HomeMy WebLinkAbout2016-03-21-AC-ATM-STM2-STM3-rpt APPROPRIATION COMMITTEE
TOWN OF LEXINGTON
REPORT TO THE
2016 ANNUAL TOWN MEETING
&
SPECIAL TOWN MEETINGS 2016-2, 2016-3
Released March 21, 2016
APPROPRIATION COMMITTEE MEMBERS
Glenn P. Parker, Chair • John Bartenstein, Vice Chair/Secretary
Robert N. Addelson (ex-officio; non-voting) • Kathryn Colburn • Mollie Garberg
Alan Levine • Beth Masterman • Eric Michelson • Richard Neumeier • Andrei Radulescu-Banu
APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
Contents
Summary of Warrant Article Recommendations ii
Preface 1
Introduction 2
Special Town Meeting 2016-2 Analysis and Recommendations 7
Article 2016-2.2: Land Purchase—20 Pelham Road 7
Special Town Meeting 2016-3 Analysis and Recommendations 8
Article 2016-3.2: Appropriate for Middle Schools—Additions and Remodeling 8
Article 2016-3.3: PEG Access and Cable Related Fund Acceptance 11
2016 Annual Town Meeting Analysis and Recommendations 12
Article 4: Appropriate FY2017 Operating Budget 12
Article 5: Appropriate FY2017 Enterprise Funds Budgets 18
Article 6: Appropriate for Senior Service Program 22
Article 7: Establish and Continue Departmental Revolving Funds and Special Revenue Fund 23
Article 8: Appropriate the FY2017 Community Preservation Committee Operating Budget and
CPA Projects 25
Article 9: Appropriate for Recreation Capital Projects 32
Article 10: Appropriate for Municipal Capital Projects and Equipment 33
Article 11: Appropriate for Water System Improvements 34
Article 12: Appropriate for Wastewater System Improvements 34
Article 13: Appropriate for School Capital Projects and Equipment 36
Article 14: Appropriate for School Zone Traffic Calming 36
Article 15: Appropriate for Public Facilities Capital Projects 36
Article 16: Appropriate for Advice and Analysis—Getting to Net Zero 38
Article 18: Appropriate to Post Employment Insurance Liability Fund 39
Article 19: Appropriate Bonds and Notes Premiums 40
Article 20: Rescind Prior Borrowing Authorizations 40
Article 21: Establish and Appropriate To and From Specified Stabilization Funds 41
Article 22: Appropriate to Stabilization Fund 42
Article 23: Appropriate from Debt Service Stabilization Fund 42
Article 24: Appropriate for Prior Years' Unpaid Bills 43
Article 25: Amend FY2016 Operating, Enterprise and CPA Budgets 43
Article 26: Appropriate for Authorized Capital Improvements 43
Article 27: Establish Qualifications for Tax Deferrals 43
Article 28: Accept Chapter 59, Section 2D of the MGL 44
Article 31: Amend General Bylaws—Contracts and Deeds 45
Article 40: Amend Zoning Bylaw—Accessory Apartments 45
Article 41: Amend Zoning Bylaw—Gross Floor Area 47
Article 42: Amend Zoning Bylaw—Two-Family Homes 48
Appendix A:3-Year Budget Projection 50
Appendix B: Enterprise Funds 54
Appendix C:Revolving Funds 55
Appendix D: Tax Relief Programs 56
Appendix E: Specified Stabilization Funds 59
Appendix F: Other Post Employment Benefits 61
APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
Summary of Warrant Article Recommendations
Abbreviations
EF Enterprise Fund CPA Community Preservation Act
GF General Fund DSSF Debt Service Stabilization Fund
RE Retained Earnings IP A motion to Indefinitely Postpone is expected
RF Revolving Fund TDM Traffic Demand Management
SF Special Fund
Special Town Meeting 2016-2
Ar- Title Funds Funding Committee
tide Requested Source Recommendation
2 Land Purchase—20 Pelham Road Unknown GF Debt Pending
Special Town Meeting 2016-3
Ar- Title Funds Funding Committee
tide Requested Source Recommendation
2 Appropriate for Middle Schools— $62,196,247 GF Debt Approve (9-0)
Additions and Remodeling (excluded debt)
PEG Access and Cable Related Fund
3 None N/A IP
Acceptance
2016 Annual Town Meeting
Ar- Title Funds Funding Committee
tide Requested Source Recommendation
4 Appropriate FY2017 Operating Budget $198,63,731 See motion Approve (7-0)
5 Appropriate FY2017 Enterprise Funds $21,707,817 See below Approve (7-0)
Budgets
6 Appropriate for Senior Service Program $30,000 GF Approve (7-0)
Establish and Continue Departmental
7 Revolving Funds and Special Revenue See below RF Approve (7-0)
Fund
Appropriate the FY2017 Community 8(c)Disapprove(3-6);
8 Preservation Committee Operating Budget $4,838,365 CPF 8(1)Pending;
and CPA Projects 8(a-b,d-k,m-q)
Approve(9-0)
9 Appropriate for Recreation Capital $65,000 Recreation EF Approve (7-0)
Projects
10 Appropriate for Municipal Capital Projects See below See below 10(a)Pending;
and Equipment 10(b-s)Approve(9-0)
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APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
Ar- Title Funds Funding Committee
tide Requested Source Recommendation
11 Appropriate for Water System None N/A IP
Improvements
12 Appropriate for Wastewater System $1,800,000 See below Approve (7-0)
Improvements
13 Appropriate for School Capital Projects $1,384,087 See below Approve (7-0)
and Equipment
14 Appropriate for School Zone Traffic None N/A Refer to Committee
Calming
Appropriate for Public Facilities Capital 15( Ip)
15 Projects $1,878,249 See Below 15(a-fa-f,,i-p)
Approve(9-0)
16 Appropriate for Advice and Analysis— $40,000 GF Approve (7-1-1)
Getting to Net Zero
18 Appropriate to Post Employment $1,512,318 GF Approve (9-0)
Insurance Liability Fund
19 Appropriate Bonds and Notes Premiums None N/A IP
20 Rescind Prior Borrowing Authorizations None N/A Approve (6-0)
21 Establish and Appropriate To and From $5,112,434 Free Cash Approve (6-0)
Specified Stabilization Funds
22 Appropriate to Stabilization Fund None N/A IP
23 Appropriate from Debt Service $124,057 DSSF Approve (9-0)
Stabilization Fund
24 Appropriate for Prior Years'Unpaid Bills None N/A IP
25 Amend FY2016 Operating, Enterprise and Unknown Unknown Pending
CPA Budgets
26 Appropriate for Authorized Capital Unknown Unknown Pending
Improvements
27 Establish Qualifications for Tax Deferrals None N/A Approve (7-0)
28 MGL
Accept Chapter 59, Section 2D of the None N/A IP
31 Amend General Bylaws—Contracts and None N/A Pending
Deeds
40 Amend Zoning Bylaw—Accessory None N/A Disapprove (1-5-1)
Apartments
41 Amend Zoning Bylaw—Gross Floor Area None N/A None
42 Amend Zoning Bylaw—Two-Family None N/A Disapprove (1-6)
Homes
iii
APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
Preface
This Preface describes the structure and stylistic conventions used in this report. It is followed by an In-
troduction discussing changes in the Town's financial status since the previous Annual Town Meeting,
along with issues pertinent to the Town's general financial situation. The main body of this report con-
tains article-by-article discussions and recommendations on those articles that, in our opinion, have sub-
stantial financial relevance. The report references several appendices at the end of this document that pro-
vide a deeper explanation of particular financial issues.
The discussion for each article presents the prevailing view of the Committee, as well as any other con-
siderations or cautions that we feel Town Meeting should be informed of. If one or more Committee
members are strongly opposed to the majority position, we summarize the opposing perspective. Each
article discussion concludes with the most recent vote of the Committee prior to publication. The vote is
summarized by the number of members in favor, followed by the number of members opposed, and lastly
(when applicable) the number of members abstaining, e.g. "(6-2-1)" indicates six members in favor, two
opposed, and one abstaining. It is not always possible to collect a complete vote for every article from
nine voting members. In such instances, the total number of votes and abstentions published will be less
than nine. For convenience, Committee votes are also summarized on the preceding pages.
This report does not replicate information readily available to Town Meeting members elsewhere. Key
documents that inform our analysis and provide a more thorough picture of the Town finances are:
• The Town Manager's Fiscal Year 2017 Recommended Budget&Financing Plan, dated
February 29, 2016, commonly known as the "Brown Book", fully describes the annual budget of
the Town. The Brown Book also summarizes budget laws and bylaws (Appendix B) and includes
a glossary of financial terms (Appendix D). http://www.l exi ngtonma.gov/budget
• The School Committee's Fiscal Year 2017 School Committee Recommended Budget(the "Gray
Book") dated February 2, 2016,which details the budget plans for the Lexington Public School
System. http://1ps.1exingtonma.org/Page/7718
• Capital Expenditures Committee (CEC)Report to the 2016 Annual Town Meeting, which pro-
vides a detailed report on appropriation requests for capital projects.
• Community Preservation Committee (CPC)Report to the 2016 Annual Town Meeting.
Special Town Meetings (STM) are now identified by the calendar year in which they are called, plus a
sequence number in the calendar year. Thus, the two meetings addressed in this report are "2016-2" and
"2016-3". An STM article is identified by appending the article number to the STM identifier, for exam-
ple "2016-2.2"refers to Article 2 of the second STM in 2016. While this is sufficient to uniquely identify
any article,we will typically mention the article title for ease of recall.
Acknowledgements
The content of this report, except where otherwise noted, was researched, written and edited by Commit-
tee members who volunteer their time and expertise, and with the support of Town staff. We have the
pleasure and the privilege of working with Town Manager, Carl Valente; Assistant Town Manager for
Finance, Rob Addelson; our Budget Officer, Patricia Moore; the Capital Expenditures Committee; the
Community Preservation Committee; the School Committee; the Permanent Building Committee; the
Planning Board; Superintendent of Schools, Dr. Mary Czajkowski; Interim Director of Finance and Oper-
ations, Ian Dailey; and the Board of Selectmen. We thank the municipal and school staff, Town officials,
boards and volunteers who have contributed time and expertise to help us prepare this report. Last but not
least,we thank Sara Arnold,who records and prepares the minutes for our meetings.
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APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
Introduction
The Appropriation Committee is appointed by the Town Moderator and serves as an advisory group to
the elected members of Town Meeting. The Committee is required by Town bylaw to present its recom-
mendations to Town Meeting prior to any vote with a financial impact on the Town. This report summa-
rizes the Committee's deliberations and analyses regarding the warrant articles deemed to have financial
significance, along with the vote of the Committee for each article. The Committee also gives oral reports
and responds to questions during Town Meeting as necessary, or when important information has become
available following the publication of a report.
This report is distributed to the members of Town Meeting as a printed document and as an electronic
document via the Town website. It was published on March 21, 2016, a week prior to the session when
financial articles are anticipated to be taken up in Town Meeting.
Due to the scheduling of Special Town Meeting 2016-3, a portion of this report was released on Monday,
March 14, 2016, one week prior to the start of debate on Article 2016-3.2 "Appropriate for Middle
Schools—Additions and Remodeling".
This report also contains a section for Article 2016-2.2: "Land Purchase — 20 Pelham Road". Special
Town Meeting 2016-2 was convened on February 22, 2016, and immediately adjourned until March 21,
2016.
Committee Membership
Susan McLeish resigned from the Committee at the end of FY2015. We are grateful for her service. We
welcome Kathryn Colburn who joined the Committee at the start of FY2016.
Reserve Fund
The Committee has approved the following Reserve Fund transfers so far during FY2016:
Date Amount Description
9-10-2015 $150,000 Cary Memorial Building Renovation
Supplemental funding of 2015 Annual Town Meeting
3-10-2016 $26,800 Article 8(1) Reconstruction of Basketball Courts at
Marvin and Southerland Parks
$176,800 Total Transfers
As of publication, the remaining balance in the FY2016 Reserve Fund is $723,200.
Developments Since Adoption of the FY2016 Budget
Since the start of FY2016, the Town has called a total of four special town meetings on two dates. Two
were called in November 2015, and two more were called in February 2016.
November 2015 Special Town Meeting 1#1
The November 2015 STM #1 was focused on school capital, and resulted in the appropriation of
$5,386,000 under Article 2 (Appropriate for School Facilities Capital Projects). Of that amount,
$1,951,000 was designated for design work on renovations at the Clarke and Diamond Middle Schools. In
the event that the Massachusetts School Building Authority (MSBA) did not offer state matching funds
for Hastings, $520,000 was designated for design work on that building. The remaining $2,915,000 was
designated for the purchase and installation of up to six modular classrooms at three elementary schools.
These appropriations were all approved.
In the meantime, the MSBA has invited the Town into its funding process for Hastings Elementary. This
necessitated a new appropriation by Town Meeting for feasibility and schematic design work in compli-
2
APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
ance with the MSBA process (see Article 2016-1.3 below). The original $520,000 appropriation for Has-
tings at the November 2015 STM#1 will be rescinded if it cannot be used for any other valid purpose.
November 2015 Special Town Meeting#2
The November 2015 STM #2 requested $2,500,000 under Article 4 (Appropriate for Water System Im-
provements). The request was funded using debt under the Water Enterprise Fund. The request was ap-
proved and, as a result, there will be no further requests for debt-based appropriations under the Water
Enterprise Fund in the FY2017 budget.
Special Town Meeting 2016-1
Article 2016-1.2 (Amend Regional School District Agreement of the Minuteman Regional Vocational
School District) was approved, allowing six member communities to exit the Regional District, and pav-
ing the way for reconstruction of the Minuteman High School with significant financial support from the
MSBA.
Article 2016-1.3 (Appropriate for Hastings School Feasibility Study) was approved. This will fund the
feasibility study and schematic design work at Hastings Elementary under the MSBA process. Once the
resulting design is approved by the MSBA, a second appropriation will be requested to fund full construc-
tion documents and the actual construction. The project cost has been estimated at $60 million, of which
approximately $20 million would be eligible for MSBA reimbursement. This estimate assumes a 30-
classroom school, and is subject to change based on the MSBA review. We anticipate that a new Hastings
Elementary will be ready for occupancy by September 2019.
Special Town Meeting 2016-2
Article 2016-2.2 (Land Purchase —20 Pelham Road) has not been taken up by Town Meeting due in part
to delays in negotiations with the current owners, but also to obtain results from an engineering study
considering ways to improve roadway access to the site. On March 21, 2016, Town Meeting will consider
a motion from the Selectmen on how to proceed with this article.
School Master Plan
The School Committee, in cooperation with the Superintendent, Town staff and the finance committees,
has continued to refine their recommended plan to address the growing enrollment, particularly in the el-
ementary and middle school levels. The plan contains a mix of administrative and physical changes. Ma-
jor renovations to the two middle schools will add more space while also integrating key maintenance
work. Redistricting some students will improve classroom utilization district-wide. Changing the way
some educational programs are implemented will reclaim a small amount of additional space.
The FY2017 Budget
The Town Manager has proposed a balanced, level-service budget that is not contingent on an operating
override. The table and chart below comprise the General Fund budget totaling $198,562,732. This does
not include enterprise funds, revolving funds, Community Preservation Act funds, grants, or exempt debt
service.
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APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
Revenue Summary
Ent. Funds 1%
Cap Stbl. Fund 0%
Available Funds 7%
Local Receipts 6%
d =
State Aid 6°/n ; -
Tax Levy 800/0
FY2017 Revenue Summary
Tax Levy $161,138,273 80.4%
State Aid $11,804,630 5.9%
Local Receipts $12,130,550 6.0%
Available Funds $13,093,204 6.5%
Cap Stbl. Fund $710,000 0.4%
Ent. Funds $1,629,135 0.8%
4
APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
General Fund Expenditures
Benefits
Insurance 17% .,
Debt(within-levy)
4%
Reserve Fund 0%
Municipal •
Departments 17% = Facilities 5%
Cash Capital 3%
- - _
Minuteman - =====----- --- == Other(allocated)
__- -- =- -
Regional School --- - it 4%
1% -
Lexington Public
Schools 49% F
Unallocated 0%
FY2016 Municipal Budget Summary
Lexington Public Schools $97,293,299 49.0%
Minuteman Regional School $1,396,528 0.7%
Municipal Departments $34,536,720 17.4%
Benefits &Insurance $33,607,231 16.9%
Debt(within-levy) $7,199,028 3.6%
Reserve Fund $900,000 0.5%
Facilities $9,984,116 5.0%
Cash Capital $5,554,789 2.8%
Other(allocated) $7,107,759 3.6%
Unallocated $983,261 0.5%
5
APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
The following table compares the FY2016 operating budget with the proposed FY2017 operating budget.
FY2016 FY2017 Change Change
Program Appropriated Recommended
Budget Budget $
Education $93,233,052 $98,689,827 $5,456,775 5.9%
Shared Expenses $50,614,515 $51,690,375 $1,075,860 2.1%
Municipal Departments $33,594,270 $34,536,720 $942,450 2.8%
Subtotal—Operating Budget I $177,441,838 $184,916,9221 $7,475,085 4.2%
Cash Capital $4,642,987 $5,554,789 911,802 19.6%
Other (Approp. to reserves, misc.) $10,904,668 $8,091,020 ($2,813,647) -25.8%
I Total General Fund I $192,989,492 $198,562,7321 $5,573,239 2.9%
Projected Revenue $193,186,829 $198,562,732 $5,375,902 2.8%
Surplus/(Deficit) $197,337 $0 ($197,337)
As always, the Town crafts its budget using assumptions about how much State funding to expect, pri-
marily in the form of aid under Chapter 70 (schools) and Chapter 90 (roads).
The Committee may update its recommendation on the floor of Town Meeting if new information be-
comes available.
6
APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
Special Town Meeting 2016-2
Analysis and Recommendations
The Warrant for Special Town Meeting 2016-2 contains a single financial article. This STM was con-
vened on February 22, 2016 and immediately adjourned to March 21, 2016.
Article 2016-2.2: Land Purchase — 20 Pelham Road
Funds Requested Funding Source Committee Recommendation
Unknown GF Debt Pending
As of publication, the Town was in negotiations with owners of 20 Pelham Road and was not prepared to
proceed with this Article.
The Committee has taken no position on this request.
7
APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
Special Town Meeting 2016-3
Analysis and Recommendations
The Warrant for Special Town Meeting 2016-3 contains two Articles with financial implications for the
Town. This Special Town Meeting will allow the Town to proceed quickly with a debt exclusion referen-
dum, and to begin the Middle Schools projects under a schedule that is coordinated with the school year.
Article 2016-3.2: Appropriate for Middle Schools — Additions and
Remodeling
Funds Requested Funding Source Committee Recommendation
$62,196,247 GF Debt (excluded debt) Approve (9-0)
This article seeks Town Meeting authorization to borrow $62,196, 247 to fund renovations and additions
to Clarke and Diamond Middle Schools. These projects are the first in an expected series of school con-
struction projects intended to increase school capacity system-wide and thereby help alleviate overcrowd-
ing resulting from a recent trend of significant enrollment growth.
A town-wide referendum in the spring of 2016 will request approval of the use of excluded debt to fund
the full cost of the middle school renovations. The referendum would also cover previous appropriations
totaling approximately $4.5 million in borrowing for design work already in progress (see below).
Responding to Enrollment Growth in Lexington Public Schools
Student enrollment in Lexington Public Schools (LPS) K-12 has increased from 6,114 students in 2009 to
6,866 in the fall of 2015. Growth is occurring at every level, including preschool, and is projected to con-
tinue until at least school year 2020-21 (FY2021), when the total student population is projected to reach
about 7,478.
In addition to the middle school projects, 6 modular classrooms (funded under Article 2 of the November
2015 Special Town Meeting #1) will be installed at three elementary schools in late 2016, and the
MSBA-supported project to build a new Hastings Elementary School is targeted for completion in the fall
of 2019.
Future enrollment growth may require additional capital investment for increased elementary school ca-
pacity, a new or expanded preschool, and a new or renovated high school.
The Clarke and Diamond Middle School projects will modify existing space and add additional space to
accommodate rising student populations. Enrollment at the middle school level has been growing since
FY2010, and it is reasonable to assume that the growth will continue for at least a few more years. Thus,
LPS projections of the middle school enrollments based on recent history include continuing growth at
least through FY2021. The School Committee has chosen a target total capacity for the middle schools of
1,830 students. This number was the midpoint of enrollment projections for FY2020 (school year 2019-
20) developed by the Enrollment Working Group in 2014.
Lexington's middle school students are divided into "teams" of students, and each team has dedicated
core subject teachers. Presently, the two middle schools together have capacity for 18.5 teams,but contain
19 teams' worth of students,with overcrowding more severe at Clarke. With large classes of sixth-graders
coming in the fall of 2016, there is an urgent need for additional space. These construction and renovation
projects will create capacity for three additional teams across both middle schools, increasing capacity to
21.5 teams with 86 students per team, or 1849 students.
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APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
Clarke Project
The Clarke project will include a 17,400 square foot addition and 21,600 square feet of interior renova-
tions. The project will increase Clarke's capacity from 9 to 10.5 teams, adding 5 general education class-
rooms, 2 science classrooms, 3 rooms for art, music, drama and engineering, and improved special educa-
tion space. Site work around the school will provide better separation of cars and buses and will improve
student safety. The construction will occur in phases and is expected to be complete by August 2017,
when a large enrollment increase is expected. The total estimated project cost for Clarke is $21,675,000.
