FINANCE CONTROL BOARD MEETING, January 31, 2005
Present: Thomas Trimarco, Chairman Alan LeBovidge, Mayor Charles V. Ryan, City Council President Tim Rooke, Jake Jacobson, City Clerk Bill Metzger, Executive Director Phil Puccia.
Alan LeBovidge: We have a change in the composition of the board: Tim Rooke is now the representative, and Domenic Sarno is rolling off the board, so we have this little plaque, Domenic, in appreciation of your work. Come on up here, Domenic, and get your plaque; it’s all we can afford to give you. Thank you for all your help, and enjoy it. Thank you.
[Applause]
AL: OK. Why don’t we start—the first thing is: we’re going to have a meeting this morning, and then we’re going into executive session to talk about collective bargaining, litigation, etc. and we won’t be coming back from that meeting, so I just want to let everybody know.
Control Board to Hear from Citizens on February 16 at 10:00am
Also just wanted to mention that—actually it was the mayor’s suggestion, and I thought it was a good one--that the mayor and I are going to co-sponsor a meeting (which I assume we can have here) on February 16 at 10:00 in the morning for any of the citizens of Springfield who wish to give us their thoughts as to what’s going on in the city. It’s not for deliberative action, it’s just more for listening to the citizen’s point of view. We’ll start at 10:00; hopefully we can break by noon, a couple of hours. We’ll see how it goes, as to how many people come and what they want to say, because this is not the right forum to do it in, and we have business to accomplish, and open meetings, really in a public forum, a control board meeting....and I think it was in the newspapers on Friday that it was announced. I just wanted to announce it here publicly.
The next item is the approval of the minutes from the last meeting. I think that everybody on the control board got a copy of the minutes.
**Motion approving minutes passes unanimously.
And we can move into just getting a general up-date from Phil Puccia.
Status of Revolving Loan Fund from the State
Phil Puccia: A general up-date. I’d like to spend some additional time on the ’05 deficit projection as well as on the ’06 budget. A couple points I’d like to make to the board is that from a cash flow perspective, the City has at this point has made two borrowings from the revolving loan fund. As I think I may have reported earlier, the city borrowed $22million from the for cash flow purposes, for operating purposes in the month of December. That money was paid back after the receipt of our quarterly overlay installment, approximately on January 12th to the 14th, I’m not exactly sure of the date.
Secondly, the city borrowed approximately $12million on either Friday or today, depending on when the money is actually received via wire. We estimate that our borrowings this quarter will be somewhere between $30million and $40million. I apologize for the range of that estimate, but we’re still trying to improve our reporting from a cash flow perspective. That money will be paid back also at the end of this quarter. Our projection is, at this point, that we will borrow and pay back, borrow and pay back somewhere in the neighborhood of $100million in the course of this fiscal year.
AL: But the ending balance....
Tax Collections
PP: The ending balance, just so there’s no confusion amongst the board and the public, is that the ending balance will be what the city’s deficit is for this fiscal year, of which we will give you an update and a projection in the next few moments. As it relates to tax receipts: last year, as you know, the historical average was around 93% tax collections. I’m happy to report that the mayor and his staff have made significant progress in those collections, and our average for the first two quarters of this fiscal year is up to 96%. We hope to increase that in the third quarter and increase that in the fourth quarter as well and, hopefully, hit our target of 97½%.
AL: Just for information, do you know a point increase, what does that translate into in revenue for the city?
PP: $1.3million.
AL: So, for every point we go up, it’s $1.3million?
Reorganization of City Departments
PP: And our initiatives related to the reorganization of various city departments are on-going; it’s something we work on every day. And I think we’ll be in a position to have the reorganization plan, and, really, its impact on spending and operations, we’ll be able to report as we go through and complete the ’06 budget process where much of this re-organizational activity will take place.
According to the agenda, we have an up-date on Section 18 which we can go through now if the board is so inclined. Marilyn?
Medicare B (Section 18) Health Insurance
Jake Jacobson: I asked that this agenda item be added, because, clearly, I think we all, but I at least was very puzzled by the reaction we got from the public at our last meeting, as it looks to us like the adoption of Section 18 is one of those few things that is an unvarnished good. Everyone benefits, and because the federal government picks up a big piece of the tab.
