windham town audit with letterhead final 12 9 10

8/8/2019 Windham Town Audit With Letterhead Final 12 9 10

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PO BOX 464 Windham, NH 03087 6038945881

Windham, New Hampshire

Issues

Overview:

This report found many good things in the review of Windhams finances. For instance, thetowns debt situation is exemplary. The 2009 Town Report notes that, Other than a small notefor the Searles Building that is funded in its entirety through rental revenues of the building, the

Town has no outstanding municipal debt. Those things they have done well have generallybeen publicized by either the auditor or the towns management team and this report finds noneed to elaborate on them for that reason. The focus of this report was to identify those areaswhere Windhams town leaders need to bring the same fiscal prudence that they approached thedebt issue with.

High Salary Costs:

The following chart shows the salaries of those who received over $100,000 in totalcompensation from Windham as recorded in the annual report. 1

Windhams highest grossing employee in 2009 was a patrolman whose salary and benefitstotaled an eye popping $167,098 on a base salary of $54,569. Good management practices willnot allow employees to record that much overtime for several reasons. First, overtime hours costthe city more than just the 150% of regular salary hours that overtime pay constitutes because of the exceedingly high benefit load in Windham (see following section on benefits). Fiscallyprudent management practices dictate than when you have as many hours of overtime asWindham appears to have incurred you either hire additional employees, whose hours cost youless than the overtime hours you are replacing, hire part time employees to fill those hours of need or better yet contract for those hours, which allows the city to avoid the huge benefit costsinherent in Windhams standard pay structure.

Not only is it instructive to notewhich positions are receiving these more than adequate salaries but the nature of how theybecame so large. A review of all employees found that regular salaries totaled to a reasonable$4,945,280.93 but after overtime, incentives and benefits the amounts nearly doubled to anincredible $8,798,231.01. The use of that much overtime and that high of a benefit load points tosignificant personnel management issues.

1 http://www.windhamnewhampshire.com/updated/pdfs/2009WageReportCorrect.pdf
http://www.windhamnewhampshire.com/updated/pdfs/2009WageReportCorrect.pdfhttp://www.windhamnewhampshire.com/updated/pdfs/2009WageReportCorrect.pdfhttp://www.windhamnewhampshire.com/updated/pdfs/2009WageReportCorrect.pdfhttp://www.windhamnewhampshire.com/updated/pdfs/2009WageReportCorrect.pdf


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Position Regular Salary Gross Pay BenefitsTotal Salary

