Here’s the full text (as prepared) of Board of Finance Chairman Jon Zagrodzky’s State of the Town Address to the Representative Town Meeting on Monday night:
Good evening. My name is Jon Zagrodzky, and I’m chairman of the Board of Finance. This is my second time to address you, and I appreciate the opportunity to offer some perspectives.
First, I’ll begin with some budget comments. If you look at the total operating budget on the Town side of the ledger, recent numbers have been pretty favorable. Total spending was actually down 0.5% last year, and it’s projected to be up just 1.6% this year. A lot of this was driven, however, by a two-year drop in pension contributions due to the reset of pension return rates and other assumptions, along with favorable investment results. Next year, we won’t benefit again from such declines.
Debt service reflects a similar trend. Last year it dropped 5.5% due to re-financings and other factors, but will increase 6.4% this year and is expected to grow 7.6% next year with the debt service from debt we’ll be adding this spring – which we’ll structure as expertly as possible to mitigate debt service variation.
The re-financing opportunities we’ve saved so much from in the past, by the way, are largely gone now, which is unfortunate.
All this means that we’re likely to see higher Town expenditures and debt service going forward. These adverse trends are reflected in the forecasted 4.4% growth you see for next year, which like all these future numbers is a forecast and not a budget.
Some good news is that I hear the Selectmen plan to ask all departments to limit next year’s increases to 2%, which will help matters. We should reflect briefly on this 2% goal in the context of the services we receive. Our terrific parks and public facilities, our fine Police Department, our world-class library – the list goes on. The Selectmen oversee delivery of really excellent Town services, and have done so with very limited budget flexibility for years. They should be commended for that!
The rest of Darienite.com’s coverage of the State of the Town Addresses:
- The State of Darien as Seen in Four State of the Town Addresses Monday Night Before the RTM
- State of the Town Addresses for 2016: Part 1, First Selectman Jayme Stevenson’s
- State of the Town Addresses for 2016: Part 2, Finance Board Chairman Jon Zagrodzky’s
- State of the Town Addresses for 2016: Part 3, Board of Education Chairperson Michael Harman’s
- State of the Town Addresses for 2016, Part 4: Planning & Zoning Commission Chairman John Sini’s
I’ll also do a shout-out regarding the collaborative budget process last year. The Selectmen were gracious enough to include us in their department reviews, and Jack Davis and F&B participated early and often. I hope we can continue this efficient collaboration next year!
As for the Board of Education, we saw a 2.8% increase last year, quite modest given that a significant component is driven by contracted personnel costs. The forecast you see, however, which is based on trends and not submitted budgets, shows steady annual increases of 3%, growing to 4% in a couple of years.
I’m of two minds on education spending. On the one hand, I understand the drivers, many of which are difficult to address in a single budget year. In this sense, I appreciate the many thoughtful, multi-year initiatives that Dr. Brenner has undertaken with support from the Board. His holistic and strategic approach to special education, union negotiations, facilities and other elements will, I’m convinced, help us financially over the long-term. We just need to be patient.
On the other hand, though, you’ll note in the forecast that in two years, education spending, excluding capital projects and school debt service, will exceed $100 million for the first time and will rise to nearly $115 million in five years. It is shocking, to me at least, that education in a town of this size could cost this much money.
There are complex and sensitive factors involved, which is why I’m glad I’m not on the Board of Education, but I would encourage everyone who demands more program spending to periodically reflect on these numbers.
Again, though, there is good news. For next year, at least, Dr. Brenner has indicated that he expects to keep the overall Education increase next year to 2%, which would be terrific. Long-term, though, union contracts, health costs and other factors will ensure higher future increases.
Next, a few comments about revenue, as John Sini promised I would make. You’ll recall that we had some last-minute uncertainty in setting the mill rate in April this year when the State was toying with the idea of reducing Town grants. Based on their preliminary rumblings, we faced the loss of over $1 million in state funding.
As a precaution, we deferred some investments like the Town generator and adjusted the mill rate upwards. Fortunately, most of those cuts were not made, so this year’s budget should end up better than the forecast you see in the five-year plan.
But the prospect for such cuts remains, especially given the hopelessness of State finances. As my fellow Board colleague Senator Jamie McLaughlin has said, the State is running a structural deficit of a magnitude never before imagined in large part due to unfunded pension liabilities, which have worsened dramatically over the last two years.
