers for the citizens and should have a contact
link for direct email communication. Additionally, linkages should be provided to
more detailed sources of information on each topic.
B. The creation of an email list server to citizenry for updates on budget process,
progress and meeting notification.
C. A media plan that includes the use of the Minuteman and Colonial Times for
disseminating budget information and meetings.
D. Enlisting local organizations to sponsor educational forums (TMMA, PTA,
League of Women Voters, Stand for Children) regularly scheduled and executed not
just in override years. For example, the TMMA might host an annual budget
discussion with question and answer that is open to the public.
E. The maintenance and strengthening of existing educational documents or
single -page fact sheets and creation of additional fact sheets as necessary. These
could be made available in print and on the town website. Examples would include:
• Components and projections of revenues (e.g. real estate taxes, state funds,
fees...etc.) and operating expenditures.
• Role of Proposition 2 '/2, overrides and debt exclusions.
• Explanations of and projections for expenditures.
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■ Explanation of Moody's ratings.
F. The creation of a budget document as a template (such as that used by Andover
or Newton) with greater detail for each department and with reader -friendly graphics
which is consistently reproduced year -after -year. This insures the reader ease in
making comparisons over time.
G. Distribution of a community -wide letter from officials explaining in lay terms
the proposed budget that is to be considered by Town Meeting. This letter would
explain the town's current fiscal position and articulate policy issues related to it.
H. Tax Bill Educational Insert to raise the awareness of citizens of the existence of
resources for further information on the budget and their ability to provide input.
Analytics Discussion & Recommendations
Creation of a Metrics Review Committee (MRC)
Many of the active participants in the budget process have developed a deep
understanding of Lexington's financial condition and operations and how Lexington
compares to comparable communities. These groups and individuals have used this
understanding to develop frameworks and metrics for making the recommendations,
decisions and tradeoffs that are a part of the fiscal process every year. Some of these
frameworks and metrics differ from group to group. Some are common but are neither
clearly articulated nor easily available in published documents or on the web.
Frameworks are not well understood by many of those outside the budget process.
Outside of Lexington, the taskforce investigated the frameworks and metrics used in
other communities. Many communities generate different frameworks and metrics
depending on the audience. Andover sends out high level summary metrics in letters to
the community and provides detailed, historical trends of services by department within
each departmental budget request. Newton's budget details historical cost information by
department.
Careful, strategic thought is required to decide which metrics to generate in creating a
framework for Lexington. For this reason, the taskforce recommends the creation of a
Metrics Review Committee (MRC). This committee would be a one-time committee,
specially chartered to develop key metrics separately from the budget process and include
representatives from governing boards (town and school), professional staff (town and
school) and members of the community.
A. Develop Key, High Level Metrics
The Metric Review Committee (MRC) should develop key, high level metrics that
illustrate our progress toward meeting the Town's goals, report where we stand
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relative to key indicators (such as inflation indices) and compare Lexington to other
communities.
Through previous 2020 task force groups and town -wide strategic planning efforts,
Lexington has worked to develop a clear sense of values and goals, and has
articulated these five:
• Fiscally sound
• Excellent schools
• Open space
I • Public safety (fire and police)
Affordability
Sample metrics the MRC should consider in determining Lexington's progress
toward these goals could include but are not limited to:
Is the town fiscally sound and financially well managed?
o Ratio of reserves (rainy day funds) to annual revenues
o Bond rating
o Analysis of selected "expense" trends (relative to comparable
towns and businesses) (for example, employee health care costs,
utility costs)
• Are we maintaining the excellence of our schools?
o Educational spending per student
o Average teacher salary (relative to comparable towns)
• Are we moving toward our open space goals?
o Ratio of open space to total (relative to comparable towns)
Do we have the right levels of staff, equipment and facilities to provide for
the health and safety of our population?
o Time required to respond to a fire
o Police officers per capita
• How are property taxes and town fees affecting the,relative affordability
of our town?
o Residential tax rate (relative to comparable towns)
o Average single family tax bill (including service fees such as water
and sewer charges) (relative to comparable towns)
B. Develop Measures of Cost and Quality
This taskforce recommends that the MRC review the town's initiatives to include
measures of cost and quality of department level services offered in its detailed
budget documents and on its website. Many on the taskforce felt that these detailed
measures help to build understanding, increase accountability and support town
management in its self-evaluation and continuous improvement processes. Some on
this taskforce were concerned that department level metrics can shift the focus of
Town Meeting onto the minutia of departmental management and away from broader
discussions. Therefore, the MRC should carefully weigh these considerations in their
deliberations.
