2005-01 2020 Budget Task Force Report

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The FPRC would certainly review and assess fiscal policies recommended by the Appropriation and Capital Expenditures Committees and implemented by the Board of Selectmen. The task force anticipates lively dialogue between the FPRC and these entities, but does not see any conflict in the charge to the FPRC and the statutory responsibilities of the financial committees. The following are examples of financial policies that the FPRC would consider: A. Reserve Policies Budget Reserves  As a % or an amount of prior year revenue? As a % or an amount from property tax revenues? As a % or an amount of Free Cash? Stabilization Fund  What % of prior year revenue? When can it be used? How much can be withdrawn in any fiscal year? How is it replenished? Liability/Catastrophe Fund  Needed? If so, how to determine appropriate funding level? Overlay Reserve  What procedures govern the use of this reserve? B. Free Cash Policies What are limitations on use of Free Cash?  What is Free Cash policy for funding reserves?  What is Free Cash policy for capital projects?  C. Capital Improvement Projects Policies What defines a Capital Improvement Project?  What projects should be included in the capital budget?  How far into the future should the capital budget reach?  How is the capital budget evaluated? How are priorities established?  What are the financing policies?  D. Debt Management Policies What are debt management policies?  What priority should be placed on retaining a Moody’s Aaa rating?  Under what circumstances should the town issue bond anticipation notes?  What should be the Town’s ratio of debt to town assessed values?  What is an appropriate level of annual tax levy debt service to the total tax levy?  In answering these questions, the FPRC should focus on statutory requirements, the specifics of Lexington’s financial circumstances, and on policies and practices in other well-managed communities (e.g., Brookline).