When the Budget Committee reviews the town budget, they review and vote on every line item for each department, including town administration, police department , fire department, Parks and Recreation, two utilities, the library, and the school system. The budgets are presented to the committee, the line items are explained, and the committee asks questions concerning how the amount for each line item has been determined. Then then committee votes either to approve or change the amount in each line item. During this process, it is easy to focus on the details without looking at the big picture. At last night's meeting, however, Steve Felton reminded the committee that the town is facing serious financial problems because we have not put away money to meet upcoming expenses. He said that the town now has a little over $7,000 in capital reserve but over $20,000,000 in accumulated depreciation. What does this mean?
The simple answer is that the town does not have money to cover its near and long-term large capital expenses - things like equipment replacement, building repair, and road repair. We will have to borrow money and/or raise taxes to cover these expenses.
The more detailed answer involves understanding depreciation. Depreciation is an estimate of the decline in value of an asset over time. We know that the value of cars declines over time. The decrease in value is dependent on the condition of the car, how it has been maintained, and how far it has been driven. Depreciation is an accounting method that accounts for this decrease in value based on an annual percentage. For example, a car owned by a business might be depreciated over a 10 year period at 10% per year. If the car initially costs $20,000, then the depreciation would be $2,000 the first year. In a perfect world, the business would put aside $2,000 the first year to cover the replacement cost of the car.
A business uses depreciation in calculating taxes because depreciation is part of the cost of doing business. Businesses have depreciation schedules that show the depreciation of all of their assets (buildings, equipment, and machinery) over time. The town also has a depreciation schedule, but since the town does not pay taxes, depreciation serves only as an estimate of replacement costs. The town has an accumulated depreciation (all of its assets) of over $20,000,000. This means that if all of the towns assets needed to be replaced today, it would cost $20,000,000 or about 3 times the annual town budget. We have $7,000 in reserve for this purpose, which means we would need to come up with $19,300,000 to cover this cost. That is a lot of money.
Fortunately, not all of the assets need to be replaced today, but they will likely need to be replaced over the next 5 to 10 years. We still need to come up with the money, but we don't know when - or how. How many of our assets will result in emergency situations like the Fire Department roof? This roof repair has been ignored for so long that it is now dangerously water logged and needs to be replaced immediately at an estimated cost of at least twice the amount in the current proposed Warrant Article.
We are not going to be able to build up our capital reserves fast enough to cover these impending expenses; but we have to start building NOW or we will simply be overwhelmed by them. This is the essential problem the Budget Committee faces - not just cutting individual line items or reducing individual department budgets. The overall plan should be to not only reduce department budgets but increase capital reserves. The Select Board is asking for $125,000 to be placed in capital reserve for roads, probably all the town can afford at present, but not nearly enough to address the million plus dollar figure needed to repair/replace those roads in the worst condition. We should identify our most immediate needs and focus on building reserves for them. We need to begin developing capital improvement plan immediately, so that we can identify our real needs and develop a plan to address them. The hard part is that our taxes will have to increase at a time when many can least afford it, and when the federal and state governments are cutting back aid but not local responsibilities.
Thursday, December 29, 2011
Tuesday, December 20, 2011
Fire Station Roof
At last night's Select Board Meeting, Paul Branscombe told the Select Board that the Fire Station roof is in very bad shape and will need to be replaced at a cost possibly of over $50,000. A core sample of the roof was taken in the process of getting an estimate, and the sample was completely water-logged. The roof is sagging, and there is a danger that it could collapse and damage the fire fighting equipment. Mr. Branscombe said that a structural engineer should be called in to evaluate the problem. The Select Board had approved a warrant article for the repair of the roof to go before the voters this March, but that article was based on an estimate made before the core sample was taken.
If we had a capital improvement plan in place and had put away capital reserves to deal with the roof, we would now be able to draw on those funds to repair the roof. The town has known about the roof for some time, just as the town has known about other long term capital needs. By the town I am not only referring to the Select Board and the Utility Commissioners, I am referring to the voters as well. We have put off many capital improvements, and now we are facing more situations like the Fire Station roof in a time when we are in a recession and cannot afford to pay higher taxes. To paraphrase Dan Golden, we had a choice to pay a little more in the past, but now we are going to be paying a lot in the present and a lot more in the future.
We cannot wait until the election to fix the roof, and we cannot wait until the election to begin developing a long term capital improvement plan. As I have written before, it will take years before we can get the town on a firm financial footing. We need to spend millions to buy equipment, repair roads, and repair buildings. This year if the town passes all of the warrant articles, we will be putting away $150,000 for roads. We need to consider cutting existing budgets, especially those that are higher than those in similar towns, and placing more of our tax dollars in capital reserve.
