2026-09-17 - Finance Committee

00:12I'd like to welcome everybody to the

00:13finance committee meeting of September

00:16the 17, 2026.

00:19And we're going to call this meeting to

00:20order. And first item of business, I'm

00:24going to let the members of the

00:25committee introduce themselves. I'll

00:27start on my right and go around the

00:30table.

00:31>> Uh Jim Flynn,

00:33>> Dennis Okonnell,

00:34>> Kelly [clears throat] Barner,

00:35>> Milin Kitkar,

00:36>> Vicram Chabra,

00:38>> Victoria Pittney, Sandra Fritz,

00:40>> and David Remington is joining us

00:43tonight by phone. So that means that

00:45each vote we encounter will be a roll

00:49call vote. With that, the next order of

00:52business is going to be to reorganize

00:55the committee for the upcoming year. And

00:58I'll just briefly before I get into it,

01:01I just want to thank the committee

01:03members for this past year and thank the

01:06town staff for everything they've done.

01:08And I just one more introduction. I'd

01:10let the manager introduce his staff and

01:13our guests.

01:14>> Sure.

01:15>> Well, we'll have everyone introduce

01:16themselves.

01:17>> Christina Ordo, I'm assistant town

01:19manager. administration and finance.

01:21>> Kevin Mizakar town manager.

01:23>> Alex Martinez, director of fiscal

01:24planning.

01:25>> Brian Brian Germos from Bartholomew

01:28Company.

01:31[laughter]

01:33>> Alex Bartholomeia from Bar.

01:36>> And with that, this [snorts] year we've

01:39done something a little bit different.

01:40We've had a nominating committee and I'm

01:43going to ask Victoria if she's going to

01:46recommend the upcoming slate of offices

01:48for this year.

01:50>> Sure.

01:51>> Take it over from there.

01:52>> Um I will start by nominating Mr. Jim

01:55Flynn as chair.

01:57>> Do I have a second?

01:58>> Second.

02:01>> All those in favor?

02:03>> I.

02:04>> Roll call, isn't it?

02:05>> Oh, yes. Well, we can go first and then

02:08Well, we'll go. We'll go with a roll

02:10call. I I'll start off uh

02:14well, I'll start off over there with

02:16Sandra.

02:16>> I I

02:18>> I

02:19>> I

02:20>> I

02:22>> I

02:23>> Oh, thank you.

02:25>> David and David.

02:29>> I think he said I

02:30>> might be on mute, Dave.

02:31>> Okay.

02:34Can you hear me? Yep.

02:35>> Yep.

02:38>> Okay.

02:40I'm gonna pass it over to Kelly as

02:42another member of our nomination

02:43committee.

02:44>> So for vice chair, we nominate Milan

02:46Kicker.

02:48>> I'll second that.

02:51>> Are there any other nominations? If not,

02:55>> I I I

02:56>> I

02:59>> I

03:01>> I

03:02>> David.

03:03Hi.

03:04>> Thank you.

03:05>> Thank you.

03:07>> And Mr. I'm gonna we'll leave lastly. Uh

03:12>> you're

03:12>> I'm I'll recommend uh David Remington as

03:15clerk.

03:16>> Okay.

03:17>> Second.

03:18>> Second.

03:21>> I I

03:23>> I

03:24>> I

03:24>> I

03:25>> I

03:26>> I

03:27>> David.

03:30Thank you. Well, I think that uh

03:33completes our new slate of offices. I'll

03:36just swap over from one seat to the

03:38other here and let Mr. Flynn take over.

03:42Thank you.

03:45>> I'll just Oh, you want

03:46>> Yeah, you can just You want to stay

03:48there, J?

03:48>> Yeah, I'll just We're good. Is that all

03:51right?

03:53>> All right. [laughter]

03:55>> Great. This whole meeting is going to be

03:58[laughter]

03:59>> We'll get through it.

04:00>> Waited. [snorts]

04:01>> Okay. Okay, our third item on the agenda

04:04today is to approve minutes from our

04:05June 18th. Um, I'm going to bundle these

04:08July 8th and our August 4th uh 2026

04:12meetings. I think one of those was by

04:14Zoom. Um, has everyone had a chance to

04:16review those and any comments or edits

04:19anyone like to make? If not, I'll take a

04:22motion.

04:23>> I move to approve the minutes.

04:26>> Second.

04:27>> All right, we'll start with a roll call

04:28with Sandy. I

04:29>> I

04:30>> I

04:31>> I

04:31>> I

04:32>> I

04:33>> I

04:34>> I

04:34>> David.

04:38>> Dave, can you hear us? Okay,

04:43>> I'll take that as a yes. I think you

04:44can. [laughter]

04:45>> It looks like you said yes.

04:46>> All right, great. Uh on to item four. Uh

04:49we have our presentation from from

04:51Bartholomew. I think uh we're scheduled

04:54for earlier this year, so thanks for

04:56coming in. uh back at our first meeting

04:59from our little summer break. So, uh

05:01welcome and I'll uh turn it over to

05:04Brian andor Alex for uh your

05:06presentation.

05:07>> Excellent. Thank you. Good evening

05:08everybody. Um

05:11yeah, my name is Brian Gerros. I'm from

05:13Bartholomew Company and Alex

05:14Bartholomew. Uh we it's good to see you

05:17again this year. Thank you for your

05:18time. Um sorry about earlier in the year

05:21we had to reschedule. Um but thank you

05:23for letting us come back out. So, this

05:25is the annual presentation we usually

05:27like to do and come out and uh review

05:29the operating and oped account. I think

05:31we have some new members uh on board.

05:33Correct.

05:34>> Correct.

05:35>> I'll give you a little brief view of who

05:37we are. Less than a minute. Uh

05:39Bartholomew Company is an independent

05:41adviser essentially located out of

05:43Worcester, Massachusetts. We're a little

05:45over six billion dollars assets under

05:47management uh in the municipal

05:49institutional space. We represent about

05:52uh 3.4 billion as of June 30th. Uh what

05:55does that all mean? We have about 300

05:57and excuse me uh we deal with about 300

05:59and over 330 municipal entities which is

06:02uh which part of that in cities and

06:04towns is about 82% of the cities and

06:06towns in Massachusetts.

06:08Part of the uh success of that was

06:10really uh 24 years ago. Um we hired a a

06:15municipal treasurer and always had a

06:17municipal treasurer uh or somebody on

06:19staff to educate us in the world of

06:22municipalities and married the two

06:24investment world and the um municipal

06:28world. Uh one of those came from here in

06:30Shbury. Everything great comes from

06:31Sherbury, right?

06:33Um but anyways um worked for us for 24

06:37years now since retired but ever since

06:39we've had um a couple of people on the

06:42municipal space always on board. So

06:43before we make any change in the

06:45municipal or investment world uh we're

06:47always checking in on how does that

06:48impact the municipals or how does it

06:50impact cities and towns and how does

06:53that impact uh the laws and and keeping

06:55a breast of that. So a lot of these

06:57funds are the three buckets of monies

06:59[snorts] uh in the municipal space. uh

07:02you have municipal law chapter 4455

07:064454

07:07and then you have prunit investor

07:09chapter 203C. Um a lot of the uh the

07:12operating funds are restricted under uh

07:16the chapter 445

07:21and

07:22um well actually yeah chapter 4 4455 and

07:27um then the OPED is invested under

07:28chapter 203C. Um I have Alex Bartholomew

07:32who's going to give we can give a we'll

07:34give a overview of the accounts. Um we

07:36can start first with the OPE other

07:38postemployment benefits and if you can

07:41just see that on your handout here we

07:43have as of through 8:31 of 2026 we like

07:47to bring the last full month on record.

07:49Um this is for your retirees for the uh

07:53for the town for the um uh health

07:57benefits not the pension. Okay. Um, so

08:01we've made some changes along the way.

08:03Uh, this portfolio is a 70% equity with

08:0630% fixed income with private markets

08:09ranging up to 13%. And we're going to

08:12dig right into that. Uh, without further

08:13ado, I'm going to turn over uh, Alex

08:16Bartholomew. Uh, he's not only our CEO,

08:18but he's the CIO as well. So, um,

08:20Kathleen Gawaki, who was supposed to be

08:22scheduled to be here, her mom

08:24unfortunately had an accident. And so we

08:26do have not only Alex but we have uh one

08:28of the ma future analysts his son in the

08:31background. Uh this just happened

08:33yesterday and we didn't want to cancel

08:34again. So uh but he'll be he'll be good.

08:37So thank you Alex. Go ahead.

08:40>> Thank you Brian. Um thank you everyone.

08:42Thanks for having us. Nice to be back.

08:44Um I think I was here a year ago in

08:46front of this committee as well to to do

08:48the same thing. So um please stop me at

08:50any time if you have any questions on

08:51any accounts, the markets, the economy,

08:53um anything at all. Um, as Brian said,

08:56I'm gonna I'll start with the OPED

08:57portfolio. What we've provided you

09:00tonight is u what's called a portfolio

09:02review. It's informative but still

09:05condensed review of the account from

09:07performance holdings um and other data

09:10points that are relevant uh to the

09:12respective portfolios. So, as Brian

09:14said, this portfolio is managed under

09:16the prudent investor law. Why is that?

09:18Is because we're trying to invest for

09:21growth. you're putting money aside for

09:24decades from now based on your actuarial

09:26study to offset future unfunded

09:28healthcare liabilities

09:30um in the Commonwealth of Massachusetts.

09:32Uh this liability is is pretty great

09:34across all cities and towns and other

09:35municipal entities. So at the end of

09:37August you have a $15 million portfolio

09:41and over time that is a little under $10

09:45million in contributions for the town

09:47and over $6.5 million in investment

09:50growth. Um, we are targeting somewhere

09:52between that six and 7%. I would have to

09:55look at your actial study to see what

09:56your actual discount rate is for future

09:59long-term expected returns, but this

10:01portfolio is going to be expected to

10:04return similar to what you would have in

10:06a pension system. We're generally taking

10:08on equity risk. We have fixed income to

10:11diversify and then alternatives

10:13including private markets to further

10:15diversify and increase enhanced return

10:17expectations. Um the portfolio recently

10:22has performed very very well since 2022

10:25when inflation was over 9% interest

10:27rates skyrocketed equities sold off.

10:30Here in calendar year 2026 the portfolio

10:33through August is up over 8%. We are

10:36lagging relative benchmarks and that uh

10:39attribution can be attributed to both

10:41domestic and unfortunately international

10:43equity exposure. Um the fixed income

10:46part of the portfolio because interest

10:47rates are not zero anymore since 2022

10:52has continued to add value to the

10:53portfolio for the first time um really

10:55since before the great financial um

10:58recession in 2008 and as we'll see in

11:02the operating fund and the alternatives

11:05which is a lot of different things in

11:07there that we certainly can go through.

11:08Private equity, private credit, real

11:10estate um is adding tremendous value as

11:12well. um higher interest rates really

11:15help a lot of other port parts of the

11:16portfolio other than just equities

11:19deliver contributing returns to a

11:21diversified portfolio. So the

11:26the the service that we're delivering,

11:28the portfolio we're delivering for the

11:29town is again we want to give you the

11:32same experience as a pension system

11:34where greater liquidity, greater

11:36control, lower costs,

11:39um greater customiz customization should

11:42you need to um and the same quality

11:47portfolio. So at a $15 million

11:49portfolio, I would argue that you have

11:52no shortcomings versus a hundred billion

11:55dollar portfolio, we have exposure to

11:59the same type of common stocks globally,

12:02the same type of high quality active

12:04exposure in fixed income that's adding

12:06value versus the indices. And then the

12:09diversification in private markets that

12:11we can deliver in 2026 that we couldn't

12:1515 years ago into priv diversified

12:17private equity real estate is so much

12:20better and again at a much more

12:22costefficient way and we are seeing that

12:24add value in the portfolios um year-to-

12:27date through the end of last month and

12:29this isn't not everything in that part

12:32of the portfolio actually has an updated

12:34price because there is a one-mon lag on

12:36some of those positions is up nearly 7%.