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f
The taskforce uncovered numerous resources to be used by the MRC in their
deliberations. Two resources for use in determining reporting metrics are the
Governmental Accounting Standards Board (Appendix B) and the Municipal Yardstick
produced by a consulting firm called Municipal Benchmarking LLC (Appendix C).
Finally, Appendix D outlines linkages to other town websites.
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Appendix A
Research Questions for Other Communities
Demographics
a. Population
b. School-age population
c. Income
d. Total property values
e. Tax rate
f. Proposition 2 1/2 ceiling
g. Override history (amount, timing and format -- bundled, unbundled)
2. Supporting documents to gather
a. Last year's budget
b. Present budget
c. Published annual report
d. By-laws
e. A sample tax bill insert (if any)
3. Process questions
a. Who are the basic parties involved in the budget process?
b. What is the basic timeline for the budget process? (like Michael Young's)
c. What are the basic steps? (like Michael Young's)
d. What is the first step, who begins the process, and when does it begin in relation to
your town elections?
e. What parties are involved in each step?
f. How is information disseminated at each step?
g. What role does citizen input play at each step?
h. Is there room for department input at each step?
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i. How do you set goals as you enter the budget process (goals for budget outcomes,
goals for the process)?
j. How do you assess whether your budget meets these goals? Who checks and how
often?
k. How do you do long-range planning (operational and capital)?
I. Do you use strategic audit?
m. Do you use any formal method to achieve continuous improvement?
n. Do you bench -mark? If so, against which communities and for what items?
o. Who are the ultimate decision -makers on budget matters?
4. Communication questions
a. How do you communicate budget decisions? (Method and timing.)
b. How do you keep citizens engaged in the budget process?
c. How do you talk about tax bills and their impact (tax bill insert?)
d. Who is responsible for communicating budget information to the community?
e. Who issues budget documents? Letters? Meeting notices?
f. Who maintains the website?
g. Who maintains meeting minutes?
h. How much does the town spend on reporting and communicating?
2020 Budget Taskforce Report 5/13/2005 Pg. 10
Appendix B
Governmental Accounting Standards Board Resource Materials
The Governmental Accounting Standards Board (GASB) sets forth the standards that
state and local governments must follow in their accounting and financial reporting. The
GASB's mission is "to establish and improve standards of state and local governmental
accounting and financial reporting that will result in useful information for users of
financial reports and guide and educate the public, including issuers, auditors, and users
of those financial reports."
In recent years performance measurement has been an area of emphasis for the GASB.
New standards have been issued requiring state and local governments to communicate
their service efforts and accomplishments and setting forth standards for effective
communication. The GASB website on service efforts and accomplishments is
http://www.seagov.org, and contains examples of effective communication materials and
projects. A recent special report developed with funding from the Sloan Foundation on
effective communication of service efforts and accomplishments is available at
http://www.seagov.org/sea gasb project/criteria summary.pdf.
Appendix C
Municipal Yardstick Resource Materials
This taskforce discovered that several other communities purchase a report called the
Municipal Yardstick: Revenue, Expenditure, Staffing Salary and Debt Comparison
created by a consulting group called Municipal Benchmarking LLC in Waltham
(www.municipalbenchmarking.com). The report compares a town to a customized select
peer group on a variety of measures. The information comes primarily from the DOR and
DOE databases. The towns that use this report do not rely solely on it but rather augment
it by creating comparisons with internal data as well. The availability of rich information
of this type would ease the burden of developing metrics and its independence could add
to credibility; our research also indicates that the service is reasonably affordable.
Alternatively, this taskforce did note that Municipal Yardstick data comes primarily from
published sources; an independent group of volunteer citizens with skills in this area
could also be a resource for the development of benchmark data for Lexington.
Regardless of whether metrics are purchased or created internally, the MRC would be
asked to develop a list of which communities should be used for comparison.
Appendix D
Websites
Town of Andover - www.andoverma.gov
Town of Brookline - www.town.brookline.ma.us
Town of Newton - www.ci.newton.ma.us
Town of Wellesley - www.ci.wellesley.ma.us
Town of Concord - www.concordnet.org
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