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2023-04-27 Special TOWN OF BERLIN SPECIAL BOARD OF FINANCE BUDGET MEETING APRIL 27, 2023 REMOTE MEETING 7:00 P.M. https://berlinct-gov.zoom.us/j/88128356264?pwd=SXRYRTRXTDNoYmpkMklLN2V6VWtkdz09 Call-in Option: 1 929 205 6099 Meeting ID: 881 2835 6264 Passcode: 826421 A. CALL TO ORDER Chairman Bordonaro called the meeting to order at 7:00 p.m. B. PLEDGE OF ALLEGIANCE C. ROLL CALL ATTENDANCE Members Present: Sal Bordonaro, Raul Fernandes, Tim Grady, Mark Holmes, George Millerd, Gerald Paradis Members Absent: None Staff Present: Arosha Jayawickrema – Town Manager Kevin Delaney – Finance Director D. PUBLIC COMMENTS Julia Dennis, 115 Norton Rd. Ms. Dennis said the Board of Education has worked hard on adopting a budget that will fill the needs of all of our students and support the overall educational community in our town. At minimum the Board of Education needs a 4.23% increase to maintain contractual obligations. I have heard in meetings that the Board of Education has a contingency fund. I want to clarify that the contingency fund is grant money that we received from the Choice Program. Any remaining funds from the Choice Program are used for Special Education outplacement costs and any unanticipated amounts. The Board of Education does not sit on a contingency fund, rather we have money from a grant. It is important not to exhaust all of it because that will create additional constraints. The children have already been impacted tremendously from COVID and we are facing issues of learning recovery and addressing learning loss. Now is not the time to take away systems and structures in place through reducing our 1 operational budget because that will result in personnel reduction. At minimum 4.23 is needed for our contractual obligations. Cornel Boudria, 115 Skinner Rd. Mr. Boudria said he is speaking on behalf of the school budget. Voters sent a clear message that the school budget was substantially too low. It is my hope that members of the Board of Finance will see fit to raise the Board of Education budget. A fully funded budget requires a 5.84% increase, that is a $1.4M gap from where we are now. Voters made a case that they are fine investing in schools and if it means raising the mill rate, the Board of Finance should entertain discussion to that extent. Peter Zarabozo, 158 Ellwood Rd. Mr. Zarabozo said the 3.2% or $100k increase to the Board of Education budget fell far short of what we need. This has been repeatedly stated by the Superintendent and the Board of Education President. At bare minimum the Board of Education needs 4.23% or $590k to meet contractual obligations. Also, it is a little bit reckless for the town to be pulling money from fund balance when we have a $4.2M surplus. Drawing off that fund balance is going to impact our AAA bond rating and it is not good when we are looking into the future. It is critical that we utilize that surplus money. I do not know how that surplus money has been allocated, but it seems like it has been allocated to pet projects and the Board of Education has been put on the back burner. Investing in education is always a wise move for the town and its people and young families. I hope the Board of Finance advocates for the appropriate funding. E. NEW BUSINESS 1. Discuss Fiscal Year 2024 Proposed Budget (If one or both budgets fail on th April 25): Chairman Bordonaro said the current year surplus is getting close to $5M. That has grown in the last several months as interest income is growing. Chairman Bordonaro asked Finance Director Delaney what kind of interest rates have we experienced over the last couple of months and what is the basis of our proposed budget for interest income? Is there more room for interest income that we could add? Finance Director Delaney said the current year budget was adopted at a time when interest rates were 0.25%. Over this past year, the federal government has been increasing interest rates dramatically. Currently, the town is investing between 3.65% and 4.8%. It is at various institutions. The town also has the benefit of a little bit over $5M of ARPA money which is available, but will be used over the next 18 to 24 months to fund the Willard 2 HVAC project. There are earnings on that money that will not be available. The town also has a few other larger projects where there has been funds sitting there. For next year, the interest rate assumption is about 4%. The ARPA money will be going out so we can’t earn