Budget Review Committee

BUDGET REVIEW COMMITTEE JULY 3, 2014 A meeting of the Budget Review Committee was held Thursday, July 3, 2014, at 7:00 p.m. in the Aldermanic Chamber. Alderman-at-Large David W. Deane, Chair, presided. Members of Committee present: Alderman-at-Large Lori Wilshire, Vice Chair Alderman Richard A. Dowd Alderwoman Pamela T. Brown Alderman Ken Siegel Alderman David Schoneman Alderman Michael Soucy Also in Attendance: Mayor Donnalee Lozeau John Griffin, CFO PUBLIC COMMENT - None COMMUNICATIONS – None WRAP-UP SESSION Chairman Deane Before we get started, I had inquired about the Solid Waste Department being an Enterprise Fund and what the advantages and disadvantages whereas we are currently supplying the Solid Waste Department with a $4 million supplemental appropriation out of the tax based to cover the maintenance operation, closure cost, and things of that nature. Unlike the Waste Water Treatment Plant, which is also an Enterprise Fund, that tends to cover the cost of operations through the user fees that are collected whereas our landfill with our changes in the laws and requirements in order to maintain a landfill permit from DES in Concord, we have had to meet the criteria set forth and our tipping fees, due to the change in the requirements; our tipping fees no longer cover the maintenance and operations of the landfill and that’s why we end up having to supply the Solid Waste Department with a $4 million supplemental appropriation and the Waste Water Treatment Plant we don’t have to deal with supplying them with any money. Mayor Lozeau I had scheduled a special meeting to talk just about that and I meant to re-schedule it when we didn’t have people….it’s not a lengthy discussion and I’m happy to have it now. One of the issues that I have since come to understand is what an Enterprise Fund is. I think for a few years when I started the term true Enterprise Fund was used a lot and I think many of us were under the impression that meant it had to be fully self-sustaining. What I have since learned is that an Enterprise Fund is really a financial term, actually a government financial term. There are at least two kinds of Enterprise Funds, one, like waste water which is totally self-sustaining and the other such as solid waste, which is not self-sustaining and by which we appropriate funds. The biggest advantage to having it done that way, from the prospective of myself and the CFO, and our Accounting Compliance Manager is that having the solid waste in an Enterprise Fund allows everything that happens there to be a clear and transparent picture of everything; where the money comes from, what the appropriation is, everything in one fund that is easily accessible. That, from our prospective was the number one reason to have it remain an Enterprise Fund. I just wanted to make sure that everybody learned what I learned which is that it doesn’t have to be fully self-sufficient in order to be an Enterprise Fund. Budget Review – 07/03/14 Page 2 Chairman Deane It almost sounds like if there are appropriations in other areas that are not Enterprise Funds the transparency goes away? Mayor Lozeau No, that wasn’t my intention. Chairman Deane That’s what it sounded like. Are you concerned with the revenue that’s brought in and what it’s actually used for? Mayor Lozeau I’m not concerned with anything. When I got here it was an Enterprise Fund. I was concerned that it wasn’t a true Enterprise Fund because I was under the impression that it needed to be self-sustaining so first I wanted to make sure of that point. I think Mr. Griffin wants to add to it as well. I don’t other things are not transparent, I just think when you look at the land fill it is very similar to solid waste as far as how many activities are taking place there. So, what does it cost to operate the land fill, what does it cost to run the trash collection and pick-up and soft yard waste? It’s kind of nice to have it all in one single place where you see all that comes in and all that is done. Mr. Griffin The Mayor has already hit on the major points but a couple of things are when one looks at the financial statements of the city, for several years now they have been used to seeing in the CAFR, general government and then waste water and solid waste presented as Enterprise Funds. I think some of the struggles that we have all had is with the $6 billion solid waste Enterprise Fund where $4 million of the revenue that needs to match the sum total of the revenue and the expenses is somewhat troubling for us but as the Mayor indicated, if it makes sense for this Board and the management of the city; the administrative part, to kind of understand what the cost drivers are of that particular operation to include land fill and collection then it’s good to have it all in one place. Furthermore, from a capital asset perspective, the balance sheet of the solid waste Enterprise Fund has been created over several years of buying assets and literally placing them in the Enterprise Fund for solid waste and depreciating; that’s where we actually use depreciation on government wide financial statements. In working with our external auditors, Melanson Heath, and Ms. Evans, the Accounting Manager, if we ever were to decide to put some or all of the solid waste Enterprise Fund back into the operating budget, she would have to unwind several journal entries and other things that we make on an annual basis. Before we do that, we thought it best to, as the Mayor said, to describe what an Enterprise Fund is and what is the usefulness of it. It’s not really a transparent thing; it’s collecting a bunch of costs that provide that service. We can do it for other things as well. My personal opinion is to not unwind everything we have done over the last several years and have our financials consistent. I’m not sure what the requirements would be to restate financial statements back several years if we were to collapse the solid waste Enterprise Fund back into the General Fund. We’ve heard that maybe we can have the landfill operation be the Enterprise Fund and possibly put the collection and all of the cost associated with that in the General Fund. We are here today with a combination of those two functions of the solid waste operation together. Budget Review – 07/03/14 Page 3 Alderman Siegel I’m not advocating changing what you are doing and I appreciate the discussion but when you say unwind the Enterprise Fund, typically with depreciation, unwinding is a bad thing. It means you have to give the money back. Mr. Griffin Unwind not from a cash flow perspective; unwind all of the journal entries that created the balance sheet. All of the expenses, all of the things when the Board of Aldermen approved the expenditures, for example, with the waste trucks, etc.; our financial reporting group takes those assets and assigns them to the solid waste. Unwinding is probably a bad word, it’s probably just moving back from the solid waste into the General Fund Operations because we have three balance sheets. We have one for the General Fund, one for solid waste, and one for waste water. The sum total of those and the CAFR present what’s called government wide financials. Each one of the have assets, liabilities, etc. Alderman Siegel But we can depreciate assets inside the Enterprise Fund? Mr. Griffin We do. Alderman Schoneman Do the funds that we collect, the Enterprise Funds let’s say, cover the cost of collection but not cover the cost of the landfill? Mr. Griffin I haven’t actually seen the study but it’s my understanding that were discussions back in the early 2000’s of possibly splitting off the collection aspects of the landfill of the solid waste from the landfill. When we think of the landfill revenue streams, its folks coming and depositing things in the landfill and paying for it. I’m not even sure if that would pay for what would be left if we stripped out the collection side. I think because the number was rather large, $4 million is the General Fund contribution to a $6 million operation; I think they just dropped it at that point. I am familiar from discussions with my colleagues that there was some movement to try to potential raise some fees at the landfill and it didn’t pass. The concern I would have is that it’s not a simple one for one, I wouldn’t recommend taking $4 million in collection and moving it over and putting it is the General Fund. There would be some management and staff allocation. As you know, we allocate certain functions, the Treasurer, the Accounting Manager, the folks who look over the cash flow and the books; we allocate some of their cost into those funds. It is located is in the small book; the back pages contains all of those allocations. I think it would be difficult to separate them clean cut. Alderman Schoneman So the $4 million that is contributed by the city out of the General Fund, that’s not strictly for the landfill or strictly for the collections? Budget Review – 07/03/14 Page 4 Mr. Griffin No. It’s derived from the cost of the landfill operations collection and the other things that pertain to solid waste are all collected. The difference between the revenue that you’ve seen and the cost is the contribution. It changes from time to time depending upon the increases or decreases in the cost of operation. We throw $4 million out and generally since I’ve been here it’s between $3.5 and $3.8 contribution. Chairman Deane The use of the enterprise accounts and the mingling of sprinkling in of different positions associated with the functions that are provided by your office or whomever, the Public Works Director; there are a whole bunch of positions that are partially funded in both of these enterprise accounts. The big difference is that one of them has to raise the revenue to cover the cost and the other one does not. If you took everyone’s position and what they did in any part of the city and started breaking it up because…Do you process AP for the Park Department? Mr. Griffin Correct. Chairman Deane Do you charge the Park Department for the time that the folks process that AP? Mr. Griffin No, we charge the general fund. Chairman Deane So we are supplying $4 million out of the general fund yet we are providing portions of salaries of a lot of different positions because it’s an enterprise account but we don’t do that in other areas so that’s one thing that, especially with the landfill because it’s painfully obvious that the revenue doesn’t cover the operating cost. That landfill will only support what the market is going to bare so if you crank the fees up then these companies will say we can bring it somewhere else for less money. I think the only other fee change was the increase in the residential permit that was proposed that didn’t pass but my thought was that the taxpayers were already paying $4 million so they shouldn’t pay any more than $5. Do you have a split in the operations of the land fill versus the collection? Mr. Griffin My understanding is that it was looked at maybe 12 years ago. Mayor Lozeau It was 2005. Chairman Deane Do you have a breakdown of that? The spending cap is another issue with this? Budget Review – 07/03/14 Page 5 Mr. Griffin No, the