 Good evening and welcome back to Byline. This is a public affairs show of the Amherst League of Women Voters here at Amherst Media. And we're going through a really exciting transitional year as we're ramping up with our new town government and also working for the first time with our two new state legislators both in the state senate and in the House of Representatives. So this show is focused on helping you get to know who the players are and how our new system is coming online. And we have two guests here this evening. Back by popular demand is Paul Backelman. He's the town manager. And we also have Sonia Aldridge who is our finance director and we're going to learn more about her long career here in the Amherst town government in a couple of minutes. But as always we want to start with the process. So we're talking budget today. It's all about the budget today. So give us the top line, the headline that's going to be in the newspaper about the budget and then we're going to talk about the process. Okay. So I think the headline is major investment in roads and sidewalks, steady state budget, operating budget for all, for the libraries, the schools and the town. Very good. Any new programs? No new programs. We're just trying to hold on to what we have. Any layoffs? No layoffs. Sounds like a good budget. Maybe not a great budget because we all want more. It's in the nature of things. But the good news is that there aren't cuts and you're able to maintain all of the services and provide some focus on a couple of key areas that you started out with. Okay. So let's go to the process because we're all familiar, well many of us are familiar with how budgets used to get built when we had a select board and a town meeting. So now we have a town council, which is the legislative body and you are the executive. So tell us how the budget process differs now from them. So this was a hybrid year because the council came into office on December 2nd. Before that, the old finance committee and the old select board had already met. We had a four boards meeting and those two bodies established the policies and what they wanted to see come into the budget for this year. So the parameters were set by the old process because if we didn't start then we were going to be behind the eight ball. And so we used that as our starting point and felt like there wasn't going to be too much difference from what the council and it was going to take the council a while to get up to speed before they could articulate what their goals were going to be. So we based it on the old government. The big change this year is we had a very short time frame to do everything. Capital CPAC, which is our Capital Community Participate Community Preservation Act. And all the different aspects of the budget came in a very tight time frame. So put a lot of stress on the council, on staff, and just everybody. Four boards meeting, what is that? The four boards is where the select board, the board of library trustees, the school committee and the finance committee would come together, review information through a financial indicators project that the finance director and the town manager would put together and based on that information they would give us goals for the coming year. So that's the first stage where each of the departments, the major departments put on the table some of their ideas but you also lay out the parameters based on what's possible. Correct. Very good. And will that four town board committee continue into the new cycle? So it's a good process. The town has a really superb process. It won't be four, it'll be three because the finance committee is a subset of the town council now. So it'll be the town council, the board of library trustees and the school committee who will come together and talk about the finances of the towns. Sonia will do projections for revenue and everything flows from how much money is likely to come in. Great. Well, so now you just introduced Sonia and starting to look at her role. So Sonia, you've been in town government for quite a number of years. We don't have to say the exact number but you've been around a while. So you know the system, you know the players, you know how it all works. How is this new system working from your perspective? It's a hard year to judge that being a transition year. I think in future years it'll be a little bit of an easier process for us because we'll have more flexibility on any adjustments that need to happen to the budget throughout the year. Being able to have council meetings and appropriations if needed throughout. So then you don't have to call a special town meeting and go through all of that process. Things can move a little bit more efficiently when you need to review and revise. That's what we're helping for, yes. Very good. Tell us, what are the components of the budget? As a former Ways and Means Chair, I think of it as this is what we want to spend the money on but I also need to know how much money we've gotten where it's coming from. Is that pretty much how you do budget down here too? Mm-hmm. Okay. So talk about the revenue side. Well, there's four revenue sources. The major one is taxation which is about 60 or 62% this year of our revenue. That's our more stable source and there's local receipts which are highly economically driven. The motor vehicle excise, people are buying new cars when the economy is better doing building permits, adding on their houses, building new houses, that all happens in a good economy. So those are iffy at times. And then we have state aid, which is also, as you know, iffy at times. Approximately how much of our revenue comes from the state versus local sources? About 20%. It's been pretty steady at 20% in that state aid. And so most of the money is coming from local property taxes and auto excise and a little bit from fees and permits and things of that nature. Right. And new growth which increases the property tax. And how much new growth is there in a typical year? We've typically projected $600,000 a year. That's $600,000 in income based upon the amount of new construction that's taken place. And that holds pretty steady? It has. The last couple of years it's been a little higher. We had one year that it went over a million and that was due to a lot of personal property increases with Eversource, was it Eversource or Verizon? Eversource. Okay. And then we had, we've