HomeMy WebLinkAboutTown of Nantucket Massachusetts 10.05.2016A -Town of Nantucket,
Massachusetts
Presentation Prepared For
Standard and Poor’s
RATINGS SERVICES
2
Slide
Itinerary……………………………………………………………3
Team Nantucket……………………………………………………4
Presentation Agenda………………………………………………5
Management………………………………………………………6 - 11
Financial Policies……………………………………………………12
Revenue and Exepnditure Assumptions……………………………13 - 15
Budget Amendments and Updates…………………………………16
Long-Term Financial Planning………………………………………17
Capital Improvement Plan…………………………………………18
Investment Management……………………………………………19
Debt Management…………………………………………………20
Reserve Policies……………………………………………………21 - 22
Financial Measures…………………………………………………23
Budgetary Flexibility…………………………………………………24 - 35
Budgetary Performance……………………………………………36 - 41
Liquidity……………………………………………………………42 - 43
Debt and Contingent Liabilities………………………………………44 - 48
Other Pertinent Items………………………………………………49 - 53
Economy……………………………………………………………54 - 66
Contents
Itinerary
Opening Remarks – Jim Kelly, Chairman of Board of Selectmen
Introductions – C. Elizabeth Gibson, Town Manager
Presentation
o Brian E. Turbitt, Director of Municipal Finance
o Julia Lindner, Financial Analyst
o Andrew Vorce , Director of Planning and Land Use Services
Presentation Questions/Lunch
Island Tour
Guest Drop-Off
3
Team Nantucket
Town of Nantucket
C. Elizabeth Gibson, Town Manager
Brian E. Turbitt, Finance Director
Julia Lindner, Financial Analyst
Deborah Dilworth, Assessor
Andrew Vorce , Director of Planning and Land Use Services
Roselli, Clark and Associates
Tony Roselli, CPA, Partner
First Southwest Company, Division of Hilltop Securities
Cinder McNerney, Managing Director
Megan Hyland, Assistant Vice President
Lisa Driscoll, Assistant Vice President
4
Presentation Agenda
Management
Financial Measures
Management of Long-Term Liabilities
Planning and Economic Development
5
Management
Town Manager, C. Elizabeth Gibson
o Experience
Town Manager, Town of Nantucket (1994 –
present)
Masters in Public Administration
6
Management
Brian E. Turbitt, Finance Director
o Experience
Town of Nantucket, Finance Director (2014 –
present)
Town of Millbury, Finance Director (2008 –
2014)
Town of Millbury, Finance Committee
Chairman (2006 – 2008)
Member (2005 – 2006)
7
Management
Julia Lindner, Financial Analyst
o Experience
Town of Nantucket, Financial Analyst
Investment Banking
RBC Capital Markets – Analyst
Genuity Capital Markets – Associate
8
Management
Deborah Dilworth, Principal Assessor
o Experience
Town of Nantucket
Principal Assessor (2001 – present)
Interim Finance Director (2013 – 2014)
9
Management
Andrew Vorce , Director of Planning and Land Use Services
o Experience
Nantucket Planning and Economic Development
Commission
Director (2005 – present)
Senior Planner (1994 – 2005)
State Planner of the Year Award (2015)
MPA; Suffolk University
10
Management
The current administration is making a significant positive impact on finances
o Financial policies that have existed for a number of years were codified in fiscal 2016
o This was made possible through a grant received as part of
a Community Compact Cabinet agreement with the Commonwealth
o Emphasis is to continue the philosophy of building reserves through conservative forecasting and stringent
budget management
o Draft policies are currently waiting Board of Selectmen approval (anticipated before calendar year-end)
11
Financial Policies
Codification of Management Policies
o Revenue and Expenditure Assumptions
o Budget Amendments and Updates
o Long-Term Financial Planning
o Long-Term Capital Planning
o Investment Management Policies
o Debt Management Policies
o Reserve and Liquidity Policies
12
Revenue and Expenditure
Assumptions
Revenue and Expenditure Assumptions
o Financial assumptions and projections are realistic
and well-grounded
o Formal historical trend analysis is performed and
updated periodically for both receipts and spending
o Efforts are made to determine whether revenues or
expenditures will deviate from their long-term
trends
o Local and national indicators are monitored for any
cyclical changes
13
Revenue and Expenditure
Assumptions
Revenue Assumptions
o Property taxes are assumed to increase 2.5% per year
o New growth is estimated at 85% of long-term average
o State Aid assumed to remain constant
o Local receipts are forecasted using qualitative and