cost of both Enterprise Funds, less the revenue, contributes to the spending cap; less the items that are deducted. If you moved the entire $6 million operation over into the General Fund, there would be no increase or decrease in the spending cap. That’s why you end up with that $251 million and not $241 million which is the proposed General Fund operating budget. Basically, it’s the sum of the $6 million of solid waste plus the waste water minus the waste water costs of debt that’s funded by user fees that was added several years ago. Chairman Deane But, if it’s not a true Enterprise Fund, why do we continue to dice portions of people’s salaries out to provide services for the Solid Waste Department where we don’t do that with anybody else? Mr. Griffin The decision was made several years ago that waste water was going to be an Enterprise Fund and solid waste was going to be an Enterprise Fund. At that time, they probably recognized that we wanted to capture the costs as best we could on an allocated and direct basis of the cost of operations. So, although it might seem odd that we are allocating a portion of Ms. Evans, Mr. Fredette’s, and others to the solid waste operations, and we are not doing that for streets, park & rec, there’s no need to do it for those departments, we need to do it for the Enterprise Fund because when we set up the Enterprise Fund it was determined that we want to capture all of the reasonable costs of doing business in the Enterprise Fund solid waste in that set of accounts. Chairman Deane But at one point the fees that were collected covered the cost of the operations. Mr. Griffin It must have been a while ago. Mayor Lozeau As I was told, at that time we were getting a significant amount in tipping fees but we were getting waste from a much wider berth and we were making a lot of money on it because it was affordable and we were letting waste management and whoever brings it in. Mr. Griffin There was outside trash going into our landfill? Mayor Lozeau Yes. There were a lot of companies that were providing pick-up services that were coming in and tipping from different locations. I think it was the front cells at the landfill and people noticed how quickly it was filling up. That’s when we started doing the residential credits to mitigate it. We slowed down how much we were bringing in and I think most of us know that there is trash coming in from other communities. If a company that’s been hired by some of the housing units is working in Merrimack in the morning and they come to Nashua in the afternoon, they may have trash in their truck from Budget Review – 07/03/14 Page 6 Merrimack. We have had people tell us that they have followed trucks. There was a woman who lost her diamond in the trash and she followed the truck from Merrimack all the way to the Nashua Landfill and recovered her ring too. I think some of it we can manage and some we can’t but we have slowed it down and we have kept our tipping fees at a place that doesn’t necessarily make it worthwhile them to do that. Chairman Deane We have the life expectancy of our land fill. Mayor Lozeau I agree and I think that’s very valuable and when we started having that discussion and knew what space was going to be left we started to try to mitigate it and that was quite a while back. Chairman Deane I’m still kind of out there on these charge backs for all of these different positions. Mayor Lozeau Mr. Chairman, if you look at it, it’s about $142,000 that we are talking about, some of which are positions that really are related. There is a financial services position and a billing accountant and a collections specials and all they do is work for solid waste and waste water. The others, like the compliance accounting manager is .10 solid waste, $8,000 of that salary. They are not significant amounts. Chairman Deane What do they total all together? Mayor Lozeau $142,000. Chairman Deane That’s what I am saying. I think that is a significant amount of money. We don’t do that anywhere else and services are provided from other areas within city government that aren’t charged back to other departments although they may not be Enterprise Funds. They are true costs. Mayor Lozeau I don’t disagree but I am saying that I think that’s been done over the years because they are Enterprise Funds and we attribute those costs associated with them. Chairman Deane I thought I heard the reasoning behind it was an Enterprise Fund we want to know what the allocations were and what the costs were to operate it. If you use that analogy or reasoning behind doing it then to me that would also apply to everything else. Budget Review – 07/03/14 Page 7 Mayor Lozeau Not if they are not Enterprise Funds. Chairman Deane But we are supplying 2/3 of their operating budget with cash. Mayor Lozeau We show that. Chairman Deane I understand that but if we have all these other departments like Mr. Griffin’s area or whomever supplies services to those departments as they operate that aren’t charged back percentages of time of employees to provide those services so that the department can purchase things and pay for things. Is there a charge back to the Payroll Department from solid waste? Mayor Lozeau No. Chairman Deane Why not, that department is processing their payroll? Mayor Lozeau We do it in grants, in Special Revenue Funds; the schools do it in different places as it relates to funds. Chairman Deane This isn’t a grant or a Special Revenue Fund. We provide $4 million in tax dollars to make it operate. Mayor Lozeau I don’t think it’s necessary for it to be self-sufficient in order to charge the true cost to it. Chairman Deane My argument is that we don’t charge the true cost to other departments. Mayor Lozeau I know but they are not set-up where everything is in a single fund and to try to do it across the city for everybody’s time is just not a feasible thing. Chairman Deane It might not be feasible but like in the waste water area where it is feasible because there is revenue Budget Review – 07/03/14 Page 8 there that comes back to the city through the user fees that are collected. As a user of the system, you are paying for percentages of people’s salaries with that cash. You don’t seem to agree. Mayor Lozeau I think doing it either way, it comes out the same. Chairman Deane So if I want to change this, I can change it and it won’t be a problem? Mayor Lozeau I think it is going to be a problem, there’s a lot of work that goes behind changing it. If you want to do that then we need to talk about it and maybe work towards it the next fiscal year budget to change it over. Chairman Deane I’ve been talking about this for a couple of years now and it seems to fall under the radar. Is it the beast that nobody wants to let out of the closet? How much work is it Mr. Griffin? Mr. Griffin Consistency is very important to the reader’s of the financial statements of the city. They understand that we have two Enterprise Funds and we have a General Government Operation Fund. Chairman Deane Are we talking about the auditor’s? Mr. Griffin No, we are talking about the folks that read the financial statements and get recommendations from their advisors on purchasing the bonds of the city. Mayor Lozeau Our rating. Chairman Deane I was looking to be more specific. Mr. Griffin The auditors keep their independence and they audit and they have told us that the Enterprise Fund is absolutely fine, both of them. They are reported on consistently and accurately and there is no material changes in the way that we report it. It’s very difficult and I think Mr. McIntyre was very hesitant when we asked if he thought we should have an Enterprise Fund for solid waste. He said it depends on what your objective is, if you want to collect some costs of operation, it’s totally acceptable and that’s one of Budget Review – 07/03/14 Page 9 the reasons why we have an unmodified opinion. The $142,000 that’s allocated, the decisions made for those groups of employees to charge the two Enterprise Funds were made well before I came, I’m not sure when. You are absolutely correct, you can bring it to a certain additional level, you can charge computer time, legal, payroll and others. They probably decided that enough was enough and let’s be sensible. In my time here, there have been a couple of questions that were asked of me. My very first year was should the IT Department be a profit center and not a cost center where they would bid out services and compete with the external vendor’s. I asked if we wanted to figure out if the IT services of the city can be the best and most efficient as possible or do we want to just try to allocate the cost just to show that putting in that component of the engine project really wasn’t $250,000; it was really $300,000 because you used $50,000 worth of cost internally. The next year it was how difficult it would be for the attorney’s and the Legal Department to keep track of their time on all of the different projects. It could be done with software and would be very critical if you were actually billing a client for legal fees. It’s not so important in a city where you are not going to measure effectiveness or allocate any costs. The land fill, Attorney Bennett and Attorney Clark, they work on land fill issues and there’s no allocation of their time to the land fill. You can ratchet it back or expand it and have a fully allocated cost study done that allocates everything to all of the different departments in the city if that’s what it is necessary. What we have right now is consistent financial statements and the contribution is between $3.5 and $3.9 predominantly in how much money we are going to spend for soil wall and the gas collection. Those have been the variables that have caused that operation to need either $3.5 or $3.8 million. Chairman Deane Has the amount of money that we are required to put away through our permitting process, has that decreased or has it always been $200,000? Mr. Griffin It was probably larger at the beginning and then it went down and now it is $235,000. Chairman Deane What are we carrying for the fund balance in that account? Mr. Griffin I’d have to check but I think it’s about $4.2 million. Chairman Deane That’s the money that DES requires us to do the final cover because other communities that had land fill permits; when they go to the end they said we don’t have any money to do that. Now the state makes sure you have money to complete the job. Is that correct? Mayor Lozeau Yes, it’s called a Closure Fund. Alderman Siegel I have the same problem with the way things are done, Mr. Chair. I appreciate Mr. Griffin’s desire for consistency and understand it but what is shown externally in the books really has to be measureable Budget Review – 07/03/14 Page 10 from year to year because it is going to affect the pricing even for bonds that we’ve sold. There’s still a secondary market for our bonds. Whether we like it not, the die was cast at a certain point and we have to live with it. My big issue is that we don’t have project level accounting but I don’t know how to solve that and that’s a real issue for me. We really don’t have effective ways to measure that as far as I can see. Chairman