Diamond Project
The Diamond project will include a 36,000 square foot addition and 44,000 square feet of interior renova-
tions. In conjunction with increased sharing of spaces by teachers, the project will increase Diamond's
capacity from 9 to 11 teams. The 6 deteriorating modular classrooms currently in use will be replaced
with brick and mortar classrooms in a new wing. The addition and interior renovations will also add 3
science rooms, 3 rooms for art, music, drama, and engineering, and improved special education spaces.
The kitchen and cafeteria will be relocated to larger spaces to accommodate current and future enrollment
growth. Site work around the school will provide better separation of cars and buses and will improve
student safety. In addition, the HVAC system, which has reached the end of its useful life, will be re-
placed. The current HVAC system provides heat and ventilation capabilities. The new HVAC system will
be able to heat or cool the building as well as provide ventilation, depending on the seasonal need. The
construction will occur in phases, with classroom work to be completed by August 2017, when a large
enrollment increase is expected, and the new cafeteria and site work to be substantially completed in mid-
2018. The total estimated project cost for Diamond is $44,940,000.
Although these renovations and additions are not LEED projects, the energy and indoor environmental
quality design follow the LEED protocol.
Prior Appropriations Related to Middle School Projects
Plans for building capacity in the Lexington school system began in June 2014, when Town Meeting ap-
propriated $250,000 to hire a consultant to assist the School Department in developing a master plan for
school capacity. The School and Public Facilities Departments hired Symmes, Maini, and MacKee Asso-
ciates (SMMA) and the School Committee formed the Ad Hoc School Master Planning Committee
(AHSMPC)to complete the master plan.
In January 2015, SMMA produced its final report, which identified multiple options for building school
capacity system-wide. During the budget collaboration/summit process in early 2015, recommendations
of SMMA and the AHSMPC were considered and building options were refined further.
At a March, 2015 Special Town Meeting, the School Committee requested an appropriation of
$4,080,000 to fund further investigation of these options though concept-confirmation studies, design-
development work, and construction documents. $2,467,753 of that appropriation is attributable to design
work on the middle schools.
An architecture firm, DiNisco Design Partnership, and project manager/management consultants, Hill
International, Inc.,were hired. They then worked under the oversight of the middle school principals, LPS
administration, community members, the Permanent Building Committee, the finance committees, the
Board of Selectmen and the School Committee and completed the design development for Clarke and
Diamond by December 2015. Among the many design options considered were (1) those recommended
by the AHSMPC and SMMA, (2) building a third middle school and changing the grade configuration to
5-8, and (3) building only at Diamond, but enlarging the addition to accommodate all middle school
growth. This process also included cost estimation and value engineering of designs.
At a Special Town Meeting on December 7, 2015, Town Meeting appropriated $5,386,000 for further
design and construction work at several schools, of which $1,951,000 has been used to develop construc-
tion documents for the Clarke and Diamond projects.
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APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
Pursuant to a request made by the Chairman of the Permanent Building Committee, consultants from Hill
International who had not previously worked on the Lexington projects were hired in January 2015 to
conduct a peer review of the Clarke and Diamond designs. The purpose of the review was to test whether
the DiNisco designs met capacity goals, satisfied the requirements of the schools' educational programs
and were cost-effective compared to other design alternatives. Although Hill identified two alternative
design options at Clarke, it was determined that they would not meet educational needs as well as the
original design.No design changes were recommended as a result of the peer review process.
The current requested appropriation of$62,196,247 will fund the Clarke and Diamond projects to com-
pletion. The following table summarizes past and current appropriation requests for the middle school
projects:
Project Component Appropriation Date of Appropriation
Schematic Design/Design Development $2,467,753 March, 2015
Construction Documents $1,951,000 December, 2015
Construction $62,196,247 Requested at STM 2016-3
TOTAL $66,615,000
Financing With Excluded Debt
Because of the school year calendar, and the need for a debt exclusion referendum to finance the majority
of this project,work on the middle school project will be split into two phases.
The first phase, estimated to cost $4,104,940, will fund renovations that must be completed during the
summer of 2016 in order to guarantee adequate space for students arriving in the fall of 2016. The second,
more significant phase, estimated to cost$58,091,307, will be completed after the fall of 2016.
Debt service for all the appropriations listed in the table above will be part of a debt exclusion question
presented to the voters this spring,but the contract for the first phase of renovations must be signed by the
first week of April,before the debt exclusion vote, in order to maintain the targeted occupancy dates. The
Town cannot execute a contract without guaranteed funding, so the Town is prepared to fund this initial
phase using within-levy debt if necessary. The work associated with the second phase of the appropriation
will proceed only if the voters approve a debt exclusion.
This debt exclusion referendum question will not be limited to a dollar amount. Consistent with state law,
it will seek approval to finance the complete costs of this project with excluded debt, thus allowing some
leeway for further Town Meeting appropriations in the event of unanticipated cost overruns.
History of Debt Exclusions in Lexington
A table with a complete history of prior debt exclusions, amounts, and dates is in the Brown Book (Fiscal
Year 2017 Recommended Budget & Financing Plan, February 29, 2016, page ix). The most recent debt
exclusion, for the new Estabrook School and renovations at the Bridge and Bowman Schools, was ap-
proved in 2012. The largest previous amount covered by a debt exclusion, $52,235,000, was approved in
the year 2000 for renovations at the High School and the two middle schools. The present middle school
projects would be somewhat larger in absolute dollar amounts, but not when corrected for inflation
($52 million is 2000 would be worth approximately $71.5 million in 2016).
Property Tax Impacts
If, as anticipated, the debt service for these projects is excluded from the limits imposed by Proposi-
tion 21/2, local property tax bills will be augmented for the duration of the debt service, in this case about
30 years. The debt service comprises both principal and interest payments, with level payments of princi-
pal and a declining interest component as the principal is retired.
Assuming that $66,000,000 is borrowed with a 30-year pay-down schedule, then $2,200,000 would be
due annually for principal. The size of the interest payments depends not only upon the amount of princi-
10
APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
pal outstanding but also upon the interest rate of the borrowing. Conservatively assuming a rate of 4%,
the first full interest payment would be about $2,640,000. The interest payments would then decline line-
arly to zero over the term of the bonds. The total of principal and interest due in the peak year would be
about$4,800,000.
With these assumptions, the tax bill impact on the owner of a residence of average assessed value would
be an amount in the range of$350 to $400 in the peak impact year. After the peak year, which will be
within a few years of project commencement, the impact would decline to roughly $200 in the last year of
full principal and interest payments. It is expected that funds from the Capital Stabilization Fund will be
applied to mitigate the impact on taxpayers for some portion of the debt service during the peak years.
Committee Comment
The Appropriation Committee supports this request. Committee members are cognizant of the taxpayer
impact, particularly in light of other expensive capacity-building projects that are needed at the elemen-
tary and high school levels, but are satisfied that appropriate efforts have been made by the School De-
partment and the Public Facilities Department to reduce project costs as much as practicable. Consultants
have considered many design alternatives suggested by other boards and committees, undertaken a value
engineering process, and subjected the designs to peer review, while remaining on schedule to have new
capacity available by the fall of 2017,when enrollment is expected to rise significantly.
The Committee recognizes that if these projects do not move forward, the overcrowding that exists now
will become much worse. According to the Superintendent and middle school administrators, class and
team sizes would continue to rise, core spaces would become even more compressed, specialist spaces
could be sacrificed, and more students could be sent out of district for special education. These conditions
would likely result in an unacceptable degradation of educational quality.
The Committee recommends approval of this request(9-0).
Article 2016-3.3: PEG Access and Cable Related Fund Acceptance
Funds Requested Funding Source Committee Recommendation
None N/A IP
The inclusion of this Article on the Special Town Meeting warrant was motivated by recent changes in
State finance regulations that would have required the Town to modify the accounting method used for
monies collected by the Town from local cable franchises. These funds are primarily used to pay for ser-
vices from LexMedia, which provides access to local cable channels and video recording and broadcast
for many boards and committees in the Town.
The State has since indicated that the accounting changes may be unnecessary. Therefore, the Town has
chosen to defer implementing any changes.
The Committee anticipates that this Article will be indefinitely postponed.
11
APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
2016 Annual Town Meeting
Analysis and Recommendations
The Warrant for the 2016 Annual Town Meeting contains a full complement of operating budget, enter-
prise fund and capital appropriations, along with financial adjustments to various programs. The Commit-
tee has provided its analysis of these requests below.
Article 4: Appropriate FY2017 Operating Budget
Funds Requested Funding Source Committee Recommendation
$198,63,731 See motion Approve (7-0)
The operating budget consists of Education (1000), Shared Expenses (2000), and Municipal (3000-8000)
programs. Major components of the operating budget are discussed below.
Each major section of this request is discussed separately below.
Funds Funding
Program 1100: Lexington Public Schools Requested Source
S97,727,216 See Motion
Overview
The School Committee has voted to recommend an appropriation of $97,727,216 for school operating
expenses for fiscal year 2017. This amount includes $433,917 from the schools' portion of the revenue
allocation that will be appropriated within lines under Shared Expenses for the purposes of health insur-
ance, Medicare, and workers' compensation for new positions. The request represents an increase of
S5,666,900 or 6.16% above the FY2016 appropriation (5.68% if benefits costs are not included). The
primary drivers of the FY2017 increase include contractual requirements (1.51%) such as collective bar-
gaining agreements, legal requirements for special education and transportation services (2.21%), enroll-
ment increases (1.69%), and programmatic improvements (0.27%).
Salaries and Wages
In the FY2017 request, there are increases in salaries and wages of$3,158,073 (4.02% over FY2016) for
the addition of 30.00 full time equivalent (FTE) positions. The additional 30.00 FTE positions address a
variety of needs: 5.4 FTE positions are associated with legally-mandated special education requirements;
23.49 of the additional FTEs are intended to sustain the current level of service amid rising enrollment
and include teachers, paraprofessionals, school support personnel, finance and business positions, a new
Special Assistant to the Superintendent, and a transportation support position; 1.95 FTEs represent pro-
gram improvements, including a 0.25 FTE world language coordinator, who is charged with developing a
plan for re-instituting an elementary foreign language program; and 0.85 FTE was removed from the
budget as a result of base changes such as eliminated positions,reallocation of positions, corrections, etc.
The School Department has stated that from FY2014 to FY2016, every 1% increase in student enrollment
required hiring 14.25 additional FTEs. Enrollment is projected to increase by 2.1% (149 students) in
FY2017, so the current request for 30 FTEs is in line with this recent pattern. The expected enrollment
growth in FY2017 is greater than the average growth of 1.7% experienced over the past five years, how-
ever. The latest projections developed by the School Department, using methods developed by the En-
rollment Working Group, show enrollment growth continuing at least through FY2021 at an average rate
of 1.8% per year, which will continue to put pressure on the operating budget. This enrollment growth is
12
APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
also driving significant school capital projects that are needed to alleviate the overcrowding occurring at
every grade level.
Expenses
Expenses in FY2017 are budgeted to increase by $2,074,909, or 15.45%. A significant portion of the in-
crease, $1,122,806, is budgeted for special education out-of-district tuitions. The out-of-district tuitions
budget includes an amount held in reserve for students at high risk of needing out-of-district placement.
This "High Risk Category" was reduced by 50% in FY2016 to match prior years' actual expenditures,
though the School Department has stated that FY2015 final expenses were not yet available at the time.
Because actual high-risk out-of-district tuition payments have exceeded the 50% level in FY2016, the
FY2017 budget includes a reinstatement of the High Risk Category at the 100% level. The School De-
partment has stated that its budgeting practices regarding tuition have improved and support this adjust-
ment, and that spending will be monitored closely for future budgets.
The total FY2017 budget for special education out-of-district tuition is $10,062,292, which is offset by
funds received through the state Circuit Breaker Reimbursement (discussed below), expected to be
$3,306,288 in FY2017, and LABBB credits of$250,000. Therefore, the total adjusted budget for out-of-
district tuitions is $6,506,004.
Transportation expenses are budgeted to increase by $640,284. Rising enrollments, increased bus rid-
ership, and increased contracted rates account for $392,043 of the increase. Special education transporta-
tion expenses are budgeted to increase by $224,121 due to expanded needs for in-district programs, addi-
tional out-of-district placements, and expected rate increases. The McKinney-Vento portion of the trans-
portation budget, whereby school transportation is provided to homeless students, has nearly doubled
from $25,000 in FY2016 to $49,120 in FY2017, despite our population of homeless students decreasing
from 31 to 7. The reason for this counterintuitive increase is that more of these students will require the
use of vans in FY2017, which are more expensive per student than the regular school buses that were
mostly used in the past.
Other expense increases related to enrollment growth include $35,000 for a consultant to advise on devel-
oping a redistricting strategy to address increasing enrollment, a $127,317 increase in expenses due to a
1.8% COLA adjustment and rising enrollment, and $2,000 for increased translation services in grades
K-12.
Expenses due to program improvements total $134,515, and include $80,725 in increases to the per pupil
rate provided to elementary principals for supplies, $17,915 to purchase software used to schedule middle
school students into pilot intervention and extension blocks, $18,600 to develop a compost hauling pro-
posal to manage new compostable cafeteria trays, and $15,275 to increase financial assistance for field
trips.
One-time expenses include $76,450 for literacy professional development for K-5 teachers, $80,000 for
year 3 of 3 of adopting new math textbooks in grades 6-8, and $14,364 for year 4 of the K-12 Guidance
Program Review.
Funding Sources Not Subject to Appropriation
The annual appropriation from the Town supports the majority of the school budget. However, the com-
plete school budget includes additional funds from state, federal and other sources that are not subject to
appropriation by Town Meeting and are therefore not included in this request. The amounts of these funds
vary year to year. A brief listing of some of these follows:
• Federal Grants —For FY2017, the School Department projects that it will receive $1,931,735 in
federal grants, the same amount that was received in FY2016.
• State Grants —The Town receives grants from the state to support METCO, School Health, Ac-
ademic Support, Full-Day Kindergarten, and Special Education Program Improvement. State
grants do not include cherry-sheet local aid for education, because local aid is considered to be
13
APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
General Fund revenue. The School Department projects that it will receive $1,826,336 in state
grants in FY2017, the same amount it received in FY2016.
• "Circuit Breaker"Reimbursements—Reimbursements are received from the state when the tu-
ition costs of special education services for an individual student, whether in-district or out-of-
district, exceed a multiple of four times the statewide foundation budget. In the past, reimburse-
ment rates have varied between 35% and 75% of the tuition cost. Circuit breaker reimbursement
funds are paid to the district quarterly based on the prior year's approved claims. Funds received
go into the Circuit Breaker Revolving Account, do not require further appropriation, and must be
expended by the following June 30.
Since FY2014, the School Department's practice has been to use the prior year's Circuit Breaker reim-
bursement rate for the next budget year. The School Department projects the FY2017 rate will be the
same as the FY2016 reimbursement rate of 73%. With a base of 139 students, the total reimbursement for
FY2017 is estimated to be $3,306,288, a 3.74% increase over FY2016. Note that this projection is contin-
gent on the Massachusetts legislature passing a FY2017 budget that funds the equivalent of at least a 73%
reimbursement rate. The Governor has proposed funding the Circuit Breaker at the same dollar amount as
FY2016, so it is possible that with rising special education costs, the reimbursement rate will be less than
73%. To illustrate the potential impact of a lower rate, the School Department estimates that if the reim-
bursement rate were 70%, the Town would receive $127,000 less than it would receive at 73%. The
School Department is comfortable that it could manage the FY2017 budget at this lower rate, if necessary.
Fee Programs
Fees for participants in certain programs, such as preschool, athletics, and transportation, support those
programs in whole or in part.No changes in fees are anticipated in FY2017, except that the school bus fee
for those paying after July 1, 2016 will be increased incrementally based on the full cost per seat in
FY2017.
More detailed information about the School Committee recommended budget is available at
http://1ps.lexingtonma.org/Page/7718
Funds Funding
Program 1200: Regional Schools Requested Source
$1,377,449 GF
The Minuteman Regional High School (MRHS) Committee has accepted an FY2017 budget of
$19,728,097, a $102,906 decrease (-0.52%) from FY2016. The $102,906 decrease is the net effect of a
1.5% decrease in the costs of operations and a 15% increase in capital and debt costs. The FY2017 budget
reflects a reduced high school enrollment of 628 students and conversion to a career academy model of
education. The goal is to create a smaller school with a higher percentage of in-district students that can
still offer a diverse and high quality selection of relevant education and training opportunities. It is esti-
mated that the transition to the new model will be completed in time for the beginning of school in the fall
of 2020 and the occupancy of a new school building.
District Developments
The amended Regional Agreement was finally approved in February 2016 with support from all sixteen
member towns. The changes include weighted voting on the school committee based on number of stu-
dents enrolled; changes to the assessment formulas to smooth out fluctuations in a town's enrollment; and
explicit language that ensures non-member towns will be charged for their shares of operating and capital
costs. It also included a provision that permits seven member towns to exercise an option to leave the dis-
trict. Six towns will exercise the option. As of July 1, 2017, Boxborough, Carlisle, Lincoln, Sudbury,
Wayland and Weston will no longer be part of the Minuteman District.
The remaining 10 member towns are now poised to take advantage of 44.75% MSBA matching funding
for a new school building. The District School Committee has voted to issue the debt necessary to fund
14
APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
the project. If no member towns disapprove of this call for debt issuance by May 26, 2016, the project is
cleared to proceed. The total project cost is $144.9 million, though, with $45 million in MSBA reim-
bursement, the net cost to the district is very nearly $100 million. Lexington's share of the debt service
begins in FY2017 and will steadily grow to annual amounts over $500,000 by FY2020.
Budget Overview
This budget assumes a smaller high school population as the school aligns itself with the target size of
628 students. Staffing changes include net reductions in academic, vocational and special education staff-
ing of 7 FTEs, net reduction of administration positions of 1 FTE, a 1 FTE reduction in guidance, and
support staff reduction of 2.5 FTE. The school also anticipates further enrollment dependent staff changes
may emerge in this current budget cycle. Salaries,which make up 60% of the operating budget, decreased
$378,708 (-0.3%).
Changes in transportation expenses for FY2017 include a 9% contract increase that is partially offset by a
decrease in student population for an overall net increase of 7.46%. Total health insurance premiums drop
due to staff reductions, and assume a 5% individual premium increase. Additionally a $50,000 payment
will be made against the District's $17,000,000 Other Post-Employment Benefits (OPEB) liability. Antic-
ipating a new building, infrastructure renewal is limited with an annual capital budget of$160,000. Debt
service payments are estimated to more than double to $1,116,951, of which $500,000 may be attributed
to the beginning phases of the new building project.
As of October 1, 2015, 635 full-time students were enrolled. Roughly 60% of these students are from in-
district towns and 40% are from out-of-district towns. The District School Committee has maintained its
earlier position not to accept school choice students at MRHS. Total full-time enrollment decreased by 48
students (7%) consisting of an in-district enrollment decrease of 12 students (-3%) and out-of-district en-
rollment decrease of 36 students (12.5%). Special education (SPED) students comprise 47.7% of the
school's enrollment.
The FY2016 out-of-district tuition, set by the Massachusetts Department of Elementary and Secondary
Education (DESE), decreased to $17,556 per student and is estimated to decrease to $16,830 in FY2017.
Despite lobbying efforts by MRHS, the state-imposed tuition is determined by a formula, which continues
to underfund the district. In addition, out-of-district towns will continue to be assessed for non-resident
SPED tuition at$4,500 per student and all transportation costs will continue to be assumed by the sending
community.
Revenues and expenses related to postgraduate (PG) programs, including tuition charged to in-district
students and those assessed to towns, continue to be managed through a revolving account. This financial-
ly isolates these programs from the rest of the school's operating budget. PG enrollments have continued
to drop as school enrollment is reduced, and fewer spots are open to PG students.
With the approval of the revised regional agreement by the Commissioner of DESE effective March 11,
2016, FY2017 assessments are calculated under the new assessment formula. Member towns are assessed
for the upcoming year based on their most recent 4-year average student enrollment for operating costs.
Debt and capital costs are assessed based on 3 factors: the most recent 4 year rolling average, a "com-
bined effort" factor as determined by the Chapter 70 formula, and 1% of the annual debt is assessed
equally to all member towns. These assessments are used to fund the portion of this budget that is not
funded by the combination of: (1) all other projected revenues, and (2) member towns' State Required
Minimum (SRM) per-student payments. This year's assessments are based on an MRHS budget funded
with a projected $2,184,747 of Chapter 70 funds and $928,943 in transportation aid. These estimates are
based on the Governor's H-1 budget, which indicates modest increases in funding of Chapter 70 aid and
transportation aid compared with FY2016. These amounts are preliminary until final approval of the
State's FY2017 budget. Total assessments are increasing 0.5%.
The school district maintains an Excess & Deficiency (E&D) account that is similar in function to "Free
Cash", i.e., it contains monies received but not expended or encumbered. The balance in the account is
15
APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
certified annually by the Massachusetts Department of Revenue. For this year $825,000 of E&D funds are
being applied to reduce the assessments to the member towns; the amount is $680,000 more than was ap-
plied last year. This large variation is due to the prior year's E&D being the low point of the eight-year
period while the current E&D is the high point of the same period.
