Taxes and Fees
2012 proposed Lancaster budget, fiscally responsible or smoke and mirrors; Part II
By Lee Chowaniec
Oct 19, 2011, 14:53
At the 2012 proposed budget public hearing, more comments, questions and concerns were voiced by several other Lancaster residents. It was not that residents were opposing the proposed 2012 budget, but asking questions that were relative to past and current spending practices, whether the budget would be impacted by future union contract negotiations, and line item concerns.
No one questioned whether the proposed budget was a fiscally responsible budget, rather whether enough effort was exercised to bring added cost savings.
Resident Kevin Lemaster addressed the board and asked why the town had postponed hiring two police officers until after the upcoming election. “If they are needed, why are we putting their hiring off? Are their positions already figured into the budget?
Supervisor Robert Giza answered that the replacement costs were already included in the budget.
Lemaster asked whether the town was looking to hire from outside and promote from within. Supervisor Giza answered they were both patrol officers and not Captains or of such rank.
Lemaster then noted that the position of Parks, Recreation and Buildings Director was still listed in the budget as full time and with a budgeted salary of $82,237. “If the current administrator, Terry McCracken won his bid for the Erie County Legislator position, would he still be eligible to run this department with same efficiency?
Would his position be relinquished because he would now be in two full time government positions?
Supervisor Giza replied that he did not consider the Legislator position as a full time job. “We have a County Legislator in attendance and he knows better that I.
County Legislators normally have other jobs. There are doctors and other professional people.”
Attending the Town Board meeting County Legislator Dino Fudoli acknowledged that the Legislator position was a part time job.
Lemaster declared it was his belief the community would not be best served by having a full time town administrator holding a part time county job.
Lemaster then commented that although residents hear about town employees not getting a raise, they do not hear about town employees receiving longevity pay and longevity pay increases on anniversaries. “In the 19 departments, there is a total of $184,770 distributed in bonuses. Just because someone is employed for a certain length in time (longevity pay)…
Lemaster was interrupted and told that those were contracted agreements. (So what?)
Brown was also asked how many town employees there are. 150 full time employees was the answer given.
When asked about the total town health care costs, Brown declared that he did not have that information at hand but did say it varied by individual plan. For example, a family plan cost approximately $18,000 per year.
Resident Mike Fronczak spoke and said he saw an article in the Lancaster Source were it stated that the town would be borrowing money for the police/courts building at an interest rate of 0.36%. “Is that a true statement?”
Supervisor Giza: “No, no, I said we were borrowing $13 million at a 0.36% interest rate.”
Fronczak: “Is that in anticipation of getting the loan or is that rate for locking in a permanent rate?”
Budget Director Dave Brown explained that it is a one year note, a lending year cost. “This is an upfront loan rate to help manage costs. Come next July, we will have to request another issue.”
Fronczak: “The money we are borrowing for the police/courts facility, what rate are we getting there as an interest rate?
Brown: “0.36%.”
Fronczak: “And you can keep renewing the BAN at a 0.36% interest rate?”
Brown: “No, you just can’t keep renewing it every year. There is a five year window until you use the money.”
Fronczak: “So once you draw the money, do you have an idea what that interest rate will be?”
Brown: “No.”
Fronczak: “So the $10 million borrowed for the police/courts building project could turn out to be a lot of money?”
Brown: “It will be what the market rate is at that time.”
Fronczak: “The way it was stated in the paper made it sound like a 0.36% interest rate would be for the life of the loan.”
Brown: “I didn’t read it that way. All it said was that $13 million was being borrowed at a 0.36% rate.
Fronczak: “Going back to the fact that we don’t have any written guarantee from the unions that they will accept a no raise situation, you feel pretty comfortable that’s going to happen.”
As for health care, I know a lot of state employees, corrections officers, who contribute to their health care system. Governor Coumo thinks that with Obama Care health care costs are going to go through the roof. How can this town be so generous in this day that it does not compel town employees to contribute anything to health care? How can we budget in for something we don’t have any idea how much the costs will rise in the coming years – especially with Obama Care coming? How do we know we are financially covered in the budget?
Brown: “We do the budget one year at a time. It is not relative to this year’s budget to cover the costs. Hope that answers your question.”
Fronczak: “Okay, then what percentage did health care cost increase this year?”
Brown: “We can’t say for certain what the percent increase will be until the 2012 year has ended.”
Fronczak: ‘Well what do you estimate the cost percent increase will be?”
Brown: “Anywhere between 5-10%.”
Fronczak: “Hearing once again that health care costs are increasing significantly and that town employees contribute nothing to their health care plan, I ask why they are not being asked to sacrifice like the rest of us are?” Despite not receiving a raise this year, I just don’t see much sacrifice given back."