If we had a capital improvement plan in place and had put away capital reserves to deal with the roof, we would now be able to draw on those funds to repair the roof. The town has known about the roof for some time, just as the town has known about other long term capital needs. By the town I am not only referring to the Select Board and the Utility Commissioners, I am referring to the voters as well. We have put off many capital improvements, and now we are facing more situations like the Fire Station roof in a time when we are in a recession and cannot afford to pay higher taxes. To paraphrase Dan Golden, we had a choice to pay a little more in the past, but now we are going to be paying a lot in the present and a lot more in the future.
We cannot wait until the election to fix the roof, and we cannot wait until the election to begin developing a long term capital improvement plan. As I have written before, it will take years before we can get the town on a firm financial footing. We need to spend millions to buy equipment, repair roads, and repair buildings. This year if the town passes all of the warrant articles, we will be putting away $150,000 for roads. We need to consider cutting existing budgets, especially those that are higher than those in similar towns, and placing more of our tax dollars in capital reserve.
Sunday, December 11, 2011
Last Night's Budget Committee Meeting
The Budget Committee tabled discussing salaries until the town makes a decision on benefits. Currently, Ashland is one of two towns in New Hampshire that pays 100% of health insurance for employees. Last year the budget committee asked the town to have employees contribute to their health insurance, but the town has delayed doing so while it negotiates with the employee union. In retorspect the town probably should have maade this decision before negotiating with the union.
Sandra Coleman pointed out that the town employees were given a $.50 per hour raise two years ago to help offset the contribution to their health insurance but then were not asked to contribute. This year the town is asking for a 1.5% pay increase to help offset the cost of the employee contribution to health insurance. Ingrid Heidenreich said that a 1.5% salary increase during a recession is too much for taxpayers. In addition, employees get 120 hours of sick time and can get paid for up to 1 week of accrued time at the end of the year. Employees who do not take health insurance can opt to receive 25% of the cost of their policy. These benefits might have been appropriate at one time, but unfortunately we simply cannot afford to continue them.
Steve Felton presented a comparison showing that Ashland's police budget is much higher than towns with similar populations. His figures are similar to the figures I presented in a recent article. My comparison showed that the police budget in 2009 was $347,253 higher than towns with populations within 500 people more or less than Ashland. There are a number of factors that contribute to this difference including crime rate, salaries and benefits, and equipment needs. However, the difference is large enough to warrant further research into the police budget and other areas that are high like Parks and Recreation.
Our overall budget is also much higher than towns of similar size, a fact that accounts for our high tax rate. There is also another problem we need to consider in developing the budget. We do not have enough capital in reserve for long term expenses, and we have no plan to address these expenses. The Planning Board, the body that has the responsibility for developing the capital improvement plan, has put off establishing a committee to develop a plan until after the next election. Finally, our property values have decreased significantly. Ultimately this will reduce the tax base and lead to a corresponding increase in the tax rate.
Because we are in a recession, it is imperative that we bring our expenses in line with other small towns. Considering our financial situation, we are not in the position of deciding between what we want and what we need; we are in the position of having to decide which needs are most important.
Sandra Coleman pointed out that the town employees were given a $.50 per hour raise two years ago to help offset the contribution to their health insurance but then were not asked to contribute. This year the town is asking for a 1.5% pay increase to help offset the cost of the employee contribution to health insurance. Ingrid Heidenreich said that a 1.5% salary increase during a recession is too much for taxpayers. In addition, employees get 120 hours of sick time and can get paid for up to 1 week of accrued time at the end of the year. Employees who do not take health insurance can opt to receive 25% of the cost of their policy. These benefits might have been appropriate at one time, but unfortunately we simply cannot afford to continue them.
Steve Felton presented a comparison showing that Ashland's police budget is much higher than towns with similar populations. His figures are similar to the figures I presented in a recent article. My comparison showed that the police budget in 2009 was $347,253 higher than towns with populations within 500 people more or less than Ashland. There are a number of factors that contribute to this difference including crime rate, salaries and benefits, and equipment needs. However, the difference is large enough to warrant further research into the police budget and other areas that are high like Parks and Recreation.
Our overall budget is also much higher than towns of similar size, a fact that accounts for our high tax rate. There is also another problem we need to consider in developing the budget. We do not have enough capital in reserve for long term expenses, and we have no plan to address these expenses. The Planning Board, the body that has the responsibility for developing the capital improvement plan, has put off establishing a committee to develop a plan until after the next election. Finally, our property values have decreased significantly. Ultimately this will reduce the tax base and lead to a corresponding increase in the tax rate.