Projected Minuteman Assessment—Based on unapproved House-1 budget bill
Enrollment Basis Assessment Components
FY16* FY17 ** FY16 FY17
State-Required Baseline 43 46 $607,512 $673,939
Regular Day Students 41.5 47.8 $441,297 $521,822
Capital 41.5 47.8 $117,176 $174,938
Post-Graduate Programs 2 2 $6,750 $6,750
TOTAL ASSESSMENT $1,172,735 $1,377,449
Annual% increase (decrease) (5.76%) 17.46%
*enrollment as of October 1 in prior year(old method)
**average enrollment over prior 4 years(new method)
A breakdown of the full assessment is shown above. Lexington's FY2016 enrollment (as of October 1,
2015) was 49.5 full-time regular students in grades 9-12. This is an increase in enrollment of 8 Regular
Day students.
Due to the Town's higher enrollment, and a 15% increase in the per-student capital assessment, the pre-
liminary FY2017 assessment for Lexington is $204,713 (17.46%) higher than the FY2016 assessment.
Note that the recently approved Minuteman Regional District Agreement revised the formula for calculat-
ing a portion of the assessment, and now uses the average enrollment over the prior 4 years.
Funds Funding
Program 2000: Shared Expenses Requested Source
$51,708,675 See Motion
The Shared Expenses section of the budget includes items that do not naturally belong in the budget lines
of either the Lexington Public Schools or the municipal departments most often because the allocation of
portions of the expenses to different departments is difficult or on account of administrative convenience.
The section comprises the four different pieces listed below together with respective budget totals:
FY2016 FY2017 $Change
Restated Recommended
Benefits &Insurance $32,423,749 $33,607,231 $1,183,482
Debt Service $7,212,135 $7,199,028 $(13,106)
Reserve Fund $900,000 $900,000 0
Public Facilities $10,078,631 $10,002,416 $(76,215)
Total $50,614,515 $51,708,675 $1,094,160
The recommended total Shared Expenses line represents an increase over the FY2016 restated amount by
2.13%.
Employee Benefits and Insurance
The total request for Employee Benefits and Insurance for FY2017 is $23,612,444, which represents a
3.79% increase from the restated FY2016 amount. Retiree health benefits costs for FY2017 are projected
to increase by 10.09%, driven by a more accurate projection of the number of retirees who will be under
16
APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
65 years old and thus not eligible for Medicare supplemental health insurance, and by an increase in the
number of retiree subscribers projected to be covered by individual and family plans in FY2017.
The Town and the Public Employees Committee (PEC) have successfully negotiated a three-year succes-
sor agreement to remain in the state-administered Group Insurance Commission (GIC) health insurance
program through FY 2018. Participation in the GIC program has yielded reduced costs for both the Town
and most Town employees. The administrators of the GIC work aggressively to attempt to control the
growth of the costs of health care for the covered individuals and families.
Debt Service
The amounts for debt service in the above table do not include those needed for service of exempt debt,
because exempt debt service does not need to be appropriated by Town Meeting. For FY2017, the total
exempt debt service budget is $9,164,780, about 7.32% above the amount for FY2016. In FY2016,
$215,000 of the exempt debt service was covered by a transfer out of the Capital Projects Stabilization
Fund.No such transfer is anticipated for FY2017.
Reserve Fund
The Reserve Fund is intended for extraordinary and unforeseen expenses. Transfers out of the Fund are
done with the approval of the Appropriation Committee.
The FY2017 funding request for the Reserve Fund is $900,000, which represents level funding since
FY2014. Unused amounts at the end of the year flow to Free Cash.
In FY2014, a total of$118,000 in reserve funds was used for supplemental funding of property and liabil-
ity insurance, and for Patriots' Day security. In FY2015, a total of$289,620 was used to fund Economic
Development projects, Board of Health contractual services, LHS Modular Classrooms, and Board of Se-
lectmen legal services.
So far in FY2016, $150,000 in reserve funds has been used for Cary Memorial Building hazardous mate-
rial remediation, and $26,800 has been used to supplement the appropriation for the 2015 ATM Article
8(1) Reconstruction of Basketball Courts at Marvin and Southerland Parks. The current balance in the Re-
serve Fund is $723,200.
Public Facilities
The Department of Public Facilities manages the operation and maintenance of Lexington's municipal
and school buildings. The department supports the operation of the Community Center, supports the
School Master Planning process, manages recurring maintenance for roof, building envelope and HVAC
for municipal and school buildings, and implements other priority projects. The FY2017 projected total
Public Facilities operating budget, inclusive of General Fund appropriation requests under this article and
of revolving funds, is $10,482,177,which represents a 0.36% decrease from FY2016.
Funds Funding
Programs 3000-8000: Municipal Requested Source
$34,536,720 See Motion
The municipal budget comprises all line items from 3000 to 8999. Adoption of the recommended munici-
pal budget would result in an overall increase from FY2016 to FY2017 of$942,450 or 2.81%. The in-
crease is limited because Town management has tightly controlled the approval of program improvement
requests (PIRs) during budget development. Appendix A of the Brown Book (Fiscal Year 2017 Recom-
mended Budget) contains a list of the PIRs that were reviewed and whether each one is recommended for
approval by the Board of Selectmen and Town Meeting; the list is not duplicated here.
17
APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
Municipal Budget Line FY 2016 FY2017 $Change % Change
Restated Recommended
3000 Public Works $8,832,668 $9,032,239 $199,571 2.3%
4100 Police $6,741,405 $6,774,543 $33,138 0.5%
4200 EMS/Fire $6,379,387 $6,409,755 $30,368 0.5%
5000 Library $2,374,295 $2,459,653 $85,358 3.6%
6000 Human Services $1,206,234 $1,205,914 ($320) 0.0%
7000 Land Use/Health/Development $2,129,848 $2,232,642 $102,794 4.8%
8000 General Government $5,930,432 $6,421,974 $491,542 8.3%
The Committee recommends approval of this request(7-0).
Article 5: Appropriate FY2017 Enterprise Funds Budgets
Funds Requested Funding Source Committee Recommendation
$9,890,441 Water EF
$8,938,082 Wastewater EF
$2,626,287 Recreation EF Approve (7-0)
$253,007 Tax levy
$21,707,817
This Article governs the appropriation of funds for the operation of the Town's three enterprise funds: the
Water Enterprise Fund, the Wastewater Enterprise Fund, and the Recreation and Community Programs
Enterprise Fund. For an overview of the legal framework and accounting concepts that apply to the opera-
tion of an enterprise fund,please refer to Appendix B.
The appropriations addressed in this article cover the complete operating costs of the respective enterpris-
es with the exception of indirect costs, which are appropriated under Article 4. The following discussion
will focus on the anticipated expenses and revenues of the enterprise funds for FY2017 and issues they
raise. Capital appropriations are addressed in Articles 9 (Recreation Capital), 10 (Municipal Capital) and
12(Wastewater System Improvements).
Water and Wastewater Enterprise Funds
A breakdown of the funding request for this portion of the article is shown in the following tables.
FY2015 FY2016 FY2017 %
Water Enterprise Fund
Actual Appropriated Requested Change
Compensation $593,594 $695,679 $699,218 0.51%
Expenses $386,371 $389,400 $404,025 3.76%
Debt Service $1,378,688 $1,344,114 $1,408,576 4.80%
MWRA Assessment $6,035,893 $6,695,144 $7,378,622 10.21%
Total Requested in Article 5 $8,394,546 $9,124,337 $9,890,441 8.40%
Indirect Expenses (Article 4) $789,725 $898,614 $877,411 -2.36%
Total Water Enterprise Budget $9,183,821 $10,022,951 $10,767,852 7.43%
18
APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
FY2015 FY2016 FY2017
Wastewater Enterprise Fund
Actual Appropriated Requested Change
Compensation $217,497 $296,917 $298,234 0.44%
Expenses $334,817 $345,650 $347,525 0.54%
Debt Service $1,199,243 $1,060,456 $981,220 -7.47%
MWRA Assessment $7,177,387 $6,970,176 $7,311,103 4.89%
Total Requested in Article 5 $8,928,944 $8,673,199 $8,938,082 3.05%
Indirect Expenses (Article 4) $465,030 $478,354 $503,898 5.34%
Total Wastewater Enterprise Budget $9,393,974 $9,151,553 $9,441,980 3.17%
Note that this table differs from that contained in the warrant in three respects: (1) the MWRA assess-
ments for water and wastewater reflect the MWRA's preliminary assessments issued in February (see
table below) rather than placeholders assumed in the warrant, which assumed a 10% increase over the
prior year's assessments; (2) the debt service amounts have been changed to reflect those contained in the
Brown Book; and (3) indirect expenses that will be charged to the enterprise funds, although appropriated
separately under Article 4,have been included for completeness.
MWRA Assessments. The largest expense components of both the Water and Wastewater Enterprise Fund
budgets are the assessments charged by the Massachusetts Water Resources Authority (MWRA), which
now represent 70-75% of the total budget for each fund. The Town will be assessed a share of the
MWRA's total FY2017 water and sewer budgets based on the Town's proportionate water and sewer us-
age in the most recent full calendar year (CY2015), compared with other towns in the MWRA communi-
ty. Based on the MWRA's preliminary assessments,' the MWRA rate increases for FY2016 will be as
follows
MWRA Assessments
Fund FY2016 FY2017
Appropriated Prelim.Assmt. Change
Water $6,695,144 $7,378,622 10.21%
Sewer 6,970,176 $7,311,103 4.89%
Combined $13,665,320 $14,689,725 7.50%
Lexington's combined MWRA assessment increase of 7.5% for FY2017 is substantially higher than the
MWRA system-wide rate increase of 3.9%. This difference is attributable to another substantial spike in
Lexington water usage compared with the rest of the MWRA community in calendar year 2015. The pri-
mary cause for that spike was the Town of Bedford's decision temporarily to shut down several Bedford
town wells for maintenance following an earlier contamination issue that has been discussed in previous
reports of this Committee,requiring it to purchase more MWRA water from Lexington.2
' Final MWRA assessments issued in June, typically a bit smaller than the preliminary assessments, are used to set
water and sewer rates during the Town's annual rate-setting process in the fall. Appropriations for MWRA expenses
may be adjusted to reflect the final assessments if a special town meeting is held in the fall.
2 Lexington re-sells MWRA water to the Town of Bedford on a pass-through basis. Extra FY2015 revenue received
from the Town of Bedford in 2014 ($275,000) and 2015 ($131,000) as a result of Bedford's well shutdown was set
aside as a reserve to mitigate the expected increases in Lexington's MWRA assessments for FY2016 and FY2017.
19
APPROPRIATION COMMITTEE—ATM 2016&STM 2016-3
Direct Town Costs. In addition to the MWRA assessments, the expenses of the Water and Wastewater
Fund budgets include direct costs incurred by the Town, primarily for: (1) the wages and salaries of the
employees in the DPW's Water and Sewer Divisions, (2) the expenses of the water and sewer mainte-
nance activities and equipment, and (3) debt service on prior borrowings for water and sewer enterprise
capital improvements. All of these direct costs are increasing at moderate levels or decreasing (see Brown
Book,pp. V-27,V-31).
Indirect Town Costs. The Water and Sewer Enterprise Fund budgets also include indirect costs for ser-
vices provided by other Town departments to support water and sewer operations, such as insurance costs
(health and liability), retirement funding, engineering costs, and the cost of services provided by the
Comptroller, the Management Information Systems (MIS) Department, and the Revenue Department.
Since 2006, the Town has conducted periodic studies of the appropriate level of indirect costs and has
adjusted the charges to the enterprise funds accordingly.
Rate-Setting and Reserves
As discussed in Appendix B, the state statute governing enterprise funds, G.L. c. 44, § 53F�/2,requires that
accumulated surpluses resulting from the operations of an enterprise fund,referred to as retained earnings,
remain with the fund as a reserve, and that they be used only for capital expenditures of the enterprise,
subject to appropriation, or to reduce user charges. Deficits must be funded with existing reserves or, in
the absence of such reserves, made up in the following year's rates.
During the early 2000s, difficulties in forecasting usage and other accounting issues resulted in rates be-
ing set at less than adequate levels in several rate years. This, in turn, reduced the retained earnings in the
Water and Sewer Enterprise Funds to levels that caused concern. Since 2005, the Town's ability to meas-
ure and forecast water and sewer usage, and thereby to anticipate revenues and reserve levels, has im-
proved significantly. This has enabled the Town to restore and stabilize the water and sewer enterprise
fund reserve balances at a targeted amount of approximately $1,000,000 for each of the two funds, and
indeed more recently to draw some of the funds down for rate relief and capital investment as shown in
the table below.
Retained Earnings: Appropriations and Year-End Balances
Annual Town Meeting 2011 2012 2013 2014 2015 2016
Water
Starting Balance 1 $1,622,052 $1,952,253 $2,066,566 $2,234,007 $2,119,458 $1,786,659
Approp. for Rate Relief 2 $650,000 $350,000 $300,000 $250,000 $0 $0
Use of Bedford Surplus $200,000 $250,000 $275,000 $131,000
Approp. for Capital 3 $145,100 $25,000 $750,000 $873,500 $1,015,500 $620,500
Projected End Balance 4 $826,952 $1,577,253 $816,566 $860,507 $903,958 $1,035,159
Wastewater
Starting Balance 1 $1,525,612 $1,168,190 $1,319,000 $1,990,816 $2,027,941 $1,032,942
Approp. for Rate Relief 2 $300,000 $150,000 $100,000 $50,000 $0 $0
Approp. for Capital 3 $300,000 $0 $200,000 $940,500 $1,390,500 $177,500
Projected End Balance 4 $925,612 $1,018,190 $1,019,000 $1,000,316 $637,441 $855,422
1 Certified retained earnings as of the end of the prior fiscal year(as of 6/30/2015 for this year's ATM).
2 Appropriations from retained earnings to subsidize the next fiscal year's operating budget. An appropriation of$200,000 was
originally made from the Water Fund at the 2015 ATM for rate relief in FY2016; however, when it appeared at the fall 2015
rate-setting proceeding that FY2016 rate increases would be minimal even without such planned rate relief a decision was made
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APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
to net this amount out against an appropriation from retained earnings of a `Bedford surplus" of$275,000. This action was
approved at the Special Town Meeting held on November 2, 2015, as described in our report to that STM.
3 Proposed appropriations for capital projects for the next fiscal year(FY2017 at this ATM); this year's proposals are found in
Articles 10(Municipal Capital) and Article 15 (Wastewater System Improvements). Also included for FY2017 is an "advance"
appropriation of$400,000 from Water Fund retained earnings made under Article 4 at the 11/2/15 STM for repair and replace-
ment of water mains under Massachusetts Avenue in East Lexington.
4 Note that appropriations from retained earnings at the annual town meeting must be deducted as a liability from the projected
retained earnings to be certified as of the end of the current fiscal year, even though the funds will not be applied until the follow-
ing fiscal year. The projection of anticipated retained earnings assumes break-even operational results during the current fiscal
year.A higher(lower)starting balance available for appropriation the following year indicates that the current year's operating
results were higher(lower)than were projected at rate-setting, resulting in an operating surplus(deficit).
We are pleased to note that, capitalizing on an opportunity presented at the FY2016 rate-setting proceed-
ings in the fall of 2015, as described in note 2 to the table above, the Selectmen were able to accelerate a
gradual process of"weaning off" of annual retained earnings subsidies for rate relief and eliminate such
subsidies altogether. Accordingly, this year's budget proposes no retained earnings subsidy for general
rate relief for either the water or wastewater fund, though $131,000 will be appropriated from retained
earnings to mitigate the effect on FY2017 MWRA water assessments of Bedford's extraordinary water
use in calendar year 2015. Elimination of such annual rate relief subsidies will free up retained earnings to
be applied instead to capital projects,which should promote long-term rate stability.
Recreational Enterprise Fund
Early in 2015, the Recreation Department was reorganized as the Department of Recreation and Commu-
nity Programs (DRCP), resulting in increased costs for operations and programs. The Director of Recrea-
tion and Community Programs, through the Recreation Committee, will continue to set fees with the ap-
proval of the Board of Selectmen.
The multi-year budget growth of$886,920 (51%) starting from 2015 has been due to the inauguration of
the Lexington Community Center (LCC). The FY2016 LCC budget included $383,073 to fund 5.5 full
time and seasonal staff to plan, manage and deliver community programs along with the supplies needed.
Recreational FY2015 FY2016 FY2017 Dollar
Enterprise Fund Actual Approp. Requested Increase Change
Compensation $657,739 $1,127,630 $1,190,742 $63,112 5.6%
Expenses $981,628 $1,374,201 $1,335,545 $38,656 2.8%
Debt Service $100,000 $100,000 $100,000 - 0.0%
Total Requested in Article 5 $1,739,367 $2,601,831 $2,626,287 24,556 0.9%
Indirect Expenses $233,600 $240,608 $247,826 7,218 3.0%
(transfer to General Fund)
Total $1,972,967 $2,842,439 $2,874,113 $31,624 1.1%
The operational costs of all programs offered by the DRCP are designed to be revenue neutral, with
charges to users matching the program's operating costs. However, to supplement the overall increases in
cost of operation and programing of the LCC, the motion includes a transfer of$253,007 in tax levy funds
into the Recreation Enterprise Fund,which would be appropriated under this article.
Debt service costs are unchanged at$100,000.
Other factors contributing to the increase:
• Increases in compensation driven by costs of prospective step increases, cost of living increases
and increases in the minimum wage for seasonal employees;
• Increase in compensation for the Department Director to reflect additional responsibility in over-
seeing the operation of the Community Center;
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APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
Sources of revenue include $375,000 from the Recreation Enterprise Fund retained earnings, $1,012,996
from user fees for recreation, $454,810 from registration fees for Community Center programs, and
$775,000 from golf fees at Pine Meadows Golf Course. The revenue from fees is based on projections.
Projected revenue from golf fees is $25,000 lower than the previous year based on actual usage figures.
The Recreation Fund contributes to the debt service on some recreation capital projects, in particular the
Lincoln Field restoration project. However, most recreation capital costs are subsidized by the General
Fund through a combination of within-levy debt, excluded debt, and by Community Preservation Act
(CPA) funding.
The balance of retained earnings in the Recreation Enterprise Fund at the close of FY2015 was $879,592.
A withdrawal of$65,000 from this fund is proposed under Article 9 Recreation Capital Projects.
The Committee recommends approval of this request(7-0).
Article 6: Appropriate for Senior Service Program
Funds Requested Funding Source Committee Recommendation
$30,000 GF Approve (7-0)
This article proposes an appropriation for the Town's Senior Service Program of$30,000. This amount is
a $10,000 increase from the FY2016 request because there is an insufficient carryover balance from prior
years to assure that the potential demands of the program in FY2017 can be met. Participation for this
fiscal year remains at 23 participants, which will cost approximately $24,000 if the maximum allowable
hours are worked and no additional participants join before the end of the year. The program allows roll-
ing admission so the FY2017 request also allows for growth in the program.
The Senior Service Program
Since 2006, the Town has operated its own Senior Service Program, which allows low to moderate in-
come seniors (age 60 and over) to perform volunteer work for the Town in exchange for a reduction in
their property tax. The Town adopted this program, in substitution for a similar program previously oper-
ated under G.L. c. 59, § SK, to allow it more flexibility in setting the age criteria for participation, the
wage rate, and the total amount of credit allowed.
For more information on the Senior Service Program and other property tax relief options available to
seniors, including exemptions and opportunities for deferral,please refer to Appendix D.
Benefits and Criteria for Participation
The maximum amount of the tax reduction that may be earned, under guidelines established by the Se-
lectmen and amended in July 2014, is $1,045/year (110 hours at $9.50 per hour) for an individual and
$1,330/year (140 hours at $9.50 per hour) for a two-person household toward their property tax bills. Par-
ticipants may receive property tax reductions under this program in addition to any other exemption for
which they qualify, such as the $1,000 Clause 41C exemption, and may also defer the balance of their
taxes under Clause 41A if they are eligible to do so. Currently there are no couples in the program and in
the history of the program there has just been one couple.
Current income eligibility criteria are set forth in Appendix D.
Funding Requirements and Requested Appropriation
The program operates as a continuing balance account, and unexpended funds carry over from year to
year. When first established in FY2007, the program was funded at $25,000, an amount slightly higher
than the average annual amount that had been expended from an overlay account under the pre-existing
22
APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
state program during the 2004-2006 fiscal years. In anticipation of higher usage, the annual appropriation
was subsequently increased over time from $36,000 in FY2007 to $45,000 in FY2010.
This level of funding, however,proved to be more than was required to allow the Town to admit all eligi-
ble applicants who wished to participate in the program. Although the wage level was increased from
$8.50 to $9.50 in FY2014, and income thresholds have also been increased, participation has steadily de-
clined from a high of 34 in FY2007-2008 to 23 in FY2015-2016, a decrease of 33%. Accordingly, appro-
priation requests have been scaled back since FY2010 to reflect realistic funding requirements and the
amount of carryover funds available.
The following table details participation in Lexington's Senior Services Program for FY2012 to FY2016,
and the current FY2016 expenditures through December 2015:
Fiscal Year Number of Hourly Cost of
Participants Rate Program
2012 32 $8.50 $26,229
2013 28 $8.50 $24,280
2014 26 $9.50 $24,249
2015 23 $9.50 $19,884
2016 23 $9.50 * $4,019
* Reflects actual hours reported and paid through 12/2015 (some workers request
payment at the end of the year,so the total hours worked is not reflected here).
The $30,000 appropriation requested for FY2017, together with an anticipated carryover balance from
FY2016 of$7,000, would amply cover the cost of continued participation at the current level with some
growth in the program.
To encourage greater participation in this worthy program, the Selectmen may wish to consider another
wage increase,raising the maximum allowed hours, or relaxing the economic criteria for participants.
The Committee recommends approval of this request(7-0).
