Finance Chair Rips Ed Board Budget Projections

Editor's note: Board of Finance Chairman Liz Mao gave the following State of the Town Address before the Darien Representative Town Meeting on Monday. The following is the complete text of the speech, unchanged except for minor style changes (the original is attached to this article). It refers to documentation that was not sent to Darien Patch when she sent it her speech (update: that documentation is now attached to the article):

Madam Moderator, Members of the RTM, Town Officials, Fellow Citizens and Taxpayers

Good evening, All!  As Chairman of the Board of Finance, I have the honor of addressing you each December to report on the State of the Town.  Together we have accomplished a lot in the past year.  I am pleased to report that Darien’s financial health is strong, and that the Town’s hard assets are in great shape, and still improving.

The general environment we find ourselves in today includes a lot of the same factors we have been living with for the past several years. Connecticut’s economy is still not growing, and despite the largest tax increase in the state’s history, the state is still faced with a current deficit of almost $400 million dollars, and a grim forecast of a billion dollar deficit for next year.  Undoubtedly, the state’s financial problems will mean less money is returned to Darien in education and other grants in the years ahead.

In the time since I spoke to you last year, several important items of note happened in Darien on the financial front.

First, the Town ended Fiscal Year 2012 with a small surplus of about $300,000 on a total budget of about $115 million. Employee benefits cost less than expected and revenues for Town Clerk fees and building permits were higher than expected. The Town has been able to keep a tight control on expenses, and we commend the Board of Selectmen, Town Administrator Karl Kilduff, and all the heads of departments for their leadership in managing to tight budgets.

Second, The Board of Education was able to come in on budget, and the amount the Town received for the Equalized Cost Sharing Grant was $100 thousand dollars greater than what we had forecast.

Third, The Board of Finance spent the summer productively.  Working with our financial advisor Mark Chapman, and in conjunction with the hard work of our Finance Director Kate Clarke Buch, the Town of Darien was once again able to take full advantage of its pristine credit rating of Triple A, and refinance over a third of its total debt. 

• In August we refunded  $35.2 million dollars in bonds.  We directed our advisors to shorten the time horizon of the payback to take advantage of record low interest rates. Secondly, we also wished to smooth out the debt service payments in the current and the next few fiscal years.  As you may recall, last year’s forecast anticipated our going to $12.6 million dollars in debt service payments for Fiscal Year '14.  We have shaved $1.5 million dollars off that number and now expect  $11.1 million dollars in debt service for next year  (FY 2014) instead.
• The bond sale was successful beyond our expectations.  The interest rate on the new refunded bonds was an averaged 1.71 percent! We achieved a savings of $4.5 million dollars over the life of the bonds, and as I noted, most of these savings are achieved in the immediate term. 
• These savings accomplish our objective of lowering future peak debt service payments to  $11.25 million dollars or less.  This holds true even when we account for capital projects not yet approved.  The Board of Finance is very comfortable with debt service at nine percent or less of total expenditures.

To put this in perspective, the town has been able to continue to pay down the debt on the high school and Tokeneke School, as well as build and bring on to operation a newly renovated and expanded Police Department Building and new buildings at Weed Beach.  We have funded delayed maintenance and renovations at other schools and town buildings, like a new $750,000 roof at Middlesex Middle School.  The new Board of Education Building at 35 Leroy and the Mather Center here at Town Hall are timed well in that the debt service for these projects are coming in as the debt service attributable to school buildings is declining.  

In my view, a few years from now, our taxpayers will be applauding our excellent timing in improving our town and school buildings at a time when interest rates were at the lowest the U.S. had seen in 70 years or more. 

At the same time, we are aggressively paying down our debt.  At June 30, 2012, the town’s total debt peaked at $99 million dollars.  Even with our new projects coming on, by June 30, 2013, we will be down to $89.5 million dollars, and each year thereafter total debt is currently projected to drop rapidly by between five to nine million dollars a year. 

A Look at Next Year

The Five Year Plan you have before you is not a budget.  We have accepted the generous forecasts from the Board of Education as to enrollment and expenses and have not cut any proposed capital projects from either the BOE [Board of Education] or town forecasts, although in Exhibit D you will see that we assume some projects will be deferred. 

The Board of Education has given us a forecast that has each year’s spending climbing more than five percent over the previous year. I cannot agree that Darien taxpayers should be spending more than $100 million dollars a year on education by 2018. I hope the Board of Finance will direct the Board of Education to plan their spending to be more in line with inflation.

One area that is difficult to predict is school enrollment. For the first time, we have included BOE enrollment forecasts on this Exhibit. 

The unexpected continued growth in the school population is a key driver of expenses going forward, especially if the additional students tip classroom sections over their set limits. 

The BOE has said that most of the growth is in the elementary grades, and that we may need to be looking at adding additional room at the elementary level.

We have asked the BOE to plan out different scenarios, and we will be working hard to come up with optimal plans to deal with the possibility of space limitations.  

We continue to be concerned about Special Education expenses, as the BOE’s forecast has expenses rising in this area at 8.5 percent per year, double or triple inflation effects.  We hope the BOE and administration will take steps to limit such increases.

Returning to Exhibit B, you will note that the forecast predicts a rise in the Town’s total expenditures for next year of 6.2 percent, or $127.7 million dollars, up from this year’s budget of $120.2 million dollars.

AGAIN, THE BOARD OF FINANCE DOES NOT THINK THAT THIS IS ACCEPTABLE, AND WE WILL BE WORKING HARD AS A TEAM WITH THE TOWN AND BOE DURING THE BUDGET SEASON TO TRIM BACK THESE FORECASTS.

Over the past several years, the Selectmen have done a very good job in limiting new spending.  However, as we move forward, we anticipate that operating and maintenance costs may need to rise in order to keep our new, more sophisticated buildings at optimal operational efficiency.  

We also see the need to complete drainage projects, to minimize flooding.  We have assumed that these projects, totaling almost $3 million dollars, will be bonded for.  We are hoping that new capital projects will be brought in under budget as has the new Police Building and Weed Beach.

Turning to Exhibit C, you will find anticipated revenues and transfers.  We have been conservative in our revenue growth assumptions and we assume declines in governmental grants and only modest growth in our Grand List. 

We will draw on our healthy fund balance, but we will stay within our Board of Finance policy of not having a fund balance less that 10 percent of our total budget.

Before you gasp at the projected mill rate increase of 6.04 percent to fund next year’s budget, please remember that the numbers before you represent a full “wish list” of projects and expenses, and have not been subject to any real scrutiny. 

I assure you that the selectmen and the BOE will work with the Board of Finance to bring that number down to a more acceptable number through the budgetary process beginning early in 2013.

Thank you for your attention tonight.  I look forward to your comments and invite any of you to contact me at any time should you have questions about our financial picture. Please know you are always welcome to attend our meetings and provide input.

Thank you to Jayme Stevenson, our first selectman, and to all the selectmen for their leadership. Thank you Betsy Hagerty-Ross and your board for your hard work.  I continue to be honored to serve with my fellow Board of Finance Members, Martha Banks, Co-Chair, Lori Bora, Gwen Mogenson, Jon Zagrodzky, Joe Duwan, and Jamie McLaughlin.

RTM members, and all of you here and at home, I thank you for your hard work in making Darien Government an exemplary model of the best that a New England-style town government can be.