The Office of the Town Administrator has released the Five Year Fiscal Forecast for FY23-27. This memorandum provides a synopsis of the financial outlook for each year as well as a "snapshot" of the town today.
August 15, 2022
To: Town of Franklin
From: Jamie Hellen, Town Administrator
Re: Town Administrator Five-Year Fiscal Forecast FY23-FY27
Welcome to the first “Five-Year Fiscal Forecast” from my office in almost three years. Due to the immense time pressures put on the office during the pandemic in 2020 and 2021, as well as the consistent economic shifts, it was difficult to depict an accurate picture of future town fiscal affairs. As mentioned in this year's budget narrative, I’m committed to getting back on a regular routine with this traditional update now that the country is moving past the regulatory structure of the COVID-19 pandemic. With the global and national economy in the center of everyone’s minds and the start of the new fiscal year (FY23) upon us, summer is a perfect time to hit a quick reset on town fiscal matters and get the view from 30,000 feet. I am hopeful to publish a more comprehensive version later this fall/winter as the Town approaches its annual tax rate hearing in December. By then, staff will have revenue trends through the first quarter of the fiscal year, finalized state aid numbers, and expected new growth figures. The forecast is also a requirement of bond rating agencies.
Quality of life and organization stability in Franklin
Before I dive into the forecast details, I believe it is worth taking a step back for a moment to pause and reflect. Over the past few years, our community, like the rest of the world, has gone through a tremendous disruption. Everyone has dealt with unforeseen adversity, challenge, and loss. Yet despite these professionally and personally challenging times for everyone, the overall quality of life in Franklin, as well as Massachusetts as a whole, could be considered some of the best in the United States.
The Town has exceptional, diverse schools and education opportunities, unprecedented achievement in public education, one of the most prepared local public safety operations in the state, a dedicated and well-trained public works department and countless exceptional
amenities for families and citizens of all ages and backgrounds. The Town is an attractive area for major corporate businesses and has a strong local economy with many diverse economic sectors. The Town continues to make historic investments in open space and recreation to add to the great quality of life in town.
The Town has developed a proven financial management strategy. We have had strong financial audits for many consecutive years. For the first time in the Town’s history, a AAA Bond rating was awarded due to prudent financial management, a diverse economy and well executed financial policies. For details, please visit the S&P Global Rating from May 2022 for the facts surrounding the AAA Bond rating. It is one of the most important documents to read for any member of the community.
From a bird’s eye view, everyone should feel an incredible sense of achievement for being a model community that is supportive, innovative and full of continued promise. We owe an immense amount of gratitude to our municipal and school employees for their incredible dedication over the last three years, by not only weathering a global pandemic, but improving the organization and continuing to succeed at an elite level. The social fabric of the community and citizens remains very good with a positive outlook given the countless events, festivals, community organizations and opportunities for all. As we move into a fiscal year without any COVID-19 restrictions or regulations for the first time in three years, I believe Franklin is more resilient and prepared for the future than we were three years ago. The organization remains very stable.
Fiscal Year 2022 (FY22) closed out on June 30th. July is one of the busiest times for the Finance staff closing out the past fiscal year, entering the new one, working on state required reporting and closing out budgets. I am pleased to report that all departments did a phenomenal job managing their budgets in FY22. As a result, very few year end transfers were required and another sterling financial audit was presented in May for FY21.
The revenue source with the greatest fluctuation to economic conditions, “Local Receipts”, ended up coming in at pre-pandemic levels, which is very good news. This dynamic was predicted and reflected in the FY23 budget revenue assumptions.
This trend is bolstered by a slowly returning local economy. Hotel revenues are now about 60% back to pre-pandemic numbers. The new cannabis excise (sales) tax provided an additional $104,000 in new revenue for less than a half a year of collections. Motor vehicle excise taxes were higher than budgeted due to the valuation of cars increasing. Ambulance receipts have increased due to higher demand for EMS services. As the Town enters FY23, revenues remain steady in this category, but FY24 may need some expenditure adjustments in order to deliver the services that we see trending in demand.
That said, Local Receipts are revenues mostly generated based on consumer behavior (hotels, meals, cannabis, licenses) and public demand (such as ambulance runs or building permits). Thus, they can stabilize or decrease with the changes in consumer patterns and the broader economy. They can also increase, which the Town must consider that staffing or equipment may be needed to adjust to meet those demands. The fees in this category need to mirror the capacity at the staff level to deliver the services.
Indications from the Federal Reserve and leading local economists acknowledge that to quell inflation, policy will be focused on reducing demand for goods, services and products to help ease cost increases. I tend to believe any policy action at the federal or state levels will take a while to settle into the local consumer patterns that drive revenues in local receipts.
Nonetheless, this is an area of revenue that the Town will need to monitor in FY23 heading into FY24 to ensure we have the capacities to meet the demand for services. We'll also need to monitor any major declines in revenues from attempts to quell inflation.
A couple of final statistics to close out FY22: only ten (10) single family homes were built in Franklin during Fiscal Year 2022. By comparison, in 1994, at the Town’s peak, the Town built 172 single family homes. Population in 2021 decreased for the 1st time in over four decades.
|Population in 2021 decreased for the 1st time in over four decades|