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HomeMy WebLinkAbout2013-03-ATM-AC-rpt APPROPRIATION COMMITTEE TOWN OF LEXINGTON REPORT TO THE MARCH 2013 ANNUAL TOWN MEETING Released March 25 2013 Appropriation Committee Members Glenn Parker, Chair• John Bartenstein, Vice Chair/Secretary Robert N Addelson (ex-officio, non-voting) • Robert Cohen • Mollie Garberg Alan Levine • Susan McLeish • Eric Michelson • Richard Neumeier • Jonina Schonfeld APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM Contents Contents 1 Summary of Warrant Article Recommendations. .2 Preface. 4 Introduction .5 Warrant Article Analysis and Recommendations 5 Article 4 Appropriate FY2014 Operating Budget 7 Article 5 Appropriate FY2014 Enterprise Funds Budgets 15 Article 6 Appropriate for Senior Service Program 19 Article 7 Establish and Continue Departmental Revolving Funds 20 Article 8 Appropriate the FY2014 Communrt\ Preservation Committee Operating Budget and CPA Projects 21 Article 9 Appropriate for Recreation Capital Projects 27 Article 10 Appropriate for Municipal Capital Projects and Equipment 28 Article 11 Appropriate for Water System Improvements 30 Article 12 Appropriate for Wastewater System Improvements 32 Article 13 Appropriate for School Capital Projects and Equipment 33 Article 14 Appropriate for Public Facilities Capital Projects 34 Article 15 Appropriate Bonds And Notes Premiums 36 Article 16 Accept MGL Chapter 32, Section 101 Supplemental Annual Allowance 36 Article 17 Accept MGL Chapter 32, Section 12(2)(d paragraph 11) Increasing Minimum Monthl` Allowance 37 Article 18 Appropriate to Post Employment Insurance Liabilit\ Fund 38 Article 19 Rescind Prior Borrowing Authorization. 38 Article 20 Establish and Appropriate To and From Specified Stabilization Funds 39 Article 21 Appropriate to Stabilization Fund 40 Article 22 Appropriate from Debt Service Stabilization Fund 40 Article 23 Appropriate for Prior Years Unpaid Bills 40 Article 24 Amend FY2013 Operating and Enterprise Budgets 41 Article 25 Appropriate for Authorized Capital Improvements 41 Article 26 Establish Qualifications for Tax Deferrals 41 Article 29 Amend General B\laws—Contracts and Deeds (Solar Energ\ Purchasing) 43 Appendix A.3-Year Budget Projection. 44 Appendix B Enterprise Funds. 48 Appendix C Revolving Funds 49 Appendix D. Senior Tax Relief. .50 Appendix E Specified Stabilization Funds. .52 Appendix F Other Post Employment Benefits .54 1 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM Summary of Warrant Article Recommendations Abbreviations GF = General Fund, EF =Enterprise Fund, RF= Revolving Fund, CPA= Communrt\ 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 4 Appropriate FY2014 See Report See Motion Approve (9-0) Operating Budget Appropriate FY2014 $7,888,530 Water EF 5 Enterprise Funds Budget $8,800,750 Wastewater EF Approve (9-0) $1,785,840 Recreation EF 6 Appropriate for Senior Service $20,000 GF Approve (9-0) Program Establish and Continue 7 Departmental Revolving See Report RF Approve (9-0) Funds Appropriate the FY2014 $3 048,377 CPA $186 750 Rec RF 8 Community Preservation $228 2j0 GF Debt Approve (9-0) Committee Operating Budget except 8(c),(d),(e) and CPA Projects $875 GF Cash $3,464,252 $261 750 Recreation EF 9 Appropriate for Recreation $150 000 CPA Approve (9-0) Capital Projects $228,250 GF Debt See Article 8(h) $640,000 Appropriate for Municipal 10 Capital Projects and $10,248,238 See Report Approve (9-0) Equipment except 10(h) Appropriate for Water System $200 000 Water EF(Debt) 11 Improvements $700 000 Water Retained Approve (9-0) $900,000 Earnings $1 100 000 Wastewater EF 12 Appropriate for Wastewater $200 000 (Debt) Approve (9-0) System Improvements Water Retained $1,300,000 Earnings 13 Appropriate for School Capital $1,524,031 See Report Approve (9-0) Projects and Equipment $1,539,454 Free Cash Appropriate for Public $748,940 GF Debt 14 Facilities Capital Projects $100,000 CPA Approve (9-0) $5,060 Prior Year $2,393,454 Balances 2 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM Arti- Funds Funding Committee cle Title Requested Source Recommendation 15 Appropriate Bonds and Notes $4,168,632 Bond Premiums Approve (9-0) Premiums Accept MGL Chapter 32, 16 Section 101 Supplemental None N/A Approve (9-0) Annual Allowance Accept MGL Chapter 32, 17 Section 12(2)(d paragraph 11) None N/A Approve (9-0) Increasing Minimum Monthly Allowance Appropriate to Post 18 Employment Insurance $775,000 GF Approve (9-0) Liability Fund 19 Rescind Prior Borrowing None N/A Pending Authority Establish and Appropriate To $950 000 Free Cash 20 and From Specified $1,234 000 Tax Levy Approve (9-0) Stabilization Funds $67 760 TDM Payments $2,184,000 21 Appropriate to Stabilization None N/A IP Fund 22 Appropriate from Debt Service $124,057 DSSF Approve (9-0) Stabilization Fund 23 Appropriate for Prior Years' Unknown Unknown Pending Unpaid Bills 24 Amend FY2013 Operating and Unknown Unknown Pending Enterprise Budgets 25 Appropriate for Authorized Unknown Unknown Pending Capital Improvements 26 Establish Qualifications for None N/A Approve (9-0) Tax Deferrals and Exemptions Amend General Bylaws— 29 Contracts and Deeds (Solar None N/A Approve (9-0) Energy Purchasing) 3 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM Preface This Preface describes the structure and sty listic conventions used in this report. It is followed b\ an In- troduction discussing changes in the Town s financial status since the most recent Annual Town Meeting in March 2012, along with issues pertinent to the Town s general financial situation. The main both of this report contains article-b\-article discussions and recommendations on those articles that, in our opin- ion, have substantial financial relevance The report references several appendices at the end of this doc- ument that provide a deeper explanation of particular financial issues. The discussion for each article presents the consensus view of the Committee as well as an other con- siderations or cautions that we feel Town Meeting should be informed of In the case where one or more Committee members are strongl` opposed to the maiorit\ position, we summarize the opposing perspec- tive Each Article discussion concludes with the most recent vote of the Committee prior to publication. This is summarized b` the number of members in favor followed b\ the number of members opposed, and lastl` (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 pages. This report does not replicate information readil` available to Town Meeting members elsewhere Ke` documents that inform our analysis and provide a more thorough picture of the Town finances are • FY2014 Recommended Budget&Financing Plan dated March 1 2013 commonl` known as the Brown Book which documents the complete municipal budget of the Town of Lexington. The Brown Book also summarizes budget laws and b\laws (Appendix B) and includes a glossan of financial terms (Appendix D) http //www Lexi ngtonma gov/FY14_Brown_Book pdf • School Committee Fiscal Year 2014 School Committee Recommended Budget(the `Gra` Book') dated Februan 12, 2013 which details the budget plans for the Lexington Public School System. http //lexingtonps schoolwires net/Page/2682 • TMMA Warrant Information Report (March 2013) published b` the Town Meeting Members Association. http //www lexingtontmma org/uploads/Main/WarrantInfoReport2012 • Capital Expenditures Committee (CEC)Report to the 2013 Special Town Meeting • Communrt\ Preservation Committee (CPC)Report to the 2013 Annual Town Meeting Acknowledgements The content of this report, except where otherwise noted, was researched, written and edited b\ 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 Communrt\ Preservation Com- mittee the School Committee the Superintendent of Schools, Dr Paul Ash, the Assistant Superintendent for Finance and Operations, Man 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 to help us prepare this report. 4 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM Introduction The Appropriation Committee is required to create a report with a review of the budget as adopted b\ the Board of Selectmen, including an assessment of the budget plan and a projection for future years' reve- nues and expenses This report includes the Committee's advice and recommendations regarding all ap- propriations of Town funds that are anticipated in the Town Warrant, and other municipal matters that ma` come before Town Meeting. This report is published and distributed to the members of Town Meet- ing 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 mat- ters for which the Committee s formal position was pending at the time of publication. The Committee has alread\ published its report to the March 2013 Special Town Meeting, which recom- mended approval of the Board of Selectmen s offer to purchase 10 acres of land and two buildings of- fered b\ The Trustees of the Supreme Council of the Ancient Accepted Scottish Rite of Free Masonn at 33 Marrett Road. The Committee was unammousl` in support of this request, and we are delighted that the Town s offer has now been accepted. Town Meeting s strong endorsement of the purchase represents a clear mandate to develop a commumh center along with other Town services in that location. Developments Since Adoption of the FY2013 Budget The unallocated funds available within the FY2013 budget were put to use at the November 2012 Special Town Meeting. Road improvements associated with the new Estabrook School received an appropriation of $1,500 000 (Article 5 2012 STM) The Retirement Fund was supplemented with $1 000 000 in re- sponse to a significant update of the Town s pension funding schedule b\ the Retirement Board (Article 2, 2012 STM) Town Meeting appropriated $1 600 000 into the Debt Service Capital Projects Building Renewal S.F (Article 3 2012 STM)which will be used to mitigate the increase in debt service associated with the new Estabrook School construction combined with the Bridge and Bowman school renovations Against the recommendation of this Committee Town Meeting did not approve an additional $500 000 for the Post Employment Insurance Liabilit\ (OPEB) Fund (Article 4 2012 STM) but $500 000 had al- read` been appropriated into the Fund at the 2012 Annual Town Meeting(Article 18 2012 ATM) Up to $2,800 000 in increased construction costs for the new Estabrook School were authorized as part of the Town s excluded debt for this project(Article 6 2012 STM) Weather-related expenses have had a small but noticeable impact on the Town budget, requiring an addi- tional appropriation for cleanup from Hurricane Sand\ and we anticipate larger than average snow and ice expenses for FY2013 Construction of the new Estabrook School proceeds ahead of schedule and the School Committee has stated that the building should be read\ for occupanc` shortl` after the beginning of 2014 Town Meeting s approval of a Citizen s Article (Article 17 2012 ATM) requesting an appropriation of municipal funds to reduce the cost of school bus transportation in FY2013 was followed b\ a campaign to encourage greater use of school buses b\ students The resulting increase in ridership has been gratifying, and the Committee is pleased that the School budget has been adjusted so that the annual single-rider fee can be maintained at$300 without the need for a municipal subsid` The $561,518 appropriated for Phase 3 of the Muzze` Senior Center Upgrades (Article 8(c) 2012 ATM) will not be spent now that the Town has reached an agreement to purchase the propert\ at 33 Marrett Road,where it is anticipated that the existing Senior Center will be relocated. A stud\ funded under the CPA (Article 8(d) 2012 ATM) examined suggested upgrades to the Can Me- morial Building and has recommended spending roughl` $8 000 000 on renovations to complete an major APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM overhaul of the facilit Funding for design and engineering for this project will be considered under Arti- cle 8(c) The Board of Selectmen formed the Ad Hoc Townwide Facilities Master Planning Committee to perform a comprehensive long-range analysis of the needs and priorities for the Town s various facilities. The re- port of this committee will be published soon, and the Committee is hopeful that it will offer critical in- sight and practical options regarding the Town s capital planning. The Committee has made no Reserve Fund transfers so far during FY2013 however the Town s snow and ice expenses for FY2013 ma` require a Reserve Fund transfer The FY2014 Budget The Town Manager has proposed a balanced, level service budget containing some strategic program im- provements while adjusting to a significant increase in school enrollment. The budget does not require an operating override Total revenue is projected to increase b\ $11,300 000 or 6 9% a relatiyel` large annual increase that is target` the result of an increase in non-recurring funds that will be allocated target` to cash capital and reserves Total propert\ tax revenue is projected to grow b\ 4%, and the average residential tax bill is pro- jected to increase b\ 2 8% As seen here the growth of revenue usuall` exceeds the growth of tax bills due to new growth from commercial and residential development which expands the tax base mde- pendentl` of the 2 5% annual increase allowed b\ Proposition 2'/2. The budget includes $1 600 000 in propert\ tax relief for FY2014 and $2,184 000 set aside for future propert\ tax relief and/or future capital building projects in the Capital Projects/Debt Service Re- serve/Buildmg Renewal Stabilization Fund. Approximatel` $2,400 000 in unallocated funds that was mitiall` set aside for possible appropriation at a Special Town Meeting in the fall of 2013 to fund the construction of additional high school classrooms was instead used to finance the purchase of the propert\ at 33 Marrett Road. If the high school project proceeds in the fall, it will probabl` require debt funding. As always, the Town faces a challenge when crafting a budget in the absence of a firm commitment on the amount of State funding to expect, primaril` in the form of aid under Chapter 70 (schools) and Chap- ter 90 (roads) This year the situation is particularl` volatile The Governor has proposed major changes to the State s tax revenue system and to the formulas used to apportion State aid. As presented, these changes would greatl` increase the Town s Chapter 70 aid, however the Governor s budget must be rec- onciled with budget plans offered b\ the legislature where it will most certaml` be modified. So it is yen. difficult to predict the final outcome at this time In addition, the federal government has triggered a sweeping series of budget cuts under a system of sequestration that will reduce federal aid and grants to the State and Town. Due to this uncertamt\ in the State and federal budgets, $750 000 has been set aside for potential reductions in State and federal aid. A rapid increase in enrollment within the Lexington Public School system has put a serious burden on the School department. The Superintendent has requested funding for new staff to meet the legal require- ments and programmatic needs of the population. For the coming fiscal year this funding did not require a deviation from the Town s revenue allocation model. The Committee expects that the need to provide suitable classroom space for a growing school population and the associated staff will have a significant impact on future budgets Finall` this budget makes significant investments in capital improvements to the Town s buildings and infrastructure The Committee agrees that this is a worthwhile use of funds while the Town is not under pressure to meet its basic budget needs. 