Town Administrator

Town Office Building

140 Wood Street
Somerset, MA 02726
(508) 646-2800 phone
(508) 646-2802 fax

To: Members of the Board of Selectmen

From: Richard Brown, Town Administrator
Subj: FY19 Budget
Date: March 14, 2018

On May 31, 2017 The Brayton Point Power Station ceased operations and stopped providing energy
that would go to the power grid and revenue that would go to the Town of Somerset. At its high point
the roughly $13,000,000 derived from the power plant provided roughly one third of the Town’s tax
revenue. When it ceased operations, that amount was $4,250,000 roughly 7% of revenues. Brayton
Point Power Station, a coal powered plant could not compete with cheaper natural gas and no amount
of wishing and hoping would make it so. At the same time as the plant is closing, the Town stands to
lose $3,000,000 in RGGI funds. These funds come from the clean energy fund and have been used to
offset the loss of plant revenues for the past five years.

In spite of the bad financial news, the Town has been planning and preparing for this shut down. Over
the years the Town successfully adapted to the loss of substantial operating revenues and did not
negatively impact Town services. The Town has built up its reserve funds in order to maintain service
levels in spite of declining revenues. Waste water expenses have been incorporated into an enterprise
fund and are no longer funded via property taxes. And the Town has secured $550,000 in EDA funding to
help develop a plan for recovery and reinvention.

In order to maintain services and insure sustainability it is essential that the Town control its costs.
With few exceptions, the Town is not in a position to add programs, fund major capital expenses and
expand services.

The Town is fortunate that the power plant has sold to the Commercial Development Corporation. This
company is skilled in converting old industrial sites into productive re-use opportunities. However, the
process of demolition, marketing rebuild and re-use will be a longer-term effort and will not yield
substantial tax revenues in the short term. Additional re-use opportunities may require the use of a
PILOT (payment in lieu of taxes) that would further lower the revenues to the Town. In spite of this, we
are encouraged by the long term opportunities for recovery and growing the Town’s tax base.

While the Town is dealing with some of the issues outlined above, educational opportunities in Town
and the region will place additional burdens on our taxpayers. Somerset has been invited to compete for
MSBA funding for Middle School renovations. These needed renovations require substantial upfront
study costs before a project is developed and reimbursement levels are established let alone received.
Major projects at Bristol Aggie and Diman Vocational High School, while needed, will serve to draw
significant amounts of funds away from meeting Town needs. This is perhaps the worst time for
Somerset to be engaged in these projects as it places a demand on our resources and the savings we
have maintained to manage our budgets as we move toward recovery.

In a recent survey conducted on behalf of the Town by The National Research Center, most residents
rated the quality of life in Somerset as excellent or good. Residents value the high quality services they
receive and are interested in maintaining their quality of life in the community. These same residents
understand that there are costs associated with providing these services and are willing to support a
reasonable tax increase in future budgets. At the same time, we recognize our responsibility to minimize
the cost of those increase and maintain our efforts to control overall costs for local government. This is
especially important as the costs of providing services fall more and more to local property owners as
the amounts from one major taxpayer have diminished.
As we begin to plan for the rebuilding of the Town’s economic base, our mission is for Somerset to be a
progressive community that provides high quality services which promote a high quality of life and an
active and diverse business community. We commit to this through cost effective governance and
creating opportunities for future development. Our values include:

Integrity- Recognizing right from wrong and being willing to do what is right regardless of the
consequences.

Quality Service- Providing the highest levels of service to the community with the resources that are
available.

Accountability- Accepting responsibility for our decisions and actions.

Respect- Valuing each person and being considerate and courteous toward all.

The FY19 Budget is designed to be a level funded budget. With few exceptions that will be discussed
later, the propose budget maintains the level of services provided by Town departments and is adjusted
for contractual increases and cost adjustments that may be passed on to the Town.

As a result the overall budget for the general government is expected to increase by about 2.4 %.
At this time it appears that the budget for the Schools K-8 will increase by about 3% and by
approximately 3.4% for the Town’s share of the Somerset Berkley Regional High School.

A discussion of major issues in departmental budgets follows below:

1. Personal property revaluation services are included in this budget rather than as part of an
article and increase of 18,500.

