2021 Finance Committee Report

This webpage and the pages connected to it have been developed to provide supporting information from the Finance Committee to voters. Traditionally, some of this material has been provided within the Finance Committee Report itself. To maximize the content of the Report, the Finance Committee has posted that material online. 

We hope that you use this resource to learn more about our town, its finances, and information on municipal budgeting. 

Below is the Finance Committee Report Letter for the 2021 Annual Town Meeting. 


To the Citizens of Andover:

The Finance Committee (FinCom) recommendations in this report are meant to help voters make well-informed decisions at our June 5, 2021 Annual Town Meeting. Our goal is to recommend a budget that is fiscally responsible, sustainable, and clearly communicated.

For the past year, the pandemic has redefined the way we govern Andover. Town staff re-invented how the public interacts with Town Offices. Meetings have been held remotely, elections were delayed, and Town Meeting was again scheduled for a Saturday when we could safely gather outside. Town and School departments have experienced unprecedented challenges as they adapted policies and processes in light of COVID-19.

The FinCom has reviewed the Town Manager’s proposed FY2022 budget and recommends approval. The CARES Act funding has temporarily relieved some of the budgetary pressure, however, unfunded obligations continue to be a major financial concern to the FinCom. The Town has a significant, existing pension debt that we are obligated by Massachusetts General Law to pay by 2040. The unfunded pension liability pre-dates many in the Town’s current administration and is a result of budgets that, for years, prioritized funding services in Town without adequately funding the ever-increasing pension liability. The Town Manager has drafted an Integrated Financing Plan (www.andoverma.gov/IFP) to address the Town’s pension liability and the funding for the new West Elementary and Shawsheen Preschool. This plan is designed to leverage an opportunity created by low interest rates that will fund the Town’s liability through an initial borrowing that has a stable/predictable/certain repayment schedule. 

The FinCom would like to be clear that not addressing the pension liability is not an option as this is a financial obligation that the Town has incurred and must be funded. The Town Manger’s Integrated Financing Plan (IFP) has outlined a way to aggressively tackle the pension obligation and maintain level services. Without this novel financing approach, the Town would need to rely on other, less desirable options to address the unfunded liability such as service reductions, Town and school layoffs, and/or an increase to the tax bill which would require a Proposition 2 ½ override. In addition, West Elementary and Shawsheen Preschool have outlived their useful lives and are in poor shape. The proposed new schools have been accepted by the Massachusetts School Building Authority (“MSBA”), which will lessen the tax impact for taxpayers by reimbursing Andover for a portion of the project.  Approving Articles 7 and 15 will result in lower tax bills for residents compared to addressing these obligations separately.  

The Town Manger has conducted public outreach meetings to provide details of the Integrated Financing Plan, to answer voter questions and explain the importance of implementing the plan. After speaking with voters and understanding the concerns, the Town Manager has modified his IFP to incorporate their feedback.   The FinCom has noted for several years that the unfunded liability was a ‘looming crisis’ and it remains a critical issue that needs to be addressed. The risks and rewards of the plan have been analyzed at length and, in the pages that follow this letter, we will outline why the FinCom supports implementing this innovative plan. We believe it is a fiscally responsible option to address the Town’s major obligations.

You may notice that the FinCom report looks ‘thinner’ than in prior years. While we believe that providing accurate and up-to-date information will help voters make a well-informed decision, we realize that not all of the information needs to be in this printed report. With the help of Town officials, we have created a “FinComReport” link (www.andoverma.gov/FinComReport) on the Town website (www.andoverma.gov). Voters will be able to find relevant information such as articles or charts to help them better understand the budget and capital improvement plan process. Such reference guides as “What is Proposition 2 ½” and “What is Free Cash” can be found on the website.

We would also like to draw your attention to a new tool on the Town website called Andover Data, which was launched in April.  Andover Data is a data portal that hosts a variety of information including customer service response time, demographic data, and department performance data.  This is a tool that will inform data driven decision making, provide greater transparency to the public, and aid in economic development.  This tool will be expanded over time and will be collaborative in nature as the Town partners with residents and groups to highlight data and information in interesting ways.  This is a unique tool for a municipality to facilitate a higher level of engagement with the community.  We hope you find this new tool valuable.