quantitative methods (seasonally adjusted time series)
o Revenue projections are conservative despite very strong
growth in local receipts
14
Revenue and Expenditure
Assumptions
Expenditure Assumptions
o Health insurance projected to rise 8% per year
•Cadillac Tax in full effect by fiscal year 2021
o Pension funding in accordance with actuarial valuation
o Debt service in accordance with current amortization schedules
with estimates for new debt (working closely with financial
advisor)
o Operating expenditures projected to increase at an average of 2%
o Salaries assumed to increase in accordance with collective
bargaining agreements
•Non-union employees projected at 2% for fiscal year 2017 and 1.5%
thereafter
15
Budget Amendments and
Updates
Budget Amendments and Updates
o Procedures for reviewing and amending the budget are in place
o Weekly budget surveillance is performed to identify problem areas
o Management possess ability and willingness to address necessary intra-year revenue and expenditure changes to meet fiscal targets
o Involvement of department heads on a monthly basis is key to expenditure control
o Quarterly budget updates are presented to Board of Selectmen
o Response is through spending freeze, Town Meeting action or reserve fund transfer
16
Long-Term Financial Planning
Long-Term Financial Planning
o Long-term financial plan is in place
o Rolling 7- year forecasts are utilized
o Future issues are identified timely and possible
solutions are vetted
o Revenue and expenditure decisions are made
from a long-term perspective
o Structural balance is a clear goal
17
Capital Improvement Plan
Long-Term Capital Overview
o The Town has created a long-term capital improvement plan
o 10 year rolling plan
o Surveys all department heads and managers
o Annual capital needs plan developed based on high/medium/low priority
o Funding sources identified up front
o Linked to operating budget and long-term revenue and financing strategies
o Larger projects costs determined using professional consultants
18
Investment Management
Investment Management Policies
o Currently following MGL investment regulations
o Trust funds invested using published list
o Stabilization funds invested using prudent investor regulations
o Reduced risk, rather than yield is primary
objective
o Requirement to report investment performance
to the Board of Selectmen quarterly
19
Debt Management
Debt Management Policies
o Current adopted policy 12% of expenditures
o May exceed this limit only in certain situations and only through a debt exclusion
o Average life of combined debt should never exceed 10 years
o 65% of succeeding debt will be retired within
10 years
o Enterprise debt to be subsidized through user
rates
20
Reserve Policies
Reserve Policies
o Reserve ratio on a GAAP basis as defined by S+P
rating agency shall not be below 15% of
expenditures (unassigned + assigned/adjusted
expenditures)
o Free cash may not be used for operating items
and may only be used for nonrecurring items ,
emergency items, and capital or long-term
liabilities such as OPEB
o Free cash shall not be below 5% of expenditures
21
Reserve Policies
Reserve Policies
o General Stabilization Fund
Target to reach 7% of expenditures (currently 6.6%)
Use for unique and emergency type situations (i.e. 9C
cuts, snow and ice, catastrophic event)
o Capital Stabilization Fund
Target to reach and exceed 3% of expenditures
(currently 1.5% - funded in 2016)
Use for capital only to help subsidize capital
improvement plan or emergency capital event
22
Financial Measures
Budgetary Flexibility
Budgetary Performance
Liquidity
23
Budgetary Flexibility
Unassigned plus assigned fund balance (GAAP) = $20.6 million
Reserve ratio = unassigned fund balance plus assigned fund balance divided by general fund expenditures and transfers out
Reserve ratio is 25.3%
Consistently over 20% since 2010; attestation that management reserve policies are operating as intended
Dollar levels have been trending higher
142% higher than 2010
Past few years are highest level in the Town’s history
History of general overrides passing
Current forecasts call for maintaining reserves at similar or slightly higher levels for several years
24
Budgetary Flexibility
25
Fiscal General Fund Transfers One-time Adjusted Reserve
Year Assigned Unassigned Total Expenditures Out Capital Recurring Ratio
