Town of Swampscott Financial Forecast Fiscal Years And FY07 Budget Overview Presented to the Board of Selectmen, School Committee and Finance Committee Andrew Maylor - Town Administrator November 14, 2005

Table of Contents I. Introduction Financial Planning Process Goals and Priority Areas for FY07 Planning for Future Financial Stability II. Five Year Financial Forecast Pro Forma Assumptions General Fund Revenue and Expense Summary and Chart Town and School Charts III.Fiscal 2007 Budget Revenue Sources and Chart Expense Categories and Chart IV.Water and Sewer Enterprise Funds FY07 Budget Overview Pro Forma Assumptions Enterprise Funds Five Year Forecast and Rate Projections

Introduction Financial Planning Process Annual Financial Planning Process Mandated by Town Charter.Annual Financial Planning Process Mandated by Town Charter. The Financial Forecast Outlines the Status of the Town’s Finances for the Future and Identifies Areas of Need for Further Attention.The Financial Forecast Outlines the Status of the Town’s Finances for the Future and Identifies Areas of Need for Further Attention. Coordination and Integration of the Components are Necessary to Develop the Financial Plan Required to Maintain the Town’s Fiscal Stability.Coordination and Integration of the Components are Necessary to Develop the Financial Plan Required to Maintain the Town’s Fiscal Stability. Town Administrator will Distribute Budget Packages to Departments by December 9th.Town Administrator will Distribute Budget Packages to Departments by December 9th. Budgets will be Due in the Town Accountant’s Office byBudgets will be Due in the Town Accountant’s Office by Monday, January 9, School Committee Must Submit School Budget No Later than February 10, 2006.School Committee Must Submit School Budget No Later than February 10, 2006.

Introduction Financial Planning Process (continued) Capital Improvement Committee Shall Recommend a Capital Improvement Program to the Town Administrator byCapital Improvement Committee Shall Recommend a Capital Improvement Program to the Town Administrator by February 1st, Including: -A Clear and Concise Summary of its Contents; -Proposed Capital expenditures for the Ensuing Year; -A Five Year Capital Improvement Plan with Supporting Information as to the Need, Cost and Method of Financing for Each Projected Capital Expenditure. Town Administrator will Submit Operating Budget to Selectmen in Accordance with Town Charter for Approval by a Majority Vote by March 1 st.Town Administrator will Submit Operating Budget to Selectmen in Accordance with Town Charter for Approval by a Majority Vote by March 1 st. Selectmen will Forward Budget to Finance Committee within Seven Days.Selectmen will Forward Budget to Finance Committee within Seven Days. Financial Policies have been created and will be used as Guideposts to Developing the Financial Plan.Financial Policies have been created and will be used as Guideposts to Developing the Financial Plan.

Introduction Goals and Priority Areas for FY07 »Present a Balanced Budget to the Board of Selectmen and the Finance Committee. »Control Personnel Related Costs and Find Additional Sources of Revenue to Offset Out Year Deficits. »Develop an Improvement Plan for Public Buildings and Open Space. »Develop a Program for Roadway Improvements and Maintenance. »Voter Acceptance of M.G.L. Ch. 44B, the Community Preservation Act. »Continue to Review, Evaluate, Alter and Track Policy that Maintains and Enhances Town Government. »Improve the Coordination of Municipal Service Delivery. »Implement a Fiscal Policy for Future Budgeting.

Introduction Planning for Future Financial Stability »Begin to Increase the Balances in Reserve Funds to Meet Nationally Accepted Standards. »Develop a Long Range Plan for Funding Special Education, including Proposing Special Legislation. »Limit the Use of One Time Revenues to Balance the Budget. »Establish a New Method for Calculating the Funding Available for Annual Capital Improvements. »Water and Sewer Enterprise Fund Projections are Based Upon Full Cost Recovery, As Required By Statute.

Five Year Financial Forecast Pro Forma Assumptions - General Fund Revenues State Aid is Projected to increase 5% through Fiscal State Aid is Projected to increase 5% through Fiscal Tax Levy and Levy Limit will Grow Approximately by 3% Through FY2011. Tax Levy and Levy Limit will Grow Approximately by 3% Through FY2011. Charges, Licenses, Fess and Miscellaneous Revenue Projected at Either Level Funded or Minimal Increases. Charges, Licenses, Fess and Miscellaneous Revenue Projected at Either Level Funded or Minimal Increases. Fee Schedule will be Analyzed and Reviewed to Maximize Local Receipts. Fee Schedule will be Analyzed and Reviewed to Maximize Local Receipts. The Use of Free Cash is Expected to be approximately $275,000 for FY2007 with an Incremental Increase Through FY2011. The Use of Free Cash is Expected to be approximately $275,000 for FY2007 with an Incremental Increase Through FY2011. Nahant Tuition is Level Funded From FY06 to FY07 and Through FY2010. Actual Dollar Amount will not be Known Until January For FY07. Nahant Tuition is Level Funded From FY06 to FY07 and Through FY2010. Actual Dollar Amount will not be Known Until January For FY07. Other Possible Sources of Revenue Include: Enterprise Fund Indirects ($500,000). Other Possible Sources of Revenue Include: Enterprise Fund Indirects ($500,000).

