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APPROPRIATION COMMITTEE REPORT, NOVEMBER 17, 2008 STM Introduction In this report, we give recommendations on those articles to be acted upon at this Special Town Meeting. Our analysis and recommendations on each article may be found below. We also include pertinent background information in two appendices. The first appendix presents a table that was prepared by the Finance Department and Town Manager and staff and gives an overview of changes on both the revenue and expense side to the current year (fiscal year 2009) budget. The second appendix gives an overview of revenues received under the Community Preservation Act umbrella. The Massachusetts Department of Revenue has certified the Town's available funds, also known as free cash balance, as of July 1, 2008. The certified balance is $5,481,717. The DOR also certified the balances in the Water Enterprise Fund, the Sewer Enterprise Fund, and the Recreation Enterprise Fund. The Water and Sewer Fund balances are set forth in the discussion under Article 4 below. The Recreation Fund balance was certified at $1,258,039. The Assessors and the State have not yet determined a final figure for new growth for FY 2009, but, as may be seen in the table in Appendix A, the new growth number will be greater than the figure included in the FY 2009 budget at the 2008 Annual Town Meeting by a minimum of $7b2,419. The new growth number should be finalized before the tax rate is set in early December. At this time, it appears that the only impacts on the Town's current fiscal year budget of the worldwide financial and economic crisis that are known with reasonable certainty will be relatively minor. The negative impacts to date include very small cuts in State aid to Lexington and modest reductions in the expected level of local receipts (see Appendix A). Of course, there are likely to be additional ramifications of the crisis, e.g., reduced revenues and reduced value of the employees' retirement pension trust fund, but it is premature for Town Meeting to act before we have a good idea of what the real problems might be. Among the implications, it is likely that the crisis will affect the revenue picture for FY 2010. That will be addressed next spring at the Annual Town Meeting where it is likely that serious decisions will have to be made. At this time town officials have been studying budgets in order to be able to react to any further deterioration in the current fiscal year revenues. We note that for the articles involving appropriations, the possible sources of funds at this Special Town Meeting include the General Fund (which for this purpose generally includes the tax levy, other sources of funds such as state aid and local receipts), the Enterprise Fund, the Mitigation Fund, Free Cash, the Stabilization Funds, the Reserve Fund, and Community Preservation Act (CPA) funds. Page 4 of 15