PO BOX 464 • Windham, NH 03087 • 6038945881

Windham, New Hampshire

Issues

Overview:

This report found many good things in the review of Windham’s finances. For instance, the
town’s debt situation is exemplary. The 2009 Town Report notes that, “Other than a small note
for the Searles Building that is funded in its entirety through rental revenues of the building, the
Town has no outstanding municipal debt.” Those things they have done well have generally
been publicized by either the auditor or the town’s management team and this report finds no
need to elaborate on them for that reason. The focus of this report was to identify those areas
where Windham’s town leaders need to bring the same fiscal prudence that they approached the
debt issue with.

High Salary Costs:

The following chart shows the salaries of those who received over $100,000 in total
compensation from Windham as recorded in the annual report. 1 Not only is it instructive to note
which positions are receiving these more than adequate salaries but the nature of how they
became so large. A review of all employees found that regular salaries totaled to a reasonable
$4,945,280.93 but after overtime, incentives and benefits the amounts nearly doubled to an
incredible $8,798,231.01. The use of that much overtime and that high of a benefit load points to
significant personnel management issues.

Windham’s highest grossing employee in 2009 was a patrolman whose salary and benefits
totaled an eye popping $167,098 on a base salary of $54,569. Good management practices will
not allow employees to record that much overtime for several reasons. First, overtime hours cost
the city more than just the 150% of regular salary hours that overtime pay constitutes because of
the exceedingly high benefit load in Windham (see following section on benefits). Fiscally
prudent management practices dictate than when you have as many hours of overtime as
Windham appears to have incurred you either hire additional employees, whose hours cost you
less than the overtime hours you are replacing, hire part time employees to fill those hours of
need or better yet contract for those hours, which allows the city to avoid the huge benefit costs
inherent in Windham’s standard pay structure.

1
http://www.windhamnewhampshire.com/updated/pdfs/2009WageReportCorrect.pdf
 Total Salary
Position Regular Salary Gross Pay Benefits and Benefits
Patrolman $ 54,568.93 $ 122,960.97 $ 44,137.04 $ 167,098.01
Sergeant $ 63,892.66 $ 118,122.91 $ 42,804.79 $ 160,927.70
Sergeant $ 59,364.36 $ 106,269.53 $ 41,170.45 $ 147,439.98
Sergeant $ 65,809.64 $ 106,003.39 $ 40,863.37 $ 146,866.76
Town Administrator $ 99,253.93 $ 100,381.73 $ 41,623.19 $ 142,004.92
Patrolman $ 55,887.02 $ 102,525.58 $ 32,419.66 $ 134,945.24
Sergeant $ 63,892.66 $ 93,727.84 $ 38,829.55 $ 132,557.39
Fire Chief $ 89,599.10 $ 90,534.90 $ 41,121.95 $ 131,656.85
Patrolman $ 54,607.93 $ 98,325.99 $ 33,095.63 $ 131,421.62
Firefighter $ 50,898.25 $ 89,854.02 $ 41,448.00 $ 131,302.02
Chief $ 89,599.10 $ 91,214.40 $ 38,882.36 $ 130,096.76
Firefighter $ 49,925.51 $ 86,744.49 $ 40,822.42 $ 127,566.91
Lieutenant $ 57,695.56 $ 86,018.30 $ 39,780.56 $ 125,798.86
Assistant Fire Chief $ 80,875.01 $ 83,672.18 $ 40,864.91 $ 124,537.09
Patrolman $ 52,615.04 $ 85,865.19 $ 38,017.38 $ 123,882.57
Firefighter $ 50,948.49 $ 83,240.80 $ 40,256.84 $ 123,497.64
Highway Agent $ 81,254.69 $ 84,256.86 $ 38,729.13 $ 122,985.99
Patrolman $ 56,206.02 $ 90,951.69 $ 31,797.15 $ 122,748.84
Firefighter $ 51,076.02 $ 82,482.97 $ 40,100.16 $ 122,583.13
Lieutenant $ 57,360.91 $ 80,971.34 $ 40,068.88 $ 121,040.22
Assessor $ 81,254.69 $ 82,368.86 $ 38,506.98 $ 120,875.84
Firefighter Mechanic $ 51,900.89 $ 80,990.83 $ 39,861.35 $ 120,852.18
Info Tech Director $ 81,254.69 $ 82,108.29 $ 38,466.29 $ 120,574.58
Asst Town Admn-Finance $ 81,254.69 $ 82,024.70 $ 38,387.72 $ 120,412.42
Sergeant $ 61,602.40 $ 80,332.82 $ 36,855.23 $ 117,188.05
Patrolman $ 53,127.23 $ 92,520.63 $ 23,285.51 $ 115,806.14
Patrolman $ 44,408.73 $ 82,478.99 $ 32,438.32 $ 114,917.31
Firefighter $ 50,898.25 $ 71,232.17 $ 38,164.54 $ 109,396.71
Lieutenant $ 57,695.56 $ 77,771.62 $ 31,509.13 $ 109,280.75
Firefighter $ 50,898.25 $ 70,962.87 $ 38,052.09 $ 109,014.96
Patrolman $ 54,568.93 $ 85,704.09 $ 22,324.45 $ 108,028.54
Captain $ 12,069.01 $ 77,879.94 $ 28,860.35 $ 106,740.29
Firefighter $ 50,898.25 $ 67,960.91 $ 37,600.65 $ 105,561.56
Library Director $ 80,727.32 $ 81,644.04 $ 23,415.34 $ 105,059.38
Maint. Director $ 66,123.66 $ 68,847.46 $ 36,029.28 $ 104,876.74
Bldg Inspector $ 66,893.58 $ 71,342.74 $ 32,982.84 $ 104,325.58
Firefighter $ 50,898.25 $ 65,359.74 $ 37,035.10 $ 102,394.84
Firefighter $ 50,961.03 $ 65,316.11 $ 37,039.66 $ 102,355.77
Firefighter $ 48,342.65 $ 62,115.94 $ 38,219.10 $ 100,335.04
Excessive Benefit Costs:

The author of this study has reviewed government entities at various levels of government over
nearly two decades and seldom has encountered a benefit load as high as this city’s costs. The
following chart highlights this issue 2:
Benefit Load as
Total Salary a % of Regular
Position Regular Salary Gross Pay Benefits and Benefits Salary
Patrolman/Special Offcr $ 29.40 $ 21,081.92 $ 1,612.77 $ 22,694.69 5486%
Patrolman/Special Offcr $ 14.63 $ 10,101.60 $ 772.75 $ 10,874.35 5282%
Captain $ 12,069.01 $ 77,879.94 $ 28,860.35 $ 106,740.29 239%
Planning Director $ 21,004.96 $ 57,039.47 $ 24,052.17 $ 81,091.64 115%
Custodian $ 33,467.50 $ 35,098.04 $ 30,243.74 $ 65,341.78 90%
Operator 1 $ 17,466.98 $ 19,267.42 $ 15,543.81 $ 34,811.23 89%
Secretary $ 36,086.46 $ 40,722.51 $ 30,674.01 $ 71,396.52 85%
Patrolman $ 35,871.39 $ 65,823.30 $ 30,371.69 $ 96,194.99 85%
Patrolman $ 17,521.97 $ 29,369.81 $ 14,505.90 $ 43,875.71 83%
Firefighter $ 49,925.51 $ 86,744.49 $ 40,822.42 $ 127,566.91 82%
Firefighter $ 42,248.85 $ 55,817.29 $ 34,483.26 $ 90,300.55 82%
Firefighter $ 50,898.25 $ 89,854.02 $ 41,448.00 $ 131,302.02 81%
Patrolman $ 54,568.93 $ 122,960.97 $ 44,137.04 $ 167,098.01 81%
Firefighter $ 48,342.65 $ 62,115.94 $ 38,219.10 $ 100,335.04 79%
Firefighter $ 50,948.49 $ 83,240.80 $ 40,256.84 $ 123,497.64 79%
Admin Asst $ 39,681.06 $ 40,815.06 $ 31,166.01 $ 71,981.07 79%
Firefighter $ 51,076.02 $ 82,482.97 $ 40,100.16 $ 122,583.13 79%
Truck Driver $ 41,488.47 $ 44,051.35 $ 31,919.99 $ 75,971.34 77%
Firefighter Mechanic $ 51,900.89 $ 80,990.83 $ 39,861.35 $ 120,852.18 77%
Firefighter $ 50,898.25 $ 71,232.17 $ 38,164.54 $ 109,396.71 75%
Firefighter $ 50,898.25 $ 70,962.87 $ 38,052.09 $ 109,014.96 75%
Firefighter $ 50,898.25 $ 67,960.91 $ 37,600.65 $ 105,561.56 74%
Dispatcher $ 44,232.11 $ 48,856.55 $ 32,633.35 $ 81,489.90 74%
Patrolman $ 44,408.73 $ 82,478.99 $ 32,438.32 $ 114,917.31 73%