been experiencing a lot of new growth in Amherst. So we've been at about $800 for the last couple of years. Okay. So that's been a little bit better. But we can't count on that. Right. Going on. And does that get built into the budget or some of it goes into reserves? It's all built into the tax rate. So it's all part of the tax rate and it's all. When we figure out what the department's needs are, whether we're doing a level services budget, whether we need to cut, instead of increasing 2.5% this year, maybe we need to cut operating budgets to 2% or something. We have some challenges ahead of us. We lost some ambulance revenue when Hadley went to a private ambulance service. And we didn't make any cuts to the fire department and I don't believe we're planning on doing that. So we have to figure that out. So there's a lot to think about for next year. So is that the only service that Amherst was collecting money from another community? We have contracts with other communities with the other towns for ambulance service and some other things. But Hadley was by far the largest of $600,000 through the contract with the town of Hadley. Plus we were able to bill for the ambulance runs themselves. So as we looked into it, that was a significant reduction in revenue that we had to make up and we were able to do it through having new growth in town so we didn't have to lay off anybody or do any significant reductions in budget. The other thing that helped the town a whole lot was that last year we moved our insurance from a self-insured program to a fully-insured program and now that we're in the fully-insured program, our increase for next year FY20 is 0.6%, which is less than 1%. And that has helped us this year. We can't count on that every year and so we were just talking earlier today about future years is going to be even tougher than this year. We got through this year, we're pretty solid, but going forward I think it's going to be a tighter and tighter budget. And are you in a commercial plan or are you in one of the aggregations? So we're in a plan that the Mass Municipal Association put together. So it's 110 or 120 communities who all buy insurance through it, but it's a fully insured program. Previously we were self-insured and so if our, and we just paid the claims that people incurred and that was a very volatile experience. Okay, so let's focus for a couple of minutes on the, oh actually before we go on to that, since we're talking about revenue, what's the potential impact if things don't go as well as we hope down at Hampshire College? So they don't pay taxes so we're not dependent on that. Because they're an educational nonprofit. Exactly. But they do use town services. They use water and sewer and one of our big concerns isn't necessarily the loss of revenue from the water and sewer being, but the way the town is set up, we're a long narrow town. They're at the south end of town and they use a lot of water so that keeps the water flowing through the south end of town and if that dries up then we'll have to purposely pump water so that the applewood and adkins and they all get fresh water. You have to have, you can't have stagnant water in your water pipes. It's gotta keep moving. It's gotta keep moving. And Hampshire provides that leverage in the south end of town. So it's operationally critical as well as providing some revenue. Yes. Yeah. So both parts of that, you'd still have the expense. Yes. Because, except they're not going to be using the water but you'll be pumping. You can't bill it. Right. Yeah, very good. Okay, so let's look at the spending side of the budget. Paul, you wanna? Sure. So, let me just start by saying in most communities the largest share of the town's spending or the city's spending is on education. Is that the case here? It absolutely is. So, we're proud of our new budget. Nice cover. Yeah. Yeah. And so this is everything that we talk about today is online at AmherstMA.gov. Good. You will see the town's budget and this is the municipal side of the budget. We also have the school budget which is the elementary schools. We have the regional school district budget and the library budget. And in addition, we have on that same page links to the capital budget and the Community Preservation Act budget. So everything that deals with finances can be linked to right from that one page to make it easier for the public to gain access. So, education is by far the largest part of our budget. Percentage-wise, I'll give you the numbers. $23 million we spend on the town, about $23 million for schools, $16 million for the region, and about $2 million for the library, just in rough numbers. So all of that is education related, although it's the education budget and then the library budget. Right. So what does that leave for the rest of town operations? So the town is $23 million, then the elementary schools get about the same amount. We get a bill from the region for about $16 million. So $2 million, so of the $82 million, $83 million total budget, about $25 million is on the town side, the rest is on the school side. Got it. Okay, but there's always pressure on the town side because you have to meet certain obligations in relation to education spending. And also if you want to keep your library funding from the state, you have to meet those as well. Yeah, an important thing to remember is the library is just a piece of their budget because they also have a trust, and they raise funds, and they supplement the town portion with money that they raise on their own like they raised at the Sammy's Award this year. So what portion of the budget is set aside for capital? Capital, you want to talk about capital? I'm sure. Our goal is to reach 10% of the tax levy to spend on capital every year. So this year we were able to maintain 9.5%, we hope to reach 10% next year. That depends on the economy and the future. But we have been building up since 2011, trying to build our capital spending up, knowing that we have a lot of big projects coming down the road. So we're trying to build up our reserves and build up our debt capacity to do that. So this year we had about a $5 million amount of cash to spend on capital, but out of that capital budget comes any current debt. And is the $5 million that you're spending, are you spending $5 million that year building things or paying the debt on building things? We're paying debt and we're