City of Portsmouth, New Hampshire 2022 - 2024 City Council, 25 Jan 2022

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From YouTube: 1.25.2022 City Council Work Session

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1.25.2022 City Council Work Session

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Thank you. Everyone, uh we're gonna, get started here tonight at our work session.

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To discuss the budget and budget schedule, I'm going to pass it over to.

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City manager, karen kanar, look forward to this presentation. Thank you mayor and I'm happy to be.

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Here, with parts of the team uh joined by finance director, judy belanger deputy finance director.

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Andrew pergle, I can also share that chief newport and karen senecal from the pd are here.

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And commissioner cher great wonderful, so I'm gonna get uh I'm gonna run the powerpoint so bear with me. One moment.

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Okay, so uh you have in front of you this evening and for those at home on the screen.

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The presentation and it'll be a bit of a back and forth with judy and myself so bear with us, but.

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We we've developed it a little informally and we want to have more of an informal conversation.

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Rather than a talking to the whole time, so if it makes sense, it's good to hold questions till the.

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End but if something's really driving you nuts just just collar, so what we would like to do.

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Tonight is walk you through the schedule, as we know it, it's pretty prescriptive.

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Talk about what we're seeing for forecasting and we don't have too many numbers defined yet.

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The ones we do have we were happy to share, but many of them are still in development.

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And then we'll look forward to the discussion and to any public comment that might arise.

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So as a reminder, this is the way the budget unfolds. We are at the last meeting in january.

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As you see, um the school department at the school board has already had one public hearing.

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And coming up in february there will be school board public hearing number two followed by.

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Along with the fire and the police in there- and they have their meetings fairly early.

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And by way of schedule, once we creep into march.

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Judy and andrew and I will have met with all the departments, to refine and understand how.

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Their budget is going to essentially go to print, to come to you and and then, amongst that we have.

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The cip adoption in march, which obviously helps inform the budget we get you the budget on or.

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Before the last friday in april and and then we have a series of meetings, may is a busy meeting.

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Month as you can see, and then the goal is to adopt at the first regular uh council meeting in june.

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So judy's going to speak to budget forecasting but as I said, she and I may do a little bit of.

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Ping pong and back and forth, and turn it into more of a conversation so judy take it away. Okay, thank.

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You good evening, good evening, mayor and members of the city council, I'm very happy to be here and.

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And to kind of walk through the budget process and give you some information that I hope will be.

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New to you and or helpful or a refresher of some of the information and how we handle.

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Budgets in portsmouth- I guess I'll start right off with just uh reiterating the fiscal year. 22.

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Final budget, um our budget's broken down into two sections: we have the operating side and then.

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The non-operating side for the general fund and tonight we're just talking about the general fund.

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The operating budget consists of expenditures that are associated with the services that are.

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Provided to you by the school, the fire and the police department, and that makes up about 78.

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Of the total budget, I'm going to go back sorry, the non-operating portion of the budget, which houses.

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Expenditures associated with your debt service, capital items, rockingham county tax, this portion.

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Makes up about 22 percent of the total budget? The city council adopted a budget at 123 million.

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Dollars or 3.44 over fiscal year 20. at 21. However, since the adoption there were two supplemental.

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Appropriations um funded from unassigned from balance one on the operating side for 116 000.

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And that was for the community campus operations and the second one was 2.2 million dollars.

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For the first phase in design, construction of the skateboard park.

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So now this brings a total fiscal year, 22 budget at 125 million, 525 or 5.28 over the previous year.

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um So in the state of new hampshire there's a handful of states that don't.

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Have a sales tax there's a handful of states that don't have an income tax.

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But there's only two states in the country that have neither.

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The income tax or the sales tax and that's alaska in new hampshire, but as a result for new hampshire.

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What that results is that property taxes really is your primary method of financing local services, so.

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We start with the um expenditure side, which is the budget, which is what the city council adopts.

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So fiscal year 22 is 125 million and then we look at revenues. So we we do a lot of trending and.

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Comparisons and we're really conservative on our revenue estimates.

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So I like local revenues, bringing about 21.9 million state revenues because of the lack of.

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Other taxes is really only about 3.3 million dollars and then we also use fund balanced and.

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Every year we use a portion of fund balance to offset the taxes.

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So what this, what this means is that in simple math, is that you take your expenditures, less.

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Your revenues, and that comes up with your your tax levy and calculating that against your.

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Property assessed values, then it calculates the tax rate now the problem with this process here.

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Too, is that budget is passed in june, so there's a lot of state revenues that were unsure of at.

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That time and we're also unsure of the rockingham county obligation, which is a which is a big number.

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Property assessments are also not due to the to the state until uh september october,.

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Deadline so we're kind of at a you know quandary there of trying to finalize exactly.

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What the tax rate is going to be so during the budget process, we'll talk about an estimated.

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Tax rate during that time, and then the tax rate is not set by the department of revenue.

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Until it's really kind of leaning into november now it used to be earlier in october, but now it.

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Seems to be pushed into november, so that's when your tax rate will be finalized. Switching to the.

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Next slide, this is where you all come in, and this slide has been used. The last two budget cycles.

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And this slide was built around a previously agreed upon set of goals.

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That boy they date back to before I even got here. So um I think there was conversation about.

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Resetting goals and then covet hit, and then it was just sort of all hands on deck. So we're excited.