Firefighter $ 50,898.25 $ 65,359.74 $ 37,035.10 $ 102,394.84 73%
Firefighter $ 50,961.03 $ 65,316.11 $ 37,039.66 $ 102,355.77 73%
Planning Dpt Secretary $ 33,300.88 $ 36,237.88 $ 24,137.49 $ 60,375.37 72%
Patrolman $ 52,615.04 $ 85,865.19 $ 38,017.38 $ 123,882.57 72%
Lieutenant $ 57,360.91 $ 80,971.34 $ 40,068.88 $ 121,040.22 70%
Deputy Collector $ 32,390.15 $ 35,661.87 $ 22,604.26 $ 58,266.13 70%
Sergeant $ 59,364.36 $ 106,269.53 $ 41,170.45 $ 147,439.98 69%
Operator 2 $ 48,135.75 $ 53,034.95 $ 33,335.91 $ 86,370.86 69%
Lieutenant $ 57,695.56 $ 86,018.30 $ 39,780.56 $ 125,798.86 69%
Sergeant $ 63,892.66 $ 118,122.91 $ 42,804.79 $ 160,927.70 67%
Patrolman $ 42,690.95 $ 63,381.38 $ 27,891.95 $ 91,273.33 65%
Sergeant $ 65,809.64 $ 106,003.39 $ 40,863.37 $ 146,866.76 62%
Admin Assistant $ 49,933.21 $ 54,850.23 $ 30,945.43 $ 85,795.66 62%
Highway Laborer $ 43,186.91 $ 51,007.06 $ 26,441.10 $ 77,448.16 61%
Sergeant $ 63,892.66 $ 93,727.84 $ 38,829.55 $ 132,557.39 61%
Patrolman $ 54,607.93 $ 98,325.99 $ 33,095.63 $ 131,421.62 61%
Sergeant $ 61,602.40 $ 80,332.82 $ 36,855.23 $ 117,188.05 60%
Dispatcher $ 43,578.34 $ 47,843.64 $ 25,965.55 $ 73,809.19 60%
Supervisor/Driver $ 26,096.62 $ 47,675.40 $ 15,492.74 $ 63,168.14 59%
Library Admin Asst $ 43,121.56 $ 43,258.33 $ 25,275.31 $ 68,533.64 59%
Supervisor/Driver $ 23,208.49 $ 25,679.25 $ 13,466.72 $ 39,145.97 58%
Patrolman $ 55,887.02 $ 102,525.58 $ 32,419.66 $ 134,945.24 58%
Patrolman $ 56,206.02 $ 90,951.69 $ 31,797.15 $ 122,748.84 57%
Lieutenant $ 57,695.56 $ 77,771.62 $ 31,509.13 $ 109,280.75 55%
Maint. Director $ 66,123.66 $ 68,847.46 $ 36,029.28 $ 104,876.74 54%
Tech Services Librarian $ 52,391.57 $ 52,537.85 $ 26,882.25 $ 79,420.10 51%
Tech Services Librarian $ 52,391.57 $ 52,528.73 $ 26,880.82 $ 79,409.55 51%
Assistant Fire Chief $ 80,875.01 $ 83,672.18 $ 40,864.91 $ 124,537.09 51%