We currently receive north of $4 million in annual State grants, mostly to support education. It’s not impossible that a town like Darien could lose all these grants as the State wrestles with its problems.
What’s worse, there are regionalization plans being discussed that could significantly increase what we pay for certain services, which Jayme will address in her remarks. All told, I believe we are at risk for millions of dollars in additional net cost, the bulk of which will fall on residential taxpayers.
One of the things we’ll need to wrestle with in the coming budget discussions, by the way, is whether to budget conservatively and assume that we won’t receive some or any of these grants.
This is why we should be supportive of opportunities to increase the value of our Grand List. John just talked about the many projects before his Board that would do this, and while I don’t have a clear total at the moment, they are likely to boost our Grand List significantly.
John duly recognized the role of public support for at least one of these projects, and he has laid out a smooth and reasonable process for getting these projects reviewed and approved. I would urge P&Z to adhere to this plan in its coming deliberations.
Let me turn now to town debt and prospective capital projects. As of June 30, total debt was about $71 million, down from nearly $100 million a few years ago. Given our expected bonding this year for the Town garage and the Ox Ridge Hunt Club land acquisition, total debt will still be around $71 million by June 30 next year.
There are some storm clouds on the horizon, however. As has been mentioned, the Board of Education is working to finalize plans that will include some major construction. It appears that in most scenarios, we will see debt levels significantly exceed $100 million at some point.
It is true that back in 2010, the Board of Finance adopted a guideline suggesting that total debt should not exceed $100 million. I continue to believe this is prudent, but I also recognize that buildings don’t last forever. We just happen to be at a moment when these investments need to be made.
As the Board of Education finalizes its proposals, I’d like to emphasize a few things. First, we need to see a complete and comprehensive capital plan. As Michael says, however, the plan isn’t ready.
I’ve urged them to take their time, though, because it will be hard to gauge whether the District’s proposed capital spending next year makes sense unless we can do so in the context of a clear, long-term strategy. We certainly don’t want to spend money fixing a building when a year later there’s a change and the building gets torn down.
But let’s not take too much time with these plans, as it is increasingly clear that low interest rates may be a thing of the past.
Second, I know the District is thinking carefully about capacity. Predicting enrollment is really hard, and it has to be frustrating see the slight declines in overall numbers that Michael mentioned, while having to deal with localized capacity problems for particular grades or schools.
Whatever the final enrollment numbers are for the capital plan, I would urge the Board to build in as much flexibility as possible, as there are many factors that could drive future enrollment up: affordable housing, state-mandated pre-K, more students remaining in district, etc. Doing so will enable us to minimize future expenditures if we have to add classroom capacity unexpectedly.
Third, it’s important to stress functionality over aesthetics. New or renovated buildings should get the job done; taxpayers shouldn’t be asked to support something more. The entry-way at Tokeneke, a beautiful thing but a waste of space, ended up proudly on the company brochure of the architect who designed it. The time for these luxuries has passed.
I’ve been a little critical here, so I want to emphasize that I believe Dr. Brenner and the Board of Education are all mindful of these points and taking them into account. I know they are working hard to balance capacity and other needs with sensitivity about cost and ostentatiousness. I just wanted to go on the record one more time about these points.
This is probably a good point to reiterate our thanks to the many organizations in town that have generously donated to fund important projects related to the schools and their sports programs, such as the Darien Athletic Foundation, which has committed upwards of several million dollars. We have some great fields that otherwise would have cost taxpayers a lot without the DAF’s help – so thank you again.
Before I move on, on last point about capital spending. I know there was some controversy earlier this year about the Board of Finance capital contingency reserve. As a reminder, this is an appropriated reserve, which means that the Board of Finance can spend it without further RTM appropriation.
The controversy came about when we used this reserve to fund the street light acquisition without consulting with the RTM. I regret this – it wasn’t our intention. Going forward, I will try make sure the RTM leadership is kept apprised of our plans to use this reserve.
I know you’re re-thinking whether to keep it. Bear in mind that it was established so that the Board of Finance could move quickly on modest, non-controversial capital projects when speed is of the essence. I would hate to see the Town lose such flexibility because of this incident.
