OPEB is coming. OPEB is coming. OPEB stands for "Other Post Employment Benefits," and it means that Northborough will join the commonwealth in a retiree benefit liability in years to come. It is unavoidable, mandated, and to the tune of nearly $30 million.
Coderre is hoping the town will support a meals and hotel tax to help, in part, fund the mandate.
OPEB is one of the many moving pieces, both predictable and completely the opposite, that reflect Town Administrator John Coderre and his financial team's approach to a balanced budget, which he presented on Monday night at the Board of Selectmen meeting.
Coderre, in this joint public hearing with the Appropriations Committee, proposed a FY2014 budget of $51,802,233, a 4.6 percent increase over FY2013 on Monday night.
If approved at Town Meeting on April 22, it would mean an estimated impact of $145 on the average single family home, which is valued at $383,652.
Coderre stressed that through strategic planning and strong economic growth in a precarious economy, the impact has been minimal, pointing to an average tax bill that increased $189 within a three-year time span. Prior to that, the tax bill increased at least $200 each year.
"$189 is real tax relief," said Coderre, "and we are being cognizant of what people are feeling."
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The burst of economic growth Northborough has enjoyed in the last few years, largely due to the introduction of Avalon Bay and Northborough Crossing, will subside, Coderre added. While those projects brought the economic value up to around $90 million, it should "go back to prior years at around $30 million."
The economic boost, said Coderre, helped to backfill the lack of state aid, maintain services and "give residents a break on their taxes."
While state aid is slowly improving, it continues to be less than what Northborough would hope for, and also unpredictable. Planning to be level funding for FY2014, Coderre said, "We almost never know what state aid will be until well after Town Meeting. We were hoping state aid would have improved, but it seems to have stalled."
While economic growth was up, that very factor hit Northborough hard this year as a new state Chapter 70 formula assessment that expanded Northborough's side of the pie for Algonquin Regional High School. This year, Algonquin's operating assessment increased from $801,000 to $8,835,115, or 9.8 percent.
Since the debt assessment on Algonquin decreased by nearly 50 percent, the net effect would be 1.85 percent. Assabet Valley Vocational Technical's Northborough assessment, too, decreased by 1.48 percent.
"If this didn't happen at the same time," said Coderre, "we'd be in fiscal distress."
In a state formula that officials often refer to as confusing, an increase in Northborough students (some 53 more than last year) as well as economic growth factored into the increase.
"We met with the Department of Education for them to explain the formula for Chapter 70," said Coderre. "I think I now know less about it than I did from when we started ... it was like pulling a Band-Aid off, and we were hit with the worst part of it."
Within the last five years, reductions have carried over, including an eliminated cemetery superintendent position, a vacant assistant DPW director, eliminated position of assistant library director, and vacancies for an assistant town engineer and Family & Youth Service Assistant Director.
"By and large, with a nip and a tuck, the departments are getting what they request," said Coderre. "At some point in this cycle we have to review staffing."
Coderre highlighted that a new police office position has been added. While the position was added to backfill an officer vacancy because of an injury, the new position will remain when the officer returns. Other highlights include a new Fire Department position, the CodeRed emergency system, a regional money-saving Veterans District and DPW reorganization.
The health insurance budget for FY2014, Coderre noted, increased just 2 percent. Once a "budget buster," negotiations for health insurance with town employees is vastly important to the solvency of the budget, he stressed.
"In 2010, health insurance went up by 12 percent," said Coderre, adding that a joint procurement agreement with Southborough was extremely beneficial. "We get along with everyone here in Northorough. Health insurance has been our saving grace for the last five years." Collective bargaining agreements for non-school employees expire on June 30, 2013, and will be re-negotiated.
This year's budget includes $1.8 million in capital projects, to be approved by Town Meeting. Of that, $1.3 million would be funded by free cash, and the rest by old bonds.
"Our debt service is down," said Coderre. "We are paying the credit card but not using the credit card, and you all know what I mean. We always have to bond larger things. But for the smaller things, we pay as we go, and that is by design."
And back to OPEB.
Funding retiree benefits, which will be mandatory in the next fiscal cycle, will cost the town etween $350,000 to $500,000 annually.
"It is the one 800 pound gorilla in the room, and we have to fund it," said Selectman Aaron Hutchins. "And you have to do this either by raising taxes or other revenue. What people have to understand is we have a major liability in the next cycle. It is just such a huge obligation."
If approved, the financial team predicts that a meals and hotel tax could potentially bring in $280,000 annually to Northorough.
"You want to make decisions not in an emergency or in a crisis," said Coderre. "You want to do it in a studied approach."