Saturday, August 28, 2010

A simple five-point plan

Guest article by Jim Pierce, Sandwich selectman

The proposal below addresses only four of the five big slices of the Town of Sandwich budget pie as shown on chart 5 of the August 5th presentation to the selectmen. The intent is to look at the 22% that goes to Gen. Gov't Operating, the 21% combine shown as Employee Related and State & County Assessments, and touch briefly on the 7% labeled debt. The 48% shown as School Operating Budget is the province of the School Committee.

If you want to skip the details, then scroll down to where it says PLAN and save yourself some pain.

To understand what's going on you also need to be familiar with chart 4 of the July 22nd presentation. The pie chart shows that the money comes from three places. Tax bills account for 74%. State aid provides 15% and most of the rest, 8%, comes from local receipts. The first simple fact is that by the General Laws of the Commonwealth of Massachusetts those two pies must be equal. That is the definition of a balanced budget.

First let's look a the big piece of the income pie. For the current fiscal year the dollar amount is just under $45.2 million. Proposition 2.5 allows that number to grow by 2.5% in FY12. Estimated new growth will add another 1%. Doing the math, 3.5% of $45.2M adds about $1.58M to the income pie.

Now let's look at the 15% state aid piece. In FY09 the two biggest pieces of that, Discretionary and Chapter 70, added up to $9.25M.

In FY11 the total of those two was $8.45M. There is every reason to believe the downward trend will continue. The assumptions built into the FY12 budget projection include another 5% reduction in "discretionary" and flat Chapter 70. That pokes an $850,000 hole in the $1,580,000 growth from tax revenue. Local receipts have been relatively flat at $4.8M plus or minus $50,000 for four years. So, there will be no help from there.

Summarizing, the "income" pie will grow by about $730,000 in FY12 vs FY11. That assumes no further cuts in state aid, which is not entirely a safe assumption.

Now let's take a look at the "expenses" pie. The Gen. Gov't employees accepted a "pay freeze" in FY10 and the current year, FY11. The total "pay check" for all 173 employees is $10.5M. What might the employees have gotten if they had taken the town to arbitration? Let's just pick a number out of the air, 2%. That would have added $210,000 in FY10. That would have persisted as part of the base for another 2% in FY11. The FY11 increase would be another $215,000. Adding 210 plus 210 plus 215 comes to $645,000 cost avoidance over the last two fiscal years. Thank you, town employees!

In order to secure that second year "pay freeze" the town contracted with the municipal employees for a 3% raise in each of FY12 and FY13. What does that 0,0,3,3 mean? Over a four year period raises for Gen Gov't employees will average 1.5%. Adding in step raises included in the contract of about 1.25% and you get 2.75%. The "income" pie is growing at a little over 3.25%. That says something very important. Gen Gov't salaries will not add to the "structural deficit" over that four year period. And, if future increases are held around 2% the whole system is sustainable indefinitely within Proposition 2.5.

But, looking at FY12 alone, the 3% plus steps adds about $450,000 to the total Gen Gov't "paycheck". Remember, the whole "income" pie is only projected to grow by $730,000 and that has to be shared over the whole "expenses" pie.

If we look at the Employee/Assessment piece of the "expenses" pie, what do we find? Health Insurance up $400,000, county retirement up $150,000, liability insurance, unemployment and Medicare up a combined $150,000. That total of $700,000 does include the school system portion, which is about $500,000.

Summarizing: The town contracted for a $450,000 pay increase for Gen Gov't employees in exchange for a $645,000 two year savings and getting on a long term sustainable track. Cost elements largely controlled outside the town will grow by $700,000. The revenues available will grow by $730,000. This is the definition of the proverbial rock and hard place.

On top of that, some of our buildings are in need of repair. The Capital Improvement Planning Committee says about $25 million worth. However, they paired it down to a $5.25 million immediate need.

PLAN (Only deals with General Gov't, Employee and Assessment costs)

The problem is simple:
- The Gen. Gov't needs an operating cash injection via Prop 2.5 override, annual impact $750,000.
- The town needs a capital injection via debt exclusion, annual impact $550,000 ($5.25M financed over 20 yrs)
- The timing sucks!

Five Points

1. In 2005 the voters authorized a $2.5M override of Proposition 2.5. Later that year, the voters accepted a $500,000 "underride." Asking the voters to "override the underride" would provide two-thirds of the $750,000 leaving $250,000.

2. The state legislature provided us with an "opportunity" to add an estimated $137,000 to local receipts by raising the meal tax 0.75%. Grab that opportunity, and $250,000 becomes $113,000.

