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FY 2017 General Fund Budget Executive Summary with appendix1 TOWN OF NANTUCKET Fiscal Year 2017 Budget Message As of December 10, 2015 Endorsed/Revised by Board of Selectmen: December 9, 2015 I. Introduction The Town’s financial position was strong in Fiscal Year 2016. Going into Fiscal Year 2017, indications are that the Town’s position will remain strong, due to the following: -- we increased reserves by establishing a Capital Projects Reserve Fund at the 2016 Annual Town Meeting, with an initial appropriation of $1,000,000; -- the Town’s bond rating was raised to Aa1 by Moody’s Investor Services, in January of 2015. This bond rating is one level below the highest bond rating issued by Moody’s that a municipality can achieve. The benefits of this rating include the opportunity to borrow at a lower interest rate; -- Free Cash for use in FY 2016 and 2017 was certified by the Department of Revenue on October 14, 2015 in the amount of $5,405,506 (of this, $2,300,000 was allocated at the November 9, 2015 special town meeting). Free Cash is used exclusively for non- recurring items; -- the Stabilization Fund remains strong with a current balance of $4,834,733. A best management practice is to have reserves that are 10% of the budget. Using a budget number of approximately $85,000,000, the Stabilization Fund balance is slightly over 5%; however, with the Free Cash (undesignated reserves) balance of nearly $5,500,000, these amounts exceed the best management practice threshold (see attachment); -- short-term and long-term capital projects planning continued and was improved during FY 2016 and in preparation for FY 2017 the acquisition of software called “Plan-it” will help the Town better manage capital projects on an ongoing basis for budgeting purposes. The software will help the town produce a more uniform and consistent plan that is accessible to all departments; -- increased focus on Town infrastructure continues, with a Facilities Assessment Report finalized in June, 2015 (see attachment); as well as the acquisition of software to assist with tracking of maintenance, repairs, and capital planning needs; 2 -- economic conditions for the Island are healthy based on indicators including meals excise tax and room occupancy tax revenues coming in higher than projected; and, new growth which came in 9.86% higher, or $102,335 over the amount certified in FY 2015; (revenue schedule attached) -- on November 19, 2015, the Town signed a Community Compact with the Commonwealth which will enable us to revise/rewrite and update our financial policies. While local economic conditions are strong, we need to be cognizant of national economic indicators as well, including the monthly labor report, weekly report on first-time unemployment claims, consumer goods and materials report, and the monthly report on building permits issued by the Conference Board (see attachment). These seem to be steady for the moment; however, in light of how severe the most recent economic downturn was in 2008-11, we feel it is prudent to retain a level of financial flexibility between local revenues and the proposed budget and are not proposing to spend to the Town’s allowable levy limit for FY 2017. Each year, we are challenged to not only present a balanced budget but a plan of service for the community that must acknowledge that all requests and competing needs cannot be met to the degree desired by individual groups and departments. This is inherent in any budget process and is no different this year. Fixed costs are always increasing, especially those of employee benefits, service contracts and (generally) utility costs. Health insurance is particularly problematic, with state and federal requirements that leave municipalities with few options to address rising costs. Fortunately, the Town’s levy capacity for FY 2017 will allow for funding fixed obligations and annual appropriations, as well as a level of additional expense increases to meet goals and priorities of the Board of Selectmen and Town Administration. 3 II. Overview of FY 2017 General Fund Budget Tax Revenue 85% Local Receipts -All Other 3% Motor Vehicle 2%Rooms and Meals 4% Licenses and Permits 2%State Aid 4% Projected Revenues Fiscal Year 2017 As noted above, local economic revenue indicators are good, with increases in all areas that reflect a strong local economy including: new growth, building permits, room occupancy tax, meals tax, ferry embarkation fee, motor vehicle excise tax (see attachments). Although it will not be factored in as a revenue source to fund the budget, beginning in FY 2017 we are anticipating the beginning of a multi-year payment plan for the “payback” of General Fund monies used to subsidize Airport operations from FY 2012 to FY 2015, totaling $4,611,770. Prior to FY 2017 we expect several local fee categories to increase or to be proposed for increase, including: Town Clerk fees, Event and Licensing fees, Health Department, HDC. These increases have not been included in the FY 2017 budget plan (see attached). Expenses The proposed FY 2017 General Fund budget will fund: Fixed Obligations (each of these is explained in further detail in the attachments to this