Budget11519chap2

2019-01-15 · Budget Committee · 1:05:39 · watch on YouTube →

The second part of a Budget Committee budget session, given over almost entirely to Public Works capital. Most of the time went to a $236,500 request for a new plow truck: what the money buys, whether the figure is a quote or an estimate, whether to go out to bid before or after the town votes, and whether publishing the number invites vendors to bid up to it. The committee then worked through the capital reserve balance, the practice of rolling departmental operating surpluses into capital reserves, and what happens when a department overspends. The last third turned to the road bond (a $4 million bond having been turned down by the town the year before) and to a longer argument about whether doing public works in house is cheaper than the old plow contract. No motions were made in this part of the recording; the session was information gathering ahead of the committee's February meetings, and the recording ends mid-sentence.

No written minutes could be matched to this meeting. The transcript records that the speaker changed but never who was speaking, so any name attached to a statement below is inferred from context and is marked (?).

What was discussed

1. 0:43
   Public works capital reserve balance

   The session opened on money going back into the public works capital reserve, including $46,103 of Auburn Pownal Road funds, for a total of $208,570 and a balance given as $460,299. The figures around them are partly garbled in the recording.

2. 0:43
   Request for a new plow truck

   The public works capital request is $236,500 for a new truck. Last year's truck was quoted at $210,000; the increase was attributed to the cost of steel, and anything not spent would go back into the capital fund.

3. 0:43
   What the truck is

   The specification is a Freightliner tandem axle, or an International equivalent, carrying about twelve to fourteen yards of material: the same as the newest three the town runs now. The chassis comes from a dealer and the plow gear is built to the town's specification by a plow builder.

4. 0:43
   Delivery time

   Delivery averages about six months. Approved in April, the truck would not be on the road until roughly November, so it would not help for the coming plow season.

5. 0:43
   Quote or estimate

   Asked whether $236,500 was an actual quote, the answer was that it is an estimate, described as within about a five percent increase. A member asked whether a firmer number could be had by the time the Budget Committee meets in early February.

6. 0:43
   Why buy rather than lease

   A member said he had asked the same question the previous year and could not recall the answer: why buy a truck rather than lease one, given it spends its life spreading corrosive material.

7. 5:44
   Lease financing explained

   The answer was that what is called a lease is really lease financing, effectively the same as taking out a bond, and that the town looked at it for the fire truck last year and found it came out more expensive. A neighbouring town was called about how it does it and reported no real difference.

8. 5:44
   The article would read 'up to'

   The warrant article would authorise spending up to a stated ceiling out of capital reserves, with the selectmen recommending up to $236,500 and the Budget Committee free to recommend a lower figure. A member noted the Budget Committee may see a revised number in February but it will still be a budget figure, not an actual price.

9. 5:44
   Whether publishing the number invites higher bids

   A member argued that once the ceiling is public, vendors could bid up to it. Others said bidders still have to beat four or five competitors, and that this had been evident when the plow bids came back.

10. 5:44
    Auburn Pownal culvert as a comparison

    A member asked whether this explained why the Auburn Pownal culvert bid came in as it did, and how the town's estimates could be so far off. That estimate had come from an engineer, based on the specifications of the job.

11. 11:05
    Whether to go out to bid before the town votes

    It was explained that a formal RFP would not go out until the town has voted to buy a truck, and that in the meantime the estimate could be checked informally by phone. Members disagreed about whether doing the RFP first would be wasted effort.

12. 11:05
    Estimating high or low

    One member said he would estimate on the high side, since the published ceiling becomes the number bidders work back from. Another (?) said this gave vendors too much credit for reading town warrants and minutes, and said he had never had a bidder cite an appropriation back at the town.

13. 11:05
    How many vendors get the RFP

    The RFP typically goes to about five or six vendors known to build this kind of truck (Freightliner, International and Western Star were named) and about four or five bids come back. The spread between highest and lowest bid on past work was described as several hundred thousand dollars.

14. 11:05
    Is $236,500 a basic truck

    Asked whether the figure buys a base model, the answer was that price follows the specification and that this is a middle-of-the-road to basic truck with the technology the work requires.

15. 16:08
    Keeping the fleet to one make

    There is value in keeping the trucks similar so the town does not have to stock parts for two makes, but it was called a judgment call: a $1,000 difference might go to Freightliner, a $9,000 difference might not. The specification is written so more than one manufacturer can bid, and a bidder that cannot meet a line has to say why.