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To be able to inform this page and the goals, as we talked about at our retreat on saturday,.

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With the things that you find to be important, so a slide like this, with with.

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The philosophy behind the budget being a statement of values and what it is.

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You find important will be informed by the goals we set saturday, so we will update this page, but.

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This was just to show that setting up goals really is critical to the whole budget.

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Conversation, and also with building a budget, we want to not focus on the one.

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Year, it's very important to look out several years. What might occur in one fiscal year.

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May have a significant impact negatively or positively going forward. So what we want.

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To do is really avoid what we call break even budget practices, which is having that.

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Fluctuation of going down and up and down and up and down that we want like a nice.

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Create a nice, stable, glide path to address all of the goals of the council in the city and still.

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Provide those services for the current fiscal year and for many years going forward next slide.

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So there's been a number of long-term financial policies and I'd like to go.

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Over these, because this is really how we build our current budget and our future.

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Budgets, long-term planning assists in keeping the annual budget and the tax rate stable.

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From year to year, so we have a number of policies that have been input already in place.

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And I'll start with the overall and we'll go into these in a little bit more detail. But just to list.

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Them so taking in consideration the whole general fund. We have an unassigned fund, balance policy and.

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I will explain that on the operating side of the budget to help with that stabilization, we have.

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A leave it terminate termination stabilization fund. We have the health insurance stabilization.

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Fund and then we have a cola adjustment kind of stabilization policy that we have in place.

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On the non-operating side, we um have policies related to our capital projects.

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Which will help also stabilize the budgets for the future and our rolling stock replacement program.

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Now these policies that they've been put in place over a couple of decades now and really.

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Has put portsmouth in a very strong financial position, these policies are incorporated in our.

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Budgeting forecasting approach and it carries out over several years. These policies also has placed.

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Portsmouth ahead of other communities and has put us in a better position when handling emergencies.

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And like what we had just gone through with the pandemic, what I would like to mention, though,.

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Just a little side note, I had the privilege a few years back to speak at the new hampshire municipal.

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Association workshop and that topic was on budgeting and I spoke in great detail.

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About the importance of long-term planning, what portsmouth had implemented and- and I will say.

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I was approached after that work session by by town managers by select board members and other.

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Finance directors and they were really impressed um with what portsmouth has achieved and I'm.

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Hoping that we can create more and talk about more innovate, innovation for the budget going forward.

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So I'd like to start with the first one fund balance, so so what is fund balance? So this is.

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A term that's using governmental reporting for the general fund and we, um when we talk about.

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The general fund, it's based on a modified basis of accounting, using current financial resources.

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So there's a balance sheet in your annual report and your offer, and also in your password that has.

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The balance sheet, specifically for the general fund again on current financial resources, so.

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When we talk about assets, minus liabilities equals your fund balance. Your assets are reported um with.

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No long term there's nothing long term um in the balance sheet. This is why it's called finding.

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Current financial sources, so there's no reporting of capital assets such as land or building.

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And there's no reporting of long-term liabilities such as debt service. This is very different than.

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What you see in other financial statements when you're looking at a private sector.

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Or a major company, so fund balance then is really made up of five categories. There's non-spendable.

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Which is what it says you can't spend it. um We do have a small amount on our.

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Non-Spendable, because several years ago we had loan money to the trustees for the docs.

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So they gradually pay us back, but the balance of that is what they haven't paid back yet so.

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We have to reserve that in our fund balance in the event that they would default.

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And restricted fund balance is for grants or enabling legislation.

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Committed fund balance is where houses are reserved assigned is intended for a specific.

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Purpose mostly, are encumbrances, or sometimes during the budgetary process. When the council.

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Decides to use unassigned fund balance during that budgetary process. It would be moved to a signed.

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Before it gets moved up to a budget and then as we all talk about, is your unassigned fund balance.

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Which we talk about that term a lot and that is really not designated for any specific purpose.

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And sometimes referred to as the rainy day fund or emergency fund, or just you know, as savings overall.

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So again, we'll talk about more of the committed fund balance which houses your.

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Those stabilization reserves, the health insurance leave, it termination and the future debt service.

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Reserves and then we'll talk about uninside fund balance, which is can go right to the next page.

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So when we talk about um an ordinance that was put on file many years ago, um this was to to.

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Recognize and to stay within a guideline between 10 and 17 of your unassigned fund balance. Now this.

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Was amended in 2013 to refer to that 10 to 17 percent prior to that it was more like 5 to 10.

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So you know what is the specific? What is the appropriate guideline for that range.

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For your community, so there is isn't any one specific number or guideline in this area.

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Really, what what gfoa and the rating agencies look at is? Is it adequate for your community so.

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The the 10 to 17, we felt was, you know, pretty adequate for our area. If you were in an area.

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Where you had earthquakes or hurricanes or floods, then you would see those communities wanting to.

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Have a higher range of their unassigned fund balance and also gfoa also references, sometimes.

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Maintaining like two to three months of your operating budget in an unassigned fund.

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Balance, we really haven't approached that that's probably more up to the higher 17.

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But staying within the 10 and 17 has been working really well and demonstrated to work really well.

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As we saw going through the pandemic or still am going through the pandemic, the next slide shows.

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The unassigned fund balance from fy15 to fy21 um it's a total of 16.3 million dollars or 13.74.

