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APPROPRIATION COMMITTEE REPORT—APRIL 2006 Extract of Appendix C from DRAFT #08 3 Apr 2006 Tax growth from new/improved real estate and personal property – (projected to be $1.675M in  FY2007) Local receipts: growth of 5.3% projected for FY2007 (This reflects a trend towards some modest  economic recovery.) State Aid: growth of 3.16% projected for FY2007 (State Aid still falls well below pre-2003  levels.) Together, this adds up to an annual imbalance between available revenues and expenses for level service which must be addressed by raising revenue, reducing expenses through new efficiencies, cutting programs, or drawing on reserves (or some combination of these). The proposed FY2007 budget is predicated upon a $5,041,751 operating override (Line 4 of Exhibit C-1) in order to close the gap between revenues and level service expenses AND provide funding for a limited number of service restorations and improvements. Regardless of the outcome of that override and the resulting service level, we anticipate annual revenue/expense gaps for the foreseeable future simply to maintain services at FY2007 levels (as determined by the voters in the June 2006 override) without diminishing reserves beyond present levels. We have estimated this gap for FY2008 at $2.79M, shown on line 41 of Exhibit C-1. This figure is net of a $1.9M appropriation of free cash in FY2008 and is discussed in more detail in the next section. B) Preserving reserves and services - two scenarios: As described earlier in this report, the Town has made progress towards improving its Reserves position. The Selectmen’s ad hoc Fiscal Policy Committee has just released a report outlining a series of reserve policies and targets, which, if implemented, will require an even greater accumulation of reserves than we have at present. Therefore, the Appropriation Committee believes that our planning for FY2007 and at a minimum FY2008 should, , preserve current reserve levels as the Selectmen and appropriate boards and committees review the ad hoc committee’s recommendations and develop an implementation plan. We describe here two scenarios for addressing the FY2007 and FY2008 shortfalls while preserving, but not building, reserve levels. In February, the Town Manager provided a Reserves Analysis to the Budget Collaboration Group, which is reproduced for reference here as Exhibit C-3. Reserves are estimated for the end of each fiscal year and are equal to the sum of free cash and the stabilization fund. (The Appropriation Committee has excluded the reserve fund balance from Reserve totals since the monies appropriated to this account are typically spent in full each year.) On June 30, 2006, Reserves are projected to total $5.57M ($5,719,611-$150,000 reserve fund balance), and on June 30, 2007, are projected to total $6.22M ($6,524,611 - $300,000). Referring now to Exhibit C-2: Line 1: The $5.57M projected reserve total as of June 30, 2006 represents our “starting reserves balance” as we analyze and present two scenarios for addressing the “gap” in FY2007 and in FY2008. Line 2: The $6.22M projected reserve total as of June 30, 2007 (one year later) from Exhibit C-3. Line 3: The Town Manager’s projections assume $750K of expense reversions and revenue receipts above estimates when the books are closed on FY2006. This line shows the additive affect of an additional $250K of reversions and/or excess receipts (in the nominal case), $0 addition (in the pessimistic case), and $500K (in the optimistic case). For the closeout of FY2007, we propose no additions to the Town Manager’s projection of $1M in expense reversions and/or excess receipts. Line 4: Similarly, we are projecting the nominal case of $1M in reversions and/or excess receipts at the close of FY2008. Page 2