But obviously there was a lot of confusion about that, and a gentleman from Springfield, Bob Brown, whom I’ve only met telephonically, but who is the, I guess, the president of the retired police and firefighters association was kind enough to call up, and we had a couple of really good conversations about what the issue was, and in essence, it seems to me that the concern was that the adoption of Section 18 would actually cause some seniors to pay double premiums, and, therefore, would be an economic hardship for them. And, since that’s not the case, I thought that it was a worthwhile exercise to ask Ms. Montagna to come back one more time and just review with us what the actual facts are.
[Ms. Montagna passes out packets to the control board.]
AL: Take it away, Marilyn.
Personnel Director Marilyn Montagna: Before we get into the presentation, let me just start by sort of recapping the history of what we’ve done up to this point. We actually started having discussions, and, I think, talking about Section 18 with the retirees and the employees almost a year ago. It was about this time last year, we started to do some analyses on how our health plan experience was running for the fiscal year, and we realized that we were running well over projections.
We, at that point, had to make some very hard decisions about actually increasing the employees’ contributions for the balance of the year, so at that point, we also started thinking about the kinds of things we could do to try to get the plan costs under control. And that’s really when this initiative was first discussed. My best recollection is that, since that point in time when we first introduced this, we have had in excess of a dozen meetings with the different constituents about this, so if this is repetitive for anyone, my apologies to start, and we’ll just go through this quickly.
OK. Section 18 of Massachusetts General Law Chapter 32B is a section that, if a municipality adopts it, requires that all of the retirees who are Medicare eligible in fact enroll in Medicare. The plan provides some protections, the law provides protections for those retirees, specifically that the city must provide a Medicare extension or “wrap-around plan” that, when coupled with Medicare, keeps the retiree whole from a benefits and coverage perspective. The second protection is that the municipality is obligated by the law to pay Medicare late enrollment penalties which can be, for people who have been eligible for Medicare B and not enrolled for several years, really sizeable. That is clearly a city accountability.
If you look at why we saw this as really being a win-win [indicates chart] and, I expect, why the control board adopted it, first of all, I think it’s important to say that people who are Medicare eligible who were not enrolled in Medicare, in fact, had already through themselves or through their spouse at some point in their career paid into the system, so, in effect, have money on deposit with the Medicare administration, and were getting no benefits from it.
And, in addition to that, we have several hundred retirees in the city who were buying both Medicare Part B and the city health plan, and the city historically...so they were paying twice for one set of coverage. Historically, the city has in setting its plan rates never identified and recognized those people, so these people have been paying extraordinary extra amounts of money out of their pocket and really getting nothing back.
AL: And I assume that they cannot go for refunds, that they can’t get that money back.
MM: Exactly. That’s sort of down the drain.
The adoption of Section 18 transfers up to 80% of the eligible medical cost to the federal government, so, again, this is something that people have made contributions into, they’re entitled to, and the federal government is really on the hook for providing.
If we look at transferring, when we take that amount of money out of the city’s health plan, the costs in the health plan are shared by the city and by the employees retirees, so to the extent we can take actual dollars out of the health plan, it’s clear that everybody is going to benefit.
There’s a point here I really want to, I really can’t, stress strongly enough: From a retiree perspective, no change in coverage. As this chart shows, their coverage after Section 18 will be identical to that coverage of the active employees. The difference will be who pays for it, and the city will pay about 20% of their costs, Medicare will pay about 80%, but they will be whole. So, as an example, if today when you go for a doctor’s office visit you pay a co-pay, going forward that retiree out of his or her pocket will still pay only that co-pay. The federal government will pay about 80% of the balance of that office visit, and the city will pay about 20%.
As we’ve said before, there are significant savings in the health plan itself. The city, as you know, is responsible for paying 75% of those costs and, therefore, the city’s savings literally is millions and millions of dollars, projected over the next three fiscal years to be just under $19million in savings, and that is after we take out, and the city pays, the penalties.
Penalties for Late Enrollment in Medicare B
AL: Can you just explain this penalty, why we keep paying this penalty? There’s no way getting around that, getting away from that?
MM: That’s basically federal Medicare law.
AL: That’s the cost of getting into the system.
MM: That’s the cost of getting into the system late.
AL: When could it have been avoided? When would there be no “late?”
MM: My understanding is that Section 18 was first available to be adopted in the early 90s, 1992...
AL: So if we’d have done it in the early 90’s, we wouldn’t be paying this penalty today.
