Southampton must change its ways, according to Mass. Dept. of Revenue report

Southampton crowd.jpg

Emotions ran high at a recent public meeting in Southampton.

(Mary Serreze Photo)

SOUTHAMPTON — Southampton has been advised to make fundamental changes in town governance and its budget process if it wants to regain the trust of its citizens and establish financial stability.

An Oct. 6 report (see below) by the Mass. Dept. of Revenue declares that the town is in a "vulnerable financial condition," and makes 18 recommendations for turning things around.

The study recommends "substantial reforms" to the town's budget process, including empowering the town manager to be a leader, formalizing and expanding the town's finance team, establishing a formal budget timeline, increasing accountability and transparency, and taking steps to win back the confidence of town residents.

The report, prepared by the DOR's Division of Local Services at the request of the Selectboard, chastises town officials for using reserves to pay for operating expenses, points out that the town provides no incentives for people to pay their water bills, and slams the fiscal 2014 and 2015 budget process.

The authors single out the town's four-member elected finance committee:

"In at least the last two years, the finance committee has been unable to prepare a balanced budget or submit a report of its recommendations to town meeting. For the FY2015 budget, the committee voted to allow the new town administrator to present the budget at town meeting since she was more familiar with the budget details."

This spring, those missteps culminated in a last-minute budget scramble, a failed Proposition 2½ override vote, depleted reserves, and a divided community.

The study expresses confidence in "the new town administrator" — without mentioning Heather Budrewicz by name — saying she has worked effectively with her finance team, including treasurer/collector Donna Whiteley and accountant Vicki Moro, since starting her job in March 2014. It recommends that the "financial team" approach be expanded to include the assistant assessor and perhaps even the school business manager.

If the report's recommendations are adopted, the town administrator would take responsibility for preparing the first draft of the town's budget. That responsibility currently sits with the finance committee.

The DOR report advises selectmen to "vest the town administrator with the formal authority to lead the budget process" and give her the authority to appoint and supervise all department heads. As it is, some departments, which the report does not name, have "resisted" attempts by Budrewicz to institute basic administrative reforms in the areas of payroll and purchasing, the report notes.

"We recommend that selectmen advocate for a fully empowered town administrator's position with appointment authority and supervisory responsibility," the analysts advise.

Southampton should stop using reserves such as free cash or the stabilization fund for operating expenses, the DOR recommends. The town did not adopt a structurally-balanced FY2014 budget, and relied upon newly-certified free cash to balance the budget in December. That set up a "fiscal cliff" for FY2015 when, with minimal cash reserves on hand, department budgets had to be cut deeply when the override question failed.

Town meeting should avoid adopting unbalanced budgets with the expectation that the gap can be filled in December with certified free cash, the authors advise.

Southampton currently has only about $93,000 in its general stabilization fund with "limited prospects for a healthy upcoming free cash certification," said the DOR analysts.

Free cash is the amount of money a municipality has left in various departmental budgets at the end of a fiscal year. That money can't be spent before it's certified by the Department of Revenue, generally toward the end of the calendar year. As a general policy, the DOR recommends that certified free cash be used to replenish reserves or fund one-time expenditures — and not to prop up operating budgets.

Certain line items are non-discretionary, note the authors, including education expenses associated with Hampshire Regional High School and Smith Vocational and Agricultural High School.

Increases in assessments to the two regional schools have "contributed significantly" to the town's problems over the past three fiscal years, the report says. Between FY2012 and FY2015, the combined assessments increased by $1.275 million, consuming all the town's revenue growth.

To address the Hampshire Regional issue, the DOR advises Southampton to challenge the governance of the regional school district.

The report's authors declare that the school committee for the Hampshire Regional School District "does not conform to the legal requirements for a regional school committee," and claim that Southampton is underrepresented.

According to state law and the constitution, elected bodies such as regional school committees must be proportionate to the citizens they represent, write the authors. Southampton has six of the board's total 17 members, or 35 percent, whereas the town's 2012 population constitutes more than 48 percent of the total district population.

"We recommend that Southampton pursue amendment to the Hampshire Regional School agreement to bring school committee membership in line with the 'one person-one vote' principal," state the DOR analysts.

As for water bill collections, the report notes that late payers are only hit with a single $25 fee: "Delinquent ratepayers have no incentive to pay, and it appears that some prefer to let this charge stand until it is eventually submitted to the assessors as a water lien."

In recent decades, Southampton has grown from a small town to one with nearly 6,000 people and a $17 million budget. The report notes that between 1990 and 2010, the town saw a 47% increase in housing units and that population nearly doubled between 1970 and 2012.

Southampton's per capita income of $34,054 is the fifth-highest among the 43 communities in the Pioneer Valley, yet voters have repeatedly rejected Proposition 2½ overrides. A total of 39 override questions have been put before voters since 1991, all of which have failed, including the July 1, 2014 $1 million override rejected by a nearly two-to-one margin.

"Perhaps the lack of accountability in town government has contributed to a basic distrust of the ability of town officials to properly manage additional spending," the report suggests.

DOR staff interviewed selectmen, members of the finance committee and board of assessors, the town accountant, treasurer/collector, assistant assessor, town clerk, and town administrator. The group reviewed town meeting minutes, bylaws, town budgets, expenditure reports, audited financial statements, and the town administrator's job description. Analysts examined a series of failed Proposition 2½ votes, as well as town ballots and election results.

The review of Southampton's budget process was signed by Robert G. Nunes, Deputy Commissioner & Director of Municipal Affairs, distributed to members of the Selectboard, and copied to Sen. Donald F. Humason and Rep. Peter V. Kocot. It was prepared with the assistance of Joe Boudreau, DOR field representative.

The DOR's Division of Local Services provides municipal consulting services at no charge through its technical assistance section.

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