16. 16:08
    What is in the specification

    The specification was described as extensive and technical (axle weights, engine power, plow control configurations, rate of sand spreading and its variability) written years ago with the road commissioner of the time. The front end was beefed up from 18,000 to 20,000.

17. 16:08
    Outfitting

    HP Fairfield was named as the outfitter. The town asks for pre-wetting and tanks, side dump bodies and ground speed control; some towns add stainless steel bodies for another 50 grand, which Durham does not.

18. 21:37
    One vendor responsible for chassis and body

    Bidders submit the chassis and outfitter numbers together. The road commissioner said he did not want to hire HP Fairfield separately, so that if something goes wrong there is one party responsible rather than an argument over whose fault it is.

19. 21:37
    What last year's truck actually cost

    Last year's budget figure was $210,000; the truck was bought for about $205,000 before trade-in and about $194,000 after. There is nothing to trade in this year.

20. 21:37
    Existing bonds

    Members discussed where the equipment and road bonds stand in their terms; the figures given are garbled in the recording. The point made was that the town is still paying on trucks bought when Public Works started that are no longer in service, and one member said financing ten-year-old equipment over ten years is not a good way to go.

21. 26:50
    Bond structure and interest rates

    A member said the building and the excavators should probably have been bonded separately, over different terms. The building bond was recalled at about three and a half percent and the other just over four percent, and it was suggested the rates be looked at again.

22. 26:50
    How far to draw down capital reserves

    Asked why not use more of the capital reserve balance, the answer was that spending reserves to zero, or close to it, is not good practice. Two trucks are in the twenty-year range, and the plan discussed was one this year and one next year out of reserves, which would turn the fleet over.

23. 26:50
    The $46,000 as a paper shuffle

    An $83,693 appropriation gave permission to spend out of capital reserves but was not spent, so roughly $46,000 of the $208,570 is money that was already there. Of the total, about $160,000 is new money.

24. 32:04
    Where the balance lands if the truck is bought

    Working from a beginning balance around $224,000 after a $236,500 truck, with another $50,000 straight contribution and a smaller operating overage rolled in, members put the balance at roughly $324,000 before the purchase and well under $100,000 after.

25. 32:04
    Caution on penalising underspending

    A member cautioned that what the town approves is an 'up to' amount, that the department head has to keep room for unforeseen circumstances, and that cutting his budget because he did not spend it encourages departments to burn what they have. Another member said the Budget Committee and the selectmen appeared minded to challenge the public works operating budget so it does not come back with a ten percent overage.

26. 32:04
    Rolling operating surpluses into capital reserves

    The practice of rolling fire department and Public Works operating balances into their capital reserve accounts was passed at town meeting, and stopping it would require another town meeting vote. A Capital Improvement Policy Committee is working on recommendations that the board has not yet seen or discussed.

27. 32:04
    Arguments either way on the practice

    Ending the roll-in would increase what the town has to be asked for in the capital reserves article each year, which was called risky given years when the town voted zero. It was also described as an incentive for department managers to run tight during the year.

28. 37:22
    What happens when a department overspends

    If a department overspends at the bottom line, an article has to go on the 2019 warrant asking the town's permission to take the difference out of undesignated funds. Two such accounts are expected this year, described as not huge amounts.

29. 37:22
    Personal liability remark

    A member said he had read that where an account is overspent and not watched closely, suit can be filed and selectmen held personally liable. No source was given and the point was not pursued.

30. 37:22
    Roads in the bond and the MaineDOT project

    The committee was told it would make two separate recommendations on the roads. A MaineDOT project near the Quaker meetinghouse would shift Route 125 to soften the curve by a house on the inside of the turn, scheduled for 2019 but not yet confirmed; the other road names and mileages in this passage are badly garbled in the recording.

31. 42:42
    Road bond: tax impact and term

    The committee will be given a breakdown of the bond's tax impact and its payout schedule before it discusses the article, as it was last year. This would again be a ten-year bond; last year's first-year payment was a little over $250,000 and a further roughly $2 million would add about the same again.

32. 42:42
    Last year's bond was turned down

    A $4 million bond proposed last year was turned down by the town, and members said they had no indication the town would approve splitting it over two years. One member said he had spoken to several residents who had been confused by last year's bond and had not realised it would have been split over the first two years.

33. 42:42
    Getting information out before town meeting

    Members discussed putting the road plan on the website well ahead of town meeting so residents could see it, rather than having the argument on the floor. The same point was made about larger questions coming in the next year or two, including changing the town's fiscal year to align with the state and whether to move to a town manager form of government.