and BenefitsPatrolman 54,568.93$ 122,960.97$ 44,137.04$ 167,098.01$Sergeant 63,892.66$ 118,122.91$ 42,804.79$ 160,927.70$Sergeant 59,364.36$ 106,269.53$ 41,170.45$ 147,439.98$Sergeant 65,809.64$ 106,003.39$ 40,863.37$ 146,866.76$Town Administrator 99,253.93$ 100,381.73$ 41,623.19$ 142,004.92$Patrolman 55,887.02$ 102,525.58$ 32,419.66$ 134,945.24$Sergeant 63,892.66$ 93,727.84$ 38,829.55$ 132,557.39$Fire Chief 89,599.10$ 90,534.90$ 41,121.95$ 131,656.85$Patrolman 54,607.93$ 98,325.99$ 33,095.63$ 131,421.62$Firefighter 50,898.25$ 89,854.02$ 41,448.00$ 131,302.02$Chief 89,599.10$ 91,214.40$ 38,882.36$ 130,096.76$Firefighter 49,925.51$ 86,744.49$ 40,822.42$ 127,566.91$Lieutenant 57,695.56$ 86,018.30$ 39,780.56$ 125,798.86$Assistant Fire Chief 80,875.01$ 83,672.18$ 40,864.91$ 124,537.09$Patrolman 52,615.04$ 85,865.19$ 38,017.38$ 123,882.57$Firefighter 50,948.49$ 83,240.80$ 40,256.84$ 123,497.64$Highway Agent 81,254.69$ 84,256.86$ 38,729.13$ 122,985.99$Patrolman 56,206.02$ 90,951.69$ 31,797.15$ 122,748.84$Firefighter 51,076.02$ 82,482.97$ 40,100.16$ 122,583.13$Lieutenant 57,360.91$ 80,971.34$ 40,068.88$ 121,040.22$Assessor 81,254.69$ 82,368.86$ 38,506.98$ 120,875.84$Firefighter Mechanic 51,900.89$ 80,990.83$ 39,861.35$ 120,852.18$Info Tech Director 81,254.69$ 82,108.29$ 38,466.29$ 120,574.58$Asst Town Admn-Finance 81,254.69$ 82,024.70$ 38,387.72$ 120,412.42$Sergeant 61,602.40$ 80,332.82$ 36,855.23$ 117,188.05$Patrolman 53,127.23$ 92,520.63$ 23,285.51$ 115,806.14$Patrolman 44,408.73$ 82,478.99$ 32,438.32$ 114,917.31$Firefighter 50,898.25$ 71,232.17$ 38,164.54$ 109,396.71$Lieutenant 57,695.56$ 77,771.62$ 31,509.13$ 109,280.75$Firefighter 50,898.25$ 70,962.87$ 38,052.09$ 109,014.96$Patrolman 54,568.93$ 85,704.09$ 22,324.45$ 108,028.54$Captain 12,069.01$ 77,879.94$ 28,860.35$ 106,740.29$Firefighter 50,898.25$ 67,960.91$ 37,600.65$ 105,561.56$Library Director 80,727.32$ 81,644.04$ 23,415.34$ 105,059.38$Maint. Director 66,123.66$ 68,847.46$ 36,029.28$ 104,876.74$Bldg Inspector 66,893.58$ 71,342.74$ 32,982.84$ 104,325.58$Firefighter 50,898.25$ 65,359.74$ 37,035.10$ 102,394.84$Firefighter 50,961.03$ 65,316.11$ 37,039.66$ 102,355.77$

Firefighter 48,342.65$ 62,115.94$ 38,219.10$ 100,335.04$


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Excessive Benefit Costs:

The author of this study has reviewed government entities at various levels of government overnearly two decades and seldom has encountered a benefit load as high as this citys costs. Thefollowing chart highlights this issue 2

:

2 http://www.windhamnewhampshire.com/updated/pdfs/2009WageReportCorrect.pdf

Position Regular Salary Gross Pay BenefitsTotal Salary

and Benefits

Benefi t Load asa % of Regular

SalaryPatrolman/Special Offcr 29.40$ 21,081.92$ 1,612.77$ 22,694.69$ 5486%Patrolman/Special Offcr 14.63$ 10,101.60$ 772.75$ 10,874.35$ 5282%Captain 12,069.01$ 77,879.94$ 28,860.35$ 106,740.29$ 239%Planning Director 21,004.96$ 57,039.47$ 24,052.17$ 81,091.64$ 115%Custodian 33,467.50$ 35,098.04$ 30,243.74$ 65,341.78$ 90%Operator 1 17,466.98$ 19,267.42$ 15,543.81$ 34,811.23$ 89%Secretary 36,086.46$ 40,722.51$ 30,674.01$ 71,396.52$ 85%Patrolman 35,871.39$ 65,823.30$ 30,371.69$ 96,194.99$ 85%Patrolman 17,521.97$ 29,369.81$ 14,505.90$ 43,875.71$ 83%Firefighter 49,925.51$ 86,744.49$ 40,822.42$ 127,566.91$ 82%Firefighter 42,248.85$ 55,817.29$ 34,483.26$ 90,300.55$ 82%Firefighter 50,898.25$ 89,854.02$ 41,448.00$ 131,302.02$ 81%Patrolman 54,568.93$ 122,960.97$ 44,137.04$ 167,098.01$ 81%Firefighter 48,342.65$ 62,115.94$ 38,219.10$ 100,335.04$ 79%Firefighter 50,948.49$ 83,240.80$ 40,256.84$ 123,497.64$ 79%Admin Asst 39,681.06$ 40,815.06$ 31,166.01$ 71,981.07$ 79%Firefighter 51,076.02$ 82,482.97$ 40,100.16$ 122,583.13$ 79%Truck Driver 41,488.47$ 44,051.35$ 31,919.99$ 75,971.34$ 77%Firefighter Mechanic 51,900.89$ 80,990.83$ 39,861.35$ 120,852.18$ 77%Firefighter 50,898.25$ 71,232.17$ 38,164.54$ 109,396.71$ 75%Firefighter 50,898.25$ 70,962.87$ 38,052.09$ 109,014.96$ 75%Firefighter 50,898.25$ 67,960.91$ 37,600.65$ 105,561.56$ 74%Dispatcher 44,232.11$ 48,856.55$ 32,633.35$ 81,489.90$ 74%Patrolman 44,408.73$ 82,478.99$ 32,438.32$ 114,917.31$ 73%Firefighter 50,898.25$ 65,359.74$ 37,035.10$ 102,394.84$ 73%Firefighter 50,961.03$ 65,316.11$ 37,039.66$ 102,355.77$ 73%Planning Dpt Secretary 33,300.88$ 36,237.88$ 24,137.49$ 60,375.37$ 72%Patrolman 52,615.04$ 85,865.19$ 38,017.38$ 123,882.57$ 72%