6 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM Warrant Article Analysis and Recommendations 1 Article 4: Appropriate FY2014 Funds Funding Committee Requested Source Recommendation Operating Budget See Below See motion Approve (9-0) Pro- Description Amount gram t 1000 Education $82,788,229 illi ` ... 2000 Shared Expenses $44,799,110 hared = Expenses = 3000 Public Works $8,216 796 25% 4000 Public Safety $11 60,583 t=_� Education III 1 5000 Culture &Recreation $2,081 015 46% 6000 Human Services $1 179 918 I 7000 Community Devel $1 671,318 � � I Municipal ,' 8000 General Government $5,253,205 . '�� , Total Municipal $30,052,835 Capital $13,360,748 Other $7,474,719 other Capital 8% The operating budget consists of Education (1000) Shared Expenses (2000) and Municipal (3000-8000) programs Major components of each program are discussed below Funds Funding Program 1100• Lexington Public Schools Requested Source $81,313,963 See motion The School Committee has voted to recommend a FY2014 appropriation of$81,313 963 for the Lexing- ton Public Schools This request represents an increase of$4 685 607 or 6 11% above the FY2013 appro- priation. The requested appropriation would implement a level service budget with a few exceptions for program improvements, primaril` the addition of 12 7 full-time equivalent (FTE) staff to address major program needs. Here we brief` summarize a few aspects of the requested budget. More comprehensive and authoritative information on the request ma` be found in the FY2014 School Committee Recommend- ed Budget The prmar drivers underlying the increase in the request above the FY2013 appropriation are (1) salar increases based on current negotiated contracts (2) staffing increases (10 6 FTEs) in the regular education program due to enrollment increases (3) staffing increases (16 8 FTEs) in special education attributable to overall increased enrollment and to additional in-district capacit that will serve students who would otherwise require more expensive out-of-district placements and (4) staffing increases (12 7 FTEs) and other costs in response to significant program needs. Funding Sources While the General Fund supports a high percentage of the school budget, other sources of revenue also support school operations Some of these sources must be appropriated b\ Town Meeting, others go di- 7 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM rectl\ to the School Department without the need for appropriation. A brief discussion of some of these revenue sources is given below • Federal grants—For FY2014 the School Department projects that it will receive $1 900 000 in feder- al grants, the same amount that was received in FY2013 However because of the uncertainties en- gendered b\ the sequestration of funds in the federal budget, the recommended FY2014 Town budget includes $750 000 set aside as a resource to be available for appropriation later in case of unexpected reductions at the federal and state levels Federal grant funds are not subject to appropriation b\ Town Meeting and are not included in the $81,313,963 request. • State grants —For FY2014 the School Department projects that the total amount that will be received in state grant revenue will be the same as in FY2013 namel` $1 725 698 The grants include those for METCO School Health, Academic Support, Full-Da` Kindergarten, and Special Education Program Improvement. These funds are not subject to appropriation b\ Town Meeting. • Circuit breaker reimbursements come from the Commonwealth when the cost of special education services for an individual student,whether in or out of district, exceeds four times the statewide foun- dation budget. During the last five years, the School Department began to carefull` evaluate in- district special education costs and to identif\ costs for which reimbursements could be sought. This process was a major factor in the increase in the total number of students for whom the reimburse- ment was claimed between FY2008 (70) and FY2012 (110) During the same period, reimbursement rates have varied between 40% and 72% The projected re- imbursement rate used for budgeting purposes was 60% in FY2013 while the actual reimbursement rate was 70% For FY2014 a rate of 70% is assumed for budget purposes Given this assumed rate and a base of 106 students, the total reimbursement for FY2014 is estimated to be $2,629 751 The comparable estimate for FY2013 was $2,318 438 Because of this increase in the projected reimbursement and the shift of students from out-of-district placements to in-district programs, the amount in the budget request for support of out-of district spe- cial education costs is $5,267 812 which is 5 75% lower than the corresponding FY2013 amount. Cir- cuit breaker reimbursement funds are not subject to appropriation b\ Town Meeting, and are not in- cluded in the budget request under this Article • The FY2014 school budget request assumes $250 000 presentl` in the Avalon Ba` Student Enroll- ment Mitigation Stabilization Fund will be transferred to the School Department b\ appropriation b` Town Meeting. After this transfer the Fund will have a $47 000 balance • In FY2014 the School Department is planning to use a $250 000 credit from the LABBB program in partial payment of Lexington s LABBB bills. Lexington, Arlington, Burlington, Bedford, and Bel- mont comprise the LABBB collaborative LABBB provides educational and support services for over 250 special needs students from over 60 districts Several years ago the LABBB program had an un- committed balance that was allocated to the participating towns In FY2015 Lexington s LABB cred- it will be more than$100 000 The LABBB credit is not subject to appropriation b\ Town Meeting. • In FY2014 the component of Chapter 70 aid (a major part of state aid) specificall` attributable to kindergarten costs is expected to increase following the Lexington Public Schools elimination of fees for full-da` kindergarten in September 2013 Chapter 70 kindergarten aid is calculated on the basis of the program in the previous year Therefore in FY2014 Chapter 70 aid will include full credit for each kindergarten student (instead of half credit) for the first time However given the uncertainties in the state budget, and in the non-kindergarten components of Lexington s Chapter 70 aid, onl` the total amount to be received in state aid was used in setting the baseline municipal/school revenue split. For the FY2014 budget, the overall amount of state aid is projected to be the same as it was for FY2013 FY2014 status of programs for which parental fees were eliminated in FY2013 In FY2013 the School Department eliminated fees for full-da` kindergarten. To do so it used a one-time appropriation of $79 024 from the Town, a State kindergarten grant of $230 000 and school operating 8 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM funds In FY2014 the School Department will continue the program, and, for budgeting purposes, pro- jects that$205 000 will be received through the State kindergarten grant. As in FY2013 the cost of the elementary instrumental music program is full` supported b` this operating budget. School Bus Transportation Subsidy The budget request includes $320 000 to continue the subsid` approved for FY2013 under Article 18 of the 2012 Town Meeting that allows bus transportation to be offered for $300/student for the school year to students who do not qualif` for free bus transportation services The budget request also includes a subsid` of total value approximatel` $150 000 intended to reduce the cost for students willing to sign up to regularl` travel to Estabrook School via school bus transportation. This would be the second and final year of that specific subsid` intended to reduce traffic during the construction of the new building. Staffing The total number of full-time equivalent staff will increase from 916 64 to 963 56 under the requested budget. This is a 5 1% increase There are multiple factors underlying the increase The\ include among other factors (1) the general increase in enrollment, (2) the continuing shift in special education services from out-of- to in-district, and (3) changes in rules/regulations/laws that increase the teacher assessment workload and the level of effort for other tasks A table on page 16 of the Budget Overview section of the FY2014 School Committee Budget presents staffing levels b` unit and fiscal year Funds Funding Program 1200• Regional Schools Requested Source $1,474,266 GF The Minuteman Regional High School (MRHS) Committee has accepted a budget for FY2014 of $18,547 098 a $1,295,385 or 7 51% budget increase over FY2013 This increase consists of a 4 8% in- crease in the costs of operations and a 60 6% increase in capital costs. The operations budget is a level- service budget, designed to accommodate a greater number of students, while continuing to reevaluate staffing needs The school continues to see a reversal of declining in-district enrollment. The freshman class for Fall 2013 is expected to increase again. Due to lack of consensus among the District member towns, the school still remains unable to initiate a MSBA approved renovations program to address unmet needs in Career and Technical Education facili- ties and equipment. This project process is in its fifth year and the delays have prompted the New Eng- land Association of Schools and Colleges to put Minuteman on Warning Status for having failed to make progress under the Facilities Standard. A major consequence of this dela` is that the district towns have to address urgent maintenance problems that would be better handled as planned renovations, and that would be less costl` if the\ could be done with MSBA support. To build consensus for a capital program and to ensure future district operations are sustainable the District School Committee is undertaking a feasibihtc stud` The stud` s goals include defining enrollment trends, potential program changes, and regional agreement revisions One of the sticking points is that the State sets the tuition charged to out-of-district students based on op- erational costs, yet it does not allow the district to charge a capital fee to these students These students comprise almost 45% of the school population. The district is working hard to convince the State to either change the tuition formula to account for capital or to create another mechanism to allow districts to share capital costs with these non-district pupils This budget assumes level out-of-district enrollment and a 10% growth of in-district students, with an anticipation that the incoming freshman class will increase b` 70 students Eights percent of the operating budget increase occurs in salaries, health benefits and contracts in place Salaries, which make up 61% of 9 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM the operating budget, increased $803,280 (4 37%) The school continues its commitment to small-scale infrastructure renewal with an annual capital budget of$870 000 which includes a $200 000 contribution to their Stabilization Fund. As of October 12, 2012, 666 full-time students were enrolled. Roughl` 56% of these students are from in- district towns and 44% are from out-of-district towns The School Committee continues to vote to not accept School Choice students at MRHS Total full-time enrollment increased b\ 7 students (1 1%) In- district enrollment decreased b\ 11 students (-2 9%) and out-of-district enrollment increased b\ 18 stu- dents (6 5%) Special education students comprise 88 7% of the school s FTE enrollment. The FY2013 non-resident tuition rate capped b\ the State was set at $19 046 per student. It is expected to decrease in FY2014 based upon recent information provided the Massachusetts Department of Elemen- tarn and Secondary Education (DESE) In addition non-resident SPED tuition assessments will continue to be $5 000 per student (in-district SPED costs are $4,500 per student) with all transportation costs as- sumed b\ the sending communrt\ Post Graduate (PG) enrollment on October 1 2012 dropped sigmficantl` (39%) from the prior year This drop in enrollment will likel` yield less than the anticipated $125 000 of FY2013 revenue and the FY2014 revenue projection dropped to $100 000 There are 77 PG students PG in-district enrollment dropped 33%while out-of-district enrollments dropped 43% Member towns are assessed for the upcoming year based on their student enrollment in the current year These assessments are used to fund the portion of this budget that is not funded b\ 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 $2,115 902 of Chapter 70 mone` and $600 000 in transportation aid. These estimates are based on the Governor s H-1 budget, which indicates increased funding in Chapter 70 aid and level funding in transportation aid com- pared with FY2013 All of these figures, with the exception of the bottom line MRHS total, are prehmi- nan until final approval of the State s FY2014 budget. Using Tuition Revenue From The Current Year Three years ago our report included a criticism of the use of prior-year and current-year tuition mone` Up until FY2002 the school budgeted yen. conser®ativel` considering anticipated but uncollected tui- tions to be too speculative and onl` applied the tuition collected from the prior year towards its budget. Starting in FY2003 $280 000 of current-year (anticipated) tuition was applied towards the budget. The application of anticipated tuition then began a potentiall` dangerous increase (see table below)that trend- ed towards a point where eventuall` all anticipated current-year tuition revenue would be applied to the same year s budget. That trend ended with the FY2013 budget, and we are pleased to report that the FY2014 revenue plan draws on a reserve of$5 100 000 from prior-year tuitions, reducing the use of cur- rent-year tuitions to $600 000 The Application of Tuition Revenue Total Minuteman FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Current Year Tuition 375,392 382,181 888,363 1,541,984 1 480,984 900 000 600 000 I Prior Year Tuition 3 112,724 3 473,927 3 457,303 2,888 748 2,793 400 3 700 000 5 100 000 I 10 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM Minuteman's Projected Assessment- based on unapproved House-1 budget FTE BASIS AVG.PER PUPIL ASSESSMENT ENROLLMENT* CHARGE PROGRAM FY13 FY14 FY13 FY14 FY13 FY14 Grades 9-12. Regular Day Students 54 53 $5 762 $6 700 $311 159 $355 111 ,Special Education 4ssessment 22 27 $4,500 $4,500 $99 000 $121,500 State Minimums for Lexington 60 58 $14,266 $13,540 $855 942 $785,340 Totals, grades 9-12(incl. SPED) 54 53 $23 446 $23 810 $1,266 101 $1,261,951 Post Graduate Programs. 