12:39Um, now that's lower than public equity

12:42was up which is up double digits but

12:44it's more mechanical. It's not as

12:46volatile. The standard deviation is

12:48lower. Um, it's it's more reliable in a

12:51sense. When econ economic conditions are

12:54poor, private markets will be, you know,

12:56have poor expectations of returns as

12:58well, but there's not as much irrational

13:01exuberance and therefore not as much

13:02volatility. Um, furthermore,

13:06you may be aware that in the public

13:09equity markets more than they ever been

13:11before, and this is actually creeping

13:12into international exposure, uh, the

13:14concentration risk is greater than it's

13:16ever been. So, if you invest your money

13:19in the index, whether it's the S&P 500

13:21or the Russell 3000, you're largely

13:23investing in a small group of companies

13:26where it used to be representative of

13:27diversification. You know, 500 names,

13:29300 names, but the percentage waitings,

13:32it's

13:34over 50% in the top 10 names. So, how do

13:38you diversify what is supposed to be

13:40your risk bucket, the engine of returns

13:42long term? It's really in the private

13:44markets. Why are the private markets

13:47more accessible,

13:49better diversifiers than they were 15,

13:5120, 30 years ago? It's the amount of

13:53capital in the global economy. Companies

13:56don't need to go public in order to

13:58raise capital for growth. raise capital

14:01to buy out original owners. The amount

14:04of access to private capital

14:07comes with less strings attached.

14:08Sometimes you don't have to build an SEC

14:10reporting group. It's less expensive.

14:13The um you don't have to have quarterly

14:15calls with shareholders. So um and then

14:18the partnerships you have with these

14:20private equity companies that invest,

14:22you know, can be seen better. Now, every

14:25industry is different, every company is

14:27different, but this is why companies are

14:29staying private longer. This is why the

14:31average market cap of IPOs is

14:33significantly higher than they used to

14:34be. IPOs or initial public offerings

14:37used to be small and microcap stocks.

14:39Now we have the largest IPOs ever in

14:42SpaceX this year at over a trillion

14:44dollar valuation. Why is that? It's

14:47because the amount of capital in the

14:48private markets and that how does that

14:50impact investors? How does that impact

14:52an institutional investor? We have

14:54really no choice but to access the

14:57private markets for diversification

14:59which is a measure of risk reduction but

15:03also you know in increased expectations

15:05of return enhancement. Okay. The same is

15:07true in real estate, same is true as

15:09private credit and private

15:10infrastructure and other more um

15:12eclectic exposures. But um what I want

15:16you to take away from this is it's a

15:19portfolio built for growth. It is well

15:21diversified and even at $15 million you

15:24are getting the same experience as a

15:27hundred billion dollar fund 30 years

15:30ago. Even 15 years ago I couldn't say

15:32that. Okay. So um I'm happy to move on

15:36the operating fund cover any questions

15:38you have.

15:39>> Well can can we pause there for a second

15:41and take a few questions before we move

15:43on? Yeah.

15:43>> Um

15:44>> do you want to start?

15:45>> Yeah. So you talked about alternatives

15:48right? So um I see that it's like 19.85%

15:53kind of exposure. U what was it last

15:56year?

15:57>> So we've we've been very consistent at

15:59targeting to the investment policy

16:01statement that 20% threshold. If you

16:04look at traditional pension systems they

16:05could be as high as 60%. We have been

16:09you could say slow in building up the

16:11liquid exposure in that bucket over

16:13time. and after 2020 it was below 5%.

16:20So we've we've taken the last three or

16:21four years to build it back up. The

16:23reason for that is we har in a period of

16:25market dislocation like March of 2020 if

16:29you have the right diversification in a

16:30portfolio there should be parts of it

16:32that you can harvest the buy low and we

16:35did that um very very well in the

16:38liquidity crisis in March in 2020. So we

16:40we were we were all sent home um

16:43concerned with a great many other

16:45things. Um we harvested um several

16:49positions in alternatives and in fixed

16:51income to buy equity and so that kind of

16:53threw us out of whack the IPS for a

16:54period of time. We had to build it back

16:55up.

16:56>> So as as part of the strategy, you're

16:58kind of limiting that up to 20%.

17:02>> Right now if that were to change, we

17:04have room in the IPS to increase it over

17:0620, I believe, to 30% max. Um but we

17:10would have to have a real tangible

17:12mathematical reason to do so.

17:14>> And so sorry. Um so while you're kind of

17:19slowly building that out where have been

17:21you know kind of rebalancing the other

17:23side of the coin

17:23>> mostly from public equity we had an

17:25overweight to public equity as um it's

17:28where we moved the capital to that and

17:30actually corporate bonds. So

17:33[clears throat]

17:33and this is this I could follow the

17:35bouncing ball all the way back to March

17:37of 2020. where corporate bonds sold off

17:39because of the liquidity crisis and

17:42there was a massive once in a lifetime

17:44buying opportunity. So we put as much

17:45money as we possibly could into

17:47investment investment grade corporate

17:48bonds. that trade realized within 12

17:51months and then we've rolled it into

17:52other things along the way like

17:53securitized fixed income. Um equity

17:56certainly at different points in 2020

17:58and then kind of unwinding that um 2022

18:02is a big catalyst for also unwinding

18:03that and building up the alternatives

18:05again.

18:06>> Considering this is the like retirement

18:09health benefits for the town, right?

18:11>> From a bond perspective, what's the

18:13average maturity that you kind of look

18:15around when you try to make an

18:17investments? Yeah,

18:18>> sure. So the exposure is through

18:21diversified mostly active some passive

18:24mutual funds ETFs. So not necessarily

18:27buying an individual bond that's you

18:29know 20 or 30 years out. Even if we did

18:31we would have liquidity in those and

18:33I'll show you that in the operating

18:34fund. But um we're benchmarked against

18:36the US universal index.

18:39It's similar to the US aggregate bond

18:41index except it's more 21st century. US

18:44A is kind of a relic where it's really

18:46just government securities and a little

18:48bit of investment grade corporates. Um

18:50since 2008 the the bond market has

18:53changed dramatically and that index

18:54hasn't caught up. So the average

18:57duration on that is between five and

19:00seven years. Okay. So the average

19:02weighted life or average maturity your

19:04of your exposure is going to be similar.

19:06We have a barbell approach in this

19:09portfolio where we have we have fixed

19:12income investments that the middle of

19:13the curve. They're intermediate. A

19:15barbell approach is we have exposure on

19:16the short end and the long end to

19:18complement as well. So year to date

19:21depending on the month we have rising

19:23interest rates because of oil and we can

19:25certainly talk about that. Um the short

19:28end of the curve that barbell is

19:30outperforming while the long end is

19:31actually underperforming. But when rates

19:33go down like they did in August, the

19:36long end outperforms while the short end

19:38underperforms. So that barbell appro

19:40approach is adding more diversification

19:42instead of us just sitting in the middle

19:43of the curve.

19:45>> Last one probably considering the US

19:48treasuries are at the highest level. You

19:50know, what are the opportunities do you

19:52see?

19:53>> I mean the opportunities in fixed income

19:55in the last three and a half years have

19:57been the best in my career. Um levels

20:00are very exciting, right? We haven't

20:02seen, you know, four and 5% interest

20:04rates on treasuries. The the challenge

20:06we have is that spreads or the amount

20:09that you're getting paid to buy a

20:11corporate bond, securitized mortgage

20:14versus a treasury are tightest they've

20:16ever been in history.

20:18>> It's kind of similar to the equity

20:20market where there's more cash

20:23investable capital seeking out fewer and

20:26fewer public investment opportunities.

20:28So that's driving corporate bond spreads

20:30tighter and tighter and tighter. We even

20:31have some AAA like Johnson and Johnson

20:34corporate bonds that are trading at

20:35negative spreads. That means you can

20:36make more on a treasury than you can the

20:38corporate bond.

20:39>> You shouldn't be able to do that

20:40academically. Um so it's it's great from

20:44a level perspective. We're not buying at

20:46zero or buying at four and 5%. But it's

20:48there are some challenges in

20:50diversifying. In some cases it's just

20:52better to buy the treasury depending on

20:54where you are and what you're trying to

20:55accomplish.

20:56>> Thank you.

20:57>> You're welcome.

20:59Oh yeah, thank you Jim. U so I had a few

21:02questions. Uh one is basically the

21:04private markets. How do you invest in

21:06that? Is al that also via ETFs or money

21:09managed money money funds?

21:11>> Sure. There's um

21:14there's a couple of different investment

21:15vehicles. So there are funds called

21:18evergreen funds.

21:20Um they're all 1940 act SEC registered.

21:24That's why they gen generally have

21:26ticker symbols here that look like

21:28mutual funds.

21:29>> Okay.

21:29>> Some of them are called interval funds

21:31or tender offer funds. Um they are

21:34either daily subscription or monthly

21:36subscription. So when we want to buy one

21:39of these positions or add more when the

21:41town adds more capital. Um sometimes we

21:45need additional signatures from the

21:46town, sometimes we don't. We can either

21:48buy it every single day or at month end.

21:50They almost all have the same type of

21:52liquidity, which is quarterly. There's

21:55no guarantee of liquidity, but if you

21:57bought a traditional private equity fund

21:59or a vintage, you would not expect

22:02liquidity for 7 to 10 years at a

22:05minimum. And the first couple of years,

22:07you would expect negative returns

22:09because you're effectively giving a

22:10blank check to this private equity

22:12company to go find opportunities. We're

22:15buying fully diversified portfolios and

22:17know what we're buying on day one. So

22:19this 21st century really re-engineering

22:23of this space, not only can we access it

22:26at lower minimums, really good

22:28economies, but we actually know what

22:31we're buying. We know that when we buy

22:33the private shares fund, which is the

22:35smallest position you have there, the

22:36largest position is SpaceX. We we knew

22:39that and participated in that going in

22:41this year.

22:43>> So do the daily subscriptions have a

22:45daily fee as well then? Um fees under in

22:50mutual funds tend to be daily acral

22:52regardless of public private. Um

22:57there's not a commission though, right?

23:00There's no upfront fee. It's all ongoing

23:03management fees, annual management fees.

23:05>> So it adds up like over a year or

23:07something. Is that very similar to what

23:09we would get in something else if we

23:11were to take like a

23:12>> Right. So, if I bought the S&P 500 at

23:15the cheapest basis points I could, you

23:18compare that to private equity, it's

23:19much more expensive. Um, but you're

23:21getting a vastly different portfolio, a

23:23different risk return stream. So, how

23:26it's impacting the portfolio is very

23:28very different.

23:29>> Okay. Thank you. My my my last question,

23:32Jim, um

23:34could we do you have the data as far as

23:37like I mean you've given the activity

23:39summary just for one month or or two

23:41months. So the withdrawals are zero. So

23:43do we have a one-year like year till

23:46date or the past one year uh summary?

23:49>> So when we provide the fiscal year um

23:52annual report to the town office they we

23:55give it as a fiscal year end. We try and

23:57come out with most um recent updated and

23:59it is formatted to give you fiscal year

24:02to date. Um withdrawals should be zero

24:07>> growth and accumulation phase.

24:09>> Okay. So you're not [clears throat] and

24:11your actuarial study will will

24:12demonstrate this as well is you're

24:14putting money aside for the long term to

24:16offset the budget years from now. I

24:19don't know what that is because I don't

24:20have the actuarial study in front of me.

24:22Um there are almost zero towns in the

24:25Commonwealth that are tapping into this

24:29to supplement their budget in current

24:31fiscal years. You have what's called

24:33payo. So you're paying the premiums that

24:36you're responsible for and any other

24:38expenses tied to your employees health

24:40care. It's part of the budget and then

24:43the other part of the budget is funding

24:44the long-term portion which is this the

24:47contributions.

24:49Okay, that makes sense.

24:51>> Just when do they withdraw them? I don't

24:53>> that would be after the actuarial study.

24:55That could be 20 years from now.

24:57>> It could be it could be a long time from

24:59now. I don't know what it is. Could we

25:01and if I may through the chair um add a

25:04little bit of uh color on this. If

25:05you're looking at the top left

25:06withdrawals, I don't know if you're

25:07looking at that top left on page three.

25:09>> Yes.

25:09>> Let me just point something out just in

25:11case you have a question. So the total

25:12contributions for the town is

25:149.65726870.

25:18Okay. There was a withdrawal of 1.325

25:21million. One of uh the previous

25:23treasurers in the past made a

25:25contribution to the OPED inadvertently

25:27and should have went into the other

25:28account. Um, so it was a withdrawal one

25:32day only. It wasn't a withdrawal of the

25:34funds. So the withdrawals here is zero.

25:36But because our broker dealer

25:38compliance-wise doesn't allow us to wipe

25:40this out because it actually happened,

25:42but it didn't it was not an actual

25:44withdrawal from the fund. I just want to

25:46clarify that so everybody knows.

