2018-03-26-AC-ATM-rpt - Laserfiche WebLink

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APPROPRIATION COMMITTEE-ATM 2018 4 Proposed appropriations for capital projects for the next fiscal year(FY2019 at this ATM). 4 Note that appropriations from retained earnings at the annual town meeting must be deducted as a liability from the projected retained earnings to be certified as of the end of the current fiscal year,even though the funds will not be applied until the follow- ing fiscal year. The projection of anticipated retained earnings assumes break-even operational results during the current fiscal year. A higher(lower) starting balance available for appropriation the following year indicates that the current year's operating results were higher(lower)than were projected at rate-setting,resulting in an operating surplus(deficit). As can be seen from the table,this year's certified retained earnings balances in both the water and wastewater fund are significantly lower than in past years, standing at about half of the usual target. Part of the reason for this is that unusually large appropriations were made from retained earnings at the 2017 Annual Town Meeting, both for capital projects to be undertaken in FY2018, and also to"mitigate" against rate increases anticipated to result from unusually large quantities water consumed during calen- dar year 2016 by the Town of Bedford(which had system issues with its alternative supplies)and the Town of Burlington(which required a temporary supply from Lexington), the proceeds of which had been set aside for this purpose. The certified levels of retained earnings are nevertheless suspect because during FY17, which included the extremely dry summer of 2016, the Water Enterprise Fund experienced a significant operating sur- plus, of well over one million dollars, primarily attributable to record irrigation water usage substantially in excess of estimates.' (The Wastewater Fund experienced a small deficit, but this was attributable pri- marily to revenue which ordinarily would have been booked in FY2017 not being received until after the close of the fiscal year.) As a consequence, the retained earnings balance in the Water Fund as of June 30, 2017, all else being equal, should have been substantially higher than the projected"break-even" end bal- ance of$514,633 shown in the table. The reasons for this anomaly are still being explored and could re- sult from either an over-certification of the FY2016 year-end retained earnings, an under-certification of the FY2017 year-end retained earnings, or a combination of the two. If it is determined that there was an under-certification of the FY2017 year-end balance, the shortfall should be corrected when year-end FY2018 results are certified. In any event, because this year's certified retained earnings balances are below targets, they are not being proposed as a source of significant capital funding in FY2019. On the wastewater side, no appropriations from retained earnings are proposed. On the water side, appropriations from retained earnings are limited to $75,000 for the hydrant replacement program under Article 16(a) and $30,000 for a water valve turner under Article 16(h). As discussed under Articles 17 and 18, the major annual water and sewer main and pumping station capital projects will be funded exclusively by water and sewer fund debt. Recreational Enterprise Fund Early in 2015,the Recreation Department was reorganized as the Department of Recreation and Commu- nity Programs (DRCP), resulting in increased costs for operations and programs. The Director of Recrea- tion and Community Programs, through the Recreation Committee, continues to set fees with the approv- al of the Board of Selectmen. The multi-year budget growth from 2015 has been due to the inauguration of the Lexington Community Center (LCC). The FY2016 LCC budget included $383,073 to fund 5.5 full time and seasonal staff to plan,manage and deliver community programs along with the supplies needed. 6 See Brown Book, page V-26. As shown in the column "FY207 Actual," the sum of funding sources, including user charges, other fees, interest income and prior-year retained earnings was $12,192,616, whereas total expenses were$10,663,218, resulting in an FY2017 operating surplus of$1,529,398. 22