March 1, 2023
To: Joint Budget Subcommittee
From: Jamie Hellen, Town Administrator
Re: Preliminary FY24 Budget Model
In anticipation of the March 8th meeting, I have prepared a preliminary FY24 budget model based on the information we have to date. I have also attached the committee charge.
Budget Process Update
I have met with every department and outside entity (MECC, CRPC District, Retirement Board, etc.) that is reflected in the town's budget. I have not included Governor Healey’s H1 budget numbers into the model yet. I do not expect any substantial increases in local aid by July.
Line items will continue to be altered as new information becomes available through mid-April when my budget is released, hopefully just prior to the start of School vacation. The Finance Committee budget hearings are the week of May 8th. Schedules will be established soon, but will mirror previous years with one night for the General Government, one night exclusive to the Schools and one night for Public Safety & DPW. The Town Council budget hearings are scheduled for May 24th and 25th.
FY24 Preliminary Budget Model
The narrative below is intended to give a flavor of early assumptions based on the budget model. The attached document reflects the department's “wishlist” or optimum budgets for FY24 from each department. The current deficit between expected revenues and budget requests from each department is $5.78 million. With new revenues included, requests are approaching $10 million in one year. Half of this increase is being requested by the Franklin Public Schools at nearly $5 million for level service, as well as some space for capital funds. I remind all readers, this model is preliminary. The assumptions will change and far more data will be provided in the Budget Narrative document. See previous budgets here.
Revenue assumptions
● New Growth -
○ The model assumes a $1,000,000 increase in New Growth, which is a responsible assumption. After conferring with the Assessors, a small uptick is possible as the Town enters the building and home improvement spring season.
○ Please note this assumption is a decrease of nearly $300,000 in lost revenue from FY23. The next 8 weeks are critical to getting a sense of the general home improvement and building conditions in town. I expect a lukewarm market.
● Tax Levy -
○ The anticipated tax levy growth for FY24 over FY23 is $3,181,388, which is calculated based on last fiscal year’s tax levy limit plus 2.5% (maximum allowed by law), combined with a near $300,000 loss in New Growth from FY23.
● Local Receipts -
○ The model assumes an increase of at least $1,000,000 over FY23. It appears that most revenue streams have rebounded since the pandemic years and appear to have greater stability in FY24. As a result, the Town will see some requests for personnel to accommodate for the trends (notably public safety). I have attached the local receipts to date for FY23 through the fiscal year midpoint (12/31/22).
○ A few other notes:
■ Ambulance receipts have climbed steadily due to a record breaking amount of ambulance calls.
■ The cannabis excise local option tax (3%) is on target to bring in approximately
$275,000 in FY23.
■ Hotel revenues appear to have rebounded back within striking distance of pre-pandemic totals.
○ Local Receipts are generally a fee-for-service revenue source that includes licenses, alcohol licenses, fees, building fees, ambulance receipts, motor vehicle excise and a variety of other revenues on specific services or state laws that apply by the Town. By contrast, any similar revenue sources for the Franklin Public Schools are retained by the School Department in their revolving funds.
○ As we do every year, staff evaluate the local receipts trends as of March 31, 2023 and make FY24 budget recommendations based on those trends.
● State Aid -
○ I don't expect a substantial increase in state aid. Governor Healy’s H1 numbers actually show a small loss in aid. As usual, I expect the House & Senate to increase those numbers into a positive, but nothing to make a substantial impact.
● Other Revenues
○ Host Community Cannabis agreements and the Opioid Settlement funds will not be a part of the FY24 budget due to changes in those agreements, state laws and regulations or requirements of those revenues.
○ Off operating related budget items: Community Preservation Act budget will be forthcoming, as well as an Opioid Settlement budget for FY24.
Expenses Assumptions
The following is a summary list of highlights to the preliminary operating expense budget model:
● Assumes a 2.5% Cost of Living Adjustment (COLA) for all municipal personnel, including collective bargaining agreement commitments.
● The Public Property & Buildings (Facilities) expense budget has the largest expected increase at almost $760,000 increase over FY23. The simple fact is electricity, gas, materials, contractors, water and new stormwater costs are all increasing. This past year saw a near 3-cent/per KwH increase in electricity. The Town was fortunate to lock in at a very stable .139-cent/per KwH electricity rate this year (and for three more years) despite the increases globally. These are fixed costs in a multi-generational inflationary environment on 1.4 million square feet of public facility. As always, a detailed breakdown will be provided by building and by utility come April.
