Mr. Townsend presented the FY22 budget very clearly to the Finance Committee. I do not have exhaustive notes from the presentation itself, but the deck is pretty clear and I have included Q&A from the committee below. If you are interested in our new revenues and how we are handling debt services, I recommend going back to Pegasus.
Presentation to Fin Com: This was very similar to the presentation to the Select Board
Natick FY22 Preliminary Budget: The full budget doc
Q&A: the best I could do
Questions from Committee:
Rooney - Why do we spend all our tax levy?
Townsend - It has been tradition in Natick to spend this money. Also, we have a structural deficit that needs to be covered.
Natick has improved the free cash. We used to be in the range of $12M in free cash, but have improved budgeting so it is more like $5M
When tax levy increases by 2.5% and things like health insurance increases by 6-7%, you will have a deficit that you may need to eventually true up with an override.
Rooney - Unfunded pension and benefit liabilities. Why don’t we put aside money for this each year.
Townsend - We are putting a lot against this in FY22. $11M+.
On target to have fully funded pension plan by FY30. Once fully funded, this focus will shift to OPEB.
Minimal funding into OPEB this year, but commitment to pay down after pension liability is handled.
Rooney - Modernization: Philosophically, will this lead to savings such as with a reduction in needed positions
Townsend - These do not usually lead to saving money. It increases productivity and gives residents better access.
Overtime, there may be some reduction in the headcounts needs, but it is not th key driver.
Scurlock - Have you received feedback from ratings agencies?
Townsend - No, we have not.
Scurlock - Abatements
Townsend: We were concerned but we haven’t seen a lot of activity in January, but people may wait for the last minute to file
Overlay account is well funded
Scurlock - % of tax levy used in this budget
Townsend: 97.5% is the last number I saw. Lower than I’d expect in the end.
Cutover to new system also may be impacting collections, but should come back to normal.
Scurlock - No new initiatives around water?
Townsend: This is a separate fund. We invest very heavily, but probably get more detail in subcommittee.
Scurlock - Do you feel we are deferring too many capital investments with regard to buildings?
Townsend: No. We are doing a lot of work with regard to getting assessments on our building. We will have a number of projects going forward in Feb.
Scurlock - We won’t see a large regress in terms of buildings over next few years?
Townsend - I wouldn't say that. For example, Town Hall needs a new roof and that will be pricey and will come up.
Scurlock - Current NPS budget is below current run rate for NPS. Do you feel that is a gap we can close?
Evans - When is the most recent report that assesses our readiness to meet our retirement objectives?
Most recent on “paric” website
Evans - Given that we are at ~8% of debt service, there seems to be some leeway in terms of adding debt?
Townsend: <missed this, but basically agreed we’re in good shape>
Lafleuf - Have we done scenario planning around interest rates?
Townsend: No, but I share your concerns around the unknowns in this area.
Deluca - Will that go beyond 2030 with changes in interest rates? (I didn’t get this one right)
Townsend: Defers to retirement board.
Deluca - Have you discussed with rating agencies the impacts of changing management in such a short time period?
Townsend: Last ratings agency call was Feb 2020 and it did not come up.
Foss - Didn’t Select Board vote for $2.3M in stab fund usage over next few years?
Townsend: I don’t recall then voting on that.
Foss - What is the structural deficit? 7.3M?
Townsend: How much free cash is used to balance budget over last few years. We use free cash for operating needs. We’ve done for year; however, it is getting tighter and tighter.
Foss - assumes $7.3 as stab fund plus free cash