Administrator's Introduction Letter to the 2013 Budget & CIP

October 31, 2012

The Durham Town Council
Durham, New Hampshire 03824

Re: Administrator’s Proposed 2013 Operational & Capital Budgets
Administrator’s Proposed 2013-2022 Capital Improvement Plan

Dear Honorable Members of the Council:

I am pleased to present the Administrator’s proposed 2013 Budget, which includes the General Fund, Water Fund, Sewer Fund, Library Fund, Parking Fund, Depot Road Lot Fund, Churchill Rink Fund, and Stone Quarry TIF Fund budgets, as well as the Administrator’s proposed 2013-2022 Capital Improvement Plan incorporating the FY 2013 Capital Fund budget utilizing a ten-year time horizon for your review and consideration. The proposed budget once again reallocates scarce resources, supports limited funding for targeted initiatives, and is intended to generally sustain and in some circumstances enhance the current level of municipal services available to residents and taxpayers of Durham.

The development of the proposed budget was part and parcel of a rigorous, yet inclusive process. The Business Manager and I have evaluated (and modified as needed) each budgetary line item utilized by the municipality in an effort to assure ourselves, and thereby the Council, that requests are justified and reflect meaningful efforts on the part of our boards, committees, commissions, trustees, and departments to accomplish the broader goals and objectives articulated by the Town Council and the community as a whole. Our effort was intended to eliminate unnecessary requests altogether, identify and take advantage of new efficiencies, and align spending to the extent possible with the 2012-2013 Town Council goals thereby allowing the Council to focus its limited time on broader policy issues impacting the overall community. It should be noted that departments did a fine job developing budget proposals that were tight and meaningful for FY 2013.

Durham Has Responded to a Challenging Economic Environment

Much progress has been made in our collective efforts to make Durham a better place in which to live, work, and obtain goods and services over the last five years. We have worked hard to spend the taxpayers’ money wisely and have provided the maximum number of desired services possible within the limits of the Town budget. Every effort is being made to stabilize the cost of the various services the municipality provides. Like many other communities throughout the state, the tax rate is significant and today, in the wake of the Great Recession, it places a particularly heavy burden on the property taxpayer. Of particular concern is the fact that unless some additional means of financing the requirements of local government can be found, this burden will continue to increase, particularly amidst an environment of downshifted costs from the state and limited revenue streams.

It is in this context that the Town of Durham has been engaged in the process of budget development for the 2013 fiscal year (January 1st – December 31st). A primary driver within Durham’s municipal budget is personnel-related costs that account for 64% of total spending. To offset these costs, in FY 2009 & 2010 there was no pay increase included as part of the Administrator’s proposed budget for non-unionized, salaried personnel in anticipation of the difficult economic environment that was developing within the state and the nation. A 2% increase was budgeted for non-union personnel in 2011. In 2012, there was not an increase budgeted for non-union personnel. For 2013, the Administrator does include a 2% increase for non-union personnel. Two collective bargaining contracts remain outstanding for 2013: the public works contract and the firefighters contract.

The Importance of Sound Business Practices

The Town of Durham continues to be economically and prudently operated. It functions as a purveyor of public services, and staff is working hard to implement business practices to control costs and maintain the municipality’s fiscal position during uncertain times. Over the last several budgetary cycles we have worked to hold operational expenses flat as a short-term strategy to limit the impact of the U.S. macroeconomic situation on Durham taxpayers. But this is not in and of itself a sufficiently broad or sustainable approach to address Durham’s long-term needs. Faced with an escalating full (town, local school, state school, and county) tax rate in recent years, additional strategies are being implemented with the goal of creating a more agile municipal entity poised to seize upon business, grant, and regulatory opportunities that are consistent with our community values. These include:

Economic development and smart growth activities intended to broaden the tax base to mitigate anticipated future cost increases across the municipal operation in areas that are specifically targeted for development or redevelopment;
Making strategic investments to ensure Durham’s long-term sustainability and resiliency such as bringing the Spruce Hole well on line in 2014, moving forward with an innovative adaptive management strategy to address water quality deficiencies within the Great Bay Estuary, moving to renewable energy where viable, stormwater improvements, and more.
Rethinking the manner in which services are delivered by departments utilizing Kaizen techniques in an effort to improve efficiencies and mitigate cost centers over the long-term;
Working with UNH to find win/win partnership opportunities intended to broaden the tax base, better link the campus to the broader community, make UNH/Durham more desirable for residents/students alike, and ensure fair compensation from UNH for its fiscal impact upon the Town;
Controlling escalating health care benefit costs by changing health insurance providers, exploring new health care options for the mutual benefit of employees/employer, and discussing additional employee contributions toward health insurance co-pay levels. All municipal employees presently contribute 10% - 20% toward monthly health insurance premiums incurred by the Town;
Coping with increasing utility costs and working creatively to offset them in the future through wholesale power purchase agreements and investment in green technology;
Maintaining a strong balance sheet and favorable bond rating status by working to stabilize and in the long-term increase the undesignated fund balance within the General Fund, maintaining a strong Overlay account, realistic revenue/expenditure projections, and maintaining a contingency fund equal to approximately 1% of the total budget to cover unforeseen, unanticipated circumstances.

Fiscal Year 2013 Budgetary Proposal

This year’s budget cycle has resulted in a proposed 2013 General Fund budget totaling $12,410,419.00, a spending increase of $1,133,210.00 or 10.05% compared to FY 2012. Due to an infusion of revenue from a variety of sources (see General Fund Revenue section below), a number of which directly offset proposed expenditure increases for the coming year, non-property tax revenues are expected to increase dramatically in FY 2013 by $661,696.00 or 14.1% to $5,354,900.00. In total, this year’s budgetary proposal is projected to increase the 2013 local municipal portion of the tax rate by 36 cents (or 4.72%) to $7.97 from the estimated 2012 level of $7.61. If debt service associated with the new Durham Public Library project that overwhelming passed (74%) by referendum last year is subtracted from the equation, the municipal tax rate increase would be 1.77%.

Revenue projections do continue to include an annual $225,101.00 payment from UNH to Durham which began in 2009 to compensate the community for the University’s financial impact upon the Town in areas such as roadways, traffic, and policing services. Budgetary projections take into account this additional revenue, a projected $18 million infusion into the tax base associated largely with the Capstone project as of April 1, 2013 (an initial increase largely associated with Capstone was added to the tax base for 2012 totaling $15 million), holding Overlay at $300,000 due to a number of outstanding property tax abatement appeals pending with the Board of Tax and Land Appeals/Superior Court, no use of fund balance, and recommended expenditures.

The proposed Sewer Fund budget reflects a 0% increase in user fees in 2013 (a rate of $5.75 per hundred cubic feet), while the proposed Water Fund budget carries an anticipated 5.3% increase in user fees (a rate of $4.18 per hundred cubic feet) for FY 2013.

For comparative purposes, the twelve-month September 2011 to September 2012 Consumer Price Index (CPI-U) numbers are: U.S. City Index – 2.0%, Northeast Urban Index – 1.7%, and Boston-Brocton-Nashua-MA-NH-ME-CT – 1.7%.

A listing of highlights from the proposed FY 2013 budgets follows:

General Government

A 2% pay increase is budgeted for non-unionized personnel, as is a 1% pool of funds for market-based wage adjustments, if necessary.
In FY 2001, the Town had 85.6 full-time equivalent (FTE) employees. Despite the implementation of new programs and initiatives since that time, we have been successful over the years in identifying strategies to increase efficiencies and hold our workforce relatively static. The FY 2013 budget includes 86.60 FTE’s. (1.8 FTE’s are the result of a proposed Health and Safety Inspection Program at the Fire Department focusing on rental units in Durham that would be offset by revenue.)
This budget and fiscal forecast, as was the case in 2011 and 2012, proposes to bond the 2013 road program. The decision to do so was not taken lightly but seen as the only way to avert an approximate 9% municipal tax rate increase in 2011 while also stabilizing to the extent possible 2012 and 2013 tax rate projections. It gives another twelve months for the community to broaden the tax base so as to mitigate anticipated future spending increases associated with paying cash once again for Durham’s ongoing long-term roadway maintenance program.
Funding is again budgeted to contract out a third day for Assessing services to more adequately yet still minimally meet the demands of the department. There are delays in our ability to respond to requests and workload remains marginally behind with only three days of staffing yet generally speaking we are meeting the Town’s basic assessing needs. $52,500 is also included to pay for the cost of a statistical assessing update in 2013 as required by state regulations.
In 2012, the Town increased the number of hours for the part-time Parks and Recreation Director position from 20 hours per week to 30 to more accurately meet the needs and aspirations of the community within this bourgeoning functional area. With this investment, we experienced a 30% growth in recreation programs and a 40% increase in attendance at Parks and Recreation events. Based upon a unanimous recommendation of the Parks and Recreation Committee and a careful analysis by the Administrator of municipal priorities, funds are included to support moving the Director position to a full-time salaried classification in 2013 at an additional cost of $32,550.
A total of $161,000 is budgeted once again in 2013 (it was budgeted, but not expended in 2012) from the Urban Development Action Grant (UDAG) account to specifically support smart growth central core redevelopment should a major redevelopment project require public partnership in order to come to fruition in areas such as transitioning one-way to two-way traffic, offsite underground utility infrastructure improvements; or for part-time economic development staffing, consultative, engineering, traffic modeling, or economic development project-related services.
Funds are tentatively budgeted for the new Town Office project at 8 Newmarket Road, the former People’s United Bank site, presently under conceptual development. (See CIP plan for details, as well as Looking Ahead at Durham’s Fiscal Forecast Projections section below.)
The Contingency account is again funded at $100,000 to protect against unanticipated/unforeseen expenditure requirements and as a way to sustainably increase undesignated fund balance over time from the present level of $992,950 to the desired $1.5-$2 million level per Council policy. (If not expended, this appropriation lapses and monies are transferred to fund balance.)
Social Service Agencies
$25,302 has been included to provide ongoing support for area social service agencies serving Durham residents in need of assistance, up $4,083 from 2012 due to increased requests from the American Red Cross, Goodwin Community Health, and a new request from A Safe Place of $1,200.
$15,000 has again been budgeted within the Welfare Budget to provide public assistance to eligible Durham residents, up $5,000 from 2011 due to increased demand for assistance locally.
Police Department
The department’s 19th full-time police officer position which had been cut by the Administrator in 2009 due to budget constraints, restored by the Council in 2010, held vacant for the majority of 2011 by the Administrator, and then eliminated for 2012 as a cost savings measure has been restored for 2013. The department requests a 20th officer in addition which has not been funded by the Administrator due to funding constraints. (The 20th officer would have been utilized as a Problem Oriented Policing (“POP”) officer, an initiative in which the Rental Housing Commission and the Council have both expressed interest.)
Ongoing replacement of two of the department’s 8-cylinder Crown Victoria Police Interceptor vehicles with more fuel-efficient 6-cylinder cars in 2013 at a cost of $62,000. (For planning purposes we annually target two police vehicles for replacement allowing our six front-line marked cruisers to be rotated every three years. Police vehicles are driven under the most strenuous conditions, 24 hours daily. Vehicles are then downshifted to command and detective personnel, and then ultimately transferred for Town Office and Public Works Department use with mileage generally within the 130,000 to 200,000 level. Durham continues to evaluate the potential of hybrid technology for the future.)
$5,000 is budgeted to support the cost of a building needs analysis for long-term police planning purposes.
Dispatch Services
The FY 2013 budget continues to include annual savings associated with the 2008/2009 transition from the UNH Dispatch Center to the Strafford County Communications Center for police, fire, and public works dispatching services. This transition is anticipated to save Durham taxpayers $450,000 over five years and $250,000 per year thereafter.
Fire Department
In accord with our Kaizen and sustainability efforts, the Fire Department, in conjunction with representatives from the Town and UNH, was able to develop an innovative long-term funding solution to address the department’s 25-year capital item replacement program by calculating an inflation adjusted yearly contribution to the Fire Equipment Maintenance Capital Reserve Fund. This annual contribution would eliminate the need to bond department-wide capital items (exclusive of a new station or new fire trucks) thereby eliminating approximately $80,000 in annual debt service cost, enhancing predictability in our funding stream, and eliminating the peaks and valleys associated with the long-term capital needs of the department – a win/win arrangement for both Durham and UNH (which supports 50% of the cost of the department). (We partially implemented this program in FY 2011 by adding $98,400 to the fund and contributed another $40,000 in FY 2012. $150,000 is budgeted for FY 2013 and beyond, an increase of $110,000 over last year.)
$68,905 is included to support emergency services radio reception upgrades (repeaters) within the Oyster River High School and Middle School. At the present time, Durham Police and Fire personnel have tremendous difficulty obtaining radio signal within these two critical facilities posing safety issues for students and officers alike. (This expenditure would be offset 50% through a state grant and 50% through the Oyster River School District. The municipality, not the school, must apply for the grant.)