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Of appropriations, now that is as of june 30th, so we only close the books at the end of the year.

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So that's where your final numbers of fund balance and that assigned from balance are.

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Kind of locked in, um however, we just had two supplemental appropriations, which.

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Temporarily has brought that um unassigned fund balance down to a level of 11.19, so that doesn't.

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Mean that we're going to end the year with that, what that means is this is where we are right now.

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So, at the end of the year, when we close, if there are, um if there are surpluses, revenue surpluses or.

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Expenditure surpluses, this would all fall back to one of the five categories in front balance.

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So this um 11.19 percent, we were in comparison to the past with that's about a fiscal year.

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09 to a fiscal year, o 012 level, when we were slightly below 12 of an assigned fund balance.

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But the uh but really what standard and poor's- and we don't talk about this a lot and I think that we.

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Should talk about this standard and poor's really looks at not only your understanding from balance.

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But they look at your total fund balance, which are those five categories and um state reports. Last.

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Reported to us in their report, it says we expect the available fund balance to remain above.

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30 percent of expenditures for the current and next fiscal years, which we view as a positive.

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Credit factor doesn't mean that if you go below 30 all of a sudden boom, you you lose your aaa rating.

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Because there's a lot of factors that go into that, but they really want to know why and how.

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You're going to how you're going to recoup that, if you go to the next slide, now again, when we use.

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Unassigned fund balance it. It affects your total fund balance so now we're down to about 34.87.

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So what we want to do is just be careful going forward. Look at our current budget, see where.

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We're going to end up and replenish some of this fund violence again, this 34.87 percent.

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Was back in about fiscal year, seven fiscal year, eight, when we were in that range judy, the.

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uh Thirty percent of the this.

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Okay, exactly it's on the slide general fund. I just wanted to know if that included water and sewer no.

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It's yeah just just general fund, just the general fund, so use of fund balance. So you know we do use.

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Fund balance every year we utilize part of our reserves. We have the reserve for debt.

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Service that we utilize in our budget to really offset the tax rate, so this is just showing and.

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Demonstrating that we do use- and we do maintain and we do follow and we do make sure that we stay.

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Within those ranges of fund balance of every year, so fiscal year, 22 with the two supplementals we.

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Have now utilized uh 4.7 million dollars of fund balance to offset taxes uh in uh fiscal year, 22.

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So now to move on to the levit termination stabilization fund. Now this goes back to 1999.

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So what this means is um this is leave payout to employees when they leave municipal services.

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So way back in the early 90s or prior to 1996, any employee of the city was able to accumulate.

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An unlimited amount of sick time and when you left service with the city, you would be.

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Paid out of percentage, and it depended on what union you were in what percentage that would be.

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So what this was causing is um just a large liability that was continuing to grow.

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And so back in the 90s it was like. How can we mitigate that that liability and kind of.

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Ease it out and grandfather the employees that were hired before 1996. um and that's just the.

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Sick leave part because annual leave is also paid out of the stabilization fund.

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Annual leave, is you know, it is your earned time and you are paid out if you don't utilize, all your.

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Tour max there is a max on that as well. So what the steps that we're taking during.

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This time, through the negotiations of all the collective bargaining agreements, was.

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To um to eliminate any cash payout for any employee that was hired out to 1996.

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And then the second piece of this was really to to remove this liability from.

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Year to year, within each individual department, because school, fire and police and municipal.

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Had to figure out okay who's retiring this year, you know one year they may need. You know. 300.

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000, the next year, then no one's retiring. So then they kind of have that little 300 000 players. So.

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We wanted to to remove that from the departments, even though they're still funding a certain amount.

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But to remove those spikes and valleys, um which also caused a budgeting nightmare for.

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The departments because you could have five people leaving um so those were the policies that were.

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Put in place and how how this works is there was an actuarial study done. We maintain it in-house.

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Started back in 19 like in the early 90s and then um it's monitored throughout the time of.

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Course things can change. Unexpected events could happen that can kind of swing. This.

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So what the theory of this is each department funds x amount of dollars on july, 1.

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That appropriation gets moved over to the stabilization fund.

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All of the payments are paid out of this fund and at the end of the year.

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If they actually can use an example, so police department funds, 180 000., but if they had to.

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Spend 300 000 it's paid out of the stabilization fund. The deficit is paid out of the reserve.

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Fund balance reserve, but we put them all together. So it's combination of fireplace school and.

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Municipal, so I want to jump to the next slide to try and clarify that a little bit and then we'll.

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Come back to this one, so this next slide is the history of exactly what has happened. The blue line.

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For each of the general government, school fire and police is the actual expenditure, so you can see.

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It might spike one year it might drop in another year, so the blue line is your actual expenditure.

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And the orange line is what was budgeted within those departments. So again, at the end of the year,.

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If there was surplus and that in that fund it would fall back into fund balance if there was a.

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Deficit, it would be used from the reserve to cover those costs. So the theory about this is that the.

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Liability has reduced significantly going forward, it will become more manageable as we go as we move.

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Forward there will always be a leave at term, but once any the larger cash outs for for sick leave.

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Are done, it'll be a little bit more manageable, but if we can go back to that previous slide.

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So the blue box on the right is really kind of telling um telling us where we are now remember at.

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One point: a hundred percent of employees got the sick leave payout. So now on the general government.

