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Medfield Town Finances in 'Good Shape' Heading into Town Meeting

A cautious approach to town finances and a number of other variables have contributed to the town’s current financial situation.

At a time when many towns are making cuts to balance their budgets, Medfield’s town finances look pretty good this year, according to Town Administrator Michael Sullivan.

“We’ve been through a couple of rough years but this year we seem to have a variety of factors that come into play to weather the storm … It’s not just one thing,” Sullivan said. 

First, voters passed a $500,000 operating override at last year's Town Meeting and special town election to make up a difference in the school department budget. 

“So, instead of having to drain down our free cash and other reserves, we were able to maintain good levels of reserves,” said Sullivan.

Second, Sullivan said the town tries to “look out long-term and not try to budget year to year but rather two or three years ahead so we don’t drain down our reserves one year and try to dig ourselves out the next year.”

Third, “it’s a little bit of this and a little bit of that,” said Sullivan.

“Some of our major budget increases in past years did not go up this year,” he said, including the school department budget and health insurance, to name a few.

The proposed 2013 school department budget – which represents 60 percent of the town’s overall budget – includes only a slight increase of less than one percent, down from what had been an average of four to seven percent, said Sullivan. The modest increase is due to trimming within the department, possible in large part to decreased enrollment. 

The town’s health insurance, which had been increasing by double digits in the past (one year saw an increase of 23 percent), did not increase at all this year. 

“Health insurance premiums stayed level so that was a huge help,” he said.

Sullivan said town departments, boards and commissions submitted decreased, level-funded, or only slightly increased budgets, which also helped the bottom line.

Over the past four or five years, the town has eliminated several positions so the number of employees is down and the benefit expenses related to employment is also down.

The town receives about $1 million each year in new revenue from property tax increase. A lot of that money, said town officials, has been used in recent years to cover lost revenue such as decreased state aid and local receipts. 

Sullivan noted the town’s interest income has also taken a major hit.

“We used to make $800,000 in bank interest earnings [but] last year we earned $39,000 so we've had to use the additional revenue we've made under [Proposition] 2 ½ to cover drops in other receipts and other revenue resources.”

Sullivan said the town did lose income on bank interest but, at the same time, was able to take advantage of low interest rates by refinancing town debt, which is now at $5.4 million (it peaked in 2003 at $7.4 million due to school and library projects and land purchases).

He noted that excise taxes have “stagnated” but market research shows that consumers are buying cars again so that number could improve next year.

One thing that steadily increases is the residents’ use of the recycling program where it costs the town only $35 a ton to dispose of recyclable materials versus $100 a ton to dispose of regular household refuse. This translates into continued savings for the town.

“So, it’s not just one thing.  This may be a one-year aberration,” he said. “Even though we’ve had a good year this year, we’re cautious about future years.  We may be back to a 10 percent increase in health insurance next year. If the school department budget went up less than one percent this year, there may be some pressure to increase it next year … I have a lot of sympathy for the communities who are going through hard times; we’ve been through them and it’s not a pleasant thing.” 

Medfield's Annual Town Meeting will be held Monday, April 30 in the Medfield High School gymnasium at 7:30 p.m.

Errin Chapin April 24, 2012 at 12:38 PM
Can someone explain how we can be in good shape with an unfunded pension and retiree health insurance liability in excess of FIFTY MILLION dollars? When do we address that?
GM April 24, 2012 at 01:10 PM
Good question, Errin. You'll see in the town budget that the town has been regularly contributing to these liabilities each year. The state has provided relief to towns, giving them more time to close the gap and that has helped relieve (but not eliminate) the near-term budget pressure to fully fund these liabilities. They remain an obligation that the town needs to meet. To understand how these liabilities can get so big, it's important to realize that projected investment returns over the long-term have a huge impact on the magnitude of the liability. Back in the 1990's when stock market returns were through the roof, the perceived liability (what you needed to have in the bank today in order to generate the revenues needed in the future) was a much smaller number because the expected return on investments was so high. For the past decade, with anemic investment returns, the estimated liability today is much higher because the assumed return on investment is so much lower than in the 90's. Actuaries do their best to accurately forecast the expected returns on investments, but big swings in the economy can't help but have an impact on the level of the liability.
Errin Chapin April 24, 2012 at 05:44 PM
GM, Where would I find out how much money has been saved for this and why is it called unfunded if it is partially funded? Is this "line itemed" per department as county retirement contributions?
Osler Peterson April 24, 2012 at 08:40 PM
Errin, It may be quibbling, but I think the figure I recall was the town having about $43 m. of unfunded retiree health care liability. Very little has been set aside for this liability. Last week I suggested that we needed to be looking at this issue and making some decisions about whether we just continue to ignore it or whether we decide to deal with it. Mike said he would get the Board of Selectmen the actuarial study after the annual town meeting, so we have the actual facts as a basis from which to start. What bothered me the most, and what I had not appreciated before the discussion last week, was that this is an ever enlarging hole. Mike guessed that last year it grew by $1.5 m. I had assumed that this was some sort of a historic anomaly, not a current year deficit that it instead appears to be. We need to come up with a plan to solve this deficit over the long term, which will probably mean decades. It is not responsible, however, for our town to just keep putting off any action. Pete
Errin Chapin April 24, 2012 at 11:33 PM
Wow. So, GM, how much has been set aside of the $50 million cited in the Report on the Warrant.

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