Deane Are there any ways to measure that? Mr. Griffin The city’s internal financial statements have been built on departmental appropriations. We have struggled a bit with trying to create project accounting with no project accounting software. We have been able to use the system to determine the individuals who work on certain projects to include Main Street. They assign their time with a code. We have had discussions on how we should compete. I was in the natural gas distribution business for years where we had service departments and the biggest complaint to the Public Utility Commission was how can I compete with a utility that’s offering the services that I offer and they are not even allocating all of the cost? We didn’t have project accounting software either and they finally just abandoned the business. I don’t think we do enough projects that would warrant project accounting software. Mayor Lozeau It’s better when we start out that way rather than to try to rebuild it so we have been using activity codes. Chairman Deane, I did confirm in the CAFR that it’s $4.2 million for closure. Alderman Dowd It’s a very interesting discussion but it’s clear that we can’t resolve this in this budget so maybe we should refocus on the FY 15’ budget. Alderman Siegel My question is directly related to what stuff will come up. The specific reason that I mentioned project accounting is because we did get some breakdowns on the Sidewalk Project and the only line item for labor was overtime labor and there wasn’t a line item for straight time labor. Well, there was a line item but it was zero. Mayor Lozeau It’s in the budget and it’s been there for over a year and a half. Alderman Siegel The sheet that I have had a zero for that. Mayor Lozeau Was it on the top or the bottom? Budget Review – 07/03/14 Page 11 Alderman Siegel It was on the bottom. Mayor Lozeau Okay, then that was a pretty old one. Alderman Siegel It was the only one I had. Mayor Lozeau You can pull it up any time, it’s on the web but I’d be happy to send it to you. Mr. Griffin We have been tracking that. We had to go back in time a bit to calculate what the straight time was but a year ago and going forward we allocated the straight time to the phase of the project, the block of the project. It’s going to be in the detailed sheets as well by block. MOTION BY ALDERMAN DOWD TO SUSPEND THE RULES TO ALLOW FOR THE INTRODUCTION OF A COMMUNICATION AFTER THE AGENDA WAS PREPARED MOTION CARRIED MOTION BY ALDERMAN DOWN TO ACCEPT AND PLACE ON FILE MOTION CARRIED Alderman Dowd was kind enough to work with the school administration on some of the items that have been raised. Alderman Dowd At the last budget meeting there were some questions requesting additional information, particularly around the area of special education and CTE, which is continuing technical education. I had a couple of sessions with Mr. Conrad and Mr. Donovan. They made 21 motions reducing it by $1.8 million. The reduction in the budget was really around $700,000 or $800,000 because they are not counting the re- negotiation of the school bus contract that came in. They cut the price by $450,000. The increase over the FY 14’ budget was $3,283,847 and the percent increase was 3.37%. The 2015 submitted to the Mayor was $1,748,192. The biggest budget increase was salaries due to negotiations and they had several unions that finalized negotiations, the increase was $2,594,493 and that was not just teachers. The new bus contract, the actual increase was $554,143. We had negotiated the bus contract that was good for five years and we knew when it came time to re-negotiate it was going to cost us because they weren’t making any money on the contract we had. Alderman Siegel Is the bus contract the aggregate of both special education transportation and regular? Budget Review – 07/03/14 Page 12 Alderman Dowd Yes, it’s the total. Alderman Siegel So they don’t break them out separately? Alderman Dowd No. We bought software a few years ago that allows the Director of Transportation to detail every route down to the minute and if there is any traffic or weather issues it goes to “heck in a hand basket.” The special out of district increase from the prior year is $195,000; internal SPED cost is $80,000; heating increase is $125,750; and then there were other smaller increases especially in the area of technology and software. Chairman Deane So that $125,750 on the heat, that was the 6% as recommended by the Purchasing Department? Alderman Dowd Yes. Then the Mayor and Board of Education got together and the Mayor had reduced the request by $360,000. The Board of Education and the Mayor agreed that $200,000 of it would come out of their Deferred Maintenance Account. Some of the projects are large enough that they should be bonded. They have to replace the two middle sized gymnasiums at the two high schools. Chairman Deane You are looking at $200,000. Alderman Dowd Yes. Chairman Deane It just seems like deferred maintenance and the school district is now a thing of the past and we are bonding money. Alderman Dowd Yes, but that $200,000 doesn’t cover those two projects. The Mayor’s budget to the Board of Aldermen was $100,388,192 and there was an additional $160,000 that was reduced from the Board of Education’s budget which they feel is extremely problematic based on what they had negotiated down to their budget request. Alderman Siegel There was maintenance associated with a project that they are now planning on bonding so we are not maintain something because we are going to re-do it or is it actually that it’s decided that we are not Budget Review – 07/03/14 Page 13 going to spend $200,000 in maintenance that we would otherwise spend? Alderman Dowd The $200,000 that was allocated for Deferred Maintenance in the budget went to zero because the work that they were going to do for that $200,000 we believe will be encompassed in a larger project that will be bonded. Alderman Siegel So the maintenance that would have happened if the project didn’t happen is going away because there’s going to be a project that eliminates the need for maintenance because you are just re-doing the whole thing? Alderman Dowd The work will have to be done but funded a different way. Mayor Lozeau There use to be $300,000 that we carried in deferred maintenance for the schools. Chairman Deane There used to be $500,000. Mayor Lozeau But when I got here it was $300,000. When I looked at the deferred maintenance list this year as provided to the Capital Improvements Committee, they were talking about putting a new roof on the Dr. Crisp Elementary School. To me that’s not deferred maintenance. They are looking at bricks, replacement of lockers, boiler work, kitchen, and ventilation. Chairman Deane The Fire Department uses their deferred maintenance for roofing. Mayor Lozeau I’m just saying that when you looked at this list and you saw that potentially there was $300,000 to go in there, and this was just a small list of items, we either looked at bonding it, reprioritizing it, or put more in deferred maintenance. With 17 schools and an administration building, that’s significant. That’s one of the reasons why I thought if we moved that it wouldn’t be the end of the world plus, based on what they are doing right now, they don’t have time to take on these projects. Chairman Deane But if something fails, what do they do? Budget Review – 07/03/14 Page 14 Mayor Lozeau There’s still money is deferred maintenance; it’s just $100,000 instead of $300,000. Chairman Deane In today’s world, Mayor, $100,000 divided up into 17 different facilities… Mayor Lozeau You can make the same argument for the $300,000. Chairman Deane At least you are starting with something you can work with. Alderman Dowd What happens is some of the deferred maintenance keeps getting deferred and we end up with projects like Broad Street where we have to replace the entire roof and HVAC system and windows and other things. Chairman Deane But those things have been in there for over 50 years so it’s beyond being a deferred maintenance issue. Alderman Siegel The thing that concerns me is the deferred maintenance is such a low number. If you look at the capital stock of the schools, what is the capital work of the school? Alderman Dowd Fifteen years ago we calculated that the school facilities were approximately $200 million worth of investment. That has significantly gone up with the two new high schools. The industry standard said that you should be putting aside about $200 million a year for deferred maintenance so we have never been keeping up with deferred maintenance. When we built the new high schools and tore down the south school, it was amazing. There were things in there that hadn’t worked in eons. Are we taking care of the buildings the way we should, no but they try to focus on the most critical items. Mayor Lozeau We put a RFP out just about a year ago to look for a company that could help us get our arms around all of our buildings and what their needs were, all of the city physical assets and we settled on a company and we actually escrowed the money last year and it was my hope to bring them in to do a presentation that would do the work for schools and city and put everything in a maintenance upkeep program for capital assets so we would know when the roof is due to be replaced and we would know when the bleachers were due to be replaced. Those sorts of large expenses. We have been budgeting for city buildings an amount of money for the first time in the last few years towards city buildings working towards that maintenance or replacement number. We are not close to where we should be based on Budget Review – 07/03/14 Page 15 our assets but if we can get everything into a system where we can then look at it similar to what we do with CERF we can say this is the life expectancy and that sort of thing I think we might actually be able to start budgeting appropriately and make those determinations on what are expenses that we want to bond based on their life span versus deferred maintenance and what we should bond each year and what those projects are that might be completed in that budge year. Last year’s deferred maintenance has not all been spent. Alderman Siegel That’s scary. I’ve mentally gone through the calculations and just thinking what the capital stock might be of the school system with the new high schools and it would be equivalent to the average citizen budgeting $40 or $50 per year for the maintenance of their home. It’s a recipe for disaster and now you are saying that they didn’t spend the deferred maintenance budget that they had, that’s really frightening. Mayor Lozeau I think part of the problem is that there are just so many things that need to be done. I agree that the percentage is out of whack. There are a few things that I worry about. I worry about a long-term plan for paving so that we can plan and allocate appropriately. I worry about the infrastructure of the city instead of chasing sink hole after sink hole. I worry about the city building and assets and how we plan for that long-term. Those are big things that we need to find a way because something is going to fail and it’s going