3. The Board of Selectmen has been "jawboning" Pay-As-You-Throw to death for months. There is a proven track record in over 130 communities that says Sandwich will save at least $125,000 in tipping fees alone. That also goes to local receipts. The $750,000 is gone, and, at no time did my fingers leave my hands. "Overriding the underride" does add about $50/yr to the average tax bill.

4. In 2000 Sandwich adopted the Community Preservation Act and added a 3% CPA surtax on top of property taxes. When 3% is applied to $45.2 million the total surtax is $1,356,000. One-third of that is $452,000. A Town Meeting vote coupled to a ballot question could reduce the surtax from 3% to 2%. That's a genuine, no smoke-and-mirrors tax reduction of about $42/yr for the average taxpayer.

5. The debt exclusion of $5.25 million financed over 20 years would cost the average taxpayer about $52 the first year decreasing to about $30 in year 20. That's an average of about $41/yr. A Town Meeting vote coupled to a ballot question is required for a debt exclusion. What is proposed is a shift of priorities from CPA activities to repairing our crumbling infrastructure.

Questions left open:

- Will the voters say, "Thanks for the tax reduction, but, no way on the debt exclusion"?

- How long will the $750,000 combined override, meal tax and PAYT last?

- What will the school system ask for?

Friday, August 20, 2010

Sign Wars

It’s political campaign season and, as Mark Wiklund noted in one of his columns a spring or two ago, the signs are popping up like crocuses and tulips, except that it’s a dry summer with lawns on the decline and there is no evidence of crocuses and tulips.

In the Town of Sandwich, political signs are allowed to be put up 60 days before an election, but we’ve always followed a gentlemen’s agreement that 30 days is sufficient to irritate the complainers but not too long as to be ridiculous.

By the way, any town’s political sign bylaw is purely a guideline for signs erected on private property. The free speech clause of the First Amendment of the U.S. Constitution has been widely recognized in the courts to trump local bylaws, including homeowners’ association covenants. If you want to display a four by eight foot banner in your yard screaming “Impeach Bush,” as was the case on Tupper Road in Sandwich for most of a year, the town cannot deny you that right.

Playing the spoiler in our friendly game of Sign Wars is the state Department of Public Works. In an email issued by Donald Pettey, assistant maintenance engineer for the DPW division based in Taunton, Pettey wrote “We are starting to field complaints about political signs. Please remind your personnel to remove any political signs that are obviously in the state highway layout or installed on a fence line.”

And that’s what the workers stationed at the DPW depot on Route 130 across from the Sandwich transfer station did. They pulled only political signs that they eyeballed were in the road layout.

There are several obvious problems with this:

1) By only plucking political signs, it’s clear that the DPW’s responsibility to keep a public way safe by removing unsafe objects was discriminately carried out. That is, how do they justify pulling up a political sign in the road layout and not a “for sale” sign planted in the same road layout? It really isn’t a safety issue, is it?

2) For ten years or more, residents on Route 6A in Sandwich have been displaying the same sized political signs in the same locations without any DPW heavy handedness. In fact, an informal agreement was reached years ago that signs should be placed far enough off the pavement to not impede their grass mowers. Simple and effective.

3) The road layout on Route 6A and Route 130 is 25 feet out from the centerline of the road. Being ancient ways with many antique houses, there are homes with almost no setback. Twenty-five feet from the centerline on some of these houses is six feet inside their living rooms. Does that mean that people in old houses have no right to display political signs? Would the U.S. Supreme Court uphold the Pettey ruling?
I have spoken with my opponent and we both agree that we’ll only plant signs in places authorized by the owners or in the various town-owned spots specifically allowing for political sign display. On state-owned roads, we’ll put the signs back at least 25-feet from the centerline or as far back as possible where 25 feet is impossible.

On another note, signs are expensive and are generally paid for by people who graciously give their money to our campaigns. My opponent and I do not want to see any vandalism or theft of our campaign signs. It’s really not funny to destroy other people’s property.

If you see any political signs in unauthorized places, such as on state or town-owned land or under NSTAR lines, etc., please contact our respective campaigns and ask that they be removed. I assure you that I will act promptly on such a notification.

Monday, August 16, 2010

10-point plan to jumpstart Cape Cod's economy

Cape Cod's economy is fueled by tourism, retirees, technological and ecological development, health care, and the demands for goods and services related to all of the above.

The 5th Barnstable District reflects these same characteristics and its business community is a roster comprised, almost exclusively, of small businesses.

Our focus, as a state legislature, must be on the small business owner. Nationwide, approximately 70 percent of all jobs are created by small businesses; on Cape Cod, that figure is even higher.

Rather than repeat the platitudes and talking points that voters seemingly have become immune to, I have compiled a list of specific items that can be embraced and acted on by your state government to improve the overall business climate and expand opportunities for businesses of all sizes across the commonwealth.

