2010-03-ATM-AC-rpt - Laserfiche WebLink

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APPROPRIATION COMMITTEE REPORT TO 2010 ATM — MARCH 2010 line -item transfers at the end of the year. Finally, the Town Manager has recommended setting aside $200,000 of the Free Cash balance in case it is needed to help cover FY2010 deficits. As of press time, there have been no transfers out of the Reserve Fund in FY2010, and therefore, the entire $550,000 that was appropriated is still available, per approval of this Committee, to address unforeseen and extraordinary expenses. The Lexington Retirement Fund's investments declined in value from roughly $120,000,000 in early 2008 to roughly $80,000,000 early in 2009. Since then, the stock market has recovered a substantial fraction (but certainly not all) of its earlier values, and the value of the Retirement Fund's investments has followed this partial recovery, being $96,600,000 at the end of January, 2010. This may not be sufficient to fully cover future liabilities. An actuarial evaluation of the Retirement Fund is being done and will lead to discussions of 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 amounts similar to those being appropriated for FY2011 to fund future pension liabilities will then be made to address the Town's liabilities for future retiree health care costs. We applaud the completion of the new Public Services facility and the transition of the DPW staff, the Engineering Department, and the Public Facilities Department into their new location. FY2011 Every Town budget depends upon an estimate of revenues. While most — those from the property tax and available funds — are more or less definite (with the exception of new growth) given that there is no intent to seek approval of a Proposition 2'/2 override, the amounts of state aid and local receipts that will be received are less certain. New growth, i.e., the property tax on newly constructed buildings and new commercial equipment, is estimated at $1,500,000. The corresponding number for FY2010 was $1,900,000. The reduction of the estimate from FY2010 to FY2011 was made in response to a decrease in construction activity. As has been done for several years, the FY2011 budget earmarks $300,000 to be applied to any snow removal deficit remaining from FY2010; that amount is carried in the budget as a revenue offset. The recommended budget assumes that State aid will be level - funded, i.e., the same as for FY 2010. As of mid - March, key legislators have suggested that a reduction in the neighborhood of 3% to 5% is likely. The Town Manager recommends that reductions in State aid below the budgeted level be covered by first reducing uncommitted funds within the budget (about $427,000 as of press time) and then by appropriation of funds from the Stabilization Fund. The filling of temporary revenue shortfalls is one of the main purposes of the Stabilization Fund. In his report in the Brown Book, the Town Manager discusses 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 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. The Minuteman Regional High School assessment is lower than last year's assessment by about 10 %. Please see the discussion under Article 4 for details. In regard to health insurance for Town and School employees, the Town's consultant and Blue Cross have recommended an appropriation sufficient to cover an 11 % increase in health care prices. That, together with the projection that 65 additional employees will sign up for Town health insurance plans, Page 6