Finally, I wanted to review progress on the focus areas I mentioned last December. The first and biggest area was capital projects. As I stated, no town should manage them better than Darien. So how are we doing?
Jayme Stevenson has taken the lead on this by establishing a building committee for the Public Works Garage, for which I am grateful. We have some great members on the committee, including Martha Banks, and I’d like to thank Jim Bosek and Joe Pagliarulo for serving as co-chairs.
I’d also like to thank Ed Gentile and Michael Lynch for working with the committee. We’ve already had several productive discussions, which I think will help ensure that this project is well-managed without creating another layer of bureaucracy.
In addition to the committee, Kip Koons has initiated an effort to create a Construction Process Manual. Rusty Shriner, who played a key role in the Middlesex work a while back, is helping us with a draft.
The purpose of this manual is to capture the learnings from previous building efforts — we want to make sure our best thinking is part of every project, and that mistakes of the past are never repeated. So, thanks to everyone involved in creating this manual.
We have some significant capital projects coming up, and I believe these recent efforts will help us manage them, as I say, better than anyone else. But let’s make sure we don’t drop the ball.
I also said last year that when it comes to staffing levels and retiree liabilities, no one should manage them better than Darien. Well, we saw net growth of seven employees this year versus last, 5 for the Town and 2 for Education.
I’m not overly concerned about the Town staff growth — one was a new hire to help Jeremy in Planning & Zoning with his huge workload, one was for a new Recreation Department program supervisor, based on an expected revenue increase from additional programming, and two were consolidation of multiple part-time roles.
Still, as I’ve described, adding even one employee is hugely expensive in the long run. As we did last year, we will scrutinize any such plans carefully as part of this year’s budget process. But the good news is that we saw no benefit changes that would adversely impact long-term pension or health liabilities.
Here’s the video of the RTM meeting from Darien TV79 (lasts 1 hour, 20 minutes):
Lastly, I stated that no one should be leading the way on shared services better than Darien. We’re making progress here, and I’d like to thank Frank Huck for his tireless efforts. Frank leads the Consolidated Services Working Group, which has been working with school administration to identify shared service opportunities.
Last year, the group hired Milliman, one of the leading experts in healthcare financing and delivery, to see if consolidating Town, Library and District health insurance could save us money.
The answer, delivered last week, is yes, possibly a few hundred thousand dollars. I’m hopeful that this is the first step in the savings would could see with consolidated services, but I recognize that getting to agreement takes effort. I would urge this group to keep going – real progress will only come with persistent effort over time.
I’ll close with a couple of thoughts.
Last year, I spent a few minutes on state’s terrible financial condition. I think I described it has having reached “alarming proportions.” And yet, a year later, here we are. Lots of bad news, lots of smoke, but no real fire.
The fact is, for all the trouble, they continue to muddle along. My new term to describe the unhappy state of affairs is “sustained unsustainability.” Terrible news year after year, but no disaster. I suspect I’ll report next year that all this unsustainability has been sustained for yet another year.
My experience with circumstances like this is that everything is fine — until it isn’t. There’s often a dramatic inflection point after which everything is different. We’ll see this eventually, but I have no idea what form it will take, and therefore nothing to recommend as to what we might do as a town to prepare financially.
In the meantime, we can expect the slow bleed I alluded to earlier. Regionalization, loss of grants, higher State-imposed costs — all of these have the real prospect of creating budget pressure and uncertainty for the Town. Here I do have one recommendation: we should do all we can to keep our own costs under control. Now is not the time to engage in extra spending.
I’ve been in this job for a year now, and on the Board of Finance for eight years. And I’ve learned a few things. The first is that the details of government matter — you have to spend time understanding them, and it does take time, I can assure you.
Second is that relationships matter. Having a strong and trust-based network of other elected officials and town personnel is essential — I could not do my job without it.
Third is that local control matters. I have been amazed at how much time and effort is expended by volunteers – many of whom are in this room — to maintain Darien as a great place to live.
Sure, local control is important as a financial matter, but I’ve learned that there’s another reason: only local control engenders local ownership, local enthusiasm and local dedication. And the results are clear for all to see.
That’s all I have to say. Thank you for indulging me. Happy Holidays.
Editor’s note: This article was originally posted at midnight. The time stamp has been changed for layout purposes on the home page.