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APPROPRIATION COMMITTEE REPORT TO 2010 ATM — MARCH 2010
<br />Introduction
<br />In this Introduction, we give an overview of financial developments since the 2009 Annual Town
<br />Meeting, the proposed FY2011 budget, the current status of the Town's financial reserves, and comment
<br />briefly on the financial outlook for FY2012 and beyond. The "Report of the Town Manager" in the
<br />FY2011 Brown Book (see link in the Preface) is useful to read before this introduction.
<br />Developments since adoption of the FY2010 budget
<br />The Lexington Public Schools received a federal grant for FY2010 of $818,090 via the American
<br />Resource and Recovery Act (ARRA). The funds were provided for special education and other purposes
<br />(see the School Budget document for details). The Schools expect to receive a similar grant in the same
<br />amount for FY2011. A major portion of the FY2010 ARRA funds are being used for special education
<br />tuitions and expenses that will not be covered by State circuit breaker funding which was reduced from
<br />the levels of the past few years.
<br />Prior to the Special Town Meeting in November 2009, the Massachusetts Department of Revenue
<br />certified the Town's free cash balance as of July 1, 2009, to be $6,159,509. The DOR also certified the
<br />balances, also known as "retained earnings ", in the Water Enterprise Fund ($2,113,729), the Sewer
<br />Enterprise Fund ($1,831,967), and the Recreation Enterprise Fund ($1,427,466). The Assessors and the
<br />State determined the final figure for new growth for FY2010, viz., $2,431,902, which is substantially
<br />larger than the amount of $1,900,000 that was assumed for the recommended budget for FY2010. At a
<br />total of $9,017,027, state aid for FY2010 came in slightly below the $9,058,898 estimate used in the
<br />adopted budget, as reported in the 2009 Brown Book. The State's financial situation and the economic
<br />crisis is apparent when one compares these numbers with the State aid that was anticipated in March 2008
<br />for FY2009, $9,963,843 (2009 Brown Book), and that actually received for FY2009, $8,854,044 (2010
<br />Brown Book).
<br />After the 2009 Annual Town Meeting concluded, the State legislature approved the elimination of an
<br />exemption of utility poles and wires from the property tax. This expected to generate approximately
<br />$600,000 to $700,000 per year in revenue starting in the current fiscal year (FY2010).
<br />At the special town meeting in November, several financial articles were approved. A summary of the
<br />actions may be found in Appendix A. Of particular note is the approval of increases in local taxes on
<br />meals and room occupancy per the new provisions in the State FY2010 budget legislation. The increase in
<br />the meals tax became effective on January 1, 2010 while the increase in the room occupancy tax will
<br />become effective on July 1, 2010. These two tax increases are projected to yield a total of roughly
<br />$440,000 per year in additional revenue. We also note the appropriation of $669,843 into the Stabilization
<br />Fund, this amount representing the net change in projected revenues relative to appropriations from the
<br />time of the Annual Town Meeting to the fall.
<br />As of press time, the most recent review by the Town's professional staff of the current fiscal year
<br />(FY2010) reveals only one area that will end the fiscal year in deficit, i.e. snow and ice removal. Snow
<br />removal costs as of March 29, 2010, were approximately $1,476,000 while the formally budgeted amount
<br />is $737,455 (as a component of the DPW budget). In addition to this amount, $300,000 is proposed to be
<br />set aside via a revenue offset in the FY2011 budget to address year -end deficits. Since snow removal
<br />costs increase in a most unpredictable manner, we will present an update orally at Town Meeting.
<br />The Town Manager and staff may request the approval of adjustments to the FY2010 budget to address
<br />the snow removal deficit or other presently unidentified financial issues under Article 24. This will be
<br />done late in Town Meeting. The Reserve Fund can be used, upon approval of this Committee, to address
<br />deficits that arise after the end of this Town Meeting. There is also a mechanism for making limited inter-
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