interest on it. Some of it is existing cash that the town will have that will front reimbursable projects such as Biscoglio Field renovation. It is a $2.1M project and we will be pulling money out of the bank to pay and get reimbursed by the state. It takes typically 90 to 120 days to get that money back between submitting, reviewing, approving and providing the money. I can’t say definitively there is no opportunity, but the opportunity is somewhat limited. You increased the original budget by about $500k. One of the concerns is if the county enters a recession over the next several months, the Federal Reserve may reverse course and lower interest rates. I caution not to go too far out on a limb with interest. Chairman Bordonaro said it seems like we have a fair number in there for the budget. Mr. Millerd asked to clarify something that Mr. Zarabozo said. Whatever the surplus is, $4.2M, that money at the end of the year goes into fund balance. People are saying to use the $4.2M and don’t use fund balance, but the money is going into fund balance. We have to use fund balance in order to do any additional funding unless we are going to raise the mill rate. Chairman Bordonaro said that is correct and I think people are getting confused. We have a target fund balance of say 11%, that $4M or $5M is above that 11% ceiling. That is true surplus that is being generated out of the current fiscal year. There is confusion with the cap at 11% that we use for financial reasons, the $4M is excess to that 11%. Finance Director Delaney said the 11% is the floor, not the cap. Two months’ worth of savings would be an appropriate target for a community to have that is both unexpected expenditures and potential shortfalls and revenue. Especially if we are entering a potential recessionary period. There is a possibility that taxes would come in later. Two months would be 16.7%. Chairman Bordonaro said we have been targeting that floor for many years now. Finance Director Delaney said part of that is trying to compensate for many years of deferred capital. Mr. Grady added that part of the confusion is because of a commentary that a Town Councilor put into the Berlin Citizen stating that the town only had $5M in fund balance and wasn’t keeping good practice and good accounting practices. Which was completely inaccurate. Whomever read that is assuming that we are using fund balance and running the town out of money which isn’t the case. Finance Director Delaney said that is not the case. If anyone has inferred or stated that the town has a problem, that has not been the case from our auditors, Standard and Poor’s and our actuaries. I don’t think any 3 independent group that has looked at our financials would say we are in a poor situation, or have been run poorly. Chairman Bordonaro said we have a stellar financial posture with the town. Mr. Paradis said I don’t know who wrote the article, but our reserves are in accordance with our policies. Some of us might think we should have a little bit more because of our deferred maintenance and capital practices, but if someone is saying that we only have $5M in reserves that is totally wrong. Chairman Bordonaro said he would like to make a clarification. When we had the joint meeting, we offered the 3.2% plus covering the $200k risk. My understanding was that the Mayor and Superintendent were comfortable with that position. There seems to be a little miscommunication on what everybody is comfortable with. My understanding is the 3.2%, plus $200k if they had to use it for outplacement for example. The town would replenish that $200k and that would equate to 3.6%. I understood that the Superintendent was comfortable with that position. The town voted and it is disappointing that not enough people come out. Last year about 5% came out and this year it was at 10%, but about 90% of the town does not come out to vote. Maybe we can look at better communication in the future. Maybe people don’t really understand what budget means. It should say budget that affects property taxes. Chairman Bordonaro said he will make a proposed position on the Board of Education budget. I’m recommending a 3.5% increase compared to the 3% that is currently the proposed budget. They still will have $200k of risk monies. For the last 4 years there has been Choice grant money remaining. That is a $245k increase from the Board of Finance initial proposal. I would like to offset that by taking it out of surplus to not increase the mill rate. Mr. Fernandes