● The FY24 preliminary budget reduces the Department of Public Works budget by approximately $942,000 in stormwater costs. These services will move those expenses to the Stormwater Utility Enterprise Fund (see Enterprise Fund details below). The FY24 budget assumes $600,000 is now in the permanent tax base that will go toward roads maintenance and construction. Additionally, the budget assumes an additional $416,000 will go toward Snow and Ice Removal. As a result, I expect the DPW to not need any further capital appropriation toward snow and ice, which will free up about $750,000 in annual capital funding. My FY24 budget will reflect the accurate 10-year average cost of snow and ice.
The DPW also is seeing a large increase in fuel costs. The FY24 budget estimates an increase of $150,000 +/- over FY23 for fuel, which is used for all town and school fleet (sans the busses)
● A full year assessment of regional dispatch at $1.28 million. Assuming the district receives the state 911 Grant, 25% of this final assessment will be reduced. The grant program will end in FY25 and the Town will be responsible for the full assessment. A stabilization account has been created to help with the reinstatement of the full price.
● The Franklin Public Schools have informed me that to maintain “level” or “status quo” services for the current year, a 7% increase is needed for Franklin Public Schools in FY24. Enrollment based reductions will lower their request by the time the School Committee is completed with their budget process in a few weeks. The formal request will likely be approximately $2.9 million, of 4.2%, over FY23 due to declining enrollment.
There is not a plausible scenario where an increase of either $5 million or $2.9 million could happen out of the town’s operating budget without drastically affecting other town services. School revolving funds and other one-time revenues will certainly be used to generate their budget, just like Local Receipts revenues do for the Town. See above Revenue assumptions.
The School Committee is still in the process of developing their final FY24 budget. Some addition informational points that relate to the fiscal challenges of the public schools and their cost drivers:
● Out of District placement costs rose statewide at 14% this year, or $775,496 in direct costs to Franklin Public Schools. Traditionally, this has been 2-3%. Most districts are facing these cost increases. A possible statewide legislative solution may appear, but until then the District will have to absorb these cost increases due to inflation.
● Personnel, recruitment, retention, retirements and collective bargaining costs are driving the costs of public education. Salaries make up about 78% of the entire school budget and 10% are benefits. Thus, approximately 88% of the school budget relate to personnel.
● School Revolving Funds were at $7 million on 6/30/22. Approximately $5.57 million of those funds are already accounted for in FY23. The District projects a balance of $6.7 million in funds in FY24.
● Franklin is a “Hold Harmless” community in the eyes of state aid. Franklin currently receives $11.2 million in excess (hold harmless) state aid and, thus, the Town is held harmless of a penalty due to the steep enrollment drop. This provision of state law has been the safety net. Franklin is second to Boston at $41.7M. Some other districts with excess base aid: Weymouth $7.8M, Billerica $8.2M, Mansfield $6.8M, Pentucket Regional $6.8M, and Somerville at $6.9M.
● In 2008, the school district enrollment was 6,464. The current school district enrollment is 4,764 students in the 2021-2022 school year. As everyone knows, the School District is losing 100-150 students a year in district enrollment and this trend is expected throughout most of the rest of the decade. The School Committee is hosting a redistricting exercise and looking at future enrollment projections and facilities needs.
● FPS is spending $8.8 million more than what is required by Net School Spending (NSS) state requirements. NSS is the minimum amount a district must spend per student.
As the Town has discussed for many years, a day of reckoning will arrive for the Franklin Public Schools. The dynamics of the District are facing a unique reality. Similar to the City of Boston, which is seeing very similar dynamics, there are no easy answers. The School Committee and Superintendent of Schools have some challenging dynamics to solve.
● The preliminary model assumes many strategic town staffing investments to meet the needs of the community. The proposed additions or transitions are:
○ a Deputy Town Administrator and Administrative Assistant in the Administrator’s Office;
○ Two Town payroll and/or Human Resources staff to support both town and schools.
○ Four (4) additional Police officers who will be invested in to help traffic enforcement, mental health related calls and the overall increase in calls for service throughout the community. These investments will also reduce overtime costs to help offset the new salaries.
○ Two (2) additional paramedics for the EMS unit. It's a simple fact of record breaking calls for service. The situation mirrors the PD above.
○ Transition the part-time Historical Museum Archivist to full-time.
○ A full-time Director of Public Arts and Cultural Affairs. FY24 will be a half year beginning in January 2024.