to be beyond what we are prepared to deal with. This one I think is easier than the sewer but we have to start somewhere and we are not there yet. Chairman Deane But now we have settled on bonding everything. Mayor Lozeau I don’t know that we have. I think we have settled on some of these particular projects like a roof replacement at a school. Chairman Deane But we have settled on bonding. Deferred maintenance is soon to be a thing of the past. I think we had a little chat about that. We have to call things what they are. The elementary school is not an HVAC project. That project over there is about $8.6 million. We look at the other lines in the School Department’s operating budget and we look at some of the decisions that we are making on some of these projects. I mean we go in and renovate these buildings but put the 50-year old toilets back into the bathrooms. Why do we do that? Those are the decisions that are being made but we have money leftover at the end of the job. Alderman Dowd The next three slides – the reduced OGAP training, that’s a teacher assessment program for teaching math. Budget Review – 07/03/14 Page 16 Chairman Deane So if the teachers struggle with these math programs and in turn, they can’t provide skills to the kids that are in the classrooms, who is benefitting? Alderman Dowd This is new techniques for teaching multiplication and division. Chairman Deane Where are we in math in our school district? Alderman Dowd In what regard? Chairman Deane How do our students do in mathematics, math and science? Alderman Dowd They are struggling in those areas. The next slides are reducing the middle school libraries, two guidance positions at Pennichuck Middle School. Middle school is where they have the greatest degree of issues with students. The transition from elementary to high school through the middle school; that’s where you lose kids. I can remember when we had expulsion hearings; 9 times out of 10 we found that kids started going array in middle school. We need to save those kids. One math coach is another reduction in math. They reduced two of the four proposed elementary teachers. They were trying to reduce class sizes; they needed four and they cut two. They added $50,000 to the contract services Medicare billing fees and that’s probably conservative but the return is significant. The total reductions or adjustments are $1.8 million. Just quickly, our high schools are not failing. In the last ten years there’s been a 372% increase in the Nashua High School AP exams being taken. The increase in the student scoring is 3+ and 5 is the highest. Above 3 which you can get college credit is 401%. The Nashua High School’s average on their AP scores nearly 1 point higher than the U.S. average so there are a lot of smart kids at the high school. In 2011, and this is being updated for the current year, out of 953 seniors that graduated from Nashua High, 694 students went on to college, that’s 73% but that does not include students that joined the military or who went to trade schools. The numbers are very similar in 2012, 2013, and 2014. I do have a copy of all of the colleges that they went to and there are a number of significantly difficult schools to get into. As far as the special education, the chart shows you from FY 05’ to FY 13’; the total school expenditures and what percentage of that spending was for special education. Some years it went down but some years it went up as high as 12%. In FY 13’, it was $28,678,235 and that’s just not for placements; that’s for all of special education. Alderman Soucy Thank you for your report however when I read it, I didn’t find the answer to the one question that I had asked during that budget meeting. When I was looking under wages full-time, I noticed that it was pretty detailed. You have an Outreach Worker, you have the Attendance Officer, you have a lot in there but I didn’t notice the school nurses, psychologists, how many guidance counselor’s, the math coach, the social worker, I’m not sure what is in there. I was told by Mr. Conrad that those positions are in the Budget Review – 07/03/14 Page 17 919.58 teachers and he had promised that he would give us a more detailed outline of how many were actually teachers, how many school psychologists, how many school nurses, etc., just to see if there are positions in there… Alderman Dowd He sent an answer to Alderman Moriarty. I thought it went to Sue to get distributed to everybody, but he did answer that. If I’m remembering correctly there’s about 600 and some odd teachers and then they broke out the rest of the 300. Alderman Soucy Most people wouldn’t know that we’ve got a math coach. Do we have too many school psychologists? I don’t know. I don’t know the answer. I was just looking for my own self-interest. I don’t know if any of the other aldermen or alderwomen here have received that, but I would still like to. Alderman Dowd I will try to get that e-mail and have Sue send it out to everybody. Alderman Soucy Just out of curiosity because I know we have more than one LPN. Chairman Deane Were you copied on the e-mail because I never saw it? Alderman Dowd Alderman Moriarty went and asked the question directly to the superintendent. Anytime an alderman asks the school department a question, I get a copy of that. Alderman Soucy I had asked the question here at the Board meeting. He wrote it down. Chairman Deane That doesn’t mean Sue Lovering was copied on the e-mail. Alderman Dowd I don’t know who else to copy. Chairman Deane It’s kind of hard for her to distribute anything if she’s not part of the distribution. Budget Review – 07/03/14 Page 18 Alderman Dowd I’ll go back and check on that. Alderman Siegel It did not go to us. The only thing that Sue distributed was Alderman Dowd’s presentation that we’re looking at now. Alderman Dowd But he did answer that question. It’s available and I’ll have it for you as soon as I find the e-mail. Alderman Schoneman I’m looking at the special education program detail. You have total school expenditures for Fiscal Year 13 at $142 million yet I’m seeing the number for Fiscal ’15 of $100 million. What is the gross up to get to this number here in the special education program? Alderman Dowd Federal and state funding grants. Alderman Deane has always asked that question. What’s the true cost of education? It’s not what the city comes out of the general fund. There are also federal and state funds. Chairman Deane We provide a portion. Alderman Dowd The next chart which is page 12, in January, 2014, 91 students were out-placed, 25 different schools or centers. The yearly cost for the out-placement was $4,561,754.78. The average student cost was $50,129.17. The most expensive one-student placement was $189,748.90. Fortunately we only had one student in that area. The school district has 1,828 special ed students and 91 are out-placement. That’s like 4.9 percent of our special ed students are out-placed. Somebody asked about what disabilities are handled. In 2013 and 2014, these are the quantities and the different categories. Some of them say zero. The reason the zeros are there is in other years we have people in that category. Those are the categories that we are responsible for. Alderman Siegel Point of order. This is the out-of-district ones. This is not all of them. Alderman Dowd No, no. It’s the out-of-district, just the out-of-district. We received $294,000 tuition from other towns for special ed services that are provided by Nashua. There were 20 other cities that participate with us at various times as far away as Monadnock, Concord. Several towns. And, we’re trying to expand that. Every time we have a student from outside of Nashua that comes has services from one of our special ed teachers, we can back charge that percentage of the teacher’s time to that other district. Budget Review – 07/03/14 Page 19 Chairman Deane Is there a plan going forward? Alderman Dowd Yes, it’s been a long time coming. Chairman Deane If school district is making the investment and the city is making the investment, what areas are they going to cover? Alderman Dowd I didn’t get to that level of detail. Certainly it would be areas where it’s not so severe you don’t have to outplace to special facilities. Chairman Deane Somebody must have done a cost analysis on it to see if was worth providing that service in-house as supposed to out-sourcing it. Alderman Dowd We do speech therapy. We handle kids that need physical assistance to be able to get through the day. I’m not a specialist in that area, but Jan Martin could give you a really good breakdown. Our special ed programs are centralized in certain schools. Amherst Street has a classroom set aside for handling people that are physically handicapped. Then there are other schools that handle special reading and other things, developmental issues. Alderman Siegel If you look at just the percentages, you would say the school district is doing a very good job as far as trying to keep everyone in. It’s just that slightly less than five percent is just incredibly expensive. I know having spoken how well they did; they are making a significant effort to keep people in district. Unfortunately the laws are such that if somebody really wants to go out-of-district there’s nothing we can do. Alderman Dowd All too often people are out-placed to other areas it usually involves the courts or lawyers. Alderman Soucy Remember that alternative school we have a few years ago at the Boys Club? A lot of those students when they were over there, were they at risk of being out sourced to other places or did they go back to regular public schools when that closed down? Budget Review – 07/03/14 Page 20 Alderman Dowd The students that went to alternative schools were students that were having issues functioning in a normal school environment. They required a special type of handling. It’s not necessarily because they have learning disabilities. There were some students that came out of that alternative school, went back to the high school and were on the honor roll. They had difficulty dealing with the normal school environment. There’s a lot of sensitivity of what that involves. Alderman Soucy I did work in that school for some time. I was just wondering if it was feasible if we reinstituted an alt school, maybe a little bit different, but an alternative type of school that could maybe handle like the emotional disturbance kids, the 33 there, and if it would be cheaper to actually have something here in district rather than sending them out. Alderman Dowd They actually put smaller versions of that in the middle school and at the high school, itself, rather than have a separate school. That school was exceptionally expensive to run. Alderman Soucy It’s very expensive to send them away too. I was just wondering if there was a cost per hour. Alderman Wilshire The Children’s Home has a special ed school. That’s first kids that are not successful in the public classroom. We have 30 students in the school. Its kids that need that little extra to get them an education because they just aren’t doing well in the public school. Those are the kids we take care of. Alderwoman Brown I spoke with Dr. Mark LeGare; he’s