25:48[clears throat] You can see that because

25:49on the uh graph below on the brown line

25:53um you can see the contributions and

25:55since we're in accumulation phase there

25:57has been no withdrawals. I see

25:59>> to Alex's point, uh, you know, until

26:01this fully is fully funded, that's when

26:04you can touch it. Uh, now, yes, it's

26:06your it's it's your money. It's for the

26:08OPED. It can be used for, uh, OPED

26:10expenses. But if you start withdrawing

26:12out of this account, your your rating

26:15agencies are going to look at you

26:16unfavorably and saying, "Hey, how come

26:17you guys are managing this

26:18inappropriately?" You know, there's

26:20always a one-time emergency that you can

26:22have. We get that. But if you start

26:24taking out until it's fully funded,

26:26they're going to look at that uh not

26:28favorably. Okay.

26:30>> And last question, uh what is the fully

26:32funded target? Is that

26:34>> Oh, that would be a question for your

26:36actuary.

26:36>> Actually, okay.

26:37>> Yeah, I don't. So, I have our report

26:40from 2024.

26:42Um we had a net liability position of

26:4658,33,000.

26:49So, uh we have about 16%

26:54uh funding because our gross liability

26:57is about 69.5 million. That's of June

27:0030th, 2024. We're doing we do a study

27:03every two years. So, we're undertaking

27:05our uh study for the fiscal year end

27:08right now. Um so, we're not in a bad

27:13spot. You know, that that's a big

27:15liability. I understand that. Um,

27:17Massachusetts kind of sits,

27:19municipalities on average sit like 70 to

27:22150% of their covered payroll. We're

27:24only at 62% of our covered payroll. Our

27:27covered payroll on an annual basis is

27:29about $96 million. So, um, we're in a

27:33favorable position. And again, as Alex

27:36and Brian said, this is this is us

27:38setting aside money in the future to

27:41fund our contribution to retirees health

27:44insurance because we're making that

27:45commitment to them as current employees.

27:49So, if you look at this year's budget on

27:51the payo that Alex mentioned, we funded

27:54about $3.2 million in insurance premiums

27:58for retirees through the current

28:00operating budget. So, um, maybe once we

28:04get to a certain percentage, right, if

28:06if we're able to build this up, although

28:07I'm not in a big hurry to to satisfy

28:10this liability given our ability to pay

28:12as we go, um, you would start to use it

28:15as a true trust fund and revolve and pay

28:17money out of it and add to it. So, we're

28:20in a decent position as we compare to

28:22other municipalities with no real risk

28:25given the $3.2 million annual price tag.

28:29It's about, you know, our total health

28:31insurance budget is about $27 million

28:33now. So, it's actually a small

28:35percentage. The rest of it is for active

28:37plans.

28:38>> Thank you. No more questions.

28:40>> Anyone else? Dennis?

28:42>> Um, I'm looking at the alternatives.

28:44What is the actual exposure to private

28:46equity? Because there is some concern

28:48private equity might have also taken on

28:50too much debt and I've heard some

28:52compare it to 2008 in the banks.

28:55So, um,

28:58Stepstone Private Markets, the first one

28:59listed, that is I would say that's

29:02entirely private equity, but it's mostly

29:04private equity. There's some

29:05infrastructure and real assets in there.

29:07The AMG Pantheon Fund, which has the QIP

29:10instead of the ticker symbol.

29:11>> Yep.

29:12>> And then the private shares fund at the

29:15bottom. So, it's it should be about 7%

29:18of the portfolio.

29:19>> Okay.

29:20>> Um, again, pension systems could be 30%.

29:23So, while I say we want to deliver that

29:26experience, we're not taking on the same

29:28type of illiquidity risk. Um, but for

29:31full for full transparency, since you're

29:33talking about debt, there is a private

29:35credit position there, which is 2.83%

29:38which is the AMG Pantheon Credit

29:40Solutions Fund. And that's a newer

29:42position to the portfolio added um just

29:44over a year ago, 15 months ago.

29:52>> Good. Yes, question. Just a point of

29:55information

29:57during these investments that that

30:00you're making, how much input do we get

30:02from the cities and towns on what you're

30:06actually investing in

30:10>> um the actual companies?

30:12>> No, no. Input from the town itself. Like

30:15the town of Shoesby, you you've laid out

30:18six or seven different investments

30:19you're going to make, right? How much

30:21input do you get from the town that they

30:23agree with that?

30:24>> So for actual security selection, almost

30:26none. We are working with our decision

30:30makers, trustees, and custodians of the

30:31funds, regardless of what account it is,

30:33to craft an investment policy statement.

30:36Inside that investment policy statement,

30:37we're hired to manage the portfolio with

30:39discretion. Now, we can talk about

30:41anything, but we're we're not in those

30:44days of of calling up and selling

30:46securities

30:48um of we think you should buy this today

30:50versus that. That would be more of a

30:51brokerage relationship. And we're also

30:54not yet operating as an investment

30:56consultant where a committee has the

30:58discretion. We're making a presentation,

31:00a recommendation on what to buy or sell

31:02in the portfolio and then they take a

31:04vote on a meet on a quarterly basis. So,

31:06we're operating as a discretionary

31:08investment manager. Now, you mentioned

31:10in your opening remarks a six or 7%

31:14return, which I think is, you know, a

31:17real good return, but this coming year,

31:20we're already thinking about that. We're

31:22not going to be able to rely on some of

31:25the investment income we've had in the

31:27past towards our normal operating budget

31:30itself. But a six or seven% return is is

31:35still pretty good what the overall

31:37market is is doing in general on there.

31:40I would think if we could work on six or

31:427% and we knew that was solid that would

31:46put us in

31:47>> right a very good position.

31:49>> Right.

31:52And then you got you had mentioned you

31:54know some higher percentages on some of

31:56these returns and uh the way the market

31:59is stayed I mean it's all over the

32:01place. I mean day to day hour to hour

32:04247 7 days a week. I mean it's up and

32:07down. I follow it for a hobby and I mean

32:10I just I can't believe the trading and

32:13the value changes after 5:00 in the

32:16afternoons right 7 o'clock the next

32:18morning. It's it's mindboggling how much

32:22change there is and how much movement

32:25there is again depending on what's going

32:27on in the whole world itself. Thank you.

32:32Thank you.

32:32>> That's again

32:34>> Jean brings up a good point. Um do you

32:36have statistics on how you do

32:39investments do in an up market very

32:42strong up market and a down market? Do

32:44you typically beat the market in the

32:46down markets?

32:48>> Because I think that's that's the key

32:50is,

32:51>> you know, an index fund might get me 10%

32:54over 10 years, but it's not going to be

32:5510% a year every year. Some years is up

32:5730. Some years it's down 15 or 20.

33:00>> So

33:01that's correct. If you turn your u

33:03attention to page five.

33:08So we we were hired to manage this

33:10midway through 2011. Um, we have three,

33:14four negative calendar years there since

33:172011. We outperformed dramatically to

33:20start. Granted, that's not exactly a

33:23full calendar year. Um, we outperformed

33:26being slightly positive in 2015 when the

33:28market was negative, outperformed pretty

33:30healthily in 2018, and then

33:32unfortunately underperformed in 2022

33:34with interest rate risk. So, more often

33:37than not, we've underperformed. But I

33:39also want to be clear and transparent.

33:41It's it's underperforming on a rel I'm

33:43sorry. It's it's outperforming in a

33:44negative market on a relative basis. So,

33:47it's not about protecting it on an

33:48absolute basis to zero. You're still

33:50going to lose money. It's just how much

33:54comparison. If you're outperforming by

33:562%, it depends on what the market does.

34:00>> True. In that market,

34:01>> I'd rather have you outperform in down

34:03market than underperform.

34:04>> Yeah. And we've always tried to um

34:08there's no guarantee that you're going

34:09to in 2022 we were aggressive at buying

34:13fixed income as rates rose because

34:16history tells us that when you do that

34:18you will be rewarded. Um but in the

34:21meantime in the near term it can be

34:23painful. Um so we we've seen that work

34:27in in

34:29at points here in the last four years

34:30but um in other markets the way we've

34:34crafted the diversified portfolio has

34:36shown true.

34:38>> Yeah. I just think that's something to

34:39point out you know more more than just

34:42here. Here you have to kind of go

34:43through the table and look and compare.

34:45>> Something I think you should bring up in

34:47these meetings when you're outperforming

34:48or underperforming.

34:49>> Absolutely.

34:49>> Sure. And remember 22 was an anomaly,

34:52right? That was uh interest rates were

34:54near zero. Fed ra uh raised the rates

34:57trying to beat inflation 9 10%. Equity

35:00markets are going down. That's never

35:01really happened uh in US history. So

35:04that's a that that was an anomaly year.

35:06So our thought process or or or mindset

35:09in behind the scenes is you know don't

35:12lose on um don't lose as much on a down

35:15market so you don't have to make as much

35:16on an up market. That's always been our

35:18philosophy working with 82% of the

35:20communities. We understand, you know,

35:22these public funds still, you know,

35:24they're not your personal funds or our

35:25personal funds and uh so we we're

35:27mindful of that.

35:30Any other questions?

35:31>> Yeah, I had a few if everyone else is

35:32through. Um more administrative in

35:34nature. I'm sure I could do the math,

35:36but I'm just looking and some of this

35:38was touched on, but just I'll go one

35:40step deeper. I see the beginning B.

35:43We've been talking about the balance of

35:4415 mil roughly what it um been this time

35:48last year. Uh, I'm sorry. Say that

35:50again.

35:50>> I'm I'm looking at we're running at a

35:52balance of 15 billion.

35:53>> Okay.

35:54>> Right. So, I'm just look I can see in uh

35:56July of this year is 14. I'm just

35:58curious what it was this time last year.

36:00Last time you were in front of us.

36:02>> Uh, this year specific like right now?

36:04>> No, this time. No, just in general.

36:06>> I can tell you that

36:11>> if it's it's really if you don't have

36:13it, it's not

36:15>> I have it. I'm I'm a yearto date guy

36:17like where we were a year ago. So August

36:1831st of 2025,

36:22the portfolio was

36:25>> Yeah, we could be like airline pilots

36:26very precisely.

36:27>> 12.9 million.

36:29>> Thank you. [cough and clears throat]

36:34>> I was just making a few notes as we

36:35went. Um on that 1.3 mil redemption we

36:39had to take. Um you caught my attention

36:42when you said um there was an a clerical

36:45error. Correct. How far that rings a

36:47bell. Is that recent or is that going

36:49way back?

36:49>> Uh that I believe that goes way back.

36:51>> Way even before your time in 201.

36:53>> Uh not necessarily. I could I was just

36:55curious.

36:55>> But it was a one-day transfer. Uh it was

36:58before the current uh treasurer, but I

37:00have to go back. I really want the

37:01detail

37:02>> and I'm sure I asked this last year, so

37:04>> I'll ask Bring it up again if it's a

37:06question.

37:06>> And it's not I'm really not questioning

37:08it because it's it's super low. But just

37:09can you remind me on the management fee

37:11structures like that tiered the balance

37:13grows? If we're at, you know, 119, we're

37:16at 15.

37:18>> How does that break point work?

37:19>> Yeah, great question. And it always

37:20changes because your balance is going

37:22up,

37:22>> right?

37:22>> As you know, as you just asked that

37:24first question, what were the balances

37:25from last year to this year? Uh, you're

37:27currently at 12 basis points. Okay,

37:29that's an annualized management fee.

37:30>> Uh, that's probably the one of the

37:32lowest management you'll fee you'll see

37:34around

37:35>> and that's based on total relationship.

37:36So, our size across all accounts we

37:38manage for the town dictates the

37:40management.

37:41>> Okay. And the uh that the withdrawal

37:43happened on um March 31st, 2022.

37:46>> 2022. Great. Okay. Um

37:50I think Jean I was just following up on

37:51one of Jean's points. Um I know you're

37:54here in front of us today. We had last

37:55year before that and I understand all

37:58the decisions are made. That's why we

38:00hired you.

38:00>> Sure.

38:01>> Is there any other interaction with

38:03Kevin and his team? I I think the answer

38:04is yes, but maybe just a few seconds on

38:07that just to think that we're not

38:09>> sure. I'm sure everyone's paying

38:10attention to it, but uh communication

38:13outside of finance committee or or other

38:15boards.

38:16>> Yeah, good good question. Thank you. Uh

38:18through the chair, uh what

38:20>> we at least minimum twice a year. Okay.

38:23Uh last year we met on um May of 2026,

38:27I'm sorry, this year May of 20 uh May

38:2915th of 2026 and then we met on 929 of

38:3325 and then we'll have those for at

38:36least the minimum reviews and then from

38:38time to time throughout the year. We're

38:40right down the street uh Kevin and and

38:42the team will bring us in to ask us a

38:44few questions.

38:45>> I don't necessarily have those

38:46documented but at minimum of twice a

38:48year.