said that he thinks we can do $500k to bring it up to 4% and does not see the need to touch surplus and fund balance. We are talking about a .06 or .07 increase in the mill rate. I think we have a lot of projects. Mr. Fernandes asked Mr. Delaney for a rundown of what the surplus is earmarked for right now. Finance Director Delaney said the Town Council and Board of Finance have to vote on the use of the surplus. Nothing has been voted on. You voted to appropriate about $400k for scanning work to clean out the area that will be the police station. That would have been the money that would have gone to surplus. That technically has been used this year. There is a special meeting on May 2 to review the Willard HVAC project. The bids came in and there is a gap between the remaining ARPA funds and where that bid came in. There was a proposal from staff that will go to the Town Council to ask for a town meeting. It would go to the voters and then the Town Council if approved. 4 Then it would go to the Board of Finance on May 9. The final numbers will be determined by the PBC for what they recommend for that project. Somewhere between $700k to $1M of interest. We are proposing to use some of that to close that gap and move forward before school lets out. Beyond that you saw the capital items that were eliminated in preparation for the first referendum as well as items identified coming into the budget discussion. That is where we would start, but nothing has been approved or proposed. Mr. Millerd said we had a pretty heavy contingent of people that were advocating for something to be done with the playgrounds. There is $500k there that is not in the budget. We talked as a group about potentially using some of that surplus to do at least one of those playgrounds. Chairman Bordonaro said the 3.5% that I’m proposing is a $1.7M increase over last years budget. If you compare the town operation side, we are giving the town less budget than we had last year by $99k. Mr. Grady added that he is going to be with the 3.5%. That meets the redline that the Board of Education had where they need to keep critical staff. We had a vote and the vote came back no, too low. Our position was also no, too low and that was on the basis of not getting an agreement at the joint meeting. We were not in any way pushing this 5.8%, or even a 4% number. If you want to count the people that vote, don’t assume that all of the 800 people that voted no, too low are voting for a 5.8% increase, or even a 4% increase. We are now at one of the highest budgets that this Board of Education has ever received going back two decades. Mr. Fernandes said we are in agreement that we cannot afford 5.8%. We can afford a 4.2%. Mr. Grady said we can’t afford a 4.2% if we can’t find a way to fund this 3.5% without raising taxes. I am not voting for one more penny of tax increase. Chairman Bordonaro said the Superintendent asked for a 4.87% increase, within that you have contractual requirements of 3.43%. The 3.5% actually covers the contractual requirements of the Superintendent. Plus, there is risk reserve in their numbers. It is more than 3.5%. Mr. Fernandes asked who on the Board of Finance originally asked for 3.5%? It was me, because those were the numbers. Chairman Bordonaro asked why are you changing your mind? Mr. Fernandes said because now the number has been 4.2% for the last month per the Superintendent at the Board of Education meetings. Chairman Bordonaro said we are being given different messages. Mr. Grady said last year’s contractual obligations were higher and it came in way lower, as were the years before. I think 3.5% is fair, but for that $250k I will be expecting something on the town side as a reduction for the mill rate as 5 well. We won’t forget the town side because there was a vote there too. If we are doing $250k on the Board of Education, then I want to do $250k on the town side. Chairman Bordonaro presented some things at the joint meeting that we can use to bring the town side down a little bit. We go with 3.5% on the Board of Education and that is more than fair for everybody. Is it $255k that we still have to work with that was not accepted at the last meeting? Chairman Bordonaro said we had $100k left over on the grant match. Then $155k associated with the HVAC systems for Hubbard and Griswold, the interest on that loan isn’t going to happen so we took that out. Mr. Grady said there is the $250k on the town side. Chairman Bordonaro said we offered up taking