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Town Administrator Submits $58.2 Million Proposed Budget to Council

The following budget message was submitted to the Town Council Wednesday night.

Town Administrator John Klimm submitted the following budget message to the Portsmouth Town Council Wednesday night. The message was submitted along with the Capital Budget, Operating Budget and draft Budget Policy for the council to consider. 

Town Administrator’s Budget Message

To the Honorable Town Council:

In accordance with our Town Charter, I am honored to present to you our FY 2013 operating budget for your consideration. The fiscal environment we face, in many ways, is not only similar to every Rhode Island city and town, but also to many communities across this country.

For decades, we in local government have tried to provide services well beyond our capacity to pay for them. In short, we have tried to be all things to all people. And we have failed. Increasingly, budgets are strained as the longstanding practices of deferring maintenance, draining reserves and holding unrealistic expectations have wreaked havoc on local finances. Citizens have increasingly asked us, “Why can’t you live within your means just like we do at home?” And the truth is that we don’t have a track record that would suggest that we’ve done that. We haven’t looked under every rock and haven’t evaluated and implemented proven alternatives and reforms. Unfortunately, the practices of consolidation, collaboration and/or regionalization are rarely discussed and even more rarely implemented. At the same time, we have witnessed a systematic reduction in federal and state aid because they have also lived beyond their means. The only thing worse than the challenges we face at the local level is the out of control spending at the federal and state levels over the past decade. They wrote the book on fiscal irresponsibility and it is unrealistic, indeed foolhardy, to expect them to be a solution to our problems.

Although I just began my tenure here on Feb. 13, 2012, it did not take long to identify several critical issues that need to be addressed right away. First, I can’t overstate my belief that we are living well beyond our means. This is not mere speculation. It is a stunningly obvious fact. The practices employed such as spending down fund balances and not addressing infrastructure needs are as clear as day. The challenge in making tough budgetary decisions not only goes to the core of our fiduciary responsibility to our citizens, but is necessary to ensure that we do not become a community, like our distressed sister Rhode Island communities, in utter financial crisis. The good news is that we are not there yet. The bad news is that we will be there without thoughtful, swift and lasting changes in our spending habits and financial practices. 

Implementation of a solid and thoughtful financial plan is necessary now to restore a level of security and trust with the citizens and taxpayers to whom we answer.  A high level of trust and confidence is essential for us to achieve truly effective local government. This is never an easy message to deliver. For it is human nature to defer or put off that which is not absolutely essential to address today. My central message to you is that we must begin to confront our challenges.  

We are now at a crossroads. We can follow in the footsteps of Providence, Woonsocket, Central Falls and West Warwick or we can set our own path to financial sustainability. We can choose to be a community which opts for fiscal responsibility and security over an uncertain future and utter chaos. But that can only happen with your action, not through inaction.

The budget before you brings us down a different path.  One that is not philosophically or politically motivated, but solely based on sound generally accepted financial principles. To those who say we can’t afford to choose a different path at this time I say, then don’t… and wait a few more years when our bond rating will plummet, trust and confidence between our citizens and will erode, tens of millions of dollars in new spending will have to take place all at once to address unmet and now critical needs and the reality of financial disaster that we read about in the newspaper each and every day will be staring us in the face.  

Are we going to follow or are we going to lead? 

If we want to follow our sister communities into fiscal irresponsibility, bankruptcy and insolvency than all we have to do is to do nothing.  I told you before that inaction is easy. Simply do nothing.  And in the future we can blame each other for the mess. We can blame our dedicated School Committee and staff and say that they are not doing enough and that they are the problem. And they can, in turn, blame us. We can blame Washington and Providence for our ills, and state the obvious, but to what end? Where does it get us? The beauty and the wonder of local government is that it gives all of us…citizens, elected officials, town employees and volunteers the capacity to solve our own problems.  

So the question is, will we? I don’t want our bond rating to go down, I want it to go up. I don’t want our financial liabilities to grow, I want them to disappear. And I don’t want Portsmouth added to the growing and embarrassing list of communities who are about an inch away from insolvency. This budget begins to turn the corner.  It is a blueprint to recovery.

The Budget includes:

  • A proposal to fund a long term Public Roads Plan;
  • A proposal to fund, in cooperation with our Schools, a five-year Capital Improvement Plan for our infrastructure;
  • A proposal to increase funding for our Pension liability;
  • A proposal to return real dollars to restore our Fund Balance;
  • A proposal to adopt a Community Outreach and Civic Engagement Plan;
  • A proposal for a new and more effective Town/School compact to strengthen the working relationship of our elected bodies and their respective staffs; and,
  • A proposal to provide assistance to update the Portsmouth Comprehensive Community Plan. 