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Side we're down to like 19 employees, we're done police are six, and this is as of june 30th. So.

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Since june 30th, a couple of these employees who are eligible for the sickly payout have since left.

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um And the same with five or seven and then 33. so we're you know we're down to less than 10.

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Of the employees for this particular benefit, so this has drastically reduced that liability.

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So that's how leave it termination works.

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And so with the funding for this year, you know I want to take another look at it. I want to see.

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Where we are, I you know most likely. There will not be any increase in that particular.

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Area but I want to take a better look at and do a little analysis on that before.

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Giving that information to the department so now the health insurance works very very similarly.

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It again, we have two plans, we have the city side, employees are on health, trust.

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And then the school department employees are on school care, but they kind of both work. The same.

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So we're kind of self-employed we're part of a pool. Our rates are based on the.

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Predominantly based on our experience of the members that are on our plan.

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And you're going to remember our retirees. Many of our retirees are also on this plan.

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So the same thing: we try to come up with a budget for the departments, so we took out.

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The actual expenditures within the department moved it over to the stabilization fund and then.

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um The past policy was to take the 10-year rolling average and, as you can see from the chart, it's up.

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It's down it's up and down, so we took the 10-year rolling average added that to the previous budget.

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For the departments- um and then you know again, if there was surplus in the fund, it would go to fund.

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Balance if there was a deficit, it would be taken from reserve. Now this worked great for a number of.

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Years, um but really over time and we we started to tweak it a little bit last year, but really.

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Over time it's like it didn't the way we handled that policy didn't really take in consideration.

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The the total amount of ftes, so if there was a reduction enough to ease or an increase enough.

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To ease so some of this was starting to fall a little bit behind so last year we made some.

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Movement, we changed it a little bit and again. I want to look at it again.

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For this year, the health trust is going up a guaranteed maximum rate of 5.4. They will.

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Adjust that number uh I think in early spring or somewhere in there but they'll give us what their.

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Actual rate is, I think, it's usually april, um but the guaranteed maximum rate will be 5.4 and but.

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The school care is pretty much locked in at the 2.8. I can't read it 2.8, I think 3.9 3.9, oh guys,.

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um So so it works very. Similarly, I'm still working on the numbers to see if there would be an.

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Increase, um we are underfunding it from the the actual um amount within the department.

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And we did underfund it last year as well, knowing that will be utilized from reserve.

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So is it possible just to clarify how just quickly how the way we self-insure is different than.

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How a family might receive uh health care through their employee just talk about how we actually.

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Pay for these total costs. Okay, so um so we're part of this, the pool and it's managed by health.

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Trust and it's taken consideration um across the state and all the other communities that are in.

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Are in here so there's a certain I um kelly, harper could answer this question a little bit.

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Better than I, but from what I understand, there's a certain portion of their the claims. So if you.

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It depends on the number of claims that you use and the utilization um is how they base.

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Your experience, so um there is a certain portion of the more catastrophic uh claims and they're.

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Kind of pulled against the whole state and then there's another section of claims that um just go.

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Within the members of portsmouth, and um so that's how they base the rate and actually the.

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Guaranteed maximum rate they gave portsmouth 5.4, I believe, is lower than they gave the overall. It.

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Over six percent, um but let me let me add to that a little bit. The pandemic really threw a wrench.

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Into all of this, because many fewer people were going to the doctor and and and having.

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Insurance needs, so it was sort of a false sense of what was really going on.

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The other thing I want to make sure you mention is um premium holidays, yeah, okay, so um there was.

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There was a lawsuit back, 2012 or somewhere in that time frame where I would think it was the.

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Fire association had gone to the state and said you know, the insurance rates are going up and up.

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Your fund balance is being retained, so, if you didn't, if, if your community or your employees.

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Didn't use or utilize all those premiums and the claims weren't coming in they were putting.

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All of that money into their fund balance, so there was a lawsuit that said: um okay,.

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They can, and I don't know what the level is. I think it's 12, maybe 15 but they're only.

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Allowed to maintain a certain level of their fund balance at the end of the day.

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So if they had, which happened during covid, is people weren't, utilizing their health insurance.

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There weren't enough claims out there, so there was a bigger pocket of money that went into their.

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Reserve so they have to re refund, to the to the members that gap between what they're allowed to.

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Keep in their fund balance in in the um amount of premiums they collected less their claims.

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And less their fees, so that's called they call it holiday premium kind of a strange name, but they.

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Call it a holiday premium so at so the last couple of years, because of that we have received- and this.

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Is why we were able to kind of reduce health insurance a little bit last year? Is we received.

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Health premium: this is a refund, it's a refund of premiums, so retirees pay a hundred percent of.

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Their premiums, so we had to we mail them a check for their for their refund employees, also pay a.

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Portion so we had to figure out what that portion was, so employees would get a little bit back.

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And then the city received the remaining amount for the holiday premium, so we're seeing that again.

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This year- and this is why I want to do a little bit more analysis on it. But this is not going to.

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Continue, you know if, especially if we climb out of this covent environment, it's not going to be.

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As large as it was, and so we want to be mindful of that, as we look at health insurance going forward.

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So the new hampshire retirement system, so a little bit of good news for this fiscal year.

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They usually set their rates, they do a biennium budget, so they they set their rates. Every two.