the city’s school psychologist, because I was interested in the percentage of the emotional disturbance students. Those are a big percentage of the out-placement. He had spoken about the fact that with the emotional disturbance there might be safety issues of them staying at the school. Also many of them are involved with the juvenile courts. It maybe court ordered for them to be placed elsewhere. He gave me some good insight regarding that. Chairman Deane On the court ordered placement, I wonder what the number was. Did he give you a number on that? Alderwoman Brown No. Alderman Dowd I think it’s around 10. Somewhere I have the list of where all these children are sent. Budget Review – 07/03/14 Page 21 Alderman Schoneman Looking at Special Education Program Detail, for Fiscal Year 2013, total special educations were $28.7 million roughly. Alderman Dowd Out placement and in placement. Alderman Schoneman Some of that is grant funded. That’s just a total cost. Alderman Dowd Yes. Alderman Schoneman And this number, $4.5 million that’s out-placement only. Alderman Dowd Out-placement only. Alderman Schoneman I thought I read something in the paper recently about the possibility of Nashua taking over a school in Merrimack, special ed related. Did anyone else read that? Alderman Siegel The Charter School for the Arts. Alderman Schoneman No, no. There was something else. Maybe I’m wrong. Alderman Dowd Not that I’m aware of. Chairman Deane Alderman Dowd, what page are you on? Alderman Dowd First page of CTE. Budget Review – 07/03/14 Page 22 Chairman Deane CTE starts on Page 15. Alderman Dowd We have a technology center in our two high schools that was set up when we built the two high schools funded predominately by the state. It’s sort of a cooperative with the surrounding towns. It serves both Nashua high schools, Alvirne High in Hudson, Campbell High in Litchfield and Hollis-Brookline, Merrimack, Milford and Souhegan. It’s probably not in here but we also send students to Hudson and other places that have different types of CTE. In Hudson it’s farming. I don’t know what the others are. Chairman Deane There’s nothing wrong with farming. Alderman Dowd And there’s a technology center. There are 19 different programs and they are all spelled out there and detailed. There’s also a listing in the briefing. We have the Regional Technology Center here. These programs require ongoing investment in capital expenditure. This year we spent $259,750 to upgrade some video equipment in the television lab that we have. If you’ve never seen that lab, that is amazing. It’s a regular operating television station. The graphics area sort of went down for a number of reasons. They’ve now upgraded that equipment again. They have repurposed it. The CTE capital equipment reserve fund is the major source of trying to replace this equipment. Chairman Deane It’s the only source, is it not? Alderman Dowd Yes, at the moment. The next couple pages are the 19 programs. I know that the other point I wanted to make is a lot of these programs, the kids go out of here and go on to college programs. Even in culinary arts, they go to Johnson and Wales. A lot of them go to Johnson and Wales and a couple of other schools. In career in education, they go to multiple colleges to learn how to be teachers. There’s a pre-engineering course that’s taught by some people. I believe BAE have some people come over and teach. There’s a lot of equipment they have. They are involved in a number of different engineering programs. Some of these kids come over and serve as interns at BAE in the summer. They continue to serve as interns when they go to college. If we’re lucky, we hire them. Chairman Deane That’s a good program. Alderman Dowd All those programs. Hospitality and hotel management, again it’s Johnson and Wales and schools like that. Then I have some additional information that I thought would be helpful. The ELL which is English Language Learning numbers has grown from 236 students in 1994-1995 to 1182 in 2011-2012 and 1144 in 2012-2013. There are a couple of charts on the next few pages that show that. The diversity at the Budget Review – 07/03/14 Page 23 high schools, I think it’s the Nashua schools, 23 percent was diversity in 2006-2007 to 32.9 percent in 2012-2013. The other sort of sad thing is Nashua students eligible for free and reduced lunch was 22 percent in 2001, it’s 42.5 percent in 2013. The dropout rate in Nashua high schools is one of the lowest in New Hampshire, 4.56 percent. It was 11 percent in 2006-2007. Alderman Siegel I just want to qualify there was a legislation change preventing 16 years old from being able to drop out. There’s a reason why the dropout rate changed. Alderman Dowd There are a number of reasons for the changes but if you look at the chart, the third chart in, you’ll notice that we’re below the state average. Alderman Soucy Students attending Clearway to get their GED, are they considered dropouts or is that a completion? My understanding was they considered them as graduates. Alderman Dowd Unfortunately I believe they are considered dropouts until such time as they pass the GED. Alderman Wilshire I didn’t think they were. Alderman Soucy I wasn’t sure; that’s why I asked the question. I’ve heard that they were and I’ve heard that they weren’t. Alderman Dowd I think after they get their GED, they are not considered a dropout anymore. The reason being there are a fair percentage of them that don’t make it even through that school. Alderman Soucy To me it just sounds like the numbers are kind of artificial at that point if that’s true. Alderman Dowd Those numbers are never an exact science, but being lower than the state average, everybody calculates it the same way. A lot of times the kids that go to Clearway are given an alternative education after for different reasons including expulsions. Alderman Schoneman I have a question about the Nashua students eligible for free and reduced lunch and changing that much in that period of time. Has the threshold change or has the threshold stayed the same and more families Budget Review – 07/03/14 Page 24 are just falling below the level? Alderman Dowd The threshold has gone up. I don’t know what rate they use to calculate that, but it’s still significant. The amount of money to qualify hasn’t stayed the same, no. Alderman Schoneman Has it stayed the same in real dollars? Are we deciding as a society to raise the level and it pushes more people into that or are they actually falling below the level? Alderman Dowd I don’t know. Alderwoman Brown I believe it’s a certain percentage of the poverty level, but I’m sure we could contact the schools and get an answer to that question. Alderman Dowd Again we’re below the state average. They have a bigger issue in Manchester. Then there’s a summary chart. I had these charts, I went over them again with Mr. Conrad and Mr. Donovan to make sure that the numbers all reflected what they were. Chairman Deane What are they going to do with the revenues if they’re not putting it into the CTE? Alderman Dowd They don’t have it. Chairman Deane “The city has elected not to deposit the revenues from the surrounding cities.” Alderman Dowd For 2014. That’s not for the 2015 budget. Mr. Griffin Subject to check, there are two types of revenues that come in. I think we might be confusing them. The reimbursements from the state have to be deposited into a city account. Then if you want to spend those moneys, they have to be appropriated and identified. Budget Review – 07/03/14 Page 25 Chairman Deane Or CTE. Mr. Griffin Correct. Then there’s another set of revenue that comes in from tuitions. Chairman Deane User fees. Mr. Griffin Those would go into the special revenue fund. That’s the revenue and then you have expenses coming out of it. Chairman Deane I think it was in 2010 or whatever that we looked at the CTE and the way the budget was put together. It was not above board. We found that they were funding positions in there, teaching positions that they shouldn’t have been doing. We changed that, I believe, did we not? Mr. Griffin I believe that was my first year, and the team was in the process of making right, if that’s the right word, all of the accounting associated with those accounts. Chairman Deane It just seemed like the CTE revenue had lost its way. They had created almost like a sidebar operating budget with those monies. Some of the teaching positions were being funded through the revenues that were brought in from CTE and taken out of the general fund appropriations. I think that’s how I remember it. Alderman Dowd I think the high schools were set up and the funding started coming in. There wasn’t a correct place to put it. I think you’re right, it was used for other things and the Board of Ed said. Chairman Deane It was brought to their attention. Alderman Dowd And then we came to the Board of Aldermen and said let’s create a special fund. Chairman Deane I believe Alderman Flynn was the one that drove the wagon on that one, if I remember correctly, Budget Review – 07/03/14 Page 26 because it was quite a bit of money. Mayor Lozeau I was just going to add that one of the reasons there’s a problem is because the special revenue fund can only be user fee driven. The reimbursement from the state for costs have to come into the city and therein lays the difference. We chose not to move that money over. Alderman Dowd I believe the Board of Ed was okay with it this year. Mayor Lozeau They accepted it, and I appreciated it. Chairman Deane What is that dollar total? Mayor Lozeau $200,000. Chairman Deane Is there a plan going forward? Mayor Lozeau They would have to put in legislation to appropriate that money over to CTE. I think that needs to be something determined. I’ve worked, as I think many of you know, diligently with the school department to try to find middle ground. The cuts that we’re talking about and the cuts that Alderman Dowd just talked about were not a cut in the school budget. They were cut in the requested increase to the school budget. Alderman Dowd That’s why I said reduction. Chairman Deane Now you’re using that word. Nothing has been cut. The request is $3.5 million more than what they go last year. To say something has been cut, cut is not the right word to use. Their request for additional funds has been looked at. Mayor Lozeau I reduced their request for additional funds. The point I was trying to make it wasn’t a cut to their budget. Budget Review – 07/03/14 Page 27 Chairman Deane Now you’re using it again. Mayor Lozeau I said it wasn’t a cut to their original budget. He knows that we both agree on this one. Chairman Deane For a change, we’re onboard with the word “cut” because nothing has been cut. Mayor Lozeau The point I was trying to make, Alderman Deane, part of my conversation with the school board there terms used like “we want our money for CTE because we get that money from the state.” I finally said to them if you take all the money you get from the state, all the money you get from the federal government, all the adequacy funds, all the special ed money, all of that, if it didn’t come to the city at all and it went directly to the school, can you operate? No. I