Stuart Arnett of Arnett Development Group, the town’s contracted development consultant, outlined for the Planning Board, as he had previously done for the Town Council, what the TIF (Tax Incremental Funding) district in the Pettengill Road area would do.
He said the TIF had two goals – economic development and acceleration of the bond paydown.
“A TIF district is a tool that the town has to use new incremental tax revenues received by private investment paying property tax, take that incremental new revenue, and apply it against any bonding for that district until such time as it is paid off,” Arnett told the board at its Wednesday, Nov. 13 meeting.
Arnett said that by using a TIF, the town can accelerate the bond paydown because every year that the bond is kept open, money from the development – which is expected to expand over time and bring in more money – can be used to pay down the bond.
“If you adopt the (TIF) district, then there is an opportunity to – not a requirement to – use 80 cents of revenue collected versus 20 cents, if the TIF district wasn’t there,” he said. Because the TIF district is not residential, the money that the school district would receive for its portion goes instead to pay down the TIF bond.
“If it wasn’t a TIF, you would only get the 21 cents that goes into the operating budget. So generally it is a four times accelerator to pay off the bond,” Arnett explained.
He told the board that a TIF would provide for a better quality of road and sewer infrastructure to be built, as well as better and more jobs, and would allow a greater tax base from increased per square foot floor space valuation.
According to Arnett, more reasons to create the TIF are: better quality of road and sewer infrastructure; faster growth; better and more jobs; a greater tax base: $70/ square foot assessed value to $100-plus/square foot; realizing benefits sooner; expansion potential for the road if traffic warrants; greater density: more square feet; and trail system expansion.
“As far as conditions before funding, the Town Manager has to be convinced that there will not be a negative effect to the town tax rate, basically tax positive or tax neutral from day one, and also that there is significant private sector contributions now and subsequent investment later,” Arnett said.
He noted that the recent Town Council vote to enable the TIF does not commit the town to any spending. But he noted that revenues from the TIF could be used for road, sewer, utilities, rights of way, trails, intersections, lights, sidewalks, administration and marketing.
A TIF bond would require a vote at the March election. The bond would also require construction bids before any “go” order, and authorization to proceed from the Town Manager with cash flow neutral or better, along with what he termed “significant private sector contributions.”
Arnett said current inquiries for the area concern fewer but larger buildings.
The range of projects eligible for TIF financing are $8.5 million to zero for road and traffic fixes, the zero amount meaning the business could pay costs; $200,000 to zero for the trail; zero for rights of ways; and $4.5 million to zero for sewer, water and utilities, with zero if the developer pays and the City of Manchester provides the water, with another option being that the town could provide those services and recoup the money.
Arnett said that the actions needed were that the town adopt the TIF as an option before April 1, 2014 and that sooner is better due to current permitting; then a vote needed to be taken for the bond in March. Road and sewer construction would start by July 2014 to keep existing permits.
Arnett said once there is positive cash flow for one year, any surplus would be used either to accelerate the payoff of the bond or to go into the general fund.
Board member Al Sypek asked if the voters approved the bond, whether the bond would not be issued until tax neutrality was met.
“The (Town) Manager would not bring the vote to the town until he saw evidence of it being positive, and he still has the obligation to not sign off on the final one until he’s satisfied (of tax neutrality),” Arnett said.
“So what do you do if you have several large developers that would like to contribute yet you don’t have enough money – do they give you a letter of credit or letter of intent, do they hold that money aside in escrow until a project is ready to go?” Sypek asked.
“It could be any of those,” Arnett responded, adding town officials would know quickly if the project would be cash-flow positive.
Board member Maria Newman asked if the warrant article would specify the cash flow neutral or positive status, and board chairman Art Rugg stepped in to say, “I think we’re getting a little ahead of ourselves.”
Arnett said one of the next steps was for the Town Council to adopt RSA 49-C, which would allow payment by developers either up front or at the end to recoup costs.
Sypek said that as far as water, he would like to see Manchester Water Works put in the water.
Newman asked about sewer user fees as a source of income, as she had a conversation with the Public Works director regarding another area that needed sewer upgrades and learned that at some point, user fees would not be enough to complete the upgrades.
“That’s why we have a question mark next to that,” Arnett said.
In response to a question from member Leitha Reilly, Comprehensive Planner Jon Vogl said there are no other TIFs in Londonderry, but the town has two Economic Recovery Zones (ERZ), one in the airport area and the other near Tire Warehouse. He said a TIF had been proposed previously but didn’t pass.
Arnett emphasized that a TIF has nothing to do with the tax rate or tax bills, only with what is done with the money once it comes in.
Sypek said he sees three options.
“Number one is to do nothing and let the weeds and the trees grow, number two is the town pays for the road and prays that we get our money back when someone develops the land, and three is going with the TIF, in which case we’re not going to pay, the project is not going to go forward unless money is found elsewhere,” Sypek said. “Personally, I’ll take the TIF.”
