Finance Committee Meeting
Minutes – July 26, 2004
7:30 p.m.
Members Present: Brian Fitzgerald, Kenneth Goldberg, David Hearne, Ira Miller, Paul
Pietal, Gloria Rose (Hamilton)
Absent: Michael Feldman, David Fixler, Charles Goodman, Jonathan Hitter,
Gregory Sydney
1. Representatives to Capital Outlay and Planning Board: David Hearne and Jonathan Hitter from the Finance Committee, Kenneth Goldberg, Alternate; William Heitin and Walter Joe Roach from the Board of Selectmen.
2. Actual borrowing. Depends on term of borrowing for each request--5 year, 10 year, 20 year.
3. Borrow first then pay as you go, principal & interest. Buy items to match 5 year, pay 5 year. Town does not get same depreciation as private sector. Useful life of asset is longer than in private sector. Guide correlations between borrowing and life of asset. Five years is minimum life of borrowing. School books issue of bundling life of asset. Not borrowed. School wants to capitalize for one time only, $125,000--8 to 9 years life of books. Can lead to good asset management. Depreciating out as close to life span.
4. Police car--useful life of vehicle is 5 years, but only 3 for police. In 5 years have to be replaced. Should be 5 year budget item. Police Department responsible for wear and tear. Will come to ask for new cars. Do not account for depreciation of asset. Don’t spend all budget incentive. Borrow for books and allocate to school in capital. Above priorities not departmentally managed, committee managed. School Committee members on capital committee. Bias by members by voting for their own department. Police covered by selectmen. Two different managers of funds. One person to manage Capital Committee and Priorities Committee. Department should be responsible for their own assets. Nature of how we borrow. Our borrowing is bundled and in the past managed on a bundled basis.
5. Non-profit oversight of depreciation in one department not allocated for each department--money bundled for borrowing purposes.
6. How do we best manage community assets from a community’s best interest and a department interest? Depreciation in operating budget? How does it impact for labor and equipment intermingled.
7. Allocating a good direction. 5 years $10,000 threshold, was $5,000. Differentiate between supply, repair, maintenance, consumables. Each purchase should be determined depending on item and group if purchased same year or need next year. Threshold not hard and fast rule. When quantitative borrowing, is it better to borrow and pay cash? If it could be put in operating budget, should we borrow? Match cost of asset with use of asset. Do not burden whole amount this year when it is used over many years. Minimize fluctuation in tax burden. Avoid big debt one year and nothing other year. Replacement value and depreciation borrowing over useful life of asset. Purchase asset up front. Cost to borrow. Borrowing should be qualitative.
8. David Grasfield: Annual process is within the cap. GASB 34. Inform of assets we own and should be managing. Accounting principles should be with threshold. $1,000 item operating. Ten items could be capitalized. [Question to be asked of Bob Uyttebroek about accounting principles with threshold.]
9. Not approaching our overall borrowing cap yet. No policy that says there is no threshold limit. Guidelines for credit rating, Moody’s, etc. Suggest operating budget. 7% of budget.
10. Total debt service 2022--$57,000,000+. $21,000,000 total debt principal in Foxboro. Interest long and short term just under $2,000,000, FY’04. 5.8% proposed. 5.3%, trending down. (A.) Hard and fast rules to look at. (B) Not concerned limit over $10,000--qualitative not quantitative. Should not be a consumable or maintenance item. Bundling not nailed down
11. Allocation on borrowing: The sense of 6 member quorum attach borrowings to departments to help managers to manage better. Be aware of where they stand. Assign depreciation. Phase in over time. Not to be next year--over few years. There should be an education process. Management item. Operating vs. capital item. Put off some items. Increase accountability. Put off purchase so other item would be purchased instead. Trade-off depreciation. Police Department hands down car to Building Department--5 year borrowing goes to other department--incentive to buy more effective car. Free use because depreciation down because other department takes over. The money stays within the DPW budget. One year there is 2.4 million and they wouldn’t borrow. Then does money stay in their budget? Is it enough of an incentive? Two years of capital freed up in budget. Build up borrowing capacity. Depreciation could build up that cap. That may cause delay of the operating budget. Fixed assets over time. Needs education.. Pass along asset with no intrinsic value--other department would take free asset. Do not over burden Police Department. It has use vs. having any value. Police Department--allocate borrowing, budget specific. DPW plan for replacement of expensive equipment. Police, DPW, Water think individually. Small departments collectively. Spread over many departments. Schools large enough to individually manage their assets. Council on Aging, hand-me-down assets. Incentive to manage.
