Town Manager’s Recommended Fiscal Year 2018 Budget and Financial Plan Andrew P. Flanagan Town Manager February 27, 2017

Recognized by GFOA for FY17 Budget Preparation February 27, 2017

The Town Manager’s Recommended Budget for Fiscal Year 2018 $181,679,548 $2,985,293M / 1.67% increase over the FY17 Budget of $178,694,255 February 27, 2017

Budget Highlights Town and School Operating Budgets to increase only by the amount of available funds after meeting the funding requirements of all obligations. Retirement contribution to increase by 10% from current budget per the existing funding schedule established by the Retirement Board. General Fund Other Post Employment Benefit (OPEB) funding will be based on the following: 0.4% of the FY 2018 adjusted revenue budget. Appropriating the incremental annual savings in the health insurance budget from the OPEB Reform Plan that was adopted in April of 2016 to the OPEB Trust Fund. Employee Health Insurance expense to increase by 8% Based on the assumptions as outlined above, Town departmental personnel and expense budgets are increasing by $1,194,714 (3.11%). February 27, 2017

Town Manager’s Recommended Budget Fiscal Year 2018 FY2017 FY2018 EXPENSES Approved TM Rec. $ Change % Change School Department $76,099,203 $79,143,171 $3,043,968 4.00% Town Departments $38,437,389 $39,632,103 $1,194,714 3.11% Health Insurance & RMTs $17,905,037 $19,257,000 $1,351,963 7.55% Debt Service $14,790,396 $14,048,907 ($741,489) -5.01% Retirement $8,360,984 $9,428,488 $1,067,504 12.77% Water & Sewer $7,670,495 $8,167,538 $497,043 6.48% Other Obligations $4,512,606 $4,922,936 $410,330 9.09% Capital Projects Fund $3,440,000 $3,678,875 $238,875 6.94% Offset Expenditures $2,070,000 $2,148,530 $78,530 3.79% Warrant Articles $5,408,145 $1,252,000 ($4,156,145) -76.85% $178,694,255 $181,679,548 $2,985,293 1.67% February 27, 2017

Town Department Budget Highlights 3.11% total increase – mainly due to contractual obligations and solid waste costs 360.48 total FTEs; increase of 1.63 FTEs IT: 2 Technicians/1 Business Solution Team Leader (net approx. $30,000) (net FTE +1.2) DCS: .5 Program Assistant (No GF Impact)/1 PT Admin (No GF Impact) (net FTE -.17) CD&P .1 Transferring Portion of Nurse Salary from Grant to GF (No GF Impact (net FTE .1) MS / P&F: .5 Town Custodian – Police Department (net approx. $23,938) Notable Operating Budget Expense Increases Information Technology: $40,425 for upgrading phone and internet connectivity MS / DPW-Solid Waste: $295,245 for Solid Waste, Recycling & Materials Disposal February 27, 2017

Gap Between School Budget & TM Recommendation TM Initial Recommendation (3.5%) $78,762,675 ($2,663,472) TM Revised Recommendation (3.66%) $78,884,369 ($2,785,166) TM Final Recommendation (4%) $79,143,171 ($3,043,968) Current Gap February 27, 2017

Former vs. Current Retirement Funding Schedule (10% Annual increase through 2032) Increase of $3.28M over first five years February 27, 2017

Health Insurance February 27, 2017

Other Post Employment Benefits (OPEB) General Fund / W&S OPEB Appropriation Savings from OPEB Reform Total OPEB Appropriation FY 2018 $1,015,783 $632,938 $1,648,721 FY 2019 $1,037,949 $769,703 $1,807,652 FY 2020 $1,060,622 $906,194 $1,966,816 FY 2021 $1,083,812 $978,690 $2,062,502 FY 2022 $1,107,530 $1,056,985 $2,164,515 FY 2023 $1,135,218 $1,109,834 $2,245,053 FY 2024 $1,163,599 $1,165,326 $2,328,925 FY 2025 $1,192,689 $1,223,592 $2,416,281 FY 2026 $1,222,506 $1,284,772 $2,507,278 FY 2027 $1,253,069 $1,349,010 $2,602,079 February 27, 2017 10

Projected Obligations to 2032 Obligations as Percentage of Budget FY 2017 16.94% FY 2018 18.33% FY 2019 19.17% FY 2020 19.87% FY 2021 20.75% FY 2022 21.64% February 27, 2017

FY 2018 Revenue Overview Tax Levy to increase by the 2.5% (less Excess Levy Capacity) New Growth and Local Receipt estimates are based on five year averages of actual growth and collections. State Aid projections have been adjusted to reflect the Governor’s Budget (H1). Free Cash to be appropriated only for one time capital expenditures February 27, 2017