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Years last year we saw a significant increase in the retirement the employees portion for.

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For the retirement, as you can see here, um police pays the highest percentage of 33.88.

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Percent, so for every dollar a fireman makes 33 cents. 33.88 cents goes uh goes to the retirement.

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System um but we're not seeing an increase in here, so the only increase in retirement.

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In the budget process would be due to anyone any cola, adjustments or any step increases or.

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Some fte changes whether increased or decrease, so that would be. That would be that there too.

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Now the new hampshire retirement system had a couple of things going and there's a couple of.

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Reasons why our rates are so high. um One is that, um prior to fiscal year, 10 the state contributed.

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35 of the employees, contributions for teachers, police and fire personnel, so they had said.

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Legislation they wanted to to basically eliminate that contribution and really got pushed down to.

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To the local communities um for this, for this cost, so um in fy 11 it was their obligation, was.

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Reduced to 25 percent and then after fiscal year 12 the state reduced its obligation to zero and.

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It hasn't come back since there's been talk about it. Apparently there's a house bill right now: 1417.

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That they would like the state to start reinstating a small portion.

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7.5 percent for teachers, police and fire personnel- I know jane ferrini- will be addressing this with.

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The legislative subcommittee, but there it's not very hopeful that this is going to go through so.

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This is something that the subcommittee could, you know, maybe uh keep an eye on and and research that.

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And see where that's going to go, it got killed the last time, but it's back on the table for a little.

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Bit this will be very helpful. The other piece why the rates are so high is the unfunded liability.

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And I know alina corset had mentioned this and talked about this during the audit presentation.

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There is a piece of the unfunded liability um that were that were paying for within the rates.

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And it really varies. It's like 70 to 85 percent of these rates is really going to that unfunded.

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Liability portion, so if that didn't occur, the the pension rates here would be a lot lower.

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Okay, so another area um which helps stabilize budgets was the cost of living adjustment.

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So um first I'll bring your attention to the right hand. Side of the screen which.

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Has the the we utilize, the november to november boston, cambridge um cpi, and what was negotiated.

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In all of the collective bargaining agreements is that we'll take the 10 years of that november.

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Compared to the previous november november, to november rate, to 10 years average that so.

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um Also in the collective bargaining agreements is also a stipulation excuse.

C

Me that there is a floor of two percent, so if that ten year average drop below two percent.

C

The cola would be two percent and then um there's a ceiling at five percent.

C

um So, with the ten year average, this the um cpi is five point three one percent in november to.

C

November but the ten-year average is 2.05 uh social security cola. Adjustment currently is 5.9.

C

um The left chart identifies all our collective bargaining agreements.

C

So we have 16, the ones that are highlighted in tan are the ones that are will expire. This.

C

This june so going into the fiscal year 23 budget. Currently uh those contracts will have expired.

C

Current salaries across the board fireplace school is- and this includes all full-time part-time.

C

Overtime holiday, stipends education is 51.6 million dollars, benefits of 14.3 million.

C

So this slide here is just kind of grouping the the operating side of the budget. You know we're.

C

The city manager and we'll be working with each one of these departments. We've had.

C

We've had uh brief discussions on the budget going forward the um so, but we you know we.

C

Need to pull together we're actually having another department, hood meeting.

C

um On thursday, to talk about the fy 23 budget, but some of the items that might impact the budget.

C

um Would be really salary adjustments across the board right, so uh your general government police.

C

Fire in school and then on the general government side- and you know I don't know karen if you want.

C

To speak to any of these, but happy to speak to um at least government general government side and.

B

Feel free to lean on the chief and karen. If you have any pd questions, but.

B

The in addition to salary adjustments that may be recommended by a staff.

B

It would be important to point out at this early juncture that in this coming budget, we will have.

B

Exhausted the city's udag line of funding, which was managed in repayment of loan funds.

B

Udag is a former federal grant program believe it or not, that fund has been funding uh the economic.

B

Development manager position and a few other items uh for judy would have to even give decades.

B

A whole long time, essentially long story short, the fund will be exhausted and in order to continue.

B

To pay an economic development manager, we will need to attribute or account for that in the.

B

Budget in in in the general fund this year and not take advantage of the udag fund, which will have.

B

Been depleted uh similarly and the inspection group is looking to add a full-time inspector.

B

And I think that might sell itself. As you all know, we're coming up to speed and trying to.

B

Bring the department back in line and be much more responsive to the the overwhelming need in that.

B

Area public works is looking to reposition some some classifications, a good example that we've.

B

Shared with you before is if you're, a water sewer plant operator or an engineer, it's a completely.

B

Different story with a 91 million dollar state of the art wastewater treatment plant and the.

B

Type of salaried experienced employee that we need is something we don't. We aren't able to.

B

Currently address we've mentioned to you before that, we're looking to build and make more robust.

B

Our information technology as a real department and something that we haven't accounted for.

B

Yet, but um it's early still and budgets still have to be formulated is how we handle.

B

The procurement of ppe across all departments, but, um as you can see, police in schools are similar in.

B

In costs that they can anticipate now, whether it be human resources or training.

B

Or agreements related to financial software or things of the like the school department.

B

Has been discussing and we'll continue to discuss the restoration of certain cuts and different.

B

Changes in their staffing as well, but in the blood in the blue box are things we we know to.

B

Be true, as as things that are always on the table and under consideration, judy's talked about some.