Five Year Financial Forecast Pro Forma Assumptions - General Fund Expenses Salaries and Operating Expenses (Including Schools) Projected to Increase 2.5% Annually. Salaries and Operating Expenses (Including Schools) Projected to Increase 2.5% Annually. Health Insurance Costs Projected to Increase By 15% Annually. This is Net of Savings From the Town Accepting MGL 32B s18 and Assumes a Change to the Existing Benefit Mix. Health Insurance Costs Projected to Increase By 15% Annually. This is Net of Savings From the Town Accepting MGL 32B s18 and Assumes a Change to the Existing Benefit Mix. State and County Charges and Cherry Sheet Offsets are Expected to Increase by 2.5% Each Fiscal Year. State and County Charges and Cherry Sheet Offsets are Expected to Increase by 2.5% Each Fiscal Year. Special Education Costs are Expected to Increase on the Average of 10% Each Fiscal Year Through FY2011. Special Education Costs are Expected to Increase on the Average of 10% Each Fiscal Year Through FY2011. Debt Service Based Upon Current and Future Capital Improvement Programs Cost Expected to Remain at approximately 5% of the Tax Levy Through FY2011 Exclusive of School Construction. Debt Service Based Upon Current and Future Capital Improvement Programs Cost Expected to Remain at approximately 5% of the Tax Levy Through FY2011 Exclusive of School Construction. Includes Sewer Debt Exclusion. Includes Sewer Debt Exclusion. Uncompensated Balance Account has a $58,914 Balance. This Appropriation will be Gradually Reduced. Uncompensated Balance Account has a $58,914 Balance. This Appropriation will be Gradually Reduced.

Five Year Financial Forecast Revenue and Expenditure Summary General Fund

Five Year Financial Forecast Revenue and Expenditure Gap

School Department Spending FY2005 (FY2005 Schedule 19)

Fiscal 2007 Budget Revenue Sources Revenues Projected for the FY07 Operating Budget Total $42,072,155 Revenues are Derived From The Following Sources: Taxes - $33,054,068Taxes - $33,054,068 Nahant Tuition - $1,231,696Nahant Tuition - $1,231,696 Motor Vehicle Excise - $1,850,000Motor Vehicle Excise - $1,850,000 Licenses and Permits – $160,000Licenses and Permits – $160,000 Fines and Forfeits - $95,000Fines and Forfeits - $95,000 State Aid- $4,041,391State Aid- $4,041,391 Local Receipts - $865,000Local Receipts - $865,000 Note- Revenue Detail Does Not Include Free Cash or Other Available Funds Which Total $775,000

Fiscal 2007 Budget General Fund Revenue Sources FY 2007 Grand Total - $42,072,155

Fiscal 2007 Budget Expense Categories For Presentation Purposes FY07 Expenses are Detailed in the Following Categories: General Government -$5,165,812General Government -$5,165,812 School Department - $20,915,202School Department - $20,915,202 Public Safety- $5,414,014Public Safety- $5,414,014 Pensions- $2,872,293Pensions- $2,872,293 Insurances- $4,341,250Insurances- $4,341,250 Debt Service- $3,008,561Debt Service- $3,008,561 Non-Appropriated- $856,392Non-Appropriated- $856,392

Fiscal 2007 Budget General Fund Expenditure Categories FY 2007 Grand Total - $42,573,524

Water and Sewer Enterprise Funds FY07 Budget Overview The Town’s water/sewer system infrastructure requires yearly maintenance and upgrades. With the assistance of $565,000 provided by the MWRA through an interest free loan, the DPW was able to re-line and replace three miles of water main. The Town’s water/sewer system infrastructure requires yearly maintenance and upgrades. With the assistance of $565,000 provided by the MWRA through an interest free loan, the DPW was able to re-line and replace three miles of water main. Over the past several years, the Department has contracted out the re-lining or replacement of close to eight miles of water main. This total represents about sixteen percent of the Town’s overall infrastructure. Over the past several years, the Department has contracted out the re-lining or replacement of close to eight miles of water main. This total represents about sixteen percent of the Town’s overall infrastructure. Obsolete water mains present the Town with significant losses in water pressure, as well as, considerable water discoloration problems. Obsolete water mains present the Town with significant losses in water pressure, as well as, considerable water discoloration problems. The installation of new waters meters is virtually complete with less than 100 of the 5,000 old meters remaining unchanged. This will greatly reduce the amount of unaccounted for water consumption. The installation of new waters meters is virtually complete with less than 100 of the 5,000 old meters remaining unchanged. This will greatly reduce the amount of unaccounted for water consumption. The new meters are equipped with radio read technology, which will ensure accurate and timely reading of usage and allow the town to institute quarterly billing in FY07. The new meters are equipped with radio read technology, which will ensure accurate and timely reading of usage and allow the town to institute quarterly billing in FY07.

