Town meeting day 2: Voters approve $43M budget, dip into rainy day fund

by susan on April 14, 2010

It’s a debate that’s taken place every year for at least the past five years, so when it came time to talk about spending down the town’s stabilization fund, town meeting voters knew the drill. With limited discussion to supplement presentations by the Selectmen and Advisory Committee, Town Meeting voted overwhelmingly to use $417K from stabilization to fund town budgets.

In a separate vote, Town Meeting approved using $89K of stabilization money to fund K-8 school technology. That’s a total of $506K that will be pulled from the town’s so-called rainy day fund in fiscal year 2011, bringing the fund down to $400K, the minimum amount recommended by the Advisory Committee.

By choosing to use stabilization money to fund the $43M municipal budget, voters kept the expected tax increase for next year at 3.4%, which amounts to $264 in additional taxes for the average home. If voters had decided not to use stabilization funds, the tax increase would have been 5%.

Selectman Bill Boland argued against tapping into the stabilization fund, saying the Board of Selectmen recommends keeping 5% of the town’s budget in the fund to cover emergencies and to protect the fiscal health of the town. That would have the fund at about $2M.

Boland also noted that if voters chose to spend down the stabilization fund to the $400K level recommended by Advisory, they wouldn’t have the option to do the same next year. “We’re on the road next year or the following year to having services slashed.”

But Advisory Committee member John Butler said not having the stabilization fund as a buffer means municipal budgets will truly be “pay as you go” in future years. “It’s the lowest-cost way for you to buy whatever services you want from this town and not waste any money,” he said.

In other town meeting news, voters funded a number of capital items including school technology, a new (used) sander for the DPW, and a new police cruiser. Voters weren’t so accommodating when it came to a proposed change to the town bylaw that sought to give police more control over traffic enforcement on road construction project. The article was soundly defeated.

I’ll have more on these topics — and I’ll tell you about an attempt to get Town Meeting to reconsider it’s decision on Quinn Bill funding — in an upcoming post.

1 Already Involved April 14, 2010 at 7:51 AM

OK parents of school-aged children, it’s time to step up and get involved in town government. There are several committee and board openings that need to be filled with our generation. It’s the only way to make a difference and move this town forward.

2 Resident April 14, 2010 at 8:25 AM

From town meeting last night, am I correct that the bos, who are elected by the people, did not even consider asking the people who elected them if they preferred using stabilization money over a higher increase in property taxes? Instead they put together a slide presentation with misinformation and then, when the vote came, according to the MWDN, the residents rejected the bos’ position in a “landslide with only a handful of voters raising hands” in support of the bos. Did they ask the people about the flagger vs. detail issue that they also supported but relied on wrong data, which again, according to the MWDN the bos’ position “failed by a healthy margin.”

Hasn’t town meeting clearly indicated that change is not only mandated by essential? To be so out of touch with the mentality of the electorate smacks of arrogance and superiority. Time for democracy to work on May 10 people.

3 KenG April 14, 2010 at 2:30 PM

It didn’t go exactly like that, but you would be more familiar with the subtleties of the process and the discussion if you had attended the meeting. Taking a two-blip synopsis from the MWDN is not exactly accurate or fair. And they did ask us. They made a recommendation, but town meeting is about asking the electorate to choose. That is exactly what happened.

4 Mary Hynes April 14, 2010 at 10:30 AM

Dear Resident – please let me know what the “misinformation” was on the BOS presentation – am not certain what that was. And, I may be incorrect, however, I believe there were more than a “handful”, (more than 60?) supporting the BOS position (almost a third?).

While I don’t always agree with the BOS, I would not characterize any of the very hard-working members as apearing “arrogant” or feeling “superior”. I believe each of them votes according to his or her conscience and what is felt to be right or best for the town.

5 Superfly April 14, 2010 at 1:04 PM

Originally posted under “What’s Going on in Town Government” on 4/13/2010

What’s going on with the BOS again?

Saw an agenda item for the Planning Board about “BOS Internal Investigation.”
Is this another attack on the freedom of speech?

There was discussion at a public meeting over this item. Heard they have hired counsel for the “investigation.”

Who’s paying for this? Are we paying for attorneys for another Witch Hunt? Who’s being investigated this time?