document) -- allocates the required funding for 10 union contracts; and, for non-union employees; -- provides $774,916 within the budget, allocated equally between the Town and School departments for capital improvements, pursuant to a requirement of the Town Code: The Town shall spend on capital projects a minimum of 1% of total Town local receipts collected in the prior fiscal year plus 1% of the total real estate and personal property taxes collected in the prior fiscal 4 year. If local receipts fall below the 1% minimum, the Town may forego the funding requirement. Nantucket Town Code Chapter 11, § 11-12.1 -- funds the projected increase of 9.5% in Town employee and retiree health insurance; - funds the projected increase in the Barnstable County Retirement Association annual assessment of 4.5%. Municipal Departments, 28.33% School Department, 30.50% Non - Departmental, 28.79% Special Appropriations, 12.38% Budgeted Expenditures Fiscal Year 2017 Annual Appropriations -- provides $500,000 to the Other Post-Employment Benefits (OPEB) Trust Fund, in accordance with the Town’s OPEB policy. FY 2017 will be the 3rd consecutive year in which a deposit to this Trust Fund has been made. The current balance of the fund through FY 2016 is $1,265,994 (see attached policy); -- provides $500,000 to the Reserve Fund (see attachment); -- provides subsidies to two Enterprise Funds: Our Island Home ($2,352,375) and Solid Waste ($5,630,250) (see attachment). Expense Increases From a broad perspective, the proposed FY 2017 budget will begin or continue to address the following goals and priorities: -- Increased seasonal demands (summer employees and expanded programming) -- Facilities maintenance (buildings, parks, fields, beaches, energy efficiencies) -- Infrastructure maintenance/improvements (streets, sidewalks, streetlights) 5 -- Water quality (monitoring; pond management; fertilizer regulations education and enforcement) -- Administrative management improvements (budget and long-term capital planning; information technology operational and project management improvements, personnel/payroll/human resources management improvements) -- Housing initiatives -- Substance abuse prevention efforts -- Public safety improvements (increase in level of emergency medical services) -- Community convenience and visitor experience initiatives (traffic mitigation strategies; recreational activities; increase in information availability) Specifically, the above goals and priorities will be addressed with the following expense increases: Personnel-Related 1. Natural Resources: Increase part-time administrator to full-time. This will enable additional, needed office coverage as well as additional time for activities such as establishing a tracking/monitoring system for Conservation Commission Orders of Condition and fertilizer licensing conditions. 2. Police/Marine: Full-time year-round beach maintenance position. Every since the stand-alone Beach Coordinator position was absorbed into other positions due to departmental consolidations we have not been able to effectively coordinate beach-related maintenance activities to definitively address the maintenance demands of several heavily used public beaches. This position will maintain Town-owned, life-guarded beaches including fencing, signage, ramps and general maintenance and cleanliness. 3. Fire: Two additional (new) firefighter/paramedic positions. We are proposing to move from our current Basic Life Support (BLS) emergency medical services model to the Advanced Life Support (ALS) model that most municipalities use. This will need to be a phased program so as to spread the costs over more than one year. A total of 4 additional positions are planned (these being the first 2), with at least ten current firefighters to be trained as paramedics over a two-year period. 4. Fire: Additional overtime. In order to fill two shifts with the staff needed to run a partial ALS service (initial phase), we anticipate the need for some amount of additional overtime at first because it will take time to train the firefighters for ALS. It is intended that ALS be provided on every shift within 2-3 years. 5. Fire: Paramedic training. 6 Training will be necessary to bring a number of the current firefighters to the paramedic level. There will be some ability to hold training here on the island but there is likely to be a need for off-island training and travel. Again, this is a process that will phased over time. 6. Visitor Services: Additional seasonal staff. In order to provide a better visitor experience, we would like to add additional staff and/or staff hours at the Straight Wharf information kiosk. 