FY18 Revenue Highlights Property Taxes – $135.7M: 4.89% / $6.3M increase; Prop. 2.5 Levy Limit; $2M New Growth; $300K Unused Levy Capacity; Plus $4M Exclusions State Aid – $12.1M: -6.62% / $861K Decrease (Gov’s H1. Jan 25th)/No GF MSBA Reimbursement. Actual Increase $281,300 /2.4% General Local Revenues – $11.49M: 4.5% / $494,872 increase Water & Sewer Enterprises – $14.3M: 3% /$427,861 increase /2.5% water rate increase /2.5% sewer rate increase Offset Dept. Revenues – $2.1M: +78k increase to reflect FY18 proposed programming Other Available Funds – $1.4M: From Water & Sewer Reserves, Bond Premium Stabilization Fund, Cable Fees, AYS Gift, Parking Fund, etc. Free Cash – $500,000 from estimated $4M available balance February 27, 2017

Use of Free Cash Estimated at $4M Ballardvale Fire Station Design - $300K High Plain/Wood Hill Accessibility Project – $200K FY17 Supplemental Appropriations – ?: Unknown at this time; probable Snow & Ice deficit appropriation and/or transfers February 27, 2017

Expanding Capital Capacity Prior Non- Exempt Debt Service + New Non- Exempt Debt Service General Fund Revenue = Total Non- Exempt Plan Establish Annual Spending Target for “non-exempt” Capital Investment Composition of Target includes appropriations from Taxation and Non-Exempt Debt – Funding within the Limitations of Proposition 2 ½ Does not include Free Cash, Other Designated Funds or Water & Sewer Enterprise Funds Goal – Provide the Town with the capacity to fund major capital projects within the tax levy and avoid debt exclusion votes February 27, 2017

Establishing A “Target” Prior Non- Exempt Debt Service + New Non- Exempt Debt Service General Fund Revenue = Total Non- Exempt Plan Non-exempt target has been set at 5.72% FY 2018 recommended CIP is balanced and supports investments in all functions of Town government FY 2018 Recommended CIP 5.52% of the 5.72% target The following four years of the CIP fluctuate for a five year average of 5.64% Provides for future non-exempt flexibility within the plan February 27, 2017

Revised Capital Improvement Program for FY2018 General Fund Revenue $3,678,875 General Fund Borrowing $21,460,000 Use of Free Cash $500,000 General Fund Exempt Borrowing   Special Dedicated Funds $1,914,288 Water and Sewer Enterprise Funds $ 5,375,000 Total Recommendation $32,928,163 February 27, 2017

Municipal Services Facility Project 2016 Town Meeting Appropriated $2,250,000 from Free Cash to purchase 5 Campanelli Drive. Established Municipal Services Facility Mitigation Fund to mitigate the financial impact of constructing a new facility at 5 Campanelli Drive. Appropriated $900,000 from General Fund Taxation to fund the design and engineering phase of the Municipal Services Facility Project. 2017 Town Meeting Consider voting to authorize borrowing $17,500,000 to construct the proposed new Municipal Services Facility February 27, 2017

Projected Deficit Based on Assumptions FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Revenues $162,915,552 $165,952,579 $170,901,908 $176,560,749 $182,147,642 $187,591,893 Appropriations $172,089,476 $180,006,664 $186,959,091 $194,556,733 Deficit $0 -$1,187,568 -$3,445,915 -$4,811,449 -$6,964,840 February 27, 2017

FY18 Budget Process February 2017 Fri. 10th Town Manager’s Recommended FY18 Budget Released Mon. 27th High Level Overview Presentation of Town Manager’s Recommended FY18 Budget  March 2017 Sat. 4th All Town Department Budgets (MHL – 9:00 am to 3:30 pm) Wed. 8th Tri-Board Meeting – School FY18 Operating Budget Presentation Mon. 20th Final Votes on Water & Sewer Budgets & Rates Mon. 27th Final Operating & Warrant Article Votes Wed. 29th Final Votes (If Needed) & Chair Letters to Finance Committee  April 2017 Fri. 21st Finance Committee Report due to Residents May 2017 May 1st 2017 Annual Town Meeting (1st night)   February 27, 2017

2017 Annual Town Meeting Monday May 1st at 7:00 PM continues Tuesday May 2nd (if needed) Monday May 8th(if needed) Tuesday May 9th (if needed) J. Everett Collins Center, Andover High School February 27, 2017

is available on-line in its entirety at The Town Manager’s Recommended FY18 Budget is available on-line in its entirety at    www.andoverma.gov February 27, 2017