Resident Dave Hanguarer addressed the board and declared he sees both sides. As an employer in the private sector and working in the public sector he sees the two worlds and declares they are totally different.
Hanguarer: “Obviously this is an election year budget. Last year there was a large tax increase and as politicians…
Supervisor Giza: “That’s not true. Last year we looked at the budget and drew a little over $1 million from the fund balance. We took out less than $1 million this budget year. We don’t look at it being an election year when doing the budget. We look for what we can afford and what we can do with the money. There are years we lower the budget and years it’s increased.”
Hangauer: “What I have noticed is that we losing people from the private sector to the public sector because now the salaries for comparable jobs have risen, and are sometimes higher than in the private sector. And of course the benefits in the public sector have always been higher than in the private sector to compensate for lower salaries in the past.
So now it seems to be the point where people in the private sector are paying more in taxes to provide for the public sector for salaries and pensions they don’t receive. The system is going to collapse at some point unless changes are made. I guess that’s the point we are all feeling here. It’s nice to be generous when we can be.”
Brown: “Changes have been made in the fire and police contracts that I thought would never happen in my day. The wage freeze is an attempt to balance that disparity. But, you are right the public sector has gone in that direction you have stated. It takes a long time to turn a big ship around.”
Hangauer: “The movement has to be accelerated, otherwise the system will collapse.”
Resident Dan Beutler asked questions and had comments on the debt service – money borrowed from lending institutions.
Beutler: “What is the difference between a Bond Anticipation Note) and a Serial Bond?
Brown: “BAN’S are a serious of one year notes. They don’t have to be a year. They issue them during the course of and up to the project commencement – like the police building project. We borrow what we need for the first year and then the next 12 months we borrow what we think we will need for that year. And when the project is done and you know what your total costs are, then you convert to a serial bond.
Beutler: “The reason I ask is because the BAN taken for the purchase of Walden Avenue Colecraft Building in 2003 had an interest rate of 1.75%. That was for the year 2004 and 2005. In 2006, you switched to a serial bond with an interest rate of between 3.5 - 4%.”
Now you are saying that the biggest decrease in the budget is due to the lowering of debt service by 16.49%. What is that number based on, total debt decrease, decrease in interest payments, or decrease in principle payments? How did we come up with that number?”
Brown: “We have an amortization schedule that is in place for all our debt. The difference between this year’s principle interest obligations and next years is what this is about.”
Beutler: “So far the town has paid nearly $500,000 in interest since the $1.855 million 2004 loan has been in place for the Walden Avenue Colecraft Building purchase. In total the town will spend well over $700,000 in interest for this loan. Together, principle and interest on this loan will exceed $2.5 million.
Once again we have structured a $10 million loan for the police/courts building on Pavement Road and will be adding to the debt service in the near future. We hear about the short term 0.36% interest rate on the BAN, but we have no idea what the long term serial bond rate will be.
Considering what we paid in interest on the Colecraft Building the interest on this project could be significant and this will negatively impact our debt service in the future.
Supervisor Giza stated in the media that the interest rate on the $13 million loan will be 0.36%. This is for the short term. We should have built that police station on Pavement Road in 2003.
Next: Part III: Government Waste
Hanguaer stated it accurately, but I like to call it "strategic budget." It did take much thought in making it look good. I do give the democrats some appreciation on bringing in a fiscally strategic budget.
I will wait until the end and see if in fact this budget continues to be a sound budget.
This budget is just the calm before the 2013 budget storm.Originally Posted by shortstuff
Georgia L Schlager
You're right gorja. I am scared because we know the school districts are starting to complain that they cannot keep the budget under the 2% cap, and will be appealing again to the public. At least for the school budget it goes up for a referendum to the public. BUT the teachers will bring the union voters in droves to vote on the referendum to bypass the cap.
Could very well be he calm before the storm. There are too many unknowns and assumptions in the 2012 budget.
I would also like to add here that I received the information I sought on the total cost for hospital/medical/dental/vision) that I asked me for at Monday night's budget public hearing. The total in the 2012 budget for those items (including the amount for the self-funded health plan) is $2,745,500.
As there are 150 full time employees, that averages out to $18,303 per town employee. And town employees contribute nothing into the plan. And some are really pissed when anyone even suggests they do.
The town is not going to give any employee a wage increase this year. Boy, that will show them!
Financial/Budget Director Dave Brown declared at Monday's budget hearing that this course of action will help in the long term to bring balance. "We can do this forever (deny wage increase) if needed. It takes a long time to turn a ship around." Mr. Brown may be right, but this ship has been adrift for too long. The town has been too generous for too long - and why not as the town fathers reap the same compensation/benefit gains.
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