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APPROPRIATION COMMITTEE REPORT—APRIL 2006 Extract of Appendix C from DRAFT #08 3 Apr 2006 Line 5: This is the total of Lines 2, 3, and 4 and represents a preliminary projection of our reserve balance on June 30, 2008. Line 6: If we only achieve the minimum goal of preserving reserve levels at the June 30, 2006 level of $5.57M, we have $1.9M of free cash available for appropriation (in the nominal case). This represents the difference between Line 5 and Line 1. If this free cash is used, the nominal reserve balance reverts to $5.57M (Line 7). Line 8: Scenario 1 assumes a combination of (a) utilizing $1.90M in free cash in FY2008 and (b) seeking annual overrides for both FY2007 and FY2008. The nominal size of an operating override in June 2007 required to balance the FY2008 budget is $2.793M. This assumes that all questions on the prior year’s (FY2007) June 2006 override pass; however, the impact on the FY2008 gap of failure of some or all of the June 2006 override questions is nominal (on the order of $20K - $50K per $1M of override lost) IF one assumes that we will preserve level service in FY2008 at whatever level the voters choose for Any plan to restore or introduce items in the FY2008 budget which were lost in the June FY2007. 2006 override will increase the size of the gap for FY2008. Line 9: Scenario 2 assumes, instead of annual overrides, that we address the gap by (a) utilizing $1.90M in free cash in FY2008 and (b) adding an additional $1.38M stabilization fund question to the upcoming June 2006 operating override. If this question were to pass, it would allow us to accumulate in FY2007 and FY2008 a total of $2.79M in a stabilization fund which could be drawn down in FY2008 to help balance that year’s budget. Just as in Scenario 1 above, this assumes that all questions on the June 2006 override pass. If any portion of that override for FY2007 fails, any plan to restore or introduce items in the FY2008 budget which were lost in FY2007 will increase the gap for FY2008. Line 10: Both scenarios will leave overall reserve levels intact at the $5.57M maintenance goal, but will achieve no progress towards increasing reserves. Line 11: This shows the impact of rejecting both Scenarios 1 & 2 and instead further drawing down reserves to close the FY2008 gap of $2.79M. The nominal result is a reserves balance as of June 30, 2008 of $2.78M. This would require not only using all available free cash, but appropriating from the stabilization fund, as well. C) Questions to consider with each scenario: This list is by no means exhaustive, but is meant to spur discussion: Is one approach more straightforward, or “transparent,” than the other?  What sort of promises are we making to voters? Can we keep them?  What happens in the event that one or more of the other override questions fails? How does this  impact plans to come back the following year (or not) for an override? What do we do in the event of significant deviations from projections?  Which of the two scenarios offers more service/staffing stability?  What amount of free cash can reasonably be considered to be recurring in subsequent years? The  Town Manager’s projections suggest approximately $1M; therefore what adjustments should be made to mitigate the impact of using $1.9M to balance the FY2008 budget? Instead of simply preserving reserve levels, should we be aggressively building reserves further?  What is the right balance among preserving services, maintaining reserves, and stabilizing taxes? Page 3