9 7 $3 000 $3 000 $27 000 $21 000 TOTAL OPERATING 63 60 $21,518 $21,383 $1,355 606 $1,282,952 Special Assessments (based on enrolled 9-12) Capital Assessment $970 $3 610 $52,372 $191,314 Debt&Feasibility Study Interest $1 158 - $62,505 - TOTAL ASSESSMENT $22,349 $24,571 $1 407,978 $1,474,266 Percentage increase(decrease)over pnor year 9 37% 9 94% (17 48%) 4 71% * -prior year's enrollment as of Oct. 1 A breakdown of the full assessment is given above The prelimman FY2014 assessment for Lexington is $66,288 (4 7%)more than the FY2013 actual assessment. This is slightl` less than the percentage growth of the total district budget and due to a drop in enrollment of one Regular Da\ student. The Regular Da\ Student and Capital and feasibiht` stud\ assessments are based on Lexington s FY2013 Base Enrollment (as of October 1 2012) of 53 full-time regular students in grades 9-12 This has increased our total full- time student operating-share assessment slightl` to $355 111 with a per-pupil increase of 16.28% This increase is primaril` driven b\ the 272% increase in the per student capital assessment. The State Re- quired Minimum payment has decreased $70 602 due to a decrease per-student charge Additional sav- ings are seen in a $6 000 reduction in our PG program costs, where the number of students enrolled in post-graduate programs has decreased. Funds Funding Program 2000• Shared Expenses Requested Source $45,883,421 See Motion Shared Expenses encompasses line 2100 Employee Benefits line 2200 Debt Service line 2300 Reserve Fund, and line 2400 Public Facilities See Section IV in the Brown Book for more information. Line 2100 Employee Benefits This line includes the annual payment to the Lexington Retirement Sys- tem to cover the costs of the future pension liabilit` incurred b\ active municipal employees and non- teaching school employees and to cover the unfunded liabilit` incurred in prior years the Town s share (1 45%) of employee compensation for the Medicare tax, health and dental insurance for current and re- tired employees premiums for propert` and liability insurance policies potential unemployment and workers compensation expenses, and an appropriation to cover uninsured losses The financing of the un- funded liabilit for retiree health insurance benefits (OPEB) is covered under Article 18 Health Insurance The largest single component of employee benefits expenses is the Town s contribu- tion to health insurance for current and retired employees (line 2130) The FY2014 projected budget for line 2130 is $20 945,505 a decrease of $54 495 (-0 26%) from the FY2013 appropriated budget. The FY2013 and FY2014 appropriations reflect decreases from prior years due to the Town joining the Com- monwealth of Massachusetts Group Insurance Commission(GIC) as of Jul` 1 2012 11 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM The following points summarize the main aspects of employee health insurance under the agreement be- tween the Town and the coalition of employee bargaining units reached in Februar\ 2012, which covers Town and School employees • The Town transferred its employee and retiree subscribers to the GIC as of Jul` 1 2012 and, per GIC rules, is committed to remain a participating mumcipalits for at least 3 years, i.e through the end of FY2015 • Each benefits-eligible employee and retiree ma` choose a plan from the GIC plan menu. • The premium contribution rate split returned, for most plans, to the levels that existed before the most recent health benefits contract negotiated in 2010 i.e to 85% for the Town and 15% for ac- tive employee subscribers and 80%120% for retirees (but see the discussion below about the HRA and Part B subsidies) • Two Health Reimbursement Accounts (HRAs) desired b` employees were established. • A Medicare Part B subsid` is provided to retirees • The HRA and Medicare Part B subsidies are funded b` contributions from both the Town and ac- tive employees and retirees The Town has no obligation to continue this funding beyond the con- clusion of FY2015 Funding for the HRA and the Medicare Part B subsidies comes from several sources 1) The Town made a one-time payment of an amount of$1 120 000 (equal to 25%of the anticipated savings accruing in the first year after transferring to the GIC) to an employee mitigation fund. The one-time payment was included in the $21 000 000 FY2013 adopted budget for health insur- ance 2) Each year the Town will contribute to the mitigation fund the amount of subscriber premium contributions that differ from what subscribers would have paid using the premium contribution rate split in effect before the 2010 agreement. For plans with a higher subscriber premium contri- bution rate (e g. mdemnrt` plans) that difference is added to the fund and for plans with a lower subscriber premium contribution rate (e g. retiree Medicare supplement plans) the difference is withdrawn from the mitigation fund b` the Town. This contribution is cost neutral to the Town as it is equal to the excess amount collected in subscriber premium contributions 1 3) Additional funding was provided b` a transfer of a portion of the Health Insurance Claims Trust Fund equal to the premiums paid b` employees but not spent to cover claims under Lexington s pre-GIC self-insured health plan. That portion of the HICTF would otherwise have been returned to the employees. Projecting Health Benefits Costs and Enrollments Under the GIC Lexington s actual claim history is onl` one of mans factors that must be taken into account in projecting costs Lexington s costs are now driven b` the GIC rates which reflect the overall GIC claims history as well as how our subscribers 1 The proportion of the premiums to be paid by the Town for the duration of this agreement, 85% for active employees and non-Medicare retirees and 80% for retirees in Medicare supplement plans, is the same as that paid prior to the 2010 agreement. This is the same proportion that the Town would have paid if it had unilaterally elected to join the GIC The agreement sets premium contribution percentages by the employee and retiree subscribers to 25% for high-cost indemnity plans and, 15% increasing to 18% in year 3 of the agreement, for all other plans. Amounts equal to the contributions in excess of 20% for Medicare retirees and in excess of 15% by other subscribers will not be used for premiums but will go into the mitigation fund. In addition, to compensate for the decrease in retiree contribution split for Medicare supplement plans from amount prior to the 2010 agreement, the difference between 15% and 20% will be withdrawn from the mitigation fund in years 1 and 2, and the difference between 18% and 20%will be withdrawn in the third year of the agreement. 12 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM choose among the various plans offered b\ the GIC The total enrollment remains a critical variable but the choices of plans b\ subscribers are also important. For estimating FY2014 expenses, the Town was able to use the FY2013 experience as a base Enrollment numbers and projections are shown on page IV-6 of the Brown Book. The FY2014 budget is designed to accommodate an enrollment reaching 2286 an increase of 95 subscribers (4 3%) This in- crease allows for changes in enrollments due to new hires to fill currentl` open positions (9) or newl\ cre- ated positions (57) and provides a buffer for new subscribers among present employees/retirees (26) It also captures increases in numbers of subscribers coming from the movement of eligible employees from famil` plans to Medicare supplement plans that does not lead to cost increases. The health insurance amount in line 2130 reflects an increase of 5 4%, when discounting the one-time FY2013 mitigation payment of$1 120 000 due to the expected combined effects of changes in the num- ber of subscribers, and increases in the costs of medical services The net effect relative to the total FY2013 health insurance appropriation is a small decrease in the overall budget for health benefits as stated above Line 2100 in aggregate. The total amount budgeted for Line 2100 is $29 688 138 This amount is 1 2% less than the corresponding number for FY2013 Besides employee/retiree health insurance line 2130 includes $910 832 for dental insurance $1,305 421 for Medicare Tax, which the Town pays for all Town and School Department employees hired after 1986 and $20 400 for life insurance The FY2014 budget includes the amount of$200 000 on line 2140 Unemployment Benefits, to fund the Town s estimated statutory liabilit\ for unemployment compensation payments for employees who were or ma` be laid off. This is a 31% reduction from FY2013 reflecting an anticipated reduction in the num- ber of employees eligible for unemployment insurance benefits and in the lengths of time that the\ will eligible for unemployment benefits The Workers Compensation recommended appropriation in line 2150 $610 915 represents a 0 42% in- crease over FY2013 and continues the Town s response to actual experience and efforts to build a reserve balance in this continuing balance account. The second largest line in Shared Expenses is line 2110 Contributor\ Retirement, $4 80 ,537 This amount is based on an actuarial valuation of the Lexington Retirement System. It will be paid b\ the Town to the System, which is managed and overseen b\ the Lexington Retirement Board, to fund the Town s pension payments to retirees in FY2014 as well as to help fund liabilities for future payments due to current or past obligations The recommended appropriation for FY2014 represents a $400 000 or 7 68% decrease from the total FY2013 appropriation. Note that the FY2013 total includes a one-time supplemental appropriation for Contributors Retirement of$1 million that was approved at the November 2012 special town meeting. If this supplemental appropriation is removed from the FY2013 base the un- derlying change in costs between FY2013 and FY2014 is an increase of$600 000 or 14 3% The major drivers of this increase are the final phase of capturing the losses attributable to the 2008 recession and a change in the mortality table used in the biennial valuation of plan liabilities, specifically the recognition that members are living longer The Retirement Board s goal is to achieve full funding of the liabilities b\ the year 2030 Line 2200 Debt Service This line item includes within-ley` debt service i.e it does not include exempt debt authorized b\ Proposition 2'/2 debt service referenda. This line also does not include the request to appropriate $1 600 000 from the Capital Project/Debt Service Reserve/Building Renewal Stabilization Fund in order to pay a portion of the payments that would normally be covered b\ the FY2014 exempt debt service That is covered under Article 20 Line 2300 Reserve Fund The Reserve Fund request is level funded at$900 000 13 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM Line 2400 Public Facilities The Department of Public Facilities (DPF) is responsible for municipal and school facilities management and maintenance functions The Department administers major capital pro- jects,building maintenance and custodial services Overall, DPF funds expenses are projected to increase b` 3 83%from FY2013 to $10 182,713 The budg- et includes funding for 6 6 FTE new positions, including an additional custodian to start work at the larger new Estabrook School when it opens and three custodians to work at the proposed new communrt\ center at 33 Marrett Rd. These and other details of the DPF staffing and budget ma` be found in the Shared Ex- penses section of the Brown Book. Funds Funding Program 3000-8000• Total Municipal Requested Source $30,052,835 See Motion Line 3300 DPW Public Grounds The Public Grounds department is requesting $45 000 to share the cost of grounds maintenance of the 33 Marrett Rd with the Scottish Rite Trustees, using the landscaping compan` which currentl` is contracted to care for the entire propert\ The Forestry Division will add one full-time position for $38 043 This increased expense will be offset b\ a decrease in the Highwa` Divi- sion, due to a one-time contractual expense ending. Line 4100 Law Enforcement The Police Department is requesting $58 040 for an Administrative Ser- geant, a new position, which will free up a Sergeant for patrol supervision. The Department is seeking two pieces of hardware to boost operating efficient` $21 800 for an electronic fingerprint scanner which will eliminate the ink pad printing; and $8 197 for a Spectracom Net('lock, which will allow the dispatch- ers to accuratel` record and synchronize events Line 5100 Cary Memorial Library — The Library plans to sta` open three additional Sundays with a re- quest for$3,511 Line 6210 Transportation Services — The Transportation Services is a part of the Human Services De- partment. A request for $10 868 will allow them to convert a part-time Transportation Coordinator posi- tion to full-time This would allow for increased planning and implementation of new transportation initi- atives, help oversee the Liberte Ride contract, and