Mayor Ryan: The people who are in it now, who are covered, for whom we’re paying the penalty now, as they die, it will stop, so twenty or so odd years out, there’ll be little or no penalty being paid.
AL: That’s right.
Councilor Tim Rooke: Mr. Chairman, if I could understand. Marilyn, how was the city notified that we were eligible for Medicare B?
MM: Well, you know, I, I ‘m sorry, I can’t answer that; that pre-dates me. My understanding is back some number of years ago, there was, in fact, a consideration and, for whatever reason, it was determined not to go forward. I believe that was not back in ’92, that that was sometime since then.
TR: We were aware of it, we just didn’t....
MM: Absolutely. The other 25% of the savings will go directly to the retirees, That’s estimated to be almost $2.5million in the next fiscal year, over $8million over the next three fiscal years, and that will go directly back to the retirees who are impacted in terms of a reduction in their contribution to their city coverage.
Let me go through some examples of it. We have over 500 retirees who already purchase and are already enrolled in Medicare B. Those people, for as long as they have been in that situation, have really been buying health insurance twice. They have been paying a full 100% contribution to the city (I mean their full share) plus they have been paying for Medicare, and they’ve only been getting one benefit for that.
As we implement Section 18, these people will receive actual cash in their pocket, so their city pension check will go up by $78.20 if they have an individual plan and by $156.40 if they have dual coverage. So, those people, over 500 people, will actually receive real cash in their pocket from July 1.
And, finally, those people who are eligible for Medicare B, but do not yet have Medicare B, when they enroll in it in July, will not pay any more of a monthly cost than they would have otherwise. So, if we look at the total column: without Section 18, they would be paying $138.53 a month for individual coverage; after July, they would still be paying that same amount and the only difference is really the mechanics of how they pay it. So they will now have amounts withheld both from their city pension check and from their social security check, but those amounts in total will be consistent and identical with what the “actives” are paying.
AL: How’re we doing as far as signing people up for this program?
MM: That’s a good question. Medicare mandates that the open enrollment period is from January 1 to March 31. We sent a mailing out in mid-December to all 2800 people who may or may not be impacted, and we need some information from them to determine.... We, as of last week, had over 2100 return which is a slightly over 75% return rate, so we are extremely pleased.
We are holding a series of enrollment meetings for three weeks in February, once a week for three weeks. There are some people who are confused by the forms, have some questions that they want answered before they submit them, so those will be working sessions. We will be there, representatives of the Social Security Administration will be there, to help people with their forms.
AL: We obviously want 100% of the people to sign up....
MM: We have to.
AL: If someone misses the deadline, what happens to that person?
MM: Well, technically, according to the law, they would lose their insurance. We are certainly trying to find alternatives to that. The other thing we will do once we hit March 1 or after the last February meeting is we are going to place personal phone calls to everyone who we’ve not yet heard from. My worst fear is those people who may be nursing home-bound who we just can’t find, and I’ve actually started some discussions with the city solicitor about what kinds of things we might be able to do to protect those people.
AL: Well, could you contact the nursing homes and find out who their patients are?
MM: If we know where they are.
AL: You mean they could be out of state, is that what you’re saying, out of state nursing homes?
MM: A lot of our retirees retire to Florida or Arizona or wherever, so....
Thomas Trimarco: The board, for them to give notification through the checks that go out or the payments, they must have addresses and...because the savings that you present to us here, and that we knew about when we adopted this, are based on 100% participation, and to the extent that we, at 75%, these numbers are pro rata reduction of these savings.
MM: Well, I mean, technically, if someone were no longer insured with us, then we...the savings would become mute, but, certainly, our intention is to find everyone. I mean we don’t want to, and that is an alternative that I don’t want to...I want to be able to sleep at night.
AL: So we have a full court press on trying to find everybody, to make sure they at least know about this, and if they decide not to sign up, that’s really their personal decision for whatever reason.
MM: And we want to be sure that it’s a conscious decision they’ve made, and that it’s not that there’s an oversight or neglect or whatever....
CVR: Well, I was going to reinforce what Mr. Trimarco said, and that is that the retirement board should have as good an address as you’re going to get for anybody, because that’s where the retirement checks come from, and I would suggest that we not wait until March 1, but that we move into that just as quickly as possible, because this is a very important situation, and that you’re going to need all the time that you have in front of you. You told me the other day that the percentage that is signed up right now, could you give us a current figure on that?
