2009-07-10-FTF-rpt - Laserfiche WebLink

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pervasive savings in employee healthcare benefit costs. We can envision no financial scenario in the near-term future or beyond which enables us to maintain services and our public workforce without such significant changes. Capital items. Increased use of borrowing to defer an additional portion of capital costs, and perhaps some modest deferrals of capital maintenance, should be considered. As discussed below, the current environment of construction costs and interest rates may favor expanded reliance on borrowing over simple deferral of projects that we know we will have to undertake in the next several years, especially ones whose costs may grow due to postponement. Some members of the task force, however, expressed concerns about the wisdom of either deferring capital maintenance or increasing the level of borrowing to fund such projects as a way to fund on-going operating expenses. Retirement obligations. Some modest deferrals of funding of the town’s long-term obligations to retiree pension and benefit costs may be prudent, although, like utilization of the stabilization fund (see below), such choices may call for additional expenditures during the recovery phase. Discretionary cost restraint. During FY 2010, both the municipal and the school administrations should continue to take all prudent measures to hold down costs—for instance by deferring the filling of non-critical vacancies and by careful review of all purchases. These measures can help avoid FY 2010 cost overruns, may help secure free cash balances for FY 2012, and may assist in identifying potential budgetary savings for FY 2011. Early identification of possible cost reductions. Both the schools and the municipal departments need to identify possible areas for reductions in spending for FY 2011. We recommend that both the schools and the municipal departments be asked to identify possible strategies for cutting the anticipated growth in their respective budgets. This process should generate a menu of options that could save $1 million, if needed; this $1 million target should be equitably allocated between the town and school budgets. We believe that program reductions should only be considered to the extent that the other strategies discussed in this report prove insufficient to close the gap. But we also believe that it is important that such options be identified and available in case of need. If program cuts become necessary, we recommend prioritizing cuts that would be relatively easy to restore in future years, rather than ones that would entail long-term consequences. FY 2011 Revenues Broadening the tax base. Apart from the current circumstances, it has long been a goal of many municipal-finance experts, and officials, to broaden localities’ tax bases. In light of recent state legislative action, we recommend that Lexington take the necessary steps to enact the new local-option user taxes (0.75 percent meals tax, additional 2 percent hotel tax) with the earliest feasible effective date, and develop revenue estimates for these sources for FY 2011 and beyond. These new revenue sources will help to diversify the town’s revenue stream and will provide a badly needed supplement to the existing sources. We believe that the scale of these taxes is such that they are unlikely to affect the vitality or competitiveness of Lexington’s businesses. Grant and stimulus funding. Consistent with good management practice, both the municipal departments and the schools should take all reasonable measures to pursue any 15