2016 3,028,651 17,571,873 20,600,524 75,753,810 16,551,710 (10,938,480) 81,367,040 25.32%
2015 6,323,207 15,470,669 21,793,876 72,251,992 8,312,295 (5,271,000) 75,293,287 28.95%
2014 2,047,757 14,745,606 16,793,363 68,622,281 8,403,098 (4,017,480) 73,007,899 23.00%
2013 5,146,635 13,881,601 19,028,236 64,911,578 9,843,342 (4,855,920) 69,899,000 27.22%
2012 2,182,323 14,373,770 16,556,093 63,774,476 11,278,447 (2,965,297) 72,087,626 22.97%
2011 4,488,570 12,186,769 16,675,339 63,133,614 9,666,236 (4,550,470) 68,249,380 24.43%
2010 3,136,435 11,047,142 14,183,577 69,768,595 5,586,596 (4,510,690) 70,844,501 20.02%
Budgetary Flexibility
Existing Stabilization Funds (As of June 30, 2016)
o General Stabilization - $5,044,555
o Capital Stabilization - $1,250,000
26
Budgetary Flexibility
10.0
15.0
20.0
25.0
2010 2011 2012 2013 2014 2015 2016
14.1
16.7 16.6 19.0
16.8
21.8 20.6
Unassigned plus assigned fund balance (in millions)
27
Budgetary Flexibility
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
2010 2011 2012 2013 2014 2015 2016
20.0% 24.4%
23.0% 27.2% 23.0% 28.9% 25.3%
Reserve ratio
28
Budgetary Flexibility
The Town has tremendous flexibility in its future
budgets
o Levy capacity in the past 5 years at 3 - 5% of levy
o Direct capital from the General Fund $3 - $11 million in past 5
years
o New growth averaging $0.9 million over last 10 years
o Reserve ratio at almost 25%
29
Budgetary Flexibility
Historical Unused Levy Capacity
30
Fiscal Levy Unused
Year Limit Levy Levy Capacity Tax savings
2016 72,429,696$ 69,636,374$ 2,793,322$ 3.86%
2015 69,792,303 66,329,953 3,462,350 4.96%
2014 67,372,224 64,647,039 2,725,185 4.04%
2013 65,695,822 63,618,274 2,077,548 3.16%
2012 64,834,729 62,274,744 2,559,985 3.95%
Budgetary Flexibility
Direct Capital Outlay
31
Fiscal Direct Percent
Year Capital of Levy
2016 10,938,480 15.7%
2015 5,271,000 7.9%
2014 4,017,480 6.2%
2013 4,855,920 7.6%
2012 2,965,297 4.8%
2011 4,550,470 7.2%
2010 4,510,690 7.4%
Budgetary Flexibility
New growth is trending back to its highs of
2007 and 2008 as current development is
robust and will have a positive impact on
future economic conditions; also see planning
section of slides for economic development
10 year average $0.88 million
2016 new growth $1.14 million
32
Budgetary Flexibility
New Growth History
33
New Growth
2007 1,180,879
2008 1,371,189
2009 1,028,362
2010 683,501
2011 333,058
2012 518,585
2013 859,044
2014 679,339
2015 1,037,749
2016 1,140,085
5 year average 846,960
10 year average 883,179
Budgetary Flexibility
-
0.20
0.40
0.60
0.80
1.00
1.20
1.40
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
New Growth (in millions)
34
Budgetary Flexibility
History of successful tax overrides
35
Fiscal
Year Amount
2012 100,000
2007 2,200,000
2006 495,000
2004 282,000
Budgetary Performance
The Town’s budgetary performance has been outstanding in each of the last 4 years
Results versus expenditures have ranged from 8 to 11% after factoring out direct capital disbursements
The trend is expected to continue in 2017
The Town was able to balance its budget for fiscal 2017 and is in the process of setting the tax rate
36
Budgetary Performance
37
2016 2015 2014 2013 2012
General Fund Revenues 88,986,863 82,466,208 78,058,829 76,902,637 74,609,148
Adjustments:
Transfers in 44,402 81,000 1,751,972 600,428 106,831
Unique items - strom reimbursement (843,805) - - - -
Adjusted General Fund Revenues 88,187,460 82,547,208 79,810,801 77,503,065 74,715,979
General Fund Expenditures 75,753,810 72,251,992 68,622,281 64,911,578 63,774,476
Adjustments:
Transfers out 16,551,710 9,512,295 8,403,098 9,843,342 11,278,447
Unique items and capital (10,938,480) (5,271,000) (4,017,480) (4,855,920) (2,965,297)
Adjusted General Fund Expenditures 81,367,040 76,493,287 73,007,899 69,899,000 72,087,626
Adjusted budgetary result 6,820,420 6,053,921 6,802,902 7,604,065 2,628,353
General Fund Net Result 8.4%7.9%9.3%10.9%3.6%
General Fund
Budgetary Performance
38
2016 2015 2014 2013 2012
All Governmental Funds Revenue 97,741,601 91,584,368 86,860,554 84,605,465 84,246,345
Adjustments:
Indirect charges - - 1,110,478 579,447 260,996
Unique items (843,805) - - - -
Adjusted Governmental Fund Revenues 96,897,796 91,584,368 87,971,032 85,184,912 84,507,341
All Governmental Funds Expenditures 105,290,679 85,326,226 79,508,402 75,872,635 72,319,131
Adjustments:
Enterprise subsidies 8,706,384 7,962,295 8,053,098 8,882,738 11,464,597
Unique items and capital (20,235,917) (5,951,395) (3,933,554) (7,977,431) (3,128,718)
Adjusted Governmental Fund Expenditures 93,761,146 87,337,126 83,627,946 76,777,942 80,655,010
Adjusted budgetary result 3,136,650 4,247,242 4,343,086 8,406,970 3,852,331
All Governmental Funds Net Result 3.3%4.9%5.2%10.9%4.8%
All Governmental Funds
Budgetary Performance
Primary drivers for 2016 (favorable to
budget/forecast)
o Motor vehicle receipts $0.8 million
o Meals excise receipts $0.1 million
o Room occupancy $0.9 million
o Departmental and other receipts $0.9 million
o Tax title and delinquent taxes $0.6 million
o Other minor revenue items in aggregate $0.8 million
o Expenditure turn-backs $2.5 million
39
Budgetary Performance
Primary drivers for 2015 (favorable to
budget/forecast)
o Motor vehicle receipts $0.5 million
o Meals excise receipts $0.1 million
o Room occupancy $0.6 million
o Departmental and other receipts $0.7 million
o Tax title and delinquent taxes $1.9 million
o Other minor revenue items in aggregate $0.8 million
o Expenditure turn-backs $2.2 million
40
Budgetary Performance
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
2012 2013 2014 2015 2016
2.60
7.60
6.80 6.10 7.70
Operating performance general fund (in millions)
41
Liquidity
The Town’s liquidity has historically been
very strong
Unrestricted cash and investments $66 million
at end of fiscal year 2016
Trend continues into fiscal year 2017
Cash to debt service and cash to expenditure
ratios are at the top end of the rating scale
42
Liquidity
43
Gross cash 106,919,887
Gross investments 4,200,701
Restricted cash (44,915,972)
Restricted investments (167,197)
Unrestricted cash 66,037,419
debt service 2016 (not enterprise)7,062,270
ratio 935.07%
General fund expenditures 2016
(includes subsidies to OIH and Landfill)84,523,324
ratio 78.1%
Debt and Contingent
Liabilities
Strong liquidity position has enabled the Town
to avoid cash flow notes for a number of years
The Town does not engage or have any
exposure in any of the following
o Bank loans
o Variable rate debt
o Direct purchase debt
o Unrated loans or bonds
44
Debt and Contingent
Liabilities
The Town does not have any overlapping debt
Projects related to the current bond issue
o School - $40M
o Airport - $ 2M
o Miscellaneous rollovers
Projects related to possible future bond issues
o Complete sewer number 1 - $41M
o Sewer number 2 - $80M
o New nursing home - $40M
o Fire station - $17M
o Administrative offices - $30M
45
Debt and Contingent
Liabilities
Barnstable Contributory Retirement System
Net Pension Liability - Nantucket
proportionate share - $59.9M
Plan assets as a percentage of latest Actuarial
Accrued Liability 58.1%
In top 50% relative to funding ratios in the
Commonwealth as of 1/1/14 valuation out of
105 systems
46
Debt and Contingent
Liabilities
Other Postemployment Benefits (OPEB)
o Created Trust under 32B section 20
o Created a dedicated annual funding source from
taxation
o Plan is to eventually incrementally fund each
year until ARC is reached; if forecasts allow
o 2014 - 2017 – funded $1,750,000 in aggregate
o Upon fully funding pension in 2036, become
more aggressive with OPEB
47
Debt and Contingent
Liabilities
Other Postemployment Benefits – funding to
date
48
Fiscal Year Amount
2014 250,000
2015 500,000
2016 500,000
2017 500,000
Other Pertinent Items
2017 budget versus 2016 budget
o Health insurance +9%
o Pension +8%
o Planned staff increases +2%
o Contractual wages +2%
49
Other Pertinent Items
Proprietary Fund Subsidies
o Several years ago Our Island Home and Landfill were converted
to enterprise funds from Town Departments
o Management believed transparency was important
o Nothing has changed economically from the previous reporting
o Activities will never be self sufficient and never were
o Essentially they are still Town departments supported by taxation
o Any Town department, if carved out, would need a general fund
subsidy
o Town is committed to and will continue to support these
activities
o All other enterprise funds are self supporting
50
Other Pertinent Items
Storm mitigation
o Storm mitigation is a critical component of the Towns strategic goals
o The Town is confident it is well prepared for a major catastrophic event
Tremendous budgetary flexibility
Direct cash capital outlay is up to about $10 million per year; this could be deferred or borrowed