B

Of them, some things we haven't talked about is potential needs that are going to be larger. This.

B

Coming year for prescott park, obviously with a community campus coming online, that's a whole new.

B

Building we've never taken care of, and then the future anticipated needs at places like mcintyre.

C

Okay, so now more on the non-operating side of the budget, so.

C

When it comes to fund funding capital projects, there are kind of two approaches that we utilize.

C

That have an impact on the on the budget. Capital outlay is one approach.

C

These are projects that are identified in the in the capital improvement plan.

C

Adopted by the planning board and then ultimately adopted by the city council, um we call this your.

C

Pay-As-Your-Go basis, so this is your cash basis. The policy in the policy that has been in practice.

C

Is to budget no more than two percent of the prior year's appropriation for capital outlay,.

C

So, as you can see, the blue bar far away over to the right right now what's been.

C

Identified is 1.8 million dollars. This is 1.47 percent, so it hasn't reached that 2 percent.

C

um But also, if you look at it in comparison to the previous years, it's noted very clearly here that.

C

The last two fiscal years, this particular area has been reduced for obvious reasons.

B

I'll spend a moment on this slide it's hard to read on the big screen, but if you, if you.

B

Have the handout in front of you and- and we will make this available uh on the city website as well.

B

These are the items that that comprise the 1.84 million and of note about a third of the way down.

B

Would be the greenland road recreation facility, as you as we've talked about? There is a 2.2.

B

Million supplemental appropriation that was passed after this was laid out as one of the.

B

Items in capital outlay, so, depending on how that is expended and the funds from which.

B

This item could stay in or come out of of next year's capital outlay. Similarly, about two-thirds.

B

Of the way down sound barriers in the residential area along I-95, the city was initially told we.

B

Would need to provide a match and that number of 100 thousand dollars represents the match.

B

uh But, depending on the way that the um the funding is recognized by the state, the the.

B

Match on our part may not be needed, so those are two good examples of moving targets. If you will.

B

I don't know if you want to add anything else well and actually, once you know if.

C

If once it's adopted, and it's adopted this way, it will be presented in the budget document.

C

um Like this, but the it's not cut and stored until you adopt the budget, so there's still.

C

Room to talk about these projects and and and make some changes, if you will.

C

And the second approach is for funding of capital projects is uh dead service, issuing bonds.

C

So the city's policy is to use no more than 10 percent of the annual appropriations.

C

Towards net debt service payments to keep debt manageable, if you recall.

C

um Hearing from um alina corsac during the audit presentation, the word manageable.

C

Is actually a good term, so it's a good term. That's you know the the, um and this is really specific.

C

To portsmouth, I'm sure other communities have some kind of mechanism to to manage their debt.

C

By law, we really only have to follow the state statute, which we are well below. The debt limit.

C

um From the rsa standpoint, but we also incorporated this policy and and what this does is.

C

Just help project out and manage your future debt. So, although this chart shows um right now for fy.

C

23 through the cip, with current and projected debt we're at 8.91. But if you look out to the future.

C

To like the fiscal year 28, you see it creeps over 10. That doesn't mean it's going to be 10.

C

Because we go through the cip process every year, things change priorities and initiatives change so.

C

We just this is just a guideline to say: hey we're getting up to the 10 or passing the 10.

C

We need to do a little bit more work so and that helps keep that very manageable.

C

The rolling stock program there's really no number to the rolling stock program or a percentage. You.

C

Know at this point, but what I, what this slide shows you is. This is just an example of how we.

C

Manage that rolling stock this is for this is citywide, so this will include all our vehicles.

C

um For water and sewer prescott park and then all the general fund department in the back.

C

Of your budget book there's an appendix it has an inventory of all your vehicles and equipment.

C

It has the purchase price, the age, and this is just illustration- this is just an example.

C

But I just wanted to do a little clip it to show you how that how we manage this and then.

C

And then the bottom part, and also in your appendix, is the replacement schedule. So this.

C

Is where we identify the use for life and where we're gonna we're gonna roll these um equipment or.

C

Aging equipment out over time. Now again, this can change um it's just it's a managed tool.

C

The next slide shows what we've done in the last.

C

Few years since fiscal year, 18. so again um right now this the the 1.1 million dollar number.

C

Is really what has been requested to the city manager from the department city manager has not.

C

At this time currently sat down- and this is going to be part of our process in the very near future-.

C

To see what this equipment is and and see what she wants to present in the upcoming proposed budget.

C

As you can see, just like with capital outlay fiscal year, 21 and 22.

C

We really put a hold and pushed out some of the replacement vehicles to be mindful of covid.

C

And what we're going through there all right, it's fair to say that that 1.183 projected or.

B

Proposed or things that have been asked for is um to a certain extent playing catch up with the two.

B

Previous years, where we really put the brakes on on the replacement schedule and and certain needs.

B

So um that's something we'll weigh as a as a group and and make thoughtful decisions about before.

B

Coming to you so that 1.18 will most likely change almost done almost done. So I believe that's like.

C

Pretty much the rockingham county is um is the last non-operating item that I'll speak to.

C

Tonight so rockingham county is a big, is a big number for us in portsmouth how it is calculated.

C

Is uh twofold: it's the whatever the county adopts their budget at their tax levy portion.