No Planning Board action was called for.
Town Manager Kevin Smith said the Planning Board has no say in the TIF. The meeting was for information purposes only.
Budget Season Kicks Off With Saturday Session
Members of the Town Council and Budget Committee heard budget outlines from the heads of the police, fire, and public works departments as well as the library, and Finance Director Sue Hickey reviewed the remaining departments at a meeting that lasted a little over four hours on Saturday, a kick-off to budget season.
Police Chief William Hart said his department will be at or under budget by the end of FY 14, noting that’s been the case for the last 18 years.
Hart said budget history since FY 08 shows the police will be in the 2 percent plus or minus range of funds remaining.
“The Londonderry police department has 80 full-time personnel, 64 sworn and 16 civilian positions; seven part-time personnel, which includes crossing guards, clerical staff and an animal control officer; and one volunteer chaplain,” Hart said.
He added that since FY 08, the department has returned $1,064,657 to the General Fund. “This is in my judgment reflective of our prudent approach to managing our budget,” he said.
Hart said one of the concerns is overtime, but said the department has been “very prudent” in management of overtime.
“We know what we need and in order to have truth in budgeting, that’s an area that should be addressed,” Hart said. “Early tracking and indications are that our FY 14 overtime levels, both total hours and cost, will be similar to FY 13.”
Another issue Hart called a concern was the rising costs of benefits, noting that over the last four or five years, the state has transferred retirement costs to the towns. He also cited a dramatic increase in healthcare costs to employees.
“As a consequence, our discretionary spending has been dramatically reduced,” he said. “We used to spend 92 cents to 93 cents of every dollar on personnel. That’s been significantly increased to 96, 97, 98 cents.”
Hart said discretionary spending covers uniforms, training supplies, seminars and workshops, office supplies and software. FY 14 discretionary spending is budgeted at $83,442.00.
He said that since FY 10, the department has experienced a $470,698 increase in healthcare costs. Coupled with the legislatively driven increases in the retirement system of $523,643, the department has seen an overall cost increase of $994,341.00 in those costs alone, he said.
“By comparison, salaries have only increased by a total of $223,2120 since FY 10, and overtime has only increased by $35,661 since FY 10,” Hart said.
Council Chairman John Farrell noted a 9.9 percent increase in health benefits this coming year.
“The state averages 6.3 (percent),” Farrell said. “We’re taking a higher hit because of our past claim history. We have engaged a consultant to go out into the market and we will only pay the consultant based on whether or not they can save money.”
Farrell said the collective bargaining units were working with the town on how to mitigate those costs.
Councilor Tom Dolan asked what percentage of fines ordered by judges comes back to the town, and Hart said very little, with most going to the state.
Budget Committee member Tom Dalton asked if the cost of overtime was increasing and Hart said it was.
“The overtime costs are reflected in the contract, so as those contractual increases come down the road, those increases are reflected in the increased cost of overtime,” Hart said.
Hart said they accrue about 12,500 hours in overtime. It comes about in five areas: court, investigations, vacation coverage, sick time coverage and training.
“A part of what’s happened over the past 10 years is prior administrations and councils would go across the budget and say we want a 3 percent cut,” Farrell said. “The budgeting philosophy was to cut 3 percent from every line item. Over the last two years the council has given direction to the town manager, the chief and now the new town manager, that we want a real budget.”
Dalton asked if there were going to be “a tax on Cadillac (health) plans,” and Town Manager Kevin Smith said there would be, and all of the town’s plans would be considered Cadillacs, subject to a 40 percent excise tax beginning in FY 18.
Smith said it would be a tax on the total of whatever the town is paying for all its health insurance.
“That could be in the millions,” Dalton said.
“Easily,” Smith responded.
Hart reminded the Council that the lead time to prepare police needs for the Woodmont Commons development is 2-1/2 to three years.
Fire Chief Darren O’Brien presented his first budget since becoming chief.
He said in 2006 the number of calls for service was 2,591, and that in 2012 it was 3,107. So far this year, the calls total 2,584.
O’Brien said this year the department has re-entered an agreement with Elliot Medical Services, which should generate calls and revenue. “Since August we are the primary transporting agency for the Elliot,” he explained.
O’Brien said projected impacts to services for proposed projects in town involve 240 apartments in 10 structures on Perkins Road (Wallace Farm), 135 houses on Old Derry Road, 114 homes off Hunter Mill Way, workforce housing on Mammoth Road, Woodmont Commons and Pettengill Road.
Staffing at each station is at 10, and O’Brien said it should be at 14 per station. “It would be my recommendation, once these (developments) get started, that we’re going to have to look at increased staffing or increased structure of the fire department,” O’Brien said.