Article 7: Establish and Continue Departmental Revolving Funds and Special
Revenue Fund
Funds Requested Funding Source Committee Recommendation
See below RF Approve (7-0)
This article seeks reauthorization of all existing municipal revolving funds for FY2017 as shown in the
table below. Information regarding the nature and purpose of revolving funds can be found in Appendix C
of this report.
Fund Authorized Departmental FY2016 FY2017
Program or Purpose Representative or Approved Requested
Board Receipts Limit Limit
1100 School Bus Transportation School Committee School Bus Fees $850,000 $1,050,000
2400 Building Rental Public Facilities Dir. Building Rental $425,000 $460,000
Fees
3100 Regional Cache - Hartwell Public Works Dir. User Fees $20,000 $10,000
Avenue
3320 Tree Fund Board of Selectmen Gifts and Fees $45,000 $45,000
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APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
Fund Authorized Departmental FY2016 FY2017
# Program or Purpose Representative or Recei is Approved Requested
Board p Limit Limit
3330 DPW Burial Containers Public Works Dir. Sales $40,000 $40,000
3420 DPW Compost Operations Public Works Dir. Sales and Permits $520,000 $615,000
3420 Minuteman Household Public Works Dir. Fees Paid by $180,000 $180,000
Hazardous Waste Program Consortium Towns
6120 Council on Aging Human Services Dir. Fees and Gifts $100,000 $75,000
Programs
7140 Health Programs Health Dir. Medicare $14,000 $14,000
Reimbursements
7320 Tourism/Liberty Ride Town Manager and Liberty Ride $280,000 $285,000
Tourism Committee Receipts
7340 Visitor Center Economic Devel. Sales,Program $117,000 $191,000
Dir. Fees and Donations
8140 PEG Access Board of Selectmen License Fees from $565,000 $500,000
and Town Manager Cable TV Providers
The spending limit proposed for each of the funds is based on a reasonable estimate of the fees and charg-
es likely to be received, as well as of the expenditures likely to be required. A summary of the historical
receipts, expenditures, and balances for each fund during FY2015 and the first half of FY2016 can be
found at Appendix C,page C-2, of the Brown Book.
Changes in Authorization Levels from FY2016
The School Bus Transportation Fund limit will be increased by $200,000 to accommodate two potential
additional buses, which may be required by expanded ridership and redistricting needs, as well as an in-
crease in rates. This reflects a continuing expansion of the program as three regular buses and two addi-
tional after-school buses were added in FY2016.
The Building Rental Fund limit will be increased by $35,000 to reflect an increase in staff and utility
costs.
The DPW Compost Operations Fund limit will be increased by $95,000 to reflect increased staffing costs
and revenues for disposal of compost tailings.
The Visitor Center Fund limit will be increased by $74,000 to reflect increased staffing and inventory
costs,which are supported by increased revenues.
The PEG Access Fund limit will be reduced by $65,000 because the FY2016 budget contained an addi-
tional amount for the Cary Wireless Project,which has been completed.
Note that a proposal was made, following the issuance of new guidelines by the Department of Revenue
(DOR), to convert the PEG Access Revolving Fund to a special revenue fund; however, after further con-
sultation with the DOR, it was determined that this fund may continue as a revolving fund.
The remaining changes to fund limits are based on historical trends and experience.
The Committee recommends approval of this request(7-0).
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APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
Article 8: Appropriate the FY2017 Community Preservation Committee
Operating Budget and CPA Projects
Funds Requested Funding Source Committee Recommendation
8(c) Disapprove (3-6);
$4,838,365 CPF 8(1) Pending;
8(a-b, d-k, m-q)Approve (9-0)
The Community Preservation Act (CPA) is a State statute that allows municipalities to raise a surcharge
on property taxes for local use for purposes related to historic preservation, open space (including recrea-
tion), and affordable housing. The State provides matching funds (the amount depending on monies
available and demand from adopting communities) from fees imposed on real estate transactions, includ-
ing mortgage refinancing.
While the CPA provides broad guidance on the appropriate use of funds, it allows for a considerable
measure of local control by 1) establishing a local Community Preservation Committee (CPC) to review
and make recommendations on candidate CPA projects to Town Meeting and 2) authorizing Town Meet-
ing to approve CPC-recommended projects. Town Meeting may not increase a CPC-recommended ap-
propriation, nor may it alter the stated purpose of an appropriation, but it may amend to decrease an ap-
propriation.
Communities adopting the CPA have each implemented the statute in a way that reflects local opportuni-
ties, priorities and needs. One of Lexington's opportunities lies in the inventory of municipal and school
buildings that qualify as historic buildings and which are therefore eligible for CPA funding. These pro-
jects can be funded through a combination of Lexington taxpayers' CPA surcharges and State matching
funds.
Since Lexington's adoption of the Community Preservation Act in 2006, the CPC has recommended and
Town Meeting has approved a total of$60,227,454 for CPA projects. These funds have supported 50 his-
toric preservation projects, preserved 87 acres of open space, created or preserved 27 recreational facili-
ties, and created or supported 254 units of affordable housing. Of this total, $12,610,396 or 21% of the
Town's total project costs (exclusive of Administrative expenses) has been received from the State as
matching funds.
Funding Sources and CPA Categories
The requests recommended by the CPC are listed below. The funding source for each request is entirely
CPF unless otherwise noted. All CPA projects must qualify for CPA funding under one (or more) of the
following categories: Open Space, Historic Resources, Affordable Housing, or Outdoor Recreation. The
CPA fund has a restricted account for each category, along with an Unallocated Reserve that can be used
for any qualifying project. CPA funds are appropriated from an eligible restricted account when feasible,
or from the Unallocated Reserve.
Beginning in FY2007, following voter approval, the Town began to assess a Community Preservation
Surcharge of 3% of the property tax levied against all taxable real property. For owners of residential
property, the assessed value used to calculate the surcharge is net of a $100,000 residential exemption.
Community Preservation funds can be used for those purposes defined by the Community Preservation
Act, MGL Ch. 44B. Such purposes include the acquisition and preservation of open space, the creation
and support of community (affordable) housing, the acquisition and preservation of historic resources,
and the creation and support of recreational facilities. Beginning in FY2008, the Town began receiving
State matching-funds to supplement the local surcharge. Receipts for FY2016 from the surcharge and
state matching funds are preliminarily estimated at$5 million.
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APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
Article 8(a)Munroe Tavern Archaeological Dig—$15,000
Eligible for CPA Funding as Historic Resources.
The Lexington Historical Society plans to add a 25' x 25' Munroe Tavern Archives Wing with a full
basement to house its archives of over three hundred years of Lexington history. The archaeological dig is
part of that larger project estimated to cost $400,000, all of which would be ineligible for CPA funding.
State grants and private donations will be secured to fund the archives wing construction. Because of the
historic significance of the site, an archaeological dig is required in the basement footprint of the new
wing before the construction can begin. The Society is requesting CPA funding for the dig and associated
expenses.
Plymouth Archaeological Rediscovery Project(PARP)has been selected to conduct the dig in April 2016,
and be completed by early May 2016. It will be conducted as a well-supervised community-involved pro-
ject with educational opportunities for the public who choose to join in the dig. To enhance the public
experience, there will be an on-site exhibit of the archaeological finds from the Hancock-Clarke House
dig.
A ground penetrating radar survey of the entire Munroe Tavern site will identify significant features that
might suggest future exploration. A completion memo will be submitted to the MHC within one week of
the completion of fieldwork so that the project can proceed without delay as the report is written.
The area to be impacted by the proposed construction will measure 20' x 24' (6 x 7.5 meters) and the en-
tire area to be impacted should be completely archaeologically excavated, leaving what is essentially an
empty, relatively shallow, hole within the impact footprint. The impact area will be gridded off into the
one-meter squares that will form the basis of the excavation.
The historic sites in Lexington are of local, state and national significance. Adding an archives wing to
Munroe Tavern will permit the Society to provide more adequate care for the town's historic archives and
to make them much more accessible to visitors from near and far. A professional archaeological dig that
meets state requirements will permit the Society to move forward with this important project.
The preliminary budget for the dig and the ground penetrating radar is $15,000. The proposal from PARP
estimates $9,000 for archaeology, and the ground penetrating radar is $1,500. The request for a contin-
gency of $4,500 is included, as the size of the dig may need to be expanded somewhat if the building
footprint is larger than anticipated in initial plans.
Article 8(b) Munroe Center for the Arts Window Study—$30,000
Eligible for CPA Funding as Historic Resources.
The Munroe Center for the Arts seeks funds to complete a study of the 117 windows at their facility. The
windows are believed to be original to the 110-year-old building and are in poor condition. The air infil-
tration makes the building uncomfortable in the colder months and decreases the buildings energy effi-
ciency. Additionally, the windows are difficult to operate and many are potentially dangerous. Over one
thousand people a year subscribe to programs at the Munroe Center for the Arts, making it a major recrea-
tional resource for Town residents.
The proposed engineering study will provide recommendations for the replacement or restoration of the
windows, construction documents and cost estimates. The Munroe Center anticipates that additional CPA
funds will be requested in FY2018 to complete the replacement or restoration, based on the study's rec-
ommendation.
The Department of Public Facilities would oversee the study.
26
APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
Article 8(c) Lexington Arts & Crafts Society Parsons Gallery Lighting Renovation—$24,280
Eligible for CPA Funding as Historic Resources.
The lighting system in the Parsons Gallery was installed 40 years ago with an expected service life of ap-
proximately 20 years. After 40 years of use, the fixtures are worn, some are electrically unsafe, and a
number cannot be aimed or adjusted. The track system that provides power to the lights is failing in some
locations.
The Lexington Arts and Crafts Society plans to remove and replace the lighting system in its Parsons Gal-
lery and requests $24,280 in CPA funds to complete the renovation. The Society is also contributing pri-
vate funds towards the project. The plan is to replace all of the current fixtures and the track system with
an LED system designed to deliver light for an art gallery.
The Historic Commission has determined that the society is "significant" in the history, archeology, ar-
chitecture or culture of the Town of Lexington, as required by the Community Preservation Act, and there
is a significant public benefit derived from the grant.
Item Detail Cost
Edison Price- Minimax LED fixtures 60 S27,000
Edison Price- lighting track 128 ft. $1,280
Replacement switches and wiring $2,000
Labor,remove existing system and install new system $6,000
Total $36,280
The appropriation request is for $24,280. The remaining funds would come from other sources, including
$8,000 in cash and in-kind donations raised by LASC.
The Committee does not feel that it is prudent to use CPA funds for typical maintenance needs of a non-
historic component in a building owned by a private organization that is largely supported by membership
dues. A majority of the Committee recommends disapproval of this request by a vote of(3-6) against.
Article 8(d)Visitors Center Renovation—IP
The Committee anticipates that this request will be indefinitely postponed.
Article 8(e) Keeler Farm Community Housing Acquisition—$185,000 (or $115,000)
Eligible CPA Funding as Affordable Housing.
LexHAB requested $185,000 to potentially fund the purchase of one unit of affordable housing at the new
Keeler Farm development. The unit will be utilized as affordable housing for one family in perpetuity.
LexHAB applied for US Department of Housing and Urban Development HOME funds for this project
and expects to receive approximately $70,000 to pay of a portion of the costs. Advertising and selecting
renters for CPA funded properties will be in compliance with current State requirements for units to count
toward the Town's stock of affordable housing units for Chapter 40B purposes. If HOME funds are re-
ceived, the request for CPA funds will be reduced accordingly.
Article 8(f) Greeley Village Rear Door and Porch Preservation—$263,000
Eligible for CPA Funding as Affordable Housing.
The Lexington Housing Authority (LHA) requests CPA funds to help finance the preservation of all rear
exit doors and porches at Greeley Village. LHA has identified the over 100 failing doors and porches as
priority needs and will utilize CPA funds in conjunction with an allocation received from the State. The
proposal includes replacement of the dilapidated rear doors with new doors and doorframes. The rear
porches would be rehabilitated with new steps and railings. The current doors leak water causing a serious
water infiltration issue leading to a deterioration of supportive beams, sagging and warped doors and loss
27
APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
of energy. Concurrently, the rear porches (75 total) leading to the doors are sagging and pose a structural
hazard for each building.
If funded, the bid will go out in 2016, and door replacements will be completed by summer 2017.
Other funding sources include $87,750 of State DHCD funding.
Article 8(g)Wright Farm Barn Needs Assessment and Feasibility Study—$35,000
Eligible for CPA Funding as Open Space and Historic Resources.
At the 2015 Annual Town Meeting, voters approved $618,000 to fund the Town's purchase of the re-
maining parcel of the Wright Farm residential lot. The Town now has an enclosed barn on a portion of
land to be incorporated into the previously acquired 12.6 acre conservation parcel of land acquired in
2012, located at 241 Grove Street, the northernmost property in Lexington.
The historic barn is a three-story structure with a shed portion at the rear. In its present state, the historic
barn is only suitable for storage, and is already in need of some maintenance, and will continue to deterio-
rate without maintenance and upkeep. Although it appears structurally sound, it would need significant
upgrades to be used as a public space.
This request is for funds to conduct a feasibility study of the barn to determine if it can be utilized as an
environmental education facility. The feasibility study would consist of a structural analysis, needs as-
sessment and architectural assessment. As an educational facility the barn could house a number of activi-
ties for adults and school aged youngsters. Such programing could put Lexington on the forefront of pub-
lic environmental education. In addition, maintaining the historic barn it will preserve a piece of Lexing-
ton's history as an agricultural village.
We have learned that school field trips for off-site learning opportunities are increasingly difficult to
schedule, for reasons of both available time during the school day and associated costs. An in-town envi-
ronmental and outdoor learning center, potentially open to schools of neighboring towns as well, would
allow easy access to three diverse natural environments — open meadows and grassland areas, protected
wetland resource areas, and forested areas. A renovated historic barn could add shelter, bathrooms, class-
room, and exhibit space. Such a use would ensure continued presence and preservation of an historic barn
structure at the northern entrance of the Town. If this is feasible it is an opportunity that the Town should
not miss out on.
This is a long-term project considering the actual,physical rehabilitation of the Wright Farm Barn,but the
needs assessment and feasibility study could be completed before the end of FY2017.
The budget request is for$35,000
Article 8(h) Antony Park Construction Funds—$60,000
Eligible for CPA Funding as Open Space, Recreation, and Historic Preservation.
The Lexington-Antony Sister City Association is dedicated to promoting goodwill, friendship, educational,
civic and cultural exchange between the people of Lexington and Antony, France. In 1999, the city of
Antony dedicated Place de Lexington to celebrate the relationship between our two communities. Place
de Lexington is a center island in a public roadway, and it contains a 15-foot tall obelisk bearing a com-
memorative plaque, surrounded by a garden.
In 2010, the Board of Selectmen authorized the Tourism Committee to design and construct a park to
commemorate Antony, France. The selected location is at the far right corner of Tower Park at 1200 Mas-
sachusetts Avenue, Lexington.
The project began with a budget of$60,000,which was raised through private contributions.
A portion of these funds was spent for design work, and some initial site preparation was done. The Town
worked with the Tourism Committee to install a water line at the site and completed initial grading. Pub-
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APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
lic bids to complete the construction came back much higher than budgeted, so the work could not pro-
ceed. In the fall of 2016, trees were donated and planted but they did not survive due to the record-
breaking winter weather. Six years after the initial approval, the project is stuck.
The total estimated cost to complete Antony Park is $120,000 including architect fees, irrigation, parts of
the waterline, and construction. This amount includes the original $60,000 in private donations. The ap-
propriation request for $60,000 would provide the supplemental funding needed to complete the construc-
tion. Efforts to raise more funds through private donations to support this project are still ongoing.
The design of the park includes a sitting wall, pathways, landscaping and a memorial linking the two cit-
ies. The park will be an enhancement to Tower Park and be open to all residents and groups visiting Lex-
ington. It will provide gathering space, quiet space and demonstrate the Town's commitment to the sister
city program.
Presently DPW mows and string-trims the area as part of Tower Park and this labor is covered in the Park
Division Budget. This would continue and the DPW would seek volunteers to maintain the planting beds.
Article 8(i)Minuteman Bikeway Wayfinding Signs Implementation—$120,000
Eligible for CPA funding with a recreation purpose.
The 2015 Annual Town Meeting approved $39,000 to fund the design of wayfinding and etiquette sign-
age relating to the Minuteman Bikeway in Lexington. The current request would fund the purchase and
installation of approximately 220 signs containing information on bikeway access and etiquette and near-
by attractions. The signage is one of the recommendations in the report entitled Navigating the Minute-
man Bikeway, completed with the cooperation of the Bicycle Advisory Committee and representatives
from the towns of Arlington and Bedford. Those two towns are not ready to install signage within their
boarders,but Lexington can proceed. The signage will provide information to users which includes direc-
tion on accessing the bikeway, what can be found near the bikeway (e.g.businesses, shops,banks, restau-
rants, etc.), and describe the rules of bikeway etiquette for users.
The tasks include the purchase and installation of the signs, project oversight and GIS mapping of the
signs.
It is anticipated that the signs would have to be replaced every ten years.
The annual maintenance cost is anticipated to be $200 to cover the cost of repairs due to storm damage
and/or vandalism.
Article 8(j) Town Pool Renovation Design and Engineering Costs—$166,000
Eligible for CPA funding as recreation.
This request will partially fund Phase III of a multi-phase renovation program to the Irving H. Mabee
Pool Complex. Phases I and II (approved in 2010 and 2011) are complete. The current request is for de-
sign and engineering documents for the replacement of the existing filtration system, which is past its life
expectancy, and additional work required to ensure the successful operation of the pool complex.
The building will have to be enlarged in order to accommodate four new filtration systems. The Main Lap
and Diving Pools share a common filter system. The Department of Public Health regulations have
changed over the years and replacement of the filtration system now requires each pool to have its own
filter. When pools share a common filter, if a situation occurs that warrants closing a pool, all three pools
must be closed. Phase III of the project will also include a reconfiguration of the wading pool with the
inclusion of new amenities such as water spray features which will help attract families with young chil-
dren to the facility.
The estimated cost of the construction for Phase III is $1,620,000, based on the Pool Facility Audit com-
pleted by Bargmann Hendrie + Archetype, Inc. in February 2008. It was updated in the spring of 2015.
29
APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
Design and engineering costs are based on 10% and contingency is based on 8%. A request to fund the
construction is expected to follow the completion of the design and engineering phase.
Article 8(k) Park Improvements -Hard Court Resurfacing—$61,000
Eligible for CPA funding as recreation.
This request from the Recreation Committee is for design, engineering, and construction funds to reha-
bilitate the basketball courts at Rindge Park and Kineen's Park. This project will include reconstruction of
the courts and installation of new backboards and poles. The program would include resurfacing, paint-
ing, and striping the hard-court surfaces. It will also include installation of a bike rack at each site.
Article 8(1) Granite Forest Pocket Park Construction at Lincoln Park—$30,000
Eligible for CPA funding as Open Space and Recreation.
This project proposes construction of a Public Art greenway corridor within Lincoln Park modeled after
Thoreau's Path at Sisters Hill in Concord. The project connects the lower park to the upper park with the
installation of"The Granite Forest." It is made up of granite benches and will be landscaped with trees
and shrubs. It will be located in the meadow between the multipurpose athletic field and the wood-
land/meadow gardens of Lincoln Park. This is along a high traffic path connecting the high school cam-
pus to the upper section of Lincoln Park.
The primary material for the design started with the opportunity to utilize 11 antique granite foundation
stones from the Isaac Mulliken House built around 1850 and located at 2013 Massachusetts Ave. This
house was being moved and renovated as part of the Inn at Hastings Park project. Mr. and Mrs. Michael
Kennealy donated the granite. These 11 pieces of hand carved granite range in size from 5 feet to 11 feet
and are a priceless reminder of earlier methods of building. Ultimately, it is the intent to have text carved
into the granite adding a layer of ecology,history and poetry art.
The appropriation request of$30,000 would supplement $45,000 in private donations raised by the Lin-
coln Park Subcommittee.
Article 8(m) Park Improvements -Athletic Fields—$120,000
Eligible for CPA funding as Recreation.
The request would fund renovation of Adams Park Multipurpose Athletic Field, located behind the Wal-
dorf School. Renovations will include laser grading the athletic field, grading for proper drainage and
adding permanent park benches. The athletic field is utilized by the Waldorf School and youth organiza-
tions and undergoes excessive wear.
This is part of a multi year effort to maintain and renovate town athletic fields. DPW staff hours, equip-
ment and materials costs should decrease with improved field conditions.
Article 8(n) Park and Playground Improvements—$75,000
Eligible for CPA funding as Recreation.
The Recreation Committee requests $75,000 to replace the safety fencing at the Center Recreation Com-
plex along Worthen Road and at the Muzzey Multipurpose Field along Massachusetts Ave. Currently, the
fence is falling over and posts are coming out of the ground due to frost heave damage.
The improvements will include removal, disposal, and installation of a new chain link fences at both loca-
tions. The project also includes installation of an eight-foot fence next to the baseball and softball fields at
the Center Recreation Complex to minimize incidents of balls hitting cars along Worthen Road.
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APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
Article 8(o) Grain Mill Alley Design Implementation—$214,114
Eligible for CPA funding as Recreation.
The Grain Mill Alley project will improve the pedestrian and bicycle network in the Center by creating a
safe passage and a defined bikeway node that will visually connect to a well-designed passive seating area
in the public right of way at Massachusetts Avenue.
The project has been in the planning stages for over five years in consultation with key stakeholders. It
has met the concerns of and received the support from:
• Historic District: All materials, location, placement, and plantings are in keeping with the archi-
tectural heritage and integrity of the town.