Excess levy capacity is averaging about $3 million per year and could be used
Reserves are well above Town target level of 15% thus $8 million could be freed up and still be at target
Excess flood insurance of $10 million
Reliance on Federal Emergency Disaster Relief (No-name storm 1991 was costliest on record at $30 million and was covered by
FEMA)
Borrowing capacity is close to $1 billion
Town has shown a willingness to override debt when needed and general operating when needed as illustrated in previous slides
51
Other Pertinent Items
Land Bank
o Separate organization created through a special act
o Town has no control
o Town guarantees debt
o Outstanding debt $26.9 million
o Annual debt service approximately $2.8 million
o Unrestricted equity $10.8 million
o 2016 operating revenues $24.2 million
o 2016 operating expenditures $7.8 million
o Purchased land each of last two years with annual surplus
52
Other Pertinent Items
Miscellaneous items
o School enrollment is increasing due to population
increases
o More people are moving to the Island
o Current contracts are through June 30, 2017
o Negotiations will be commencing in the near future
53
Economy
Economic development mission
o Maintain strong property values
o Plan for the orderly and coordinated development and protection of the physical, social and economic resources of the Island
o Maintain low vacancy rate and turnover in
commercial property
o Aggressively compete with other vacation
destinations
o Stimulate future investment in the community
54
Economy
Expansion of Wastewater system is key
o Will result in increased values and growth
o Will attract more business to the island
o Maintaining high water quality in the harbors
55
Economy
Major Employers
o Town of Nantucket
o Nantucket Cottage Hospital
o Nantucket Island Resorts
o Stop and Shop
o Marine Home Center
o Blue Hills Bank
56
Economy
57
Equalized valuation has been consistently very strong over the
past few years; and in 2016 exceeded $20B. The most recent
valuation places the Town 4th in the Commonwealth with 5 of the
top 6 rated AAA.
Equalized Valuation (in billions)
Boston 128.0
Cambridge 34.7
Newton 24.3
Nantucket 20.5
Brookline 19.7
Barnstable 13.1
Quincy 12.0
Worcester 11.2
Falmouth 11.2
Economy
58
Economy
59
Economy
Projects
o Harbor Place Redevelopment
o Richmond Great Point Development, LLC
o Nantucket Cottage Hospital
o Nantucket Public Schools
60
Economy
Harbor Place Redevelopment
o Downtown parcel (5.65 acres) located adjacent to the Boat Basin
o Four current landowners
o Currently home to a fuel farm, supermarket, and parking lot
o Extraordinary opportunity for the Town to develop its waterfront into
a mixed use gateway
o Recently the landowners presented a plan to redevelop the entire area
o Plan includes relocation of fuel farm and supermarket; and removal of parking lot
o Erection of a 3 story parking garage and transportation center that will aesthetically blend into the downtown
o Facelift of the area closest to the waterfront with a mixed use component in the center of the new layout
o Estimated project to complete – up to $200 million
61
Economy
Harbor Place Redevelopment
62
Economy
Richmond Great Point Development LLC
o Old South Road properties
o Goal of RGPD is to make the best and appropriate use of the
company’s land portfolio through the development of a thoughtful
mixed-use Master Plan Community
o Currently phase 1 of the project is under construction which consists
of 28 market rate apartment units with a mix of studio, one-bedroom
and two-bedroom options
o Proposal for 42 residential buildings on 14.5 acres that include 225
apartment units of mixed market rate and affordable rate units
o Proposal for 100 single family lots for 2, 3 and 4 bedroom homes;
both mixed market rate and affordable priced homes
63
Economy
Richmond Great Point Development LLC
64
Economy
Nantucket Cottage Hospital
o $90 million construction of new hospital
o Current facility is 104 years old and is in need of major repairs and
maintenance
o New facility will be designed to maximize privacy, safety and
efficiency in a more modern medical manner
o Expected to be completed in 2018
o Funded completely from gifts and donations including $20 million
from Massachusetts General Hospital
65
Economy
Nantucket Cottage Hospital
66
Questions
67