Lieutenant 57,360.91$ 80,971.34$ 40,068.88$ 121,040.22$ 70%Deputy Collector 32,390.15$ 35,661.87$ 22,604.26$ 58,266.13$ 70%Sergeant 59,364.36$ 106,269.53$ 41,170.45$ 147,439.98$ 69%Operator 2 48,135.75$ 53,034.95$ 33,335.91$ 86,370.86$ 69%Lieutenant 57,695.56$ 86,018.30$ 39,780.56$ 125,798.86$ 69%Sergeant 63,892.66$ 118,122.91$ 42,804.79$ 160,927.70$ 67%Patrolman 42,690.95$ 63,381.38$ 27,891.95$ 91,273.33$ 65%Sergeant 65,809.64$ 106,003.39$ 40,863.37$ 146,866.76$ 62%Admin Assistant 49,933.21$ 54,850.23$ 30,945.43$ 85,795.66$ 62%Highway Laborer 43,186.91$ 51,007.06$ 26,441.10$ 77,448.16$ 61%Sergeant 63,892.66$ 93,727.84$ 38,829.55$ 132,557.39$ 61%Patrolman 54,607.93$ 98,325.99$ 33,095.63$ 131,421.62$ 61%Sergeant 61,602.40$ 80,332.82$ 36,855.23$ 117,188.05$ 60%Dispatcher 43,578.34$ 47,843.64$ 25,965.55$ 73,809.19$ 60%Supervisor/Driver 26,096.62$ 47,675.40$ 15,492.74$ 63,168.14$ 59%Library Admin Asst 43,121.56$ 43,258.33$ 25,275.31$ 68,533.64$ 59%Supervisor/Driver 23,208.49$ 25,679.25$ 13,466.72$ 39,145.97$ 58%Patrolman 55,887.02$ 102,525.58$ 32,419.66$ 134,945.24$ 58%Patrolman 56,206.02$ 90,951.69$ 31,797.15$ 122,748.84$ 57%Lieutenant 57,695.56$ 77,771.62$ 31,509.13$ 109,280.75$ 55%Maint. Director 66,123.66$ 68,847.46$ 36,029.28$ 104,876.74$ 54%Tech Services Librarian 52,391.57$ 52,537.85$ 26,882.25$ 79,420.10$ 51%Tech Services Librarian 52,391.57$ 52,528.73$ 26,880.82$ 79,409.55$ 51%Assistant Fire Chief 80,875.01$ 83,672.18$ 40,864.91$ 124,537.09$ 51%
http://www.windhamnewhampshire.com/updated/pdfs/2009WageReportCorrect.pdfhttp://www.windhamnewhampshire.com/updated/pdfs/2009WageReportCorrect.pdfhttp://www.windhamnewhampshire.com/updated/pdfs/2009WageReportCorrect.pdfhttp://www.windhamnewhampshire.com/updated/pdfs/2009WageReportCorrect.pdf


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The salaries of the towns personnel do not appear out of line until you view them in theirtotality. Once you include the incentives, overtime and benefit cost they become a poster childfor what is wrong with government employment structures. This is amplified because some of these positions are in support and administration and do not directly provide any services.Growth in the hidden overhead facets of government is an endemic issue in all levels of government. The issues regarding benefits in Windham are basically a two part issues: healthcare and retirement plans.