• Lexington Center Committee: Supports this as a way to increase social and cultural activity, en-
hance aesthetics, improved traffic flow for pedestrians.
• Bicycle Advisory Committee: Supports this as an effort to continue to improve bicycle routes.
• Center Streetscape Project: The project includes streets and sidewalks along Mass. Ave, including
this area, and focuses on improving pedestrian safety, accommodating bicycle traffic, and making
sidewalks and crosswalks more accessible and safer for people with disabilities. Economic De-
velopment has worked with the town engineer and this design has been integrated into the Center
Streetscape vision and preliminary plans. There would be no additional cost, the Grain Mill Alley
would serve as an accent point and help aesthetically pull the area together.
• The Commission on Disabilities: Supports this project as a means of promoting greater crossing
safety for pedestrians and cyclists. Additionally, improving the surface makes is easier for people
with mobility devices to safely cross the parking lot area and access the center.
• Douglas House: supports this project because it will make it easier for its residents in wheelchairs
to navigate through the parking lot area and access the Center.
The project would even out the ground surface at the bikeway node and add a speed table intended to
slow down vehicles that drive through the public parking lot. The work would also improve the lighting,
and enhance way-finding to orient people to the Center.
The Board of Selectmen approved the closing off that alley to vehicle traffic five years ago for safety and
aesthetic reasons. There is no interference with the fire code.
The redesign improves only the property currently owned by the Town. There remains disagreement
among the private owners of that parcel regarding whether to leave it as is. Any future use of that parcel
would require a zoning change and at that time, the town and the property owners would resume their dis-
cussion. None of the benefits of these improvements are undermined by the absence of full integration of
the space between the Bank of America and the Office Condominiums.
Town Meeting approved $18,000 in FY2016 for design development and field-testing concepts of the
space; to date, there remains $5,000 in this account. This request includes $20,000 to bring the conceptual
designs to 100%, $153,165 for construction, and $45,949 of contingency funding.
The request would appropriate $209,114 in CPA funds. Another $10,000 would come from the Center
Stabilization Fund. The previously appropriated $5,000 would complete the funding.
Article 8(p) CPA Debt Service—$3,289,722
Projected debt service on the CPA projects is outlined in the following table. Two different types of debt
are used: Bond Anticipation Notes (BANs), and multi-year municipal bonds. BANs allow interest-only
short-term borrowing for a term of up to one year. They are issued for individual projects prior to bun-
dling the debt from several projects to create a single multi-year bond. There are no BANs for CPA pro-
jects in the FY2017 budget.
31
APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
Project/Approval Total Debt Debt BAN
Appropriation Financing Service Interest
Wright Farm Purchase $3,072,000 $2,090,000 $410,050 -
ATM 2012 Debt service ending FY2024
Community Center Acquisition $10,950,000 $7,652,500 $1,028,100 -
STM 3/2013 Debt service ending FY2024
Community Center Renovation $6,320,000 $451,000 $321,829 -
STM 11/2013,Amended STM 3/2014 Debt service ending FY2020
Cary Memorial Building Upgrades $8,677,400 $8,241,350 $1,529,743 -
STM 3/2014 Debt service ending FY2025
Totals $3,289,722 -
The practice of the Town,based on recommendations from the Appropriation Committee and Capital Ex-
penditures Committee, is to limit the size and duration of debt funded by the CPA to the practical mini-
mum, usually below the maximum that would be allowed by statute. This reduces the potential for long-
term financial commitments that would linger should the residents vote to rescind the CPA surcharge in
the future. That said, this practice should not be allowed to consign too much of the CPA annual revenue
for debt service,which would stifle the ability of the CPC to fund new projects directly with cash.
Article 8(q) Administrative Budget—$150,000
The Community Preservation Act permits up to 5% of annual CPA funds to be spent on the operating and
administrative costs of the Community Preservation Committee. The Committee is allowed to use this
money to pay for staff salaries, mailings,public notices, overheard, legal fees, membership dues, and oth-
er miscellaneous expenses related to CPA projects. Five percent of the anticipated FY2017 revenue from
the surcharge and Sate supplemental match is $269,300. However, as in past years, the CPC is requesting
an appropriation of$150,000. This money will be used to fund the Committee's part-time Administrative
Assistant, membership dues to the non-profit Community Preservation Coalition, administrative expens-
es, legal and miscellaneous expenses, and land planning, appraisals and legal fees for open space pro-
posed to be acquired using CPA funds.
The Committee recommends disapproval(3-6) of 8(c).
The Committee has taken no position on 8(1).
The Committee recommends approval(9-0) of 8(a-b, d-k, m-q).
Article 9: Appropriate for Recreation Capital Projects
Funds Requested Funding Source Committee Recommendation
$65,000 Recreation EF Approve (7-0)
This request will fund the reconstruction of the 4"'putting green, and the men's tee-box on the 8"'hole of
the Pine Meadows Golf Course. The unfavorable contours on the 4th green have resulted in significant
turf injury during the past several winters. Reconstruction of the men's tee-box on the 8"' hole (middle
tee) would also be funded under this request. The back tee is located in an environmentally sensitive and
densely wooded part of the golf course with very little sun.
The Committee recommends approval of this request(7-0).
32
APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
Article 10: Appropriate for Municipal Capital Projects and Equipment
Funds Requested Funding Source Committee Recommendation
See below See below 10(a) Pending;
10(b-s)Approve (9-0)
Financial details of the request are summarized below. For a discussion of the items in this request,please
see the Brown Book (relevant pages are cited in the Comments column). The Capital Expenditures Com-
mittee Report to the 2016 Annual Town Meeting contains further discussion about these capital requests.
We caution that, as of publication, the details of the request for 10(a) Center Streetscape Improvements
were not settled. The Committee has reserved judgment on 10(a) until the Board of Selectmen clarifies
their intended motion.
Present Description Funds Funding Source Comments
Requested
a. Center Streetscape Improvements $2,700,000 GF debt p. XI-5
b. DPW Equipment $755,000 GF debt p. XI-6; Water fund
Free cash$449,000 retained earnings
($145,500),wastewater
retained earnings
($145,500)($15,000)
c. Street Improvements and Easements $3,500,000 Tax levy $2,526,835 p. XI-21-22; Chapter 9C
Chapter 9C $973,165 funds ($973,165)
d. Storm Drainage Improvements and $340,000 GF debt p. XI-6
NPDES Compliance
e. Hydrant Replacement Program $150,000 Free cash$75,000 p. XI-22; Water
enterprise retained
earnings ($75,000)
f. Comprehensive Watershed Storm Water $390,000 GF debt p. XI-7
Management Implementation
g. Massachusetts Avenue—Three $6,900,000 Free cash$75,000 p. XI-22; State
Intersections Improvements and Transportation
Easements Improvement Plan(TIP)
funding $6,550,000
h. Sidewalk Improvements,Additions, $600,000 GF debt p. XI-7
Designs and Easements
i. Town-wide Culvert Replacement $390,000 GF debt p. XI-8
j. Town-wide Signalization Improvements $125,000 Free cash p. XI-23
k. Cary Memorial Library Walkway $149,500 GF debt p. XI-8
Replacement
1. Pleasant Street Sidewalk and Easements $175,000 GF debt p. XI-8
m. Replace Town-wide Phone Systems— $21,000 Free cash p. XI-20
Phase V
n. Head End Equipment $150,000 Free cash p. XI-21
Replacement/Packet Shaper—Phase V
o. Election System Upgrade $81,000 Free cash p. XI-25
33
APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
Present Description Funds Funding Source Comments
Requested
p. Parking Meter Replacement—Phase 2 $230,265 Parking Meter Fund p. XI-20
q. Transportation Mitigation $30,000 Traffic Mitigation SF p. XI-21
r. Ladder Truck Replacement; and $875,000 GF debt p. XI-5
s. Public Safety Radio Stabilization $90,500 Free cash p. XI-20
The Committee has taken no position on 10(a).
The Committee recommends approval(9-0) of 10(b-s).
Article 11: Appropriate for Water System Improvements
Funds Requested Funding Source Committee Recommendation
None N/A IP
At the November 2015 Special Town Meeting #2 held on November 2, 2015, an appropriation of
$2,500,000 was made to repair and replace water mains underlying Massachusetts Avenue in East Lex-
ington. This appropriation was effectively an "advance" on the annual appropriation for water system im-
provements that normally would have been made at the 2016 Annual Town Meeting for FY2017. The
funds were sought ahead of schedule to permit completion of the pipe replacement project before the
commencement of major, state-funded roadway work on this portion of Massachusetts Avenue, anticipat-
ed to begin as early as the spring of 2017. Accordingly, this article will be indefinitely postponed.
The Committee anticipates that this article will be indefinitely postponed.
Article 12: Appropriate for Wastewater System Improvements
Funds Requested Funding Source Committee Recommendation
$1,768,000 Wastewater EF (Debt)
$32,000 Wastewater RE Approve (7-0)
$1,800,000
This Article addresses proposed capital expenditures to be made during FY2017 as part of a continuing
program to upgrade and keep current the assets of the Wastewater Enterprise Fund. For general back-
ground on the enterprise funds, and the relationship between the budget process and the water rate-setting
process,please see Appendix B and the discussion under Article 5.
A total of$1,800,000 is again requested this year: $1,000,000 as part of a multi-year plan to rehabilitate
sanitary sewer infrastructure, particularly in remote areas, including brook channels, where poor soil con-
ditions lead to storm water infiltration; and $800,000 as part of an ongoing program to upgrade Lexing-
ton's ten sewer pumping stations. The details of the projects including the expected work sites can be
found in the Brown Book (p. XI-11). Capital appropriations for similar purposes have been made in most
years (except for FY2006, when engineering studies were not ready, and FY2011, when only pump sta-
tion upgrades were performed).
The costs of this year's wastewater system improvements will be funded by a combination of borrowing
($1,768,000) and retained earnings of the Water Enterprise Fund ($32,000). The resulting debt service
costs for the portion borrowed will be borne by the operating budget for the Water Enterprise Fund in
FY2014 and for an additional ten years until the debt is retired(see Brown Book,p. XI-11, Table III), and
34
APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
will be included each year as a component of the wastewater rates. Part of the funding may come from
MWRA grants or loans.
Prior to FY2006, capital expenditures for sewer distribution improvements were funded primarily by en-
terprise-fund cash capital, which was raised in the rates. Subsequently, there was a transition to funding
these ongoing improvements primarily with debt. While the transition to debt financing mitigated the
need for rate increases early on, that change, together with the fund's allocated contribution to the debt
service for the new DPW facility, steadily increased the annual debt-service costs of the sewer enterprise
fund,both in dollar and percentage terms, as illustrated below.
Growth in Wastewater Fund Debt Service
Fiscal Wastewater Total Budget Debt Service
Year Debt Service Ratio
2006 $275,950 $7,084,802 3.9%
2007 $333,899 $7,440,920 4.5%
2008 $439,792 $7,355,479 6.0%
2009 $488,135 $7,643,649 6.4%
2010 $575,357 $8,083,478 7.1%
2011 $791,777 $8,315,556 9.5%
2012 $879,713 $8,934,624 9.8%
2013 $956,855 $9,282,077 10.3%
2014 $1,131,673 $9,257,354 12.2%
2015 $1,220,843 $9,517,618 12.8%
2016 $940,679 $9,103,316 10.3%
2017 $981,220 $9,441,980 10.4%
Judicious use of some of the fund's accumulated retained earnings to fund capital needs has helped to de-
fray the impact of these growing capital costs and helped to maintain long-term rate stability. Contribu-
tions from retained earnings to fund wastewater system improvements have recently been made in the
amounts of: $300,000 in FY2012; $200,000 in FY2014; $900,000 in FY2015; and $1,350,000 in FY2016.
These contributions were made possible by periodic operating surpluses and consequent growth of the
retained earnings to levels well above the approximately $1,000,000 recommended to be held in reserve.
As can be seen in the table above, they have moderated the growth in debt service costs that would other-
wise have to be included in rate requests going forward, and where available they are a productive use of
excess reserves.
This year, a smaller contribution of only $32,000 from retained earnings is proposed to help fund
wastewater system improvements. Note, however, that an additional appropriation of $145,500 in
wastewater fund retained earnings (matched by an equal amount from water fund retained earnings) will
be requested under Article 10(b) (Municipal Capital) to cover the cost to acquire a rubber tire loader used
in water and sewer operations, and 93% of the cost of a Ford F550 pick-up truck with a plow that is used
both in water and sewer operations and general town snowplowing operations. For a more complete dis-
cussion of the status and use of water and sewer enterprise fund retained earnings, see the discussion of
the enterprise fund operating budgets in Article 5.
The Committee recommends approval of this request(7-0).
35
APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
Article 13: Appropriate for School Capital Projects and Equipment
Funds Requested Funding Source Committee Recommendation
$1,384,087 See below Approve (7-0)
Financial details of the request are summarized below. For a discussion of the items in this request,please
see the Capital Expenditures Committee Report to the 2016 Annual Town Meeting and the Brown Book
pages XI-9,15-16.
Project Description Funds Funding Source Committee
Requested Recommendation
(a) System Wide School Furniture, Equipment
and Systems $186,087 Free Cash Approve (9-0)
$427,607 GF Debt
(b) LPS Technology Capital Request $770,393 Free Cash Approve (9-0)
$1,198,000
The Committee recommends approval of this request(7-0).
Article 14: Appropriate for School Zone Traffic Calming
Funds Requested Funding Source Committee Recommendation
None N/A Refer to Committee
It is the understanding of the Committee that this Article will not involve a request for an appropriation.
The proponent intends to make a motion to submit the proposed school zone traffic-calming project to the
Transportation Safety Group (TSG), a Town Manager—appointed working group, for consideration. If the
TSG decides to move forward with the project, it may use funds requested under Article 10(q) "Transpor-
tation Mitigation." Those funds are typically not appropriated for specific purposes,but are used through-
out the year to fund projects brought forward by citizens and approved by the TSG.
As of publication, the Committee does not anticipate any request for an additional appropriation.
The Committee has taken no position on this article.
Article 15: Appropriate for Public Facilities Capital Projects
Funds Requested Funding Source Committee Recommendation
$1,878,249 See Below 15(g,h) IP;
15(a-f, i-p) Approve (9-0)
This article requests the appropriation of funds for the facilities projects summarized below.
Project Description Funds Funding Committee
Requested Source Recommendation
(a)Town-Wide Roofing Program $176,400 GF Debt Approve (9-0)
(b) School Building Envelopes and System Program $215,000 Free Cash Approve (9-0)
GF Debt(c) LHS HeatingSystem Upgrade -Design $500000 Approve (9-0)
)(Exempt)
36
APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
Project Description Funds Funding Committee
Requested Source Recommendation
(d) Municipal Building Envelope and Systems $187,329 Tax Levy Approve (9-0)
(e)Building Flooring Program $150,000 Free Cash Approve (9-0)
(f)Public Facilities Bid Documents $100,000 Free Cash Approve (9-0)
(g) Diamond Middle School Renovations - Construction None N/A IP
(h) Clarke Middle School Renovations - Construction None N/A IP
(i) School Traffic Safety Improvements $25,000 Free Cash Approve (9-0)
(j) Security Camera Upgrade to Digital from Analog $49,500 Free Cash Approve (9-0)
GF Debt
(k) Munroe School Roof $298,000 financed with Approve (9-0)
Tenant Lease
Revenue
(1) LHS Security Evaluation and Upgrade $25,000 Free Cash Approve (9-0)
(m) LHS Guidance Space Mining- Design $13,800 Free Cash Approve (9-0)
(n) LHS Nurse Office and Treatment Space - Design $17,000 Free Cash Approve (9-0)
(o) LHS Fitness Center/Athletic Training Floor $41,220 Free Cash Approve (9-0)
(p) Fire Headquarters Exercise Room $80,000 Tax Levy Approve (9-0)
The request under Art. 15(a) for $176,400 will cover work to stop water infiltration in the Central Admin-
istration building, with a specific focus on the front A-frame roof. Over the next few years, there are like-
ly to be additional requests for funds for town-wide roof maintenance or replacement projects. The antici-
pated projects include:
1. Repair or replacement for the LHS Field House roof in FY2018 with a projected cost of
$433,200;
2. Repair or replacement for the Central Administration building and the Diamond middle school
building roofs in FY2019; and
3. Later work on the Bridge School and the Lexington High School roofs.
The total cost of the requests for FY2017 through FY2021 is projected to be approximately $7.7 million.
The middle school projects, Art. 15(g) and 15(h), were included in the warrant before STM 2016-3 was
planned in detail. Since the appropriations for those projects will be requested under Article 2 of Special
Town Meeting 2016-3, the Committee anticipates that these subsections will be indefinitely postponed.
The request regarding the Munroe School roof under Article 15(k) will be funded by General Fund debt
issued by the Town, to be reimbursed through tenant lease payments.
For further discussion of other items in this request, please see the report of the Capital Expenditures
Committee and the Brown Book.
The Committee anticipates that 15(g) and 15(h)will be indefinitely postponed.
The Committee recommends approval(9-0) of 15(a-f,i-p).
37
APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
Article 16: Appropriate for Advice and Analysis — Getting to Net Zero
Funds Requested Funding Source Committee Recommendation
$40,000 GF Approve (7-1-1)
Background
This article was put forward by the Sustainable Lexington Committee to obtain funding for a Net Zero
Task Force that will explore ways to achieve the goal of"Net Zero" energy use in buildings in the Town.
A Net Zero building, is "a building with zero net energy consumption, meaning the total amount of ener-
gy used by the building on an annual basis is roughly equal to the amount of renewable energy created on
the site or in other definitions by renewable energy sources elsewhere.i3 The Lexington Net Zero Task
Force would apply the concept to the buildings in Lexington collectively rather than to each building in-
dividually. In turn, this goal would help reduce the emission of greenhouse gases associated with life and
work in Lexington.
The Task Force will be comprised of Town staff, a professional meeting moderator, subject matter ex-
perts, members of the Sustainable Lexington Committee, representatives from other Town committees,
residents, commercial landlords, and business owners.
The City of Cambridge has recently published a Net Zero action plan, which will serve as a starting tem-
plate for the effort. Cambridge's plan has four components: Report, Reduce,Produce, and Purchase:
• Reporting current greenhouse gas emissions in the built environment
• Reducing energy use in new and existing building
• Producing renewable energy,both on and off site
• Purchasing renewable energy
As of now, no long-term cost estimate has been made available for the Cambridge Net Zero project,but it
is expected that cost estimates will be released as each tasks is initiated.
Discussion
The list above would provide a blueprint for Lexington's Task Force. Many subtasks of the four compo-
nents (Report, Reduce, Produce, and Purchase) are already being implemented in Lexington by residents,
business owners, and by the Town. Bringing the effort under the umbrella of a Net Zero task force will
serve to:
• Concentrate disparate efforts.
• Define policy changes that the Town can adopt to ease or accelerate implementation.
• Improve cost transparency for Net Zero policies.
• Track overall progress towards the Net Zero goal.
This project is intended to generate new policies and approaches to the construction, operation, and
maintenance of buildings in the Town. To accomplish this, the Net Zero Task Force foresees spending a
total of $100,000 over two years, with an initial expenditure of $40,000 in FY2017. The expenditures
would fund 1) an energy use modeling company that would create a model of present-day energy use in
Lexington buildings that would serve as a baseline, 2) services of a professional meeting facilitator who
would chair Task Force meetings, and 3) consulting services from energy use reduction experts.
The expectation is that a large reduction in emissions would result from reductions in on-site energy use
and from conversion to reliance on electric power from renewable sources for the energy that is used on
3 Quotation from https://en.wi ki pedi a.org/wi ki/Zero-energy_bui l di ng
38
APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
site. Energy use reductions could be accomplished through better insulation, more efficient heating, light-
ing, and ventilation equipment,use of energy recovery systems, and other methods.
We cannot estimate the long-term costs of the project before the NetZero Task Force completes its initial
analysis. Significant appropriations for the implementation of new policies may be requested in the fu-
ture. Of course, any funding requests will have to be prioritized and carefully considered.
Given the great magnitude of the implications of climate change from greenhouse gas emissions, the in-
vestigation of methods of reducing emissions from buildings in Lexington is timely and potentially very
important.
The Committee recommends approval of this request(7-1-1).
Article 18: Appropriate to Post Employment Insurance Liability Fund
Funds Requested Funding Source Committee Recommendation
$1,512,318 GF Approve (6-0)
The Post Employment Insurance Liability (PEIL) Fund holds funds dedicated to health care benefits for
retirees. These benefits are also known as Other Post Employment Benefits (OPEB). For a detailed dis-
cussion of OPEB and related issues,please see Appendix F.
Based on the actuarial report, Other Post-Retirement Employee Benefits Analysis For Fiscal Year July 1,
2012—June 30, 2013, dated February 21, 2014, the "Unfunded Actuarially Accrued Liability" for OPEB
was approximately $87 million as of June 30, 2013, and the "Normal Cost" for FY2014 was approximate-
ly $1.7 million. These amounts were derived assuming a 7.75% rate of return on investments, the same
rate currently used for the Town's pension trust fund.
The Normal Cost is the present value of the expected post-retirement benefit obligation attributable to
employee service during the fiscal year. The Unfunded Liability is the sum of obligations earned during
prior fiscal years that have not been funded. Every year, the Unfunded Liability grows by the amount of
future benefits earned during the current year, less any contribution to the PEIL Fund, and less the cost of
benefits provided to retirees during the current year.