These actionable items fall into three categories:

Health care
  • Adopt a 50-employee exclusion (currently ten) for determining which small businesses must offer health insurance. This is consistent with the new federal Affordable Care Act and would allow small businesses to grow beyond ten employees without triggering a huge expense for mandated insurance.
  • Abandon the "creditable coverage" standard, which mandates that everyone carry a blue ribbon, bells and whistles policy. We have to wake up to the fact that not everyone can afford the same insurance plan enjoyed by our legislators.
  • Implement other measures to reduce the cost of insurance, such as tort reform, standardized electronic medical records, and interstate competition between insurers (a federal issue), to name a few.
  • Allow small businesses to band together to purchase health insurance policies as a group. This is a provision that was included in the Small Business Health Care Cost Relief Bill passed in the most recent legislative session. Unfortunately, that bill also included measures to increase government control in this market which, in the end, will drive away competition and increase costs.

 Taxation

  • Roll back sales, meals and personal income tax to 5 percent. Our state government's insatiable appetite for spending resulted in $2 billion of new taxes during the most severe economic recession in decades. That ignores the fact that it leaves less spendable income in the pockets of consumers, who are the life blood of small businesses.
  • Reduce corporate income tax to 5 percent. At 9.5 percent, Massachusetts is among the highest taxing states in the country; yet another reason for large businesses to not come here or to relocate elsewhere. These large businesses generate big demand for goods and services from our small business community.
  • Reduce the short-term capital gains tax rate from 12 percent to 5 percent. As a CPA, I'm always cautioning my small business owners about the state's taxation of capital gains. This puts the brakes on entrepreneurs who would otherwise expand more quickly. 

Regulation
  • Open public construction projects to all bidders, not just union shops. The governor claims that PLAs (project labor agreements) account for relatively few of the total contracts awarded by the state. What he doesn't say is that those "few" are the largest projects, accounting for the lion's share of project dollars spent.
  • Repeal the Pacheco Law, which bars privatization of state services. Small businesses could certainly benefit if allowed to bid on such things as vehicle fleet maintenance, building management and maintenance, and state park maintenance.
  • STOP CHANGING THE RULES (at least changes that make things worse.) The unpredictability of what our legislators have in store for businesses from year to year makes Massachusetts a poor choice for new and expanding businesses.

Monday, August 9, 2010

School committee: Watch where you step

Regarding the Cape Cod Times editorial last Saturday, as much as people here on my blog might think that the CCT’s opinion is counter to mine, it is not.

I provided a road map for cooler heads to work through this superintendent issue knowing that the distraction of a “nationwide” search would be detrimental to dealing with the current town budget problems. A lame duck superintendent is not going to be very useful for that task.

Since the school committee rejected my compromise plan last Wednesday and is pushing forward on the search, I completely agree that the town will be better served if the superintendent chalks this one up in the loss column and plans to move on to bigger and better things on July 1, 2011. So, on this point, I am in agreement with the CCT editorial.

The problem is: The school committee’s leadership refuses to acknowledge that there might be a valid contract for the current superintendent through June 30, 2013. They are thinking that the April 30th meeting being declared a nullity by the assistant district attorney automatically rescinds the signed contract.

Watch out. In my humble opinion, a judge is likely to see this as a bifurcated issue. That is, the question of whether the meeting was valid is one issue, and the question of whether the contract is valid is a second issue.

I could imagine several thought processes that would result in: No/No, No/Yes, and Yes/Yes. If either of the last two are the decision, then we’ll have two superintendents on the payroll starting July 1, 2011.

The school committee must 1) get a written agreement from the superintendent that she will not pursue payment under her contract beyond June 30, 2011 (which may involve a payoff), or 2) get a judge’s ruling before starting the process of hiring a new superintendent.

If the school committee tries to ignore this issue away, the taxpayers may well end up holding the bag.

Thursday, August 5, 2010

Myopic school committee misses an opportunity

Last night, the school committee stared a gift horse in the mouth and didn’t see anything. They were led to water, but once again refused to drink.

Superintendent Johnson’s declaration that she holds a valid contract through June of 2013 provided the cover needed by those who voted her out, without being forced to dine on crow.

They could have stipulated to the fact that the contract extension is valid without spending a dime on attorneys and search firms. And without spending a huge amount of time on, and enduring the distraction of, an unnecessary search for a new super.

My plan for rescuing this unfortunate situation required a large dose of humility in order to move forward. It’s as if the tooth fairy showed up last night and took away the hardest part of that plan.

But we’ll have none of that. With heals dug firmly in, Ms. Chairman is willing to let the chips fall where they may—no matter the expense.

When foresight is lacking, that’s the way the cookie crumbles.