$557,400 (paid 50% by UNH) is budgeted for architectural and engineering services for the design of a new fire station at UNH B-Lot. The appropriation would bring construction documents to 85% complete and to a “permit ready” stage. It is anticipated that the building would be approximately 25,000 sq. ft. The project construction budget is circa $8 million. (The Town has $230,000 in a Fire Station Capital Reserve Fund which would be utilized to substantially offset Durham’s 50% contribution for design in 2013.)
Public Works
The road program is funded at $478,080 for FY 2013 through long-term debt, rather than with cash (see CIP document to review proposed list of roadways). Targeted roadways include Bagdad Road (Rt. 4 overpass to Madbury Road), Beech Hill Road, Coe Drive, Garrison Avenue, Griffith Drive, Hoitt Drive, Pinecrest Lane, Wiswall Road Phase II. (UNH will be contributing $21,674 to the Garrison Avenue paving as a portion of the work is a result of the new Peter Paul Business School construction.)
$520,000 is budgeted for the development of a Stormwater Management System Capital Improvement Plan in accordance with our Federal MS-4 permit and implementation of that plan which includes monitoring, repairs, and improvement projects according to a prioritized project list. The project will include identifying/mapping catch basins and stormdrains in Durham, installing biorentention structures (rain gardens and gravel wetlands) to treat stormwater, in addition to water quality monitoring. This program will ultimately improve water quality and sustainable practices to protect Durham’s natural resources.
$173,746 is budgeted to replace the Town’s 351 Cobra Head Style inefficient high pressure sodium and metal halide municipal street lights with energy efficient L.E.D. street lighting. (This project would be contingent upon receipt of offsetting grant funds.)
$215,000 is budgeted to purchase a Rubber Tire Excavator to efficiently install bioretention retrofit structures (rain gardens and gravel wetlands) for enhanced treatment as part of Durham’s Federally regulated stormwater management system. (This acquisition would be contingent upon a State Revolving Loan Fund grant providing 20% principal forgiveness.)
In 2012, initial engineering was completed to evaluate structural deficiencies of the Main Street RR Bridge (the bridge that spans the Amtrak Downeaster platform) next to the Durham/UNH Train Station. $78,500 has been included in FY 2013 to repair identified deficiencies such as steel plate resurfacing and concrete/masonry.
$68,800 is included to replace the 3,695 ft. long, 5 ft. wide bituminous asphalt sidewalk and concrete curbing installed in 1977. This sidewalk links the Oyster River Middle School to the Oyster River High School and will be done in conjunction with the 2013 Road Program as Coe Drive will be resurfaced.
With the anticipated 2013 opening of the new Durham Public Library on Madbury Road, the proposal includes $102,260 to install 808 ft. of sidewalk and bike lane on the west side of Madbury Road from Garrison Avenue to the Library site ($85,143), as well as the replacement of the existing curb on Garrison Avenue and sidewalk with bituminous asphalt to include ADA compliant tip downs ($17,116).
$136,000 is included for the replacement of a 35,000 lb. GVW Public Works dump truck with flow body, side wing, and font plow. Truck #7 is a 2000 International dump truck with 4,800 hours and 12 years of service. It is a front line piece of snow fighting apparatus. (This truck was originally scheduled to be replaced in 2012 but was moved out to 2013 as a cost containment strategy last year. There are six dump trucks in the DPW fleet.)
Library
A $4.8 million Library project ($2.2 million through private fundraising/$2.6 million through debt) at the new 49 Madbury Road location was included in the adopted 2012 Capital budget and overwhelming passed by a referendum vote of the Town. This project adds debt service (principal and interest) in the amount of $208,861 in FY 2013.
$30,568 is included in 2013 to support additional operating hours for 6 months at the new Library facility (increasing hours of operation from 38 hr./wk. to 49 - $16,580) as well as for increased facility operational costs attributed to the new structure.
Water Fund
It is recommended that ratepayers review the long-term CIP and fiscal forecast for the Water Fund within this budget document to take account of projected rate increases dependent upon anticipated project implementation.
$815,000 in included in 2013 for interior and exterior painting of the Town’s 3,000,000 gallon water storage tank at Foss Farm, as well as for our 650,000 gallon Beech Hill tank. (The interior of the Foss Farm tank has not been painted in 17 years and is showing wear and tear from the elements. The inside of the Beech Hill tank has not been painted in 25 years.)
$302,000 (supported 2/3 by UNH) is budgeted in 2013 for design associated with the Spruce Hole Well development project with an estimated construction date of 2014. An additional $1,378,000 is planned for FY 2014 to fully fund construction of the project. The Town’s Master Plan and 2004 Water Allocation Report calls for the development of the Spruce Hole Aquifer (this is distinct from the Spruce Hole Bog) as the next water source for Durham and UNH.
Sewer Fund
It is recommended that ratepayers review the long-term CIP and fiscal forecast for the Sewer Fund within this budget document to take account of projected rate increases dependent upon anticipated project implementation.
$2.5 million (supported 2/3 by UNH) is included to replace the 25 year old Sludge Dewatering Equipment at the Durham Wastewater Treatment Plant, specifically the filter belt press and gravity belt thickener. This specialized equipment removes the wastewater from solids and allows for the thickening of the solids to a sludge material enabling it to be transported offsite. Not only has the equipment reached the end of its useful life, the enhancement is also anticipated to have the effect of decreasing the liquid content of the Town’s sludge thereby resulting in a 10% decrease to the sludge disposal cost that is determined by the weight of material. (This project will require a referendum vote of the Town because the amount of the bond will exceed $1 million.)
General Fund Revenues
To supplement General Fund revenue in FY 2012 and in light of the lingering effects of the Great Recession, this budget proposal again reflects a recommended transfer of approximately $60,000 from the Depot Road Parking Fund to the General Fund (this was done as well in 2010, 2011, and 2012).
he proposed Health and Safety Inspection Program for all rental units in Durham, staffed by the Fire Dept., is estimated to generate $138,000 in revenue in 2013/14.
new cable franchise fee associated with the Town’s franchise agreement with Comcast for television service should conservatively garner around $78,405 in revenue to offset DCAT/Channel 22 expenses, as well as supplementing the General Fund.
he additional $80,690 expense for Police Department special details will generate approximately $100,864 in revenue as the Town charges for special detail assignments.
he Town has received a one-time Worker’s Compensation Insurance “credit” from PRIMEX for 2013 in the amount of $101,182.
The sale of 37 Main Street (the Grange project) will generate $58,533 in 2013.
The additional $19,296 that has been included in the Building Inspection Department for part-time inspection support for large-scale project construction in town will generate approximately $20,000 in revenue through permits and fees.