said then it’s not your money. I mean that in the kindest of ways, but the fact of the matter is, you have to work together and try to find a balance. What comes in as city revenue versus what goes into the school revenue? Chairman Deane But the CTE money that’s coming back Mayor Lozeau Is a reimbursement to the city for costs for the program, not the user fee from students that are somewhere else coming in to use the program? Chairman Deane What happens to that money, it just goes into the general fund? Mayor Lozeau Exactly, unless legislation is brought in to transfer those funds which is what they were asking to do this year which I said, I ask you not to do that. At least those funds will be available to use against the tax rate once the budget is completed. Chairman Deane In the meantime what happens to the capital reserve account for CTE? Anything? Mayor Lozeau I think $561,000 is what they have in that account. Budget Review – 07/03/14 Page 28 Chairman Deane And what’s their Alderman Dowd Millions. Chairman Deane So we’re up against a percentage of what’s retained. Then we look at depreciation, where is the $561,000 of all the equipment. If it’s like the rest of everything else here, it’s probably not enough. Mayor Lozeau That’s what I would believe. Chairman Deane Do you agree with me? Mayor Lozeau I do agree with you. I’m sure it’s not enough to meet what their demand is like everything else. Chairman Deane I just don’t want to start seeing a resolution coming in to bond replacement equipment for the CTE program. I don’t want everything to turn to borrowing money. I understand the idea of bonding items. Alderwoman Brown May I make a motion please? MOTION BY ALDERWOMAN BROWN TO REPLACE THE $160,000 THAT MAYOR LOZEAU REMOVED FROM THE FISCAL YEAR 2015 BUDGET Chairman Deane We have to take the budget off the table and then you can do that. TABLED IN COMMITTEE MOTION BY ALDERMAN DOWD TO TAKE FROM THE TABLE R-14-034 MOTION CARRIED Budget Review – 07/03/14 Page 29 R-14-034 Endorser: Mayor Donnalee Lozeau RELATIVE TO THE ADOPTION OF THE FISCAL YEAR 2015 PROPOSED BUDGET FOR THE CITY OF NASHUA GENERAL, ENTERPRISE, AND SPECIAL REVENUE FUNDS Alderman Siegel Just as a procedural, I thought we were going to go in order. Chairman Deane If Alderwoman Brown wants to go right to the school district, she can and then we can go through. MOTION BY ALDERWOMAN BROWN TO ZERO OUT LINE ITEM 90120 ON PAGE 188 IN DEPARTMENT 191, MAYORAL BUDGET ADJUSTMENT CURRENTLY ($160,000) ON THE QUESTION Chairman Deane That shows a negative $160,000. You wanted to make a motion to add that back in. That would be a budget adjustment because it’s not up to us. You can put it in the budget wherever you want, but the school district can go and spend it on whatever they want. You have a bottom line adjustment of $160,000 add. That would change that number to $133,748,556, the new bottom line number. Mr. Griffin My recommendation is if you look at the school as proposed, that would be the true-up number. $133,758,556. Chairman Deane You’re right. Mr. Griffin We put the cut on one line so everything else is where the school presented it so there’s no need to add to other line items. Chairman Deane I would debate my colleagues to the death if they attempted to do that. It just makes no sense. We don’t control how they spend their money. If they want to show you they are going to do this and then turn around and do something else with it. They are the ones that are going to have to answer to that, not us. This is what they proposed. We did that one year with a piece of equipment, I think it was a backhoe. It was something that fell apart and it was total junk. We put it back in the budget and then they never bought it. Budget Review – 07/03/14 Page 30 A viva voce roll call was taken which resulted as follows: Yea: Ald. Dowd, Ald. Siegel, Ald. Brown, Ald. Wilshire Ald. Deane 5 Nay: Ald. Schoneman, Ald. Soucy 2 MOTION CARRIED Chairman Deane No one has any changes in the revenue area, do they? The yellow pages? Good. Alderman Schoneman We also have before us R-14-033. The resolution on that would have a large impact on what’s going to happen here. Chairman Deane Absolutely it will. Alderman Schoneman Should we be discussing that first or what would you recommend? Chairman Deane We’re not going to finish this tonight anyway. Alderman Dowd No matter what we do with that motion, when it goes to the full Board, we have to pass it at the full Board level. If we say yes or no, that changes at the full Board level whatever we’ve done on the budget. I’m not sure how we handle that. Chairman Deane We’re nothing but a committee of recommendation. If the full Board doesn’t agree with things that we do here. Alderman Dowd If we vote down the paving, make it very simple, then we would have to I suppose look at the budget from the standpoint of? I’d have to defer to the Mayor as to how that lines up because if we defeat that we’d have zero for paving. There would be no paving. Someone would have to add in a paving line. Chairman Deane There’s a paving line already in the budget. It just has a zero next to it. That wasn’t eliminated. Budget Review – 07/03/14 Page 31 Alderman Siegel As a practical matter, I express an interest in making some amendments to the existing legislation. I’m not prepared to do that this evening because it was my understanding that we were just going to be going over some presentations in the beginning of the discussion of the budget itself, and I didn’t see any downside in leaving that on the table for a little while. Given that I’m not going to make amendments in front of the full Board, if it would be reasonable to not address this now, I’d prefer that if that’s acceptable to the rest of the committee. Chairman Deane We’ll have our way with both pieces of legislation. They will be recommended one way or another. There will be some sort of recommendation generated by a majority here and that will be sent to the full Board. It’s up to the full Board and any of our other colleagues have the opportunity to attend these meetings and chime in if they care to do so. If we’re going to make amendments and send a recommendation forward, we’ll do our work here. If somebody else wants to amend it further up at the full Board level, they have every right to do that. If we’re going to do something with it, amend it or not amend it or whatever the case may be, we’ll just send it forward with a recommendation to the full Board to deal with. Alderman Dowd It’s probably just as easy to leave that aside and proceed like it’s not impacting anything at this point. Chairman Deane But it does have a significant impact. Let’s not fool ourselves. Alderman Schoneman I don’t mind going that way. I certainly defer to your judgment on that. But if we end up going through this budget and all these different line items, I presume whatever we do with R-14-33, if that has an impact which we expect it will then we can go through this again? The budget again? Chairman Deane Ya, we can sit here and go through it as long as you want. What we’ve had to do in the past is file a continuing resolution. It was brought in at a certain date, we set the schedules up. Unfortunately we had a conflict last week with Joint Special. It doesn’t matter to me. Alderman Schoneman It sounds fine to me then too. Thank you. Chairman Deane We can start on page 61, the Mayor’s Office. Alderman Siegel The conferences and seminars, I’m looking to see how much of this is necessary. I understand it’s desirable to go do things, but we’re going to be chipping away and make up the funds for the teachers Budget Review – 07/03/14 Page 32 and additional police. I’d like to see that reduced, but I’m uncomfortable seeing it as zero because at what point do you jump off a cliff and now you’re doing harm versus just cutting something that might be deferrable. Chairman Deane Mayor, do you want to answer that question? Mayor Lozeau The first few years I was here, I didn’t go to conferences. I think it was last year. I typically go to the US Conference of Mayors. The problem is a lot of time the conference is in DC. The costs for hotels in DC are just prohibitive. I often also go for a congressional meeting. The senators usually have a New Hampshire Day. I get included in that and meet with them and businesses. People on the hill do the same at the US Conference of Mayors. I think those are important and I think they are helpful for the city. It’s nice for us to be there. I’m not going to pine away if I don’t go to a conference, but I think it’s valuable. I came back from the US Conference of Mayors this time with some ideas around paving and lighting and some other things that are happening in other communities. It’s helpful to look at it. That’s typically what I do. Chairman Deane But you spent more than $2,000 on that, didn’t you? Mayor Lozeau I did. Chairman Deane There’s $2,000 being requested. If you spent $2,000 on one trip and you went twice. Mayor Lozeau I didn’t spend $2,000 on one trip. Chairman Deane How much did you spend? Mayor Lozeau I’d say $1,300. Something like that. That’s all spent right now if that’s the question you’re asking. Chairman Deane Nope. Mr. Griffin, do you have fresh numbers for the entire operating budget for ’14? Mr. Griffin We have published through May, audited all the journal entries done and online and in your book in the Budget Review – 07/03/14 Page 33 Aldermanic Chamber. Chairman Deane Do you have access to you in front of you though? Mr. Griffin I can. Chairman Deane I just thought it would be handy if you had that up. How is it posted on the city side? Similar to the book that we get? Mr. Griffin Correct. MOTION BY ALDERMAN SIEGEL TO REDUCE ON PAGE 61, DEPARTMENT 101, ACCOUNT 55400, CONFERENCES AND SEMINARS, BY $2,000 ON THE QUESTION Alderwoman Brown I would like to mention that the previous amount, the $160,000, does not put us over the Cap of 2.2. I just want everybody to know that. Can we have a roll call? Alderman Dowd I thought we were going to chip away at different places. It would seem to me that attending the Annual Mayor’s Conference is beneficial to the city. I might support a reduction of $500 in that account, possibly even $1,000, but zero I can’t support. Alderman Wilshire I agree with Alderman Dowd. Alderwoman Brown I think it’s an important that our Mayor attend an annual meeting like this to represent the city and to learn how other cities are managing the increasing challenges that we have. For example, with increasing diversity and what challenges those bring to us. I believe it’s beneficial. I would agree with Alderman Dowd to reduce it to $1,500 but I think bringing it to zero is unnecessary. Chairman Deane He said $1,500 or $1,000. I think that’s what he said. Budget Review – 07/03/14 Page 34 Alderman Schoneman I have a general question looking at conferences and seminars, altogether. Do we have the possibility of knowing how much is spent throughout the year in all the departments on conferences and seminars? Mayor Lozeau Yes, in the front of the budget. There are summaries. Chairman Deane Its page 24, I believe. There’s $161,976. Alderman Dowd Could someone make a motion to reduce