Health care costs have risen for businesses and government alike over the last decade but there isa fundamental difference in how the two entities have dealt with them. Business understandsthat the most important factor in health is the individual themselves. Genetic predispositions arelargely uncontrollable by the individual but behavior is a major issue in health outcomes. One of the purposes of deductibles in conjunction with health insurance is to get the insured to modifytheir behaviors by forcing them to not only share part of the cost but understand what those costsare. The city currently self insures through payroll deductions but this approach has a cost to thecity in administering it that is unnecessary and lacks some of the benefits that another form of self funded deductible brings to the employee. The use of Health Savings Accounts (HSA)would give the employee some additional benefits in exchange for being responsible for thedeductible that are not available in the current structure. Here is a brief outline of how theywork:

Benefits of an HSA:

1. You can claim a tax deduction for contributions you, or someone other than youremployer, make to your HSA even if you do not itemize your deductions on Form 1040.

2.

Contributions to your HSA made by your employer (including contributions madethrough a cafeteria plan) may be excluded from your gross income.3. The contributions remain in your account from year to year until you use them.4. The interest or other earnings on the assets in the account are tax free.5. Distributions may be tax free if you pay qualified medical expenses.6. An HSA is portable so it stays with you if you change employers or leave the work

force.

Qualifying for an HSA:

To be an eligible individual and qualify for an HSA, you must meet the following requirements.

1. You must be covered under a high deductible health plan (HDHP)2. You have no other health coverage except what is permitted3. You are not enrolled in Medicare.4. You cannot be claimed as a dependent on someone else's tax return5. Under the last-month rule, you are considered to be an eligible individual for the entire

year if you are an eligible individual on the first day of the last month of your tax year(December 1 for most taxpayers).


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6. If you meet these requirements, you are an eligible individual even if your spouse hasnon-HDHP family coverage, provided your spouse's coverage does not cover you

7. Under the last-month rule, you are considered to be an eligible individual for the entireyear if you are an eligible individual on the first day of the last month of your tax year(December 1 for most taxpayers).

8.

If you meet these requirements, you are an eligible individual even if your spouse hasnon-HDHP family coverage, provided your spouse's coverage does not cover you.

An HDHP may provide preventive care benefits without a deductible or with a deductible belowthe minimum annual deductible. Preventive care includes, but is not limited to, the following.

1. Periodic health evaluations, including tests and diagnostic procedures ordered inconnection with routine examinations, such as annual physicals.

2. Routine prenatal and well-child care.3. Child and adult immunizations.4. Tobacco cessation programs.

5. Obesity weight-loss programs.6. Screening services. This includes screening services for the following:a. Cancer.b. Heart and vascular diseases.c. Infectious diseases.d. Mental health conditions.e. Substance abuse.f. Metabolic, nutritional, and endocrine conditions.g. Musculoskeletal disorders.h. Obstetric and gynecological conditions.i. Pediatric conditions.

j. Vision and hearing disorders.

These are plans that require the employee to take more ownership of his/her health by requiring ahigh deductible. The employee gains some significant tax advantages in this structure while theemployer reduces their costs of coverage via the high deductible policy. This report believes thata conversion to this type of plan should be considered with the employee financing the HSAinstead of the citizens. Not only does employer financing of the HSA account fail to accomplishany savings for the taxpayer it also removes the employee incentives to control their health.

A review of state law confirms that there are limited options for dealing directly with the

retirement costs. However, given the growing nationwide concern with governmental definedbenefit plans costs and unfunded liabilities the city must consider its options. There has been aconsiderable amount of media attention lately to the rapidly growing debts of the statewideretirement systems but it is endemic in local governmental units also. The unfunded liability is acost that is truly hidden. Current government accounting standards do not require these amountsto appear in the financial statements of government entities and Windham is no exception. Thisis especially troubling because these plans have structural flaws that tend to accumulate large


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amounts of debt over and above what the combination of employer and employee contributionscan cover. The structure of these plans provides for these unfunded liabilities to be theobligation of the employersin this case the citizens of Windham.