provide increased outreach and education. Additional- 1\ $20 000 of Transportation Demand Management Stabilization Funds will be used as matching funds for the Route 128 Business Council shuttle Line 7100 Office of Community Development—The Conservation Department is seeking a 16% increase in funding for. $12,250 Conservation Town Ranger for education and for the enforcement of open space b\-laws $5 400 to increase the hours of their two land management interns, improving response on con- servation land issues, a one-time $7,500 to convert Old Idyewilde from garden to natural space and $875 for the ACROSS Lexington project, which will be added to $5 000 of CPA funds requested under Article 8(n) to fund a 3 year project to create a pedestrian/bike route Line 7200 Planning— The Planning Department is seeking a 49% increase in their consulting expenses This $15 000 will employee a consultant to assist them in their ongoing revision of the Town B\-Laws Line 8100 Board of Selectmen — The Board of Selectmen require $21,364 to convert a part-time munici- pal assistant position to full-time This line item also allocates funds from the PEG Access Revolving Fund,which have been increased b\ $30 000 to cover negotiated increases in the LexMedia budget and to provide additional technical staff to support broadcast of public meetings Line 8230 Town Manager— The Town Manager s line item includes the Satan. Adjustment Account, a continuing budget account which funds unsettled contractual agreements for both municipal and school settlements Onl` the Lexington Education Association and Department of Public Facilities contracts 14 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM have been settled, so this year s request is for $801 988 The municipal departments have asked that an equivalent of 2 13%of their salaries be allocated to this account. Line 8400 Finance—The Assessors Department is asking for two program improvements, $50 000 for an Assessing professional services contract which would support legal costs for cases currentl` before the Appellate Tax Board, and allow for an anticipated increase in the caseload, and $55 000 to add a third full-time Residential Analyst/Inspector in order to reduce the work backlog. Line 8500 Town Clerk — The Town Clerk is responsible for documenting actions taken b\ Town Meet- ing. The $40 000 requested here is to implement electronic voting at the Town Meeting, in response to the amending of Chapter 118 Section 17 (Voting) under Article 32. The request is for a one-time expense of $35 000 for electronic vote recording hardware and software and $5 000 for ongoing additional staff time to maintain and operate the system. This line item also includes a decrease of$15,536 in personal services and a decrease of$20 000 in contractual services. These reductions reflect that in FY2014 there is onl` one town-wide election planned, not three elections as in FY2013 Line 8600 Information Technology — The Information Technolog\ department supports all the Town Departments technolog\ needs This year s request includes $38,999 for ti iewpermit hardware for use of inspectional services in Fire Commumh Development and Engineering. It s a comprehensive integrated electronic permit management and tracking system that will allow real-time in-the-field access for the staff, reducing paperwork and increasing accurac` Additionall` requested is $3,500 for web hosting for the LexEngage communrt\ forum, and $4 800 to install an independent network connection, which will increase bandwidth and create a backup WAN in case the current RCN network encounters problems The Committee recommends approval of this request (9-0). Article 5: Appropriate FY2014 Funds Funding Committee Requested Source Recommendation Enterprise Funds Budgets $7,888,530 Water EF $8,800,750 Wastewater EF Approve (9-0) $1,785,840 Recreation EF 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 Enterprise Fund — with the exception of indirect costs which are appropriated under Article 4 For an overview of the legal framework and accounting concepts that appl` to the operation of an enterprise fund, please refer to Ap- pendix B The following discussion will focus on the anticipated expenses and revenues of the enterprise funds for FY2014 and issues the\ raise A breakdown of the funding request for this article is shown in the following tables Water Enterprise Fund FY2012 FY2013 FY2014 Actual Appropriated Requested Change Personal Services $603,565 $647 687 $667 183 3 0% Expenses $387,265 $389,590 $395,200 1 4% Debt Service $1,233,364 $1,299 091 $1,260 655 -3 0% MWRA Assessment $5 049 999 $5 145 927 $5,565 492 8.2% Total Requested in Article 5 $7,724,193 $7,482,295 $7,888,530 5.4% Indirect Expenses $704 624 $665 848 $818 689 23 0% Total Water Enterprise Budget $7,978,817 $8,148,143 $8,707,219 6.9% 15 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM Wastewater Enterprise Fund FY2012 FY2013 FY2014 Actual Appropriated Requested Change Personal Services $201,519 $276 183 $292,711 6 0% Expenses $335,323 $333,200 $337 100 1.2% Debt Service $1 106,551 $956 855 $1 131 673 18 3% MWRA Assessment $6 802,875 $6,954 177 $7 039,266 1.2% Total Requested in Article 5 $8,356,268 $8,520,415 $8,800,750 3.3% Indirect Expenses $646,217 $623 444 $456 603 -26 8% Total Wastewater Enterprise Budget $9,002,485 $9,143,859 $9,257,353 1.2% Recreation Enterprise Fund FY2012 FY2013 FY2014 Actual Appropriated Requested Change Personal Services $594 026 $645 044 $677 799 5 1% Expenses $932,667 $1 018, 84 $1 008 041 -1 0% Debt Service $131,500 $130 600 $100 000 -23 4% Total Requested in Article 5 $1,658,193 $1,794,228 $1,785,840 -0.5% Indirect Expenses $213 600 $223 600 $228 600 2.2% Total Recreation Enterprise Fund $1,871,793 $2,017,828 $2,014,440 -0.2% Note that this table differs from that contained in the Warrant in two respects the MWRA assessments for water and wastewater reflect the MWRA s prelimman assessments issued in Februar\ rather than place- holders assumed in the Warrant; and indirect expenses that will be charged to the enterprise funds, alt- hough appropriated separatel` under Article 4 have been included for completeness. Water and Wastewater Funds MWRA Assessments The largest expense component of both the Water and Wastewater Enterprise Fund budgets is the assessment charged b\ the Massachusetts Water Resources Authority (MWRA) The Town will be assessed a share of the MWRA s total FY2014 water and sewer budgets based on the Town s pro- portionate water and sewer usage in the prior calendar year (CY2012) compared with other towns in the MWRA communrt\ Prelimman assessment figures are published in February of each`•ear and final as- sessments are made in June The appropriations for MWRA expenses in the motion for this article will be adjusted from the placeholder figures in the Warrant to reflect the MWRA s February 2013 prelimman assessment estimates, as shown in the following table MWRA Assessments Fund FY2013 Final FY2014 Warrant FY2014 Prelim. % Change vs. Assmt. Placeholder Assmt. FY2013 Water $5 145 927 $5 668 686 $5,565 492 8.2% Wastewater $6,954 177 $7 735 633 $7 039,266 1.2% I Combined $12,100 104 $13 404,319 $12,604 758 4.2% The final MWRA assessments issued in June which are tvpicall` somewhat lower than the prelimmarn assessments, will be used to set water and sewer rates during the Town s FY2014 rate-setting process in the fall. If a special town meeting is held in the fall, the appropriation for MWRA costs ma` be adjusted upwards or downwards as a `housekeeping matter 16 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM It should be noted that this year s increase in Lexington s MWRA water assessment of 8 2% is considera- bl` higher than the MWRA-wide average increase of just 3% This discrepant` is largel\ attributable to a major spike in the consumption of water b\ the Town of Bedford during the late summer and earl\ fall of 2012 as part of a remedial pipe flushing program to remove contamination in certain parts of its water system.-As a consequence of that event, Lexington s consumption of MWRA water increased in CY2012 b\ 4 6%, compared with an MWRA-wide increase in water use of less than 1% Now that the problem in Bedford has been resolved, it can be anticipated that Lexington s MWRA water share will drop back to normal and thus fall, relative to other MWRA communities, in CY2013 This should result in a lower- than-average water assessment increase next year (for FY2015) In the meantime additional revenue that the Town of Lexington earned from the Town of Bedford in 2012 due to the flushing program was ex- cluded from consideration in setting the FY2013 water rates, and thus should add to the water fund s re- tained earnings to help mitigate this year s water rate increase (See discussion below of the use of re- tained earnings to mitigate FY2014 rates ) Direct Town Costs In addition to the MWRA assessments, the expenses of the Water and Wastewater Fund budgets include direct costs incurred b\ the Town, primaril` 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-25 V-27) with the exception of sewer fund debt service costs which continue to grow at a comparatiyel` high rate (18 3%) As this Committee has noted in past reports, the growth of debt service costs is a predictable consequence of a transition made six or seven years ago from an earlier practice of funding ongoing capital improve- ments and repairs to the water and wastewater infrastructure with a combination of debt and cash capital to a practice of funding them primaril` with debt. See the discussion of Articles 11 (Water Capital) and 12 (Sewer Capital) and accompanying tables. While debt financing helps to spread the costs of projects over their useful life the immediate effect of the change was a temporar\ lowering of current-year capital costs As interest payments and principal repayments come due on the higher levels of debt incurred, the annual capital costs of the enterprise funds that must be captured in the water and sewer rates are gradual- 1\ growing back to their original levels In addition, the Water and Sewer Enterprise Funds debt service burden has been increased b\ their assumption of responsibilit for approximatel` 25% of the debt ser- vice costs for the construction of the new DPW facilit\ (17% and 7%respectivel` based on their usage of that building) This year as will be addressed in the discussion of Articles 11 and 12, it is proposed to finance $750 000 of a total $1 09 ,500 in water system capital improvements, and $200 000 of a total $1 44 ,500 in sewer improvements, from retained earnings The Committee applauds this proposal as it will both bring the level of retained earnings down to more reasonable levels and mitigate future increases in debt service costs,thus providing long-term as opposed to mere temporarn short-term rate relief. Indirect Town Costs The Water and Sewer Enterprise Fund budgets also include indirect costs for ser- vices provided b\ other Town departments to support water and sewer operations, such as insurance costs (health and liabilit`) retirement funding, engineering costs, and the cost of services provided b\ the Comptroller the Management Information Systems (MIS) Department, and the Revenue Department. In 2006 Town staff conducted an analysis of indirect charges and concluded that the\ were higher than could be justified. To address this issue without causing undue disruption to the Town Budget, the level of indirect costs charged to the water and sewer funds was graduall` phased down, from FY2008 through FY2012, at the rate of about 3-5% per year This year following the performance of an updated indirect cost analysis, the indirect costs charged to the water fund will be increased b` approximatel` $150 000 from $665 848 to $818 689 or about 23% and the indirect costs charged to the sewer fund will be de- 2 Lexington re-sells MWRA water to the Town of Bedford on a pass-through,wholesale basis 17 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM creased b` approximatel` $165 000 from $623 444 to $456 603 or about 27% Because the increases and decreases are roughl` offsetting, the net effect on combined water and sewer rates going forward will be minimal. 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 the\ be used onl` 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 earl\ 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 of concern. Since 2005 the Town s abilrt\ to measure and forecast water and sewer usage and thereb` to anticipate revenues and reserve levels, has improved sig- nificantl` This has enabled the Town to restore and stabilize the water and sewer enterprise fund reserve balances,' and indeed more recentl` to draw some of the funds down for rate relief or other purposes, as shown in the table below Retained Earnings Appropriations for Rate Relief and Year-End Balances FY08 I FY09 I FY10 I FY11 I FY12 I FY13 I FY14 TTater Rate Rel.App. $362, 70 $463 046 $525 000 $450 000 $650 000 $350 000 *$300 000 End Balance $2, 37,249 $2,113 729 $1 622,02 $1,952,253 $1,932,000 **$1 032,000 Sewer Rate Rel.App $0 $0 $625 000 $400 000 $300 000 $150 000 *$100 000 End Balance $2,763 179 $1 831,967 $1,525 612 $1 168 190 $1319 000 **$1 019 000 Combined Rate Rel.App. $362,570 $463 046 $1 150 000 $850 000 $950 000 $500 000 *$400 000 End Balance $5,300 428 $3,945 696 $3 147 664 $3 120 443 $3,251 000 **$2,051 000 *Proposed appropriations from retained earnings to subsidize the FF2014 operating budget **Projected retained earnings at the end of FF2013 The projection assumes (1) break-even operational results during the cur- rent fiscal year (2) appropriations from retained earnings at this war s -lnnual Town Meeting for rate relief($300 000 water and$100 000 sewer) and capital improvements($750 000 water and$200 000 sewer) and(3)supplemental water find revenue of$150 000 from the Town of Bedford that was not included in the rate-setting budget Note that appropriations from retained earnings made this spring must he deducted as a liabiliii from the projected retained earnings to he certified as of 6,30,2013 even though the finds will not he applied until the following fiscal year As can be seen from the chart above from FY2010 through FY2012 the Town appropriated significant amounts of retained earnings at each year s Annual Town Meeting to subsidize the following fiscal year s water and sewer budget. Once a practice of making recurring appropriations of retained earnings for rate relief