out the capital and using surplus for that. Mr. Grady said I don’t care about the capital because we have to buy that stuff anyways. That is a non-issue. Mr. Millerd said he shares the concern, if you go back historically and throw out this 4.23% minimum. Previous years has always been a minimum. They have never gotten that level of funding and had surpluses. It is hard to believe that is a real number because of the history that we have. They come in with a high budget and are happy when they get half of it. Why is this different from the last six years? I’m on board with the 3.5% too. Anything that we give them is obligated in the future. If we give them 4.2%, they will start with 4.2% next year. The state mandates that we have to keep it the same. I’d rather have them come to us in 9 months and say we need more money and work with them. Mr. Fernandes asked if the Board of Finance is okay with if they come back and say they need more money? Mr. Millerd said if it is legitimate and they can substantiate it. I would be okay with it. Mr. Grady said that has always been the case with every department. Mr. Millerd said as long as we have the surplus, that is what it should be there for, critical needs. Chairman Bordonaro said from the town side we have more visibility with respect to budgets. On the Board of Education side we don’t have that visibility. I would be uncomfortable committing to saying if you go over, we will provide you with additional funding. Because we don’t have control over it. Mr. Fernandes asked if the Board of Finance would do $400k on the town side? Mr. Grady said he would not go over 3.2%. I’m looking at everybody in town, not just one department. Mr. Fernandes said we did the same thing for the VNA. We see the math and there is opportunity there. We take $150k from the town for the $250k. Chairman Bordonaro said the majority of us were comfortable with the 3% to begin with per the vote. Now we heard the voters speak and say it is too low, we are trying to accommodate them. We are not going to go above the 3.5%. 6 We can put it to a vote and if we don’t agree then the 3% goes to the Town Council and they decide to accept or reject. Mr. Paradis said seeing the results of the referendum, you could say 90% of the people didn’t think enough of the budget in a negative way to even vote. Which implicitly says that they support the budget that we have. I’m not inclined to make any changes to the town side of the budget. Those people that voted for the Board of Education budget to be increased. If they want it increased, then their taxes should go up. I’m not inclined to say that it should be funded from fund balance. If we were to do an increase to the Board of Education budget, I see it coming out of taxes. Chairman Bordonaro asked if Mr. Paradis is saying that you are sticking with the 3% on the Board of Education? Mr. Paradis said no, I’m saying that I would increase their budget, but it would not come from fund balance. At the most I would add $400k. Mr. Holmes said he is in lockstep with everything. Chairman Bordonaro said we have $245k increased to a $400k increase. We can put it to vote and see where we end up. Chairman Bordonaro asked if Mr. Grady is saying not to take anything out of fund balance to offset that? Mr. Grady said I would use surplus, which is fund balance. Mr. Fernandes asked if the Board of Finance members would do $400k from fund balance? The members said no. Chairman Bordonaro said he does not believe in increasing the Board of Education by $400k. I don’t want to go above the initial 3.5%. Mr. Grady motioned to move the Board of Education budget from 3% increase to 3.5% increase. Which would be a $245,416 increase. Then take surplus or fund balance to off-set that increase of $245,216. Seconded by Mr. Millerd. Those voting in favor: Chairman Bordonaro, Mr. Grady, Mr. Millerd Those not voting in favor: Mr. Fernandes, Mr. Holmes, Mr. Paradis Vote being: 3-3 (Motion Fails) Mr. Fernandes made a motion to increase the Board of Education budget by appropriating $400k out of fund balance. Seconded by Mr. Paradis. Those voting in favor: Mr. Fernandes, Mr. Holmes, Mr. Paradis Those not voting in favor: Chairman Bordonaro, Mr. Grady, Mr. Millerd 7 Vote being 3-3 (Motion Fails) Mr. Fernandes said lets meet in the middle at $325k. Mr. Grady asked what about $300k? Mr. Millerd said he would like to get to a solution. Mr. Fernandes said lets meet in the middle between $200k and $425k. Mr. Grady said he can’t go that