MM: As of the end of last week, it was just over 2100 which is just 75%.
CVR: 75%, so you’ve got a missing 25% right now which is of concern to all of us, but I would suggest that we move just a quickly as possible...and OK, fine.
MM: We can do that.
AL: Tim?
TR: Those were my comments. I was going to see if we could check with the retirement where the checks are sent out or if we’re cooperating with the Social Security, maybe provide them with a soc numbers and update our list, because I don’t think we want to, and, as you mentioned, that’s a worse case scenario if someone hasn’t responded because of a medical condition or any other reason, they find out they haven’t any health insurance.
AL: Great.
City Council Upbraided for Voting Down Medicare B
JJ: Marilyn, was this information or similar information provided to the city council before they voted on this matter?
MM: Yes, it was.
TT: That’s a good question, because it just boggles, you know, our mind that, if I recall, that was a 5-4 vote against this proposal, and, you know, it was like a vote against the city’s interest and the retirees’ interest. It’s truly unbelievable if this information was available, and that was the vote.
AL: Let’s just get the other 25%, that’s what I want to focus on. I want to get 100% participation, and I think it is a win-win, and so we’ll go forward on it so, get that 25%
TT: Absolutely.
JJ: Thank you, it’s very, very good work. I do think though, Mr. Chairman, that there’s a point to be made here off of Mr. Trimarco’s comment that, throughout our existence, I think the mayor and then-Council President Sarno and I’m sure now Council President Rooke has always tried with every decision to show us the human element of the decision, and how things were going to be effected in Springfield, and I think we’ve done our best to take that into consideration. And, now, we have a vision that what people want from good government (we’re part of that government now) is pretty simple: They want a safe, clean city with good schools and rising property values. I mean, it’s not rocket science.
And I’m just astounded that we’ve talked in the past about past administrations and past councils, and, creating problems from competence and whatever reason, but now we have five members of the sitting city council, five members, a majority, that voted to, basically, pick the pockets of 500 retiree families for something like $700,000 a year. That’s $60,000 a month, and they just sat there and said, for whatever reason, “Let’s keep taking this money from these guys.” You know, if it is the early 90s, just doing that arithmetic, that’s something like between $8million and $14million that have been taken directly out of the pockets of the retirees of the people of Springfield just because the council wouldn’t act. And, I’m, I’m staggered by that.
And this penalty, let’s put this in perspective: we have a city which has good employees who have had their wages frozen for some time. This penalty that we have to pay is, in round numbers, close to a 2 1/2% wage increase for every employee in the city that now we can’t offer because we have to pay it, because we have a late enrollment penalty. So, I mean, I just am astounded that a majority of the council could take that position, and I think as we go forward when we consider what role the council, this particular council, can play in delivering a Springfield that is safe and clean with good schools and rising property values, we just have to take into consideration that a majority of this council appears to have their own agenda, something different than our agenda.
I mean, I’m sorry that’s an editorial, but I think that that’s the facts.
AL: OK. I appreciate your comments. Let’s go on. OK. Duly noted. Phil you want to now talk about, or, Mary, the up-date?
Projected Budget Deficit for FYs ‘05 and ‘06
PP: I wanted to talk about two budget items, one related to the brief up-date on the fiscal ’05 budget and to give you some detail on our plans and timetable for the ’06 budget. As the board knows when we first met, I think, in September, we had a budget deficit estimate of approximately $41million. The legislature delivered an additional $4million in lottery receipts which reduced the number to $37million. I think that, when we last reported to you in November, taking some of the measures that the board has approved whether it’s the wage freeze or other items, we calculated the deficit at approximately $23.5million. We’re pleased to report to you today that our most up-dated estimate is approximately $21million as you will see on the sheet in front of you.
Again, I caution you, it is only an estimate. There are things that are as yet unforeseen—Mary and I will discuss some of those--but we believe we’re making progress. There’s a general understanding, I think, within city government that we need to control spending, slow things down, and that’s what we’ve done. We’re shooting to reduce this number even further, and, as I would say, from an operating standpoint for fiscal ’05, it is our intention to hold in reserve, not to necessarily cut department budgets but to hold in reserve approximately $1.5million for the remainder of this fiscal year. There will be a process that will allow the different department heads to justify their expenditures, but as a way of slowing spending down and controlling it. My experience, and I think any who’s worked in the budget process in any sort of state or federal government or local government will tell you, that whatever is in there gets spent. We want to avoid the unnecessary part of that spending, so that is our next step is to put in reserve approximately $1.5million. We will report to you again, if not next month, certainly the month after what our next projected estimate is, but we feel that we’re making progress.
