November 4, 2022
Memorandum
To: Finance Committee
From: Jamie Hellen, Town Administrator
Alecia Alleyne, Assistant to the Town Administrator
Re: FY23 Budget Adjustment & Five-Year Fiscal Forecast Update
We are requesting the Finance Committee to support the amendment to the FY23 Town operating budget as outlined in this memo and recommend the changes to the full Town Council for their approval prior to setting the annual tax rate on November 30th.
Overall, the budget appears to be right on track through 9/30/22. Revenues have hit targeted projections and the staff has done a terrific job of managing cost increases in their expense budgets. We have attached an updated revenue sheet for local receipts through 9/30/22.
Five-Year Fiscal Forecast Update
There is very little updated news since the published forecast in August 2022. Click here for the forecast. Since August, the Federal Reserve has raised interest rates an additional ¾ of 1%. Home mortgage rates have reached a near 40-year high and many economic experts continue to predict a recession within the next 12 to 18 months. The federal government also announced the federal deficit is at $31 trillion. We have attached a recent Massachusetts economic analysis from MassBenchmarks, which is published through a partnership between the UMass-Amherst Donahue Institute and Federal Reserve Bank of Boston, that notes in its October 27, 2022 quarterly report the state’s “declining workforce and interest rate exposure in key industries make the Commonwealth vulnerable to an economic downturn”. The Town should be cognizant of these dynamics and will present new fiscal pressures on the operating budget in the coming fiscal years.
The only additional commentary is it will be our objective throughout the fiscal year to monitor the Town’s financial situation through the lens of the recently awarded AAA bond rating from the rating agencies. As anyone can see in the report, recent financial actions by the Town have resulted in a top rating. As the global economy continues to adapt to geo-political situations, it is prudent to follow these trends, which will ensure the Town maintains its AAA bond rating. This policy approach is a key technique to maintain services within the tax levy.
For those who have not read the ratings report, please click here. It is the most important document to read.
Revenue Adjustments
The following is a macro-synopsis of the revenue adjustments to the FY23 budget from the budget approved earlier this year at the annual budget hearings in May:
1. According to the Assessors, New Growth should attain approximately a $271,000 increase.
2. The Local Receipts bottom line will stay the same except for the additional funds received from the J&J opioid settlement and Host Community Agreement (HCA) funds. Two revised items are:
a. Host Community Agreements, as predicted, will decline. The numbers here depict actual receivables to date and NOT anticipated. I expect this revenue source to be eliminated at a date uncertain in this fiscal year. The Town still has the local option excise tax at 3%.b. J&J Opioid settlement is a new line item of revenue received due to the national opioid settlement. The Town has received $67,505 to date. Expenditure for these funds have strict restrictions per state law, but amounts will be as follows:i. SAFE Coalition will receive $50,000 for direct substance abuse support; andii. Franklin Fire and Franklin Police will receive $17,505 for narcan, training and support in responding to opioid cases in Franklin.
3. State Aid, Assessments & Other Revenues should see an overall increase of approximately $290,000 after the state local aid, education, county assessment and state budget formulas settle out.
Expense Adjustments
The attached resolution depicts the changes within each departmental account on the voting document. All of the changes to this document reflect the actual costs of the municipal collective bargaining agreements that have been ratified, as well as the 2.5% COLA adjustment for all municipal nonunion staff. The exceptions are:
1. The Town Administrator’s expense budget increased just over $103,000, which is where the opioid and host community agreement funds will be expended from.
2. Line item 164 Elections increased $14,738 due to state laws on mail in and early voting.
3. Line item 610 Library is noted due to the large shift from Expenses to Personnel due to collective bargaining agreement. The germane note is that the overall budget maintains the state required funding (“MAR”) requirement.
4. Line items 710/750 Debt & Interest have increased $225,044 to reflect the actual costs of the borrowing for the Municipal Building improvements and the Horace Mann drainage project.
5. Line item 910 - Comp Reserve is reduced approximately $430,000, which are the funds transferred for the COLA and CBA’s. The remaining amount in comp reserve will go toward the usual reasons for appropriation, such as unforeseen personnel decisions, retirement costs, recruitment and retention of employees, collective bargaining, etc. Additionally, I expect some funds to be used to begin implementing the Compensation & Classification Plan, which should be completed later this Fall. Any unused funds revert to the Town’s Free Cash allotment for the annual Capital Plan.
Please let us know if you have any questions
Shared from the Finance Committee agenda ->
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