7. Sewer Enterprise Fund: New Wastewater Superintendent position. The scope of work contained within the DPW Director job description includes oversight of the wastewater treatment facilities and all matters relating to the sewer system. With the complexity of recent and upcoming projects and the need to develop a strong, viable capital program, as well as the need for dedicated project management it is clear that the DPW Director position cannot absorb these functions. We are recommending a senior level, non-union stand- alone position that would be funded from the Sewer Enterprise Fund and report to the Town Manager. A dedicated position to manage projects and “educate” the public about sewer projects has been discussed for several years. This position will oversee the rollout of the sewer capital plan outlined in the Comprehensive Wastewater Management Plan (CWMP) update. There is a 20-year capital program generated by the CWMP that will require close supervision during bidding, design and construction. Initiatives need to be implemented to remove remaining clay pipes in the core area as well as program the design of the repair and replacement of problematic areas. These areas have been maintained on a daily basis instead of investigating repairs and coordinating the construction for these repairs. The problematic areas have been identified; however, the design of the repairs will take more investigation and design work before the construction repair work can begin. Inflow and infiltration into the sewer system also needs to be pursued more diligently. 8. Town Administration: Energy Coordinator position. This existing position was initially established with grant funding, then grant and Town funding. The grant(s) come to a close in FY 2017 and we propose to continue the position. 9. Town Administration: HDC Minute taker. In FY 2012, due to budget cuts and the creation of the PLUS department, several administrative functions that support HDC were spread out over several positions. The Town’s dedicated Minutes Taker currently takes minutes for the HDC as well as several other boards and committees; however, with the increase in building permits to pre-2008 levels it is clear that dedicated minute taking services for HDC will improve the delivery of services for the Commission and the public. 10. Planning & Land Use Services (PLUS): Part-time housing specialist. Current staff is unable to effectively manage housing initiatives on an on-going basis. We had a full-time position 3 years ago, it was determined after about one year that activity levels were insufficient to justify retaining the position and the individual was laid off. Today, the island housing situation has changed: there are multiple requests for 40B applications, zoning changes, the development of Town-owned land for housing. The Town needs a dedicated position to 7 manage these issues and help to meet the Town’s obligations under state affordable housing requirements. 11. DPW: New Engineering Technician Position. Initially, we were considering a Deputy DPW Director position; however, if the Wastewater Superintendent position is established, and one of the existing foremen positions is dedicated to fields and parks maintenance, with this additional position to gather, prepare and track the information needed for the engineering division of the DPW to be more functional, we believe this will bring the DPW into a more proactive and less reactive mode. 12. Human Resources: New part-time support position. Over the summer of 2015, an operational review (see attached) of the Town’s human resources function was performed. One of the findings was that for the number of employees the Town has, it does not have sufficient administrative support in place to handle all of the regulatory, statutory and reporting requirements. In a future year, this position will likely be requested to increase to full-time. Expense-Related 1. Natural Resources: Water quality monitoring. This 4-part expense will allow for: -- funding annual water quality testing of identified areas for TMDL (Total Managed Daily Load) compliance as outlined in the Nantucket Harbor and Madaket Harbor MEP (Massachusetts Estuary Project) reports (Note: this expense was being funded from the Waterways Improvement Fund; however, that Fund is projected to be utilized more going forward for a maintenance plan for the Town Pier); -- necessary equipment and instruments for water quality testing, again, in conjunction with the recommendations of the MEP reports; -- water quality analysis for the twice-annual openings of Hummock Pond and Sesachacha Pond – this is an expense that wasn’t specifically budgeted to this level in the past and as a result budget transfers have been needed; -- in conjunction with the Nantucket Pond Management Coalition, funding would be provided to help implement initiatives of the Comprehensive Pond Management Plan, including the continuation of invasive species removal at various ponds; analysis of phosphorus data to be obtained through a state grant, currently underway; assistance with the purchase of a harvester for the removal of excessive vegetation at various ponds. 2. Police/Marine: Annual maintenance for Town Pier. This expense will be funded from the Waterways Improvement Fund. It is expected that annual maintenance of the Town Pier will result in less capital costs over time. 3. Fire: ALS equipment. The ALS program will require additional equipment for the ambulances. This amount can be funded from the Ambulance Reserve Fund. 4. Town Administration: Selectmen initiatives. 8 This funding would allow for the engagement of specialists or the acquisition of services, equipment or other expenses when needed by the Board to pursue a specific unanticipated initiative (examples in the past include the Fast Ferry Connector parking lot, fertilizer reduction initiatives and water quality testing). 