C

And that will be distributed amongst all 37 uh communities in rockingham county. It's based on.

C

The um the the population is how it's distributed, and it's based on the.

C

The equalized value, so this chart shows all 37 communities. um You know as portsmouth is.

C

The fourth most populous community, but we pay the highest percentage in last year,.

C

We paid 11.4 percent of that proportion for the rockingham county obligation, tax.

C

And then this the next slide shows our history and of the rockingham county obligation. I will say.

C

That one of the things that the rockingham county did to us as we were able to track it a little bit.

C

Better because they used to be on a calendar year january to december, and so their budget meetings.

C

Were in january and february, we were able to like really monitor what they were coming in.

C

With their with their budget, and then we had some ideas, we got closer to setting the tax rate.

C

Of where we're going to be in the equalized value state, um but a couple of years ago, they um the the.

C

State allowed them to change their fiscal year so now they're on the same fiscal year as as we are.

C

July 1 to june 30th, so now their budget meetings are really kind of coincide with.

C

Your budget meetings, so um it's it's a little bit harder for us to to predict, but ultimately.

C

Though um it really always changes a little bit by the time we set the tax rate, so those aren't.

C

Official until the october november time frame so during the budget process, we'll utilize a number.

C

um To our best estimate, but most likely it will change um for fiscal year 22 we budgeted 5.8.

C

Million dollars, as you can see on this chart, it came in at 5.67 million dollars, so there will.

C

Be some budgetary savings in that area for county, but we certainly don't want it to go the other way.

C

And then the last slide just kind of groups what we just talked about on the non-operating side.

C

Debt service, what we're predicting right now we're estimating right now a change of 1.1 million.

C

Rolling stock just under 600 000, it upgrades 197, 000 and then capital outlay. This 760 thousand.

C

Doesn't mean this is what's going to be presented to you in the proposed budget, but this is what.

C

We're looking at right now so with that judy and I of course would be happy to answer any question.

B

But we would also want you to know that starting thursday and and traipsing right through the month.

B

Of february we will meet with every department, get a better handle on things they absolutely.

B

Need things they'd like to see we're going to pay particular attention to efficiencies they.

B

Can achieve or things we can do cross department by way of cross training or shared services. The.

B

The department heads have gotten really nimble, certainly during a pandemic and figuring out.

B

What they need to have and what they they and what makes them run as efficiently as possible. So we'll.

B

Be meeting to review and refine things that we all know to be and we'll bring those to you, as we have.

B

Them, but we would obviously love your feedback both tonight and on a going forward basis, as we.

B

Look to develop a budget that reflects not only the values we talked about on saturday, but the.

B

Realities of things we need to provide in terms of core services. So with that we will stop talking.

A

Okay, uh so open up to to questions um counselor cook, you have your hand up.

A

And no ground rules feel free to ask whatever you guys want.

D

Thank you mayor, um so I have a question about the unexpected expenditure.

D

That occurred out of general fund balance at the end of the year. The 2.2 million dollar skatepark.

D

Expenditure, if we leave that in the current cip budget, which we just saw and it's funded.

D

In that manner, and, therefore those funds, my understanding, returned to the general fund.

D

How is how does that impact that 95 million dollar tax assessment.

C

So um the tax levy, that's on that sheet for 95 million. Yes, um that is still offset so the piece.

C

So, as you look at the expenditure, so it increased 125 million the on the revenue side on the bottom.

C

Of that slide, the use of fund balance also increased, so there was no tax effect. Okay, okay,.

C

And the tax rate was already established, so that's really um with a supplemental appropriation. You.

C

Have a couple choices which I've never seen here. If you need a supplemental appropriation one, you.

C

Send out a new tax bill to people which you don't want to do or two take it out of your fund balance.

C

So it has no tax effect. Can I follow up with that? um So I guess my follow-on question then, is.

D

It would return us back to a 13.6 percent reserve rate. Is that correct.

D

um Where we were prior to that expenditure for this year, um so it so, it all depends on what.

C

Happens at the end of the year as of june 30th, and it depends on what the council chooses to do.

C

If one to reserve or encumber that money, then no, it would not fall back to fund balance and.

C

Also see where, if there's any other revenue or expenditure surplus, you know we use the debt.

C

Service reserve every year too, so we like to also replenish that so that doesn't eventually run out.

C

um But there's one or two things to do and that will be a council decision.

A

Any other questions.

A

This is a lot uh to take in uh we'll go through it twice as a council, uh I still uh learn um as.

A

I've watched it a uh now sitting through this, the the third time so questions uh can.

A

Arise and and and we will certainly have opportunity uh to address them.

A

But if there's not uh any further questions I will uh I will move on to public comment.

B

There's no one here from the public kevin. Is there anyone on zoom that wishes to to offer comment.

A

Not at this time, maybe everybody's celebrating poppy getting into the hall of fame. um If I can.

B

um Offer once again that both judy and I would be available for one-on-one questions, no question is.

B

Too big or too small you can lump them together or just come at us every time you have a question.

A

Assistant mayor, I don't know what that that sound was like. It wasn't.

A

It wasn't coming from you, but uh do you have a question yeah judy? Can you explain.

D

um A little bit more how the rockingham county tax, um how that is calculate how they.

D

Calculate it, as you mentioned, you know, we only have the fourth highest population, but pay.

D

A staggering amount more than yes, so that piece is based off your equalized value, so.

