TOWN OF REDDING
BOARD OF FINANCE SPECIAL MEETING
7:00PM ZOOM MEETING
(Click here for recording of meeting – Access Password: 2Q$QM4C9 )
Filed subject to approval.
Dr. Kimberly Yonkers, Chair; Ward Mazzucco, Vice Chair; Jamie Barickman; Rob Dean; Ed Miller; Jenifer Wyss
Steve Gniadek, Finance Director; Wes Higgins, Treasurer; Pat Moisio, Tax Collector; First Selectwoman Julia Pemberton; Selectwoman Peg O’Donnell; Selectman Michael Thompson; Chris Parkin, BOE; Scott Reiss, Finance Director Region 9; Todd Johnston, Region 9 BOE; Members of the Public
Chair Yonkers called the meeting to order at 7:00PM.
- PUBLIC COMMENT
Chair Yonkers said due to the volume of public comment, she will list the names of residents and their positions on the budget.
14 Residents wrote letters requesting no increase in the budget:
Brian and Claire Matzke
Gary and Katie Zigmond
Kenneth and Randi Hutton
Leslie and Peter Swan
14 residents wrote letters requesting rejection or reduction of the budget without a stipulated amount:
Brian and Jennifer Ward
Mark and Laura Hoeing
Thomas and Vicki Derderian
Urs Broderick Furrer
Mary Lou Carlson
Mike and Sandy Hoffman
7 residents wrote letters requesting a 10% reduction in the budget:
Claudio and Joyce Rodrigo
Roger Van Ausdal
8 residents wrote letters requesting to maintain the budget as presented:
Christina Galluzzo and Chrysovalanti Sakoglou
Susan Krivit and Kent Stivers
Chair Yonkers said the budget commentary letters are listed on the website.
Chair Yonkers said there will be a public comment at the end of the meeting.
- CASH FLOW SCENARIOS
Chair Yonkers asked Mr. Higgins to present to the BOF.
Mr. Higgins said there are two stresses related to Covid-19: delays in tax payments and tax delinquencies.
Mr. Higgins said the Covid-19 situation means there will be a likely delay in payment of taxes. This creates a situation where the Town will likely have to borrow. The Town is ready to cover anything except the worst-case scenarios when it comes to tax delays.
Mr. Higgins said this type of borrowing is called a TAN (Tax Anticipation Note). It is a short term borrowing related to possible collection of taxes.
Mr. Higgins said delinquent taxes are the second stress facing the Town. The Town’s cash balances could cover a variety of scenarios, but a high delinquency scenario creates a future cash balance crisis.
Mr. Higgins said careful budgeting now will prevent a future situation where a tax increase or reduced spending will need to happen.
Mr. Dean asked Mr. Higgins how he is incorporating tax delinquency lifespans into his analysis. Mr. Higgins said for FY 2021 and FY 2022 there will not be a significant recovery of delinquent taxes.
Mr. Dean said the Town shouldn’t look at taxpayers as adversaries and that the Town has a responsibility to care for taxpayers.
Ms. Moisio said the Town is not deferring taxes for 90 days. The BOS voted for a lower interest rate. The interest penalty will be 3% for three months. Escrow accounts are not included in this. The interest rate will go back to 18% in October. Ms. Moisio said the Town can sell tax liens, but they are a last resort.
Mr. Barickman asked Ms. Moisio about the tax lien option and how it works in CT. Ms. Moisio said there are many companies that buy tax liens across the US. The Town of Fairfield sells their liens. The value of the liens could be anywhere from $0.80 on the dollar to over $1 depending on the properties.
Mr. Barickman asked about the $3.4m tax lien on the Georgetown Property and if the Town could sell that. Ms. Moisio said that is a complicated legal matter.
Chair Yonkers said Governor Lamont could extend the grace period if things became worse. Ms. Moisio 32 of 95 towns are using a low interest rate and 22 of 95 are using the payment deferral.
Mr. Higgins said there are many possibilities for change between now and July 1 for taxpayers and municipalities. He imagines facilities will be created between now and June 30th for towns to borrow outside of TANs.
Mr. Dean said the Town has an efficient and friendly relationship with its taxpayers. He said tax lien sales scare taxpayers. Ms. Moisio said tax liens are a last resort.
Mr. Mazzucco asked Mr. Higgins about the Tax Anticipation Note motion and his recommended amount of borrowing. Mr. Higgins said the Town should borrow up to $5m. He said this would only be necessary in a circumstance of high delay of payment. It would be prudent that the Town be prepared to apply for a TAN as a backup plan.
Mr. Mazzucco asked if this should be voted on tonight or later. Mr. Higgins said the Town needs to start having discussions with financial institutions. He said he would prefer the Town identifies a lender that would be willing to fulfill a TAN.