Now, what I’d like to do, unless the members have any questions...
JJ: I just have one question. This $21million deficit is actually kind of the most optimistic way of looking at it, and I just want to clarify, because we have litigation with the various bargaining units over whether wage freezes were properly, were actually properly put in place, and if it would be found that the city did not properly put those in place, then the actual deficit would be more like $30 odd million than $21million, right?
PP: At least.
Special Revenue Accounts
Chief Financial Officer Mary Tzambazakis: It may be higher due to some other factors. One of the items that, in the past, has been completely ignored in the financial area is the area of “special revenue accounts.” The city of Springfield currently has 200 special revenue accounts; these accounts are accounts that are established by the city of Springfield receiving various grants. The city’s had the practice in the past of allowing departments to spend on these grant award letters prior to the actual receipt of cash, so we are “fronting” the money. We are going to be reviewing over the next few months all of these accounts, because several of them are in a deficit position, and the draw-downs of these funds have not been reimbursed. Some of these have multi-year impact, prior year grants. One of the areas that I am very concerned about is that area, and until the city auditor....
AL: What kind of magnitude are we talking about having a deficit on the account? Can you give us some examples?
MM: It could be several million dollars. Well, there are so many grants, for example MCDI receives grant funding, and we budget based on the grants they receive, and in some cases, the grant might not come in that year, it might come in a year later. The money doesn’t come in, but it doesn’t make the books on a timely basis, so what we’re trying to do is to go through every grant fund that we have that was supposed to receive money and do a couple of things:
1. Make sure that there’s valid money that should come in and that hasn’t come in and go after it and draw it down and determine why.
2. Put in place some controls through the auditor’s office where we limit the amount of money that the general fund fronts for these grants until the money starts coming in.
So those are two control mechanisms that the city auditor is going to be working on over the next few months.
Potential Impact on Deficit of Wage Freeze Litigation
PP: I would say that, Jake, to your point, that our biggest exposure is clearly in how the courts determine the imposition of Chapter 656 related principally to the wage freezes for the ‘05 budget. Obviously, that litigation would impact the ’06 budget as well on the health care side as well. That’s where the greatest strength would be, upwards of $20million.
AL: I mean, I was on the radio this morning before I came here, and the last question they asked me is “Are we going in the right direction--yes or no—to avoid receivership?” And I said, “Yeah, we are.” But in my mind, that’s because if we win that case. If we lost that case, then I think my answer would be “We’re going in the wrong direction, and receivership is pretty darn close.” Because you’re right; you’d have a huge deficit increase.
PP: Well, you know, if you do the math and the projected—let’s just call it $20million today—is the deficit for ’05, and we were to lose the wage freeze case, we would essentially use up all of the money set aside in the loan fund.
AL: You’d need all of it.
PP: We’d essentially need all of it, which would leave us very little room to manage within ’06 and the out years from there, but we remain optimistic.
AL: OK.
Financial Management
MT: There are some positives that have happened or are in process of happening, I think, with respect to financial management. The new city auditor has been working with MIS, and we hope that within the next sixty to seventy days to have financial statements for the city of Springfield produced on a monthly basis. This is a historic event. The city of Springfield has never been able to produce a monthly financial statement since it’s inception, and a significant amount of work is taking place in order to do that.
We are also looking at completely automating some of the cash flow analysis and work, the way the numbers feed into the system right now is pretty much not automated, and is just reconciliation of paper work, so we’re hoping that those two significant events will occur within the next sixty days.
AL: It’s only been a short period of time, but I know you’ve reorganized the financial reporting, any initial comments about how’s it going?
MT: Well, it’s been and interesting, interesting change. First of all, I don’t think people realize that there were approximately 31 City of Springfield departments, and of the 31 city departments, only 10 had financial people. And of the ten, for example, the school department had 9, but overall, we had probably I would say another nine for the whole city. We were very taxed in the auditors office for accounting, because there were basically 2 financial people doing all the accounting and budgeting work for the whole city. We have started transitioning all the people in.