5. Town Administration: Information Technology assessment recommendations. This is something of a place-holder. Town Administration initiated an IT operational assessment mid-fall of 2015. The assessment is on-going and we expect that there may be a recommendation(s) that would need to be funded in order to be implemented. 6. Town Administration: Video production coordinator. This would be to fund the “G” part of the PEG (Public, Education, Government) channel. We have found that without a dedicated resource to manage the taping of numerous public meetings – many of them after hours -- too many mistakes occur and the public is not able to view governmental meetings. This will provide consistency in management and operation of the equipment. 7. Town Administration: Fast ferry connector funding. Based on a Board workshop discussion on October 7, 2015, we propose to fund this approximately $250,000/year service with $25,000 from the General Fund and $25,000 from the Cape & Islands License Plate Fund, for a total Town contribution for FY 2017 of $50,000. It is our understanding that the remainder will be funded from other contributions (SSA, Hy-line, private businesses benefitting from the service, etc). 8. Town Administration. Increase in Health and Human Services annual appropriation. We are proposing a $50,000 increase to this annual appropriation in recognition of the substance abuse and other issues that have arisen recently in the community. These funds would be recommended for specific allocation by the Contract Review Committee for the agency the CRC determines would use the funds most effectively. Over the past 5-10 years, the Town’s assets have increased, our scope of responsibility has increased and we have taken on initiatives that are beneficial and responsive to needs or requests but do subsequently require additional resources. Our staffing and resources have not always kept up with these items, which include: additional infrastructure such as bike paths, roads, sidewalks, parks and fields; lifeguarding additional beaches; events and business license management and monitoring; code enforcement; renewable and other energy initiatives; public buildings; tasks for the NRTA (signs, benches, bike racks, trash pick-up, brush cutting, line painting); providing proper collection and disposal of sharps (used needles). The expense increase requests address several of these. Other expense increase requests not specifically listed here will address inflationary cost increases, licensing and permit fees, personnel adjustments, operational issues or necessary equipment replacements. Some of these are “one-time” expenses, others are intended to recur annually. These are shown on the attached “Expense Increase Request Summary Sheet” and are not explained in detail in this narrative. 9 III. Future Year Considerations/Unknowns Strategic Plan During FY 2017, the Board should consider the development of a Strategic Plan with measurable goals and objectives. Without one, we are more reactive than proactive and cannot properly plan and use our resources effectively to focus on and accomplish formally agreed-upon goals. We suggest a workshop devoted to this in the spring, with a budget request if needed to be prepared for FY 2018. Staffing Assessment We recommend the Board consider a Town-wide staffing assessment – perhaps as part of a Strategic Plan or in addition. Are we staffed effectively? According to a Boston Globe report in March, 2015, Nantucket is one of the fastest growing town/counties in the country and with multiple large multi-unit construction projects in the works, Town resources need to grow to meet the anticipated demand. We have added and reduced staff the best we can with our own internal experience and understanding of Town operations. We know that initiatives and projects can become stalled due to workload of key staff. An outside consultant with extensive knowledge of municipal operations could help us determine if we are staffed correctly and/or using our resources in the most efficient manner possible. Health Insurance The “Cadillac Tax is a component of the Affordable Care Act, is federally mandated and is to be implemented January 1, 2018. In summary, employers will pay a 40% tax on all costs for health insurance plans in excess of $27,500 for family and $10,200 for individual plans. Based on Nantucket’s current workforce and related insurance portfolio, the Town would be required to pay in excess of $600,000 beginning with FY 2018. Sewer Improvements While not an impact on the FY 2017 General Fund budget, there are two significant sewer projects being proposed at the 2016 Annual Town Meeting which would be partially funded through debt exclusion overrides. This will have an impact on the debt service appropriation for the FY 2018 budget. Contract Expirations During FY 2017, the following concession leases will expire (all expire 12/31/16): Jetties, Surfside and Children’s Beach. We are planning to put these out to bid in the spring of 2016. Conservative estimates will be used for the anticipated revenue from these concessions which in FY 2016 will total approximately $200,000. The contracts for cleaning of various Town buildings and for landscaping will expire in March of 2016; the Town’s contract for gasoline and diesel expires in June, 2016; the contract for vehicle maintenance services in August of 2016. Again, conservative numbers will be used for the anticipated costs of these contracts, if unknown before the budget is finalized. 