38:48>> Awesome.

38:49>> And that's every year.

38:49>> Great. And last question, this is more

38:52curiosity. 80% 82% of the um communities

38:56in the state of and Mass.

38:58>> What are the other 18 doing?

39:00>> What are the other 18 doing? We uh

39:03question.

39:04>> Um

39:04>> I'm just curious like if there is there

39:06competitors

39:07>> there's generally two of us. They're

39:08either

39:09>> with us another bank which is our

39:11largest competitor or Okay. Just or just

39:14just deposit banks or the MMBT.

39:17>> I guess I was curious if they do it in

39:18house or in town.

39:20>> No. Okay. No, that's more at the state

39:22authority level.

39:23>> Okay.

39:23>> Um and that would generally be um when

39:26they're have just fixed income

39:27portfolios. So they're working directly

39:29the street.

39:30>> Thanks guys.

39:31>> Could I just one quick follow

39:32>> please?

39:33>> You mentioned twice a year annual

39:36meeting with the town itself and you

39:38know some sub meetings in between. Is

39:41that normal through all the the

39:43Commonwealths for the clients you handle

39:45only twice?

39:46>> Yes. Uh we used to do it four times a

39:48year. um they're like get away. They

39:52didn't want to talk to us four times a

39:53year. But that is very normal.

39:55>> Follow up on that. Uh any cities and

39:58towns got investment committees?

40:01>> Investment committees. Um can you def

40:04clarify?

40:05>> Generally, generally you have trust fund

40:06commissioners. Um they are constructed

40:09differently in every town that has one.

40:11Some of them are advisories, some of

40:12them are true trustees. Um there are

40:15some communities, very few that have

40:17true OPED trustees.

40:19that are not advisory.

40:21>> Um most investment committees if they

40:23exist are advisory.

40:24>> Yeah. Because you know we have a

40:26retirement committee,

40:27>> right?

40:27>> Yeah. That kind of oversees

40:31investments in in general. So I just I

40:33was just curious on the other end. Thank

40:35you.

40:36>> Yeah, that's a great question. and

40:37through through the uh OPED adoption of

40:4032B section 20 uh 99% of the communities

40:43after November 7th of 2016 uh and I I

40:47know you've adopted before then but um

40:50the

40:52they're going towards having the treasur

40:54as the trustee and custodian until these

40:56funds become larger they haven't really

40:59um considered having a a board per se.

41:02Part of the challenge is it's a 5 to 13

41:04member committee. Uh it has it's very

41:07specific through the state law. Uh out

41:10of three of those positions, they have

41:11to be run by ballot. Uh former employee

41:14is one of them and the former employees

41:16have to have the ballot. Uh so they've

41:18made it very restrictive in that regard.

41:20Your treasurer currently handles uh you

41:22know well over north of $200 million and

41:26you're dealing with a $15 million

41:27account and with a professional service

41:30uh with us um they've they've satisfied

41:33that at this point.

41:35Thank you. Great. I think we can move

41:37on.

41:37>> Yep.

41:38>> Please. Thank you.

41:39>> Excellent. Thank you. Next is the

41:41operating account.

41:44>> The operating fund

41:47stands at just over $94 million at the

41:50end of August. This account is up

41:53significantly the last five years with

41:55contributions.

41:56Um, you know, it's still a large

41:58portfolio, $40 million part of the large

42:00contribution. But um this is a very

42:04different risk profile. This portfolio

42:06is invested entirely in short-term

42:08high-grade fixed income almost

42:11exclusively in treasuries and corporate

42:12bonds, investment grade corporate bonds.

42:15Um this is invested off the list of

42:17legal investments which is chapter 4454.

42:22>> Okay. Sorry, I mixed those up.

42:24>> Go ahead.

42:25>> Um the legal list is chapter um 167

42:28section 15 A through K. If you want to

42:30do some light reading,

42:32>> [snorts]

42:32>> um it is managed by the division of

42:34banks

42:35and um the Commonwealth of Massachusetts

42:40allowed communities to by local option

42:43um three or four years ago to exempt

42:46themselves from that list, but only for

42:49certain monies. I would I'm not a legal

42:52expert or legislative expert, but I

42:53don't believe that this is the account

42:54you would be looking at necessarily. Um

42:57it's possible but um

42:59>> and if I may uh that was adopted by your

43:01town vote for your prudent investor

43:03chapter 203C u but not for these funds

43:06that was for your library funds

43:08scholarship type funds cemetery

43:10perpetual care those changes were

43:12already made adopted at uh your town

43:14meeting and um the management team had

43:17already executed that and well under

43:19their way.

43:20>> Yep. Which is great for fulfilling

43:21fiduciary responsibility. So, um,

43:25[clears throat] this portfolio is, um,

43:28built for safety, liquidity, and yield.

43:30Okay. Um, and with higher interest rates

43:34off of zero, you know, this portfolio

43:36becomes more exciting and and there's

43:38more to talk about. So, if you look on

43:40page four to start here on the right

43:42hand side, that average yield to

43:44maturity, YTM, we're at 4 and a half%.

43:48Obviously, that is a materially

43:49different level than we were four or

43:50five years ago. And quite frankly since

43:52since really around 2008 2009 um we have

43:56a short weighted average life maturity

44:00duration duration is at 2.26.

44:03We are benchmarking ourselves against

44:05the 1 to threeyear government credit

44:06index. So bonds generally that mature

44:09between one and three years. So very

44:12short part of the curve with a average

44:14S&P credit rating of single A+.

44:17Um, now reminder that the uh, US

44:21Treasury is double A plus by all major

44:25rating agencies now or at least the ones

44:27that matter, S&P and Moody's. Um,

44:30and that Moody's was the last hold out

44:32and I believe it was in the last two or

44:34you know a year or two that they finally

44:36downgraded the the uh the S&P I'm sorry

44:39the US Treasury based off of the balance

44:40sheet. So year to date through August

44:44the portfolio is up just over 1%. We are

44:47holding a

44:50um larger cash position than usual. We

44:53want to we want to target cash as little

44:55as possible, but in this portfolio we

44:57have around 3% right now. So cash is

45:01generally a drag long term. It really

45:04hasn't been because cash is so high. Um

45:06we have in the last couple years seen an

45:08inverted yield curve which means that

45:10yields on short shorter securities cash

45:13one month six month are yielding higher

45:16or better the same or better than one

45:19year two year threeear securities. Um as

45:21we've seen that yield uh curve steepen

45:25we've seen that benefit the portfolio

45:27because we've taken this portfolio prior

45:29to 2022

45:31we had a lot of floating rate

45:34securities. So, as yields increase, the

45:38value of the bond didn't go down. The

45:40coupon just went up with it. We've

45:43worked out a lot of those, but we still

45:45have some low coupons in this portfolio

45:49from pre2022.

45:51And I'll go over those in a second. But

45:53if you look on page six, the three-year

45:55number of almost four and a half%.

45:59That is a remarkably different number

46:01than one year, fiveyear and since

46:04inception which is 25 years. So over the

46:07long term this type of portfolio

46:10um and the indicy is representing that

46:12as well is around 2% two and a quarter%.

46:16Granted we had 15 years in that 25 year

46:18period that was near zero in this on

46:21these portfolios. So if you look on the

46:24bottom of page seven, you can see 2022,

46:28even a conservative portfolio like this

46:30was um experienced negative performance

46:32both in 2021 and 2022. Um and as Brian

46:36mentioned earlier, 2022 was the worst

46:38calendar year on record for fixed income

46:41in the United States of America ever. Um

46:44so it was historic, but since then, this

46:46is this is the beauty of it. You know,

46:47it's a double-edged sword. As rates go

46:49up, the value of your existing bonds go

46:52down, but your forward-looking return

46:54expectations on fixed income immediately

46:56go up. So, we see returns we hadn't seen

46:59in quite a while in 23, 24, and 25 of of

47:02nearly 5%, 4%, and about 5 and a half%.

47:05Year to date, it's been a little

47:07different story. Rates have gone back up

47:10because of inflation.

47:12Oil in the um supply shock in the Middle

47:14East has a lot to do with that. and we

47:17just had our first rate hike even though

47:19we were coming into the year expecting

47:21rate cuts. So we're back up to 375 on

47:24the overnight lending rate and this

47:27portfolio because it started at a higher

47:30level in yield even though we've seen

47:31interest rate risk is at 1% not negative

47:33for the year. So um again on a

47:36forward-looking basis if you

47:37[clears throat] think back to that yield

47:38to maturity 4 and a.5% over the next two

47:41plus years is your reasonable

47:44expectation of returns on an annual on

47:46an annualized basis. Granted we have

47:48reinvestment risk. If we hold cash

47:50greater than we want to maybe that will

47:52impact things and when we have

47:55contributions or withdrawals that can

47:57also impact the positioning of the

47:58portfolio. Um and then lastly we have

48:03what is mostly an investment grade

48:05corporate bond portfolio. When I started

48:08working at this company this portfolio

48:10was invested mostly in certificates of

48:11deposit and US agencies.

48:14Um for various reasons we have under my

48:18tenure really shifted it dramatically in

48:21all of our accounts under this law to

48:23take advantage of spreads in investment

48:24deal corporate bonds and complement them

48:27with the safety and liquidity of

48:28treasuries.

48:31So thank you.

48:34>> One question.

48:36>> Uh so

48:39as far as the rate the yield is

48:41concerned um do we have some like uh

48:46target or information as far as do we

48:48always beat inflation on average? Um

48:52cuz right now I [clears throat] think

48:53you're saying 4.48 year till until date

48:56as far as August is concerned. So that's

48:58about8 points above inflation I think.

49:02>> Sorry if on on page six might be the

49:06best way I can answer that. So we have

49:08the trailing performance of the

49:10portfolio ending August 31st and the

49:12last benchmark we have there is the

49:15consumer price index. So this portfolio

49:18is not going to compete with inflation

49:20in periods of time where inflation is

49:21hot in the short time period. And you

49:23can see that in you know like the one

49:26year year to date inflation has been

49:29higher than rates because rates have

49:32gone up. Um over time say 25 years if

49:36inflation is actually at the Fed's 2%

49:39target which it never is. It's going to

49:41be closer. So you're not growing

49:43purchasing power in this portfolio. At

49:45best we're trying to protect it. If we

49:47can generate a if yes if we're if we can

49:50generate a return equal to or near equal

49:52to inflation net of fees because all

49:54this is net of fees

49:56>> then we're doing our job in safety

49:58liquidity and yield of this portfolio.

50:00If we're talking about the OPED

50:01portfolio we need to grow that not only

50:05net of inflation but really net of

50:07healthcare inflation

50:08>> but that's for the actuarial study to

50:10determine.

50:10>> Okay.

50:13>> Okay.

50:13>> Anybody else? I had just a quick

50:16question.

50:16>> Where are our trust more [clears throat]

50:18in the minute? Where are our trust funds

50:20for the for the library, the cemetery,

50:23the parks? Where are they invested?

50:26>> They're all in in this

50:28>> it's in a different account. So, what

50:30Brian was mentioning just a little

50:31earlier about um Massachusetts 203C,

50:34which is the same law on the OPED, we

50:36have a separate account for those funds

50:38and other funds that are invested um

50:41appropriately for long-term growth and

50:44income for the spending needs of those

50:46funds.

50:46>> Is that something you could share with

50:48us in the future that we see a list of

50:51that?

50:51>> You'd have to ask uh

50:53>> the balances left in some of those

50:55accounts. Yeah,

50:56>> we could send those along. Yep.

50:59I I think that would be important to

51:01see. [clears throat]

51:03>> Thank you.

51:04>> Anybody else? Dennis.

51:06>> Uh the chart on page three

51:10significant jump in what it looks like

51:12market value. Um probably in 2023. Is

51:16that I mean I'm looking at 40 million

51:19and then up to 80 million.

51:23>> We contribution to the account not an

51:26investment return. And that's what it's

51:28getting at was.

51:29>> Yeah. So if you see that gold line there

51:31jumps with it.

51:32>> Yeah.

51:32>> If that gold line stayed down there,

51:34that would have been

51:35>> But what was the contribution? I mean,

51:38that's a significant contribution. Was

51:39that catchup?