The request is approximately 85% of the maximum amount recommended by the Selectmen's policy for
the annual appropriation to the PEIL Fund. If approved, this appropriation would increase the balance of
the PEIL Fund from the current balance, reported at $6,978,443 as of December 31, 2015, to approxi-
mately $8.5 million.
Payments for health benefits of current retirees in FY2017 will also affect the Town's unfunded liability.
The combination of the appropriation into the PEIL requested here, which increase the funding level, and
payments to retirees, which lower the funding requirement, will improve the Town's OPEB funding ratio
to approximately 10%. The next actuarial analysis of the OPEB liability for the Town will cover the peri-
od ending June 30, 2017, at which time the Town will receive an updated estimate of the funding ratio.
The bulk of the funding for the request is based on a one-time use of$1,200,000 from the Health Insur-
ance Claims Fund to pay for annual health insurance costs. This frees up a matching amount in the Gen-
eral Fund for this request, or other potential uses. The remaining $312,318 is from Free Cash,but reflects
the amount the Town received in Medicare Part D reimbursements from the federal government, which
has been directed into the PEIL Fund for the past several years.
The Committee recommends approval of this request(6-0).
39
APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
Article 19: Appropriate Bonds and Notes Premiums
Funds Requested Funding Source Committee Recommendation
None N/A IP
This Article is routinely included in the Warrant for the Annual Town Meeting in the event that premiums
are received as a result of issuing bonds. These premiums can be appropriated for project costs and will
also rescind the bonding authorization for the same amounts. Doing so will not increase or decrease costs
for the associated project. As of publication, the Town has not received any bond premiums that can be
appropriated for project costs.
The Committee anticipates that this article will be indefinitely postponed.
Article 20: Rescind Prior Borrowing Authorizations
Funds Requested Funding Source Committee Recommendation
None N/A Approve (6-0)
State law requires that Town Meeting vote to rescind the unissued portions of borrowing authorizations
(appropriations funded by debt) that are no longer required for the purpose stated in the authorization.
Rescinding these authorizations is the final bookkeeping task for all debt-based appropriations. Town
staff has recommended the following bond authorization rescissions.
This table lists amounts from various borrowing authorizations that were not part of any bond offering.
Since these funds were never borrowed, approving the rescissions has no financial impact on the Town.
Town Meeting Article Description Amount
2012 ATM 12(d) Culvert Replacement $28,000
November 19, 2012 STM 6 Estabrook Construction Supplemental $2,600,000
2013 ATM 10(1) DPW Equipment $83,365
2014 ATM 10(b) DPW Equipment $27,022
2014 ATM 10(m) Ambulance Replacement $21,789
March 13, 2015 STM #2 3 Fire Engine $20,335
2015 ATM 18(b) Middle School Circulation&Parking Improvements $363,000
The next table lists unexpended balances of bond proceeds for projects that are completed. These funds
were borrowed,but the projects are complete and the remaining funds are available for re-appropriation to
finance capital projects.
Bond Description Available for Re-
Appropriation
2010-12A Replace Self-Contained Breathing Apparatus $122
2012-12D Culvert Repairs $1,288
2012-16K LHS Overcrowding $778
2013-10L DPW Equipment $25,100
TOTAL $27,288
40
APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
These unused funds will be appropriated in the motion for Article 15(p) Fire Headquarters Exercise
Room. Their application to that article will free up tax levy funds that will be applied to "Unallocated".
The Committee recommends approval of this request(6-0).
Article 21: Establish and Appropriate To and From Specified Stabilization
Funds
Funds Requested Funding Source Committee Recommendation
$3,100,000 General Fund Approve (6-0)
$2,012,434 Tax Levy
$5,112,434
The State statute authorizing towns to create and maintain a stabilization fund (G.L. c. 40, § 5B) was
amended in 2003 to permit the creation of stabilization funds for specified purposes. Multiple funds may
be created for different purposes. They are separate and independent accounting entities. Each specified
stabilization fund holds monies that may be appropriated for the stated purposes but not for other purpos-
es. Lexington's first specified stabilization funds were established at the 2007 Annual Town Meeting. A
history and description of these funds can be found in Appendix E.
An article similar to this one is now routinely included on the annual town meeting warrant to give Town
Meeting the opportunity to act in relation to specified stabilization funds. Town Meeting may create a
specified stabilization fund, alter a fund's specified purpose, or make an appropriation into or out of a
fund by a two-thirds majority vote. Appropriations into specified stabilization funds do not authorize ex-
penditures,but rather are transfers of funds into accounts for specified future uses.
Status of Funds and Appropriation Requests
The current balance of each fund, the amount recommended for appropriation into each fund, and the
amounts proposed to be withdrawn from each fund, are as follows:
Amount
Current Amount Warrant
Specified Stabilization Fund Balance Deposited Withdraw Article
Avalon Bay School Enrollment Mitigation Fund $45 $0 $0 —
Center Improvement District S.F. $86,666 $0 $0 —
Debt Service S.F. 893,379 $0 $124,057 Art. 23
School Bus Transportation S.F. $18 $0 $0 —
Section 135 Zoning S.F. $0 $0 $0 —
Special Education S.F. $1,075,612 $0 $0 —
Traffic Mitigation S.F. $69,129 $0 $30,000 Art. 10(q)
Transportation Demand Management S.F. $147,220 $0 $137,000 Art. 4
Transportation Management Overlay District S.F. $98,139 $0 $0 —
Capital S.F. $16,687,470 $5,112,434 $710,000 Art. 4
All deposits into specified stabilization funds are covered under this article. Withdrawals from these funds
are covered under the indicated articles.
The Transportation Demand Management Stabilization Fund was initially created to support the Lex-
press bus service. This motion will extend the purpose of this fund to "supporting the planning and opera-
41
APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
tions of transportation services to serve the needs of town residents and businesses."Under Article 4, this
fund will be used to support both Lexpress ($91,600) and the Rev Shuttle ($46,000). The Rev Shuttle is a
bus that runs between Hartwell Ave. and the Alewife MBTA station with an intermediate stop in front of
the Depot in Lexington Center. The Rev Shuttle is also funded by fares charged to riders and by annual
contributions from Hartwell Ave.businesses.
This article proposes to appropriate $5,112,434 into the Capital Stabilization Fund. The motion under
Article 4 will appropriate $710,000 out of that fund to offset within-levy debt service payments for the
Lexington High School modular additions.
As of press time there are no other monies to be transferred into these stabilization funds. However if any
payments are received prior to the vote on this article, those payments would be deposited into special
revenue accounts. The motion would then be revised to allow the Town Meeting vote to transfer the mon-
ey into the specified stabilization fund from those corresponding special revenue accounts.
The Committee recommends approval of this request(6-0).
Article 22: Appropriate to Stabilization Fund
Funds Requested Funding Source Committee Recommendation
None N/A IP
As of publication the Selectmen had made no recommendation for appropriation to the Stabilization
Fund. We support this decision as a part of the recommended budget and therefore we support the antici-
pated indefinite postponement of this article. A fund history can be found in the appendices of the Town
Manager's FY2017 Recommended Budget&Financing Plan.
The Committee anticipates that this Article will be indefinitely postponed.
Article 23: Appropriate from Debt Service Stabilization Fund
Funds Requested Funding Source Committee Recommendation
$124,057 DSSF Approve (9-0)
In August 2006, the Town received a lump-sum reimbursement of approximately $14 million from the
Massachusetts School Building Authority (MSBA) to cover its remaining obligation for construction pro-
jects previously completed at Clarke and Diamond Middle Schools and Lexington High School. The
Massachusetts Department of Revenue (DOR) required the Town to set aside the excess funds from up-
front reimbursements for those public school construction projects, and to apportion those funds over the
life of the bonds related to the projects to help fund the debt service obligations.
The 2009 Annual Town meeting voted to establish a specified stabilization fund under G.L. c. 40 Section
5B called the Debt Service Stabilization Fund(DSSF). The $1,739,894 remaining from the FY2007 set-
aside was then appropriated into the DSSF. This fund allows the Town to invest the set-aside bond pro-
ceeds beyond the one-year arbitrage limit that would otherwise apply. The required annual appropriations
from the DSSF will be completed in 2023.
The Committee recommends approval of this request(9-0).
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APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
Article 24: Appropriate for Prior Years' Unpaid Bills
Funds Requested Funding Source Committee Recommendation
None N/A IP
As of publication, the Committee was not aware of any unpaid bills from prior years.
The Committee anticipates that this article will be indefinitely postponed.
Article 25: Amend FY2016 Operating, Enterprise and CPA Budgets
Funds Requested Funding Source Committee Recommendation
Unknown Unknown Pending
A recommendation from the Town Manager, Town staff, and the Board of Selectmen regarding actions, if
any, under this article is not expected to be available until a date after the Annual Town Meeting com-
mences. Consideration of this article, which is routinely included in the annual town meeting warrant, is
normally deferred until a session near the end of town meeting to allow Town staff to gather the latest
data,project expenses for the fiscal year, formulate recommendations, and coordinate final adjustments to
the current year's budget in a single motion. This Committee will report on any recommended actions
when the article is taken up by Town Meeting.
The Committee has taken no position on this request.
Article 26: Appropriate for Authorized Capital Improvements
Funds Requested Funding Source Committee Recommendation
Unknown Unknown Pending
As of publication, no action is planned under this article. This Committee will make a report when the
article is taken up.
The Committee has taken no position on this request.
Article 27: Establish Qualifications for Tax Deferrals
Funds Requested Funding Source Committee Recommendation
None N/A Approve (7-0)
This article proposes to raise the income threshold for participation in the Town's tax deferral program
under G.L. c. 59, § 5, Clause 41A from $65,000 to $70,000. Under the deferral program, qualifying resi-
dents age 65 or older can defer payment of some or all of their property taxes, in an amount up to half the
value of their home,until the property is sold or otherwise disposed of. For general background on Clause
41A and other programs offering property tax relief to seniors,please see Appendix D to this Report.4
4 A brochure prepared by the Selectmen's Tax Deferral and Exemption Study Committee entitled Property Tax Re-
lief Programs is available on the Town web site: http://www.lexi ngtonma.gov/assessor
43
APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
The 41A Program and the Home Rule Amendment
Under generally applicable state law, the highest income threshold a Town may adopt for participation in
the 41A program is the limit established by the DOR each year under the state's Circuit Breaker program.
In 2008, Lexington obtained a home rule amendment allowing it to expand eligibility beyond that permit-
ted under the general laws. The special act permits the Town, by vote of Town Meeting and with the ap-
proval of the Selectmen, to set its own income limit for deferrals. Town Meeting most recently raised the
income threshold from S60,000 to S65,000 in 2013.
The Proposed Increase
This year, the Tax Deferral and Exemption Study Committee (DESC) has recommended that the Town
increase the threshold by an additional $5,000 to S70,000. The change is intended to help ensure that all
persons who have been participating in the program can continue to do so, and to allow more residents to
participate.
With a history of low utilization, and a participation rate that has not changed after previous income limit
increases, it is unlikely that this change will add significantly to the number of deferrals, or produce a ma-
terial impact on the Town's finances.
The Committee believes that the proposed increase in the threshold to S70,000 will offer needed property
tax relief to some moderate-income senior homeowners who cannot currently take advantage of the defer-
ral program. Given the nature of the program, which essentially involves well-secured temporary loans by
the Town, the financial risk to the Town is minimal.
The Committee recommends approval of this request(7-0).
Article 28: Accept Chapter 59, Section 2D of the MGL
Funds Requested Funding Source Committee Recommendation
None N/A IP
Chapter 59, Section 2D(a) of the MGL states in part:
Whenever in any fiscal year real estate improved in assessed value by over 50 per cent by new
construction is issued a temporary or permanent occupancy permit after January 1 in any year, the
owner of the real estate shall pay a pro rata amount or amounts, as herein defined, to the city or
town where such real estate is located that would have been due for the applicable fiscal year un-
der this chapter if the real estate had been so improved on the assessment date for the fiscal year
in which the occupancy permit issued.
In essence, this law allows the Town to more promptly update a property tax bill when the assessed value
of a property has changed. However, due to the way the law is written, it is not within the purview of
Town Meeting to accept this law. The Committee understands that the Article proponent will ask the Se-
lectmen to consider a change in the current policy regarding tax bills for new growth.
The Committee anticipates this article will be indefinitely postponed.
44
APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
Article 31: Amend General Bylaws — Contracts and Deeds
Funds Requested Funding Source Committee Recommendation
None N/A Pending
The purpose of this article is to update and clarify the Town's bylaw governing the maximum duration of
contracts that the Town staff and Board of Selectmen may approve without seeking further authorization
by Town Meeting.
State procurement law provides that local officials may not enter into any contract procuring or disposing
of supplies, services or real property for a term exceeding three years unless authorized by a majority vote
of Town Meeting. The authorization granted may be either on a contract-by-contract basis or across-the-
board for general categories of contract. Mass. Gen. Laws Ann. 30B, §§ 1, 12.
The current bylaw, Section 32-4 of the Code of Lexington ("Authorization to solicit, award and enter [in-
to] certain contracts"), was adopted in 2008 (and amended from time to time thereafter) to give the Town
staff and Board of Selectmen additional autonomy to contract without the need for Town Meeting ap-
proval, but with specified limits as to term. Under the structure of the existing bylaw, Town staff under
the supervision of the Town Manager can sign contracts for terms up to 3 years. Contracts for terms long-
er than 3 years and up to the specified limits (e.g., 10 years for the lease of equipment) may be entered
into with the approval of the Board of Selectmen alone. Anything beyond that must go to Town Meeting
for approval. All contracts requiring the expenditure of Town funds are subject to appropriation by Town
Meeting.
The proposed amendment to the Town bylaw would accomplish two main objectives.
First, it would increase the length of a contract term for which the Town, with the approval of the Board
of Selectmen only, may lease a public building from 20 years to 30 years. This is the maximum now al-
lowed under state law, G.L. c. 40, § 3 (as amended in 2010).
Second, it would clarify that the bylaw and its contract term limits—including the default limit of 5 years
for "all other contracts" — apply only to contracts governed by the state's Uniform Procurement Act,
Chapter 30B of the General Laws, and not to other kinds of contracts, the terms and duration of which
have traditionally been within the discretion of the Board of Selectmen and Town Manager or various
boards acting within their regulatory authority. Examples of such contracts are: inter-governmental
agreements, settlement agreements, copyright agreements, and subdivision covenants, some of which are
intended to be perpetual or very long-term.
Prior to publication, the final text of the proposed bylaw was not available for the Committee to review,
therefore the Committee has not taken a position on this article. The Committee will report its position
when this article is taken up.
The Committee has taken no position on this request.
Article 40: Amend Zoning Bylaw —Accessory Apartments
Funds Requested Funding Source Committee Recommendation
None N/A Disapprove (1-5-1)
The Planning Board proposes amendments to the existing Zoning Bylaw that authorizes accessory apart-
ments. The text of the current bylaw states its intent to increase the creation of small dwelling units in
Town, increase the range of housing types available, encourage population diversity, "with particular at-
tention to young adults and senior citizens," and encourage a more economic and energy-efficient use of
45
APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
the Town's housing supply while maintaining the appearance and character of one-family neighborhoods.
Currently, less than 200 accessory apartments exist in Lexington. The Appropriation Committee offers its
recommendation on this article because, in the opinion of a majority of the Committee, its adoption could
have a material impact on the Town's finances. We make related comments below in our report on Article
42.
The existing bylaw authorizes the creation of three types of accessory apartments: (1) a basic accessory
apartment, which must be located within the principal dwelling, not exceed 1,000 square feet of gross
floor area (GFA), and have no more than two bedrooms; (2) an expanded accessory apartment, which
must be located within the principal dwelling and must not exceed 40% of the gross floor area of the
dwelling, which must be of a size consistent with typical nearby one-family dwellings; and (3) an acces-
sory structure apartment with not more than 1,000 square feet of GFA, which is located in an accessory
structure on the same lot as a one-family dwelling. Both the expanded accessory apartment and the acces-
sory structure apartment require a special permit.
There are a number of conditions and requirements that currently apply to all three types of accessory
apartments. The proposed bylaw amendments would remove some of the conditions that the Planning
Board believes are unnecessary and limit the creation of accessory apartments. The amendments would
remove: restrictions on allowing roomers in the apartment; the requirement that the structure be connected
to public water and sewer systems; the requirement for particular types of off-street parking; a 10,000
square foot minimum lot size requirement; and the restriction that any structure containing an accessory
apartment must have been in existence for 5 years prior to the application to create an apartment. If Town
Meeting approves these amendments, a special permit will still be required to create expanded accessory
apartments and accessory structure apartments.
To the extent that passage of these amendments would lead to the creation of more basic or accessory
structure accessory apartments, this article raises some of the same concerns about population density de-
scribed below with respect to Article 42. These concerns are somewhat tempered for by-right accessory
apartments and accessory structure apartments by the 1000 square foot, two-bedroom size limit.
The Committee notes, however, that expanded accessory apartments can have more than two bedrooms,
could be quite large, might not meet the goal of creating small dwelling units, and, if many more are cre-
ated, could lead to population density challenges like those presented by two-family homes. The special
permit process ideally would help ensure that only proposed units that satisfy the intent of the bylaw will
be created; however, it is unclear whether the cumulative impact of such projects on the Town's finances
is a consideration that could be properly taken into account by the Board of Appeals.
Service need and budget impacts from this proposed bylaw change could be estimated on the basis of a
projection of the numbers of accessory apartments of each type that would be created over the next few
decades and the numbers and age distributions of the likely residents of such units. However, as we note
below for Article 42, there is no such projection with any plausible degree of reliability. Hence we do not
have good estimates of the impacts of the bylaw change. A basic first step would be to have a complete
detailed census and analysis thereof of the current complement of accessory apartments in Lexington.
The Committee supports the goal of creating more small, affordable dwelling units in Lexington, but is
not convinced that encouraging more accessory apartments, particularly expanded accessory apartments,
is an effective method to accomplish that goal. The Committee would like to see further in-depth study
and discussion of the likely economic and financial consequences in addition to the housing and popula-
tion consequences of this proposed bylaw change before recommending it.
The Committee recommends disapproval of this request(1-5-1).
46
APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
Article 41: Amend Zoning Bylaw — Gross Floor Area
Funds Requested Funding Source Committee Recommendation
None N/A None
The Town's existing bylaws regulate the size of residential construction primarily by a combination of
minimum setbacks from the lot boundaries, and caps on the total height with a maximum number of
floors allowed. The proposed bylaw would impose additional limits on the gross floor area of homes
based on the size of the parcel they occupy. The proposed changes are not unprecedented. Brookline and
Newton have limits on gross floor area that are comparable, or more restrictive, than the changes pro-
posed here. Concord is considering similar limits. Other communities in our region regulate home size by
constraining site coverage, or by requiring a site review process for homes exceeding some gross floor
area threshold. As of now, Lexington is one of the least restrictive communities in this regard.
New Growth
The Committee considered possible effects on the Town's property tax revenue as a result of the proposed
bylaws, particularly as regards "new growth". Under Proposition 21/2, the Town's levy limit grows by
2.5% annually, plus the amount of property tax attributable to "new growth". This "new growth" occurs
when an existing building is replaced by a new building with a higher assessed value, or when renova-
tions to an existing building result in a higher assessed value. "New growth" has factored strongly in the
Town's tax revenue growth for many years, in part due to the number of homes that are torn down and
rebuilt by developers each year,but also from growth and development in commercial real estate.
There are two scenarios that, in theory, could impact the Town's annual "new growth" figure under the
proposed bylaws. Assume that an owner wants to sell a residential property, and a developer is interested
purchasing it. The developer plans to tear down the house and construct a new house with the hope of
reselling it at a profit. However, there is another buyer who is interested in purchasing the house to use as-
is. The developer and the buyer make competing offers for the property.
The developer's offer is strongly influenced by the anticipated profit margin, which is roughly correlated
with the planned size of the new house. If the size of the house allowed under the proposed bylaws is
lower, then the developer's offer might be lower than the buyer's, in which case the buyer's offer wins
and there is no "new growth".
Alternatively, the developer may purchase the property and build a house smaller than would have been
allowed under the current bylaws. The increase in assessed value for the new house would be lower than
the theoretical maximum, producing less "new growth". However, developers are building new homes
today that already conform to the proposed bylaws, so it is hard to say how much of an impact this sce-
nario would produce.
Planning Board Analysis
The Planning Board has offered a rather complicated statistical analysis to predict the impact on "new
growth" tax revenue. The analysis is based on empirical data for Lexington home sales and teardowns in
2013, the most recent year for which comprehensive assessment data was available. It attempts to replay
the property transactions from that year as if the proposed bylaws were in effect, and it makes some sim-
ple assumptions about the resulting decisions by developers and buyers. Their analysis suggests that in
today's housing market, "new growth" could be reduced by around $200,000 annually, but also that in-
creasing competition for property would push the annual impact down to $100,000 in a few years. To put
those amounts in context, $200,000 is a little over one tenth of 1% of the tax levy in FY2016.
This analysis has some limitations. First, it did not consider the overall impact on assessed values that
might result from creating neighborhoods where the houses were generally constrained by the new by-
laws. In such a neighborhood, even though some of the houses would be smaller, the cumulative assessed
47
APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
value of all the properties might be greater by virtue of being located in an environment with more open
space and more proportionately sized houses. In other words, the whole can be worth more than the sum
of its parts, and if the total assessed value is maintained then the resulting tax revenue is also preserved.
The analysis also did not consider that, in many cases, a buyer will proceed to make additions or other
renovations that may generate "new growth,"albeit with less impact on the surrounding neighborhood.
