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03/15/2017 AC Minutes Minutes Town of Lexington Appropriation Committee (AC) March 15, 2017 Place and time: Ellen Stone Room (moved from Cotton Room), Cary Memorial Building, 7:30 p.m. Members present: John Bartenstein, Chair; Alan Levine, Vice -Chair & Secretary; Ellen Basch; Eric Michelson; Andrei Radulescu-Banu; Sanjay Padaki; Lily Manhua Yan; Jian Helen Yang; Carolyn Kosnoff, Assistant Town Manager, Finance (non-voting, ex officio) Members Absent: Richard Neumeier Other Attendees: Carl Valente, Town Manager; Dawn McKenna, Chair, Tourism Committee The meeting was called to order at 7:41 pm. 1. FY2018 Budget Issues and Report to 2017 Annual Town Meeting (ATM) on Financially Related Warrant Articles ATM articles were reviewed in preparation for Committee votes on their merits and to determine whether additional information was necessary for writing of the Committee's report. Discussion and/or actions were taken on the following articles: • Article 30: Adjust Retirement Cost of Living Adjustment (COLA) Base for Retirees: Mr. Valente disclosed that as an employee he is personally impacted by the outcome of this article. He explained that employees contribute to their pension plans, and the pensions are largely funded by those contributions. COLAs are currently applied to the first $13,000 a retiree receives. The Lexington Retirement Board has voted to approve increasing that base to $14,000, subject to a favorable vote by Town Meeting. There is current uncertainty about the actuarial impact of increasing the COLA base on the annual normal costs and the Town's unfunded liability for pension costs, and Mr. Valente said he would make further inquiry of the retirement system's actuary on that question. The Retirement Board is authorized to create a payment schedule for fully funding the pension liability. Its currently proposed schedule defers recognition of the increase in amortization payments required by the COLA base increase until FY2023 and FY2024, when the unfunded liability is expected to be retired. Mr. Valente believes the Retirement Board's proposed schedule was designed to keep the increase in the Town's pension funding obligations to 5% per year. He noted, however, that the funding schedule is subject to negotiation with the Town, and that he would prefer to make the additional unfunded liability payments earlier, rather than later, as this would allow those contributions to grow at a favorable rate of return (currently estimated at 7.75%) for a longer period of time. It was agreed that additional questions would be presented to Bob Cunha, Chair, Retirement Board, at this Committee's next meeting. There was discussion about pension payments, including COLAs, being part of the package of "total compensation" which the Board of Selectmen should take into account when engaging in collective bargaining with Town employees. There was also discussion about other uses to which the revenue stream which will be freed up once the Town has fully funded its pension liabilities could be put, including additions to the Capital Stabilization Fund and additional OPEB funding. 1