This of which $47,180,235 is requested from our local taxpayers through the property tax or a 3% increase in our tax levy to accomplish these goals. It includes a 3% reduction in the town operating budget and a 3.67% increase in the town’s appropriation to the School Budget, with a concomitant amount transferred from School surplus to the Town’s Fund Balance. 

The budget includes funds to undertake operational audits of our departments to find out where we can reform and become more efficient.  It provides funding for civilian dispatchers in our Fire Department so that more of our dedicated professionals are available to respond to calls for help.  It provides funds so that we can better communicate with our citizens including an emergency outreach system so that every household can be contacted in a matter of minutes.  It provides funds to conduct a professional community survey so that we can gain a better understanding of the likes and dislikes of our citizens as we ask the question, “Where would you like to see changes in your local government?”  It calls for the formation of the Town Administrator’s Community Outreach Committee to address issues of the Town’s website and social media options.  Additionally, it calls for a new approach to the relationship between Town Hall and our largest department, our School Department.  In presenting this Administrator’s Budget, I expect to hear thoughtful questions such as:

  • With so many needs, why does this budget not spend to the allowable tax levy cap?

I am not recommending that we go to the 4% tax levy cap, as allowed by State Law. There are three reasons for this:

  • It’s a ceiling, not a floor.  The legislation allows for budget growth up to a cap.  Any additional spending requires a vote of our Town Council, representing the taxpayers of Portsmouth.  It is not my assumption that we should automatically spend to the maximum allowed under State law every year, but that we justify every dollar requested. 
  • It’s the economy.  We can’t forget that we still are witnessing the worst economic downturn since the Great Depression.  The unemployment rate in Rhode Island is one of the highest in the country.  Many people are unemployed, others are on modest fixed incomes and have seen a decrease in the real value of their benefits as costs for other items continue to rise. 
  • Can we do more first?  The truth is that there is more that can be done to contain and reduce costs.  I do not support a position that we levy to the limit allowed by law before we implement needed reforms.  I am only suggesting that additional spending take place at this time because we are headed for a crisis without restoration of fund balances and implementation of infrastructure spending. 

2. Why do we need to restore funding to our savings account, also known as our Fund Balance?

It has been a long standing policy of setting aside 8 percent of our operating revenues in reserve for emergency or unforeseen calamities.  We presently are at 4 percent.  The foremost authority of professional municipal finance officials, the Government Finance Officers Association (GFOA), has established a Best Practice for communities nationally of setting aside an amount equal to 16% of net operating expenditures in fund balance.  In addition, municipal bond rating agencies look at spending and savings practices when determining the fiscal health of a community.  The GFOA has stated, 

“It is essential that governments maintain adequate levels of fund balance to mitigate current and future risks (e.g. Revenue shortfalls and unanticipated expenditures) and to ensure stable tax rates. Fund balance levels are a crucial consideration, too, in long-term financial planning.

…Credit rating agencies monitor levels of fund balance and unrestricted fund balance in a government’s general fund to evaluate a government’s continued creditworthiness.  Likewise, laws and regulations often govern appropriate levels of fund balance and unrestricted fund balance for state and local governments.”

  • Why implement a Public Roads Plan Now?

Our long range Public Roads Plan is an essential program aimed at combating the progressive deterioration of the Town’s roads.  The Public Works Department has requested funds for road repairs in the past, but resources have not been consistently allocated to this program.  It is the goal of this program to commit $1,000,000 annually to road maintenance until the road system reaches a condition that can accept a scaled-back maintenance program.  It is well established that the cost of allowing roadways to fall into a state of total reconstruction far exceeds the cost of an ongoing maintenance program.  The Public Works Department has already compiled an inventory of repairs needed at various locations throughout the Town.  These repairs may include full depth reconstruction, asphalt overlay, milling, shimming, paving, crack sealing or chip sealing.  

  • Why fund a Capital Improvement Plan?

For the same reasons as stated above, we have infrastructure obligations, some of which must be implemented now (in the case of State mandates) and others simply having reached a point where inaction is not a feasible alternative.  While healthy debate should take place about the components of a Capital Improvement Plan, the need to have one and to fund it annually is obvious. 

The Importance of a Healthy School/Town Relationship

The present and future relationship between the Town Council and School Committee is critical to our ability to move toward a road to financial recovery.  In Portsmouth, as in most communities, the School Department is by far the largest Town department.  Historically, the on-going relationship between the School and Town in many communities is strained.  Some of that can be attributed to the inherently different role that each plays and some to the annual competition for limited funds.  However, I am not aware of any community in which a strained relationship works well for either entity over the long term.  While the hostility in other communities does not appear to have manifested itself here in Portsmouth, it is really important to the long term financial health of the Town to have a relationship of open communication, respect and trust.