Looking Ahead at Durham’s Fiscal Forecast Projections

In each of the last several budget cycles I have expressed concern that unless we as a town were willing and/or able to strategically reallocate resources to meet desired outcomes, increase revenues, significantly grow the tax base, change the present system of state-wide taxation, increase fairness in the existing Oyster River Cooperative School District funding formula, alter/eliminate the levels and types of services presently provided, or change our future aspirations in areas such as new facilities, programs, staffing, and land conservation we would be unable to sustain controlled growth in the tax rate over the long-term on the municipal side of the rate.

Given anticipated expenditure and revenue trends, an annual municipal (local) tax rate increase of 3.75% has been projected over the next ten years in our fiscal forecast as being necessary in order to maintain sound fiscal health for Durham without loss of service. Over the next five years, however, that average is 6% assuming anticipated projects and requests actually come to fruition (see attached 10-year General Fund fiscal forecast). Between 2018 and 2022, the average projected municipal (local) tax rate increase is 1.5%. In 2014, we anticipate a local tax rate increase of 12.59% assuming all plans come to fruition including paying cash for the road program (presently bonded) and bringing a new $2,945,000 +/- town office facility on line at the former People’s United Bank site at 8 Newmarket Road (excluding property sale proceeds from 15 Newmarket Road estimated at $1,200,000 and new taxes generated from the redevelopment of the former Town Office site).

I look forward to talking more with the Council and the community concerning the FY 2013 proposed budgets and the proposed 2013-2022 Capital Improvement Program.

Very truly yours,

Todd I. Selig
Administrator

Enclosures

Web Links

Approved 2013 Operating Budget

Approved 2013 CIP