I am getting sick of the behavior of this Board! Is this the Town of Southborough or has this become the Kingdom of Southborough?

If our tax money is being used, we deserve a full and open accounting. Who authorized this investigation?

6 Kelly Roney April 14, 2010 at 1:08 PM

I went against the BoS on both these issues, but there’s nothing undemocratic or wrong about the option they presented to Town Meeting. We elect them to use their judgement, just as Advisory (appointed by the Moderator) uses their judgement. We remain free to differ from the judgement of both and to choose another course, which we did on these articles.

You’ll note that Town Meeting agreed with the BoS on most articles and recommendations in the warrant. But if you want them to take the pulse of the electorate on everything, they’re going to be doing a lot of polling!

I support Sal Giorlandino for reelection. That doesn’t mean I agree with him 100% of the time. It means I think he’s done a good job and I agree with him most of the time.

That’s democracy.

7 123 April 14, 2010 at 3:08 PM

1. The Advisory Board’s recommendation as I understood it was that “pay as you go” is great, just not this year. I missed the Advisory Board’s recommendation that the stabilization fund should be built back up in the future That would appear to contradict their premise that what’s your’s is your’s and you are better off with it in your account, and the town is no worse off without it.

2. Moody’s and the rest failed so miserably at understanding the risks of mortgage debt and its impact on AIG, Lehman Brothers, etc. because they looked at only the numbers and ignored common sense. That is, their analysis was based on the assumption that history was a reliable indication of the future (house prices only go up and if they go down, only in isolated regions of the country and not everywhere; people buying houses with no money down will be just as committed to paying their mortgages as those that were required to put down 20%; etc). I’ve heard more than one member state that their common sense told them that the stabilization fund was a good thing to have, but the “numbers” changed their mind. It would be rather ironic if our Advisory Board fell into the same trap as the credit rating agencies.

3. The safer the investment, the lower the return required by investors. None of us, no matter how much research we do, and how many numbers we reference can avoid that fact. If you believe a loan to our town is no less risky without the stabilization fund, consider yourself fortunate, very fortunate and read no further. If it seems too good to be true, it almost certainly is.

4. Bad is never good until worse happens – a quote from somewhere and not mine. I lost my crystal ball a long time ago (it was broken too) and while I truly hope we have seen the worst, my suspicion is that this recovery may take longer than many of us realize. There is no recession that has come to an end without that end being announced in error multiple times, and the sustainable recovery generally follows only after the general reaction is to disregard yet another announcement that it is over. I’m conservative and would rather plan for the worst and hope for the best. What we do know is that there is a high probability that local aid will be reduced even further next year, and that with Algonquin pulling +- $700,000 (from memory here) from their reserve fund, that amount will be required if every other line item is held flat just to be even funded. All we did last night was enable a level of service that exceeds what we will raise from our taxes and what we expect the state to deliver.

5. It was unclear whether a 2 ½ override would have been required if we did not pull from the stabilization fund. My understanding is that some people voted to pull from the stabilization fund believing that an override would have been required if we did not, and they did not want to take that risk. Easy to “Monday morning” quarterback that one but it would have been helpful if that situation was better communicated.

8 Kelly Roney April 14, 2010 at 6:14 PM

On point 3, John Butler’s graphs that show conclusively that bond ratings value income and not cash reserves are here. His analysis is here. (Both documents are Adobe Acrobat PDFs.)

The upshot for this domain (small towns in Massachusetts): A bond is safer if a debtor has the income to repay it, not if the debtor has a small part of the debt in the bank.

On point 1, would you advocate just leaving the money there? Actually, I don’t think Advisory advocated rebuilding the stabilization fund. Bill Boland for the BoS did advocate a 5% reserve from the sum of stabilization and free cash.

Rather than pay as you go, I actually would advocate rebuilding the fund when times are fat in order to smooth out the lean times. So, on that, I’m closer to the BoS than to Advisory. So I would contradict the premise at the margin, but I don’t think Advisory did.

But I’d be open to spending most of the rest of stabilization next year in the reasonable hope that FY2013 will be good economic times again.

