In an attempt to provide factual information, the school committee encouraged me to highlight each of the district’s warrant articles in a post prior to town meeting. Before featuring projects, I think it important to provide some background information.
Capital budget items and operational budget items are different in that capital projects tend to be one-time expenses (fixing a roof) and operational items tend to be on-going expenses (salary). The capital budget items can be further divided into short-term (raise and appropriate) and long-term projects (bonded).
How can we invest any money in capital items when we are asking employees to consider a 2% cost of living increase instead of a negotiated 3% cost of living increase?
Like any organization or family budget, a certain percentage of revenue (or income) needs to be expended for construction, maintenance, and repairs. Ironically, the economic situation that is making our operational budget difficult is creating an excellent environment for capital projects because municipal bonds are attractive investments and contractors are eager for work. In addition, a part of the town’s bond rating is determined by the commitment of the town to maintain and repair its infrastructure. A drop in the town’s bond rating would cost more than making the initial and ongoing investments associated with our capital projects.
The math is easier to explain in Burlington than many places because the overall town budget is approximately $100 million per year. This year the Selectmen and Ways & Means Committees are recommending between $1.6 and $1.9 million in short-term capital projects. The discrepancy is a result of the differences between the Governor’s and House’s proposed budgets. Using $2.0 million as a round number, the town is essentially dedicating 2% of it’s annual operating budget to update, replace, and repair capital items. If a family earning $100,000 is used as a comparison, this percentage would equate to this family setting aside $2,000 for repairs and updates in their annual family budget.
The Selectmen and Ways & Means Committees have also committed to a long-term bonding schedule that dedicates about 7% of their annual budget to paying for long-term or bonded debt. Using our same family, this model would equate to about $7,000 annually for mortgage and car payments. The typical bonded project in town is financed over 10 to 30 years. As long-term projects are completed, other projects are slid under the 7% bonding curve. Town and school staff have worked together to identify projects to be bonded over the next ten years that keep long-term spending around the 7% curve.
The school district initially had nine short-term warrant articles and two long-term (bonded) articles for the May Town Meeting. The nine short-term warrant articles totaled $938,085. This request represented 59% of an available $1.6 million (proposed House budget). As a point of reference, the school district spends a little over 50% of every operational dollar. With this guideline in mind, our initial warrant request is in line with the district’s percentage of operational spending. Since the end of March when warrant articles were due, we have eliminated and/or reduced several of these warrants in cooperation with town staff.
At present we are asking for support of seven articles for a total of $613,085 or 38% of the $1.6 million in funding for short-term capital projects. If the Governor’s budget amount is supported and the money available is increased back to $1.9 million, then we would ask to restore one more warrant article at $200,000. This restored project would increase our request to $813,085 or 43% of the available funding for short-term capital projects.
The district is asking for support of two long-term bonded projects – the New Memorial School and Renovations to the Varsity Field. Both projects total about $30 million. More importantly, both projects have been a part of the 10 year capital plan for many years and fit under the 7% guideline established by the Selectmen and Ways & Means Committees. If approved at town meeting and bonded, neither project will have any impact on the FY2010 operational or short-term capital budgets because the first payment on this long-term debt will not be due until fiscal 2011. In other words, we are not prioritizing building projects over people.
Thank you for your patience as this post is long. As mentioned, future posts will feature one capital project in depth.