OVERALL BUDGET HIGHLIGHTS

The Town Manager’s proposed FY2022 recommended budget totals $212,489,922, which represents an increase of $3,138,696 or 1.50% over FY2021. The Select Board, the School Committee and the FinCom all recommend approval.  The FinCom estimates that the resulting average residential single-family property tax increase will be 3.7%. 

TOWN BUDGET HIGHLIGHTS AND TRENDS

The Town budget is funded primarily through Warrant Articles 4, 5, 23, 24, and 25. The recommended budget for Town operation departments, excluding Water and Sewer, is $44,923,264, which represents an increase of $1,426,170, or 3.3% increase over FY2021.

Retiree benefits, which include pension and retiree health insurance, and current employee health insurance expenses continue to be major contributors to increased budget growth. The FY2022 appropriations to health insurance and retirement expenses are $23,147,462 and $12,897,390, respectively.

The Capital Improvement Program (CIP) is based on an annual spending target which provides the Town with the ability to fund necessary infrastructure and facilities projects. The Town Manager’s Recommended CIP for FY2022 totals $22,327,651, which includes major projects such as water main replacement and a new water treatment plant generator, as well as the annual information technology device refresh for staff and students. 

 

Last year, Annual Town Meeting allowed Andover to take a first step necessary to move forward with a Pension Obligation Bond as a possible way to fund our liability. Legislative approval was obtained in January 2021. The FinCom continues to support the next step in the issuance of a Pension Obligation Bond as a critical component of the Town Manager’s Integrated Financing Plan and therefore recommends approval of Article 7 in this year’s warrant. The FinCom also firmly believes that pension reform is necessary and essential to ensuring that the Town continues to fulfill its requirement to fully fund its pension liability. The FinCom has been recommending the Retirement Board reform pension eligibility and the buyback program.  We are pleased with the vote on eligibility that took place on April 29, 2021 and the vote on the buyback program which was approved on May 6, 2021. We fully support the appointment of the Investment Advisory Committee by the Town Manager in collaboration with the Retirement Board to advise the Retirement Board on investment decisions and asset allocation.

 

Article 35 of the Warrant asks the Town to appropriate $4,025,000 for the acquisition of, and costs related to, the purchase of a parcel of land at 138 Chandler Road.  This land could potentially be used for athletic fields, conservation land, community farm/gardens, dog park, playground/tot-lot, picnic areas or other public uses. A brief summary of the project can be found in the pages following this letter and the FinCom voted to recommend approval of this warrant article. 

Select Board Chair Annie Gilbert’s letter to the Town highlighting the issues about which the Board feels strongly can be found in the Chairs’ Letters section of this report in Section V. In addition, the Town Manager’s annual letter can be found in Section VI, where he summarizes the highlights and challenges of the past year.

SCHOOL DEPARTMENT BUDGET HIGHLIGHTS AND TRENDS

The recommended budget for the School Department is $92,593,452, which represents an increase of $3,346,752, or 3.75% increase over FY2021. While this budget assumes a return to in-person learning, it allows for level services and includes some flexibility for continued online learning and COVID-19 protocols.

Although there has been a decrease in enrollment as some students opt for private education options which provide full-time, in-person classes, Chapter 70 funding will increase by $168,840, or 1.45%.  During the pandemic, bus fees were suspended, athletic fees were adjusted, preschool fees and parking fees were reduced and Collins Center rentals were eliminated. The FY2022 budget was built with the assumption of revenue returning to near pre-pandemic levels. In addition to regular revenue, the School budget has been supplemented by financial relief from the Department of Elementary and Secondary Education (DESE) and the federal government for COVID-19 related expenses, and supplemental funding may come with future stimulus funding.

There has been an ongoing plan to shift funds from the Kindergarten Revolving Account to the regular budget to offset the costs of free all-day kindergarten. The decline in enrollment has eliminated the prior assumption that a portion of the kindergarten costs would be made up by an increase in Chapter 70 funds due to increased enrollment. Therefore, the costs of full-day kindergarten will need to be absorbed by general Chapter 70 and Town funding increases.

School Committee Chairman Shannon Scully’s summary of key School Committee issues, including the budget, is in the Chairs’ Letters section of this report (Section V).

PROPERTY TAX IMPACT OF THE FY2022 BUDGET 

Because the FY2022 average assessed value of single-family residential property will not be known until the fall, and because the Select Board uses that valuation to set the tax rate, our estimation of next year’s tax increase shown below is only that: an estimate. A property tax increase of 3.7% is estimated for the average single-family tax bill.   