The large disparity between base salary and gross salary and benefits should be a red flag for

citizens that the retirement plan is being abused. For example, the patrolman with the base salaryof $54,569 receiving a total package of salary and benefits of $167,098 suggests a manipulationof the salaries in order to maximize the retirement benefits for that individual. The way definedbenefit plans work is that your highest three years average salary are multiplied times your yearsof service and the plans benefit multiplier. The highest three years average salary conceptincentivizes employees to look for ways to inflate those final years. A department head thatallows an employee to increase their salary this much with overtime and other incentives hascreated an inflated benefit cost to the town of Windham for many years into the future as thatperson draws benefits based on the higher salary amount. It is difficult for citizens to indentifythese inflated benefits costs because they do not appear in the current budget effectively hidingthe manipulation.

There also is an overlooked ongoing cost of these defined benefit systems that impact budgetsannually. The employer and member contributions to these systems exceed the cost of even avery generous defined contribution in the private sector. This make payrolls more costly thannecessary and takes needed funds away from services and programs. Every time an employeessalary increases the amount that the city has to pay in employer contributions increasesproportionately. This is one of the lesser understood escalators in operating costs. Thepreceding chart highlights how costly this can be to taxpayers.

However the impact of the defined benefit plan is not only in direct costs but also in thedemographic of the work force which it helps shape. It is largely overlooked that the definedbenefit plan favors older employees and a review of the allocation of workforce by age of eachsystem verifies that. This older workforce serves to increase the cost of health care toemployees in Windham.

There are essentially two ways to deal with this problem. First, state laws can be changed andwe would encourage citizens and town council to consider advocating for just such a change totheir state representatives. Municipalities should have the choice to opt out of these flawedplans. The difficulty in that approach is that many legislators enjoy the special control that it

gives them over state and local employees. The politicians can turn their votes for increasedretirement benefits for these government employees into votes at the polls.

The more immediate approach to these high benefit loads is for the city to actively engage inoutsourcing. Many of the functions performed at the city level such as payroll and humanresources are services that can be found in local businesses. There are many reasons to considerthis approach:


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1. Lower coststhe competition of the bid process drives prices down as businesses mustcompete for the contract

2. Reduction in city employees---as we have noted the hidden benefit costs of governmentemployees drive operational cost increases that are unrelated to an increase inservices/programs

3. Greater transparency and accountability----the assignment of a contract delineates who isresponsible for a particular function and exactly what it costs, unlike current operationswere a taxpayer knows only the supervising department that provides theservice/program, not who is responsible and the total cost of the service/program.

4. Greater flexibility---in hard economic times government typically struggles to downsizewhile business tends to react quickly or cease to operate.

5. Stimulates the local economy more than direct city expenditures----private businessestend to reinvest profits helping grow the local business.

The fundamental flaw in most governmental outsourcing solutions is that government fails tostructure their contracts properly. A good contract not only stipulates the exact nature of therepercussions if that level is not met. This latter component is a very important concept that isnearly always overlooked in outsourcing versus in-house comparisons of functions. When agovernment employee commits grievous errors or fraud the taxpayer has very limitedopportunities for their government to recover the damages from that employee. However, aproperly written contract with a private business would provide for recovery under thosecircumstances.

Transparency, Accountability, and Efficiency

Ultimately the way to control expenditures is to ensure that the minimum amount is spent on

programs or services that dont work. Sounds simple but it is so complex when it comes toWindhams services. Private business has a bottom line or net income as it is properly knownwith which to measure how well they provide the good and/or service they provide. If the bottomline becomes zero or a negative number the business has to change or they cease to be inbusiness in a short time. No such arrangement exists for city government. Bringingaccountability to city government in this environment is exceptionally difficult; however, there isa solution once the problem is identified.