Committee Comment
The consensus of the Committee is that the connection between the proposed bylaw and the ultimate im-
pact on tax revenue is full of complex and contradictory linkages all operating in a changing market. It
would be impossible to make financial predictions with any useful degree of certainty. Any conclusion
about the net financial impact on the Town is speculative, but we feel the proposed bylaw will not dra-
matically affect tax revenue. Furthermore, the annual volatility that we typically experience for "new
growth"from all types of property could easily overwhelm the financial impact from this change.
Thus, the Committee takes no position on this article from a financial perspective, and we urge Town
Meeting Members to consider its merits as a planning measure.
The Committee has taken no position on this article.
Article 42: Amend Zoning Bylaw — Two-Family Homes
Funds Requested Funding Source Committee Recommendation
None N/A Disapprove (1-6)
The Planning Board proposes an amendment to the Zoning Bylaw to permit the construction of two-
family homes by special permit in all districts in which one-family dwellings are permitted. Currently,
two-family dwellings may be built by right only in the RT district,which is a section along Massachusetts
Avenue east of Maple Street, and by special permit only in certain designated residential developments.
Less than 250 two-family homes exist in Lexington today. The Appropriation Committee offers its rec-
ommendation on this article because it believes its adoption could have a material impact on the Town's
finances.
The stated purpose of this bylaw change is to "increase the number of small dwelling units available in
the Town" and "increase the range of choice of housing accommodations." All existing dimensional con-
trols applicable to single-family homes, such as height limits, would apply to two-family structures. In
addition, the floor area ratio limits currently proposed under Article 41 would be written into Article 42
and would thus apply to two-family homes, even if Article 41 fails. This would help ensure that two-
family homes are built in proportion to their lot sizes, though it will not ensure that two-family homes are
"small dwelling units."For example, a lot on which a single home of up to 6000 square feet could be built
would support a two-family home comprised of two 3000 square foot units.
Without stricter size limits, it is unclear to this Committee whether such two-family homes would be sub-
stantially more affordable than the current housing stock or achieve the stated purpose of increasing the
number of small dwelling units in town. Though the Special Permit Granting Authority must take the
stated purposes of the bylaw into account, there is no guidance given on what constitutes a"small" dwell-
ing unit.
It is clear, however, that this bylaw change could lead to the creation of more housing units in Lexington,
potentially many more if permitted in any residential neighborhood. Allowing any housing lot to accom-
modate two households instead of one could lead to a significantly higher population density without a
correspondingly large increase in the Town's revenue base (the "new growth" value attributable to the
construction of a two-family home would not likely be double that of a single-family home). This, in turn,
could put severe pressure on town infrastructure and services like roads, traffic control, sewers, schools,
48
APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
recreational facilities, and public safety, some of which are already strained for space and resources.
There could also be implications for the Town's compliance with Chapter 40B.
The impact on operating and capital budgets from this proposed bylaw change could be estimated on the
basis of a projection of the numbers of two-family units that would be created per year over the next few
decades and the numbers and age distributions of changes in Lexington's population related to the bylaw
change. However, there is no such projection with any plausible degree of reliability and no expectation
that any such projection is feasible. Hence the impacts are impossible to predict; they could be quite large
and significant. As we note above for accessory apartments, a basic first step would be to have a complete
detailed census and analysis thereof of the current complement of two-family buildings in Lexington.
It is not clear that the special permit process would take issues of population density or infrastructure into
account. Because of the risks to the short and long-term financial stability of the Town, this Committee
does not believe that the Planning Board's proposal to allow two-family housing by special permit in any
residential neighborhood is prudent without further in-depth study and discussion of the likely economic
and financial consequences in addition to the housing and population consequences.
Minority View
The potential fiscal impacts, i.e. concerns about tax revenues, increased pressure on municipal services,
and tighter school budgets, are all valid considerations, but they should not be the only considerations.
Lexington benefits from a diverse community, which depends in part on offering a range of housing
types. Recently, residential construction has focused on the high end of the market, with few if any new
housing units affordable to middle-income buyers. If Lexington were to set a goal to encourage construc-
tion of more modestly sized housing units for middle-class families, then the budget could be planned
with that objective in mind.
The Committee recommends disapproval of this article (1-6).
49
APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
Appendix A: 3-Year Budget Projection
This projection is offered to explore the financial challenges that Lexington will face in the next three
years. The projection is also an opportunity to obtain a better qualitative as well as quantitative under-
standing of known trends and cost drivers.
The creation of a revenue and expense projection differs in both method and purpose from the creation of
a balanced budget. In a budget, one plans conservatively to avoid both over-spending and under-funding,
either of which could necessitate harsh remedies in the middle of a fiscal year. For this projection, we
make rough estimates of future revenues and expenses, regardless of how they might impact the overall
fund balance. The resulting figures do not represent actual revenue or spending targets.
We assume that modest economic growth continues in FY2018, FY2019, and FY2020. We are aware that
we may soon exit a period of unusually low inflation. Those assumptions suggest some uncertainty in the
near future that will impact the accuracy of our projections.
We have adopted some key assumptions as the basis for the projection presented herein using limited in-
vestigations to establish their plausibility. We note below the most important aspects.
Revenue Assumptions
• The tax levy is assumed to grow annually by 2.5% of the previous year's base and by an added
amount for "new growth". No increase in revenues from Proposition 21/2 operating overrides are in-
cluded, since none are currently contemplated during the projection period.
• New growth, i.e., the increase in the tax levy from new construction and new personal property,
peaked at over $3,500,000 in FY2013 and then dropped about 15% in FY2014. It continued to drop
another 4% in FY2015 and again in FY2016. This recent history of new growth exemplifies the vola-
tility of this factor. In light of this, the model straight-lines new growth using a number slightly less
than the midpoint of the 10-year(FY2007-2016) and 15-year(FY2002-2016) average.
• State aid is assumed to increase by 5% annually, driven primarily by increasing school enrollments
leading to increased Chapter 70 aid.
• Available Funds are projected at lower levels than historical and present levels due to uncertainty re-
garding Free Cash. Available Funds for the previous five fiscal years (2013 through 2017) ranged
from a low of $11 million for FY2015 to a high of $15.6 million for FY2016, yet the average of
available funds for fiscal years 2005 through 2010 was below $3.3 million. The most volatile, and
largest component of Available Funds is Free Cash; monies received but not expended or encum-
bered. Free Cash is project here at $5.7 million for FY2017-2019 with $4 million applied to the oper-
ating budget and the remaining $1.7 million applied to cash capital.
The more stable parts of Available Funds include the Parking Fund and the Cemetery Fund. They are
assumed to be $335,000 and $105,000, respectively. Additionally we've included the town manage-
ment's recommendation that, for FY2018 and FY2019, $1.2 million will be transferred out of the
Health Claims Trust Fund for health insurance premiums, thereby freeing up the same amount to fund
the Post Employment Insurance Liability (aka OPEB) Trust Fund. To maintain some flexibility in fu-
ture health benefits spending,no further transfers from this fund are recommended after FY2019.
• We have illustrated projected transfers from the Capital Stabilization Fund to mitigate within-levy
debt service. Our projection currently shows transfers of $689,000 in FY2018, $1,146,000 in
FY2019, and $570,000 in FY2020. Additional appropriations from this fund are anticipated to miti-
gate the tax impact from excluded debt service for the proposed school capital program.
• Revenue offsets include amounts from Cherry Sheet assessments that are assumed to grow by 3.5%
annually, amounts for the Assessors' overlay ($750,000 annually in FYs 2019 and 2020; and
50
APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
$900,000 in FY2018, a revaluation year), and $300,000 that is set aside annually for potential deficits
in the snow and ice budget.
• Water and Wastewater Enterprise Fund indirect expenses are assumed to increase by 3% annually.
Recreation Enterprise Fund indirect expenses are assumed to increase by $5,000 per year. Additional-
ly, in FY2017 Recreation Enterprise Fund expenses will be offset by $253,007 in tax levy funding for
Community Center operations personnel. This expense will grow by 1.3% annually to accommodate
step increases, and the tax levy funding will increase with at that pace also.
Expense Assumptions
• Line items for FY2018-FY2020 do not include increases for unsettled cost-of-living adjustments
(COLAs) for salaries and wages. The potential impact of COLAs of different sizes initiated in
FY2018 is summarized at the end of the projection tables.
• The Lexington Public Schools personnel costs are assumed to increase by 2% annually for step
changes. Enrollment driven increases are based on the midpoint of school administration projections
showing enrollment growth of 1.2% in FY2018, 1.85% in FY2019 and 1.72% in FY2020. An in-
crease in enrollment of 1% is estimated to require a staffing increase of 14.38 FTE's at $53,000 per
FTE, an increase of approximately $762,000 in the operating budget.
• The Lexington Public School expenses for programs other than special education are assumed to in-
crease by 3% per year. Special education expenses for out-of-district tuition are net of the State Cir-
cuit Breaker reimbursement and are assumed to increase by 5% annually, while the expenses for spe-
cial education consultants and out-of-district transportation are assumed to increase by 3%per year.
• Municipal personnel costs are assumed to increase by 1.3% annually for step changes.
• Municipal expenses are assumed to increase by 3%per year.
• The assessment for Lexington's share of expenses for Minuteman Career and Technical High School
is assumed to increase by 4.5% per year. Additional debt service payments for capital improvements
will be $128,000 in FY2018 and $162,000 in FY2019 and FY2020, with debt payment of over
$550,000 in FY2020.
• Appropriations for current and future contributory pension payments are assumed to follow the
schedule set up by the Retirement Board following the most recent actuarial evaluation of pension
costs. These costs are $5,755,537 in FY2018, $6,005,537 in FY2019 and $6,255,537 in FY2020.
• Health insurance costs are assumed to increase annually by 5%. While this growth is primarily driven
by anticipated increases in school staffing due to enrollment, the combination of inflation and other
staffing growth also contribute.
• Non-exempt debt service costs are assumed to support annual debt-funded project appropriations that
will grow at the rate of 5%per year. That translates to project cost in FY2018 of$6,100,000, FY2019
of$6,400,000 and FY2020 of$6,700,000. Debt costs are shown as unmitigated debt payments. The
proposed mitigation payments are described in the revenue section.
• Dept. of Public Facilities costs include salaries and wages (assumed to grow by 1.3% annually for
step changes),utility bills, and other expenses (assumed to grow by 3% annually). Utility costs are as-
sumed to increase by 1.5% annually.
• Expenses for cash capital are assumed to include amounts for road and building envelope mainte-
nance (following from prior operating overrides) that increase annually by 2.5%, as well as the
amount of$1,700,000 from Free Cash for other capital expenses.
• No new funds will be appropriated into the general Stabilization Fund or to the Capital Stabilization
Fund after the current fiscal year.
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APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
• Other expenses are assumed to include $30,000 annually for the senior tax work-off program;
$110,000 of revenue set aside as a hedge for State or Federal aid reductions; $200,000 set aside for
unanticipated current fiscal year needs, and annual $1,200,000 contribution to the trust fund for future
costs of health insurance for retired employees in FY2018 and FY2019.
• The offsetting revenues and expenses for revolving funds, grants, and enterprise fund operations, ex-
cept the Recreation Enterprise Fund, are projected using the 5-year trend from FY2012-2016. Reor-
ganization of the Recreation Enterprise Fund in FY2017 increased its base budget ($453,007 in per-
sonal services) and those costs are now layered on top of the 5-year trend line. Enterprise capital is
projected using the five averages for FY2012-2016.
• The projection contains no set-asides for unidentified new programs.
The projection for FY2018 shows an increase of approximately $1,558,000 in total General Fund reve-
nue. This increase is significantly lower than the projected $5,375,000 increase in the FY2017 General
Fund revenue because we expect there will be a large decrease in Free Cash (the largest component of
Available Funds) compared to the FY2017 budget. Free Cash results from an excess of actual revenues
over actual expenditures. Traditionally, when additional Free Cash becomes available it is not used to
fund operating expenses, but is applied to one-time expenses such as capital projects or stabilization
funds.
The projection shows General Fund revenue growth of $8,270,000 in FY2019 falling to $6,090,000 in
FY2020. The drop in FY2020 revenue is due to discontinuing transfers from the Health Trust Fund, dis-
cussed above in the revenue section.
School budgets will be greatly affected by enrollment growth. This model is based on School Department
enrollment projections that offer predictions with a great deal of uncertainty. Recent history has shown
that enrollments matched or exceeded the projections, and annual growth could hit 4%.
COLAs of 1% in FY2017 for the schools, municipal departments, and Public Facilities Department would
increase their respective budgets by $844,000, $237,000 and $53,000. Note that we have adjusted our
FY2018 school COLA line to reflect an existing Teachers Union agreement that runs through the end of
that fiscal year. Our table illustrates the cumulative effect that COLAs of varying percentages would have
on reducing any surpluses for FY2018-2020.
Revenue Summary FY2015 FY2016 FY2017 FY2018 FY2019 FY2020
actual recap budgeted projected projected projected
Property Tax Levy $141,843,658 $148,286,733 $154,769,047 $161,138,273 $167,816,730 $174,662,148
Allowable 2.5%inc. $3,546,091 $3,709,681 $3,869,226 $4,028,457 $4,195,418 $4,366,554
New Growth $2,896,983 $2,772,633 $2,500,000 $2,650,000 $2,650,000 $2,650,000
Excess Levy Capacity ($74,194) ($18,897) $0 $0 $0
Tax levy limit $148,212,539 $154,750,150 $161,138,273 $167,816,730 $174,662,148 $181,678,702
State Aid $11,193,462 $11,568,637 $11,804,630 $12,394,862 $13,014,605 $13,665,335
Local Receipts $13,756,778 $11,880,214 $12,130,550 $12,312,508 $12,497,196 $12,684,654
Available Funds $11,012,293 $15,654,839 $13,093,204 $7,340,000 $7,340,000 $6,140,000
Debt Svc.Mitigation $919,000 $620,567 $710,000 $689,000 $1,146,000 $570,000
Revenue Offsets ($2,492,221) ($2,905,154) ($1,943,061) ($2,107,695) ($1,989,464) ($2,022,346)
Enterprise Funds(Indirect) $1,487,905 $1,617,576 $1,629,135 $1,675,574 $1,723,257 $1,772,220
Total General Fund $184,089,756 $193,186,829 $198,562,731 $200,120,979 $208,393,741 $214,488,565
Other Revenues
Revolving Funds $2,292,723 $3,096,176 $3,434,532 $2,605,895 $2,605,895 $2,605,895
Grants $102,916 $103,000 $99,841 $100,497 $100,497 $100,497
Enterprise Funds $21,116,857 $23,066,866 $21,917,810 $22,121,035 $22,757,334 $23,393,667
Sub-Total Other Revenues $23,512,496 $26,266,042 $25,452,183 $24,827,426 $25,463,725 $26,100,058
Total Revenues $207,602,252 $219,452,871 $224,014,915 $224,948,405 $233,857,466 $240,588,623
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APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
Expense Summary FY2015 FY2106 FY2017 FY2018 FY2019 FY2020
actual recap budgeted projected projected projected
Education
LPS Wages $73,057,650 $78,627,324 $81,785,398 $84,497,027 $86,596,926 $88,639,745
LPS Expenses $6,728,472 $7,118,010 $7,980,101 $8,219,504 $8,466,089 $8,720,072
Out-of-District SPED $5,486,679 $6,314,982 $7,527,800 $8,146,254 $8,532,518 $8,937,463
Lex.Pub.Schools $85,272,801 $92,060,316 $97,293,299 $100,862,785 $103,595,533 $106,297,281
Minuteman Reg.School $1,244,384 $1,172,735 $1,377,449 $1,567,434 $1,666,209 $1,950,703
Sub-Total Education $86,517,185 $93,233,051 $98,670,748 $102,430,219 $105,261,742 $108,247,983
Municipal
Municipal Wages $21,570,546 $22,963,067 $23,408,984 $23,713,301 $24,021,574 $24,333,854
Municipal Expenses $10,490,156 $10,631,203 $11,127,736 $11,461,568 $11,805,415 $12,159,578
Sub-Total Municipal $32,060,702 $33,594,270 $34,536,720 $35,174,869 $35,826,989 $36,493,432
Shared Expenses
Benefits&Insurance $27,630,669 $32,423,750 $33,607,231 $35,307,314 $37,081,563 $38,933,885
Debt(within-levy) $6,523,281 $7,212,135 $7,199,028 $7,497,303 $8,291,414 $8,068,890
Reserve Fund $0 $900,000 $900,000 $900,000 $900,000 $900,000
Facilities $9,894,474 $10,078,632 $9,984,116 $10,120,483 $10,302,989 $10,489,119
Sub-Total Shared Expenses $44,048,424 $50,614,517 $51,690,375 $53,825,100 $56,575,965 $58,391,894
Capital&Reserves
Cash Capital $5,958,117 $4,642,987 $5,554,789 $4,532,018 $4,601,568 $4,672,857
Capital Stabilization Fund $5,910,726 $9,447,832 $5,112,434 $600,000 $600,000 $600,000
PEILFund(OPEB) $1,119,000 $1,200,000 $1,512,318 $1,500,000 $1,500,000 $300,000
Other $20,000 $256,836 $483,007 $590,000 $590,000 $590,000
Other(unallocated) $983,262
Capital&Reserves Total $13,007,843 $15,547,655 $13,645,810 $7,222,018 $7,291,568 $6,162,857
Total Oper,Cap&Res $175,634,154 $192,989,493 $198,543,653 $198,652,206 $204,956,264 $209,296,166
Revolving Funds $2,292,723 $3,096,176 $3,434,532 $2,605,895 $2,605,895 $2,605,895
Grants $102,916 $103,000 $99,841 $100,497 $100,497 $100,497
Enterprise Funds
Water $8,394,546 $9,124,336 $9,890,441 $8,953,774 $9,439,938 $9,926,102
Wastewater(Sewer) $8,928,944 $8,673,199 $8,938,082 $8,864,882 $9,012,383 $9,159,885
Recreation $1,739,367 $2,601,831 $2,626,287 $2,922,862 $2,928,828 $2,934,871
Enterprise Capital $2,054,000 $2,667,500 $463,000 $1,635,813 $1,635,813 $1,635,813
Enterprise Funds Total $21,116,857 $23,066,866 $21,917,810 $22,377,331 $23,016,962 $23,656,670
Total Expenses $199,146,650 $219,255,535 $224,014,915 $223,735,928 $230,679,617 $235,659,227
Balance (w/o COLA) $8,455,602 $197,337 $0 $1,212,478 $3,177,849 $4,929,396
COLA Projection FY2017 COLA Projected Balance(Deficit)for COLAs
implemented in FY2018
Each 1%COLA for schools $844,970 1% $321,984 $1,140,465 $1,733,652
Each 1%COLA for municipal $237,133 2% ($568,510) ($919,630) ($1,530,905)
Each 1%COLA for public facilities $53,432 3% ($1,459,004) ($3,002,436) ($4,864,957)
Incremental Expense for 1%COLA $1,135,535
*There are no contracts settled for FY2018 or beyond, except LEA for FY2018.
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APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
Appendix B: Enterprise Funds
The Town of Lexington has maintained Water, Wastewater (Sewer), and Recreation Enterprise Funds
since the state legislature enacted legislation authorizing such funds, G.L. c. 44, § 53F /z, in the late
1980's. An enterprise fund "establishes a separate accounting and financial reporting mechanism for mu-
nicipal services for which a fee is charged in exchange for goods or services. Revenues and expenses of
the service are segregated into a fund with financial statements separate from all other governmental ac-
tivities" and are accounted for on an accrual basis.' An enterprise fund provides management and taxpay-
ers with information to: measure performance, analyze the impact of financial decisions, and determine
the cost of providing a service. Enterprise funds may be operated on a stand-alone basis or subsidized by
the General Fund.
The Water and Wastewater Enterprise Funds operate on a completely stand-alone basis. These funds do
not rely on any tax-levy revenues,but cover their complete operating and capital needs with user charges
and fees. The Recreation Enterprise Fund is only partially stand-alone. It covers its operating costs with
user charges and fees and contributes to the debt service on certain recreation capital projects (in particu-
lar, the Lincoln Field restoration project). However, most recreation capital costs are subsidized by the
General Fund through a combination of within-levy borrowing, Community Preservation Act (CPA)
funding, and debt exclusion funding.
Establishing the Enterprise Fund Budgets
At the Annual Town Meeting each year, Town Meeting appropriates a budget for each of the three enter-
prise funds for the upcoming fiscal year. Later in the year (in the early fall in the case of the Water and
Wastewater Enterprise Funds), user charges are set that are designed, based on projections of usage for
the fiscal year, to be sufficient to cover the appropriations made by Town Meeting to run the enterprises.
Depending on the accuracy of the usage projections, the actual revenue realized by the enterprise during
the year may exceed or fall short of the appropriated amount. Any operating surplus must be retained in
reserve in the enterprise fund. The funds accumulated in that reserve (referred to as "retained earnings")
may be applied only to meet the capital needs of the enterprise or to reduce user charges. Any operating
loss (after applying any accumulated reserves in the fund)must be made up in the succeeding fiscal year's
appropriation.
Since FY2007, the Annual Town Meeting Warrant has contained a separate Article for the appropriation
of the enterprise fund operating budgets (previously, appropriations for the enterprise funds were com-
mingled with those for the General Fund). This presentation makes it easier to understand the operating
budgets of the enterprise funds. However, it should be noted that certain indirect costs that are charged by
the General Fund to the enterprise funds (see discussion below) are still appropriated as part of the munic-
ipal operating budget, this year in Article 4. For the complete operating costs of the enterprise funds, in-
cluding indirect costs, see the Brown Book sections on Water, Wastewater, Recreation.