51:40>> So was Yeah, it was more of a strategy

51:42from um we just come off of a lot of

51:45long-term term borrowings and um we were

51:49able to manage our cash flow very well

51:52uh during the time period of those

51:53borrowings. So what we did is we

51:55satisfied the payments. We took the

51:57borrowed proceeds that we had in a

52:00separate investment account and swept

52:01them into this operating account which

52:05this is the account that you see in our

52:08monthly annual detail local receipts

52:11account. So this is the account that

52:13directly is the largest contributor to

52:16that line item that we look at local

52:17receipts. So basically,

52:21in my words, probably not these guys,

52:23but the ultimate bottom line of our

52:25checking account that we're not touching

52:27on a on a quarterly or annual basis. If

52:31the treasurer ever needs additional

52:34funds because cash flow, revenue is not

52:37coming in, we can draw down upon this to

52:40manage the town's cash flow. If the town

52:42were ever to go out of business, this

52:44would be our six-month runout or

52:45something like that if you want to look

52:47at it that way. Okay.

52:48>> Yeah.

52:50>> And Melind.

52:53>> So if I look at the corporate bonds

52:55right on page eight, you know, I see uh

52:58duration in in terms of like four year

53:00five years. So I'm I'm assuming that

53:02your your average duration to worst is

53:05probably four or five years. Is that is

53:08that fair to say?

53:09>> The in the corporate bonds.

53:11>> Yeah. Like I see collable warns there.

53:14Uh the maturity.

53:16>> Yeah. Yeah, I wish this report broke it

53:17out on page five by asset type, but it

53:20just doesn't at the present moment. Um,

53:23yeah. So, that we're we're going to go

53:25out a little bit further on the

53:27corporate bonds and we have a longer

53:30ladder there and a shorter ladder on the

53:32treasuries for liquidity. So, it's

53:34similar to what I was talking about

53:35earlier with a little bit of a barbell

53:36approach. So the best area for return

53:39that we can get in this portfolio is by

53:42buying say a seven-year corporate bond

53:44and complementing it with a three-year

53:46treasury.

53:47>> So this is basically inclusive like

53:49duration to worse.

53:51>> Yes. Yeah. Dur. So that duration

53:52calculation you saw earlier in the

53:54report is all of the bonds together.

53:56>> That two two and a quarter

53:58>> that's being brought down by the

54:00treasuries.

54:01>> And then one more question if I may.

54:03>> Go ahead. So, uh, yield to maturity is

54:06at 4.5 roughly, right? Uh, four and a

54:09half. Is that is that where you want to

54:11keep this fund or is there some

54:14>> that's dictated by the market?

54:16>> Okay.

54:16>> So, as as we have liquidity in the

54:18portfolio and we reinvest and manage the

54:21ladder. Um, there's only so much

54:23creativity we can get in there. Security

54:25selection which is limited on the list.

54:27Um, structure at times meaning fixed

54:30rate, floating rate, callable,

54:32non-allable. Um, but it's really, you

54:35know, how much credit risk are we

54:37comfortable in this portfolio to access

54:39a higher spread than treasuries and how

54:41far out? Sometimes we'll skip a year if

54:43there's a better opportunity. Um, but

54:45there's only so much creativity we can

54:47to add value. We really want to generate

54:48a return that's equal to or greater than

54:51the index net of fees and net of cash

54:54drag.

54:54>> Okay.

54:55>> Thank you.

54:57>> Anybody else? Dennis, we uh tennis um

55:03Dave, is he still with us or I haven't

55:05asked him?

55:07>> Yeah, I'm I'm here. I'm just listening.

55:09This is very interesting.

55:10>> Just making sure we didn't forget about

55:11you. I have one question. I just wanted

55:13to briefly circle back just on the Fed

55:15rate. Um, and you had mentioned earlier,

55:18I think, Alex, we're expecting decreases

55:20this year. Obviously, we saw an

55:22increase, and

55:25you can debate what it may look like in

55:27the future. How much will that impact

55:29your strategy on some of these

55:30short-term um goals you have? Will that

55:33play a role? Do do you pay a ton of

55:35attention to that or

55:36>> Oh, yeah.

55:37>> Yeah, absolutely. Can you just maybe

55:38comment on that a little bit more as we

55:40look to the end of the year, maybe into

55:4227?

55:42>> Sure. So, coming into 2026, both because

55:46of market expectations, but also um

55:50nominee expectations, right? We have a

55:52new Fed chair. Earlier this year, Jerome

55:54Powell's term was up and Kevin Worsh is

55:57the new Fed chair appointed by Trump.

56:00Um, expectations were that he was going

56:02to come in and drive policy to lower

56:04interest rates. Um, which is how he got

56:07the nomination. In fact, he's done the

56:09opposite. So, um, there's a a lot as

56:14there always is with commentary around

56:17forward-looking projections, intentions,

56:19motivations by the Fed. Are they still

56:22focused on their dual mandate? Is it

56:23more than that? Um, I think certainly

56:27anyone if they knew what was going to

56:29happen this year, you can't predict

56:31geopolitical events. So, you can't

56:33predict a war in the Middle East that

56:35drives supply shock on oil. If you did

56:38and you knew inflation was going to be

56:39higher and it was going to force the

56:41Fed's hand to increase interest rates,

56:42you would not have taken as much

56:44duration. But what we're going to do in

56:46a fixed income portfolio is take

56:49advantage of where the opportunity is

56:51when we have cash to allocate.

56:52>> Okay.

56:53>> Um and

56:55inside of our mandate, we're going to

56:57push the limits as much as we can to

56:59take advantage of that. We're not going

57:00to start buying 20-year bonds in here.

57:03We're we're extending it out, you know,

57:04seven plus years. Would it just a quick

57:08followup just again more curious where

57:10we are when you started back in January

57:12of this year and you looked at 26 based

57:14on what's happened would it be fair to

57:15say the strategies changed a little bit

57:17on your behalf regarding this portfolio

57:20>> um others as well.

57:23>> I would I understand the question. I

57:26think that the the return expectations

57:28have changed

57:29>> but the strategy would be changing if I

57:31started selling the long bonds in the

57:33portfolio and buying short and we're not

57:34necessarily doing that. You just

57:36sometimes you have to deal with the

57:38short-term volatility. The next time we

57:40have a maturity in the corporate, which

57:42is soon, this I think it's next month.

57:43>> Yep.

57:44>> We're still going to buy long because

57:45rates are even higher.

57:46>> Okay.

57:47>> Right. So, that's that's the

57:48double-edged sword of fixed income is

57:50when rates go higher, you're a little

57:52disappointed when you look at your

57:53existing portfolio, but you're excited

57:54to allocate new cash.

57:56>> Sure. Makes sense. Okay. Thank you very

57:58much.

57:59>> Thank you. Appreciate it.

58:00>> All right. Thank you.

58:01>> Forward to seeing you next time.

58:02>> All righty. Next year. same time.

58:05>> You got it. Same place.

58:06>> All right.

58:08>> Yes, ma'am. Can

58:08>> I make one solution,

58:09>> please?

58:10>> Um, next time can you I just picking on

58:14Jim's question, right? Like, can we have

58:16a summary also for year-over-year that

58:19way you know by default that question is

58:21going to be oh, what was the

58:23>> the trailing 12 months?

58:24>> Yeah, you got it.

58:25>> Thank you.

58:25>> You got it. We're next time you see us,

58:27especially if it's a year from now, uh,

58:29it's going to be in a different

58:30reporting format.

58:31>> We're going through a conversion right

58:33now. Um and um uh so I expect the the

58:37performance reporting was gonna is going

58:40to look a lot different actually.

58:42>> Thank you.

58:43>> Can the next time can they present it on

58:46screen so the cameras can catch it for

58:48anyone that's watching?

58:49>> Yeah.

58:51>> Or can we just publish this on the

58:53website?

58:56>> Okay.

58:56>> Happy.

58:57>> Thank you.

58:57>> Thank you guys. Have a good evening.

58:59>> Appreciate it.

58:59>> Thank you.

59:02All right. Um, looking ahead on the

59:04agenda, uh, item five, town managers

59:08report,

59:10>> 2026 year end financial Oh, sorry,

59:12Kevin.

59:18>> Thanks again, guys.

59:22>> Okay, Kevin, looks like you're up with

59:23the town manager report or Alex on uh,

59:26year end financial.

59:27>> Alex will run through the year end.

59:28>> Okay, great. Thank you.

59:30Thank you. Um, so we'll walk through a

59:32handful of slides to provide a

59:34preliminary overview on the close out of

59:36the fiscal year 2026 budget that

59:38concluded on June 30th. Um, you also

59:41have a copy of a memo that was provided

59:43to the select board in your drive that

59:45provides some further data and

59:46explanation. I will touch on local

59:48receipt performance, general fund

59:50expenditure performance, and turnbacks,

59:53tax collection data, and a preliminary

59:56free cash balance estimate.

1:00:00So, um, starting off looking at local

1:00:02receipts, the FY26 budget amount for

1:00:05local receipts was 17,191,122.

1:00:11Actual local receipts came in at

1:00:13$19,875,826.

1:00:18Um, this is just approximately $2.6

1:00:20million over the budgeted amount,

1:00:23exceeding budgeted by about 15%.

1:00:26Total receipts continue to perform very

1:00:28strongly. But um you'll note that FY26

1:00:31actuals were just slightly under FY25

1:00:35actuals.

1:00:38[snorts]

1:00:40So just uh touching on one of the

1:00:44biggest drivers of this this difference

1:00:46that we've had the past few years of

1:00:48local receipt budget to actuals. So

1:00:51since fiscal year 23, investment income

1:00:54has outpaced the budget amount by over

1:00:56$2 million each year, about 2.2 million

1:00:59on average. Um, this trend has obviously

1:01:02very significantly benefited financial

1:01:04performance, but is a a little bit of an

1:01:07outlier that um we just want to point

1:01:09out as there are no other specific

1:01:12categories generating this much excess

1:01:14revenue. The next closest overperformer

1:01:18is licenses and permit fees. generated

1:01:20420,000

1:01:22in excess revenue.

1:01:28And so again, although local receipts

1:01:30have shown strong financial results, uh

1:01:32we anticipate that our long-term

1:01:34financial outlook will likely continue

1:01:36to require a more conservative stance

1:01:39because local receipts are the most

1:01:41elastic and fluid revenue stream. It's

1:01:43critical for us to regularly evaluate

1:01:45and refine our long range projections.

1:01:48And even with recent strong growth, a

1:01:50cautious outlook remains advisable given

1:01:52some uncertainties in interest rates,

1:01:54investment returns, and then upcoming

1:01:57capacity limits at the Ash landfill as

1:02:00well as just general overall economic

1:02:02conditions.

1:02:06So, pivoting to expenditures, uh,

1:02:09specifically general fund expenditures.

1:02:12So the FI26 municipal and education

1:02:15budget as of the fall 2025 special town

1:02:18meeting was 161,873,040.

1:02:23Uh at the end of every fiscal year any

1:02:26funds that are not expended or

1:02:28encumbered within the operating budget

1:02:30get returned to the general fund and

1:02:32those are we call those turnbacks.

1:02:35Um as you know town meeting controls

1:02:37expenditure appropriations on a fiscal

1:02:40yearby fiscal year basis. So the funds

1:02:42cannot be used for anything other than

1:02:44their intended and appropriated use. In

1:02:47addition to excess local receipt

1:02:49revenue, turnbacks are a primary

1:02:50contributor to the town's free cash

1:02:52balance.

1:02:54Over the past five fiscal years, the

1:02:56average balance of funds turned back

1:02:58from the general fund is 1.7 million or

1:03:01approximately 1.2% of the budget.

1:03:07In FY26,

1:03:080.51%

1:03:10of the FY26 budget was turned back,

1:03:13which is about $820,000

1:03:16in turnback. Um, this is a significant

1:03:19decline, especially over the last couple

1:03:21fiscal years, which had turnbacks on

1:03:23average over 2 million. And although fin

1:03:26although department expenditures remain

1:03:28within the authorized budget, the

1:03:30turnback percentage highlights some of

1:03:31the challenges that we face in the FY26

1:03:34budget in areas such as utility and

1:03:38contract services.

1:03:44Uh the town's largest source of revenue

1:03:46is taxation and the chart on this slide

1:03:48highlights tax collection performance as

1:03:51of the end of the fiscal year June 30th.

1:03:54I want to note that this data is a

1:03:56snapshot in time and the year-end

1:03:58balances for the previous fiscal years

1:04:00that you see uh are moving targets. So

1:04:04tax collections that were received after

1:04:06the fiscal year ends are retroactively

1:04:09applied to the tax year for which they

1:04:11were levied. So FY26 might look like an

1:04:14anomaly. Um but on average between FY22

1:04:18and FY26,

1:04:20we typically ended each fiscal year at

1:04:22about a 98.6%

1:04:24collection rate uh for real estate and

1:04:27then 96% for personal property.

