2007 AC Rpt2 - Laserfiche WebLink

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APPROPRIATION COMMITTEE 2 " REPORT, April 21, 2007, TO 2007 ATM FY2009 and beyond will require drawing heavily on reserves, having another override referendum, or cutting services. These conclusions are consistent with those of last year and other recent years. Some of the fine details of the budget and the proposed override questions and amounts are still being worked out. Our final recommendations on these matters will be given orally at Town Meeting. FY 2009 and Beyond As we noted last year, it seems highly likely that health insurance, energy, and special- education services will continue to be significant cost drivers in future years. The Town is taking steps to address all of these areas, but has at most a limited degree of control in each of them. Progress is therefore likely to be incremental in nature and dependent upon external conditions. Nonetheless, incremental changes made over a long period can be of great import. Wages and salaries will also continue to be cost drivers as even increases of a few percent can have major effects. The annual increases in the number of students attending our public schools continue to moderate, although some short-term increases can be expected as the Avalon at Lexington Hills development (at the former Metropolitan State Hospital site) is completed and occupied in FY2008 and FY2009. Long -term forecasts suggest that the school population will slowly decline over the next ten years, but these forecasts become more uncertain at more distant times. Last year, we noted that the Town's liabilities for future pension payments are projected to be fully funded in 2015. This continues to be our understanding. In compliance with new requirements of the Govermnent Accounting Standards Board, the Town recently obtained an actuarial report on its future liability for other post retirement benefit costs (primarily retiree health insurance). Based upon a number of assumptions, the report estimates the Town's liability for those future benefits to be in the $100 million range. Over the next year, this Committee will be studying the report and its implications for future funding needs. While there is not yet any legal requirement to fund these liabilities, the Town Manager has suggested that the Town should make a modest start on such funding at the 2008 Annual Town Meeting by appropriating funds anticipated to be received from Medicare reimbursements. When the pension liabilities become fully funded in or about 2015, there will be a natural opportunity to make larger contributions to fund the retiree health -care liabilities. In early 2006, the Ad Hoc Financial Policy Committee recommended that the Town's physical assets be evaluated in order to put discussions of long -term maintenance needs on a sounder footing. The evaluation has not yet been initiated, but its potential usefulness has not diminished. Major capital projects beyond the DPW facility that are needed include the reconstruction of the "White House" (the present home of the School Administration) for use as a senior center or some other purpose, the provision of a larger and more functional senior center in another location if not in a reconstructed White House, and the reconstruction or major renovation of three or four elementary schools. It may also be necessary to put aside new funds for use in street and road reconstruction. Voter approval through a Proposition 2 /z debt - exclusion referendum will likely be required for each of these major projects. The Town should continue to press the State for further substantial increases in aid. It is still low in absolute and relative terms. Potential ways to increase local sources of revenue should also be investigated. The possibility of expanding revenue by growing our commercial tax base will be examined in a study that the Lexington 2020 Vision Economic Development Task Force hopes to fund under Article 42 at this Town Meeting. Page 8 of 24