is adopted, however it can be difficult to unwind. Even without an increase in costs, eliminating a combined annual subsid` of$1 000 000 from retained earnings of the water and sewer funds in an given year would result in a combined rate increase of about 6% Unless rates are set high enough each year to earn back the previousl` appropriated subsid` — a circular exercise that defeats the purpose of the ap- e This Committee has previously urged that a policy be adopted defining the appropriate level of retained earnings to be maintained for emergency purposes for both funds, and setting forth guidelines for the use of such funds either to mitigate future rate increases or to finance capital projects. Although a definitive policy still has not been adopted, the Town Manager has recommended maintaining reserves of approximately $1 000 000 in each of the fund. 18 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM propriation for rate relief in the first place — the availabiht` of retained earnings for rate relief would eventuall` give out, leading to a major spike in rates For this reason,the Committee advocated last year a reduction in the amount of the combined subsid` for FY2013 (a year in which overall combined cost in- creases were yen small) from the origmall` proposed amount of$750 000 to the ultimatel` appropriated amount of$500 000 ' with the goal of ultimatel` weaning offthe need for regular rate relief' appro- priations from retained earnings altogether This year s budget proposes a modest additional reduction in the combined annual retained earnings sub- sid` — a reduction in the water subsid` from $350 000 to $300 000 and a reduction in the sewer subsid` from $150 000 to $100 000 These reductions will help make additional progress toward the goal of elim- inating the annual subsid` while increasing the required combined FY2014 rate increase b\ onl` about 0 5% At the same time continuation of a substantial water rate subsid` this year is reasonable as it will allow the Town to offset the unusual spike in Lexington s FY2014 MWRA water assessment, attributable to excess water usage b\ Bedford in CY2012, with surplus 2012 revenues from Bedford that were specif- icall` reserved for this purpose Recreation This level-service budget represents a decrease of about $3,500 (-0.2%) from last year Wages and sala- ries are projected to increase moderatel` (5%) for five full-time staff and $175 +/- seasonal staff. Expens- es are decreasing b\ about 1% and debt service costs will decrease substantiall` b\ 23 4% to $100 000 (the Recreation Fund s annual commitment to contribute to the financing of the 2002 Lincoln Field resto- ration project) Indirect costs payable to the General Fund for Town services will increase slightl` b` $5 000 or 2.2%,based on the Town s most recent indirect cost analysis All programs offered b\ the Recreation Department are designed to be revenue-neutral with charges to users matching the program s operating costs of approximatel` $2,000 000 Sources of revenue include user fees for fields and registration fees for programs, which total a little over $1 000 000 and revenue from golf course fees,which total a little under$1 000 000 The Recreation Enterprise Fund retained earnings were certified as of the end of FY2012 (6/30/2012) at $1,389 828 This year s operating budget, like last year s, includes a working capital' appropriation of $375 000 from retained earnings that should be replenished b\ user fees received through the end of FY2013 More permanent draws from the Recreation Fund s retained earnings are also proposed for capi- tal purposes under Article 8(h) ($186 750 for Lincoln Park Field Improvements) and 9(a) ($75 000 for Pine Meadows Golf Club improvements) The Committee recommends approval of this request (9-0). Article 6: Appropriate for Senior Funds Funding Committee Service Program Requested Source Recommendation $20,000 GF Approve (9-0) This article proposes an appropriation for the Town s Senior Service Program of$20 000 This amount, together with an anticipated carryover balance from prior years of approximatel` $16 000 is expected to be sufficient to meet the needs of the program in FY2014 'Because the enterprise funds cost increases were unusually small last year(about 2%) the rate increases required for FY2013 when rates were set in the fall of 2012, even with a significant reduction in the subsidy were just 2 7% for water and 4 0%for sewer for a combined rate increase of 3 6% 19 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM The Senior Service Program Since 2006 the Town has operated its own Senior Service Program, which allows low-to-moderate in- come seniors to perform volunteer work for the Town in exchange for a reduction in their propert\ tax. The Town adopted this program, in substitution for a similar program previousl` operated under G L c 59 § 5K, to allow it more flexibilrt\ in setting the age criteria for participation, the wage rate and the to- tal amount of credit allowed. Unlike the former program, which was funded through the Town s overla\ account, the Senior Service Program is funded b\ direct appropriation from the tax le`\ For general background on the Senior Ser- vice Program and other propert\ tax relief options available to seniors, including exemptions and oppor- tunities for deferral,please refer to Appendix D Benefits and Criteria for Participation The maximum amount of the tax reduction that ma` now be earned, under guidelines that have been es- tablished b\ the Selectmen, is $935 (110 hours at $8 50 per hour) for an individual and $1 190 (140 hours at $8 50 per hour) for a couple Participants ma` receive propert\ tax reductions under this program in addition to an other exemption for which the\ qualif` such as the $1 000 Clause 41C exemption, and ma` also defer the balance of their taxes under Clause 41A if the\ are eligible to do so Current income eligibilit\ criteria are set forth in Appendix D Funding Requirements and Requested Appropriation The program operates as a continuing balance account, and unexpended funds cam over from year to year When first established in FY2007 the program was funded at $25 000 an amount slightl` higher than the average annual amount that had been expended from the overla\ account under the pre-existing state program during the 2004-2006 fiscal years In anticipation of higher usage the annual appropriation was subsequentl` increased for FY2007 (at a fall special town meeting) to $36 000 for FY2008 to $40 000 and for FY2009 and FY2010 to $45 000 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. Despite efforts to expand participation, including increases in the income threshold, the numbers have been stable at around 30-34 persons from FY2007 through FY2013 and annual expenditures have ranged from $22-28 000 Accordmgl` no appropriation was required for FY2011 and subsequent appropriation requests have been scaled back to reflect realistic funding requirements and the amount of carryover funds available The appropriation that will be request- ed this year $20 000 instead of the $45 000 amount stated in the Warrant, will be more than adequate to support current needs and also allow for some expansion. Going forward, however the Selectmen ma` wish to consider steps to enhance interest in this worth` program, including liberalizing eligibilrt\ thresh- olds, enhancing benefits, and increasing publicit The Committee recommends approval of this request (9-0). Article 7: Establish and Continue Funds Funding Committee Requested Source Recommendation Departmental Revolving Funds See below RF Approve (9-0) Authorized FY2014 Fund Departmental FY2013 # Program or Purpose Representative or Receipts Authorization Requested Board to Spend Authorization 1100 School Bus School Committee School Bus Fees $830 000 $830 000 Transportation 20 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM Authorized FY2014 Fund Departmental FY2013 Program or Purpose Representative or Receipts Authorization Requested Board to Spend Authorization 2400 Building Rental Public Facilities Building Rental $375 000 $405 000 Revolving Fund Director Fees Regional Cache— Public Works User Fees from 3110 Hartwell Avenue Director Participating $20 000 $20 000 Municipalities 3320 Trees Board of Selectmen Gifts and Fees $20 000 $25 000 3330 DPW Burial Public Works Sale of Grave Boxes $35 000 $40 000 Containers Director and Burial Vaults DPW Compost Public Works Sale of Compost 3420 Operations Director and Loam,Yard $400 000 $465 000 Waste Permits Minuteman Public Works Fees Paid b\ 3420 Household Hazardous Director Consortium Towns $175 000 $175 000 Waste Program 6120 Council on Aging Human Services Program Fees and $100 000 $100 000 Programs Director Gifts 7140 Health Programs Health Director Medicare $10 000 $10 000 Reimbursements 7320 Tourism/Libert` Ride Town Manager and Libert` Ride $285 000 $290 000 Tourism Comm. Receipts 8140 PEG Access Board of Selectmen License Fees from $450 000 $450 000 and Town Manager Cable TV Providers Reauthorization of all existing municipal revolving funds is requested for FY2014 as shown in the table above Detailed descriptions of these funds can be found in Appendix C A summary of the Revolving Fund balances can be found on page C-2 in the Brown Book The spending limit proposed for each of the funds is based on a reasonable estimate of the fees and charges likel` to be received, as well as of the ex- penditures likel` to be required. Changes in Authorization Levels from FY2014 The increases to the Building Rental, Trees, DPW Burial Containers and Tourism/Libert\ Ride Revolving Funds are based upon anticipated increased usage of services, increased costs and are supported b\ antici- pated increased revenue The $65 000 increased authorization in the DPW Compost Operations Revolv- ing Fund is to cover increased staffing and to fund debt service for the reconstruction of the culvert under the facilit s drivewa` The Committee recommends approval of this request (9-0). Article 8: Appropriate the FY2014 Funds Funding Committee Requested Source Recommendation Community Preservation Committee Operating g Budget $3 186,750 CPA $186 750 Rec RF Approve (9-0) and CPA Projects $228,250 GF Debt $875 GF Cash except 8(c),(d),(e) $3,464,252 The Communit Preservation Act (CPA) is a state statute that allows municipalities to raise a surcharge on propert\ taxes for local use for purposes related to historic preservation, open space (including recrea- 21 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM 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 b` (1) establishing a local Commumt` 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 ma` not increase a CPC-recommended ap- propriation, nor ma` it alter the stated purpose of an appropriation, but it ma` amend to decrease an ap- propriation. Communities adopting the CPA have each implemented the statute in a was that reflects local opportuni- ties, priorities and needs One of Lexington s opportunities hes in the inventors of municipal and school buildings that qualif` 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 Of the total $32,149 602 of CPA funds appropriated b` Lexington for projects and administrative costs, Town Meeting has appropriated $7,340 079 for historic projects, mans of which have led to the renovation or rehabilitation of Town buildings $3,355,392 for recreation projects $9,592,017 for acqui- sition and preservation of land for open space $6 813 114 for commumt` housing; and $730 000 in ad- ministrative expenses Categorization of an additional $4,319 000 representing appropriations for the ac- quisition of the Busa Farm propert` is pending. The State Match Under the CPA, the State provides matching funds to supplement the Town s 3% CPA propert\ tax sur- charge The state match is the product of the state matching rate times the amount collected b` the Town for the previous fiscal year s CPA surcharge This state match comes from the CPA Trust Fund, which is Targets funded b` a state fee on real estate transactions. The matching rate is determined b` the State each `•ear based on the balance in the CPA Trust Fund, and on the number of communities participating in the CPA. In FY2007 the first year following Lexington s adoption of the CPA, there were 113 participating CPA communities and the state match rate was 100% Beginning in FY2008 state revenue from the real estate transaction fees began to decline along with the econom` In addition, the number of participating com- munities rose to 148 in FY2013 As a result of increasing participation and lower balances in the CPA Trust Fund, the state match rate fell to around 28% in FY2011 and has since hovered slightl` below that level. Since March 2012, the state revenue collected from real estate transactions has improved, but not enough to sigmficantl` affect the Town s state match for FY2014 The state match for FY2014 will be bolstered b` the state legislature s decision to appropriate an additional $25 million into the CPA Trust Fund in Jul` 2012. In FY2014 (November 2013) it is estimated that the Town will receive a state match equal to 27% of the FY2013 surcharge or approximatel` $962,000 This will be in addition to the FY2014 CPA prop- erts tax surcharge revenue estimated at $3 691 000 Funds Available for Appropriation A total of $6 628 088 in CPA funds is available for appropriation at this Town Meeting. $1 958 131 in cans-forward reserves and $4669,97 in FY2014 anticipated revenues The latter includes anticipated FY2014 surcharge collections of$3 691 000 an anticipated State match of$961 957 (estimated at 27%of the collected the Town s FY2013 surcharges) and$17 000 in interest income The Motion The motion under Article 8 will be in two parts the first section will distribute the anticipated revenue among reserve accounts and the second part will appropriate funds for the individual projects as outlined in the Warrant. To be consistent with the requirements of the enabling state statute 10%of the anticipated 22 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM revenue will be allocated to each of the Open Space Reserve the Historic Resources Reserve and the Communrt\ Housing Reserve The remaining amount of 70% of the anticipated revenue will be allocated to the Unbudgeted Reserve Appropriations will then be considered separatel` for each item to be consid- ered under this Article with a particular reserve or reserves specified as the source of funds for each pro- ject. This