To present a more meaningful picture of the complete enterprise fund operating budgets, the tables in-
cluded in the write-up of this article have been expanded from those presented in the Warrant to show the
indirect as well as the direct costs of the funds. Debt service costs for previously approved capital expend-
itures are shown in the enterprise fund operating budgets. However, it should be noted that appropriations
for capital needs of the enterprises, whether funded by cash or borrowing, are addressed in separate capi-
tal Warrant articles.
'DOR Enterprise Funds Manual(April 2008)
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Appendix C: Revolving Funds
Ordinarily, revenue received by any municipal department must be deposited in the General Fund, and
cannot be expended for any purpose without further appropriation by Town Meeting. A revolving fund
allows Town Meeting to dedicate in advance a specific source of anticipated revenue from fees and
charges, on an ongoing basis and without the need for further appropriation, to pay expenses for rendering
the services for which those fees and charges are collected.
Revolving funds managed by municipal departments are generally governed by G.L. c. 44, § 53E1/2.
(There are also a number of revolving funds managed by the School Department, such as the School
Lunch Fund, which are governed by other statutes and are not within the control of Town Meeting.) Un-
der Section 53E1/2, a municipal revolving fund can be established only by vote of Town Meeting.
That authorization must be renewed prior to each succeeding fiscal year. The authorization must specify:
• The purpose(s) for which monies deposited in the fund may be used
• The source(s) of funds to be deposited
• The board, department or officer authorized to expend monies from the fund
• A limit on the total amount that may be expended from the fund in the ensuing fiscal year
Expenditures may not be made, nor liabilities incurred, in excess of the balance of the fund. If a revolving
fund is reauthorized, any balance in the fund may be carried over to the next fiscal year. If a revolving
fund is not reauthorized, or if the purposes for which the money in the fund may be spent are changed, the
balance in the fund reverts to the General Fund at the end of the fiscal year unless Town Meeting votes to
transfer the funds to another duly established revolving fund.
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Appendix D: Tax Relief Programs
In early 2004, the Board of Selectmen created an ad hoc Tax Deferral and Exemption Study Committee to
explore ways in which the property tax relief available to senior citizens and other needy residents could
be enhanced and made more accessible. Since then, Town Meeting has taken a succession of steps to ex-
pand such relief, for the most part maximizing the options that the Town is allowed to adopt under exist-
ing state law and, in some cases, increasing opportunities for tax relief beyond those that would ordinarily
be available under state law.
The principal programs for tax relief now available to Lexington homeowners are:
• A state income tax "Circuit Breaker"program providing a state tax credit for low- and moderate-
income homeowners and renters age 65 and over.
• "41A", a tax deferral program, under which low-to-moderate-income homeowners age 65 or over
may defer any or all of their property tax due, after applying any available exemptions, up to half
the value of their house, at an interest rate equal to the Town's cost of funds (see table below),
until the house is sold or transferred, G.L. c. 59, § 5, cl. 41A.
• "41C", a tax exemption program, under which homeowners age 65 or over with limited income
and limited assets other than the value of their home may deduct $1,000 from their annual proper-
ty tax, G.L. c. 59, § 5, cl. 41C1/2.
• A locally-controlled Senior Service program, adopted by Town Meeting in 2006.
• A Community Preservation Act surcharge exemption program.
State Income Tax"Circuit Breaker"
Low- and moderate-income homeowners age 65 and over whose homes have an assessed valuation not
greater than a specified ceiling may obtain a tax credit on their state tax returns (see table below). Renters
are also eligible for a tax credit. The actual credit received depends on income and real estate tax pay-
ments. This program is administered by the Massachusetts Department of Revenue and has no direct im-
pact on Town finances.
The "41A"Deferral Program
This program, although it has not been widely used, is an important tool for tax-relief because it offers
immediate and substantial property tax relief to seniors with significant equity tied up in a residence.
Those who qualify may defer any part or all of their property tax for a given year,up to a cumulative total
of half the assessed valuation of their house, at a very generous interest rate. The deferred taxes are even-
tually paid when the property is sold or transferred. The interest rate is based on a floating Treasury rate
equivalent to Lexington's cost of funds in the year of deferral (capped at 8% but normally less than 1%),
which remains in effect for the life of each year's deferral(see table below).
The 41A deferral program is an attractive form of tax relief from the Town's point of view because it is
essentially revenue-neutral. While the unlikely event of a significant increase in the number of partici-
pants in any particular year could potentially create a short-term cash flow problem, the Town is in effect
making well-secured loans. The Town should eventually be repaid all the funds that are deferred with in-
terest, and over time an equilibrium should be reached under which as many deferral agreements are re-
paid as are entered into.
The total amount of deferred taxes now carried by the Town as accounts receivable is shown below.
The "41C"Exemption Program
For many years, the Town has made available to qualifying seniors a property tax exemption under
Clause 41 of G.L. c. 59, §5, and its successor, Clause 41C. Under the "41C"Program, the Town receives
partial reimbursement from the State for exemptions defined under the program, subject to appropriation.
The portions of the exemptions that are not reimbursed are funded from the Town's overlay account.
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APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
Prior to 2004, the amount of the credit was limited to $500 per year and eligibility criteria were quite re-
strictive. Since then, the Town has taken a number of steps to expand both eligibility and the credit
amount. Taking advantage of new local options made available by the legislature in 2002, Town Meeting
voted in 2004 to:
• Increase the amount of the exemption to $750.
• Lower the age of eligibility from 70 to the minimum allowed age of 65.
• Increase the income threshold from $13,000 (single)/ $15,000 (married) to the maximum allowed
amount of$20,000 (single)/$30,000 (married).
• Increase the threshold for personal assets, not including the home, from $28,000 (single) /
$30,000 (married) to the maximum allowed amount of$40,000 (single)/$55,000 (married).
In 2005, Town Meeting voted to adopt the provisions of G.L. c. 59, § 5, Clause 41D, which automatically
adjusts the income and asset limits for Clause 41C (but not the exemption amount) by a COLA estab-
lished annually by the state Department of Revenue. The current income and asset limits are detailed in
the table below.
In 2006, Town Meeting voted to increase the exemption to the maximum allowable amount of$1,000.
The Senior Service Program
Low-income seniors may perform volunteer work for the Town in exchange for a reduction in their prop-
erty tax, currently up to a maximum credit of$1,045 for an individual, or a maximum credit of$1,330 for
a two-person household. The Senior Service program, formerly funded from the overlay account, is now
funded as part of the Town's annual budget, and is subject to appropriation.
In 1999, the Legislature authorized cities and towns,by accepting G.L. c. 59, § 5K, to offer residents, age
60 and over, the opportunity to reduce their property-tax obligation by up to $500 in exchange for com-
munity service.6 Lexington, which had earlier maintained its own program, accepted this statute shortly
after it was enacted. The statute allows towns to set rules and procedures for their implementation, but
limits participation to persons age 60 or over, and also limits the hourly credit to the state's minimum
wage of$8/hour.
In 2006, Town Meeting voted to rescind its acceptance of the statewide senior property tax work-off pro-
gram under G.L. c. 59, § 5K, and to replace it with a locally controlled program. This gave the Town the
flexibility to:
• Allow participation by persons under age 60, such as the disabled and handicapped,who might be
able to benefit from the program
• Pay a wage in excess of the minimum wage
• Allow a higher amount to be credited against a participant's property tax bill
Although the Board of Selectmen has the authority to expand eligibility to persons under age 60 who are
disabled or handicapped, it has not yet done so. The current qualifications are detailed in the table below.
CPA Surcharge Exemption
Low-to-moderate income homeowners age 60 or over, and low-income homeowners under age 60, may
obtain a 100% exemption from the CPA surcharge on their property tax. These exemptions directly re-
duce the amount of CPA revenue that the Town receives.
6 In 2002,the maximum amount of the Section 5K credit was increased to $750. In 2009 it was increased to $1,000,
and the 2010 Municipal Relief Act added a provision allowing towns to adopt a local option to set the limit at 125
hours of service at the prevailing minimum wage (now $8.00 per hour), which would automatically increase the
limit if the minimum wage increases.
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APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
Tax Relief Programs—Limits and Qualifications as of January 2014
State Income Tax Circuit Breaker
Maximum assessed valuation $691,000
Maximum tax credit for renters $1,050
41C Property Tax Exemption for Seniors Single Married
Income Limit $25,485 $38,230
Assets Limit $50,974 $70,088
Limits and Qualifications as of 2015
41A Property Tax Deferral
Interest rate on taxes deferred in 2014 0.25%
Total accounts receivable for deferred taxes $881,716.63
Senior Service Program Single Couples*
Income eligibility $53,000 $55,000
Maximum benefit (110 hours) $1,045 (140 hours) $1,330
Hourly Rate $9.50 $9.50
*Couples living in the same household.
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APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
Appendix E: Specified Stabilization Funds
The state statute authorizing towns to create and maintain a stabilization fund, G.L. c. 40, section 5B, was
amended in 2003 to permit the creation of multiple, separate stabilization funds for specified purposes.
The creation of such funds, the specification of their purpose, any alteration of their purpose, and any ap-
propriation into or out of the funds, must be approved by a two-thirds vote of Town Meeting at an Annual
or Special Town Meeting. To supplement its general Stabilization Fund Lexington has created several
specified stabilization funds,which are described below.
At the 2007 Annual Town Meeting, four specified stabilization funds were established to replace certain
pre-existing special revenue accounts. Monies in the special revenue accounts, funded by negotiated
payments from developers, had previously been spent without specific appropriation. In order to comply
with Massachusetts Department of Revenue guidelines, and to make the existence and use of the funds
more transparent, monies in the special revenue accounts were transferred to the following specified sta-
bilization funds,where they are now subject to review and appropriation by Town Meeting:
Transportation Demand Management/Public Transportation (TDM/PT) S.F.: Contains payments negoti-
ated with developers to support the operations of Lexpress.
Traffic Mitigation (TM) S.F.: Contains payments negotiated with developers to support traffic mitigation
projects, such as improvements to signals and pedestrian access at intersections, including funds previous-
ly contained in the Avalon Bay TDM special revenue account.
School Bus Transportation S.F.: Supports daily school bus operations, and was originally funded with
$200,000 contained in the Avalon Bay School Bus Transportation special revenue account.
Section 135 Zoning Bylaw S.F.: Created to finance public improvements using monies contributed by de-
velopers pursuant to Section 135 of the Code of Lexington.
At the 2008 Annual Town Meeting, the Special Education Stabilization Fund was created to set aside re-
serves to help cover unexpected out-of-district special education expenses that exceed budget. A related
goal was to enhance transparency around the out-of-district special education budget component by seg-
regating this expense item and bringing budget overruns to Town Meeting for its approval. This fund was
created in FY2009 with an initial appropriation of$350,000 and another $350,000 was appropriated to the
fund at the spring 2009 Annual Town meeting. The current target level for this fund is $1,000,000.
At the 2009 Annual Town Meeting the Center Improvement District Stabilization Fund was created and
was funded by a $100,000 payment received from the developer of Lexington Place in FY2010. The
funds may be used for projects such as tree planting, sidewalk improvements to the abutting connector
between the parking lot and the sidewalk.None of these funds have been appropriated yet.
At the 2011 Annual Town Meeting two more funds were created:
Avalon Bay School Enrollment Mitigation Fund: funded with a $418,900 payment received from Avalon
Bay pursuant to an Education and Trust Fund Escrow Agreement dated May 31, 2006. The terms of that
agreement called for the establishment of an escrow fund in the amount of$750,000 with disbursements
made to the Town annually if the number of students residing at the development (Avalon at Lexington
Hills) exceeded 111. The amount payable per student in excess of 111 was $7,100. The fund has been
almost fully withdrawn, leaving only a negligible residual balance.
Transportation Management Overlay District Fund(TMOD): funded by payments from those developers
who choose to pay a transportation mitigation fee rather than taking responsibility for improving all the
intersections in the area to a certain level as provided in Section 135-43.0 of the Zoning Bylaw. Per Sec-
tion 135-43.C(5)(c) "any transportation mitigation fees paid to the Town are intended to be used to fund
infrastructure improvements that are necessitated by the proposed development of the applicant."
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APPROPRIATION COMMITTEE-ATM 2016&STM 2016-3
At the 2012 Special Town Meeting, the Debt Service/Capital Projects/Building Renewal S.F. was created
to set aside funds for future capital projects, including but not limited to building renewal projects, and/or
to mitigate the impact on taxpayers of debt service, both excluded and non-excluded, related to capital
projects.
Current Town policy has a goal of keeping debt service at approximately 5% of total revenue. When the
Town must issue a particularly large bond, such as was needed for the new Estabrook School construction
combined with the Bridge and Bowman school renovations, the Town's debt service rises sharply. This
rise is typically followed by a period of lower growth in debt service while the Town pays down its exist-
ing debt, and limits additional borrowing, until debt service converges back on the goal of 5% of total
revenue.
Rather than adding the higher debt service directly into the tax levy, this fund allows the Town to smooth
the impact of sudden increases in debt service on property tax bills. Town Meeting can set aside funds in
periods when the Town has a surplus, and in later years these funds can be appropriated to directly reduce
annual debt service,which in turn reduces the amount that must be raised in the tax levy.
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APPROPRIATION COMMITTEE-2016 ATM&STM 2016-3
Appendix F: Other Post Employment Benefits
The OPEB Liability
The Town of Lexington is required by State law to provide health benefits to retired employees that are
comparable to those provided for active employees. These and other retirement benefits that are distinct
from the pension benefits earned by many retirees are known as "other post-employment benefits" or
OPEB for short. Health care benefits are by far the largest component of OPEB. Currently, about 80% of
retirees are eligible for Medicare and receive Medicare supplement coverage from the Town. The remain-
ing retirees receive full coverage from the Town, either because they under 65 years old or because they
do not qualify for Medicare for other reasons.
Because the Town is obligated to provide these benefits in the future, the anticipated costs over the life-
time of the current and future retirees represent a financial liability for the Town. Two factors drive the
size of this liability, one adding to it while the other reduces it. After ten years of full-time employment
with the Town, employees become eligible for a pension and all future retiree health benefits. At these
ten-year anniversaries, the Town's OPEB liability increases by an amount that can be estimated based on
the expected number of years the employee will receive retirement benefits, and the expected cost of
providing those benefits in the future. Conversely, as the Town pays for benefits to retirees each year, a
slice of the accrued liability is eliminated.
In a simpler world, i.e. a world where the number of retirees was not growing and medical costs did not
outpace inflation, the size of the OPEB liability (in inflation-adjusted dollars) would be relatively stable,
because the increases and decreases would tend to balance out. In practice, however, the inflation-
adjusted value of the OPEB liability generally increases each year, because of the increasing cost of
health care, the growth in the number of retirees receiving benefits, and the upward trend in longevity.
The Post Employment Insurance Liability (PEIL) Fund
The PEIL Fund was created pursuant to authority granted to the Town through a special act of the Legis-
lature in 2002. The Fund was created to allow the Town, at the discretion of Town Meeting, to set aside
funds to pay for future retiree health benefits. Once money has been appropriated into the PEIL Fund,
Town Meeting may only appropriate money out of it to pay for health care costs of retirees.
The Retirement Board is responsible for the management of the PEIL Fund as well as the Retirement
Fund, which supports the Town pension system. The rules governing the management of these two funds
are similar and, unlike most other Town monies,both of these funds can be invested in equities to yield a
higher risk/return ratio suitable for long-term growth.
GASB 45 and the choice of a discount rate
Under Government Accounting Standards Board statement 45 (GASB 45), the actuarial value of the
Town's OPEB liability is revised every two years and the results must be included in the Town's financial
statements. Bond rating agencies have consistently asked about this report since it became available, sug-
gesting that the size of the OPEB liability, and its current funding level, factor into the Town's bond rat-
ing.
Estimating the present value of a complicated long-term liability like OPEB involves many actuarial as-
sumptions, and the final result will be very sensitive to some of these factors, especially the discount rate
(the assumed rate of return on long-term investments), and the predicted rate of inflation for medical
costs. Understanding the results requires the reader to consider the underlying assumptions, and to judge
how well they mirror their own real-world expectations.
The Town engages an actuarial consultant who must follow procedures and reporting templates estab-
lished by GASB 45 to produce the actuarial report. The primary purpose of this report is to inform poten-
tial investors about one specific aspect of the financial health of the Town, and to enable uniform finan-
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cial comparisons across multiple municipalities. However, the required elements of the report are argua-
bly insufficient to provide practical guidance for a municipality that seeks to control or reduce its OPEB
liability.
Per GASB 45, the liability is estimated using a conservatively determined "blended" discount rate that is
well below the discount rate typically used for long-term investments. This will greatly magnify the esti-
mate of the OPEB liability for municipalities that have not already funded some large portion of their
OPEB liability. The lower the discount rate used (predicting worse investment returns), the higher the
resulting estimate of the liability will be.
In 2011, the Town's OPEB report used a blended discount rate of 2.5% yielding a liability of
$302 million. In 2013, with the consent of the Town's actuarial consultant, a higher blended discount rate
of 4.5% was used,yielding a liability of$130 million. This large drop in the official estimate of the liabil-
ity is due almost entirely to the use of a higher discount rate,but even 4.5% is too low for our purposes.
The discount rate currently used by the Town's pension fund analysis is 7.75%, and the pension fund is
quite similar in purpose and design to the PEIL Fund. At the Town's request, the latest actuarial analysis
included an auxiliary schedule using a discount rate of 7.75%. This yielded a liability of approximately
$90 million as of June 30, 2013. This is arguably the appropriate figure to contemplate for a pre-funding
plan, because, in actuarial terms, it assumes that Town will actually follow through with a funding plan
(while the blended discount rate assumes the Town will never complete a funding plan).
Unless otherwise noted, all estimates of present value in the remainder of this discussion are based on a
discount rate of 7.75%.
Pre-Funding OPEB
There are two approaches to handling the OPEB liability. Currently, the Town follows a pay-as-you-go
model where annual OPEB expenses are paid entirely through the Operating Budget. This model uses
current dollars to pay for expenses accrued in the past. The Town's pay-as-you-go OPEB cost for FY2015
is budgeted at $6.1 million.
The other approach is a pre funded model, where the cost of benefits earned during the current year is
appropriated into the PEIL Fund, and the investment returns from the Fund are then used to pay for annu-
al benefits. This model uses current dollars to pay for future expenses, and is essentially the way the pen-
sion fund operates.
Under the pre-funded model (ignoring the unfunded liability for now), the amount that would have been
appropriated into the trust fund for FY2014 was approximately $1.7 million. This amount is referred to in
the actuarial analysis as the "Normal Cost." The Normal Cost is an actuarially determined annual contri-
bution that would fund the Town's share of future retiree benefits earned by active employees in the cur-
rent fiscal year.
Until the Town fully funds its OPEB liability, moving toward the pre-funded model will require the Town
to continue paying for annual pay-as-you-go OPEB expenses, while also appropriating funds into the
PEIL Fund. Both types of payments reduce the OPEB liability in their own way. This combination of ap-
propriations would continue until the future investment returns from the PEIL Fund are sufficient to cover
the cost of all benefits earned in previous years. At that point the Town's annual OPEB appropriation
would drop significantly.
The pay-as-you-go and pre-funded model each have advantages and disadvantages. The pay-as-you-go
model is simpler to administer, but there is no benefit from long-term investment earnings, and no hedge
against the higher inflation of health care costs. In the pre-funding model, once a sufficient trust fund bal-
ance is achieved, the investment earnings pay for a substantial portion of the costs. Building up the trust
fund is more expensive in the near term, but eventually results in much lower annual appropriations from
the operating budget.
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Under pay-as-you-go, there is a disconnect between the time when services are rendered and the time
when funds must be appropriated to pay the benefits associated with those services. This disconnect can
complicate long-term financial planning. With pre-funding, the fully loaded cost of services is accounted
for in the current year.
Even partial pre-funding has some benefits. Any monies in the PEIL Fund provide assurance that the
Town will be able to satisfy at least some portion of its future liability, and the Fund could also be used as
a reserve, e.g., to fund a portion of retiree health costs in particularly challenging fiscal years.
On the other hand, monies invested in the PEIL Fund are unavailable for other uses. Appropriating money
into the PEIL Fund reduces the spending power of the current budget. One should consider whether fund-
ing the PEIL Fund takes priority over other liabilities, such as the costs of maintaining or replacing roads
and buildings in a timely manner. In some circumstances, choosing the latter might generate significant
future savings.
On March 10, 2014,based on a recommendation from the OPEB Working Group, the Board of Selectmen
endorsed a formal policy for making annual appropriations to the Post Employment Insurance Liability
(PEIL) Fund:
It is the policy of the Board of Selectmen to recommend to Town Meeting each year a budget
contribution to the OPEB Trust Fund in an amount that ranges from 35 to 100 percent of the full
Normal Cost, with the General and Enterprise Funds bearing their respective shares of those con-
tributions. This approach will mitigate growth in the Unfunded Actuarial Accrued Liability, re-
ducing the amount the Town will need to budget for health insurance by approximately one-third,
as the assets of the OPEB Trust Fund will be used to underwrite the annual cost of retiree bene-
fits.
Further, it is recognized that there are competing claims for limited Town funds, which are con-
sidered as part of the annual budget process. Consequently, the annual recommendation for
OPEB funding shall be made in the context of other capital and operating budget needs, such that
recommended OPEB funding shall not have a material, detrimental impact on service delivery or
the maintenance of Town capital assets and infrastructure.
The Committee supports this policy.
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