2018-06-27-CEC-ATM-rpt (Combined Report with Updates & Errata)

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CAPITAL EXPENDITURES COMMITTEE REPORT TO 2018 ATM(incorporating Updates&Errata) In 2025, Lexington and the nation will begin a celebration of the 250th anniversary of its independence. In part, to maximize the economic potential of that milestone, the Town seeks to build a new energy efficient, fully accessible Visitors Center. This article would fund the completion of a 21st century Visitors Center providing new economic growth opportunities." (Town Warrant) The proponent of the Article submitted it to ensure Town Meeting could address including construction funding for the project. As the Motion under Article 22 includes funding through construction,the Motion under this Article is expected to be Indefinite Postponement. Article 24:Appropriate To Funding Funds Requested Committee Recommends Post Employment Source Insurance Liability $750,000 GF (Cash) Fund + S1,079,721 GF See below for this (Free Cash)+ Committee's commentary $1,842,895 $9,089 Water EF on this request (Cash) + $4,085 Wastewater EF (Cash) "To see if the Town will vote to appropriate a sum of money to the Town of Lexington Post Retirement Insurance Liability Fund, as established by Chapter 317 of the Acts of 2002; determine whether the money shall be provided by the tax levy, by transfer from available funds, including enterprise funds, or by any combination of these methods; or act in any other manner in relation thereto." "DESCRIPTION: This article will allow the Town to continue to fund its unfunded liability for post- employment benefits for Town of Lexington retirees. Beginning with the FY2007 audit, the Town was required to disclose this liability. In preparation for funding this liability, Town Meeting voted to request special legislation to establish a trust fund for this purpose. This special legislation was approved in 2002." (ATM Town Warrant) (Brown Book 1-6, V-26, & V-30) Normally this Committee would not advise Town Meeting on such an Operating Budget matter; however, as a large amount of discretionary-use cash is being assigned to this purpose, this Committee believes it is important to raise its concern as to whether, in this period of extraordinary pressure to fund multiple, expensive, Capital projects, this is the best use. Of the total funding proposed, only the $346,058 of the Free Cash—representing the Federal contribution to the Town regarding Medicare Part D—represents a firm tie to being used toward this primarily medical-benefits-related purpose. While Lexington currently calculates it has, and acknowledges, a huge unfunded liability to this Fund (often identified as Other Post-Employment Benefits (OPEB)). The last actuarial report, which was as of June 30, 2017, had it at$138,060,208 with a discount rate of 7.5%; $200,411,080 with a discount rate of 5%. It is only under a BoS policy that the annual dollar amount is determined. So while this Committee endorses making some annual payment into the fund to affirm Lexington recognizes it has the liability, this Committee encourages the BoS to revisit its policy to recognize the amount each year should be tempered by other competing demands. One of these is having as robust a Capital SF as practical as the Town plans in the next few years to use all of that SF's cash to alleviate the impact of the debt service for the large Capital projects—which does not yet address the LHS. Another is to contribute to the Pension Fund—which has the same investment potential as the OPEB fund—to speed it reaching it's statutory obligation and,thus, providing an alternative funding of the annual pension costs. This Committee also looks to the Appropriation Committee to provide its own position in the near future on whether the currently proposed use of these discretionary funds is in the best interests of the Town and its taxpayers. 60