that overall number and then have it dispersed evenly in accordance with priorities or whatever? Chairman Deane You can do that. Alderman Soucy I think if you do that it’s going to be subjective on what the priorities are and it’s going to open up a lot, a lot of debate. I’m somewhat agreeing with Alderman Siegel. I think if he were to redraw his motion and reintroduce a new one, lie Alderman Dowd said $1,500, I could support that. A line item of zero, I wouldn’t’ be able to support. MOTION WITHDRAWN BY ALDERMAN SIEGEL MOTION BY ALDERMAN SIEGEL TO REDUCE ON PAGE 61, DEPARTMENT 101, ACCOUNT 55400, CONFERENCES AND SEMINARS, BY $1,000 ON THE QUESTION Alderwoman Brown Sorry, Alderman Siegel, but I wouldn’t support that. I really believe that even reducing it $500 would be best at this point in time. Of course this goes before the full Board. Chairman Deane The full Board can do whatever they want. You don’t have to be sorry about anything. Budget Review – 07/03/14 Page 35 A viva voce roll call was taken which resulted as follows: Yea: Ald. Schoneman, Ald. Soucy, Ald. Siegel, Ald. Deane 4 Nay: Ald. Brown, Ald. Wilshire, Ald. Dowd 3 MOTION CARRIED Chairman Deane We can come back and revisit these areas too. Anything else in the Mayor’s Office? Alderman Siegel On page 62, meals and functions, I recognize that there’s a necessity for meals and functions. It’s part of the job. I would suggest that we reduce that by $500. I know these are increments we’re going to chip away, but each one of these drops matters. I’m trying to be diligent. MOTION BY ALDERMAN SIEGEL TO REDUCE ON PAGE 62, DEPARTMENT 101, ACCOUNT 61910, MEALS-FUNCTIONS, FROM $1,500 TO $1,000 ON THE QUESTION Alderman Dowd Do we know where that number is at the moment for this year? Chairman Deane How is the fine dining line doing? Mayor Lozeau It’s not fine dining. Chairman Deane I’d just assume make it zero throughout the entire city. That’s just my position. I think people should bring their lunch to work like I do. Mayor Lozeau I don’t buy people lunch with this, Alderman Deane. Chairman Deane You don’t? Mayor Lozeau No, I don’t. It is $952 as of May. It is primarily the supplies in the Mayor’s Office for coffee and cream Budget Review – 07/03/14 Page 36 and things that you normally have as a courtesy when people come into the Mayor’s Office. No meals come out of this. Chairman Deane Is there an ordinance in place that requires a report on the expense account? Mayor Lozeau No. We had that debate. I thought there was. Chairman Deane I thought former Alderman Johnson had. Mayor Lozeau She expressed that to be the case, but during the last budget cycle there was a lengthy debate in the budget committee and it was determined that there is no reporting required. It was a resolution for the period of time based on Mayor Streeter. Chairman Deane So what have we spent that money on? Mayor Lozeau I’m happy to provide you with a sheet. Chairman Deane I know you are. What we have spent that on? Mayor Lozeau Almost all of them are Sam’s Club for coffee cups, supplies, sugar. Chairman Deane No the meals and functions, I’m talking about the Mayor’s Expense Account. Mayor Lozeau I don’t have that handy. Alderwoman Brown I thought we reviewed this during our previous meeting when we went over this budget. Are we going to be redoing that? Budget Review – 07/03/14 Page 37 Chairman Deane We’re still allowed to ask questions if that’s your question. Alderwoman Brown Are we going to go through this detail? Chairman Deane This is a very painstaking process. Alderwoman Brown I would be nice to know ahead of time so we could all be better prepared. I would have brought a lot of my notes from those meetings. I’ll know going forward to do that. Chairman Deane Okay. Sorry. Alderwoman Brown It’s okay. Alderman Dowd We won’t be going through the entire lines and we won’t be going through the entire book tonight. Chairman Deane No, that’s not going to happen this evening. Was that the question you were asking me? Alderwoman Brown No. Chairman Deane That’s not going to happen tonight, Alderwoman Brown. Believe me. Alderwoman Brown That wasn’t my question. Chairman Deane Okay, thank you. The motion on the floor is to reduce 61910 by $500. Is there a roll call on this too? Budget Review – 07/03/14 Page 38 Alderwoman Brown Please. Alderman Siegel Again? Chairman Deane Again. She wants everybody on the record, and that’s a good thing. A viva voce roll call was taken which resulted as follows: Yea: Ald. Dowd, Ald. Schoneman, Ald. Soucy, Ald. Siegel, Ald. Brown, Ald. Wilshire Ald. Deane 7 Nay: 0 MOTION CARRIED Alderman Schoneman While we’re on this page, I have a general question about subscriptions and periodicals and publications. I know periodicals and publications don’t appear in the Mayor’s section, but they do on the rollup on page 27, and there’s some significant dollars here. Just so I’m clear going forward, what’s the difference between publications, periodicals and subscriptions? Chairman Deane One’s a newspaper; one’s a magazine, and one you get periodically. Am I wrong, Mayor? Mayor Lozeau No. Chairman Deane What do you get delivered to your office? The Telegraph or the Union Leader? Mayor Lozeau Both of those. Alderman Schoneman Anything else besides those two papers add up to $450? Budget Review – 07/03/14 Page 39 Mayor Lozeau I don’t’ believe so. I think those are the only subscriptions we receive. Alderman Schoneman I get those two papers too, but I don’t think I spend $450 a year on them. I don’t know, maybe I am. Alderman Wilshire I bet you are. I just renewed my subscription. It was $208 for the year for the Telegraph, and that’s just one paper. Alderman Schoneman A paper is a good thing to have. Thank you. MOTION BY ALDERMAN SIEGEL TO REDUCE ON PAGE 62, DEPARTMENT 101, ACCOUNT 683000, MAYORS EXPENSE ACCOUNT, FROM $3,000 TO $2,000 ON THE QUESTION Alderman Soucy Before I vote on a cut, what’s this money used for? Is it something you need, Mayor? Mayor Lozeau Some years I spend it all, and some years I haven’t. I can give you an accounting. There are funeral flowers, gifts sometimes. For instance, I hope Ashley isn’t watching, but I have a little something for a staff member who was just recognized that was paid for. The city keys were purchased from that. Different things that come up that if we want to do something, where would that come from? Alderman Soucy Fair enough. Alderman Dowd I know we’re trying to chop away at little places, but at the Chief Executive Officer of the city, I would like to believe that we can afford to have $3,000 to spend on expenses in an entire year. I’m sure most CEOs skyrocket that amount. People come into the office; it would be nice to be able to do something. I don’t think that’s the type of account we ought to be looking at. Alderwoman Brown Would that, for example, be sending flowers to a funeral for individuals, staff members’ relatives? Mayor Lozeau It is. All of those things. Budget Review – 07/03/14 Page 40 Alderwoman Brown I think that is important expense, personally, so I will not vote in favor of this. Alderman Schoneman I think we always have to try to spend less. We need to work this thing down. We’re going to be working the other resolution later, and I think we need to take advantage of everything that we can. I understand the need. This is a little different from a CEO of a company. The CEO of a company is spending out of profits. We’re spending out of tax money. Profits and tax money are totally different. I think we can make it work with $2,000. When the Board of Aldermen is called on to buy flowers, we chip in. I think there’s ways to accomplish some of those things without it necessarily being from city money. Chairman Deane We pay. Mayor Lozeau Alderman Deane, I know you pay. I pay personally too. I don’t always do it out of this account. Alderman Schoneman I wasn’t trying to insinuate that you were. Chairman Deane You do it out of what, the testimonial? That account? Mayor Lozeau Either that or the Honorius account. Sometimes I do it out of my personal account. Alderman Siegel I want to make it clear this is not being dedictive or anything. As far as CEOs, my expense account is zero. I pay for things out of my own pocket when need be. I understand this is slightly different, but there’s plenty of opportunity in other departments to take care of things. This is sort of a catch-all. I understand there’s a need. That’s why I didn’t say make it zero or even cut it in half. I think it’s prudent to be careful and that’s why I think 2/3 is still plenty. Alderwoman Brown Roll call. Alderman Soucy Was the motion to cut it by $1,000 or $2,000? Budget Review – 07/03/14 Page 41 Alderman Siegel It was to cut it by $1,000. A viva voce roll call was taken which resulted as follows: Yea: Ald. Schoneman, Ald. Soucy, Ald. Siegel, Ald. Deane 4 Nay: Ald. Dowd, Ald. Brown, Ald. Wilshire 3 Chairman Deane Any other activity in Department 101? Moving on to Department 102, Board of Aldermen. Any motions in this area? Alderwoman Brown I think we should consider cutting some of our expenses too to be fair, but I have no idea which of these Chairman Deane You’re free to make all the motions you would like. Alderwoman Brown I’m asking for perhaps your experience, your advice or anyone else’s. I’m new here. I know we obviously can’t cut any of the wages. I guess the postage and delivery is probably for our packets? Chairman Deane No, the delivery is done by Ralph, the printer. Alderwoman Brown Do you know what other contracted services are? Chairman Deane Some of that is when we subcontracted. Part of that was part of the copier, maintenance, things like that. If you would like to cut that go right ahead. Cut everything you would like. This has a full time person, a part time person, office supplies. There is money set aside that was reduced. Stenographic services was reduced because the part-time person was hired. Alderman McCarthy had gone through that process prior to me. Then we have the copier maintenance contract which is a fixed cost. The copier lease which is a fixed cost. We have $75 for postage, $100 for other contracted services. Then you have office supplies which are papers, pens, pencils and paperclips. Alderman Siegel We can cut our wages. Budget Review – 07/03/14 Page 42 Alderwoman Wilshire If you’re looking for suggestions, I don’t think there’s anything in here that’s fluff that we don’t need. There are no meals, there is no anything. I think these are all valid and pretty conservative numbers. Alderman Dowd I agree. I think in past years, we’ve cut this down to about as low as it can go. I think we’ve even cut the paper account based on the fact that we were getting the electronic distribution. I’ve looked at that a couple of times and for the life of me, I am surprised we can do what we do with the amount of money we have. Chairman Deane Any further discussion in this area? Moving on to the Legal Department which starts on page 65. I wanted to make a suggestion that we end with Department 156 this evening which is Emergency Management which is on page 79. Does anyone have any issues with that? Alderman Schoneman I’m looking at page 65, other services due and memberships, $2,300. As