C

They they provide a list of all the communities, they're, equalized value united, say they. The state.

C

um So they want those equalized values and they're what they try and do when they equalize the values.

C

We have about local values and then the department of revenue does their calculation to equalize.

C

To try to bring all the communities like so you're, comparing apples to apples so kind of up to 100.

C

So if you look at the equalized value, it's going to different differ than what we say. Our local.

C

Value is um so the state uses those equalized values for, for a number of reasons, to distribute.

C

Different taxes and revenues, it's also used in the process of the statewide property tax issue, so.

C

They then they take take all the 37 and then they just kind of weigh them out what portion.

C

Of your equalized value is a total, then they take that percentage. So last year we were 11.

C

So, even though I think dairy has a higher population, but their equalized value might be.

C

Lower so um then that's distributed to the piece that's to be raised in tax obligations on the.

C

County side, so the county has a similar thing. They have their local revenues, they get revenues from.

C

uh For the nursing home- and they you know um for the jails and whatnot, so they have a piece.

C

That is really just their their tax levy, that's distributed amongst these 37 communities. Thank you.

A

So judy stating that another way we through the equalized property, we represent a greater portion.

A

Of property value in rockingham, county and as such are required to pay as a percentage higher than.

A

Other uh other cities, because their property is not valued by the state as highly as.

A

As our property, well, their total value is just going to be made up so differently.

C

Because the equalization actually brings them up to the same level like you know, um I.

C

I want to say 100 value, market value kind of thing, so that's what the whole equalization process does.

C

Is bring them up so they're comparable, but some of these communities are just smaller.

C

So they don't, their values are not as high overall as portsmouth the numbers yeah.

C

Doesn't you want to add anything? Did I see a question from counselor taber now we're.

A

We're going back so we've had public comment, but now we're nobody having any public comments.

A

Said? Okay, we got a chance to ask some more questions, so we're back on question and.

A

Answers I'll allow it here, councillor tabor, we're back for more one comment. Is that.

D

Judy and her staff are wonderful when you have questions their prompt, they research them and.

D

I've asked a lot of detailed questions over the years.

D

It helped I always have trouble understanding the difference between.

D

The budget year and the tax year would it be fair to characterize it, as we finish.

D

We finish a budget and then in november we assessed the tax uh bill for half of that.

D

Year and we're paying in arrears we're paying for the um that's correct, yeah.

C

Dover and portsmouth, I believe, are the only two communities that better do it. That way, and it's.

C

In them it had to do with a state statute, but many many years ago, when I I think when they changed.

C

The fiscal year to a july 1 to a june 30th way before I started working here and but dover and.

C

Portsmouth are the same so when they set their tax rate in november. It's it's. The the first tax.

C

Bill oftentimes, it's the second tax bill um for other communities, so in essence, our fiscal year.

C

Started right so we're funding six months into the fiscal year before we collect any tax revenue.

C

So that's how that that's, how that works? All the assessments are based as of april 1st,.

C

um So the tax here is different, it's off, um but the fiscal year is july, 1 to june 30.. So our.

C

First, tax bill is december. The second tax bill is june. Okay and again, dover and portsmouth are the.

C

Only ones I get a head shake, I deal with this on a daily basis. Yes, and you might be able to.

D

It's it's so most of the cities in case you're interested most of the towns and cities in new.

D

Hampshire actually have the first tax bill in july is half of the previous year, and then they set the.

D

Rate in the fall, and then they figure out with the whole tax bill and in december they just pay the.

D

Difference right, dover and portsmouth: do it very differently because the actual tax year is april.

D

1St to march 31st right right because they're when they do it, when the other communities, when.

C

They send their tax bills. It's an estimated tax bill right, they're, estimating it so so.

C

um Then, when you get your second bill, they they finalize their tax rate and they say: okay, here's.

C

Here's your balance that you owe yep just fun, I'm glad we have something in common with dover.

D

We do yes, there never goes down on the second one. It's always a pain to explain that every.

D

Time you close alone, yes, and it is hard so and we get a lot of calls in the tax office.

C

For closing, when it has, when it's related, I always tell them, don't call the tax office call me.

D

Yeah and we're really not supposed to you know, do that calculation project. You always.

C

We always refer those calls back to them to the realtor, to the title company and.

A

Are there any other questions that we have and again there's you don't have to funnel any.

A

Questions through the city manager, you can reach out directly to judy and the finance team, as you.

A

Can with the the city legal department, they are a resource to the council. I think it's you know.

A

It's good to have the types, any question that you have we'll make an effort to answer in public as.

A

Well, though, because for every question that you ask, there's you know 100 other people that want.

A

To know the answer at home, and so our our job is to ask the questions that you know we might even.

A

Sometimes know the answer to in order to make sure that the public is being served in this process.

A

um And then I guess, as we uh adjourn this, I I want to thank uh the staff for the the opportunity to.

A

Discuss um at our retreat, our goals um very excited to have our goals come together as a.

A

Council and then stress test them with the public so that the public can understand. You know our our.

A

Our values really through our budget and the goals that we hope to achieve uh through that.

A

Budget I'm excited to put those forth uh and have public comment on them, but with that, unless there.

A

Is any other questions I I will adjourn. Thank you very much good night portsmouth. Thank you.

B

Can I ask a question related to this.