2
http://www.windhamnewhampshire.com/updated/pdfs/2009WageReportCorrect.pdf
The salaries of the town’s personnel do not appear ‘out of line’ until you view them in their
totality. Once you include the incentives, overtime and benefit cost they become a poster child
for what is wrong with government employment structures. This is amplified because some of
these positions are in support and administration and do not directly provide any services.
Growth in the ‘hidden overhead’ facets of government is an endemic issue in all levels of
government. The issues regarding benefits in Windham are basically a two part issues: health
care and retirement plans.

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

Benefits of an HSA:

1. You can claim a tax deduction for contributions you, or someone other than your
employer, make to your HSA even if you do not itemize your deductions on Form 1040.
2. Contributions to your HSA made by your employer (including contributions made
through a cafeteria plan) may be excluded from your gross income.
3. The contributions remain in your account from year to year until you use them.
4. The interest or other earnings on the assets in the account are tax free.
5. Distributions may be tax free if you pay qualified medical expenses.
6. An HSA is “portable” so it stays with you if you change employers or leave the work
force.

Qualifying for an HSA:

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

1. You must be covered under a high deductible health plan (HDHP)

2. You have no other health coverage except what is permitted
3. You are not enrolled in Medicare.
4. You cannot be claimed as a dependent on someone else's tax return
5. Under the last-month rule, you are considered to be an eligible individual for the entire
year if you are an eligible individual on the first day of the last month of your tax year
(December 1 for most taxpayers).
 6. If you meet these requirements, you are an eligible individual even if your spouse has
non-HDHP family coverage, provided your spouse's coverage does not cover you
7. Under the last-month rule, you are considered to be an eligible individual for the entire
year if you are an eligible individual on the first day of the last month of your tax year
(December 1 for most taxpayers).
8. If you meet these requirements, you are an eligible individual even if your spouse has
non-HDHP family coverage, provided your spouse's coverage does not cover you.

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

1. Periodic health evaluations, including tests and diagnostic procedures ordered in

connection with routine examinations, such as annual physicals.
2. Routine prenatal and well-child care.
3. Child and adult immunizations.
4. Tobacco cessation programs.
5. Obesity weight-loss programs.
6. Screening services. This includes screening services for the following:
a. Cancer.
b. Heart and vascular diseases.
c. Infectious diseases.
d. Mental health conditions.
e. Substance abuse.
f. Metabolic, nutritional, and endocrine conditions.
g. Musculoskeletal disorders.
h. Obstetric and gynecological conditions.
i. Pediatric conditions.
j. Vision and hearing disorders.

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

A review of state law confirms that there are limited options for dealing directly with the
retirement costs. However, given the growing nationwide concern with governmental defined
benefit plan’s costs and unfunded liabilities the city must consider its options. There has been a
considerable amount of media attention lately to the rapidly growing debts of the statewide
retirement systems but it is endemic in local governmental units also. The unfunded liability is a
cost that is truly hidden. Current government accounting standards do not require these amounts
to appear in the financial statements of government entities and Windham is no exception. This
is especially troubling because these plans have structural flaws that tend to accumulate large
amounts of debt over and above what the combination of employer and employee contributions
can cover. The structure of these plans provides for these unfunded liabilities to be the
obligation of the employers—in this case the citizens of Windham.

The large disparity between base salary and gross salary and benefits should be a red flag for
citizens that the retirement plan is being abused. For example, the patrolman with the base salary
of $54,569 receiving a total package of salary and benefits of $167,098 suggests a manipulation
of the salaries in order to maximize the retirement benefits for that individual. The way defined
benefit plans work is that your highest three years average salary are multiplied times your years
of service and the plan’s benefit multiplier. The highest three years average salary concept
incentivizes employees to look for ways to inflate those final years. A department head that
allows an employee to increase their salary this much with overtime and other incentives has
created an inflated benefit cost to the town of Windham for many years into the future as that
person draws benefits based on the higher salary amount. It is difficult for citizens to indentify
these inflated benefits costs because they do not appear in the current budget effectively hiding
the manipulation.

There also is an overlooked ongoing cost of these defined benefit systems that impact budgets
annually. The employer and member contributions to these systems exceed the cost of even a
very generous defined contribution in the private sector. This make payrolls more costly than
necessary and takes needed funds away from services and programs. Every time an employee’s
salary increases the amount that the city has to pay in employer contributions increases
proportionately. This is one of the lesser understood escalators in operating costs. The
preceding chart highlights how costly this can be to taxpayers.

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

There are essentially two ways to deal with this problem. First, state laws can be changed and
we would encourage citizens and town council to consider advocating for just such a change to
their state representatives. Municipalities should have the choice to opt out of these flawed
plans. The difficulty in that approach is that many legislators enjoy the special control that it
gives them over state and local employees. The politicians can turn their votes for increased
retirement benefits for these government employees into votes at the polls.

The more immediate approach to these high benefit loads is for the city to actively engage in
outsourcing. Many of the functions performed at the city level such as payroll and human
resources are services that can be found in local businesses. There are many reasons to consider
this approach:
 1. Lower costs—the competition of the bid process drives prices down as businesses must
compete for the contract
2. Reduction in city employees---as we have noted the hidden benefit costs of government
employees drive operational cost increases that are unrelated to an increase in
services/programs
3. Greater transparency and accountability----the assignment of a contract delineates who is
responsible for a particular function and exactly what it costs, unlike current operations
were a taxpayer knows only the supervising department that provides the
service/program, not who is responsible and the total cost of the service/program.
4. Greater flexibility---in hard economic time’s government typically struggles to downsize
while business tends to react quickly or cease to operate.
5. Stimulates the local economy more than direct city expenditures----private businesses
tend to reinvest profits helping grow the local business.

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

Transparency, Accountability, and Efficiency

Ultimately the way to control expenditures is to ensure that the minimum amount is spent on
programs or services that don’t work. Sounds simple but it is so complex when it comes to
Windham’s services. Private business has a ‘bottom line’ or net income as it is properly known
with which to measure how well they provide the good and/or service they provide. If the bottom
line becomes zero or a negative number the business has to change or they cease to be in
business in a short time. No such arrangement exists for city government. Bringing
accountability to city government in this environment is exceptionally difficult; however, there is
a solution once the problem is identified.

It is poorly understood how much the current method of governmental accounting has been a
root of this government inefficiency. Government accounting, unlike private sector accounting,
is not structured to measure how effectively the taxpayer’s money is being spent. Governmental
Accounting Standards Board (GASB) direction is merely to track the sources and uses of funds
which while a useful function to ensure that funds come from and go to where they are supposed
to it is uninformative otherwise. In fact, government accounting as it is currently practiced
‘hides’ many of the real costs of programs and services. This flaw has been used by bureaucrats
over the years to hide inefficiencies and sometimes corruption. A prominent financial authority
recently said “Our system of accounting and financial reporting is designed as if to hold
appointed officials responsible to elected officials. We should be holding the elected officials
responsible to voters and taxpayers” 3.

Businesses generally have two sets of accounting systems. One is prepared with an eye towards
the governmental tax reporting requirements and other system functions as their management
information system for operating their business. Businesses would never think of attempting to
run their business using their tax reporting numbers. Management wants to know exactly how
much everything they do costs them and what outcomes they achieve because of those
expenditures. Do the taxpayers of Windham deserve any less?

Fixing this flaw is a two step process but the good news is that it is both quick and economical to
install and will have an immediate impact on out of control spending. A management
information system will peal back the layers of hidden expenditures and reveal to citizens exactly
how much is spent on every program and service their tax dollars pay for. The former State
Auditor of Oklahoma, the author of this study and five college interns tested just such a system
for the entire state’s finances using the state of Oklahoma’s transparency website’s data.
Working part time and with limited resources the group was able to build a functioning model in
a short period of time. Once built the model was constructed so it could be updated
automatically within just a few minutes every time the state’s transparency website uploaded
new data. 4 This model only tracked expenditures to the program level but proved that the
concept was not only viable but economical and capable of functioning with a minimum of
additional inputs on a level much more complex than the city of Windham’s structure. Putting
this type of cost allocation model into place in Windham within the current accounting system
would be not only easy to install but could be done with a minimum of cost.

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

These hidden costs also make comparisons between government’s costs of a program/service to
the private sector tainted because significant costs of government have been left out of the
3
http://www.ocpathink.org/sites/ocpathink/uploads/documents/Daxon_July_2009.pdf page 5
4
http://www.ocpathink.org/sites/ocpathink/uploads/documents/Daxon_July_2009.pdf
comparison. These misstatements of cost to provide services are often the roadblock to attempts
to outsource functions of government. By finally requiring the full allocation of costs for each
service private vendors bidding for outsourcing contracts will be able to show the true amount of
incentivized to either pressure the department providing the service to reduce their costs or look
at outsourcing that service.

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

Public Private Partnerships

Nonprofits, civic, religious, and charitable foundations form a “third” or “independent” sector
that can deliver important services and benefits that neither governments nor profit-seeking
businesses can deliver as effectively. The city should be careful not to supplant these institutions
of civil society and in fact should seek to create ‘public-private’ partnerships whenever possible
to utilize the strengths of these organizations. We encourage the town to examine its social and
cultural and health services such as the food/fuel vouchers, rent/mortgage assistance, prescription
assistance, and/or utility assistance for assistance from these groups. 5 These independent
service providers are already in the community and many times provide a higher quality of
service for the recipient. The following chart shows the growth in expenditures in the areas of
health and culture/recreation which are great candidates for these types of partnerships.

5
http://www.windhamnewhampshire.com/updated/faq.htm
Trend Analysis of Revenues and Expenditures 6

% Growth
EXPENDITURES 2005 2006 2007 2008 2009 2005-2009
GENERAL GOVERNMENT $ 1,755,264.00 $ 1,816,544.00 $ 1,947,152.00 $ 2,109,615.00 $ 2,118,259.00 21%
PUBLIC SAFETY $ 5,458,340.00 $ 5,415,687.00 $ 6,197,069.00 $ 6,813,098.00 $ 6,899,144.00 26%
SANITATION $ 923,154.00 $ 1,000,928.00 $ 1,013,780.00 $ 1,004,094.00 $ 981,378.00 6%
HEALTH $ 62,566.00 $ 67,815.00 $ 93,220.00 $ 104,200.00 $ 103,244.00 65%
WELFARE $ 60,687.00 $ 71,867.00 $ 60,871.00 $ 51,551.00 $ 53,650.00 -12%
CULTURE AND RECREATION $ 932,584.00 $ 1,031,537.00 $ 1,096,701.00 $ 1,191,332.00 $ 1,222,995.00 31%
DEBT SERVICE $ 579,159.00 $ 736,605.00 $ 392,181.00 $ 262,288.00 $ 250,305.00 -57%
CAPITAL OUTLAY $ 841,280.00 $ 710,928.00 $ 472,729.00 $ 703,963.00 $ 1,913,901.00 127%
OPERATING TRANSFERS OUT $ 85,000.00 $ - $ 177,975.00 $ 90,000.00 $ - -100%
TRUST ACCOUNTS $ 60,000.00 $ 50,000.00 $ 60,000.00 $ 60,000.00 $ 30,000.00 -50%
SPECIAL ARTICLES $ 542,067.00 $ 217,709.00 $ 37,419.00 $ 15,882.00 $ 13,874.00 -97%
TOTAL $ 11,300,101.00 $ 11,119,620.00 $ 11,549,097.00 $ 12,406,023.00 $ 13,586,750.00 20%
GROWTH BY YEAR -1.60% 3.86% 7.42% 9.52%

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

Revenue before Property Taxes by Source

$3,500,000

$3,000,000
TAXES
$2,500,000 INTERGOVERNMENTAL REVENUES

LICENSES AND PERMITS

$2,000,000
CHARGES FOR SERVICES

MISCELLANEOUS REVENUES
$1,500,000
OTHER FINANCING SOURCES

$1,000,000

$500,000

$0
2005 2006 2007 2008 2009
Fiscal Year

It does not take a fiscal expert to see that Windham’s revenue sources are relatively flat and the
largest category of revenue---licenses and permits---is actually declining. That is extremely
problematic given the preceding chart that shows expenditures actually increasing. The
inevitable outcome of this scenario is a need to increase property taxes.

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

Windham has positioned itself to be a model for other cities in debt management but conversely
it has also become a poster child for obfuscation of salary and benefit costs especially in the area
public safety. This happens for a variety of reasons such as the general deference to police and
firefighters because of the important jobs they do. This review appreciates their efforts but the
amount of salary and benefit ‘loading’ that has taken place has a growing impact on the city’s
budget both in the short term and the long term. Short term these large salary amounts are
limiting the ability of city management and elected officials to control budget expenditures and
build in safety nets to the current fiscal year’s budget. Long term these bloated benefits are a
potentially bigger problem. Public pension plans are coming under new scrutiny as the unfunded
debt they are creating is becoming larger and larger.