Water and Sewer Enterprise Funds FY07 Budget Overview (cont.) Through an inter-municipal agreement signed with the City of Lynn in 1989, the Town of Swampscott sends all its raw sewage to Lynn for treatment. The sewer system infrastructure is in very poor condition.Through an inter-municipal agreement signed with the City of Lynn in 1989, the Town of Swampscott sends all its raw sewage to Lynn for treatment. The sewer system infrastructure is in very poor condition. Many of the existing mains are over one hundred years old, and are constructed of brick or clay. Both these materials have become obsolete, and contribute significantly to the infiltration and inflow into the Town’s sewer system.Many of the existing mains are over one hundred years old, and are constructed of brick or clay. Both these materials have become obsolete, and contribute significantly to the infiltration and inflow into the Town’s sewer system. During periods of heavy precipitation, the total daily flow to Lynn is increased by as much as 500%, significantly increasing the Town’s costs for treatment. During periods of heavy precipitation, the total daily flow to Lynn is increased by as much as 500%, significantly increasing the Town’s costs for treatment. As the City of Lynn continues to remove infiltration and inflow from its own sewer system, the resulting percent of costs for Swampscott could rise sharply if our system is not upgraded as well.As the City of Lynn continues to remove infiltration and inflow from its own sewer system, the resulting percent of costs for Swampscott could rise sharply if our system is not upgraded as well. Through a low interest loan from the DEP, the Town is currently working with a consultant, engineering firm, to implement a plan to reduce infiltration and inflow into the Town’s sanitary sewer system.Through a low interest loan from the DEP, the Town is currently working with a consultant, engineering firm, to implement a plan to reduce infiltration and inflow into the Town’s sanitary sewer system.

Water and Sewer Enterprise Funds Pro Forma Assumptions - Enterprise Funds Water Debt will Increase by $56,000 Each of the Next Few Years. This Represents the Additional Commitments to the Zero Interest Loan Program Conducted Through the MWRA. Water Debt will Increase by $56,000 Each of the Next Few Years. This Represents the Additional Commitments to the Zero Interest Loan Program Conducted Through the MWRA. Debt Service Includes $189,890 to Pay for Replacement of All Meters and the Installation of Radio Read Devices. Debt Service Includes $189,890 to Pay for Replacement of All Meters and the Installation of Radio Read Devices. The General Fund Continues to Pay the Debt Service on Bonds Required for the Connection to the Lynn SWC. This represents $1,108,561 for FY 2007 the impact on rates would have been $2.11. The General Fund Continues to Pay the Debt Service on Bonds Required for the Connection to the Lynn SWC. This represents $1,108,561 for FY 2007 the impact on rates would have been $2.11. For Projection Purposes, the MWRA and Lynn WSC Assessments have been Increased by Ten Percent Each Year. The MWRA has Projected a Double Digit Increase for FY2007, and the Lynn WSC Fees Should also be in This Range. For Projection Purposes, the MWRA and Lynn WSC Assessments have been Increased by Ten Percent Each Year. The MWRA has Projected a Double Digit Increase for FY2007, and the Lynn WSC Fees Should also be in This Range. Direct Expenses were Increased by 2.5 % per year and indirect costs are level funded. Direct Expenses were Increased by 2.5 % per year and indirect costs are level funded.

Water and Sewer Enterprise Funds Five Year Forecast and Rate Projections

WHAT TO EXPECT Fiscal Reality Fiscal Reality Solutions Implemented to Date Solutions Implemented to Date Goals Goals

The Fiscal Realty Fiscal 2002 – Fiscal 2006 Estimates State Aid has decreased by $482,866. State Aid has decreased by $482,866. Health insurance costs have increased by $1,499,585. Health insurance costs have increased by $1,499,585. The Town’s retirement appropriation has increased by $478,935. The Town’s retirement appropriation has increased by $478,935. The School department’s special education budget has increased by $1,805,575. The School department’s special education budget has increased by $1,805,575. Property and casualty increases $170,000. Property and casualty increases $170,000.

Solutions Implemented to Date Partial List Expense reductions Expense reductions –Renegotiated the ambulance contract - savings $135,000 annually. –Negotiated a new Trash contract - savings $80,000. –Purchased streetlights – savings $35,000 annually. –Adopted M.G.L. Chap. 32B, Section 18, re: Medicare provision – savings $25,000 annually. –Reorganized town hall staff – savings $20,000 annually. Revenue enhancement Revenue enhancement –Bid cell tower placement increasing revenue by at least $30,000 annually. –Adopted M.G.L. Chap. 59, Section 2A to capture additional new growth - $100,000. –Entered into the town’s first towing contract - $6,000. –Increased town’s inspectional services fees - $25,000 annually. –Appropriated unspent article balances - $600,000. –Sold surplus town owned land - $585,000.

Goals Close the Fiscal 2006 budget gap Close the Fiscal 2006 budget gap –State aid increase possible. –Additional use of Overlay Surplus. –Health Insurance premium increase less than expected. –Reduce spending without impacting service delivery. Looking ahead Looking ahead –Reduce long-term debt as a percentage of budget. –Find additional sources of revenue. –Reduce the dependency on one-time revenue. –Adopt a Financial Reserve Policy.