People have been given additional responsibilities. For example, there was one accounting and financial person for DPW; that person has now taken over the responsibility for code enforcement and planning. Code enforcement raises substantial revenues; he’s putting together a revenue and cost allocation system. There were approximately 3 financial people in the parks department; we are having 2 financial people, but they are also taking on the responsibility of facilities management and also responsibility for accounting for the libraries. So, what is happening now is that every city of Springfield department will now have at least one financial person.
Is it enough? In my estimation, not really; we could use a few more, but we’re not going to do that. We’re going to try to make it do.
AL: Do you think the reorganization is working better?
MT: Yes, sir. It’s much more efficient, and when we get into the new fiscal year budget process, you’ll see some significant changes.
AL: Any other questions for Mary?
Unused School Construction Bond Money
TR: Mr. Chairman? Mary, the unused $14.3million in unused school construction bond money, has that been applied to the $21million?
MT: No. There are several things that have to happen. There is significant work that has to be undertaken in our area of bonding.
1. There are several school audits that have to be conducted. And upon completion of those audits, we may end up owing the state money or they may owe us. So those audits have to take place.
2. There has been approximately $10million of general fund money expended on anticipated borrowing for projects that we’re in the process of reconciling. The mayor and I and Mr.Puccia will be having meetings next week to determine if these are really valid bonding projects or not [and] to reconcile and close out as many as we can.
There are also other opportunities for refinancing the city, so there are at lease four to five major bonding projects that have to be undertaken within the next four months.
PP: If I may, councilor, we’ve also asked the assistance of the new School Building Assistance Authority to help us conduct one of the required audit and to use Springfield as its really first test case.
AL: This is that new state agency.
PP: Yes, the new state agency created by the legislature, I believe, last year, and I’ve had discussions with the new executive director, Katherine Craven, and she’s agreed to use Springfield, to come in and look at our program first, which will, hopefully, give us good new, but whatever it does, it will give us the answers that we need so that I can plan.
AL: Unfortunately, Tim, when all these projects were done in the 90s, no one ever closed out the accounts so we don’t know whether we owe or not owe so until we know that....[shrugs]
MT: Well, there are some significant concerns I have as the CFO with regard to this bonding that’s been taking place over the years.
1. There should have been project plans established with milestones and financial expenditures against the milestones, and then, at the completion of a project, within 60 days, there should have been a close-out package and analysis and a liquidation of the bond. That has never taken place. Moving forward, that will be taking place as far as we’re concerned, but we have to do the major clean-up first.
CVR: We’ve had many meetings on this, and most recently, ten days ago with Jim Johnson of your department, and Dennis Martin, and also Cynthia McNerney who is really the city’s bond advisor and Mary, Mr. Puccia, myself and other financial people. We’re trying to get to a point where we come to the control board with at least a recommendation as to where we should go from a bonding point of view. As we all know, we have $1.9million in this year’s budget and again another $1.9million in next year’s budget for capitol improvements, and the laundry list of needs are a mile long. But I can assure you, Mr. Chairman, that it’s an extraordinarily complex problem with many interlocking parts, but I would hope...Mr. Puccia, what’s your guess, four to five weeks that we’d be at a point to make a recommendation?
PP: By the time we meet in March, yes.
AL: Jake, did you have a question?
JJ: But, I just wanted to check my memory. I thought when we had inquired of Mr. Johnson in the Department of Revenue some time ago, he indicted, trying to speak directly to the councilor’s question, that if, upon close-out, it was determined that the $14.5million (or $14.3million, whatever) was indeed surplus to the projects for which it was originally bonded, then statute would require that it was applied against, and I always get these acronyms wrong, but the revenue anticipation bonds (or whatever) and so it’s not going to be available generally. It has to be applied to reduce certain bonding that is already outstanding. So, in any case—am I right?—whatever amount of money at the end of the analysis, whatever amount of money is determined to be surplus to the original bonding, it will then have to be applied against bonded debt., or anticipation bonds, it won’t be available for general use.
AL: The bad news would be if we owed more. That would be the bad news. We don’t want to find out there’s not excess, it’s a deficit position...
MT: So at the end of the day, what has to happen is that the school audits have to be completed, because we may have to make some reimbursements, and we also need to clear up that $9million to $10million...
AL: I’m glad that they’re agreed, the state is agreeing, this new authority is agreeing, to put us at the top of the list there so we can get this done, because I know they have a humongous list of back projects they have to audit. Tim, did you have something else you want to ask?