Because we are in a recession, it is imperative that we bring our expenses in line with other small towns. Considering our financial situation, we are not in the position of deciding between what we want and what we need; we are in the position of having to decide which needs are most important.
Monday, December 5, 2011
Budget Process - Working Together for a Common Goal
I would like to disclose that Fran Newton and Ingrid Heidenreich are members of the Budget Committee and the Coalition for Action.
The discussions on the budget have already been contentious, even though no budget cuts have been discussed. Some have felt that the budget committee is probing too deeply, some have felt that there are personal or political agendas behind the process, and some have felt personally attacked. Money is a point of contention in families, businesses, and governments. Those families, businesses, and governments that are successful find a way to work together to achieve common goals.
After attending many of the budget committee sessions, I would like to make the following suggestions. The first is that we should look at the big picture and see how that applies to more specific areas of the budget. Ashland's taxes are high, in the upper 25% of towns in New Hampshire. We have very little money in capital reserve to deal with large, long-term capital expenses such as equipment, roads, and buildings. The town has put off many large expenses over the years, but over the next five years we will not be able to put off those expenses any longer. If we do not reduce costs and put away money to meet these expenses, we will have to borrow money to pay for them. This will add to our current debt, which is already high, and it will raise our taxes. If we approve the proposed money Warrant articles, our taxes will increase $1 per thousand. While, these warrant articles begin to address some of our long term problems, they are a patch and not part of a comprehensive plan to restore the town to financial health.
Second, we recommend that our overall goal should be to develop a comprehensive long term plan that involves reducing costs and placing those savings into capital reserve funds. We should focus on reducing costs areas that are much higher than the average spent by similar towns: parks and recreation, police, education, and debt service. In terms of capital reserve, we need to develop a long-term capital reserve plan that prioritizes needs over the next 10 years so that we can begin to address the most critical areas while holding the line on spending.
Finally, we will need to address economic development so that we can increase revenues in a way that helps us to preserve and enhance the character of the town. We need to bring in sustainable businesses, develop the mill area, and develop the transfer station. All of these things require that we work together as a town to make difficult cuts in spending while investing in our future.
The discussions on the budget have already been contentious, even though no budget cuts have been discussed. Some have felt that the budget committee is probing too deeply, some have felt that there are personal or political agendas behind the process, and some have felt personally attacked. Money is a point of contention in families, businesses, and governments. Those families, businesses, and governments that are successful find a way to work together to achieve common goals.
After attending many of the budget committee sessions, I would like to make the following suggestions. The first is that we should look at the big picture and see how that applies to more specific areas of the budget. Ashland's taxes are high, in the upper 25% of towns in New Hampshire. We have very little money in capital reserve to deal with large, long-term capital expenses such as equipment, roads, and buildings. The town has put off many large expenses over the years, but over the next five years we will not be able to put off those expenses any longer. If we do not reduce costs and put away money to meet these expenses, we will have to borrow money to pay for them. This will add to our current debt, which is already high, and it will raise our taxes. If we approve the proposed money Warrant articles, our taxes will increase $1 per thousand. While, these warrant articles begin to address some of our long term problems, they are a patch and not part of a comprehensive plan to restore the town to financial health.
Second, we recommend that our overall goal should be to develop a comprehensive long term plan that involves reducing costs and placing those savings into capital reserve funds. We should focus on reducing costs areas that are much higher than the average spent by similar towns: parks and recreation, police, education, and debt service. In terms of capital reserve, we need to develop a long-term capital reserve plan that prioritizes needs over the next 10 years so that we can begin to address the most critical areas while holding the line on spending.
Finally, we will need to address economic development so that we can increase revenues in a way that helps us to preserve and enhance the character of the town. We need to bring in sustainable businesses, develop the mill area, and develop the transfer station. All of these things require that we work together as a town to make difficult cuts in spending while investing in our future.
Budget Comparisons
The New Hampshire Center for Public Policy Studies has published a spreadsheet of "New Hampshire Town Finances 2001 to 2009. We have been reviewing the data to compare Ashland to other towns with similar populations to see where we stand in comparison. We looked at the data in three different ways: (1) towns with populations between 2085 and 2585), (2) towns with populations between 2085 and 1585), and (3) towns with populations between 1585 and 2085. We compared the average spending in 2009 for 14 different categories with the amount spent by the Town of Ashland. We made no attempt to explain the differences; we only point out that differences exist.
Where there are significant differences, we recommend further investigation to determine whether budget cuts or increases might be warranted, or whether we need to develop longer term plans to deal with these areas. Given the current situation where there are no reserves to take care of large capital expenses, it might be wise to reduce spending in areas where there are significant differences and place that money in capital reserve accounts. That way we could begin to prepare for the future, meet current needs, and hold the line on tax increases.