Chair Yonkers asked the BOF to discuss what a TAN (Tax Anticipation Note) is.
- TAX ANTICIPATION NOTE (TAN)
Mr. Gniadek addressed the BOF.
Mr. Gniadek reached out to the Town’s Bond Counsel, Mike Andreana, Pullman & Comley, about some topics discussed in the last BOF meeting. He said that bonding cannot be used for operating expenses. The alternative to bonding is a TAN (Tax Anticipation Note). If the Town passes a resolution to utilize a TAN, the Town has a an alternative to manage short term cash flow
Mr. Gniadek said the BOF and the BOS need to pass the resolution to allow the Town to seek a TAN. The Town can seek out lenders, starting with their own banks (Webster Bank, People’s United Bank). If the Town goes to bid, there will be more fees associated with the TAN.
Towns cannot statutorily use a line of credit.
Chair Yonkers asked if the TAN is a line of credit. Mr. Gniadek said this is different with a TAN versus a line of credit is that the total amount of the TAN (e.g. $1M) is available on the date of issuance, as opposed to a line of credit, portions of which can be requested on demand.
Chair Yonkers asked for clarification on what a TAN is. Mr. Gniadek said a TAN is a short-term borrowing option against future tax collections which are overdue.
Chair Yonkers asked about the interest rate of the TAN. Mr. Gniadek said the interest on a TAN could be as low as 25 basis points.
Mr. Dean asked about the term options for the TAN. Mr. Gniadek said a TAN could be as short as 30 days or could be extended for a period of six months.
Mr. Dean said town governments cannot operate on credit. The TAN is not a form of credit but a short-term borrowing option.
Mr. Miller asked Mr. Gniadek if approving the resolution would result in the Town being forced to obtain a TAN. Mr. Gniadek said that if the Town were to go ahead with a TAN, there would need to be another motion to specify the specific amount of money and other details. He recommended speaking with Bond Counsel.
Chair Yonkers said the Town needs to move quickly due to the competitive nature of this. Mr. Gniadek said the Town of Stratford had a TAN borrowing resolution authorizing $50m of borrowing. Mr. Gniadek said the BOF should pass the Resolution so that the Town can start looking at offers.
Mr. Barickman said he wanted to complete the conversation about cash flow. He said this information would be helpful in determining the amount the Town should ask for in a TAN.
- CASH FLOW SCENARIOS (CONTINUED)
Mr. Barickman asked Mr. Higgins about the loan to the WPCC and if the Town could loan money to itself.
Mr. Higgins said when the Town’s bond deal closes, the General Fund will extend $850k to various capital activities. These activities will be repaid by the bond. This money is not allowed to pay for payroll and other operating expenses
Chair Yonkers said the Town structured the WPCC loan so that the Town could eventually collect on it.
Mr. Higgins said that the Town can lend money from the General Fund to Capital Funds, but not the other way around.
Mr. Gniadek said that the WPCC hasn’t paid the Town any money in the past 5-6 years.
Mr. Barickman said when the bond money comes in July, can the Town borrow off of the Bond to fund operating expenses Mr. Gniadek said he will ask Bond Counsel about this.
Mr. Mazzucco said the loan to the WPCC is an accounting mechanism. He said the TAN resolution is thoughtful.
Mr. Mazzucco made a motion to approve the borrowing of up to $5m in TANs in accordance with the draft motion that the Bond Counsel provided, with the addition of a fourth official, Chair Yonkers, to become part of the group of officials to make the borrowing decision. Mr. Gniadek said the resolution is a draft and said he could easily add the BOF Chair. He also said that the motion must approve the resolution, not the actual TAN.
Mr. Mazzucco made an amendment to his prior motion to change the phrase, “borrowing of up to $5m in TANs”, to, “the resolution for a TAN in accordance…” Mr. Miller seconded the motion.
Mr. Barickman asked where the $5m request came from. Mr. Mazzucco asked Mr. Higgins his suggestion for the TAN request. Mr. Dean asked if the Town should limit itself to $5m. Mr. Barickman suggested the Town may need far more than $5m.
Mr. Miller said this motion would allow for up to an amount. It would not necessitate the Town to borrow that exact amount.
Mr. Mazzucco said a $20m request may negatively affect the Town’s ability to go to bond. He suggested that the Town be cautious with their TAN request. Mr. Gniadek said the Town can pass multiple TAN resolutions if more funding is necessary.