2. The budget for the Town administrator includes funding for a Town Planner. This position, which
would be a contract position would work under the direction of the Town Administrator. The
planner would work to coordinate the Town’s two EDA grants, work with the redevelopment of
the power plant site, and staff Planning Board and Board of Zoning Appeals functions. A portion
of the funding for this position will result from the reassignment of drafting ZBA decisions from
the Town’s attorney to the Town planner.

The budget for the Town Attorney has been reduced by about $40,000 to reflect the above
discussed activities. This may be a bit aggressive for the first year of new labor and general
counsel.
Additionally, the planner will allow the Town to maximize the State investment of $160,000 in
the Site Readiness Program Grant and capital project funding that is currently included in the
 Senate’s Bond Bill. The planner will also take a lead in implement the LED Streetlight
replacement program and work with the State on developing opportunities as a part of its Green
Community Initiative.
3. The budget for the Town Moderator has increased to reflect a higher volume of activity for Town
meetings.

4. The budget for public celebrations was increased by about $5,000 to reflect increased activity in
this area.

5. The budget for street lights remains at $190,000. However after the replacement of existing
lights and the installation of LED streetlights we expect substantial on going savings in the cost of
our street lighting program.

6. The amount for Bristol County Retirement is increased by about $188,635. While this
is less than last year’s increase it results from the manner in which the retirement system
accounts for unfunded liability and is out of Town’s control.

7. The budget includes funding for the implementation of a new pay and classification plan for by-
law employees. The cost of the adjustments to implement the plan is approximately $45,100 for
general government and $18,960 for public utility employees and is shown on the position listing
at the end of this message.

The adjustments help to properly align the by-law positions and create a more modern and
flexible compensation system. Future increases can be made by cost of living adjustments and
regular market surveys of the affected positions.

As a part of this recommendation I am suggesting changes to the Town’s Personnel By- Law.
These changes will help finance the new plan and make the personnel by law more appropriate
to the class of positions it covers. These changes will cover only employees hired after May 19,
2018 and included:
1. Elimination of longevity pay. Pay should be competitive based on the market place and not
a function of time in place.
2. Elimination of the Tenure By-law. By law employment is intended to allow the Town to have
management flexibility. Employees are still protected from arbitrary management decisions
but should not be allowed a level of protection that seems to mirror civil service. In fact
under the current system an employee could be promoted and not perform but be afforded
protections that they earned over time as a lower level employee.
3. Vacation time would be capped at 4 weeks. This is a generous amount of vacation time and
is more than commonly allowed in the private sector. The plain fact of the matter is that
even with this limit and employee can be away from work for one month of the year’s
twelve. This does not serve the public or the organization well.
4. While not in this plan the Town should ultimately consider moving by-law employees to be
performance based compensation plan.
5. Permanent full time by law employees will work either 35 or 40 hours based on their
requirements of the position.
6. The education incentive payment will be eliminated. In some cases the payments over time
for these course greatly exceeds the cost of the course itself.
7. Annual performance reviews will be required of all employees.
 8. Stipends will be included in employee salaries and will be shown as a part of annual
compensation.
9. Full time By-law positions will be at least 35 hours per week and any grant funds that may
accrue will be used to offset costs and not supplement salaries.

During past budget sessions, we have discussed the fact that the Town budget pays for significant costs
on behalf of the schools. These expenses, which exceed $6 million, include but are not limited to
employee health insurance, administrative support, liability and property insurance, debt, Town meeting
articles, vehicle fuel and trash collection. Because of this, it is disingenuous for the schools to present a
budget that is net Ch. 70 revenue that results in the impact on the tax rate. We are fortunate the Ch. 70
funds have increased over the past several years but the true potential cost to the taxpayer is far greater
than presented. The result of this arrangement is that Town departments are asked to control
expenditures as much as possible so as to minimize the impact of increases that accrue to their activities
and increases to support funding to the schools that is outside of their budget.