1:04:34And then so free cash is the portion of

1:04:37the general fund surplus that is

1:04:39unrestricted and available for

1:04:40appropriation. It's certified as of July

1:04:421st each year by the department of

1:04:45revenue. And then all of the figures

1:04:47discussed directly impact pre-cash.

1:04:49Pre-cash is generated when the actual

1:04:51operating results compare favorably with

1:04:54the budget such as when revenues exceed

1:04:56estimates and when expenditures are less

1:04:58than appropriated. Uh it's also affected

1:05:01by increases or decreases in uncollected

1:05:03property taxes, deficits in non-general

1:05:06fund funds, and then any other legally

1:05:09incurred operating deficits or

1:05:10overdrafts. The Department of Revenue

1:05:13recommends that municipalities maintain

1:05:15a free cash balance of no less than 5%

1:05:18of the fiscal year operating budget. In

1:05:202018, the select board adopted a fiscal

1:05:22policy to generate free cash in the

1:05:25amount of 3 to 5% annually.

1:05:29The current free cash balance is just

1:05:31over $6 million. And this is after all

1:05:34the intended use of free cash that was

1:05:36approved at the May 2026 annual town

1:05:38meeting. And this is prior to

1:05:40certification by do which usually

1:05:42happens in the fall. Solely accounting

1:05:45for the excess local receipt revenue

1:05:48discussed and turnbacks, we estimate a

1:05:51free cash balance of about $9.6 million,

1:05:54which is 5.69% 69% of the FY27 operating

1:05:58budget. This doesn't account for the

1:06:01full reconciliation of the balance

1:06:02sheet. So, it's likely that free cash

1:06:04will be a little bit higher once it's

1:06:05actually certified.

1:06:10So, just to highlight, despite FY26

1:06:12being a generally challenging year, uh

1:06:15the town is in still a very good,

1:06:17healthy, and stable financial position

1:06:19between free cash, the override

1:06:21stabilization fund, and the general

1:06:23stabilization fund. The currently has

1:06:25$26 million in reserves. Departments

1:06:29strive to maintain appropriated budgets

1:06:31and strategically generate excess

1:06:33revenue. And despite strong performance,

1:06:35we recommend maintaining a conservative

1:06:37longer term approach in our revenue

1:06:39projections. Thank you for your time and

1:06:42I look forward to answering your

1:06:43questions.

1:06:46Go ahead.

1:06:47>> Thank you. Thank you, Jim. Of

1:06:48>> course.

1:06:49>> I I have a few questions. Um try to

1:06:52remember them as I go through the

1:06:53slides. Um as far as the uh on slide

1:06:57number two where we have the uh revenue

1:07:00performance summary um

1:07:03could we basically expect higher local

1:07:08receipts given that the interest rates

1:07:11are going to go up so our investment

1:07:13income could be a little bit more than

1:07:15what we currently could project. Is

1:07:18there a chance on that?

1:07:23We we could yes and I think we could get

1:07:26a pretty accurate estimate of what we

1:07:29would get for investment income. Um

1:07:31investment income is you know definitely

1:07:35one of the top three but the biggest

1:07:38local receipt category is motor vehicle

1:07:40excise that represents um almost half of

1:07:44the estimate. So it's it's one factor

1:07:46but there are other factors that

1:07:48>> too.

1:07:50Uh and as far as um uh the decrease of I

1:07:53mean it's not a significant decrease

1:07:55just about half a million maybe is that

1:07:57because of lower mo motor vehicle excise

1:08:00you're observing le less excise tax

1:08:02coming in?

1:08:03>> Yep. So um motor vehicle excise did

1:08:06underperform compared to last year. It

1:08:08wasn't [snorts] by a lot. Um last year

1:08:11was just over 8 million and then motor

1:08:13vehicle excise

1:08:15this year was 7.8

1:08:18million. [snorts] So it did decline. It

1:08:20still outperformed the budgeted amount,

1:08:22>> right?

1:08:22>> Um but there are there were a couple we

1:08:25call them revenue underperformers.

1:08:27Um the most significant two were other

1:08:31departmental revenue which

1:08:33underperformed the budgeted amount by um

1:08:3749%.

1:08:39And then cannabis other excise that uh

1:08:43also was about 40 49%. So between those

1:08:46two categories, it was about just under

1:08:48$500,000 in revenue not realized

1:08:52>> from the budget amount.

1:08:53>> Understood.

1:08:54>> Um

1:08:56my second last question and then I

1:08:57promise to give it back to the chair. Um

1:09:00as far as the slide with the the second

1:09:03last slide uh in which we have the tax

1:09:06collection performance uh uh so between

1:09:1022 23 and each year um

1:09:15as far as the tax collection is

1:09:17concerned is it is it roughly around a 3

1:09:19to 4% increase every year or because

1:09:21some years it seems to be about I mean

1:09:24I'm just doing the math in my head it

1:09:25may be around 5 6%. Uh do we have any

1:09:29insight into those numbers? And is that

1:09:31you is a higher percentage increase as a

1:09:35result of growth? That's basically what

1:09:37I wanted to understand. Or is it because

1:09:39the tax rates just went up or the the

1:09:42value house values just went up? Do we

1:09:44have that data?

1:09:45>> Are you referring to the build amount?

1:09:47>> The build the build amounts. Yes.

1:09:49>> Yep. Yeah. So that's

1:09:52um that's the total tax levy. So it goes

1:09:56up by two and a half% and then growth

1:09:59>> and growth.

1:10:00>> Yeah.

1:10:00>> And house value increase as well.

1:10:03>> Um not really.

1:10:04>> Okay.

1:10:05>> Because uh remember

1:10:08this the amount build is the levy. So

1:10:12that's where we start every year because

1:10:13it can only be two and a half% higher

1:10:15than the previous year, right?

1:10:16>> So as plus new growth. So, the vast

1:10:20majority of the differences above and

1:10:24beyond 2 and a half% year-over-year is

1:10:27new growth with new construction, new

1:10:29buildings, additions within the

1:10:31community. Um, as assessed values go up

1:10:34in excess of 2 and a half%, the tax rate

1:10:38goes down because we can only the levy

1:10:40can only go up two and a half% a year.

1:10:42>> I see. Yeah. Yeah. Understood.

1:10:45Um, and last question, uh, final

1:10:48question, uh, on the last certified free

1:10:50cash. Um, so I was just wondering as far

1:10:55as like I I know you still have to

1:10:57certify the estimate and it may go up.

1:11:00Uh, but what is basically one of the um,

1:11:04what do you think is the major reason

1:11:06for a 4 million sort of drop? Uh, do you

1:11:09have any

1:11:10>> insight into why that? It's the amount

1:11:12that was used at the Maytown meeting. So

1:11:15what we allocated. So we have emergency

1:11:17medical services. The capital

1:11:19improvement plan is funded with free

1:11:21cash. So it was just our use of free

1:11:23cash.

1:11:23>> Okay, that makes sense.

1:11:25>> Okay, thank you. Thank you. Jim,

1:11:28>> just a quick question on

1:11:30>> Go ahead, Jean. Go ahead.

1:11:31>> Oh, automotive, excuse me, automotive

1:11:33excise. What was the drop in value? We

1:11:36were about 40 million on automotive.

1:11:40What did it drop to?

1:11:42>> Oh, I'd have to I can do that

1:11:43calculation real quick.

1:11:48>> Because the cost of cars has actually

1:11:50gone up.

1:11:51>> Yeah. But so what what I see and I I'll

1:11:55get you the value, but what I think is

1:11:57happening is um the reason that excise

1:12:00has grown so much over the previous

1:12:02years is the increase in residential

1:12:05units that have come online in

1:12:06communities. So, new cars being

1:12:08introduced in the community. Um because

1:12:10as you know um in your first year after

1:12:14you buy a your vehicle, your bill then

1:12:17decreases over 20% per year each and

1:12:21every year. So, um we're climbing

1:12:24because we're not we're adding value of

1:12:27vehicles, but I think the biggest shot

1:12:28of that vehicle is the growth of new

1:12:31people in vehicles in the community. not

1:12:33necessarily just the value. They both

1:12:36work together. But

1:12:38>> yeah,

1:12:38>> um I think as we're seeing this taper

1:12:41out, it is in a fiscal year, fiscal year

1:12:4526, where um we brought much less new

1:12:48housing units online in comparison to

1:12:50the to the previous, let's just say six

1:12:52or sevenyear period where we were kind

1:12:55of, you know, we did Lakeway Commons,

1:12:57then we did Edgemeir Crossing on Route

1:13:0020, and then we did um the Elmwood. We

1:13:03just had a lot of new units and a lot of

1:13:06new vehicles come into town overall plus

1:13:09value.

1:13:10>> So that's actually going to be up and

1:13:12down too as more apartments condos come

1:13:15on board. They'll be all over the place.

1:13:17>> Yeah. But yeah, but I think what we're

1:13:19seeing again is just we didn't have

1:13:20bring a lot of new value on or new units

1:13:24on in6.

1:13:25>> Thank you Sandy. Just a question on the

1:13:29um the report Kevin that you gave to the

1:13:31select board was helpful because it

1:13:33really explained everything in detail

1:13:35and these primary drivers under the

1:13:37local receipts the four categories. So

1:13:39we know excise tax maybe decreasing

1:13:42investment income is questionable going

1:13:44forward. Looking at the other two I

1:13:46think it was building permits and uh

1:13:48landfill

1:13:49>> can't read my writing receipts. Are

1:13:51those areas you're concerned about as

1:13:54well going forward? Um I think building

1:13:57permits if everything that's attempting

1:13:59everything that's been approved by the

1:14:01planning board or going through planning

1:14:03board actually comes to fruition. If

1:14:05they build it will that'll be pretty

1:14:07stable.

1:14:08>> Um you know we have 409 South Street,

1:14:10104 Main Street, the large residential

1:14:13components that are approved. I know 409

1:14:15is moving. 104 I don't I don't see them

1:14:18moving. And then the the major

1:14:20commercial development on Clinton Street

1:14:22that hasn't started yet either. So, if

1:14:24those would move, I think we'll be okay.

1:14:26If they don't, I am concerned about it.

1:14:29The landfill, I'm I'm moderately

1:14:31concerned about. We have life about four

1:14:35years left in the landfill. Um, I know

1:14:39they're looking at different

1:14:40alternatives and things like that. We're

1:14:42in really close communication with uh

1:14:44wind waste. So, um,

1:14:48that'll, you know, to be determined if

1:14:50it maintains or remains a steady revenue

1:14:52source. I think the good news is is,

1:14:56you know, it's $2 million the landfill

1:14:58just shy of. It's it's a substantial

1:15:00component of local receipts, but not

1:15:03necessarily the overall revenue picture

1:15:05for the town.

1:15:06>> Thank you.

1:15:09>> Of course,

1:15:10>> um I first of all, I want to second what

1:15:12Sandra said about the memo you guys put

1:15:14together for the select board.

1:15:15Enormously helpful, right? All the

1:15:17additional detail and color in here. I

1:15:19had a question about how the comments in

1:15:22here on investment income connect to

1:15:23what we just heard from the team at

1:15:26Bartholomew Company. Um I I understand

1:15:29the comment about investment income

1:15:31being uncertain and it's always going to

1:15:33be right. Um, and and in terms of how

1:15:36it's affecting the town's mindset around

1:15:40projection models being conservative

1:15:41versus aggressive,

1:15:44I didn't read from them increased

1:15:47uncertainty. So, I guess I first wanted

1:15:50to double check and just make sure. So,

1:15:51that is the investment income that we're

1:15:54talking about. Is there anything in

1:15:55addition that would be affecting your

1:15:57thinking around the level of certainty

1:16:00and how it would affect your longer term

1:16:02thinking?

1:16:03>> Yeah. So the outside of what we just

1:16:05talked about in the operating um income

1:16:10the the well yeah so the operating uh

1:16:13account that we just talked about at the

1:16:15end the uncertainty that we talked about

1:16:18in that memo was you know that memo's

1:16:22maybe only five or six weeks old but you

1:16:25know as you heard Alex say like we were

1:16:27thinking um the Fed rate was going to

1:16:29continue to decline and obviously they

1:16:32just switched the other way and increase

1:16:34interest rates. So there was some

1:16:35uncertainty as we

1:16:38look at local receipts is always so

1:16:40challenging because as you know we're

1:16:41going to start our revenue projections

1:16:42here in 60 days and then we have to be

1:16:46right you know 20 months in the future

1:16:49of how that following fiscal year is

1:16:50going to play out. So that always brings

1:16:52some conservatism. But I think the

1:16:53second maybe more important point is uh

1:16:56we also have uncertainty because what

1:16:58else is in that line item is interest

1:17:01that's earned on the depreciation

1:17:03account for the cable system of Selco.