IF ALL THE WARRANT ARTICLES FUNDED BY TAXATION ARE PASSED AT TOWN MEETING AS PRESENTED, THE AVERAGE SINGLE-FAMILY RESIDENTIAL PROPERTY TAX BILL IS PROJECTED TO INCREASE BY 3.7%.

FY2021 AVERAGE ASSESSED VALUE

FY2021 TAX

FY2022     ESTIMATED TAX

PERCENT INCREASE

DOLLAR INCREASE

$695,153

$10,629

$11,022

3.7%

$393

More detailed projections and explanations may be found in Section I of this report.

For FY2021, there are a total of 8,715 single family homes.  

  • 64% or 5,579 of single family homes are below the average.  
  • 36% or 3,136 of single family homes are above the average.

 

 

 

 

 

The Town Manager develops his annual budget in accordance with Proposition 2 ½ while making reasonable assumptions regarding new growth, local receipts, and State Aid. It should be noted that Article 7 and Article 15, if approved, will be funded by debt which is exempt from Proposition 2 ½.  This borrowing will not affect FY2022 tax bills; the impact would peak in FY2024.   The estimated tax increase may be found in the financial impact box below each article in the Warrant (Section IV) of this report.

NAVIGATING THE TOWN MEETING WARRANT

The final Warrant was voted on by the Select Board on May 3, 2021 and contains a total of 38 articles. The Warrant and recommendations are found in Section IV of this report. Note that numbering of Warrant articles changed from the preliminary Warrant to the final Warrant. 

As we introduced last year, a few housekeeping articles have been consolidated into a ‘consent agenda.’ A consent agenda is a voting practice that groups routine appropriations into one Warrant article. The consent agenda may then be moved in one single vote, rather than voting on each line item separately. These articles are typically not controversial and are usually voted on quickly. The opportunity for questions and clarification of the individual items is always available at Town Meeting. Article 6 groups financial housekeeping Articles A-H, Article 8 groups minor financial Articles A-D, and Article 9 groups general housekeeping Articles A-G.

Capital projects have been reorganized in the Warrant based on funding source rather than presented as individual articles. Article 23 lists capital projects from general fund borrowing. Article 24 lists capital projects from free cash. Article 25 lists capital projects from Water and Sewer Enterprise funds.  

IN CONCLUSION

As this report goes to print and vaccinations continue to propel us toward herd immunity, the Town and country are slowly returning to normal, although it will likely be a ‘new normal’.  Budgets were developed mid-pandemic and incorporated assumptions of how Town and School activities are likely to forge ahead. These assumptions may not prove to be true and adjustments may be needed for future budgets. As mentioned above, the FinCom supports the Town Manager’s general budget for the Town and School as well as Articles 7 and 15 which comprise the Integrated Financing Plan.  The FinCom recommends voting yes for the Pension Obligation Bond in Article 7 and West Elementary/Shawsheen Preschool in Article 15 at Town Meeting on June 5th.  Voting no on Article 7 does not remove our obligation to fund our retiree pension and would require the funding to come at the expense of town-wide services.   Voting no on Article 15 will result in a more costly School building project in the future. 

The FinCom would like to acknowledge the Town and School’s senior management and department heads for keeping our community safe and for maintaining continuity of service during a time of crisis and much uncertainty. They are a highly committed and professional group.

We appreciate the concerted effort made by our colleagues who worked collaboratively through the budget development process. Constant re-evaluation of rapidly changing data required persistence and patience. Thank you to all who made themselves and their data available to assist us in the preparation of this report. Please note that the numbers used in this report were current when it went to print, and may differ from the published Town Manager’s budget.   Changes are ongoing and additional changes may occur, and these will be identified and explained at Town Meeting.

 

We would also like to acknowledge the contributions made by three members of the FinCom who will retire on June 30 after several years of dedicated service.   The Town of Andover was fortunate to have the diligence that Janie Moffitt, Linn Anderson and Spiro Christopulos brought to the committee for so many years.

Please join us at Town Meeting on June 5, 2021.  Your participation is important. 

                                         The Finance Committee

 

                                       Eugenie M. Moffitt, Chair

                                       Andrew Betts, Vice-Chair

 

            Linn N. Anderson         John Barry                   Spiro A. Christopulos   

Mary Ellen Logee         Paul Monticciolo          Kevin O’Handley

                                                Paul F. Russo, Jr.