Year's Requests The CPC has requested that Town Meeting appropriate $3 048,377 of the available CPA funds under this Article The requests are Project Description Funds Funding Committee Requested Source Recommendation 8(a)Archives and Records Management/Conservation $20,000 CPA Approve (9-0) 8(b) CPA Conservation Restriction Enforcement $25,000 CPA Approve (9-0) 8(c) Can Memorial Building Upgrades $550,000 CPA Approve (8-1) 8(d) Muzze` Senior Center Upgrade—Phase 3 $526,818 CPA IP(7-0-2) 8(e)Visitor Center—Design Phase $68,950 CPA IP(7-0-2) 8(f) Park and Playground Improvements $147,500 CPA Approve (9-0) 8(g) Park Improvements—Athletic Fields $65,000 CPA Approve (9-0) $150 000 CPA 78(h) Lincoln Park Field Improvements $186 Rec RF Approve (9-0) $228,2500 GF Debt $565,000 8(i) Lexington Center Pocket Park and Ancillan Costs $21,500 CPA Approve (9-0) 80) Merriam Hill Preservation Project $3,000 CPA Approve (9-0) 8(k) Moon Hill National Register Nomination Project $6,000 CPA Approve (9-0) 8(1) Greele` Village Front Doors $172,734 CPA Approve (9-0) 8(m) LexHAB Set-Aside $450,000 CPA Approve (9-0) 8(n)ACROSS Lexington Pedestrian/Bicycle Route $5 000 CPA System $875 GF Cash Approve (9-0) $5,875 I 8(o) Buckman Tavern Restoration and Renovation $650,000 CPA Approve (9-0) 8(p)Wright Farm Debt Service $36,875 CPA Approve (9-0) 8(q)Administrative Budget $150,000 CPA Approve (9-0) Article 8(a) Archives and Records Management Conservation $20 000 This request builds upon the previous 5-year project for conservation and preservation of a backlog of historic municipal documents and records This is the first year request of an anticipated 3-year cycle that will build upon record acces- sibilit through the electronic portal and will address smaller collections of items requiring less conserva- tion. It will also focus on technolog\ upgrades to meet the increased demand for web access to documents and materials via the Lexington Heritage portal and Lexington s digital archives This FY2014 request places emphasis on microfilming of bulk\ permanent records requiring permanent retention. Article 8(h) CPA Conservation Restriction Enforcement Funds $25 000 These funds will be used to se- cure the required conservation restrictions on the five parcels acquired with CPA funds pursuant to the Communrt\ Preservation Act (CPA) The\ will also be used to pa` a non-profit organization to hold, monitor and enforce the conservation restriction on each parcel, such funding allowed pursuant to Sec- tion 12 of the CPA statute The five parcels to be restricted are Goodwin properties, land off Cedar Street (9 5 acres) land off Hartwell Avenue (10 7 acres) Lean Land, 116 Vine Street (14 acres) Cotton Farm, 121 Marrett Road (4 2 acres) and Wright Farm, 241 Grove Street (12 6 acres) The Busa propert` is not in this list because the final designation of sections of the propert` to the CPA categories of open space and affordable housing is pending. 23 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM Article 8(c) Cary Memorial Building Upgrades $550 000 This request is to fund complete design de- velopment and construction documents for an estimated $8 000 000 renovation to the Can Memorial Building. A comprehensive review of building systems funded b\ 2010 ATM appropriation found the building, though well maintained, needed accessibilrt\ support spaces, structural, electrical, mechanical, plumbing, stage and acoustical and audiovisual improvements However at the 2012 Annual meeting, an appropriation request for $550 000 to fund design, development and construction documents for an esti- mated $7 700 000 project was reduced to $75 000 at the request of the Board of Selectmen due to con- cerns about the project s scope and cost. The $75 000 was appropriated to support development of a par- tial schematic design, to evaluate the recommendations of the original evaluation stud\ to gather public input and make recommendations on the appropriate scope and timing of work. An ad hoc committee was created and issued a final report to the Board of Selectmen on Januar\ 18 2013 The report recommends a design and construction document budget of$550 000 with a subsequent authorization for implementa- tion of almost all recommendations in the original review currentl` estimated to cost $8,537 000 The project would implement comprehensive life safety improvements, building system improvements and improve usabilit, The increase in project cost from $7 700 000 to $8 000 000 estimated in 2012 is due to inflation of construction costs Article 8(d)Muzzey Senior Center Upgrade (Phase 3) $526 818— The Town has concluded the purchase of 33 Marrett Road, and the programs currentl` offered at the Muzze` Senior Center are expected to tran- sition to that location. Previousl` planned upgrades to the Muzze` Senior Center will not go forward and the Committee recommends that this item be mdefimtel` postponed. Article 8(e) Visitor Center (Design Phase) $68 950—The Communrt\ Preservation Committee indefinite- 1\ postponed action on this project because the Board of Selectmen did not include the municipal share of funding in its final financing plan for FY2014 The Committee recommends that this item be mdefimtel` postponed. Article 8( Park and Playground Improvements $147 500 This is a multi-year capital improvement program for the Town s parks and playgrounds This Recreation Committee request would fund the reha- bilitation of the rubber playground safet\ surface at the Lincoln Park Playground located on Lincoln Street ($70 000) and the purchase and installation of equipment for the skate park located at the Center playfields on Worthen Road($77,500) Article 8(g)Park Improvements -Athletic Fields $65 000 This is an ongoing multi-year capital program to address safeh and playabilit concerns and to provide adequate and safe field conditions for neighbor- hood families and recreation and school programs In FY2014 the funds will be used to renovate the baseball field at Sutherland Park. Sutherland Park will receive a new backstop player benches, and trash receptacles The infield of the baseball field will be reconstructed adding proper drainage and creating a safer pla\ surface Article 8(h) Lincoln Field Improvements $150 000 This project represents partial funding of the first phase of a three-phase capital improvement program to replace the synthetic turf at Lincoln Park. An amendment to the CPA statute in 2012 allows CPA mone` to be appropriated for some of this work, but specificall` excludes the acquisition of the synthetic turf itself. Therefore this project request is onl` for the design, drainage and site preparation work associated with the turf replacement. The Recreation De- partment is applying for $150 000 in CPA funds for this preparator work, and the remaining $415 000 will be sought through a combination of tax ley` funds and Recreation Enterprise monies Work conduct- ed in this first phase will be on Field#1 Article 8(i) Lexington Center Pocket Park Design and Ancillary Costs $21 500 The Lexington Center Pocket Park Design Project is a two-phased proposal to convert an underutilized pedestrian alle` between 1761 and 1775 Massachusetts Avenue (the Bank of America alle`) into a small linear public park. The first phase of funding will be to develop a cohesive design intended to transform the current space into an attractive tin` park that enhances the historic charm of Lexington Center and offers a new welcoming place for people to socialize The design phase will also cover the necessar legal work to formalize 24 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM agreements with existing propert` owners who are amenable to the idea. A Phase II request, envisioned for FY2015 will be for construction funding to implement the design developed in Phase I Article 8(j)Merriam Hill Preservation Project$3 000 This is a request from the Lexington Historical Commission (LHC) The LHC is charged with the preservation, protection, and development of the his- torical and archeological assets of the town. The Commission maintains an inventors of buildings, areas, and sites of architectural and/or historical importance in Lexington,known as the Comprehensive Cultural Resources Sure` of Lexington (Inventor) If an owner requests a demolition permit for a house or other building listed on the Inventor the owner is required to participate in a hearing, administered b` the LHC under the Demolition Dela\ B`-law If, after the hearing, the LHC determines that the building is preferabl` preserved, a 12-month dela\ period is imposed. The dela\ period provides a window of oppor- tunrts to consider other alternatives to the demolition of the building. The demolition cannot be delayed mdefimtel` The requested funds would be spent to sure` Merriam Hill to determine if homes in this historic area have been mistakenl` left off the Inventor The request comes because of recent events. A Merriam Hill house which was not on the Inventor but, in the opinions of mans neighborhood residents, should have been, was demolished without the Town benefiting from a hearing under the Demolition Dela\ B`-law Also within the last two years, the LHC learned of two other houses wrongl` left off the Inventors The surveying of the Merriam Hill neighborhood that identified homes for inclusion in the Inventors was done Targets in the 1970 s and 1980's. Since then, funds appropriated for Inventor-related projects have been used to surge` other Lexington neighborhoods of historic value making Inventors information accessible on-line and correcting and amending information alread` in the Inventor In the wake of the demolition and the recognition that the Inventors ma` be incomplete the Merriam Hill Association, asked the LHC to undertake this project to prevent the premature loss of an other architec- turall` and histoncall` significant buildings The project would involve a prelimmar stud` b` a qualified professional consultant of all unlisted homes in the Merriam Hill neighborhood to identif` possible hous- es for further in-depth stud` and possible addition to the Inventors based on standards articulated b` the Massachusetts Historical Commission, and with notice to homeowners The Merriam Hill Association will also notif` all propert` owners within its jurisdiction that this project is underya` As this is a preservation project that benefits the entire town, the LHC has requested support from the CPC Addi- tional funds of$500 will come from the Merriam Hill Association to support the project. We note that the Capital Expenditures Committee has recommended that the LHC request CPC funds in FY2015 as perhaps the first of several annual requests (1) to full` evaluate and document all pending "pnorit\" items on the Inventors and (2) to ensure that no other buildings or neighborhoods have been overlooked. Article 8(k)Moon Hill National Register Nomination Project$6 000 The goal of this project is to suc- cessfull` list the Six Moon Hill Historic District neighborhood, one of the Town s most significant clus- ters of modern homes, on the National Register of Historic Places The existence of comprehensive recognition for Lexington mid-centur modern architecture and neighborhoods will publicize and pro- mote the Town s vision for the qualit\ of its neighborhoods and ensure its diversa\ of historical re- sources. The listing of Six Moon Hill on the National Register of Historic Places will encourage preserva- tion of the documented resources for generations to come The total cost of the project will be $8 000 The remaining $2,000 of the total project cost will be provided b` a grant from the Moon Hill Associa- tion. Article 8(1) Greeley Village Front Doors $172 734 This request b` the Lexington Housing Authorit\ proposes the replacement of 25 forts-year old front entrance doors, sidelights, and deteriorated flooring at Greele` Village Greele` Village is an elderl`/young disabled low income public housing apartment com- plex with 100 apartments The existing metal front entrance doors are deteriorating and have outlived their life expectanc` The new doors will have windows and screened sidelights so residents will be able to see if someone is entering or exiting. Currentl` mans of the doors are solid with no sidelights, creating 25 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM a potential safet` issue Also opening and closing of the deteriorated doors often presents difficulties for the residents This preservation project will add another level of securrt\ and safety to Greele` Village The full cost of the project is estimated at $190 734 The Lexington Housing Authorit\ applied for and was awarded a commitment of $18 000 b` the Department of Housing and Communrt\ Development (DHCD) for funding assistance This reduced the project cost to $172,734 the amount being requested in FY2014 CPA funds Article 8(m) LexHAB Set Aside Funds for Development of Community Housing $450 000 LexHAB seeks $450 000 in Set-Aside funds in FY2014 for the development of communrt\ housing in Lexington. In years past, Set-Aside funds have been used for the acquisition of affordable housing, but in FY2014 the CPC stipulated that LexHAB s grant of CPA funds must be used for creation of housing at either the Lean or Busa sites The units that LexHAB builds will be subject to specific standards set in place b` the CPC and agreed upon b` LexHAB and the Board of Selectmen. All units created (and acquired) with CPA funds will be protected b` affordable housing deed restrictions, and will become part of the Town s Subsidized Housing Inventor\ (SHI) This is the third year that LexHAB has requested Set-Aside funds for affordable housing acquisition/creation. CPA funding approved for FY2012 was used to purchase a home at 1 Wilson Road, which is now rented. Approximatel` $85 000 of that appropriation remains un- spent, as does the entire FY2013 appropriation of$450 000 In light of this, the CPC imposed the condi- tions described above for the use of FY2014 funding. Funds that are not expended in FY2014 ma` be car- ried over and used for affordable housing creation the following year subject to the same restrictions Article 8(n) ACROSS Lexington Pedestrian Bicycle Route System $5 000 ACROSS Lexington (Access- ing Conservation land, Recreation areas, Open space Schools and Streets in Lexington) is a proposed 40- mile network of pedestrian and bicycle routes utilizing existing public ways. Implemented b` the Green- ways Corridor Committee its purpose is to link mans parts of the Town of Lexington through existing conservation trails, the Minuteman Bikewa` and sidewalks The proposed project will provide CPA funds for the purchase and installation of signs, signposts, and hardware for marking the ACROSS Lex- ington network. In addition to this funding request for route marking materials, additional funds from the tax le`\ ($875) are also sought and will be used for maps, brochures, and other project components that are not CPA-eligible Article 8(o) Buckman Tavern Restoration and Renovation $650 000 This request is made b` the Lex- ington Historical Societ` for the renovation and restoration of Buckman Tavern, a National Historic Landmark. The scope of work includes repairing the historic fabric of the building, making it handi- capped accessible on both floors, making it compliant with current building codes b` installing new wir- ing throughout the building to meet current code requirements, climate control features, and a fire sup- pression system. Accessibilrt` improvements will include two accessible entrances, installation of a lift to the second floor and internal modifications made to accommodate wheelchairs without impairing historic fabric The project will also include window and door restoration, improved site drainage masonn and plaster repairs, and internal and external painting on this 18th centum building. Buckman Tavern is owned b` the Town of Lexington and is operated b` the Historical Societ\ under a long-term lease with the Town. All improvements proposed as part of this project will be approved b` the Town through the Pub- lic Facilities Department. The total project cost of the restoration is $950 000 The Historical Societ` is seeking $650 000 in CPA funds, and the remaining$300 000 will be raised from private sources Article 8(p) Wright Farm Debt Service $36 875 At the 2012 Annual Town Meeting,voters approved the $3 072,000 acquisition of the Wright Farm with CPA funding; authorized the Town to borrow $2 95 mil- lion of the purchase price and appropriated $37 000 in CPA funds for short term debt service and issu- ance costs On Februan 6 2013 the Town sold a one-year $2 95 million bond anticipation note (BAN) that will come due in Februan of 2014 The BAN s issuance costs, anticipated to be approximatel` $9 000 were paid with the FY2013 funds However the BAN s interest costs, which come due in Febru- an 2014 will be paid in FY2014 instead of FY2013 Therefore unspent funds from the FY2013 appro- priation will be returned to the CPC s Undesignated Fund Balance at year s end, and the interest expense 26 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM on the note $36 875 is now requested in CPA funds for FY2014 When the $2 95 million BAN comes due in 2014 it will be converted to a long-term bond with term and interest rate to be determined. Article 8(q)Administrative Budget$150 000 The Communrt\ Preservation Act permits up to 5% of an- nual CPA funds to be spent on the operating and administrative costs of the Communrt\ Preservation Committee The Committee is allowed to use this mone` to pa` for staff salaries, mailings,public notices, overhead, legal fees, membership dues, and other miscellaneous expenses related to CPA projects Five percent of anticipated FY2014 revenue from the surcharge and the State supplemental match is $232,648 However as in past years, the CPC is onl` requesting an appropriation of$150 000 This mone` will be used to fund the Committee s part-time Administrative Assistant, membership dues for the non-profit Commumt\ Preservation Coalition, administrative expenses, legal and miscellaneous expenses, and land planning, appraisals, and legal fees for open space proposed to be acquired using CPA funds This year the administrative funds will also be used to update the Open Space and Recreation Plan for the Town. With a project cost of$30 000 the update will be used to evaluate future CPA needs in the areas of open space and recreational resources The Committee recommends approval of all items in this request(9-0) except 8(c),8(d), and 8(e). Article 9: Appropriate for Funds Funding Committee Requested Source Recommendation Recreation Capital Projects $261 750 Recreation EF $150 000 CPA Approve (9-0) $228,250 GF Debt See Article 8(h) $640,000 Project Description Funds Funding Committee Requested Source Recommendation I 9(a)Pine Meadow Equipment $75,000 Rec EF Approve (9-0) 9(b) Lincoln Park Field Improvements $186 750 Rec EF $150 000 CPA See Article 8(h) $228,250 GF Debt $565,000 9(a) Pine Meadow Equipment XI-22 The Recreation Committee requests $75 000 to dredge the lower irrigation pond at the Pine Meadows Golf Course which has not been done in 15 `•ears and is creating is- sues with capacit\ and increased maintenance costs 9(h)Lincoln Park Field Improvements —XI-7 This item is a duplicate of Article 8(h). We anticipate that it will be considered under Article 8 and our discussion can be found there The Committee recommends approval of this request (9-0). 27 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM Article 10: Appropriate for Funds Funding Committee Requested Source Recommendation Municipal Capital Projects and Approve (9-0) Equipment $10,248,238 See below except 10(h) Project Description Funds Funding Source Committee Requested Recommendation $445,565 Tax Lev\ 10(a) Fire Pumper Replacement $39 435 Free Cash Approve (9-0) $485,000 10(b) Can Memorial Libran RFID Conversion Project $124,000 Free Cash Approve (9-0) 10(c) Head End Equipment Replacement $60,000 Free Cash Approve (9-0) 10(d) MIS Technolog\ Improvement Program $160,000 Tax Lev\ Approve (9-0) 10(e)Network Redundant` and Improvement Plan $36,000 Free Cash Approve (9-0) 10(f) Replace Townwide Telephone Systems $146,000 Tax Lev\ Approve (9-0) 10(g) Townwide Electronic Document Management System $60,000 Free Cash Approve (9-0) 10(h) Hastings Park Gazebo Rehabilitation/Design and Engineering $15,000 Tax Lev\ Approve (8-0-1) $1 890 074 Tax Lev\ 10(i) Street Improvements and Easements $924 164 Ch. 90 Aid Approve (9-0) $2,814,238 10(j) Townwide Culvert Replacement $390,000 Tax Lev\ Approve (9-0) 10(k) Storm Drainage Improvements and NPDES $155 845 Tax Ley` Compliance $184 GF Debt Approve (9-0) $340,000 $145,500 Tax Lev\ $349 000 GF Debt 10(1) DPW Equipment Replacement $14 ,500 Water EF (Debt) Approve (9-0) $14 ,500 Wastewater EF $640,000 (Debt) 10(m)Hastings Park Irrigation $73,000 Free Cash Approve (9-0) $50 000 Free Cash 10(n) Hydrant Replacement Program $50 000 Water RE Approve (9-0) $100,000 10(o) Comprehensive Watershed Stormwater Management Stud\ and Implementation $390,000 GF Debt Approve (9-0) 10(p) Townwide Signalization Improvements $125,000 Free Cash Approve (9-0) 10(q) Hartwell Avenue Infrastructure $800,000 GF Debt Approve (9-0) 10(r) Sidewalk Improvements and Easements $400,000 GF Debt Approve (9-0) 10(s) Concord Avenue Sidewalk Construction and $2, 96 $ 000 GF Debt Easements $96 000 TMSF Approve (9-0) $3,000,000 28 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM The items in this request are briefl` summarized below with a reference to the page where the request is summarized in the Brown Book. 10(a) Fire Pumper Replacement XI-7 Replace a 2010 rescue pumper plagued with mechanical issues If remed` is received from manufacturer this appropriation will not be used. 10(h) Cary Memorial Library RFID Conversion Project XI-18 To convert to mdustr\ standard for tag- ging and tracking librarn materials to enhance workflow 10(c)Head End Equipment Replacement—Phase Iti'—XI-18 To replace email spam filtering device 10(d)MIS Technology Improvement Program Phase II XI-18 Continue to purchase and install stor- age area network and blade server technolog\ for server maintenance and management. 10(e) Network Redundancy and Improvement Plan — XI-18 To provide wireless service to the Town Hall, Police department and Public Services buildings 100) Replace Townwide Telephone Systems Phase II XI-18 Replace phone systems that support the School Administration Building, Fire Headquarters, East Lexington Fire Station and Human Services de- partment with VoIP technolog\ 10(g) Townwide Electronic Document Management System Phase III XI-18 Final phase of a project to establish an enterprise wide document management system which provides a searchable database of town and school documents 10(h) Hastings Park Gazebo Rehabilitation Design and Engineering XI-20 To identif\ areas of im- provement, design necessary repairs and make the Gazebo ADA compliant. 10(i) Street Improvements and Easements—XI-19 Routine maintenance 100) Townwide Culvert Replacement— XI-20 To replace the Concord Avenue culvert near the Belmont town line to allow proper storm water flow 10(k) Storm Drainage Improvements and NPDES Compliance—XI-5 Annual request to replace and sup- plement existing drainage infrastructure 10(1) DPW Equipment Replacement XI-5 Equipment to be replaced. JCB Backhoe —Water/Sewer Di- vision, F450 with utilit\ both lift gate and plow — Water/Sewer Division, 2 Kubota Tractors with at- tachments — Cemetery Division, Toro Infield machine with attachments —Parks Division, Heav` DutA 6- wheel dump with plow under-scraper and sanding unit—Highwa` Division. 10(m)Hastings Park Irrigation—XI-21 Installation of an automated in ground irrigation system at Mass Ave and Worthen Road. 10(n)Hydrant Replacement Program—XI-21 Routine maintenance 10(o) Comprehensive Watershed Stormwater Management Study and Implementation XI-6 For design of priorit projects identified in previous studies (Charles River and Shawsheen Watersheds) 10(p) Townwide Signalization Improvements XI-21 To update traffic and pedestrian signals potentiall` at Hartwell Ave/the Bikewa` and Concord Ave/Waltham Street. 10(q) Hartwell Avenue Infrastructure - Engineering and Easements XI-6-7 $600 000 for Phase 1 de- sign and construction plan for Hartwell Ave from Bedford Street, through the Maguire Road intersection and over Kiln Brook to accommodate increased traffic Approval and funding b\ the Massachusetts Dept. of Transportation will be required for the improvements to move forward as it is a state highwa` This request also includes $200 000 for construction of a sidewalk on Hartwell Ave from the Minuteman Bikewa` to Bedford Street(previousl` included in the discussion of Article 10(r) in the Brown Book) 10(r) Sidewalk Improvements and Easements — XI-7 Routine maintenance for Town sidewalks (Article 10(q)now includes funding for the Hartwell Ave sidewalk) 29 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM 10(s) Concord Avenue Sidewalk Construction and Easements XI-7 To fund the construction of side- walks along Concord Ave from Spring Street to Waltham Street, a quite challenging stretch of road from a topograph\ perspective The Committee recommends approval of this request (9-0), except 10(h) which the Committee rec- ommends for approval (8-0-1). Article 11: Appropriate for Funds Requested Funding Committee Water System Source Recommendation Improvements $200 000 Water EF(Debt) $700 000 Water Retained Approve (9-0) $900,000 Earnings This Article addresses proposed capital expenditures to be made during FY2014 as part of a continuing program to upgrade and keep current the assets of the Water Enterprise Fund. For general background 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 A total of$900 000 is requested this year to replace unlined or inadequate water mains and deteriorated service connections and to eliminate dead ends in water mains. The details of the projects, including the locations where work is expected to be done can be found in the Brown Book (p XI-10) Two additional capital appropriations will be requested under Article 10 (Municipal Capital) $145,500 in water fund debt to cover half the cost to replace a Ford F450 pickup truck with a utilrt\ bod` and a backhoe used b\ the water and sewer divisions that have reached their end of life see Article 10(1) and $50 000 from the water fund s retained earnings to fund half the cost of an ongoing hydrant replacement program shared 50-50 with the General Fund,see Article 10(n) The costs of this year s system improvements will be funded b\ a combination of borrowing ($200 000) and retained earnings of the Water Enterprise Fund ($700 000) The resulting debt service costs for the portion borrowed will be borne b\ the operating budget for the Water Enterprise Fund in FY2014 and in future years until the debt is retired (see Brown Book, p XI-10 Table II) and will be included each year as a component of the water rates Capital appropriations for similar purposes have been made in most years (except for FY2006 and FY2012, when engineering studies were not read`) as illustrated in the table below The goal is to keep the system current so the Town can assure dependable high water qualit\ pressure and volume for do- mestic needs, commercial needs, and fire protection as well as minimization of water main breaks Water Capital Improvements History Fiscal Year Purpose Cash Borrowing Total 2003 Water Dist. Improvements $340 000 $560 000 $900 000 2004 Water Dist. Improvements $400 000 $500 000 $900 000 2005 Water Dist. Improvements $400 000 $450 000 $850 000 2006 None $0 $0 $0 2007 Water Dist. Improvements $0 $900 000 Water Meters $0 $250 000 $1 150 000 2008 Water Dist. Improvements $0 $1 800 000 $1 800 000 2009 Water Dist. Improvements $0 $1 800 000 $1 800 000 2010 Water Dist. Improvements $0 $900 000 Equipment $0 $119 000 $1 019 000 30 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM 2011 Water Dist. Improvements $0 $900 000 Water Tank Rehab $0 $160 000 $1 060 000 2012 None $0 $0 VII 2013 Water Dist. Improvements $0 $900 000 $900 000 2014 (rec) Water Dist. Improvements $700 000 $200 000 $900 000 Prior to FY2006 as shown in the table above capital expenditures for water distribution and related im- provements were funded b\ a combination of enterprise fund cash capital, which was raised in the rates, and borrowing. Subsequentl` there was a transition to funding these ongoing improvements exclusivel` with debt. While the transition to debt financing in the enterprise funds mitigated the need for rate in- creases earl\ on, that change together with the fund s allocated contribution to the debt service for the new DPW facilrt\ has steadil` increased the annual debt service costs of the sewer enterprise fund, both in dollar and percentage terms, as illustrated below Growth in Water Fund Debt Service Costs Fiscal Year Water Debt Service Total Budget Debt Service Ratio 2006 $213 150 $6,237,235 3 4% 2007 $358,301 $6,514,502 5 5% 2008 $425,565 $6 469,388 6 6% 2009 $757,247 $7 190 800 10 5% 2010 $1 074.551 $7,241,304 14 8% 2011 $1 137 075 $7 619 919 14 9% 2012 $1,28 968 $8 039 413 15 7% 2013 $1,299 091 $8 124 846 16 0% 2014 $1,260 655 $8 707,219 14 5% Recent borrowings, including the water fund s 17% contribution to the financing of the new DPW facili- h have tripled the annual debt service costs since FY2008 to a level that represents a significant portion of the overall Water Enterprise Fund operating budget. Future borrowings for water distribution im- provements will continue to increase the annual debt service costs of the Water Enterprise Fund until a new equilibrium between issuance and retirement of debt is reached. The Committee has previousl` noted that judicious use of some of the fund s accumulated retained earn- ings could help defra` the impact of these growing capital costs and help to maintain long-term rate sta- bilit` We are delighted to see that this recommendation has been adopted, at least for the current fiscal `•ear with a substantial cash contribution from retained earnings to the annual water distribution system improvements cost. Even if this cash contribution cannot be sustained in future years, it will nevertheless help to moderate debt service costs that would otherwise have to be included in rate requests going for- ward, and is a productive use of excess reserves The Committee recommends approval of this request (9-0). 