1:17:06So that that interest comes to the town.

1:17:08It's it's not retained by Selco and they

1:17:12um intend to utilize the vast majority

1:17:17of those funds in the construction of

1:17:18their new headquarters facility. So it

1:17:20just won't be able to, you know, be a

1:17:24revenue source for us in the in the

1:17:26future.

1:17:26>> Yeah. So when you when you talk about

1:17:28the and I completely understand five or

1:17:30six weeks, right? A lot changes in that

1:17:32time.

1:17:34When you talk about ongoing analysis of

1:17:37long-term financial model, how long term

1:17:40is that long term? term. I guess I'm

1:17:41curious about the connection between

1:17:42something that can change in five to six

1:17:44weeks, which completely makes sense, but

1:17:47then how closely connected that is to

1:17:50the length of time associated with the

1:17:51longer term planning and all of the

1:17:53things that have to roll together to

1:17:54make that possible.

1:17:56>> Yeah. So, our our financial plan uh that

1:17:59we use are using right now goes through

1:18:022033.

1:18:03>> Yes.

1:18:03>> Yeah. So, we're we're looking out five

1:18:06or six years in in the future. Um,

1:18:11I think we have extra conservatism

1:18:13because if you look at kind of the last

1:18:1520 years of the town

1:18:18local receipts year-over-year have only

1:18:20declined in two or three cycles, which

1:18:23is amazing, right? It's it's trusty and

1:18:25it's reliable. So, that should bring

1:18:27optimism, but since we had a down year,

1:18:29it brings a little conservatism to it.

1:18:31Um, I do worry about the general

1:18:34economic conditions if those projects,

1:18:37you know, we rely a lot upon growth.

1:18:39That's that's what we're forced to rely

1:18:41upon for not only the the property uh

1:18:44income, property tax income and that

1:18:47growth, but you know, the building

1:18:48permits, the motor vehicles, it all come

1:18:50in. And if the economy really slows

1:18:53down, I am worried because a lot of

1:18:55these uh projections will change. And

1:18:57we're coming off. Can you go to like

1:18:58slide four that shows the trend in local

1:19:01receipts? We're just coming off of this

1:19:03really fantastic period from FY22 to

1:19:06FY25 where we're seeing, you know, you

1:19:10know, two and a half, $3 million of

1:19:12growth each and every year and then all

1:19:14a sudden it's kind of pointing things in

1:19:16the other direction.

1:19:17>> Yeah.

1:19:18>> And I certainly appreciate the the

1:19:19conservatism and the point of view,

1:19:21right? Because I remember I think it was

1:19:22back in late April, we keep talking

1:19:24about the motor vehicle excise tax.

1:19:25there was concern that that was really

1:19:27down. And yet when the year finished and

1:19:29more or less all the numbers washed out,

1:19:31what it being down meant was that we

1:19:33were just a tiny bit over budgeted

1:19:36versus actually being under budget. So I

1:19:38think it it certainly pays off.

1:19:40>> Um but thank you for the additional

1:19:42detail on the

1:19:44>> the investment income and the long-term

1:19:45planning.

1:19:48>> Lind.

1:19:49>> Thank you. So um you know as as as we

1:19:53heard right the I mean the interest

1:19:55rates went in the other direction uh

1:19:58there is a sensitivity in the oil market

1:20:01>> plus we as a town adopted 2-year

1:20:04multi-family

1:20:06building moratorum

1:20:08so how do we look at it from that lens

1:20:12into especially I know it's a tiny bit

1:20:15dip or plateauing let's talk about that

1:20:17right I mean 400,000 here and there with

1:20:20with a larger scheme of things. It's

1:20:23if we are seeing that plateauing, you

1:20:26know, how how do you kind of see that as

1:20:28a um as a future growth model or you

1:20:33know how much conservative we should

1:20:35remain, you know, for

1:20:38a certain amount of time before we can

1:20:40start looking around, you know, uh

1:20:43considering we oursel limited those

1:20:45growth opportunities,

1:20:47>> right?

1:20:47>> So I just want to kind of

1:20:49>> Yeah. see see your perspective there.

1:20:51>> So, [snorts] another layer that that

1:20:53brings to mind is fiscal year 27 that

1:20:56we're starting now was

1:20:59a big leap forward for us in trying to

1:21:02bring more of our resources to bear. So,

1:21:06we did a big analysis of local receipts

1:21:09last summer and as we prepared the FY27

1:21:12budget, we moved our budget estimate

1:21:15from about $15 million of local receipts

1:21:21>> from like 17 up to $19 million. So, we

1:21:25were like, okay, we've been really far

1:21:26off, 20% off. Let's take advantage of

1:21:29that additional revenue that we're

1:21:31seeing consistently. And then things

1:21:33have have tapered. So, what we're doing

1:21:35this year is we're going to pull back

1:21:37about $800,000 in our local receipts

1:21:41estimate for fiscal year 27 in the

1:21:43revenue model. We have the ability to do

1:21:45that because new growth is a lot higher

1:21:48than we anticipated and state aid is

1:21:50higher than we anticipated. So, it's

1:21:52just going to wash itself out. We're

1:21:53going to take those recurring revenue

1:21:55sources in state aid and the property

1:21:58tax levy and we're going to supplant the

1:22:00dollars that we're going to use for for

1:22:03um local receipts. So then in the out

1:22:07years we've we've kind of just flattened

1:22:09local receipts at about $18.5 million

1:22:13you know as you know with with moderate

1:22:16growth in the years forward. So, we're

1:22:18taking advantage of the growth that you

1:22:20see from FY22 to, you know, FY25, but

1:22:24we've kind of just plateaued it out um

1:22:27from here.

1:22:28>> And then one followup.

1:22:30>> Okay.

1:22:30>> Um I know there are certain projects

1:22:32that will come online, right? I mean

1:22:34that have been in under constructions or

1:22:36like UPS thing and you know the emerald

1:22:39run has been in under construction.

1:22:43>> Um some of that revenue will start

1:22:45coming in this year. uh do you

1:22:47anticipate or are we as a town in

1:22:49discussion with any net new growth uh uh

1:22:53opportunities prospects

1:22:55>> um

1:22:55>> if we are under India don't mention

1:22:57names but

1:22:58>> trying to understand

1:22:59>> I mean there's there's not a lot of

1:23:02speculative things that we we are

1:23:04working on so we are seeing a little bit

1:23:06of downturn in that there is a lot

1:23:09that's still on the table again if the

1:23:11people that have permitted the projects

1:23:13do decide to actually make that physical

1:23:15investment

1:23:16So, some of those projects, like I said,

1:23:18our 409 South Street that hasn't started

1:23:21yet, which is about three 200 apartment

1:23:26212 apartment units. Um, we have 333

1:23:30South Street, which is the UMass

1:23:32building that's being completely

1:23:34renovated. That project is moving

1:23:35forward. UPS we are receiving revenue

1:23:39from them not substantially that will

1:23:42kind of we'll get a spike from that in

1:23:45fiscal year 27 and then maybe a little

1:23:47bit more in fiscal year 28 um new growth

1:23:51that we're projecting that we're going

1:23:52to use in the final budget numbers we

1:23:55started the fiscal year when we built

1:23:56the budget with $1,350,000

1:24:00in new growth we're actually going to

1:24:01certify new growth around 2,240

1:24:05so almost a million dollars more. So,

1:24:07we're bringing a lot of growth on this

1:24:09year. A lot of that is UPS. A lot of

1:24:12that is So, that UMass property at 333

1:24:15South Street was not on the tax roles.

1:24:17Now, it is on the tax roll. So, that's

1:24:19new growth. Um and then, you know, just

1:24:22some of the the finalization of like the

1:24:24Elmwood and and some of those other

1:24:26projects. But um you know the only other

1:24:32bigger projects that are still going

1:24:34through permitting right now is 525

1:24:37Hartford Turnpike which is a mixeduse

1:24:39and then 335 Maple Avenue which is this

1:24:42quote unquote Sam Adams property at

1:24:45Maple and Route 9. Um but to be honest

1:24:48with you, we're not seeing a lot of

1:24:50other we're not hearing from a lot of

1:24:52other developers. So that I'm not saying

1:24:54the SP has turned off, but it seems to

1:24:56have gotten not as strong as it was.

1:25:01>> Thank you.

1:25:02>> We'll go to Victoria first. Yeah.

1:25:05>> Would you attribute that to the

1:25:06moratorum or where that's going to be a

1:25:09more delayed um impact that we're seeing

1:25:12from?

1:25:13>> Yeah, I'm not sure the the impact of the

1:25:15of the moratorum. It could be playing

1:25:17its hand a little bit,

1:25:20but um we're definitely not seeing the

1:25:24standalone commercial projects being

1:25:26proposed, which those could still be

1:25:28proposed within within those areas. Now,

1:25:31we had a couple good years of of UPS and

1:25:34uh PI and the GFI development that

1:25:39hasn't been constructed on on Clinton

1:25:41Street. We're not seeing those.

1:25:47off the subject a little bit. I may

1:25:49wonder if maybe in a workshop format

1:25:52that we could sit down and get your

1:25:54feelings and thinking about what some of

1:25:58the projects are you want to do in the

1:26:00upcoming year. And I think it's

1:26:03something the board could discuss and

1:26:06understand a little more in detail

1:26:08rather we come in for a formal

1:26:09presentation and all of a sudden you

1:26:11know you you've got the grant for the

1:26:13recycling and you want to do this.

1:26:15>> We we could talk a little bit about

1:26:18things along those lines or

1:26:20>> any other projects of a million$2

1:26:24million that you're thinking of. I I

1:26:26don't know what the rest of the

1:26:27committee thinks about, but I think that

1:26:29would be something that would be

1:26:30important because I know there's a lot

1:26:33of things out there that people are

1:26:35talking about

1:26:36>> and when you take the totals, it adds up

1:26:40to be kind of a large figure. That's

1:26:43just a comment of listening. Yeah.

1:26:47>> Thanks.

1:26:50>> Couple questions. One is uh the the new

1:26:53Beal project. I I looks like they're

1:26:57starting to, you know, take down the old

1:26:59Beal.

1:26:59>> Um how when do they think they'll

1:27:02actually have that down and start really

1:27:04construction? And will any of that is

1:27:06that two years out before it hits us on

1:27:08the

1:27:09>> Yeah, probably two years. And so they're

1:27:10doing internal

1:27:12um hazmat abatement right now, the hand

1:27:15work. Um they've been at that for maybe

1:27:19about four weeks. I think they have

1:27:20about six to eight weeks to go on that

1:27:24component and then the the major

1:27:25demolition of the building would would

1:27:27occur and just continue to move forward

1:27:30from that. So they're they're moving the

1:27:33project is moving.

1:27:34>> And on the abatement, did that end up

1:27:36being bigger than everyone thought or?

1:27:38>> Oh, I don't know the the numbers to be

1:27:40honest with you. I I'm not even sure

1:27:43what they put on their building permit

1:27:44for that cost estimate, but yeah,

1:27:47>> because I know that was part of Yeah.

1:27:48the savings we would get is we sold it

1:27:50versus us taking this thing out. The

1:27:53second one is that maybe it is the

1:27:54Clinton Street one, the the big

1:27:56warehouse.

1:27:57>> Um on Whistler sanding gravel.

1:28:00>> Yeah. Um no movement that we're aware of

1:28:03on that project.

1:28:06We're not sure if they're they they

1:28:08they're they're great communicators. So,

1:28:10I would say they probably don't have any

1:28:11prospects right now.

1:28:12>> Okay.

1:28:14So, that's going to sit there.

1:28:20>> Just looking at this slide and then the

1:28:22the um the first slide the uh schedule

1:28:26local receipts there's two different

1:28:27numbers. One's 1987

1:28:30110 and this slide is 875

1:28:34825.

1:28:37Which one's the right number?

1:28:38>> I know there was a reason for the

1:28:40difference.

1:28:41>> 1987 826 is the right

1:28:43>> is the right.

1:28:44>> Yeah.

1:28:45>> Okay. Thank you.

1:28:54>> I had a couple. Alex, um did I hear you

1:28:57correctly just on the tax collections?

1:28:59Um, on the percent collected, was it 98%

1:29:02success on commercial, 96 on

1:29:05residential? Did I hear that correctly?

1:29:07>> Yeah, 98.6

1:29:09real estate um about 96%.

1:29:12>> And can you remind me slash us

1:29:16and I know I've asked this in the past

1:29:18and I should have remembered. What's our

1:29:19approach on the folks that are behind or

1:29:23delinquent

1:29:24to get to 100?