12. Bundling: What can be borrowed for and what cannot be borrowed—bubbler, caretaker’s siding; one book doesn’t do any good so bundle books. Repairs at East—small pieces went above threshold—borrowed: services, roof inspection, feasibility studies. If it can’t be absorbed in operating budget, then it should be capitalized. Bundling should be in kind—books, 10 water bubblers by school, not dock and bubblers. Roof has life expectancy. Rec department for all bubblers—buy and distributing within their department—could be bundled. 23 hand held vacuum cleaners may not be wise purchase.
13. David Hearne: Repair & Maintenance: Carve out ½% for maintenance with 7% threshold in budget. To repair small items: manage asset. No direct incentive other than goodwill to maintain physical plant. Consolidate maintenance plan. Determine operating budget, move to centralized location. Borrow for maintenance. Give DPW money to maintain town-wide property. Funding issue. No true savings from annual budget process. Longer term good idea. Maintenance and feasible length of asset. Discuss in Capital. Allocate depreciation expense to different budgets; charge 5-year asset—will have use of it for future. Keep to maintain it for free for more years. Central group doles out money to department heads or that central group takes responsibility to maintain assets. Department head needs help to maintain assets.
A. Income: Fund through overrides—proponent based, selectmen for fund raiser—politics is the antithesis of planning. Council on Aging—senior center; two schools need; CPA potential; other borrowing.
B. Expense: Departments have wish list; vetted selectmen; capital outlay;
town meeting. Not sound structure for good management. Where does common interest lie.
C. Maintenance: Get as much value as you can from it.
14. Need common terms:
1. At Capital Outlay
2. Priorities
3. Public forum
How does Capital Outlay fit relative to other committees in town? Bottom up
approach. Need-based in planning. Asked departments to come forward with a 5-
year needs projection. In format not consistent or early enough. System to hear how
we’re going to fund it as reasonably as possible. Try to avoid override. Is this for
Capital Outlay? Will come on semi-annual needs.
15. David Hearne: Who is responsible for planning in this committee. Why isn’t it the Capital Outlay Committee for long term planning. Capital Outlay for non-exempt items. One funding source—either this year’s or override. Start in year one to lessen 5 year $10,000,000 spike, reduces borrowing. Some reimbursement to capital fund—most goes to general fund.
16. Paul Pietal: Guidelines to Capital Outlay for year to year borrowing.
17. David Hearne: Building maintenance repairs and planning for replacement. Money borrowed, some goes to maintenance. Maintenance budget for long term asset. Manager to use operating for short term assets. On departmental basis a certain amount goes to maintenance. Doesn’t have to be spent. Could keep for targeted purpose in reserve account. Priorities—6%-7%.
18. What is Capital Outlay’s role? Role of this committee to recommend whatever we see fit to town meeting. Capital Outlay is advisory role. Finance Committee responsible for recommendations. Let Capital Outlay know right at the beginning of the meeting.
19. Gloria Rose: Five year plan—continuity on committee. Provide some definition and framework—maybe need new blood and not as much continuity. The framework may not be adopted. Invite Planning Board ahead before first Capital meeting. Summarize ideas to forward to Capital Outlay Committee ahead of time. Would like framework in place before meeting.
20. Minutes at the beginning of next meeting.
21. Move Finance Committee meeting to High School Library. School Department in favor of move to library. Notify Ken Wertz, Director of School Maintenance, and SCTV. High School library for all Monday meetings. Coordinate with PTSO whenever they are not meeting. No rent to be charged. Time to be out of the building is 11 p.m. in order not to incur janitorial overtime. Phyllis needs to be confirmed that we are the main user. Where would equipment come from? This room would stay as meeting room. Cameras stay in this room. If we are moving to library, better use of library, free up this room for Town-Hall use and other use if not to be used for meetings. Planning Board is other main user of this room. Talk to Sam and Kathy about who uses this room. Downside, Ben and others used to be able to be at meeting and also take care of business upstairs. School Committee finds room inadequate.
OTHER BUSINESS
22. Next meeting, Monday, August 2, at Town Hall.
23. David Hearne: Question for Selectmen: Funding for purchase of Rattlesnake Hill.
24. David Grasfield: Formal notice not clear what state will do. State has ability to borrow, but not for the bill. Previous article worded too narrow. So some things cannot be done.
25. Reserve fund issues all behind. Approved this year’s reserve fund.
26. MOVED & SECONDED to adjourn. VOTED: 6-0-0. Meeting adjourned at 9:40 p.m.