O’Brien said that in FY 13, Fire had $532,000.00 in revenue and so far this year (FY 14), it had $132,000 in revenue. He added that revenue from a projected 300 calls from the Elliot would be about $250,000.
So far this year, revenue of $3,640 has come in for permits and fees.
Councilor Joe Green said the department needed to collect from past ambulance billing.
O’Brien said vehicle repairs are at $80,000 and the department had $5.5 million in equipment.
“It’s not a matter of going to the repair shop and paying $60 an hour to get something fixed. Getting repairs to this equipment is thousands of dollars. The annual service on a ladder truck this year was $15,000,” O’Brien said.
O’Brien said for the coming budget, training would be the default amount of $23,000.
The department has 46 full-time personnel and at the current budgeted amount, the crews cannot maintain the necessary level of training, he said. “It’s a matter of continuing on with education and refamiliarizing yourself to them,” O’Brien said.
Councilor Tom Freda asked if there had been an analysis of simultaneous calls. Division Chief of Fire Prevention Brian Johnson said that in FY 12 it was 46 percent and in FY 13 it was 48 percent of calls.
O’Brien said the department had received an air monitoring grant of $44,976 in FY 13 and a $2,000 smoke detector grant. He added that the department had applied for an Emergency Management Performance Grant to replace the emergency generator in the Central Fire Station, with the old one to be hooked up at the Senior Center. The grant would provide $26,000 of the needed $52,000, and the remaining costs would be picked up by the town in “soft costs.”
“When we take the old generator to the Senior Center, any expenditures by the town in hooking it up can be submitted to the state,” O’Brien said.
O’Brien explained that hiring one firefighter would do no good, as there are four battalions. The cost of adding four firefighters would be $316,200.32, which he estimated would save the town approximately $70,000 per year in replacement costs.
Farrell said that “in 2008 the contract changed from 48 hours to 42 hours, so that significantly changed the way they have to manage the department. I don’t think it was foreseen what the cause and effect was going to be by all parties at that time.”
“We have three stations that are well staffed right now,” Councilor Jim Butler said. “In the past, to be quite frank and to be honest with you, the chief had been a puppet to the town manager, and I think the fire department has been a little bit of a scapegoat and a whipping boy. We need a truthful budget. How many years have we gone over in overtime? Every year. This budget is crazy. What’s important to me is that we staff those stations appropriately. Give this fire chief the opportunity to have a truthful budget that we can work on.”
“We have the opportunity to put out two budgets, a default budget or a budget that is above or below default,” Farrell said. “The danger of putting a realistic budget out there, say one $500,000 over default, is if it’s defeated at the polls, you still wind up with default. You don’t get the money.”
Farrell said because of the way they had budgeted over the last 10 years, they were trying to take one bite at the apple at a time to fix the situation over a period of years.
Budget committee member Chris Melcher said most taxpayers go into the voting booth and choose the lower number. “So unless we’re going to sell an increase, nothing’s going to change,” Melcher said.
Leach Library Director Barbara Ostertag-Holtkamp said that last year the library checked out 376,277 items, and noted checkout numbers have been increasing every year.
Ostertag-Holtkamp said the library is open 56 hours a week and had 20,865 reference transactions last year, an increase of 7.35 percent.
Program attendance for children’s, adults and young adults was 16,088 participants, an increase of 9.36 percent, she said.
“FY 13 had 19 young adult programs, with 823 participants, up 11.76 percent from the previous year. FY 13 had 12 adult programs with 577 participants, an increase of 6.65 percent. FY 13 had 215 children’s programs, down 7.33 percent, but participation was 14,688 participants, which was up by 8.44 percent,” Ostertag-Holtkamp said.
She said from FY 11 to the present there have been decreases to the library’s budget. The FY 14-15 default budget, she noted, had an increase of $5,660 for full-time and part-time salaries and $432 for Social Security and Medicare increases.
Budget committee member Mark Aronson asked if there could be a jar for patrons to donate money and Ostertag-Holtkamp said she had one but explained that it was the Friends of the Library that put out the jar, not the library itself.
Green said money was needed for new books and periodicals for the library, as costs keep rising. The director said the cost is $77,000.
She was directed to talk with Smith to try to come up with the money.
Director of Public Works Janusz Czyzowski said he never went over his budget, and noted that if the fire department budget were fixed, it would prevent shortfalls in other departments.
He said there is a slight increase in recycling from FY 14 of $408,000 to $440,000, due to the fact that FY 14 was the last year of the contract and he was able extend the contract for two years.
He said the estimated fuel adjustment will be over the $70,000 FY 14 number at $80,000 for FY 15.
The Environmental Division, which includes sewer, is a special revenue account funded by fees, not taxes. Its budgeted amount went down from FY 14’s $2,661,129 to FY 15’s $2,629,815.
