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Town’s $105M budget, still in need of $500,000 trim, ‘presents a fiscally sound path forward’

by | Feb 9, 2022 | Featured: News, News

One week after announcing that a deadline-beating tax appeal filed by Eversource would require an adjustment of the town’s budget to the tune of $1.5 million, Town Manager Norman Khumalo returned to the Select Board on Tuesday with a revised budget that still needs a $500,000 trim.

The town was able to move money around and make adjustments that accounted for $1 million without making any cuts.

“We did not cut the budget,” Khumalo said. “What we did was we identify alternative funding sources to cover that [$1.5 million]. To date, we’ve identified $1 million of that [$1.5 million]. We are continuing our discussions to close the $500,000 gap.”

Added Khumalo: “I’ve been working very closely with the superintendent in an effort to identify alternate funding to cover some needs in the School Department’s budget while still providing — let me underscore that — while still providing for every need identified in the school budget request.”

Khumalo, who last fall asked town departments to hold themselves to 3.25 percent increases, said the theme of the budget is growth with equity.

“The revised $105 million general fund budget that I’m presenting to you tonight strengthens the community of Hopkinton’s resilience, provides new resources to address community growth and to improve equity and inclusion, and it presents a fiscally sound path forward,” he said.

Khumalo said the budget reflects an increase of 6 percent, or $6.3 million from the previous year, and has a projected tax impact within the tax levy of 2.31 percent, which translates to an increase of $268 on an average Hopkinton home that has a value of $681,500.

Khumalo identified four primary reasons for the change in revenue forecast.

“These four unanticipated factors have shifted the budget landscape, namely, higher than expected new growth from fiscal year 2022, a critical forecast for yet more new growth tied to Eversource LNG in fiscal year 2023, Eversource’s actions to appeal 60 percent of their tax bill, and higher than expected local aid from the commonwealth. We’re hoping that as the commonwealth’s budget goes through the Senate and the House that Hopkinton’s share of the budget continues to increase.

“None of these factors were known when the budget guidance was issued back in October last year. Working with the finance team in this evolving situation, we carefully reviewed all budget requests in the context of this changing revenue picture.”

Added Khumalo: “The revised budget proposal does the following things: It sustains current service levels. It covers contractual and inflationary costs. It supports emerging needs linked to the town’s focus on growth, diversity, equity, inclusion and belonging by expanding services for at-risk constituents of the community, including high-need special education students, an increasingly diverse user base at the Hopkinton Public Library, and outreach programs operated by Senior Services, Youth and Family Services and the Hopkinton Police Department.

“It provides some enhancement driven by growth and climate change, including an expanded tree management program and professional conservation staff. It continues to sustain long-term financial stability, although several actions intended to further bolster long-term financial strength have been deferred pending resolution of the Eversource tax appeals. This budget proposal also invests in the town’s capital plan. It calls for funding $2.9 million in pay-as-you-go capital items from available free cash and insurance proceeds.”

Chief Financial Officer Tim O’Leary addressed the most recent issue with Eversource, which has appealed town assessments every year since 2014.

“We’re confident that the town will prevail in all or a large majority of those appeals, but it’s going to take time and money for us to resolve those — a lot of money, and probably a lot of time,” he said.

On a positive note, O’Leary said state aid should continue to rise based on the most recent data.

“Longer-term prospects for the state and state aid look very good,” he said. “State revenues for FY 22 through December — so that’s the first half of the year — were up 25 percent from FY 21 and they’re up 13 percent above a pre-pandemic baseline that they had established as a multi-year planning factor. So, really good news and a strong signal of a recovery. It seems most of Massachusetts is poised for a strong V-shaped recovery from COVID, which is more favorable than what we’d been planning for.”

O’Leary’s overall picture for Hopkinton was positive as well.

“To summarize, our long-term position is very good, and it would be outstanding if Eversource would stop appealing its legitimately charged taxes,” he said. “Tax collections continue to be excellent, except for Eversource. Our revenue stability is very good, and with Eversource it’s still very good. Stabilization reserves are very good to excellent but could ideally be boosted a little to capture full credit from the rating agencies by bumping those amounts up a little more. We’re making very good progress on funding the pension liability, and we need a course adjustment to get back on track with OPEB [other post-employment benefits]. We have a substantial list of identified capital projects that will have significant tax impact, but they’re achievable if the voters want them as excluded debt and seem to be tracking within the town’s debt limit.”

Khumalo suggested that the Select Board set aside time at an upcoming meeting for the public to ask questions about the budget process, “inviting criticism, welcoming feedback, and encouraging the public to contest some of our thinking.” After some discussion, the board settled on March 1 for the meeting.

Select Board Member Muriel Kramer said she hopes the town can make the budget understandable for residents so that they can weigh in on it.

“The budget is so big, there’s so many moving pieces,” she said. “That’s what I’d like to focus on, is how can we present this so that people can actually feel like they can raise their hand and ask questions that are meaningful and really dig in and understand. These are big numbers. I know that it’s a balanced budget and we’re being responsible as we go forward, but I also know that people struggle to keep pace, and we want to make sure that part of our growth, equity, inclusion and belonging piece is that Hopkinton is a town that people can afford to stay in and people can afford to move into. The affordability question is a little bit crazy in the market that we face today. But I want to make sure that we’re thinking about all of those implications and those things.”

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