TR: Well, I was just going to...on the school construction, I was pretty critical of the whole operation that was taking place, and I have the editorials to prove it, but one of the things we never did, as well as we never did the construction audit all of the schools that were built. So we took certain contractor’s words that certain things were done, and I’m sure they were, but I think it was a total of about $300million that was spent, and I had asked if we could have an audit, and there wasn’t much support for it at the time, and I don’t know if that’s also something that this special committee could....
PP: I don’t believe that the audit that the School Building Assistance Authority is either contemplating assumes a construction audit, just a financial audit. I could be mistaken on that point, but I’m reasonably sure that that’s the case, and I really have no other answer than that today.
TR: Well,. that’s fine.
MT: But there should be some type of an accountability set up, and we can work with the auditor, because I don’t feel comfortable with the city bonding for multi-million dollar projects, the projects being completed, and no one is signing off and confirming that what was supposed to get done, got done, and that the equipment that was to have been purchased, was purchased, and in fact, inventoried and tagged. Those are the types of things we need to start doing.
AL: Right, we won’t have a new project that doesn’t have that. OK. Anything else? Just anything else for Mary or...?
Introduction of Performance-based Budgeting
PP: We are going to talk about the ’06 budget very briefly. It is our intention to develop a new budget document, and I don’t just mean from a numerical standpoint, but from a communications standpoint to communicate to the citizens at large that these are the tasks and the jobs that we hope to do with the money that both you and the state have provided the City of Springfield.
It is our intention to make this a performance-based, a mission-based budget. I don’t know that we’ll complete that all in one fiscal year, but it is our intent to do as much as possible in this budget cycle, so I think that what the city council, the citizens at large, will see is something other than the strict line-item, massive document that they’ve seen before. But it’s going to say something like “The Department of Public Works is charged with doing “x,” and here’s how they do it.” And there’ll be budget items saying “these are my personnel expenses to complete these tasks, these are my materials expenses to complete these tasks, and this is how much we plan to get accomplished in this fiscal year.”
Having said that, I’d like to have Mary tell you a little bit about some of the specifics about the planning, the implementation and the timing.
MT: Our goal is to have the budget document completed by May 31. What we’re going to do, is we’re going to get into performance-based budgeting which is something that had started with the city actually several years ago, but unfortunately was completely abandoned. We’ve been fortunate enough that a few of the people that have stuck around from the financial team, and actually, I had some things in my attic from the previous time, so we can salvage some of that information, but basically what will be happening will be that we will be developing budgets for every city department based on their services they provide.
So, for example, the fire department would have suppression, hazmat, alarm services, etc., and we would identify what the input indicators are for that work, what the output is going to be for that, how efficient they are, how effective they are, the quality of the service. And then what we’ll do is that we’ll have performance metrics developed for each single program for every city department. So, at the end of every month, what we will be dong is reporting, “Here is what was budgeted for $X, these are the services that we’re supposed to provide, these are the actual services provided.” And that way there can be more logical decision-making in the budget process.
For example, if a cut has to be made, the control board, and, in the future, the city council would have the opportunity to say, “Well, I don’t want to cut this program, I want to cut this” instead of just cutting one line across and not understanding what the impact would be to the city operations.
AL: Sounds like running it like a business.
MT: Yes, sir.
PP: So, that process is underway. It’s going to be lengthy and involved, but it’s probably the most critical thing that we need to do over the next three or four months.
Publication of Annual Report for City to Resume
MT: The only other thing that we’re going to be doing, in addition to putting this budget together, and it’s going to be very complex and a lot of work over the next four months, is that at the beginning of August/September time-frame, we’re going to be producing an annual report.
The City of Springfield should have been producing an annual report on a yearly basis which basically encapsulates all the projects, all the work that’s been done and all the expenditures. That has not been done since 1995, and, in fact, I found one of the documents I done before I left here in ’96, and that was the last document that ever existed. So we are going to be not only moving towards not only developing the performance-based budgeting system, measuring performance in a monthly basis, but actually on an annual basis reporting the results of what was accomplished by the city departments for the City of Springfield residents.
AL: When you say it was required to be done, required by...?
MT: I believe there are state laws that they are required...
AL: So it just hasn’t been done in the last.... OK. Any other questions? OK. Thank you very much, Mary. Oh, Charlie?
CVR: Did you finish your look at the ‘06 budget for us?
PP: Yes, unless you have additional questions for us. I’m not making projections on the ’06 budget yet.