The Highway Division also went down from FY 14’s $3,177,878 to FY 15’s $3,157,978. That reflects a decrease in health insurance, as some employees took different plans.
“I feel that the amount of money that we have right now is sufficient for us to survive as long as we don’t cut it,” he said. “We are all right with the default budget.”
He said road construction costs were left the same and noted roads must be kept up with overlay every 12 years because of oxidation and cracks and deterioration.
“Now we are on a 100-year cycle,” he said. “We are not funding the roads sufficiently. I know that I’m not going to get more (money) but I want to point out that that is what is happening.”
Czyzowski said it costs about $1.6 million for one mile of road.
He said road maintenance was like people painting their house. “Does everybody paint their house every three years? No,” Czyzowski said.
He said that as for shim and overlay, there was zero dollars in the budget but $175,000 in the Road Maintenance Trust Fund.
“Now we have right now in the account $750,000 to put together with this, and I will have enough to start the next phase of Litchfield Road going west,” Czyzowski said.
Melcher said he thought there had been a discussion a couple of years ago that the fund would increase every year.
Farrell said the town hasn’t been using the Undesignated Fund Balance correctly. Finance Director Susan Hickey said it wasn’t a legal violation but a violation of recommendations.
Czyzowski added that the Highway Garage is in need of repairs, with poor restroom conditions and small locker facilities. The plan, he said was to build a “lean to” along one side and add lockers, a lunch room, improved bathrooms and an office
Other General Fund
Hickey noted that Smith had requested departments submit budgets under default levels.
“I compared everything against the FY 14 operating budget, and departments that had requests below the FY 14 operating budget were Town Manager ($51,831), Town Clerk/Tax Collector ($28,274), Public Works ($19,900), Senior Affairs ($3,870) and Debt Service ($23,038),” Hickey said.
Hickey said all but Debt Service had staffing changes during the past year that resulted in reductions to salary, mandatory and medical benefits in the FY 15 requests. She said the Debt Service amount shows a reduction in interest costs as one of the town’s bonds will be retiring in FY 16.
Hickey said the departments that were $100 or less above the FY 14 Operating Budget were the Town Council, with a $1 increase due to workers compensation insurance; the Moderator; Budget Committee; voter registration; cemetery; Conservation Commission and General Assistance, all of them the same as FY 14.
Hickey said departments requesting $10 or more above the FY14 Operating Budget were: Supervisor of the Checklist, $8,451 due to salaries and mandatory benefits with three elections; Assessing, $13,249 due to contractual union increases; Information Technology, $5,780 due to contractual software maintenance agreement increases; Legal, $30,000 due to in process litigation; Zoning, $5,890 due to contractual union increases; and Insurance, $15,563 due to a projected increase in property liability insurance.
Other departments listed in the over $101 above Operating Budget include: Buildings, $13,721 for contractual union increases; Solid Waste. $21,538 in contractual increases in waste removal services; Cable, $7,307 for contractual union increases; Recreation, $1,940 for contractual union increases; and Library, $3,470.
Hickey said the Town Council will have to decide if a separate warrant article is to be included to separate the Town Clerk and Tax Collector into two positions, to take effect in FY 16. She said that if passed, the Town Clerk would be elected and the Tax Collector would be appointed.
Hickey added that due to recommendations by the forensic audit and the financial audit teams, the Controller went from part time to full time. The Human Resources department was reorganized and the position re-classified from Human Resources Manager to Human Resources Coordinator, with a savings of $30,000.
“The net impact of both adjustments is an increase of $7,143 for FY 15,” she said.
Hickey said the Town Manager’s budget includes $36,000 for a contract with a health care consultant, Workplace Solutions, to assist in studying the medical insurance claim trends and to determine if self-insuring is a viable option. Smith reiterated that there is a clause in the contract that if no savings are achieved, the consultant doesn’t get paid.
Hickey said that between the state Department of Revenue Administration and the National Government Finance Association’s retention recommendations, 5 percent to 17 percent of general fund operating expenses can be retained.
“These levels approximate to $4.3 million and $14.6 million. Because the current and projected unassigned balance at the end of FY 14 will likely be below the minimum level of the guidelines stipulated in the town’s recommended levels, this budget does not propose the use of unassigned fund balance to support appropriations,” Hickey said.
Melcher asked if it was the consensus of the Town Council not to put any bonds forward this year.
Farrell said they had not discussed any bonds and he didn’t know the consensus of the Council. “I haven’t asked. We have not discussed any bonds,” Farrell said.
Melcher said Pettengill Road was on people’s minds and Farrell said the Council had established the TIF (Tax Incremental Financing) district to be able to support a TIF fund going forward.
“We would not be seeking a bond in this March election,” Farrell said.
Dolan suggested the Town Manager reiterate that citizens could be offered the benefit of the town’s attorney when writing citizen’s petitions.