It is poorly understood how much the current method of governmental accounting has been aroot of this government inefficiency. Government accounting, unlike private sector accounting,

is not structured to measure how effectively the taxpayers money is being spent. GovernmentalAccounting Standards Board (GASB) direction is merely to track the sources and uses of fundswhich while a useful function to ensure that funds come from and go to where they are supposedto it is uninformative otherwise. In fact, government accounting as it is currently practicedhides many of the real costs of programs and services. This flaw has been used by bureaucratsover the years to hide inefficiencies and sometimes corruption. A prominent financial authorityrecently said Our system of accounting and financial reporting is designed as if to hold


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appointed officials responsible to elected officials. We should be holding the elected officialsresponsible to voters and taxpayers 3

Businesses generally have two sets of accounting systems. One is prepared with an eye towardsthe governmental tax reporting requirements and other system functions as their management

information system for operating their business. Businesses would never think of attempting torun their business using their tax reporting numbers. Management wants to know exactly howmuch everything they do costs them and what outcomes they achieve because of thoseexpenditures. Do the taxpayers of Windham deserve any less?

.

Fixing this flaw is a two step process but the good news is that it is both quick and economical toinstall and will have an immediate impact on out of control spending. A managementinformation system will peal back the layers of hidden expenditures and reveal to citizens exactlyhow much is spent on every program and service their tax dollars pay for. The former StateAuditor of Oklahoma, the author of this study and five college interns tested just such a system

for the entire states finances using the state of Oklahomas transparency websites data.Working part time and with limited resources the group was able to build a functioning model ina short period of time. Once built the model was constructed so it could be updatedautomatically within just a few minutes every time the states transparency website uploadednew data .4

Here is a quick explanation of how it works. First EVERY cost that should be charged to aprogram/service is included instead of isolating costs within departments. For example, the cityhas departments that administrate the other functions and collect taxes, however, none of thecosts of collecting and allocating money to various programs/services is shown within theprogram/service costs that receive the services. This means things such as road maintenance failto include all the costs that were required for that maintenance to take place. This approachwould be the same as a business saying that the cost of the person operating the cash register andthe accountant recording it are not costs of the business! When government isolates costs withindepartments instead of allocating them to the recipient program/service it hides many of theinefficiencies of government especially in the growth of functions like administration, financeand human resources that are overhead costs. The first step in having true transparency is forcitizens to know exactly how much a service/program actually costs!

This model only tracked expenditures to the program level but proved that theconcept was not only viable but economical and capable of functioning with a minimum of additional inputs on a level much more complex than the city of Windhams structure. Puttingthis type of cost allocation model into place in Windham within the current accounting systemwould be not only easy to install but could be done with a minimum of cost.

These hidden costs also make comparisons between governments costs of a program/service tothe private sector tainted because significant costs of government have been left out of the

3 http://www.ocpathink.org/sites/ocpathink/uploads/documents/Daxon_July_2009.pdf page 54 http://www.ocpathink.org/sites/ocpathink/uploads/documents/Daxon_July_2009.pdf
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comparison. These misstatements of cost to provide services are often the roadblock to attemptsto outsource functions of government. By finally requiring the full allocation of costs for eachservice private vendors bidding for outsourcing contracts will be able to show the true amount of incentivized to either pressure the department providing the service to reduce their costs or look at outsourcing that service.

Another very important feature of this additional accounting function is its ability to exposeback door taxes. While AFP generally supports the concept of user fee financed governmentsystems where applicable, often these fees bear little or no relationship to theprograms/services rendered in exchange for the fee. Those fees that are aimed at businessbecome a cost that is passed on to the consumer and those that are paid directly by individualsbecome a part of the cost of living in Windham. When the fee reasonably covers the cost of theservice, program or regulation there is little issue other than to consider the actual need for theservice, program or regulation. However, if the fee exceeds its cost of service and the funds areused to finance other functions of city government is it actually a back door tax.

Public Private Partnerships

Nonprofits, civic, religious, and charitable foundations form a third or independent sectorthat can deliver important services and benefits that neither governments nor profit-seekingbusinesses can deliver as effectively. The city should be careful not to supplant these institutionsof civil society and in fact should seek to create public-private partnerships whenever possibleto utilize the strengths of these organizations . We encourage the town to examine its social andcultural and health services such as the food/fuel vouchers, rent/mortgage assistance, prescriptionassistance, and/or utility assistance for assistance from these groups. 5

These independent

service providers are already in the community and many times provide a higher quality of service for the recipient. The following chart shows the growth in expenditures in the areas of health and culture/recreation which are great candidates for these types of partnerships.