On point 2, the financial wizards of Wall St. failed because their incentives weren’t aligned with the risk. They were too busy getting rich off magically hidden risk to analyze the numbers deeply enough. Paul Krugman and several others warned against it, as did hedge fund manager Michael Burry. Our own Jim and Lois Denman asked five years ago where all the people were suddenly coming from who could afford million dollar houses.

The wizards missed it because, until they failed, they were watching their wallets first and only.

9 123 April 15, 2010 at 9:49 AM

Let’s pretend I’m a turkey. I was born on December 1 and as turkeys go I’m a bit of an odd duck. I read incredibly boring books and other journals on statistics and econometrics that the farmer’s daughter hides from her father in the barn where I live. Bear with me… One of those books is all about interpreting data and based on that I put together a spreadsheet that records what time I’m fed and how much, on a daily basis.

Fast forward to November and I’m noticing that I’m being fed more and that the farmer is consistently feeding me between 8 am and 10 am (68% of the time; plus or minus one standard deviation from the mean of 9 am), and between 4 am and noon almost without exception (99.99% of the time; four standard deviations from the mean). Life is better than ever and there’s this girl turkey that seems to be succumbing to my admittedly awkward attempts to impress her.

It’s now 10 am on the third Wednesday in November and the farmer hasn’t fed me; I’m hungry, a bit cranky, and confused (girl turkey won’t even look at me) but not too worried because I have every expectation that I will be fed soon based on my spreadsheet. Two hours later and still no farmer coming around to feed me. How can this be? My spreadsheet shows less than a 0.001% (1 in 10,000) probability that this can happen. Two more hours go by and the farmer comes around with a slightly guilty look on his face and no food. You know how the story ends.

So, where did things go wrong with my analysis? I relied on common statistical principles, my spreadsheet had no errors, the data was robust and my conclusion based on my analysis of the historical data would withstand the most rigorous peer review.

I respectfully suggest to you that it’s better to honor the fundamental risk-return principle and our common sense, than rely on a spreadsheet that by definition considers a limited number of variables for a limited period of time and results in a conclusion that contradicts sound thought and reason.

Granted, all of this is a bit like arguing about who left the barn door open while the horses eat the lettuce from the garden. It really just doesn’t matter. There are no “do overs”. For what it’s worth, I thought Pat Q. provided a convincing argument and data to support her position. How much more credibility can you look for than a credit report from Moody’s, for Southborough that was completed not more than two months ago?

I don’t disagree at all with your point regarding greed on Wall Street being a large part of the problem. Harry Markopolos’ recent book (No One Would Listen) on the Madoff scam is a very worthwhile read. I was somewhat aware of how bad it was, but after listening to his presentation at a lunch a couple weeks ago picked up the book and have yet to fully process how so many could ignore common sense and rely solely on their spreadsheets showing the investment return data Madoff provided. Groupthink at it’s worst – in a financial sense, although some of the victims have taken their lives.

Credit due for the turkey story to Nassim Taleb and his book, “The Black Swan” – another worthwhile read on so many levels.

10 Kelly Roney April 18, 2010 at 2:01 AM

123, the turkey story is charming, but it’s a metaphor, and the consequence for the turkey is outside the data. Advisory’s data is on target and it has a long enough baseline.

Of course, that doesn’t mean it’s perfect or certain. Nothing is. But I’d much rather trust it than an appeal to intuition – “common sense” – especially when that data shows clearly that common sense is wrong. Advisory’s data is about how Moody’s assesses risk vs. return. Since that’s where consequences accrue to us, it seems the right assessment.

I wouldn’t be at all surprised to see Moody’s downgrade the bond ratings of lots of towns. Then we’ll get to argue – with one data point – about this decision. Advisory will present another scatter plot, and it will either show a correlation between reserves and rating or it won’t. History suggests strongly that there won’t be a correlation.

11 123 April 16, 2010 at 10:20 AM

Corrected sentence below – my times were off. Apologies.

Fast forward to November and I’m noticing that I’m being fed more and that the farmer is consistently feeding me between 7 am and 9 am (68% of the time; plus or minus one standard deviation from the mean of 8 am), and between 4 am and noon almost without exception (99.99% of the time; four standard deviations from the mean).

It’s also worth noting that while I disagree with the Advisory Committee on this issue, I agree with them on others and appreciate their dedication and hardwork on behalf of our community.

Previous post:

Next post: