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HomeMy WebLinkAbout2012-11-AC-STM-rpt1 APPROPRIATION COMMITTEE TOWN OF LEXINGTON REPORT TO THE NOVEMBER 2012 SPECIAL TOWN MEETING Released November 13, 2012 Appropriation Committee Members — Fiscal Year 2013 Glenn Parker, Chair • John Bartenstein, Vice ChairlSecretary • Joe Pato, Vice Chair Robert N. Addelson (ex-officio; non-voting) • Robert Cohen • Mollie Garberg Alan Levine • Eric Michelson • Richard Neumeier • Jonina Schonfeld APPROPRIATION COMMITTEE REPORT TO THE NOVEMBER 2012 STM Contents Contents 1 Summary of Warrant Article Recommendations 2 Preface 3 Introduction 4 Warrant Article Analysis and Recommendations 6 Article 2: Amend FY2013 Operating, Enterprise Fund and Community Preservation Budgets....6 Article 3: Establish and Appropriate to Specified Stabilization Funds 7 Article 4: Appropriate to Post Employment Insurance Liability Fund 8 Article 5: Estabrook School Access Improvements 9 Article 6: Appropriate for New Estabrook School 10 Article 7: Appropriate for Authorized Capital Improvements 12 Article 8: Approve TIF Agreement(s) 12 1 APPROPRIATION COMMITTEE REPORT TO THE NOVEMBER 2012 STM Summary of Warrant Article Recommendations Abbreviations: GF = General Fund; EF =Enterprise Fund; RF= Revolving Fund; CPA= Community Preservation Act Fund; BAN =Bond Anticipation Note; DSSF =Debt Service Stabilization Fund An entry oflP for Indefinitely Postpone"in the right-hand column merely signifies our expectation. Arti- Funds Funding Committee cle Title Requested Source Recommendation $1,215,000 GF Amend FY2013 Operating,Enterprise Fund $160,507 CPA 2 Approve (8-0) and Community Preservation Budgets ($7,424) Water EF ($78,217) Sewer EF 3 Establish and Appropriate to Specified $1,600,000 GF Approve (8-0) Stabilization Funds 4 Appropriate to Post Employment Insurance $500,000 GF Approve (8-0) Liability Fund 5 Estabrook School Access Improvements $1,500,000 Free Cash Approve (8-0) 6 Appropriate for New Estabrook School TBD Excluded up to $2,800,000 Debt Approve (8-0) 7 Appropriate for Authorized Capital N/A N/A IP Improvements 8 Approve TIF Agreement(s) N/A N/A None 2 APPROPRIATION COMMITTEE REPORT TO THE NOVEMBER 2012 STM Preface This Preface describes the structure and stylistic conventions used in this report. It is followed by an Introduction discussing changes in the Town's financial status since the most recent Annual Town Meeting in April 2012, and issues pertinent to the Town's general financial situation. The main body of this report contains article-by-article discussions and recommendations on those articles that, in our opinion, have substantial financial relevance. The discussion for each article presents the consensus view of the Committee, as well as any other considerations or cautions that we feel Town Meeting should be informed of In the case where 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. This 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. For convenience, Committee votes are also summarized on the preceding page. 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: • FY2013 Recommended Budget & Financing Plan, dated March 2, 2012, commonly known as the "Brown Book", which documents the complete municipal budget of the Town of Lexington. This document also summarizes budget laws and bylaws (Appendix B) and includes a glossary of financial terms (Appendix D). • School Committee Fiscal Year 2013 Annual Town Meeting Budget Request, which details the budget plans for the Lexington Public School System. • TMMA Warrant Information Report (November 2012), published by the Town Meeting Members Association. • Capital Expenditures Committee (CEC)Report to the 2012 Special Town Meeting. Acknowledgements The content of this report, except where otherwise noted, was researched, written and edited by members of the Committee with support from town staff. Our Committee has the pleasure and the privilege of working with Town Manager, Carl Valente; Assistant Town Manager for Finance, Rob Addelson; our Budget Officer, Theo Kalivas; the Capital Expenditures Committee; the Community Preservation Committee; the School Committee; the Superintendent of Schools, Dr. Paul Ash; the Assistant Superintendent for Finance and Operations, Mary Ellen Dunn; and the Board of Selectmen. We thank the municipal and school staff, Town officials,boards and volunteers who have contributed time and expertise in support of our work. 3 APPROPRIATION COMMITTEE REPORT TO THE NOVEMBER 2012 STM Introduction The Appropriation Committee is required to create a report with a review of the budget as adopted by the Board of Selectmen, including an assessment of the budget plan and a projection for future years' revenues and expenses. This report includes the Committee's advice and recommendations regarding all appropriations of Town funds that are anticipated in the Warrant, and other municipal matters that may come before Town Meeting. This report is published and distributed to the members of Town Meeting as a printed document and as an electronic document via the Town website. The Committee also makes presentations during Town Meeting, including recommendations on appropriations and other matters for which the Committee's formal position was pending at the time of publication. Developments Since the April 2012 Annual Town Meeting and Special Town Meeting In April 2012, following a successful debt exclusion referendum, a Special Town Meeting held during the Annual Town Meeting appropriated funds for the construction of a new Estabrook Elementary School. As work continued on the design of the building, and as the market for construction materials has changed, the cost estimate for the original design grew. Working with the architects and the MSBA, the School Committee, the Permanent Building Committee, and Town staff have revised the design to reduce the increased expense,but,nonetheless,it appears that an incremental appropriation is necessary and desirable. The Town has roughly $3,900,000 in unallocated funds that can be appropriated at this Special Town Meeting. These funds mainly result from reduced costs for employee health benefits since the Town joined the State's Group Insurance Commission, and from "new growth" for FY2013 above the projection used in building the budget. Three Articles in the Warrant consider appropriations using those funds. Starting next fiscal year, the Town expects a significant increase in annual assessments for the Retirement Fund, as determined by the Town's Retirement Board. The increase is driven by two factors: the final amortization of a decrease in the valuation of assets held in the Town's Retirement Fund that occurred during the 2008-2009 recession, and the adoption of new actuarial calculations that recognize longer life spans for many retirees. Last year's pension assessment was approximately $4,200,000. If the Town made no changes to its pension funding schedule, this coming year the assessment would be over $7,000,000, and the increase would have a significant impact on the Town's operating budget. Town staff is working with the Retirement Board to develop a new pension funding schedule that would mitigate this impact. In addition, Article 2 includes a request to appropriate some of this year's unallocated funds to reduce the growth of future Retirement Fund assessments. The cost of ongoing construction and renovation of elementary schools in Lexington is being funded with excluded debt, which allows the Town to (temporarily) raise property taxes beyond the caps imposed by Proposition 2'/2. The resulting excluded debt service will result in a noticeable increase in property tax rates for the next three to five years. The appropriation of unallocated funds into a new specialized stabilization fund, which will be proposed under Article 3, would put aside resources that future Town Meetings can use to mitigate property tax increases during that time period. In addition to pension benefits, the Town is required to provide health insurance benefits for retired town employees (these benefits are referred to as Other Post Employment Benefits, or OPEB). This obligation creates a future liability for the Town, but up to now these costs have been covered within the operating budget on a pay-as-you-go basis. There are sound arguments for transitioning to a pre-funded model where the Town would appropriate annually into the Post Employment Insurance Liability (PEIL) Fund monies sufficient, together with anticipated investment returns, to cover the future health benefit costs accrued that year. The Town is considering whether to adopt such a long-term strategy. To fully pre-fund the PEIL Fund would require significant catch-up appropriations over a span of many years (much as the current Retirement Fund has required additional catch-up appropriations to achieve full funding). The appropriation proposed under Article 4 would be a small step in that direction. 4 APPROPRIATION COMMITTEE REPORT TO THE NOVEMBER 2012 STM The Town has determined that there is a need for additional road improvements in the Estabrook School neighborhood that are not covered under the Town's cost-sharing agreement with the Massachusetts School Building Authority (MSBA). Article 5 contains a request to appropriate funds from Free Cash for this work. The designs and the cost estimates for the MSBA-supported project to construct a new Estabrook Elementary School have been revised and a supplemental appropriation is requested under Article 6. It is not expected that the MSBA, which has capped its contribution to the project, will reimburse any part of the cost overrun. The appropriation would be funded by excluded debt under the previously approved debt exclusion. Although no action is being proposed at this Special Town Meeting, the Committee notes that the Town is currently considering an opportunity to purchase approximately ten acres of land and three buildings at 33 Marrett Road, next to the Museum of Our National Heritage. The property is currently owned by the Supreme Council of the Scottish Rite of Freemasonry. The necessary research into the property is ongoing, and we expect that a recommendation whether to purchase the property and, if so, how it might be used, will be made in the coming months. The long-neglected White House next to the Police Station on Massachusetts Avenue is in the middle of a much needed exterior renovation that will enhance the view of the Town for visitors and tourists. PLEASE NOTE: This Committee has nine members. Due to an extended illness, one member of the Committee has been unable to attend meetings in person and could not participate in voting. Therefore, the vote tallies published herein represent the positions of eight members and there is no implied abstention from any vote. 5 APPROPRIATION COMMITTEE REPORT TO THE NOVEMBER 2012 STM Warrant Article Analysis and Recommendations Article 2: Amend FY2013 Operating, Funds Funding Committee Requested Source Recommendation Enterprise Fund and Community $1,215,000 GF Preservation Budgets $160,507 CPA ($7,424) Water EF Approve (8-0) ($78,217) Sewer EF Contribution to the Retirement Fund The Retirement Board reevaluates the state of the Town's Pension Fund every two years, and these evaluations factor heavily in determining the Town's annual pension assessment. An evaluation considers the current value of the assets in the Pension Fund, and the expected future value of those assets. It also projects the difference between the future value of the Pension Fund and the amount that would be needed to cover anticipated pension expenses. This difference is the unfunded liability. Municipalities are required by State law to fully fund this liability by 2040 by building up the value of their Pension Funds. The Retirement Board's most recent reevaluation increased the estimate of the Town's total pension liability and also increased the estimate of the unfunded portion of that liability. The overall size of the liability increased due to the adoption of new mortality tables that reflect longer life spans for retirees. The unfunded liability grew in part because the overall liability is larger, and because reductions in the value of the Retirement Fund from the 2008-2009 recession are now fully realized in the financial model. Note that in the financial model, annual changes in the value of pension fund assets are smoothed out over several years and thus do not precisely mirror the current fund valuation. If the Retirement Board were to maintain its present target of achieving full funding by 2020, the required annual pension assessment would increase from $4,205,537 in FY2013 to over $7,300,000 in FY2014. The increase of approximately $3,000,000 would severely impact annual operating budgets beginning in FY2014, and continuing until 2020 when the Retirement Fund would be expected to be fully funded. To mitigate this budgetary impact, the Retirement Board recently voted to extend the funding timeline from 2020 to 2030,which will significantly decrease annual assessments by spreading the burden over more years. This will still allow the Town to achieve full funding well before the statutory deadline of 2040.1 The Retirement Board also analyzed the impact of an additional contribution from the Town during the current fiscal year,which would further lower future contributions by immediately reducing the size of the unfunded liability. Based on the Retirement Board's analysis, the recommendation of Town staff is to make a supplemental, one-time appropriation of$1,000,000 from available funds into the Retirement Fund for FY2013. Together with the other measures voted by the Board, this would result in a pension assessment for FY2014 of approximately $4,800,000. This would be a$600,000 increase from existing levels,which can be more easily absorbed into the operating budget going forward, rather than the $3,000,000 increase that would otherwise be required. Under the new schedule, pension assessments would thereafter grow by roughly 3% per year, peaking at around $7,000,000 in 2030, at which time the liability would be fully funded. In 2031,the pension assessment would fall to approximately $2,600,000 and would then grow in future years by roughly 4.3%per year. 1 The Retirement Board also reduced the expected rate of return on investments(the"discount rate")from 8%to what is considered to be more a practical rate of 73/4%. This adjustment will moderately increase the annual assessments. 6 APPROPRIATION COMMITTEE REPORT TO THE NOVEMBER 2012 STM The Committee believes that this is a prudent plan that will greatly soften the unexpected increase in pension assessments. As noted above, the pension funding schedule is reevaluated every two years, and future changes to Retirement Fund assessments will likely occur in response to those reevaluations. Hurricane Sandy Costs Hurricane Sandy resulted in many downed trees, power outages, and other problems. Employees of the DPW and other departments were mobilized to respond to the storm and its damage, which has resulted in unbudgeted expenses. $200,000 is being requested to supplement the affected line items and to cover these expenses. Property and Liability Insurance The request under this Article includes $15,000 to supplement prior appropriations for property and liability insurance because the premiums this year were higher than expected. Community Preservation Act The October 2012 State CPA distribution exceeded what was estimated last spring. It is proposed that the excess of approximately $160,000 be allocated to the unbudgeted reserve of the CPA fund so that it is available for use at the Annual Town Meeting next spring. Water and Sewer Enterprise Funds The MWRA's final FY2013 assessments were lower than its initial assessments,resulting in reduced costs to the Town Water and Sewer Enterprise Funds. The water and sewer rates set in the fall were based on the final assessments, and these budget line item changes represent minor bookkeeping adjustments. The Committee recommends approval of all items in this request(8-0). Article 3: Establish and Appropriate Funds Funding Committee Requested Source Recommendation to Specified Stabilization Funds $1,600,000 GF Approve (8-0) State law (M.G.L. Chapter 40, Section 5B) permits the creation of multiple, separate stabilization funds for specified purposes. Any action to create a new fund,to alter the specified purpose of a fund, or to appropriate into or out of one or more of the funds requires a two-thirds vote of Town Meeting. In practice, specified stabilization funds supplement the general Stabilization Fund. Funds from the tax levy or from any combination of available funds may be appropriated into a specified stabilization fund. Interest earned on the balance in a stabilization fund remains in that particular fund. The motion under Article 3 will request the creation of a new specified stabilization fund (Proposed Fund) and the appropriation into that fund of $1,600,000 in presently unallocated FY2013 funds. The purpose of this Proposed Fund is 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. There is no plan at this Special Town Meeting to appropriate any funds out of the Proposed Fund. At the time any such request is put forth, Town Meeting will have an opportunity to have an in-depth discussion on the merits of the particular proposal. 7 APPROPRIATION COMMITTEE REPORT TO THE NOVEMBER 2012 STM Please note that this proposed Fund, the purpose of which includes the use of funds for debt service, is distinct from the "Debt Service Stabilization Fund" (DSSF) created in 2009. The funds from the DSSF can be appropriated only for mitigating debt service resulting from the project that was initiated in 1998 to perform renovation work at Lexington High School and the Diamond and Clarke Middle Schools. The Committee recommends approval of this request (8-0). Article 4: Appropriate to Post Funds Funding Committee Requested Source Recommendation Employment Insurance Liability Fund $500,000 GF Approve (8-0) Background 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. Much of the cost of retiree health insurance is borne by Medicare, but the Town must provide supplementary coverage and coverage for retired employees not on Medicare. Since the Town is obligated to provide this benefit on an ongoing basis, the cost that will be incurred over the lifetimes of the current and future retirees represents a liability. The actuarial value of this liability must be included in the Town's financial statements and is in the hundreds of millions of dollars. In FY2013 the Town is paying upwards of$6,000,000, on a pay-as-you-go basis, for current year retiree health benefits costs. While these payments retire a portion of the existing liability, the liability grows as employees continue to work, earning additional health insurance benefits during retirement. The general escalation of health care costs makes it almost certain that the net effect, particularly over time intervals of many years, will be an increase in the actuarial value of the liability. While the Town has a legal obligation to provide health benefits to present retirees, it has no legal obligation to pre-fund any future liability, i.e., to set aside funds that would cover the costs of the future obligations. Nevertheless, in 2002 the State legislature passed a special act that allowed the Town to create the Post Employment Insurance Liability (PEIL)Fund for this purpose. In each of the last five years (FYs 2009-2013), Town Meeting has approved an appropriation into the Fund. In FYs 2009, 2010, and 2011 the appropriation was in excess of $400,000 and involved a portion of Free Cash that approximated the previous year's reimbursement from the federal government for the prescription drug coverage the Town provides to retirees in lieu of Medicare Part D coverage. These federal reimbursements go into the General Fund and become part of the following year's Free Cash balance. In FY2012, the appropriation was rounded up to $500,000. This practice was continued at the Annual Town Meeting this past spring when $500,000 of FY2013 revenue was appropriated into the Fund. The balance in the PEIL Fund is now about$2,500,000. There are at least four points in favor of funding the liability. First, any monies in the PEIL Fund provide assurance that the Town will be able to satisfy some portion of its future liability. Bond rating agencies look favorably upon this, although it is unclear how large an amount or, if in fact, any amount is necessary to maintain the Town's AAA bond rating. Second, the Town's growing liability is comparable to borrowing; funding the future liabilities by putting aside reserves,rather than"borrowing,"is an important move towards a truly balanced budget and future fiscal strength. Third, the balance in the PEIL Fund is invested and earns income, which could serve as a partial hedge against future increases in health insurance costs and inflation. In general,the Town may only invest funds in very low risk vehicles, such as certificates of deposit,but there are notable exceptions to this restriction, including stabilization funds, the Retirement Fund, and the PEIL Fund. The balances in the latter two funds may be invested in mutual funds or equities, and hence, these funds are appropriate places to accumulate large balances that will be held for many years. Fourth, the PEIL 8 APPROPRIATION COMMITTEE REPORT TO THE NOVEMBER 2012 STM Fund could be used as a reserve, e.g., to fund present retiree health costs during a particularly challenging fiscal year. On the other hand, monies invested in the PEIL Fund are no longer unavailable for other uses. In any fiscal year, one may ask whether funding the PEIL should take priority over other budget items. The other items could include liabilities such as the anticipated costs of maintaining or replacing roads and buildings in a timely manner, or even, in those future years in which the budget is particularly tight, operating expenses for education,public safety,public works, etc. If the OPEB liability were fully funded at some point in the future,the Town would still need to make annual appropriations for future retiree health benefits. As with the Pension Fund, those assessments would be significantly lower after achieving fully funded status. Proposed Appropriation The proposal under this article is to make a supplemental appropriation of$500,000 to the PEIL Fund, and to thereby increase the total amount put into the Fund during FY2013 to $1,000,000. The Town Manager and Board of Selectmen initially proposed increasing the amount put into the Fund for FY2013 during discussions of the use of health care savings at the end of the 2012 Annual Town Meeting, but no firm decisions were made at the time. After the conclusion of the Annual Town Meeting, a working group consisting of the Town Manager, the Assistant Town Manager for Finance, and members of the Board of Selectmen and Appropriation Committee met on a number of occasions to discuss policies related to management of the OPEB liabilities. The group discussed OPEB issues with a knowledgeable actuary. Later, a member of the working group performed approximate calculations based on a range of assumptions of growth rates of health care costs, investment returns, and annual deposits into the PEIL Fund to illustrate model scenarios. The results of the calculations were examined by the working group to develop some intuition about the number of years it would take to reach the full funding level as a function of the average annual contribution to the Fund, and how the Town's costs would be lowered after full funding is achieved. The working group tentatively concluded that it favors funding the liability via an approach that may include: 1) a floor, or base annual level of contributions to the PEIL Fund; and 2) additional funding if there are sufficient unallocated funds in a particular year; where the goal is to fully cover the Town's unfunded OPEB liability in the PEIL Fund at some point in the future. Yet to be determined is the optimal time period to achieve full funding, though 25 to 35 years was discussed as a possible target. At this time, the Town has a large amount of unallocated FY2013 funds, and no proposals regarding urgent or high priority FY2013 budget needs have emerged since the spring. With Free Cash projected to be certified this fall at the record level of about$12,000,000 and additional savings expected from the move to GIC health insurance plans, it appears that funds will be available in FY2014 to address capital infrastructure as well as operating costs. Therefore, the Committee concludes that the proposed appropriation of an additional$500,000 into the PEIL Fund is prudent and appropriate. The Committee recommends approval of this request (8-0). Article 5: Estabrook School Access Funds Funding Committee Requested Source Recommendation Improvements $1,500,000 Free Cash Approve (8-0) This article requests an appropriation of$1,500,000, for making improvements along Robinson Road and to the intersection of Robinson Road with Grove Street. The proposed work would also improve emergency vehicle access to the Estabrook School site. 9 APPROPRIATION COMMITTEE REPORT TO THE NOVEMBER 2012 STM The funding request includes a 20% contingency, which is typical when a project is at this stage of design. Potential claims on the contingency fund include drainage systems, for which design work is still being developed, and which may require special permitting. Testing should determine whether soft soil or ledge is under the current asphalt; either condition could increase the cost. Note that new easements are anticipated. The project anticipates removing approximately 20 trees. The project involves constructing a new sidewalk on Grove Street, Robinson Road, and a small portion of Turning Point Hill Road. An appropriation at this Special Town Meeting will allow the project to be put out to bid in early 2013 so that work can be started during the summer of 2013 while students are on vacation. Because $1,600,000 of Free Cash had been set aside by Town Meeting for this purpose during the previous fiscal year, but not ultimately appropriated, the surplus reverted to Free Cash at the end of FY2012 and is now available for this purpose. The Committee recommends approval of this request (8-0). Article 6: Appropriate for New Funds Funding Committee Requested Source Recommendation Estabrook School TBD Excluded Approve (8-0) Debt up to $2,800,000 In March of 2012, Town Meeting appropriated funds to complete the design and then construct a new Estabrook School and to raze the existing building. The project and associated request had been elevated to high priority in response to a recommendation by the federal Environmental Protection Agency that the current building not be used beyond December 2014 because it is contaminated with polychlorinated biphenyls (PCBs). The Massachusetts School Building Authority (MSBA) is providing about 32% of the overall project cost as estimated last April. The architectural work is being done by Denisco Design Partnership. This project is the first where the Town will use a construction management arrangement called "construction management at risk", allowed via MGL Chap. 149A, in which the Town hires a firm to be the general contractor. The contract at the outset is not a simple fixed price contract, but does involve the negotiation of a Guaranteed Maximum Price (GMP). After the 2012 Annual Town Meeting was completed, the Town hired Shawmut Design and Construction Co. to be the general contractor. Utilizing this procurement method enables early packages to be negotiated with the construction firm and to date three amendments have been contracted: 1) Site Enabling Package ($650,000) 2) Early Site Package ($3,120,000) 3) Early Concrete and Steel($5,250,000) Shawmut provided an updated construction estimate after the 60% construction documents were released in late September, and the new estimate was approximately $2,800,000 above the previous estimate from design development documents. 10 APPROPRIATION COMMITTEE REPORT TO THE NOVEMBER 2012 STM The primary cost drivers are listed in the table below; note that this is not a complete inventory of cost increases. However, the two main drivers appear to be material costs especially structural steel and greater regional construction activity reducing the number of subcontractors available. Preliminary 60% Constr. Difference Explanation Design Documents Concrete Foundations/ $3,881,502 $4,585,651 $704,149 Demand for steel. Reduced Structural Steelcapacity of suppliers Increase in materials costs. Masonry $1,111,955 $1,242,816 $130,861 Reduced number of pre- qualified sub-contractors Interior Woodwork $801,754 $1,021,559 $219,805 Union carpenters costs Membrane Roofing $375,630 $695,925 $320,295 Design scope underprice Windows $307,900 $442,499 $134,599 Increased materials costs Reduction in bid submission Electrical $2,342,050 $2,871,480 $529,430 from sub-contractors. Increase in materials costs. SUM OF PRIMARY COST INCREASES $2 039 139 Source:Denisco Design Partnership A second estimate was developed to compare with the contractor's estimate. This estimate, provided by A. M. Fogarty and Associates, Inc., is approximately $800,000 higher than estimates provided by Shawmut, making potential cost increases closer to $2,800,000. Variances are also expected, though they have not been quantified,in the costs for demolition of the existing building. In September, the Town (Public Facilities Dept., Permanent Building Committee, School Committee, etc.) worked with Denisco Design Partnership and Shawmut Construction to identify areas for potential cost reduction and identified $652,400 in cost reductions. In October, the School Committee, with input from the Permanent Building Committee,voted additional value engineering adjustments totaling$858,252. Though the remaining gap of$1,252,674 could be reduced with the use of construction contingency funds, it is inadvisable to apply these contingency funds at this point in the project given the inherent potential for actual vs. estimated cost variances and for market forces to result in additional cost increases. Also, aggressive bid timing and the complexity of MSBA involvement warrant that a buffer of funds be put in place to assure that the project stays on track. The project schedule shows 100%-complete bid documents are due in late November 2012, with bids due in late December 2012. With the final GMP due to be negotiated by December 30, 2012, and subcontracts to be awarded the first week of January,the Committee concurs that it is prudent to provide the necessary funds to keep the project on schedule through this critical phase. Even though a definite number for the request has not yet been set,the Committee voted 8-0 to support a request of up to $2,800,000, an amount at the upper end of the range of preliminary estimates that were current during our deliberations prior to press time. This vote is not intended to place a ceiling on the proper amount to be requested; rather it merely is a statement on our knowledge of the amount to be requested. If the request is for an amount higher than$2,800,000,the Committee will deliberate and vote on the higher request. The Committee recommends approval of this request (8-0). 11 APPROPRIATION COMMITTEE REPORT TO THE NOVEMBER 2012 STM Article 7: Appropriate for Authorized Funds Funding Committee Requested Source Recommendation Capital Improvements N/A N/A IP The Committee expects this Article to be indefinitely postponed. Article 8: Approve TIF Agreement(s) Funds Funding Committee Requested Source Recommendation N/A N/A None Approving this article would authorize the Board of Selectmen to enter into a Tax Increment Financing(TIF) agreement with Vistaprint USA, Incorporated, covering a portion of anticipated new construction at 95 Hayden Avenue. Since at press time we have not been presented with a specific proposed agreement that has been accepted by both the Board of Selectmen and by representatives of Vistaprint, we are not able to address the article in this report. A subsequent report will be issued if a proposal is actually brought to Town Meeting. The Committee has not taken a position on this Article as of publication. 12