To aid in the budget process moving forward, the town government may soon be adopting a long-term financial plan (LTFP) which will essentially serve as a forecasting tool.
Following the unanimous vote on the final, $151 million fiscal 2018-2019 town budget on Thursday at town hall, the New Canaan Town Council discussed a preliminary document outlining what the proposed five-year plan would include, which was drafted by vice chairman Rich Townsend.
The purpose of the plan, as per the draft document, is to “provide all the town funded units the opportunity to participate in setting the financial assumptions and goals for the town” over a five year period. Basically, it would require all town departments and the Board of Education to furnish a five-year forecast including future costs, revenues, goals and needs to the Board of Finance before the budget process commences.
“When we went through the budget, there were a lot of things that everybody wanted to do that would help us save money and help us work better with all the other organizations [in town],” Townsend explained after introducing the draft document. “So, when we arrive at budget time next year we are a little more prepared.”
“As we know, there’s going to be some interesting decisions between now and then, including the change of government in the state – as well as the [town property] assessment that will be done by the time we have this meeting next year,” he added. “So, what we’ve tried to do is put together a sheet, to define a little framework, around how to think about this, going forward.”
Townsend emphasized that the long-term plan is “not intended to conflict in anyway with the Town Charter,” or the state laws under which the Board of Education operates.
“I’ve shared this with the Board of Finance and I’ve shared it with you folks and I’ve talked it over with [town counsel] Ira [Bloom],” he explained. “What it basically does is support the Board of Finance in what they’re attempting to start doing: Going through how much debt we should have, and how we should deal, going forward.”
The draft document states that the five-year plan will “be the responsibility of the Board of Finance as the town budget authority” and that its preparation each year will begin immediately after the town budget is approved.
“All of the town-funded units—the Board of Finance, Board of Education, Board of Selectmen and Town Council—will be represented in the preparation of the LTFP,” the document states.
It adds that the plan “will provide a key input into the budget assumption letter that is developed and issued by the Board of Finance.”
The plan will encompass a high-level overview of the “key assumptions impacting the town’s financial health” including the value of the grand list, CPI, anticipated shifts in demographics, health insurance, space requirements, changes in regulations and state and federal mandates and more. It will include an overview of the town and Board of Education infrastructure (i.e., facilities) and may outline opportunities for reducing or eliminating redundancies, as well as opportunities to increase revenue using said infrastructure.
Basically, each department in the town and the Board of Education would be required to include all forecasted revenues, expenses, capital spending and borrowing in the plan.
Town Council Chairman John Engel said initially the idea was to make a motion supporting the implementation of the plan, for the purpose of making it into a town ordinance. However, after some review, “we decided not to make a motion and not to make an ordinance. This is merely a proposal,” he said. “That’s because we wanted to respect the fact that it is really the job of the Board of Finance to lead this. And it does not need to be made into an ordinance—which may or may not conflict with the town charter and state statutes governing the Board of Education.”
Councilman Steven Karl indicated that part of the inspiration for the plan was the fact that the Town of Greenwich is armed with similar data when it goes through its town budget process.
“[First Selectman] Kevin [Moynihan] has shared with me some of the data that the town council and board of finance is getting in Greenwich… and I thought, ‘I wish we were getting that kind of data,’” he said. “And some of that is described here… CPI and demographic trends … really great stuff.”
Karl suggested that “if we need to spend some money on getting that [type of] data and providing it to our board of finance… then we ought to get serious about getting that information.”
However, he said Moynihan cautioned him that figures for CPI and inflation are often moving targets – thus, the report could need updating in any given year prior to the commencement of budget season.
“Kevin reminds me, ‘You know, you have to consider that within an inflationary time, versus a non-inflationary time… you’ve got to always be evaluating those goals against against the CPI and inflation… because you might not be able to hold to that same number if inflation moves’,” Karl said. “So, I think we need to be able to understand what our expectations are, with regard to inflation, and how will that change our assumptions, with respect to budget growth.”
Townsend said “a number of towns around Connecticut are putting together five-year plans as a standard course of business. And it is a relative standard thing to do in the private sector.”
“It provides a framework by which you can evaluate what your growth ought to be – and what your budget ought to be in the current year,” he said. “The current year as a standalone is very difficult to evaluate. You need to evaluate it in a bigger context. And that came up in the budget process this time. A perfect example is Board of Education. Remember, we only grew our budget 1.7% last year, and we’re going to 3.5% this year. And when you have a five-year sweep—looking five years back and five years forward—you get that automatic feeling off what’s going on.”
Townsend said the plan would help get the town’s departments to think harder “about where we are going to spend some money and where are we going to get money back.”
“The things going forward like the building program—and the building evaluation that has been done —I think that’s a really terrific thing,” he said, referring to work recently concluded by the Town Building Evaluation and Use Committee. “It can be worth some money—to get some things offline that are costing us money to maintain—that we are not currently using. Perhaps we can sell some assets. So, there’s ways we can get some money out of this, as well.”
Purely as an example, Karl said one of the things the plan could help the town with is planning for things like tax relief for the elderly.
“[Town council member] Penny [Young] and I were on one of the subcommittees years ago on tax relief for seniors. This is not a new idea. We have had tax relief for seniors [for] many years now. But many years ago, a ‘means test’ was developed [to determine eligibility] because of the perception that there are people in town who are taking advantage of this who didn’t really need it.”
“We said only people who really need tax relief should get it—and you had to come in with a great deal of proof as to what your income was,” he said. “This was because there was someone in town who owned two houses who was getting tax relief—and we said this wasn’t really the intent of the rule.”
Young pointed out that the town also offers tax deferment to qualifying seniors and it should not be confused with tax relief. She says about 70 seniors are currently taking advantage of tax relief – but only about one is currently using deferment.
Karl said he brought up the topic of tax relief for the elderly only because “it’s come up again this week because of the revaluation.”
“People are asking what the impact [of the revaluation] is going to be on seniors,” he said. “So the question is, how do we get in front of this, and do we have the right program in place? And is it well communicated? This is something that the Board of Finance needs to look at closely.”
Moynihan, who was seated in the audience during the discussion, pointed out that tax relief for the elderly has historically fallen under the purview of the Health and Human Services commission.
Young said the commission members and town staff “are certainly very aware of this program—as is the tax assessor.” She said the program is “promoted person-to-person.” She said there about 70 seniors in the program and that the maximum amount of relief is $2,500.
Moynihan emphasized that tax relief is not the same as deferment, which is “basically a loan and you pay it when you sell your house.”
Karl said he wants the town to also consider tax relief for veterans. He says two to three residents have already approached him about the idea. “We don’t do that much for veterans here—and that’s a very important group,” he said.
Townsend said whatever the plan is, “it should be in line with the town plan of development.”
He said all contracts with various town collective bargaining units—teachers, police, fire, etc.—would be factored into the plan, as well as benefits.
The Town Council will be discussing the idea further with the Board of Finance and Board of Selectmen. If a long term plan is developed and adopted, it likely would not take effect until after the next budget cycle.