high. Finance Director Delaney asked if Mr. Fernandes wants to modify it to $300k? Mr. Fernandes said if we go down half it is reasonable and everybody wins. Mr. Fernandes made a motion to increase the Board of Education budget by appropriating $325k out of fund balance. Seconded by Mr. Paradis. Those voting in favor: Mr. Fernandes, Mr. Holmes, Mr. Paradis Those not voting in favor: Chairman Bordonaro, Mr. Grady, Mr. Millerd Vote being: 3-3 (Motion Fails) Chairman Bordonaro said where I’m at is where we started from. We are incrementally increasing now and I don’t believe it is necessary, 3.5% is more than adequate including any risk money that they have. I’m looking at the Superintendent position. We can say meet in the middle, but I’m not there. Mr. Fernandes asked what would make you meet in the middle? Mr. Millerd said he is looking for the hardcore reasons why that number is the magic number. This is just reacting to the cry that they need the 5.84%, or 4.23%. Chairman Bordonaro has some logic to what he is saying regarding where we started this whole conversation a month ago. Mr. Fernandes said 3.5% was his number originally, but the number that I’m going for now is 4.2% per the Superintendent. Chairman Bordonaro said there is a difference in what people say behind closed doors vs. what they say in public. Mr. Grady added that is a big problem. Chairman Bordonaro said they created havoc with the parents. I’m stuck on 3.5% period. The Superintendent was comfortable with 3.2%, plus the $200k of risk money. For the last 5 years the budget that we gave them was below contractual requirements and they had surplus. Mr. Grady said and they were not small surpluses, 3.5% is beyond what I want to do, but it is a compromise. Finance Director Delaney said Mr. Paradis mentioned not being willing to cut on the general government side, but the proposals before added fund balance. Does anybody have an interest in blending and raise the Board of Education $245,416k, which is the 3.5% and off-set it with fund balance? It blends the 8 two together by funding it through fund balance which is doable with the town’s financial condition. It does respond to what the voters said which was Board of Education too low and it does not take away from the town on the too high or too low question. Almost evenly split, but it does fund it. Chairman Bordonaro said that was the initial intent. Mr. Grady said he is good with that. You would leave the 0.86 increase, but increase the Board of Education budget without raising taxes to do that additional amount. Mr. Fernandes asked if we would do $300k? Mr. Paradis said $300k is good. Mr. Millerd and Chairman Bordonaro agreed. Mr. Grady made a motion to increase the Board of Education budget by $300k and offset it on the town side out of fund balance. Seconded by Mr. Fernandes. Those voting in favor: Chairman Bordonaro, Mr. Fernandes, Mr. Grady, Mr. Holmes, Mr. Millerd, Mr. Paradis Vote being: 6-0 (Motion Approved) a. Move to send the Board of Education budget of 50,855,071 to the Town Council. Mr. Paradis moved to send the Board of Education budget of $50,055,071 to the Town Council. Seconded by Mr. Millerd. Those voting in favor: Chairman Bordonaro, Mr. Fernandes, Mr. Grady, Mr. Holmes, Mr. Millerd, Mr. Paradis Vote being: 6-0 (Motion Approved) b. Move to send the General Government budget of $50,082,625 to the Town Council. Mr. Paradis moved to send the General Government budget of $50,082,624 to the Town Council. Seconded by Mr. Grady. Those voting in favor: Chairman Bordonaro, Mr. Fernandes, Mr. Grady, Mr. Holmes, Mr. Millerd, Mr. Paradis Vote being: 6-0 (Motion Approved) 9 c. Move to send the Berlin Water Control budget of $____5,693,282________________ to the Town Council. Mr. Paradis moved to send the Berlin Water Control budget of $5,693,282 to the Town Council. Seconded by Mr. Grady. Those voting in favor: Chairman Bordonaro, Mr. Fernandes, Mr. Grady, Mr. Holmes, Mr. Millerd, Mr. Paradis Vote being: 6-0 (Motion Approved) 2. Move to set the Fiscal Year 2024 mill rate for the Town of Berlin at _____________ and maintain this mill rate for all properties not identified in any mill rate cap established by the State of Connecticut. (If both budgets th pass on April 25) F. ADJOURNMENT Chairman Bordonaro moved to adjourn at 7:52 p.m. Seconded by Mr. Grady. Those voting in favor: Chairman Bordonaro, Mr. Fernandes, Mr. Grady, Mr. Holmes, Mr. Millerd, Mr. Paradis Vote being: 6-0 (Motion Approved) Submitted by, Alina Brown 10