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APPROPRIATION COMMITTEE REPORT TO 2009 ATM —MARCH 2009 in FY2007; see the Brown Book, page C -9), and could extend or increase the amounts of future appropriations needed to reach 100% funding of the liabilities. However, the need for such appropriations will depend on the future performance of the stock market and investment returns as well as on other factors that are difficult to forecast. When full funding of the pension liabilities has been achieved once again, we expect that annual appropriations of similar amounts will then be made to address the Town's liabilities for future retiree health care costs (see the discussion under Article 23) Completion of the new DPW facility will be a noteworthy event in FY2009. We understand that the construction is on schedule and within budget, and that the DPW plans to move its staff and equipment there in May and June. The new facility will be a big improvement over the old one and also over the DPW's current temporary quarters at the White House and other locations. The Public Facilities Dept. staff located at the old Harrington School will also move to the new facility. FY2010 Every annual Town budget depends upon an estimate of revenues. The lion's share of the FY2010 revenues — those from the property tax and available funds — are fairly predictable (with the exception of new growth), given that there is no intent to seek approval of a Proposition 2'/z override. However, the amounts from state aid and local receipts are less certain. New growth, i.e., the increase in the allowable tax levy for newly constructed buildings and new commercial equipment, is estimated at $1,900,000. Of that amount, $300,000 is earmarked to be applied to any snow removal deficit remaining from FY2009 and is carried in the budget as a revenue offset. The FY2010 recommended budget assumes that State aid could be reduced by up to 9% from the $9,963,453 approved by the State for FY2009 as of last fall. A full 9% decrease would be $896,710, leaving us with $9,066,000 in state aid. As of mid - March, the Governor's budget bill (H -1) implies a smaller decrease of about $630,000. The Town Manager's recommendation for use of free cash includes setting aside $900,000 to cover any decrease in State aid and can therefore cover a somewhat larger cut than in the Governor's current proposal. This is prudent because of the fluid economic and state tax collection situation. There are several potential new sources of revenue that could yield additional revenue for the Town in FY2010 and beyond. The first is revenue that may result from the elimination of the exemption of telephone poles and equipment from local property taxes. Following a recent ruling of the Appellate Tax Board that such equipment is not entitled to exemption, the Town has begun collecting taxes on such equipment of about $600,000 annually. However, these tax receipts have not been included as revenue in the FY2010 budget because the Massachusetts Department of Revenue has required them to be held in escrow pending the resolution of an appeal the companies have taken to the Massachusetts Supreme Judicial Court. In the meantime, a bill to eliminate the exemption has also been filed in the state legislature (if passed, this legislation might have prospective effect only). As part of his FY2010 budget, the Governor has proposed increases in the meals and hotel/motel taxes. Each of these tax increases has two parts, one a state -wide implementation and one a local option. We cannot count upon any of these revenue sources at the current time. Finally, the federal economic stimulus funding is beginning to make its way out of Washington. The Lexington Public Schools are likely to receive some of the funds. However, the details of how much and the possible uses are not at all definite as of mid - March. In his report in the Brown Book, the Town Manager gives a good description of the development of the recommended budget. Among other parts of the process, he tells about the allocation of "new" revenue to the schools and municipal budgets in a 71.5/28.5 ratio. Our comment about this last year is worth repeating. Even though this revenue allocation has now been the practice for several years, it should continue to be regarded as a starting point for discussions and not as an inviolable end point. If circumstances demand that the new revenue be allocated in a different way, e.g., because of differing priorities of unfunded programs, then the revenue allocation should be adjusted accordingly. Page 8 of 59