CVR: I didn’t know whether or not you had any, even though it’s a half year early, any projections for ’06.
MT: Not at this point. We have to develop the revenue budget prior to figuring out the expenditure budget.
PP: I really...and the reason...there’s a couple of...let me be specific here. There’s a bunch of reasons why we can’t make an estimate. One is that part of the budget process that we’re going through is that really where we want to identify the places where we want to trim things back or add additional resources. That will give us a better picture of what we want the ’06 budget to look like. At the same time, we’re doing a variety of RFP services for things like the DPW, police, fire, spending within the business services of the school and the like. Those will likely have a material impact on what our ’06 projections are, and those are simply not done yet, and really are just beginning and will probably not be, we won’t be in a position to report those estimates until probably later in the spring.
AL: All, right. Thank you, Mary.
Consultant Hired to Study Police Department
PP: I have an item for the board, and I know that it’s probably taken more time than we would have liked, but I would like the board’s approval for a contract for Carroll Buracker & Associates to conduct the study of the Springfield police department.
Just as some additional background, as you know, Ed Flynn, the secretary of public safety, agreed to assist the control board in its study of various pubic safety issues. He appointed a committee to make this selection, create the RFP and make the selection of this consultant. It consisted of three members selected by Ed Flynn: Chief Burke of West Springfield, Chief Mannix of Natick, and Richard Cos, the former mayor of Chicopee. They met, they read all of these proposals and they made a recommendation to the board that we contract with Carroll Buracker & Associates which has been doing this type of work for approximately 20 years and has done so in a variety of approximately 200 cities from big to small to medium. That was the recommendation of the committee, I....
AL: How much is the contract for?
PP: The contract is for $171,000. It should take three to four months. I know that Mr. Buracker has spoken already with the chief. I will be arranging time for him to meet with the board as well as Ed Flynn. Part of his mission will be various not only outreach to the officers themselves, but to the community at large, and I would like your approval for this contract.
AL: Any questions about the contract?
**Motion passes unanimously.
CVR: I’d just like to express my appreciation and I’m sure the board’s appreciation to Mayor Cos and the two chiefs for their participation. I think that it’s extremely helpful to us, and again acknowledge the leadership of Commissioner Flynn.
AL: All right. Thank you. That’s it?
PP: I have one item for new business, sir, and that is the approval of an executive order making the appointments to the Springfield Council on Aging. It’s in your package, and if the mayor has anything to say....
Appointments to Council on Aging
CVR: I’d be glad to speak to this. There is a city ordinance that creates a Council on Aging; that commission, like so many others, has fallen into disuse. And several months ago, I asked individuals, who have been very active and, in many cases, given their life work to this whole issue of making life a little bit better for senior citizens, to go ahead and to study this, not only to determine how we could do a better job, but also to make some sense out of the, almost the confusion because of the fact that there are a series of fragmented programs. There’s a several areas from which funds come, and to my way of thinking, we were not really approaching this whole thing in the effective manner that really was mandatory.
The commission made its report, this ad hoc committee made its report last week. There is some opposition of one or two of their principal findings within the city council. There’s going to be a meeting this week between the ad hoc committee and those members of the council who disagree with those findings, and there’ll be a public hearing either in this room or the city chambers so that in a measured and respectful way these points of view can be exchanged back and forth.
I would like, however, and this is the reason for this proposed executive order which I discussed with Mr. Puccia, to have three of the people who played a role in this ad hoc committee be allowed to be members of the Council on Aging. There’s 12 people on the council; they’re all mayoral appointees, and I have selected 9 who are residents of the city of Springfield, but the three people in this executive order: Sister Mary Caritas is an extraordinary woman who for many years was the chief executive officer of Mercy Hospital and is just really kind of a legend in our city, attorney James Tourtellotte who is a senior partner in one of the largest and most respected firms in the Pioneer Valley and also Mrs. Nancy Morales of West Springfield who was the head of the Social Security office here in this area. And these people would bring so much to the deliberations of the Council on Aging as it moves forward.
One of the findings of the ad hoc committee was that the Council on Aging really should be the central organism through which a lot of this planning and decision-making is done, and I want to have as strong a commission as we possibly can. So this is why we’ve asked for this executive order.
TR: A non-paid commission?
CVR: It’s a non-paid commission. These are all volunteers.
**Motion passes unanimously.
At this point the Finance Control Board went into executive session.