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APPROPRIATION COMMITTEE REPORT TO 2009 ATM—MARCH 2O09
<br /> Introduction
<br /> In this Introduction, we give an overview of financial developments since the 2008 Annual Town Meeting,
<br /> the proposed FY2010 budget, the current status of the Town's financial reserves, and the financial outlook
<br /> for FY2011 and beyond. The "Report of the Town Manager" in the FY2010 Brown Book (see link in the
<br /> Preface)is useful to read before this introduction.
<br /> Developments since adoption of the FY2009 budget
<br /> Prior to the Special Town Meeting in November 2008, the Massachusetts Department of Revenue certified
<br /> the Town's free cash balance as of July 1, 2008, to be $5,481,717. The DOR also certified the balances,
<br /> also known as "retained earnings", in the Water Enterprise Fund ($2,537,249), the Sewer Enterprise Fund
<br /> ($2,763,179), and the Recreation Enterprise Fund ($1,258,039). The Assessors and the State determined
<br /> the final figure for new growth for FY 2009,viz., $3,276,649, which is substantially larger than the amount
<br /> of$1,681,000 that was assumed for the recommended budget for FY 2009. At a total of$9,963,453, state
<br /> aid for FY2009 originally came in modestly higher than the $9,670,275 estimate used in the adopted
<br /> budget. However, the State is reducing the aid level by about $186,000 due to the impact of the economic
<br /> downturn on its revenues. The drop in revenues likely will affect state aid for years.
<br /> At the Special Town Meeting in November 2008, several financial articles were approved. They included
<br /> minor increases in various line items in the FY2009 operating budget totaling $457,760 that were funded
<br /> by the increase in state aid and new growth over the estimates used during budget formulation, minor
<br /> adjustments to the Water and Sewer Enterprise Fund budgets, two projects to be funded by Community
<br /> Preservation Act funds, and the transfer of monies received mainly from developers into specific
<br /> stabilization funds. Please see the Appropriation Committee Report to the Special Town Meeting for
<br /> further details (this report and others are available at http://www.lexingtontmma.org or at
<br /> http://www.lexin tog nma. ov/bud eg t.cfm).
<br /> As of press time, the most recent review of current fiscal year expenditures and staffing in the School Dept.
<br /> and a projection to the end of the fiscal year on June 30 suggests that the Lexington Public Schools will
<br /> finish the year with a deficit of about$275,000. This is the net result of several factors, the most prominent
<br /> of which is a projected overrun in spending in various SPED categories in the neighborhood of$650,000.
<br /> On the municipal side, the actual expenditures for snow removal in the DPW budget stand at about
<br /> $1,500,000 as of early March 2009, far above the budgeted amount of$946,325 (of which $646,325 is in
<br /> the DPW budget and$300,000 was set aside via a revenue offset). On the other hand, there was an error in
<br /> formulating the health insurance budget line that resulted in that line being about $1,000,000 too high.
<br /> Together with the effect of including a contingency in the projection of health insurance expenses, it is now
<br /> expected that there will be a surplus of about $1,500,000 in that line item (see the Brown Book,page IV-6
<br /> and the errata circulated on March 9,2009).
<br /> The Town Manager and staff are likely to request the approval of adjustments to the FY2009 budget that
<br /> address the school and snow/ice removal deficits in full or in part under Article 30. This will appropriately
<br /> be done late in Town Meeting. The Reserve Fund can be used, upon approval of this Committee, to
<br /> address deficits that arise after the end of this Town Meeting. There is also a mechanism for malting limited
<br /> inter-line-item transfers at the end of the year. Finally, the Town Manager has recommended setting aside
<br /> $200,000 of the Free Cash balance in case it is needed to help cover FY2009 deficits.
<br /> Of the $532,500 put into the FY2009 Reserve Fund, $15,000 has already been transferred out to cover legal
<br /> expenses related to a potential land acquisition. It is presently anticipated that an additional amount will be
<br /> needed to cover expenses for legal services for other purposes such as assistance in collective bargaining.
<br /> Due to the precipitous drop in the stock market over the past year, the Lexington Retirement Fund's
<br /> investments have declined in value from roughly $120M a year or so ago to roughly $80M early in 2009.
<br /> This increases the Town's unfunded liabilities for future pension payments (the liabilities were fully funded
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