During FY18 the Town, using M.G.L. 33B sec. 21-22 negotiated health insurance plan design changes with
its employees and retirees. The process that we undertook was designed to help slow the rate of growth
in employee health insurance premiums and to make the health plan trust more sustainable over time. I
am pleased to report that we have achieved a degree of success in that we anticipate that our overall
projected claims are expected to increase by about 5%. Premium increase have been allocated by lines
of coverage for FY18 are:

Blue Cross PPO 7%

Blue Cross HMO 4.5%
Medex lll 5.5%

I have developed a proposed capital budget. I expect that the discussion of these items will continue
past these budget discussions and will result in recommendations for funding at fall Town Meeting. By
that time we should have closed on the sale of the route six land and will have a significant amount of
money to apply toward capital needs. We will also have a better understanding of revenue projections,
union contract negotiations and the amount of funds that will need to be applied against an anticipated
tax levy.

We recognize that the Town is entering a period of more extreme fiscal stress. The timeline from
demolition to reuse of the Brayton Point property will not be sudden and the replacement of revenues
will lag behind the replacement economic activity. More aggressive management of local resources is
needed to maintain our financial stability and make the Town attractive for new development. A new
master plan and full time planner cannot be expected to achieve success if we lack the resources needed
to provide services and opportunities for development.

Many of the ideas shown below have been previously discussed and are worthy of continued
consideration. I suspect as finances become tighter some of these options may look more attractive.

The Town’s K-8 school and the regional high school comprise well over 50% of the Town’s general
government expenses. Clearly, controlling the cost of education is the single most important factor in
stabilizing the Town’s finances. The schools and Town should consider applying for a Community
Compact Grant to explore shared services that can help control overall costs.

Consider regional dispatch. The regional planning district has a study on this matter that can be updated
and a number of regions in the state have made this move. Areas that are larger and more complex than
ours have been able to do this successfully. And there are state incentives to make this happen.
Somerset is justly proud of it police and fire services. Our public safety employees are active, engaged
and effective. These services are the most highly valued in a recent citizen’s survey. However, Somerset
enjoys relatively low rates of structure fires and is a relatively safe community from a law enforcement
perspective. Consolidation of public safety activities into one department can provide effective fire,
EMS, and law enforcement services while at the same time controlling current and future public safety
costs. Additionally, this system leads to an increased visible presence of public safety officers on the
street.

Costs associated with the schools should be removed from the Town’s operating budget and included in
the schools. It is in my mind a best practice and more accurately portrays the costs of providing
educational services in Somerset. The present arrangement requires that the Town continue to reduce
its own expenses so that education funding levels can remain intact. Additionally, there is little incentive
to control these various costs if you don’t feel the impact of them.

I have not mentioned the pending expenses that will be required to upgrade and maintain the Town’s
waste water treatment plant. We have not yet received the new NPDES Permit which we expect will
drastically lower the amount of nitrogen that the plant can discharge. This will require major plant
upgrades. We are also in the process of conducting a study of infiltration and inflow and the solutions
recommend will require large amounts of spending for capital improvements. We are also using EDA
funding to explore and integrated water management plan and the creation of a waste water district to
expand our customer base and spread costs out among our regional partners.

The work required in the public utility area will be complex and costly. It is difficult for local governments
especially smaller units of government to maintain the funds and expertise needed to manage public
utility operations. The Town should explore a public private partnership that allows the private sector to
manage the utility on our behalf. This can also include designing, constructing and manning the
improvements that are soon to be required.

There is no magic formula that can create balanced budgets and economic viability. I caution you to
beware of large scale projects that seem too good to be true, make unrealistic promises and require
large scale public subsidy. Using baseball as a metaphor, we need to hit single and get on base.
Homeruns make look exciting but you can lose the game even while hitting the ball over the fence. Very
often when some project or enterprise sounds too good to be true; it is. The Town’s public officials,
Selectmen, School Board members, Advisory and Finance Committee and our other boards and
commissions are committed to providing the best services to the Town at the lowest costs. Also please
remember our Town employees. These loyal and dedicated employees have served the Town well in the
past and provide the resources that are needed to succeed in the future. I said earlier and think it is
important to repeat that budget savings made at the expense of employees tend to be rather small in
the scheme of what we need to achieve. And these types of savings may in fact diminish the intended
results. We are stronger together, moving toward our common goal of serving the citizens of Somerset.