34. 47:48
    Why the per-mile estimate is higher

    Asked why the estimate is about $19,000 more per mile than this year, the answers given were higher asphalt prices, higher labour costs with the minimum wage going up, and a wider scope on some of the roads. Some sections need to be raised out of the water table because they cannot be ditched.

35. 47:48
    Town debt guidelines

    A bond question on the warrant has to include the town's total current obligations. A member wanted the warrant also to show where Durham stands against state guidelines on how much a town of its size should carry: a percentage of valuation, which Ruth was asked about and which one member put at five percent without being sure.

36. 52:59
    Ten-year cost history

    Ruth had prepared a presentation covering 2009 to the present and the costs associated with public works, but had not finished the tweaks the board asked for because of the audit. She said she would email it as soon as she had time.

37. 52:59
    In-house against the old plow contract

    The last year of the contract was recalled at around $700,000, and at about five percent a year the contract would now be somewhere near $900,000 just to plow the roads. The whole Public Works budget is $2.2 million, and members disagreed about how equipment bonds should be counted in the comparison.

38. 52:59
    No feasibility study in this budget process

    It was stated that a feasibility study of Public Works would not be done as part of this budget process and that anyone who wants one should ask the selectmen to form a committee. If it is done, a finance professional would have to be hired, because dividing spending by road mileage says nothing about what was done to those roads or what condition they are in.

39. 52:59
    Whether the Budget Committee can recommend rebidding the plow contract

    A member asked whether recommending that next year's plow work go out to bid could be part of the budget process. The answer was that the committee's role is monetary recommendations on budget lines, but the board would be open to hearing what the committee wants looked into.

40. 58:30
    Confidence in Public Works

    A member said what he wanted was to give the town confidence that the overall picture is sound, and that residents do not have that reassurance. Others said the original case for going in house was about controlling the town's own destiny rather than saving money, and that the contracted years saw the plow increases absorb the money while top coats, ditching and cross culverts fell behind.

41. 58:30
    Audited figures

    Members were told the historical figures Ruth circulated are audited numbers from the town's outside auditor, not figures assembled in the town office. The road bonds are left out of that spreadsheet because those are expenses the town would have incurred either way.

42. 1:04:00
    How the winter comparison was built

    Ruth (?) explained that because the plow contract was paid over a seven-month period, she took seven months of base public works expense plus winter-specific costs such as salt as the winter portion. She had originally included one hundred percent of the equipment and building bonds; Laura (?) suggested using the seven-month figure instead. The recording ends mid-sentence.

What was decided

• 5:44
  The public works director is to go back and check the $236,500 truck estimate against reality before the Budget Committee meets in February. Agreed in discussion; no vote was taken.outcome unclear
• 11:05
  A formal RFP for the truck will not go out until the town has voted to authorise the purchase; in the meantime the estimate is to be checked informally rather than by a formal bid round. Stated as the practice and not disputed; no vote was taken.outcome unclear
• 32:04
  An updated capital plan will be provided to the Budget Committee before its budget meetings start. Stated as an undertaking; no vote was taken.outcome unclear
• 42:42
  The Budget Committee will be given a breakdown of the road bond's tax impact and payout schedule before it takes up the article. Agreed in discussion; no vote was taken.outcome unclear
• 52:59
  No feasibility study of the Public Works department will be done as part of the 2019 budget process; anyone seeking one is to ask the selectmen to form a committee. Stated by the chair and not disputed; no vote was taken.outcome unclear
• 52:59
  Ruth will email the committee her ten-year public works cost presentation once the outstanding revisions and audit work allow. Stated as an undertaking; no vote was taken.outcome unclear

An outcome reads "unclear" where the recording does not state it plainly. The recogniser drops short words, and "the motion does not carry" is one missing word from its opposite.

Worth knowing

• 21:37
  Last year's plow truck was budgeted at $210,000, bought for about $205,000 and cost about $194,000 after trade-in. This year's request is $236,500 and there is nothing to trade in.
• 42:42
  The town turned down a $4 million road bond last year. A member said several residents he spoke to had not realised it would have been split over the first two years, and members discussed publishing the road plan on the website well before town meeting.
• 47:48
  The road estimate is about $19,000 more per mile than this year, attributed to asphalt prices, labour costs with the minimum wage rising, and more extensive work on some roads.
• 52:59
  Comparing in-house work with the old plow contract: the last year of the contract was about $700,000, and at roughly five percent a year it would now be near $900,000 just for plowing. The whole Public Works budget is $2.2 million.

Elsewhere

2019-01-15 Budget Committee →All meetings