Wellesley Chief Financial Officer Sheryl Strother didn’t waste any time in mentioning COVID-19 during her Select Board presentation on preliminary fiscal year 2022 (ended June 30) financial results, indicating that its impact continues to be felt.
“2022 continued to be impacted by COVID, the town’s immediate response to the COVID emergency was to slow spending and to pull back on capital, and particular in 2021 budgeting. The town really curtailed the capital until we could see what the revenue picture was going to look like.”
While COVID-19 had its devastating impact on health and put a hold on town infrastructure projects, Wellesley also started to financially reap the benefits of federal funding, such as from the CARES Act, that went toward town and school costs, and from ARPA, that paid for COVID-19 leave. Local government capital budgets had been tightened, but departments still wound up turning money back to the town that they hadn’t spent, and that resulted in Wellesley having a strong reserve fund to end fiscal 2021.
“Even though we used significant reserves to kind of restore our capital, a little bit in 2022 and significantly more in 2023 budgeting, we’re going to close fiscal ’22 with very significant reserves,” Strother said. Local revenues, including from licenses/permits and the Recycling & Disposal Facility, far exceeded budgets. So did departmental operating turnback (unused funds), in large part because positions went vacant, with job candidates hard to find as the pandemic went on.
As a result the town’s financial reserves amount to about 20% of fiscal year 2023 budgeted revenue. Having a healthy free cash fund could help the town reduce the amount it needs to borrow—possibly via a debt exclusion and higher property taxes—for significant Town Hall renovations, which will be the subject of a Special Town Meeting on Oct. 24.
The fiscal year 2023 outlook continues to take the impact of the pandemic into account. For example, the move to a more hybrid workforce has whacked the town’s parking revenue, and as a result the town is using $500K from its general fund to subsidize its traffic and parking operations.
Following Strother’s presentation, Select Board members weighed in (See recording of the presentation and discussion starting about a minute into the Wellesley Media recording and lasting for about half an hour).
Ann-Mara Lanza asked about the big difference between projected revenue and actual revenue, and the impact that might have had on holding off on certain town projects. She suggested this would be something to consider for FY ’23 in light of projects approved by Town Meeting that the town’s departments have said they don’t have the capacity to handle. For example, renovations of the Park & Highway building and at the RDF have been deferred in light of all the work being done on the school building projects. Staffing issues related to such projects is a subject Lanza said she’d like to see the Board discuss.
Select Board member Tom Ulfelder, citing expertise from former Wellesley Executive Director Hans Larsen, commented that turnback isn’t necessarily a bad thing, and that tightening budgets too much on departments can lead to them maxing out their spending. Doing your best to predict budgetary needs, even if the budget goes over what is ultimately needed, can lead to more natural spending, he said.
Select Board member Beth Sullivan Woods said it might behoove the town and its residents for Wellesley leadership to share an outlook on its projects in light of the rising cost of living in Wellesley. “I think it would be good to show what our plan is for the projects, where our bandwidth is expected to be able to absorb projects, and how we anticipate funding them. Because as they push out, I think it’s reasonable to expect they will become more expensive…Maybe not, maybe all the cost of inflation we’re seeing now and the delayed delivery timing will push some of those costs down a little bit, but I think we should just be able to provide that update and that transparency both to us and to the community what the capital plan looks like now, because I think things are changing and they probably are different than what we saw at Annual Town Meeting in the financial plan.”
Ulfelder said the Board could discuss this, but addressing this issue is more for the town’s Permanent Building Committee. “What they have explained consistently is that they’re not saying ‘no’ to projects, they’re pushing them out a year. What we’re finding is that boards are going to the PBC and advocating as you would hope they would for their projects and looking for answers as to why they are being pushed out…” The PBC has consistently said that COVID has pushed projects out, he added.
Board member Colette Aufranc said, “I’m really interested in seeing what we can do to apply the excess reserves to capital projects, as we’ve always said we would do, and modify the short-term borrowing impacts for the taxpayers in town.”
Town Executive Director Meghan Jop said that looking forward, the town needs to determine year by year as part of its financial plan whether spending on big projects will come from its tax base or through borrowing.