2007-04-04-ATM-AC-rpt1 - Laserfiche WebLink

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APPROPRIATION COMMITTEE 1st REPORT, APRIL 4, 2007, TO 2007 ATM Introduction From a financial point of view, this year has turned out to be even more challenging than last year. Of the four Proposition 21/2 override questions posed to the voters last June, only two passed. The result has been an especially tight year for the Lexington Public Schools. Two Special Town Meetings were convened last November: one to contend with large increases in special education costs beyond those anticipated a year ago, and the other to continue the process of working toward full approval of the construction of new DPW facility. The School Committee has recently voted a budget in which a substantial portion of the proposed increase will be contingent on the passage of a Proposition 21/2 override in June. The next few years promise to be equally challenging. We will comment on many of these issues and on the general financial condition of the Town in more detail in a later report. This is the first year in which the CPC has engaged in a full, year-long, process of soliciting requests for Community Preservation Act (CPA) funds, of reviewing the requests, and of making recommendations to Town Meeting. The CPC has recommended a substantial number of interesting projects for funding. (For details, see the discussion under Article 26 below.) Nonetheless, it has been difficult for all parties to adapt to the schedule set up by the CPC. A number of projects that could have been funded with CPA funds were not identified in time to be submitted for CPC review. Those projects, totaling $108,500, are included in the municipal capital budget and are to be funded, if approved, by non-CPA tax-levy funds. (We comment on each of them in our discussion of the articles in which they appear: Article 31(b) has $38,500; Article 31(j) has $35,000; & Article 31(k) has $35,000.) Even though we may be giving our approval at this time for those projects, we are not happy with this situation. We strongly recommend that in the future all potentially-CPA-eligible, municipal and school capital requests be identified and reviewed by the responsible Town departments sufficiently early in the budget process so they can be submitted on a timely basis for CPC review. To responsibly fund improvements to Lexington's infrastructure, the Town staff must internalize the new reality that many needed projects qualify for funding with the use of CPA funds. We commend the CPC for establishing a clear and definite review process. However, after the Town Meeting concludes, we recommend the CPC consider, in light of a year of experience, adding mechanisms to their formal process to consider late changes and late requests that may be justified on an emergency basis. We feel it is crucial that, along with new attention to the matter by the Town departments, the CPC be proactive to assure proper consideration is given to all CPA-eligible projects in the Town's 5-year capital plans. A number of years ago, the Board of Selectmen adopted the "5% cash capital policy" under which 5% of General Fund revenues would be dedicated to pay for within-levy capital expenditures either immediately (in "cash") or through debt service (principal and interest payments on borrowings). The policy is subject to a number of interpretations and has not always been followed, notably in the last four fiscal-years' budgets. Nonetheless, it sets a benchmark that indicates, albeit roughly, whether the Town is catching up, staying abreast, or falling behind in terms of capital investment. This year, proposed "cash capital" investments seem to have fallen short of the benchmark. According to our calculations, for FY2008 the policy would set a target of very close to $6M of which $2.2M would be available for cash or debt-service financing of currently recommended projects after covering the debt service on previously approved projects. The Town Manager's recommended budget includes only $1.3M of General Fund cash for capital projects-about $0.9M less than the amount called for by the 5% policy. In fairness, it should be noted that the recommended budget also includes substantial funds for capital projects from the enterprise funds, the CPA, the Parking Fund, Chapter 90 aid (State aid for roads), and the Town continues to pay debt service on those projects whose debt is excluded from the limits of Proposition 21/x. It is clear that the Town's capital-investment needs and policies are themselves in need of evaluation. It maybe that we need a new and more appropriate benchmark to determine whether enough is being spent Page 7 of 39