○ A Van Driver and Administrative Assistant at the Senior Center to assist the coordinators of social services, programs and activities and transportation of the new van. This position is also half year beginning in January 2024.
○ A fleet manager in Public Works to manage the nearly 200 pieces of apparatus the Town owns, including rental equipment, generators, and school trucks and vans.
● The Debt and Interest budget remains one of my biggest concerns. At 1.77% of recurring general fund revenues, this slice of the budget is far below town goals and it has been trending in the wrong direction for years due to previous borrowing costs coming off the schedule and high interest rates to quell inflation. It should increase through the rest of the decade to maintain our public schools and facilities.
Other capital facilities or infrastructure projects also would be paid for in this budget. With a decent interest rate for the Schmidt Farm borrowing last December, we are cautiously optimistic that the Town will look at further borrowing for the backlog of projects in the pipeline: the Remington-Jefferson rehabilitation, the High School ten-year update, Washington Street to Grove Street sidewalk, King Street Memorial Park renovation (through CPA); Beaver Street Recycling Center and Solid Waste Master Plan and the Police Station. If the town desires any public reuse of Davis-Thayer, then those costs could be incurred in this area. If the town borrows to do any of these projects in the future, debt and interest will rise and leave fewer dollars available for other areas.
● Funds the Norfolk County Pension Retirement assessment at a $318,000 increase, which is actually relatively low compared to recent years that had been averaging $500,000 a year.
● Funds employee health care at a 5.2% increase or $332,000. This maintains current plan design and HSA contributions. Fortunately, the overall Benefits budget has been able to absorb recent employee insurance increases due to the continual decrease in resources needed to fund retired Teachers Health Insurance and unemployment insurance.
● The model assumes approximately $500,000 in various capital accounts that would appear on the Town’s annual capital plan. The model assumes two police cruisers and regular annual cycles of police tasers, police vests, and fire turnout gear. The budget also assumes additional capital resources in the schools at 7%. This preliminary model does NOT include any technology assumptions or other capital expenditures. In this year’s Capital budget that just completed, approximately $1 million was expended in recurring annual capital.
● The Library is funded at MAR level to meet state requirements.
● Some modest investments for general professional development, conferences, professional memberships, organization dues in some departments to accommodate new staff. I also proposed $10,000 in the Town Council budget due to increased MMA dues, but also for conference and training opportunities. With more new officials on town boards and committees,
having some money for training as an official is advantageous.
● $3,000 for a Town LinkedIn service for recruitment in Human Resources.
● $10,000 for the Cultural Festival is included.
Utility & Enterprise funds
● The Water Enterprise fund is sound due to the infusion of ARPA funds and the water treatment plant is up and running. The Town has not needed an operational water rate increase in five years. I hope that trend will continue and do not see an increase needed this year.
● The Sewer Enterprise Fund is a different matter. The Town should expect a large sewer rate increase in order to pay for the Beaver Street Interceptor. Bids on the project are due this week. I expect sewer rate increases to be before the Town Council in May.
● The Stormwater Enterprise Utility will see its first full year budget this year. As everyone knows, the town’s Stormwater Utility fee begins on July 1, 2023. Please visit the stormwater website for more information or call the DPW at 508-553-5500.
● The Refuse Enterprise account is in good shape due to the retained earnings (savings) the town has due to town policy. That said, as the global trash and recycling markets continue to shift, costs are increasing. A rate increase for trash removal may be necessary within the next year.
What does this model not include?
A short list of items that have been discussed publicly in some variation (not in this order):
● Additional resources or share of the pie toward Debt & Interest - see above.
● Additional public infrastructure costs of roads, sidewalks, parking lots, trails.
● $500,000 in additional capital needs that have been requested to put into the operating budget as annual operating costs.
● An increasing demand and reliance on Technology. Whether it's Cyber security, computers for our students and employees, the proper recruitment and retention of exceptional technology staff, or the required fiber and equipment, technology is a cost driver that is here to stay.
● Public Safety costs with increasing calls for service, notably mental health related calls.
● Tri-County Vocational School building assessment, likely through a debt exclusion, which will be a tax increase for citizens.
● Municipal Capital Projects: Davis-Thayer Reuse, Police Station, Beaver Street Recycling facility.
● Additional Strategic investments toward Franklin Public Schools, such as foreign language, capital, facilities and arts related curriculum, which has been discussed for many years.
 |
| FY 2024 Budget Narrative for discussion at Join Budget Subcommittee meeting March 8, 2023 - 7 PM |