1:29:27Do we is it so dimminimous we just roll

1:29:29it? Do we have a policy to

1:29:35address it?

1:29:38>> So what you don't see in some of these

1:29:41on once you get older say greater than

1:29:45two years

1:29:47>> is the money that we moved out and into

1:29:49tax title the formal tax title

1:29:51collection process. So there's about

1:29:52$2.8 8 million in addition to this that

1:29:55is going through basically the start of

1:29:58the foreclosure process. Okay.

1:30:00>> That that doesn't sit within these

1:30:02numbers.

1:30:02>> Okay.

1:30:03>> Um what the outstanding balances here

1:30:06would maybe be, you know, an anomaly

1:30:08quarter or smaller amounts that

1:30:10individual taxpayers it doesn't make

1:30:12sense to spend the legal fees to put

1:30:14them in tax title. Um, but we push

1:30:19properties into tax title once they're

1:30:21basically aged for 20 48 months.

1:30:23>> 48 months. Okay, great.

1:30:25>> We push them in.

1:30:26>> Um,

1:30:29on the free cash again, I was taking

1:30:32some notes as you went through. We

1:30:34certify that dollar amount with the

1:30:36state and that was done after town

1:30:38meeting.

1:30:39>> It's usually done in the fall. So we'll

1:30:41do it this fall for 25

1:30:44>> for 20. So the

1:30:46>> for 26, excuse me, for 20. Okay.

1:30:48>> Yep.

1:30:48>> And

1:30:50that will that include when we came in

1:30:52the 300K or so we had [snorts] a take

1:30:55out of free cash for the police.

1:30:57Was that back in July?

1:30:58>> The reserve fund transfer. Is that what

1:31:00you're talking about?

1:31:01>> Is that where Yeah. Okay.

1:31:03>> So the reserve fund is appropriated in

1:31:06the budget. So that is not free cash.

1:31:08>> That Okay. Answer that. And then my last

1:31:11question, um, it stem from Sy's comments

1:31:14on the landfill.

1:31:16You said maybe four more years, Kevin.

1:31:18So, and I get it. I heard the $2 million

1:31:21amount,

1:31:22>> and I acknowledge I bring this up every

1:31:24year, too, as well. Um, what what what's

1:31:28your gut say? Like, would you like to

1:31:30know something in two years whether or

1:31:32not this is I mean, you're not going to

1:31:33wait till year four. [laughter]

1:31:34>> No. Yeah.

1:31:34>> Because we're going to have to have a

1:31:35strategy on what we can or cannot do.

1:31:38Yep.

1:31:38>> Sooner than later, I would imagine.

1:31:39>> Absolutely.

1:31:40>> Okay.

1:31:41>> And I I know they're they're looking at

1:31:43other options. That's why I remain

1:31:44optimistic which could preserve the life

1:31:46of this, use new technologies, things

1:31:49like that that would would still be

1:31:51meaningful. Um I know they want to

1:31:54continue to invest in the site. They

1:31:55have a lot of money invested in their

1:31:57materials recovery facility there that's

1:32:00profitable for them. So they're trying

1:32:01to find ways to extend the the use of

1:32:04that with D.

1:32:05>> Okay.

1:32:07That's all I had. Did anyone else have

1:32:09any questions?

1:32:09>> I had one follow, of course.

1:32:11>> So, as far as our our um our property

1:32:15tax collection, um correct me if I'm

1:32:17wrong, we had a 7030 target to meet as

1:32:20far as commercial versus residential.

1:32:22And I believe it was mentioned last year

1:32:24that we've achieved that target. Is that

1:32:27still the case now that after all these

1:32:30discussions we had in which we're seeing

1:32:32a decrease in perhaps seeing a decrease

1:32:34in commercial activity? Is there any

1:32:36like uh shift in that uh that break up?

1:32:40>> Yeah. So, I mean, we h we haven't got to

1:32:43the 7030. We're still only about 13%

1:32:45commercial in the tax base. So, we still

1:32:48have a lot of work to do to get to to

1:32:50that level we desire.

1:32:53And I think that's part of the strategy

1:32:55associated with the Route 20 and the

1:32:57Route 9 corridors is, you know, how can

1:33:00we preserve that land for commercial

1:33:03development, not

1:33:05residential development. That's that's

1:33:06what we're looking at.

1:33:10>> Yeah. I don't know if that answers your

1:33:12question.

1:33:12>> That that makes sense.

1:33:14>> Thanks.

1:33:15>> Okay.

1:33:17>> All righty. We're good. Thank you, Alex.

1:33:19Kevin. Um, moving ahead to item six.

1:33:22Just reviewing our meeting schedule.

1:33:24>> Dave David might have a question.

1:33:26>> Oh, I'm sorry, David.

1:33:29>> Did you come in?

1:33:31>> We can know. Yeah, we can hear you.

1:33:32>> Sure. Yes. A couple things. I know last

1:33:37year were able to close out some

1:33:39projects to pay that about $300,000 in

1:33:42utility costs we didn't expect. Can we

1:33:45see

1:33:47open obligations from 23, 24, and 25? Do

1:33:51we have any open obligations left for

1:33:54those fiscal years?

1:33:56>> No.

1:33:57>> No.

1:33:58>> There are no open obligations then

1:34:00>> like expenditure obligations.

1:34:03>> Yeah. like, you know, so if a department

1:34:05has was going to purchase something,

1:34:07they made an obligation in their balance

1:34:10sheet, but it didn't come in or they're

1:34:12waiting for it to come in, so they hold

1:34:13it over the next fiscal year.

1:34:15>> Yep.

1:34:15>> Um, so do we have any of those open?

1:34:18>> Explain more on it.

1:34:20>> Yes.

1:34:20>> Yeah, we we can we can provide you with

1:34:22that. It's pretty limited, but yeah,

1:34:24absolutely. I mean, there there will be

1:34:26a couple big things. Um Dave, if we're

1:34:28on the same page,

1:34:31um you know, we we appropriated $2

1:34:33million in free cash towards the um

1:34:37Department of Public Works and Town Hall

1:34:39renovation project or the MFO project

1:34:41like that is still sitting there. We

1:34:43haven't expended that because the

1:34:44project wasn't approved for funding at

1:34:46the ballot box.

1:34:49We are still we're looking at revised

1:34:51plans for that. So, in the future, if we

1:34:54don't move forward on a project like

1:34:55that, that roughly $2 million would get

1:34:58returned into free cash. If that's the

1:35:00type of analysis you're asking for, we

1:35:02we'll we'll send that along to the

1:35:04board.

1:35:05>> Yeah, that'd be great. And and the other

1:35:06thing is, are we still I know it's early

1:35:08in 2027, but are we still planning on

1:35:122028 to start using the uh override

1:35:15funds from our uh reserve accounts?

1:35:18>> Yes.

1:35:20>> Okay. So, you know, given that given

1:35:23that we have a reduced uh free cash,

1:35:26given that our utility costs went up

1:35:28quite a bit last year, um you know, I

1:35:31think as we talk about next year's

1:35:34budget, we have to understand that we we

1:35:36actually have to pull from our savings

1:35:38account to even meet our basic needs. I

1:35:41just make that as a comment. I think

1:35:42that's going to be important to make

1:35:44some decisions. Uh, I mean, last year we

1:35:46were able to spend all that money, uh,

1:35:47which was great for the ambulance and

1:35:50for the uh, snow removals and for the

1:35:54road work, but I'm not sure we're going

1:35:55to have that flexibility this year. Um,

1:35:58so to sort of Jean's point, maybe have a

1:36:00workshop to talk about some of those

1:36:03things early on um, to kind of get a

1:36:06strategy if that if that makes sense to

1:36:07to the chair.

1:36:11>> Okay, got it. Thanks, Dave. Anything

1:36:14else?

1:36:17>> No, no, just that right now. Thank you.

1:36:18>> Okay. Yeah, we'll make a note of that on

1:36:21>> Can I just add one more thing,

1:36:23>> please?

1:36:23>> So, I I meant to talk to the committee

1:36:25under the report about a fall town

1:36:27meeting. Uh, as I just mentioned, uh,

1:36:30when we were talking about the revenues,

1:36:33we don't have any financial need for a

1:36:35fall town meeting. So, we're not

1:36:37planning any additional expenditures.

1:36:39The revenues will be balanced out on the

1:36:42recap sheet that we submit to the state

1:36:44where we'd have less local receipts

1:36:46being used equally offset by the

1:36:49additional new growth that will be

1:36:51certified and the state aid that came in

1:36:54through the budget process. So there's

1:36:55no appropriation need for for town

1:36:58meeting. Um but we do intend to still

1:37:00have a town meeting but just later um

1:37:03the board the select board is going to

1:37:05consider a date. We're recommending

1:37:07December 7th.

1:37:09Um the primary component for that would

1:37:12be zoning bylaw, two zoning bylaw

1:37:15adjustments. The board referred two of

1:37:17them to the planning board. One on the

1:37:20ground aspects of aerial drone systems.

1:37:24Um you may have heard that Amazon is

1:37:26considering starting an aerial drone

1:37:27program with delivery into Shrewsbury.

1:37:29We don't have a lot of ability to

1:37:30regulate drones in the air. We have a

1:37:33lot of logistics facilities in the

1:37:34community and potentially in the future

1:37:36that we'd like to regulate where they

1:37:38are and how they could be uh cited. And

1:37:42then the second is the concern that you

1:37:44may hear a lot in the news, which is

1:37:46data centers um and updating our zoning

1:37:49bylaws to be able to appropriately

1:37:50regulate what we call computer data

1:37:52centers right now, but um similar name,

1:37:55but really not in the same context of

1:37:57what some facil uh some communities are

1:37:59facing with the construction of those.

1:38:01So, uh those two updates. We have some

1:38:03other miscellaneous articles within the

1:38:05human resources components related to

1:38:07civil service and um age of uh hires and

1:38:12things like that that we we're still

1:38:14flushing out but real really no

1:38:16financial articles to be presented.

1:38:20>> Kevin, on that note,

1:38:21>> I'm sorry. Oh,

1:38:22>> no. Go ahead, Dave.

1:38:23>> I'm sorry. Just one question. You just

1:38:26remind me, Kevin. I'm sorry. Is the DPW

1:38:29going to come back in in the fall and

1:38:31talk to us about I I know they were

1:38:34talking about moving forward on a

1:38:35project. Is that going to be this fall

1:38:37town meeting?

1:38:38>> No, it won't be this fall.

1:38:43>> Kevin, just piggyback on what you just

1:38:45said. Will, although there's nothing

1:38:47financial, we would still, well, correct

1:38:49me if I'm wrong, have to host uh

1:38:52>> public hearings on those regardless.

1:38:55Okay.

1:38:57On that note, um

1:39:01our meeting schedule looks like it's

1:39:02spelled out until early January with the

1:39:05possibility of a December 7th uh town

1:39:08meeting. And obviously we'd sprinkle in

1:39:10some of those public hearings when we

1:39:11know more. Um

1:39:13>> and if the schedule works itself out the

1:39:14way we think, we'd be able to have that

1:39:16public hearing at your Thursday,

1:39:18November 19th meeting. So you wouldn't

1:39:20have to have an offcycle meeting.

1:39:22>> Okay.

1:39:26When's that going in front of the board,

1:39:28Kevin? December 7th date.

1:39:30>> Um,

1:39:32>> Tuesday.

1:39:33>> Sooner than later.

1:39:34>> Yeah, they wouldn't sign the warrant

1:39:35that day, but they would

1:39:36>> No, understood that they could set the

1:39:37date.

1:39:38>> Okay. And it doesn't, like you said, it

1:39:40doesn't sound like there's going to be a

1:39:42ton of articles.

1:39:43>> No, I think, you know, six to eight

1:39:44articles.

1:39:46>> Okay. Any comments on item six on the

1:39:49schedule?

1:39:50Okay. And then uh lastly, seven

1:39:52correspondents. Um

1:39:56we have

1:39:58one from Representative Kaine dated July

1:40:0214th.

1:40:04Um we have letters to the from the

1:40:07planning board uh dated July 7th. And

1:40:12then we have three from the town

1:40:14moderator regarding um this board that

1:40:18all came in on June 20 uh June 25th. So

1:40:21uh that brings us to the end of our

1:40:24agenda today.

1:40:26Does anyone else any comments? Uh we got

1:40:28a motion to adjourn.

1:40:30>> So moved.

1:40:31>> Second.

1:40:33>> We're adjourned. Thank you. Oh, I take

1:40:36the