Town’s Budget Increases over $5,000,000 without a clear explanation

Council Meeting 2-19-19

Dear Honorable Mayor and Members of the Town Council,

I would request that the Council pull Agenda Item 7 from the consent calendar and engage in a thoughtful discussion regarding the projected financial results for this fiscal year.

Accurate estimates are critical. On that, I believe we can all agree. Without accurate estimates, the Council is unable to properly govern the Town’s financial condition nor make appropriate policy decisions. Unfortunately the mid-year budget report raises more questions than it answers and for this very reason the agenda item should be pulled from the consent calendar and discussed in a public session.

The mid-year budget report does not provide an explanation as to why the current year’s total department expenditures are projected to increase 16.7% over the prior year level. That is an increase of $5,340,288. Since this is on the consent calendar, I am assuming that the Town Council is aware of this increase and understands the cost drivers. However, the public doesn’t understand this and they should be informed.  

 Here is what I know. I know that the Town Council approved pay increases of approximately 7% for the staff and police, and there is a onetime $1m expenditure associated with the preparation of the new General Plan. The staffing level from prior year is flat and the minimum mandatory payment to CALPERS is increasing approximately $600k. This explains perhaps 50% of the $5.3m increase. Where is the rest of this increase coming from?

 The Staff should provide a cost bridge which will clearly explain to the public the massive year over year increase. (Note: This years $3.1m 115 Pension Trust payment is included in non-departmental expenditures, which is included in the General Government line item. General Government expenditures are not included in the departmental expenditures). What additional services or goods are the residents of the Town getting as a result of this $5.3m increase? Or are we just paying more for the same services? Are the Town’s financial resources being properly managed? These are all reasonable questions that deserve an answer.

Lastly, if you look at last year’s departmental expenditure pattern, at the mid-year mark the Town had spent approximately 50% of the full year amount. This makes sense since departmental expenses are primarily labor and benefit costs which occur at a linear rate. Using the mid-year expenditures for this fiscal year as the baseline, that would suggest that the full year expenditures should be approximately $35.1m. As you can see, the full year estimate is $37.3m. This implies that there is at least $2m in “cushion” included in the full year estimates.

 If past practices are any indication of current practices, I predict that there is at least $2m in “cushion” in the full year forecast of department expenditures. This is what happened last year. If correct, then the Council has $2m more in funding available to them this year. 

Since there is only 4 1/2 months left in the fiscal year, the Staff should have excellent visibility on the Town’s departmental expenditures and should be able to forecast this number with a high degree of precision.

 Please pull this agenda item and engage in a discussion of the mid-year budget report so the public will gain a better understanding of the Town’s financial position.

Thank you. 

Phil Koen

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