We need a new strategy…one that fundamentally changes that relationship.  I propose to the Town Council, that a new Compact be approved that causes a tectonic shift in the way our system of government operates.  The tenets of the Compact are as follows:   

  • That there be a new understanding that most, if not all, new funding be used in repairing neglected infrastructure by way of a long term Capital Improvement Plan, to improve our depleted fund balance and seriously address our pension and Other Post Employment (OPEB) responsibilities. 
  • That no funds should be drawn from fund balance without the consent of both the Town Council and School Committee until adequate levels are reached and only for clear and unambiguous emergencies.  When the fund balance is impacted, it should be fully restored in the budget for the next fiscal year.
  • That both bodies agree to research and evaluate every non-educational function to consider collaborations or consolidation with each other and/or with other communities.

Civic Engagement and Long Range Community Planning 

Civic engagement and community outreach must be at the core of what we do.  While Portsmouth, in many ways, is still a small town, our growth has highlighted the increasing importance of community outreach and civic engagement.  We need to communicate effectively so that our citizens know what we are doing and why.  More importantly however, we must make sure that there are regular opportunities for us to listen to the concerns of our residents.  Communication and civic engagement are essential for effective local governance to work.  I suggest that we start by the forming a Town Administrator’s Community Outreach Committee, made up of citizens with interest and expertise in the area of communication to discuss the use of technology and social media to reach out to our citizens.  Next, I have included funding for a Town-wide communications system, similar to the one that our School Department and Water District use, to contact households within minutes in the event of a hurricane or other natural disaster, as well as to more effectively react to time sensitive emergencies such as a lost child or disoriented senior, a gas leak in a neighborhood, etc.  

I have also requested that funds be made available for a community citizen survey, so that we can ask our residents to articulate their likes and dislikes, make recommendations on any aspect of local government and determine what their priorities are for our limited annual funding. It is, after all, their hard earned tax dollars that we are spending. Let’s ask our citizens what they want and expect from us.

And lastly, at the request of our Town Council, I have requested funding to complete an update of the Portsmouth Local Comprehensive Plan to address the myriad of planning and zoning-related issues impacting our community.  In many instances, what residents say they want for the future of our community and what the underlying zoning allows, are two very different things. Let’s make sure that we have a clear understanding of what our citizens want and a plan to guide future growth in Portsmouth that is consistent with the wishes of our residents. 

In closing, I would like to thank our entire staff for their diligence and cooperation in adopting new procedures for this budget, every member of our Town Council for their guidance and assistance and the many residents who have taken the time to communicate their budgetary thoughts and concerns to me over the past month.

Sincerely,

John C. Klimm
Town Administrator  

A great family town April 06, 2012 at 12:55 PM
I only ask this because you added a ton of "new expenses" and long term planning to the town side and there is a decrease in the operating budget so you took a lot from services and or employees. I saw nothing of added value to the school system yet well over a million in new funds could this be explained?
Unbelievable April 06, 2012 at 03:16 PM
Just out of curiosity A great family town how do you arrive at the school budget taking up 80% of the budget? Simple math: Total Budget: $58,210,858.00 minus School Budget: $30,476,891.00 = $27,733,967.00 which would be the town budget. Take the School budget and divide it by the total budget and you get 53% not 80%. You people love to use fictitious/inflated #'s.
A great family town April 06, 2012 at 03:49 PM
I can admit if those are the numbers then I stand corrected on that. I should have said that salaries and benefits make up around 80% of the school budget. So my questions are still not valid? It takes up the greatest piece of our budget...agreed? They have never gone level funded but the town budget decreases again. The new administrator added millions in new spending and decreased the town budget and no new programs for schools but again they go up. I think it is a fair question. I know that daring to ask for fiscal responsibility from the schools is taboo and means you're anti school. I simply asked a question but let the bashing begin for asking a fair question. I care about taxes and want the best town and school that the town can realistically afford. Not the one that the crazy fringe on each side wants. You know the % that want gold floors in the school don't mind 10% increase in taxes if it is for the kids and the other side that thinks a notebook and one teacher is good for the whole district, just some fair middle ground. And thanks for calling me "you people" If that means the majority who are struggling and sick of rising taxes with no explanation, and sick of the fringe minorities that try and dominate the town then I accept your characterization and appreciate it.
A great family town April 06, 2012 at 04:02 PM
Well after some checking I guess you should redo your math as well total budget is $58,210,858 School Budget Operations $37,747,237 which is a far cry from your number. Don't forget the schools debt service that is paid from the town budget. That number is $2,085,010 for a total school budget that we pay for of $39,832,247. Which is more that 68% of the town's budget. Guess you missed those numbers on the town website. But please feel free to correct my facts.
M. P. April 06, 2012 at 04:29 PM
I wish the town administrator had discussed how much money the current town council and school committee has wasted on frivilous legal fees. I would love to see that number! As for "a great ft"'s comments... I'm pretty sure that the money our school committee wastes on legal fees is part of the school department's budget. It would be nice to see monies spent on text books and materials as opposed to legal fees!

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