of 4/30, they were $150. There looks like there’s some room in there. I don’t want to take away from something that’s really required, but it sounds like that may not be fully required unless someone has information to the contrary. Chairman Deane What’s the 5-digit commodity code? Alderman Schoneman I’m sorry, 55200. Mayor Lozeau They are required. The dues and memberships. That’s their associations required by state law for the attorneys in the office. Training and certifications are related to that as well for their COUs. Alderman Schoneman So it’s probably not spent on a pro rata basis. Probably loaded at the end of the year? Mayor Lozeau Correct. Alderman Schoneman Is it now at $2,300. Budget Review – 07/03/14 Page 43 Chairman Deane Mr. Griffin can tell us. Mr. Griffin Through May, dues and memberships, $2,130 remains but I do recall them anticipating in former session, Attorney McNamee and Attorney Bennett coming in and telling everything is done in June. Chairman Deane Anything else in the legal department? Don’t forget we can go back. Just because a page goes forward, doesn’t mean you can’t come back. Is there any reason why we’re keeping Citi-Stat at all? Should we just abolish this? Mr. Griffin It will be gone next year. There will be no budget this year. Every time you eliminate something, the prior year budget is important to true everything up from a prior year budget. Chairman Deane So that’s the only purpose it’s here for, to true up for next year. Mr. Griffin To be clearer, you need the dollars to add up to the total. Otherwise, you would have to put it on a line that doesn’t make sense. We’ve done this historically with lines and departments, traffic in particular and most recently. Chairman Deane Is there a chance we might have some surplus here? Is that what you’re saying? Mayor Lozeau The way the budget is developed, Alderman Deane, it requires that you show the original budget from 2014, what’s available and what’s been spent. Chairman Deane I understand that. Mayor Lozeau That’s why it’s here. Chairman Deane My question was is there a possibility there’s some surplus in any of these areas? Budget Review – 07/03/14 Page 44 Mr. Griffin There could be a few dollars. Mayor Lozeau There’s really not much here. Chairman Deane Okay, City Clerk’s Office. When we looked at, and I feel bad for Alderwoman Brown, she doesn’t have her notes but I have a couple of them jotted down here on the Election Services that went up. It had to do with the voting machines, two elections and police detail on Election Day. Things like that is why those lines changed along with his printing line on the 55600 account. That changed. Alderman Dowd I also recall in the discussion they are going to be moving at least three of the polling places for two elections this year. Chairman Deane Ward 3. Alderman Dowd Wards 1, 3 and 5. That’s going to probably involve some expenditure that he may not have predicted at this time. Alderwoman Brown Alderman Deane, I don’t appreciate your sarcasm stating that too bad for Alderwoman Brown that she doesn’t have her notes. I would appreciate that you refrain from that. Chairman Deane I didn’t say that. I just had some things that I had jotted down here from before. I thought it would be helpful if I explained some of the things that I had. Alderman Siegel Alderwoman, I think you’re probably the only person that would have reacted that way. I can’t speak for anybody, but I actually thought he was just trying to be helpful. Alderwoman Brown That’s not my interpretation. Chairman Deane I apologize, Alderwoman Brown, if I offended you. We don’t want to be talking about offensive things or Budget Review – 07/03/14 Page 45 offending anyone. Do we? I didn’t think so. Any other questions in the city clerk’s area? Being none, we’ll move onto Community Activities. It starts on page 70. Page 73 is Human Resources, Department 111. Anyone have any questions in this area? Any motions? Alderman Siegel There are another conferences and seminars here. That’s on page 73. It’s item 55400, under 55, other services. Are these mandatory? I know the legal department has seminars and certifications that they have to. I don’t know to what extent these are required here? They’ve been cut way down. Mayor Lozeau It went from $2500 down to $500. The last conference that was attended was further away and I think more than one staff member went. This time the conference that the HR professionals are going to go to I think is in Boston so it’s really just about Chairman Deane Location, location, location. Alderman Siegel Thank you. I appreciate it. I’m just trying to be consistent. Mayor Lozeau We look at those things because they do change depending on that. Chairman Deane Anything else in HR? Being none, we’ll move on to the Benefits Self-Insurance Fund which starts on page 76. Mr. Griffin, what’s the balance in that wellness program, the 52809 in 6600? Some of the wellness is contractual, right? Mayor Lozeau Some of it is. Some of it is also used to work on particular problems our health insurance company has pointed out to us that our employees are struggling with. There’s costly medical things. We do weight loss programs for the employees at no cost. If we see a spike in cholesterol, we work on nutrition things. Things like that. Chairman Deane The employees must be doing pretty good because there was $55,000 last year and its $25,000 this year. Mayor Lozeau It’s taking advantage of some other things. Budget Review – 07/03/14 Page 46 Chairman Deane What have we spent to date? Mr. Griffin I’d have to bring up a different screen. Just to add some clarity to this fund, changing this number is not going to do anything to the appropriation, but it’s important. Furthermore, my understanding from meetings I’ve attended is Director Hill and her team has negotiated the carriers to actually pay towards the employees that they have identified as needing help, to put their money where their mouth is. That’s why this has been cut down. They participate heavily. If you can take advantage of the annual health fair, widely attended by both retirees and employees, and a lot of participation by the local health care provides. There are alternatives to the traditional emergency rooms, etc. This is an area that has the right amount of money in there now to do what we have to do. Alderman Siegel My understanding with a lot of insurance companies if you have a wellness program in place, it actually reflects positively in your rates. It’s like a leverage expense. You spend a certain amount in wellness and they give you a significant break so in sense it might pay for itself. Is that similar? Mr. Griffin Not so much in our self-insured programs, but the concept is accurate. We’ve got a number of programs even non-participating and certain measurements: blood pressure, glucose, things of that nature. That’s really taken off here as well. We’re self-insured for the most part so it’s something we should be doing. Alderman Siegel So the wellness programs told you to go to less Board of Aldermen meetings and you’re blood pressure will get a little lower. Alderman Schoneman I think I may have missed something in a previous page, if I could just go back with a question on page 75. Under insurance and claims, unemployment compensation, is that insurance that we’re buying or is that compensation we’re actually paying? It went from $200,000 to $175,000 this year. How do we make that adjustment and is there more room there? Mayor Lozeau It’s our state contribution? Alderman Schoneman Which is mandated? Mayor Lozeau On every employer. Budget Review – 07/03/14 Page 47 Alderman Schoneman Why did they drop our state requirement? Mr. Griffin The budget last year was $200,000 as you indicated. The spend through May was $128,000. We felt comfortable dropping the $200,000 to $175,000. Alderman Schoneman With one month left in the year, we were at $128,000? Mr. Griffin I’m not sure if there’s a trailer on there so I’m not sure if this is 10 months or 11 months, but the financials indicate that there is $72,000 left. I could certainly check if that’s two months or one month. Alderman Schoneman How does that work then if there’s $72,000 and there’s $200,000 in the previous budget? Is that a surplus? Mr. Griffin Correct. As I indicated one of the things that we all need to be cautious of is essentially eliminating items that are discretionary and paying for things that are discretionary meaning you hire a person, and you have to pay them. We need surplus every year, both in terms of revenue and unexpended appropriations, to buy down the tax rate. For healthful purposes, we usually apply $4.3 million of unassigned fund balance to the tax rate. As we’ve said on a few occasions every $1.8 million is one percent on the tax rate. If you take 4.3 divided by 1.8 that’s the reduction in the tax rate using surplus. The way we approach this and my comments the other day with higher rentals, electricity, street lighting, I’ve been here when we’ve had to come in to ask for a movement from contingency to street lighting. I’ve seen where prior to the acquisition, Pennichuck had filed a rate case unexpected for the most part from us and we have to ask for more money. Those are the types of things like this one where we have to pay it. You can’t say I don’t have an appropriation for employment compensation. You do want to have a few things that you hope for the best but plan for the worse and at the end of the day you have surplus. Chairman Deane All set? All set in that area? Moving onto page 79. It’s the last area we’re going to cover. Emergency Management. Mr. Kates explained that software expense for the purchases. Any questions in this area? Any motions? Being none, we’re going to stop it there for the evening unless somebody has some objection to that? I’ll enter a motion to table R-14-034 MOTION BY ALDERMAN WILSHIRE TO TABLE MOTION CARRIED Budget Review – 07/03/14 Page 48 R-14-033 Endorser: Mayor Donnalee Lozeau CREATING A SPECIAL REVENUE FUND FROM STATE HIGHWAY FUND BLOCK GRANTS AND A PORTION OF MOTOR VEHICLE PERMIT FEES FOR ROAD AND HIGHWAY EXPENDITURES  Tabled pending Public hearing scheduled 6/9/14 at 7 PM in the Aldermanic Chamber R-14-046 Endorser: Alderman-at-Large Brian S. McCarthy AMENDING THE PURPOSE OF A FISCAL YEAR 2014 ESCROW FOR THE ECONOMIC DEVELOPMENT DEPARTMENT Alderman Deane Alderman McCarthy sent me an e-mail asking me not to take any action on his resolution. I told him we would not be doing that. He didn’t say he wanted to come and speak on it, but he wanted to be present. UNFINISHED BUSINESS – None NEW BUSINESS – None GENERAL DISCUSSION PUBLIC COMMENT REMARKS BY THE ALDERMEN Alderman Dowd I’m going to find that e-mail and send it. Chairman Deane Alderman Moriarty’s? Alderman Dowd Yes. Chairman Deane Okay, thank you very much. Alderman Dowd It’s actually Mr. Conrad’s from answering Alderman Moriarty. Chairman Deane Whoever it’s from to whomever we’ll find that out. Thank you. Budget Review – 07/03/14 Page 49 POSSIBLE NON-PUBLIC SESSION ADJOURNMENT MOTION BY ALDERMAN WILSHIRE TO ADJOURN MOTION CARRIED The meeting was declared closed at 9:28 p.m. Alderman Ken Siegel Committee Clerk