Chair Yonkers asked if the Town getting a TAN could affect the ability of the town to Bond. Mr. Higgins said he used a 60% taxpayer delay in his cash flow modeling. He clarified the term for the TAN (it is 60-days). The interest the Town will pay on the TAN is much smaller than the interest taxpayers will pay on their delayed taxes.
Mr. Dean said this is short-term borrowing related to tax payments. He said this does not expose the Town to a significant amount of risk.
Mr. Barickman asked how the Town will be affected by different TAN amounts when it comes to bonding. Mr. Higgins said he had conversations with two banks and a public finance officer about a TAN. The banks and the officer said it was highly prudent for the Town to address this well in advance.
Mr. Barickman said Mr. Higgins used a 60% delay of tax payments to October. He asked when tax collections would come into the Town. Mr. Higgins said the TAN must be paid by October 2nd. He anticipates tax monies to begin arriving in September.
Mr. Barickman asked what Mr. Higgins beginning balance is. Mr. Higgins said he used $8m as the beginning balance.
Mr. Barickman asked Mr. Higgins about the difference between tax delays and tax delinquencies. Mr. Higgins said that tax delinquency affects the town’s cash reserve and tax delays affects cash flows.
Mr. Barickman asked again about the Town lending to itself. Mr. Gniadek asked Mr. Barickman to send him an email about his question.
Mr. Mazzucco said depleting the Town’s cash reserves to lend to itself would affect the bond rating.
Mr. Dean agreed with Mr. Mazzucco. He said that delinquency and delay are the same thing. The difference is how long the delinquency lasts.
Mr. Miller said borrowing from a reserve and using tax payments to replenish the reserve is what is being discussed.
Mr. Barickman said the Town’s $5m bond will be a new fund balance reserved for two projects. If the money isn’t used, it gains interest. The Town could borrow off of that money and repay it with tax collections. He said it would useful to get a legal opinion on this.
Chair Yonkers asked Ms. Wyss for her comments. Ms. Wyss said the TAN is an interesting proposition. She said the legal question should be answered.
Mr. Mazzucco made a motion to approve the resolution to authorize four public officials to determine by majority vote the terms and conditions for Tax Anticipation Note borrowing. Those four officials would be the First Selectman, Finance Director, Treasurer, and the Board of Finance Chair. These officials are delegated the ability to borrow up to $5m in Tax Anticipation Notes on any terms they deem appropriate. Mr. Barickman asked if this could be a unanimous decision. Mr. Mazzucco made the amendment to change the term, “Majority Vote” to, “unanimous decision”. Mr. Dean seconded the motion. The vote was unanimous, and the motion carried.
Mr. Gniadek suggested changing the term, “Town Counsel”, to “Bond Counsel”.
First Selectwoman Pemberton asked if the BOF read the first paragraph of the resolution. She said the first paragraph stated that the majority of the BOF and the majority of the BOS need to approve the resolution.
Mr. Barickman said the BOF has now approved the resolution. He asked FS Pemberton if the BOS will vote on this soon. FS Pemberton said the BOS will vote on this at the next BOS meeting. Mr. Barickman said after this vote, the four officials can move forward.
- REVISED 2020-21 BUDGETS FOR COVID19 IMPACT
Chair Yonkers asked to revisit the budgets for the upcoming FY 2021-2022 and open them up to possible changes.
FS Pemberton said she spoke with Mr. Gniadek about savings and cuts. She said they discussed significant reductions that could result in layoffs. These reductions would affect Town services.
Mr. Gniadek said the cuts presented tonight are clear. The Park and Rec Summer Camp will not happen this year. The variance currently is $242,000.
The two cuts presented are:
Park and Rec Summer Camp
FS Pemberton suggested two more cuts. There are two highway vehicles that need replacement that could be delayed for one year.
Mr. Gniadek said he budgeted a 5% increase for Worker’s Compensation. CIRMA is only increasing their policy by 3%.
Chair Yonkers asked about salary freezes and new hire freezes. FS Pemberton said there has been a generalized conversation about salary freezes. She has considered reducing the % increase. Furloughing employees has also been considered. The future unemployment numbers will heavily influence these decisions.
Mr. Miller asked how laying off employees is allowed under the current executive order. FS Pemberton said that the executive order applies to schools.
Mr. Mazzucco asked FS Pemberton about the Part-Time Facilities Director. He asked her if the Town could delay this and instead use the time to find a full-time director. FS Pemberton said she wants to keep this position in the budget. She said there is so much inventory to catalog within the Town that the first year should be focused on that. The schools present their own challenge.
Mr. Barickman asked about the surplus. Mr. Gniadek said the surplus of $400k should be appropriate.
FS Pemberton said the Town will have a negative budget compared to the FY 2020 budget.
Chair Yonkers asked Mr. Parkin to discuss the BOE budget.