10 School The new intermediate school is scheduled to open in School Year 2017-18. As discussed in earlier presentations to the community, this will have implications for staffing. In particular, we anticipate additional staff such as a school nurse and one administrator. The most significant staffing need will be in custodial/maintenance staff, as we bring a 72,000 sq foot facility into our realm. Most other faculty will be transferred to the new facility from existing staff. The renovation to the middle school is scheduled to be completed in time for school to begin in September of 2016. This will not require new staff, but will provide room for existing staff who now share spaces in the existing Middle School (CPS). Revenue Although in the near future, current revenue sources appear to be sufficient, other areas to potentially look toward in the future for generating new revenue include: PILOT possibilities (Payment -in-Lieu-of-Taxes for entities that do not pay property tax – if all of these were taxed in FY 2015, taxes due would have exceeded $10,000,000); parking fees (paid parking for parking lots, downtown parking, beach parking); taxi transaction fee (requires meters); host community fee for Registered Medical Marijuana Dispensary (in process); expansion of room occupancy tax to seasonal vacation rentals (requires special legislation); increase of real estate transfer tax for housing initiatives or another dedicated purpose (requires special legislation); tax on medical marijuana sales (requires special legislation). Some of these have been pursued by the Town, others are being pursued and some have remained stalled or not pursued. IV. Other Recommendations Due to growing operational costs, an increasingly out-of-date facility, and multiple long-term infrastructure issues, at the recommendation of Town Administration and the Our Island Home Administrator, the Board of Selectmen convened an “Our Island Home Long-term Planning Work Group” in 2012. The Work Group met from October, 2012 – June 2013 to review financial and operational reports, data and other information of Our Island Home and also with the state’s only other (Taunton) municipally-operated nursing home and make recommendations to the Board regarding Our Island Home. In July, 2013 the Work Group presented its report to the Board (insert link). Our Island Home is operated as an Enterprise Fund (meant to fund its own operations); however, requires a significant annual subsidy from the Town’s General Fund. Because the Town wants to continue to ensure that the best, state-of-the art skilled nursing services are available to its elderly population, Town Administration is recommending a tax override for dedicated operating support for this service, as long as the Town remains the operator. V. Conclusion The FY 2017 General Fund budget, as proposed, is $86,843,248, this represents an increase of $4,821,600, or 5.88%, over the FY 2016 budget. The levy limit for FY 2017 is projected to be $87,134,684, which will leave unused levy capacity in the amount of $291,437. The Town has been extremely fortunate to be able to fund several items, within its levy limit, including Our Island Home, the landfill mining program, health insurance, an annual amount of capital items. While the FY 2017 budget is balanced and addresses our fixed obligations, it also 11 puts forward some new initiatives that are intended to provide better or increased service to the public, as well as additional resources toward maintaining our infrastructure in a proactive manner, and address or continue to address goals and priorities of the Board of Selectmen and Town Administration. Our biggest challenges include housing, staffing, expanded programming (beaches, playing fields, trash, bike path maintenance) and keeping pace with the cost of living and faster-than-expected increases in costs ranging from health insurance to construction/maintenance costs – the same issues Nantucket families and businesses are encountering for their own budgets. Our community has grown in size and diversity, significantly over the last 20 years. We are facing some “big city” problems (substance abuse, public safety, housing shortage) now more than ever and it will take additional resources in the coming years to address these. Nantucket is a small town with big city problems! Thanks to the Board of Selectmen, Capital Program Committee, Finance Committee, Town departments, and especially to the staff who spend many, many hours putting together the information necessary to develop the budget recommendations, including Finance Director Brian Turbitt, Assistant Finance Director Lynell Vollans and Assistant Town Manager Gregg Tivnan. Prepared by: Town Manager, pursuant to Article IV, Section 4.2(d)(3) of the Charter of the Town of Nantucket 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157