building things. It's a combination of the two. So you're paying principal and interest, and by that method you can build more than if you did pay as you go. So if you paid for the bridge as you built it, you don't borrow any money, you're going to do fewer projects in town than if you borrow money to do the bridge, and that's the normal government process. But if you take on more debt, then your cash capital is going to go down a little too. So you have to kind of balance that in the process. But it's just like at home, most people don't pay for their home and cash, but you don't want to pay for your food on credit. So it's the same idea. Building things that are going to last decades, you pay for it over decades. You're going to spend, buy something that's going to be used and gone. You want to pay for it out of your operating budget. So speaking of capital, where are we on capital planning? So capital planning, what we were presenting to the council is a one-year budget but a ten-year plan. And so we really focused on the one-year budget, but in light of where we're going in ten years because there are a lot of major capital projects, as Sonia said. This year we have focused again on roads and sidewalks. We're devoting a million dollars of town funds to roads, which goes along with almost $900,000 in Chapter 90 funds, which comes from the state. Last we're doing $200,000 in sidewalks. To put that in perspective, previously we were doing about $30,000 in sidewalks and about $300,000 in roads. So we really hope that this is the second year we're doing that because the message has come through loud and clear from the council and from citizens that our roads and sidewalks need investment. In the past the town has borrowed funds to put a sort of big infusion of funds into that, but we're still paying off those roads projects from five, seven years ago. And I'm trying to not do that. I'd rather establish enough space in the capital plan that maintains our roads because it's not something like, it's not a one-shot effort and then it goes away. We're in New England. Roads get beat up. We're all hitting potholes, the DPWs out there every day trying to fix the potholes. We've got major roads being under construction coming up right now and coming up. So we need to invest in our roads and sidewalks. What's your backlog on road construction, would you say? So we have about, gosh, we have the number, like $12 million that we need. We did a survey of every road in town with an outside engineering firm who literally drove every road and rated it based on the amount of traffic that it has and the condition of the road and the right time to invest. And so they recommend about $2 million in just the roads every year. We're getting close to that. That's where we need to be just to get our roads over a period of six or seven years back to where it should be, where they should be. That's a lot of work and a lot of money. It's a lot of work. It's a lot of money. It's a lot of disruption, too. I mean, this week or the last week when this airs, we'll be working on West Bay Road from Atkins to the Hadley Line, and that pretty much has to shut down the road for them to do the work, because it's a major reclamation project, but it's three days of inconvenience for a long-term investment in new roads, sidewalks, and crosswalks. And there'll just be a detour for that three days or so, but at the end of that, then we'll have a good solid road for a long time to come. So let's see, what else do we want to talk about? Once you submit the budget to the council, what happens then? So the council receives the budget. They, under the charter, are required to hand it off to their finance committee, and the finance committee has a really aggressive schedule during May. They're meeting every Tuesday and Thursday, two, three. We have no idea how long it's going to be, but they'll be meeting multiple hours each of those days, meeting with individuals. So you guys are going to have long days and nights. Yes. We'll be meeting with every department head, and having the department heads explain what their major, what the highlights of their budget are, what are the major changes, and what their challenges are going forward. So the council gets a bit of a flavor. We did a little prep work on this already. We had a lot. All the departments come in and meet with the council to talk about their operations. So the counselors are starting to get a sense of what the departments do, because it's a complex organization. Sure. There are 13 new people, not all new, but many of them new, and they're really working hard at learning how this town works. A steep learning curve. Oh my gosh, yeah. Yeah. It's amazing. Okay. And public hearings? There'll be a public hearing on May 21st on the budget itself, and that'll be at the Bangs Community Center. And then there'll be a public forum on the capital plan on June 10th, I think it is. Okay. And as I recall under the charter, you may appoint residents of the community to the finance committee. My recollection from a previous conversation with one of our town counselors on this show was that the decision was it was unfair to throw them into the pool in the middle of the race, and so you're deferring those appointments for next year's budget process, but those appointments won't be made so long from now, so they could potentially be at least observing and sitting on the sidelines watching it even this year. So I think these are people that the council will appoint. I think they've said three members from the public who will sit on the finance committee. They're going to start looking at interviewing and trying to make that appointment before July 1 so that whoever gets appointed will be there at the very beginning as we start the new fiscal year. Very good. Now there's another thing in the charter which I understand is not going to happen this year, but is in the sort of planning and development and consideration stage, which is the special feature that we've imported from, I think it's Cambridge, and the name of that is... Participatory Budgeting Commission. And the Participatory Budgeting Commission's purpose is... To have a sum of money that they will set up a process so that residents of the community can somehow participate in and say, here's how we want this money spent. So it's sort of circumvents the normal budget process, but Cambridge gives