5 http://www.windhamnewhampshire.com/updated/faq.htm
http://www.windhamnewhampshire.com/updated/faq.htmhttp://www.windhamnewhampshire.com/updated/faq.htmhttp://www.windhamnewhampshire.com/updated/faq.htmhttp://www.windhamnewhampshire.com/updated/faq.htm


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Trend Analysis of Revenues and Expenditures 6

EXPENDITURES 2005 2006 2007 2008 2009% Growth2005-2009

GENERAL GOVERNMENT 1,755,264.00$ 1,816,544.00$ 1,947,152.00$ 2,109,615.00$ 2,118,259.00$ 21%PUBLIC SAFETY 5,458,340.00$ 5,415,687.00$ 6,197,069.00$ 6,813,098.00$ 6,899,144.00$ 26%SANITATION 923,154.00$ 1,000,928.00$ 1,013,780.00$ 1,004,094.00$ 981,378.00$ 6%HEALTH 62,566.00$ 67,815.00$ 93,220.00$ 104,200.00$ 103,244.00$ 65%WELFARE 60,687.00$ 71,867.00$ 60,871.00$ 51,551.00$ 53,650.00$ -12%CULTURE AND RECREATION 932,584.00$ 1,031,537.00$ 1,096,701.00$ 1,191,332.00$ 1,222,995.00$ 31%DEBT SERVICE 579,159.00$ 736,605.00$ 392,181.00$ 262,288.00$ 250,305.00$ -57%CAPITAL OUTLAY 841,280.00$ 710,928.00$ 472,729.00$ 703,963.00$ 1,913,901.00$ 127%OPERATING TRANSFERS OUT 85,000.00$ -$ 177,975.00$ 90,000.00$ -$ -100%TRUST ACCOUNTS 60,000.00$ 50,000.00$ 60,000.00$ 60,000.00$ 30,000.00$ -50%SPECIAL ARTICLES 542,067.00$ 217,709.00$ 37,419.00$ 15,882.00$ 13,874.00$ -97%TOTAL 11,300,101.00$ 11,119,620.00$ 11,549,097.00$ 12,406,023.00$ 13,586,750.00$ 20%GROWTH BY YEAR -1.60% 3.86% 7.42% 9.52%

It should be noted with some interest that during the recent economic boom the growth in totalexpenditures by year were lower than the rate one would anticipate. However, the relativelyhigh increases in the middle of a recession conversely were troubling. The salary and benefitcosts we have documented are no doubt partially responsible for this growth. It is nocoincidence that the public safety sector had a 26% overall growth and is by far the biggestsingle line item when you review the chart on the highest salaries in Windham and see that 9 of the top 10 gross salary and benefits were from this sector. Controlling costs moving forwardrequires the city to address these issues immediately especially if the recession is prolonged overseveral more years.

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

2005 2006 2007 2008 2009

Fiscal Year

Revenue before Property Taxes by Source

TAXES

INTERGOVERNMENTAL REVENUES

LICENSES AND PERMITS

CHARGES FOR SERVICES

MISCELLANEOUS REVENUES

OTHER FINANCING SOURCES

It does not take a fiscal expert to see that Windhams revenue sources are relatively flat and thelargest category of revenue---licenses and permits---is actually declining. That is extremelyproblematic given the preceding chart that shows expenditures actually increasing. Theinevitable outcome of this scenario is a need to increase property taxes.

6 All graphs from information gathered from the online budget publications of Windham


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Conclusion

Windham has positioned itself to be a model for other cities in debt management but converselyit has also become a poster child for obfuscation of salary and benefit costs especially in the areapublic safety. This happens for a variety of reasons such as the general deference to police and

firefighters because of the important jobs they do. This review appreciates their efforts but theamount of salary and benefit loading that has taken place has a growing impact on the citysbudget both in the short term and the long term. Short term these large salary amounts arelimiting the ability of city management and elected officials to control budget expenditures andbuild in safety nets to the current fiscal years budget. Long term these bloated benefits are apotentially bigger problem. Public pension plans are coming under new scrutiny as the unfundeddebt they are creating is becoming larger and larger.

windham town audit with letterhead final 12 9 10

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