2022-11-01-AC-STM#3-rpt - Laserfiche WebLink

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2022-3 STM APPROPRIATION COXMTTEE 25 OCTOBER 2022 The fifth requested action is the transfer of community impact fees received in association with short-term rentals in the aggregate amount of $4,479.48 into the Affordable Housing Stabilization Fund, and the authorization of transfers of short-term rental impact fees received in the future into this Fund without the need for further town meeting action. We note that the State began collecting short-term rental impact fees on October 1, 2021, and this is the first distribution of such fees the Town has received from the State. Finally, the article requests the appropriation of$1,675,999 from the tax levy into the Capital Stabilization Fund. As noted above in the Introduction,the amount requested is the portion of the new growth resulting from increases in the assessed value of new developments governed by a Preliminary Site Development and Use Plan (PSDUP) that were approved by Town Meeting, in addition to new developments within the commercial zone at Hartwell Avenue. The Town has adopted a policy to direct this subset of new growth revenue into the Capital Stabilization Fund in anticipation of the forthcoming construction project of Lexington High School. Article 4 Amend FY2023 Operating, Enterprise and CPA Budgets Funds Requested Funding Source Committee Recommendation See below See below Approve (8-0) At last spring's Annual Town Meeting (ATM), operating and enterprise fund budgets were presented and approved based on the FY2023 Recommended Budget and Financing Plan published on February 28, 2022. This article proposes several adjustments to those budgets in view of developments which have occurred since that time. See the Introduction above for a brief discussion of revenue that has become available since the Annual Town Meeting. Line numbers in the tables for this section refer to budget categories in the Plan and to the motion approved under Article 4 at the spring ATM. A proposed change to the FY2023 Community Preservation Fund budget is addressed in Article 5. Operating Budget This article proposes both increases and decreases in the FY2023 operating budget, which would result in a net increase of$1,666,152. The details of, and reasons for,the changes are set forth below. Line I I From I To Change 2110 1 Contributory Retirement 1$ 8,159,2501$ 9,219,2501$ 1,060,000 This change would add an additional $1,060,000 to the amount appropriated at the ATM for the Town's annual contribution to the Lexington Contributory Retirement System (the "Retirement Fund"). The most recent actuarial valuation, as of January 1, 2021, of the Retirement Fund showed a significant decrease in the funded portion of the Town's outstanding liability for pensions, from 81.8% down to 76.6%. This decrease results primarily from a decision by the Retirement Board to reduce the assumed rate of return of the Retirement Fund's invested assets from 7.50%to a more realistic 7.25%. The Board will likely recommend further decreases in the assumed rate of return in subsequent years, perhaps to 7.00% or 6.75%, which would further increase the present value of the unfunded liability. The increase in the unfunded liability presents a challenge to achieving full funding by Lexington's current target of 2030 (State law mandates that full funding be achieved by 2040). Staff has recommended this increase in the original appropriation to the Retirement Fund in an effort to stay on track for that target. The source of the increased funding will be new growth in the tax levy resulting from an increase in personal property tax revenue which was not anticipated at the time of the ATM. The new revenue recently became available when Takeda Pharmaceuticals, the successor to Shire Pharmaceuticals, opted to discontinue its manufacturing exemption from the personal property tax for its Lexington facilities. The additional personal property tax from Takeda would allow larger contributions to the Retirement Fund in future years as well, since it is expected to be a recurring source of revenue. 4