this group a certain sum of money. They request proposals. They make a decision just on how to spend that money. And that panel makes the decision on how that money will be spent or does it make recommendations to the finance committee or to the council? We don't know the answer to that because the study committee is going to figure out how to make that happen. Okay, because that's a really serious responsibility because they're not elected, they're appointed. Then again, you're appointed, you're not elected, but you don't make the final decision the town council does. So that's a very critical point that's going to have to be really thought through is how much autonomy will that group have. Will it be advisory or will it be a decision... They are required to deliver a report back to the council with their recommendation that the council must act on their report, either accept it or reject it. And when does that recommendation do or report? It's due a year, December of 2020. December of 2020. So that means this mechanism, if it were put in place, might not even happen until the 2021 budget or even beyond. Correct. But there's a shot at them participating in the 2021. Now, if that panel had been in place this year, given how you constructed the budget, would you have had some money for them? We would have had to cut something in order to have funds available. We would either take some less out of capital and put it in there. We would have to cut some operating budgets. We are a people-centered budget, so most of our money is in people. So that means layoffs or whatever, or not keeping as many positions as we have. But once the council decides how they want that to move forward, we'll abide by what their goals are. Very good. So if you would have had to cut, would it have been cuts to the actual FY19 spending levels? Or would it have been cuts in terms of the projected amount that you would have provided for those same programs and departments in FY20? So in other words, would the cut have come out of the growth revenue or out of the base? I think it would come out of the amount that we dedicated to capital. And so that's we try to have that be a recurring source of revenue that's going into capital. It would just be that instead of putting $5 million into capital, we might put in $4.8 million or something like that. So that's going to be a fundamentally critical. There's two big decisions there, at least. One is, should this participatory budgeting committee have authority to actually spend the money or only make recommendations? And the second is, are you going to do it every year, no matter how much money is available? And if you are going to do that, where is the money going to come from in a level year? Now, consider a recession where state aid goes down, other sources of revenue. So this participatory budgeting committee has a lot of homework to do because this is new to us and it's new most places, but Cambridge has done it so they can look and see how did Cambridge handle it in recessions and what role do they have and where does the money actually come from? This is going to be a very, it's a wonderful idea. That said, let's also remember that we as residents of the community have the opportunity to influence the shape of the budget at any time, independent of that committee or commission because we can call our town councillors, we can show up at the hearing, we can send emails, notes, letters, et cetera, both to you and to the councillors saying, I think we should spend more here and less there, we should add this new program. So it's not the only opportunity, but it's a special opportunity if they recommend that we go forward with this. Great. Well, we are very close to out of time, so are there any closing comments that you'd like to make? I just saw that finger. Because the capital is really our focus and we have these four major capital projects that are looming in the wings. This year, the priority has been on roads and sidewalks, which is what we've done, but to get there, we had to delay or say no to a lot of other capital projects and most of them, you can help me on what, they were a lot of vehicles we didn't purchase this year. Departments had numerous requests and safety equipment or radio equipment for the public safety. A lot of needs out there by our departments, but we basically said no to all of them and Joint Capital Planning Committee supported that in order to say, we're really investing in roads this year. That's not sustainable until we get more revenue for our capital and that's a big thing, so. And what are the options for more revenue for the capital? More state aid, obviously. More state aid. Cities and towns have very limited capacity. There is a new community impact fee tax that I'm presenting to the council on Airbnb type, they call short-term rentals. This legislature has passed legislation that short-term rentals should be paying taxes just like hotels and motels do. We have over a hundred in Amherst alone. So we'll collect a little bit of money from that. I don't think that's significant. New construction, when you have a new building that's paying $200,000 in taxes instead of $20,000, that's a significant, and that's a recurring source of revenue. So there aren't a lot of options other than state aid and the state has been sort of pulling back from its commitment because it may put the same revenue out there, but they're also charging us more on different assessments. And we've done all of the local option taxes that the state allows. And so another area of potential growth will, of course, be the taxes collected on marijuana sales in the town. And then another would be if there were any major economic development projects that produced some significant commercial or other form of economic development related activity that would produce some additional revenue. So I think we're out of time, so I wanna thank you both for being here. And good luck, thank you for your long service. We're not gonna say the number of years, but you've worked your way up and you're now the finance director of town. So thank you so much for your work. And Paul, you keep it up, it's been great. And I've been admiring and watching you and the council wrestled through this new government structure. Seems to be going really well, so thank you. Thank you all for joining us, and we'll be back again for another show next week.