Mr. Parkin said the FY 2020 transportation contract question has improved. There should be an answer soon as to what kind of credit will be given and when it will be applied.
Mr. Parkin has been working with the administration on the costs for ESY and return to school in the fall. The estimated compensatory services number is between $60-80k.
Mr. Parkin said the BOE is waiting on the State for guidance on reopening.
Mr. Barickman said there should be a freeze on the mill rate and a zero-tax increase. He said the Town should look to cut costs elsewhere that don’t involve personnel.
Chair Yonkers said that there should be savings in transportation and substitute teacher costs.
Mr. Mazzucco said the Town is ignoring the elephant in the room. The BOE budget should be reduced by 5%. He said the town survey stated that the number one concern of Redding residents was tax stabilization. This was prior to Covid-19.
Ms. Wyss said this Pandemic is unprecedented. Ms. Wyss wants a reduction from the prior year budget.
Mr. Miller said that education is a critical component of the Town of Redding. The Town has been cutting the BOE budget for the past 10 years and now there are costs that must be incurred.
Mr. Mazzucco said the Town should seek a legal opinion on the executive order concerning staff reductions at the schools. He said the school population started to decline in 2007-2008 and cuts only started in 2013.
Mr. Miller said the words of the executive order are clear. Layoffs are prohibited.
Mr. Dean said a legal opinion on the executive order is a good idea. He said the Town may make cuts now that will hurt the Town in the long run.
Chair Yonkers asked the BOE to make their budget as lean as they can.
Mr. Johnston addressed the BOF.
He said the Region 9 BOF approved the FY 2020-2021 budget.
The Region 9 BOE is doing the same thing with public comment.
The Region 9 BOE is inclined to take FY 2020’s surplus and will give it back to Redding and Easton proportionally.
Mr. Miller asked Mr. Johnston about cash flow and if the Region 9 could reduce pension payments for this upcoming year to free up money for other things. Mr. Johnston said Region 9 is looking at these items.
Mr. Dean asked what the percentage decrease in obligation in the FY 2021 budget. FS Pemberton said the percentage decrease is 4.86%.
- BUDGET 2020-2021 DISCUSSION AND POSSIBLE ACTION
Mr. Barickman asked the boards perspectives on mitigating the 18 months to 2-year economic recession/depression. He asked for the perspective on using the unassigned fund balance to smooth over tax burden.
Mr. Mazzucco said we don’t know how long this crisis will last. The reason the Town can borrow at the level it does is because of our robust unassigned fund balance. He said the Town needs to reduce its spending.
Mr. Miller said the reserve should not be looked utilized for FY 2020-2021.
Mr. Dean said the Town needs open options, not panicky decisions.
Chair Yonkers said the Boards should be able to produce a mill rate that reflects no tax increase. It may be a mill rate that reflects a reduction.
Chair Yonkers said the BOF needs to approve the minutes of the past three meetings.
- OTHER BUSINESS
Ms. Wyss asked Chair Yonkers about the next meeting.
Chair Yonkers asked the BOF if they need to meet next Monday, 4/27/2020 if the other boards will not meet until later next week to discuss budgets. Discussion followed.
Chair Yonkers said the BOF will meet on Tuesday, May 5th at 7:00PM.
Mr. Mazzucco asked if all the legal opinion requests are clear.
FS Pemberton said the Town is getting a legal opinion on the executive order concerning the schools and layoffs. She said the second legal opinion is on the draft budget and comment period.
Mr. Barickman said a legal opinion on whether the Town can borrow from itself will also be obtained.
- PUBLIC COMMENT
Chair Yonkers opened the floor to public comment.
Heather Whaley asked the BOF to think about this year’s budget as a town wide budget. Children are making the sacrifice for the health of the vulnerable residents.
Jim Lang said the BOF should look at his letter. He suggests a 10% cut across the board.
Gus Olsen asked about an online vote/referendum. FS Pemberton said that the State of CT is prohibiting referendums/votes.
Dan Souza said he supports a 10% cut.
Amy Arnold said a 10% cut will affect the BOE and BOS.
Clay Cowan said the recovery from this economic situation could happen as late as Q1 2023. He said the BOF could make decisions now that prevent more difficult decisions later.
Angela Caes said she’s been enjoying these meetings. The Boards need to be fiscally conservative this year. The BOF should take a two-year long view.
Erach Screwvala said it’s an uncertain time. He said a 5-10% cut will have long-term ramifications.
Richard Stein said this is an unprecedented moment and that the Town needs to be creative.
Mr. Mazzucco made a motion to adjourn. The vote was unanimous, and the motion carried.
The meeting was adjourned at 10:01PM.