The following table shows a comparison of towns with a population equal or up to 500 more than Ashland. Areas that are significantly above the average are police, culture & recreation, and deb service. Our spending on highways and schools is significantly lower. Our total budget is $1.58 million above the average. Our spending on highways and schools is significantly lower.
The following table compares Ashland's budget to towns with populations from 1585 to 2085.
The following table compares Ashland's budget to towns with populations from 2085 to 2585.
Where there are significant differences, we recommend further investigation to determine whether budget cuts or increases might be warranted, or whether we need to develop longer term plans to deal with these areas. Given the current situation where there are no reserves to take care of large capital expenses, it might be wise to reduce spending in areas where there are significant differences and place that money in capital reserve accounts. That way we could begin to prepare for the future, meet current needs, and hold the line on tax increases.
The following table shows a comparison of towns with a population equal or up to 500 more than Ashland. Areas that are significantly above the average are police, culture & recreation, and deb service. Our spending on highways and schools is significantly lower. Our total budget is $1.58 million above the average. Our spending on highways and schools is significantly lower.
| General Government | $607,843 | $512,726 | -$95,116.92 |
| Police | $359,214 | $495,245 | $136,031.22 |
| Fire & Ambulance | $187,241 | $197,704 | $10,463.22 |
| Highways & Streets | $527,390 | $458,097 | -$69,292.89 |
| Sanitation | $226,871 | $141,783 | -$85,088.44 |
| Water Dist & Treatment | $0 | $0 | $0 |
| Health & Welfare | $49,443 | $56,116 | $6,673.11 |
| Culture & Recreation | $121,062 | $211,310 | $90,248.33 |
| Conserv/Econ Devel & Housing | $4,868 | $500 | -$4,367.56 |
| Debt Service | $138,590 | $348,649 | $210,059.17 |
| Capital Outlay | $455,412 | $472,349 | $16,937.11 |
| Schools(Local) | $4,834,770 | $3,493,423 | -$1,341,346.56 |
| Schools(State) | $813,939 | $513,829 | -$300,110.33 |
| County | $658,955 | $331,016 | -$327,939.44 |
| Totals | $9,373,647 | $10,953,996 | $1,580,348.78 |
The following table compares Ashland's budget to towns with populations from 1585 to 2085.
| Category | Town Ave | Ashland | Difference |
|---|---|---|---|
| General Government | $440,941 | $512,726 | $71,785 |
| Police | $248,044 | $495,245 | $247,201 |
| Fire & Ambulance | $248,044 | $495,245 | $247,201 |
| Highways & Streets | $447,338 | $458,097 | $10,759 |
| Sanitation | $172,505 | $141,783 | -$30,722 |
| Water Dist & Treatment | $10,179 | $0 | -$10,179 |
| Health & Welfare | $34,114 | $56,116 | $22,002 |
| Culture & Recreation | $84,732 | $211,310 | $126,578 |
| Conserv/Econ Devel & Housing | $84,732 | $211,310 | $126,578 |
| Debt Service | $92,558 | $348,649 | $256,091 |
| Capital Outlay | $293,100 | $472,349 | $179,249 |
| Schools(Local) | $3,405,231 | $3,493,423 | $88,192 |
| Schools(State) | $744,125 | $513,829 | -$230,296 |
| County | $456,340 | $331,016 | -$125,324 |
| Totals | $6,807,287 | $10,953,996 | $4,146,709 |
The following table compares Ashland's budget to towns with populations from 2085 to 2585.
| Category | Town Ave | Ashland | Difference |
|---|---|---|---|
| General Government | $290,729 | $512,726 | $221,997 |
| Police | $147,992 | $495,245 | $347,253 |
| Fire & Ambulance | $65,857 | $197,704 | $131,847 |
| Highways & Streets | $375,291 | $458,097 | $82,806 |
| Sanitation | $123,576 | $141,783 | $18,207 |
| Water Dist & Treatment | $19,340 | $0 | -$19,340 |
| Health & Welfare | $20,318 | $56,116 | $35,798 |
| Culture & Recreation | $52,036 | $211,310 | $159,274 |
| Conserv/Econ Devel & Housing | $1,564 | $500 | -$1,064 |
| Debt Service | $51,129 | $348,649 | $297,520 |
| Capital Outlay | $147,020 | $472,349 | $325,329 |
| Schools(Local) | $2,118,646 | $3,493,423 | $1,374,777 |
| Schools(State) | $681,292 | $513,829 | -$167,463 |
| County | $273,986 | $331,016 | $57,030 |
| Totals | $4,497,562 | $10,953,996 | $6,456,434 |
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