31 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM Article 12: Appropriate for Funds Funding Committee Requested Source Recommendation Wastewater System Improvements $1 100 000 Wastewater EF ebt) $200 000 Water Retained Approve (9-0) $1,300,000 Earnings This Article addresses proposed capital expenditures to be made during FY2014 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 A total of$1,300 000 is requested this year. $1,200 000 as part of a multi-year plan to rehabilitate sanitary sewer infrastructure particularl` in remote areas, including brook channels, where poor soil conditions lead to storm water infiltration, and $100 000 as part of an ongoing program to upgrade Lexington s ten sewer pumping stations. The details of the projects, including the locations where work is expected to be done can be found in the Brown Book (p XI-11-12) An additional appropriation of $145,500 in wastewater fund debt will be requested under Article 10(1) (Municipal Capital) to cover half the cost to replace an F450 pickup truck with a utilit\ both and a backhoe used b\ the water and sewer divisions that have reached their end of life The costs of this year s system improvements will be funded b\ a combination of borrowing ($1 100 000) and retained earnings of the Water Enterprise Fund ($200 000) The resulting debt service costs for the portion borrowed will be borne b\ the operating budget for the Water Enterprise Fund in FY2014 and in future years until the debt is retired (see Brown Book, p XI-11 Table III) and will be included each year as a component of the wastewater rates Part of the funding ma` come from MWRA grants or loans Capital appropriations for similar purposes have been made in most years (except for FY2006 when en- gineering studies were not read\ and FY2011 when onl` pump station upgrades were performed) as illustrated in the table below Wastewater Capital Improvements History Fiscal Year Purpose Cash Borrowing Total 2003 Storm Sewer Improvements $100 000 $0 $100 000 2004 San./Storm Sewer Improvements $225 000 $0 $225 000 2005 San./Storm Sewer Improvements $750 000 $0 $750 000 2006 None $0 $0 $OI 2007 Sewer Improvements $0 $300 000 $0 Water Meters $0 $250 000 $550 000 2008 Sewer Improvements $0 $1,300 000 $1,300 000 2009 Sewer Improvements $0 $1,300 000 $1,300 000 2010 Sewer Improvements $0 $1,300 000 Equipment $0 $263 000 $1,563 000 2011 Pump Station Upgrades $0 $100 000 $100 000 2012 Sewer Improvements $300 000 $1 000 000 $1,300 000 2013 Sewer Impts Pump Sta. Upgrades $0 $1,300 000 $1,300 000 2014 (rec) Sewer Impts Pump Sta. Upgrades $200 000 $1 100 000 $1,300 000 Prior to FY2006 as shown in the table above capital expenditures for sewer distribution improvements were funded primaril` b\ enterprise-fund cash capital. Since then, there has been a transition to funding 32 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM these ongoing improvements primaril` with debt. While the transition to debt financing in the enterprise funds mitigated the need for rate increases earl\ on, that change together with the fund s allocated contri- bution to the debt service for the new DPW facilrt\ has steadil` 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 Year Sewer Debt Service Total Budget 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% Recent borrowings, including the wastewater fund s 7% contribution to the financing of the new DPW facilit` have tripled the annual debt service costs since FY2006 to a level that represents a significant portion of the overall Water Enterprise Fund operating budget. Future borrowings for water distribution improvements will continue to increase the annual debt service costs of the Water Enterprise Fund until a new equilibrium between issuance and retirement of debt is reached. The Committee has previousl` noted that judicious use of some of the fund s accumulated retained earn- ings could help defra` the impact of these growing capital costs and help to maintain long-term rate sta- bilit\ A contribution of$300 000 from retained earnings was made in FY2012, and a similar contribution of$200 000 is again proposed from retained earnings this year We are delighted to see that this recom- mendation again being adopted, at least for the current fiscal year Even if this cash contribution cannot be sustained in future years, it will nevertheless help to moderate debt service costs that would otherwise have to be included in rate requests going forward, and is a productive use of excess reserves The Committee recommends approval of this request (9-0). Article 13: Appropriate for School Funds Funding Committee Requested Source Recommendation Capital Projects and Equipment $1,524,031 See below Approve (9-0) Project Description Funds Funding Committee Requested Source Recommendation $728,000 GF Debt 13(a) System-Wide Technology $39,435 Free Cash Approve (9-0) $445,565 Tax Lev\ $1,213,000 $201,387 GF Debt 13(b) System-Wide Classroom Furniture $37 79 Free Cash Approve (9-0) $42,579 Prior Year $281,031 Balances 33 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM An informative and detailed description of these requests, approved b\ the School Committee and submit- ted for Town Meeting approval, can be found in the Budget (Brown) Book Section XI (Capital) (School Projects, pages XI-9 XI-10) Additionall` the TMMA Warrant Information Report contains a compre- hensive review of Article 13 Item 13(a) is a request to continue a multi-phased plan designed to purchase equipment described in detail in the School Department s long range technology plan. This technology plan includes (1) replacing the oldest desktops, laptops,printers and peripherals, and (2)upgrading network equipment and adding work- stations at the high school and middle schools to get closer to the state average number of computers for student use Item 13(a) also includes the expansion of a mobile technology pilot origmall` funded b` LEF the installation of a managed wireless network in Bridge and Bowman as part the renovation project and installation of interactive whiteboards representing the second stage of a plan to equip all classrooms grade 3-12 b` FY2015 Item 13(b) is an annual request for the replacement of furniture that has reached the end of its useful life The request includes replacement of workstations, office furniture bookshelves, carts and miscellaneous items The Committee recommends approval of this request (9-0). Article 14: Appropriate for Public Funds Funding Committee Requested Source Recommendation Facilities Capital Projects $1,539,454 Free Cash $748,940 GF Debt $100,000 CPA Approve (9-0) $5,060 Prior Year $2,393,454 Balances The items in this request are briefl` summarized below with a reference to the page where the request is described in the Brown Book. Project Description Funds Funding Committee Requested Source Recommendation 14(a) Municipal Building Envelope and Systems $173,954 Tax Lev\ Approve (9-0) 14(b) School Building Flooring Program $125,000 Free Cash Approve (9-0) 14(c) School Interior Painting Program $150,000 Free Cash Approve (9-0) 14(d) School Window Treatments Extraordman $50,000 Free Cash Approve (9-0) Repair 14(e) School Paving Program $150,000 Free Cash Approve (9-0) 14(f) Lexington High School Overcrowding— $356,940 GF Debt Phase 3 Engineering and Improvements $5 060 Prior Year Approve (9-0) $362,000 Balances 14(g) School Securit\ Standardization $370,000 Free Cash Approve (9-0) 14(h) Installed Wall Units—Air Conditioner $56,000 Free Cash Approve (9-0) 14(i) School Building Envelope and Systems Program $235,000 Free Cash Approve (9-0) 14(j) Clarke Middle School Bus Loop $35,000 Free Cash Approve (9-0) 14(k) Hastings School Kitchen Renovation $90,000 Free Cash Approve (9-0) 14(1) Print Shop Renovation $312,000 GF Debt Approve (9-0) 34 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM Project Description Funds Funding Committee Requested Source Recommendation 14(m)Public Facilities F350 Vehicle $80,000 GF Debt Approve (9-0) 14(n) Public Facilities Bid Documents $100,000 CPA Cash Approve (9-0) $75 $75,000 Free Cash 14(o) School Human Resources Office Renovation $29,500 Free Cash Approve (9-0) 14(a)Municipal Building Envelope and Systems — XI-15 part of an on-going request for funds to main- tain municipal buildings and systems to avoid safeh hazards and support their intended function as public spaces 14(b) School Building Flooring Program — XI-8 a multi-year project that will replace carpet, vin`1 tile and ceramic flooring that are beyond their useful life to ensure that these surfaces are safe and cleanable 14(c) School Interior Painting Program —XI-8 a multi-year project to repaint surfaces on a 7 to 10 year schedule 14(d) School Window Treatments Extraordinary Repair—XI-8 replaces window treatments, the majorit\ of which are unusable horizontal blinds that were installed when the buildings were constructed. 14(e) School Paving Program —XI-16 for design and construction to maintain school parking and pedes- trian surfaces in a condition for public use This request will specificall` address needs at Fiske due to additional programs and improve ADA compliance at various other schools. 140) Lexington High School Overcrowding Phase 3 Engineering and Improvements—XI-9 Lexington High School is overcrowded and enrollment is projected to increase This is Phase 3 of four phased pro- ject intended to equip LHS to handle the influx with improved space utilization and additional classrooms since no significant expansion or replacement is currentl` planned. 14(g) School Security Standardization — XI-16 standardize access control and video securrt` across the elementarn schools. 14(h)Installed Wall Units—Air Conditioner—XI-17 install for four air conditioning units for the Central Administration lower level professional development/conference areas 14(i) School Building Envelope and Systems Program —XI-17 part of an annual maintenance program to prevent deterioration of school building exteriors and systems 140) Clarke Middle School Bus Loop — XI-17 fund a stud\ of the bus loop construction on Stedman Road side as well as the entrance and exits and ultimatel` identifi solutions for the heav` traffic tie-ups that occur 14(k) Hastings School Kitchen Renovation — XI-17 fund needed upgrades to the kitchen at Hastings It will involve reconfiguring existing space as well incorporate green methods such as composting and rec`- cling. 14(1)Print Shop Renovation —XI-8 fund needed improvements to wiring, ventilation, lighting and floor- ing for the print shop housed in the basement of the Old Harrington or Central Office building. 14(m) Public Facilities F350 Vehicle — XI-9 fund the second of two vehicles used b\ DPW for ground maintenance that are past their useful life 14(n)Public Facilities Bid Documents —XI-16 fund the second year of a multi-year program for profes- sional services to produce design development, construction documents and/or bid administration ser- vices This request now includes $100 000 for CPA funds to do Design & Engineering work for re- purposing the newl\ acquired buildings at 33 Marrett Road. 35 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM 14(o) School Human Resources Office Renovation — XI-8 redesign and renovate the existing HR office and the Office for the Superintendent of Human Resources All of these items are detailed in the FY2014 Recommended Budget & Financing Plan (the Brown Book.) Section XI Capital. The Committee recommends approval of this request (9-0). Article 15: Appropriate Bonds And Funds Funding Committee Requested Source Recommendation Notes Premiums $4,168,632 Bond Approve (9-0) Premiums In February 2013 the Town sold $48 700 000 in bonds of which $40 965 000 was for the Bridge Bow- man and Estabrook school projects, approved b\ the voters as excluded debt last year The successful bid for the bonds included a premium to the Town of$5 128 798 of which $4 168 632 is attributable to debt- excluded projects The interest rate for the bond is 1 93% The Department of Revenue (DOR) has approved a new regulation under which funds from bond premi- ums attributable to debt-excluded projects ma` be appropriated directl` for projected costs This directl` reduces the debt that must be issued b\ the amount appropriated,reducing interest charges and the associ- ated tax burden. The motion for the article will be to appropriate that portion of the premium attributable to excluded debt —less an amounts needed for bond issuance cost—to cover projected costs It will also require a mirror- image rescission of previous appropriations for debt. Given the magnitude of the premium associated with the Town s bond offering and the resulting reduc- tion in interest costs,the Committee strongl` encourages the Town to take advantage of this option. The Committee recommends approval of this request (9-0). Article 16: Accept MGL Chapter Funds Funding Committee Requested Source Recommendation 32, Section 101 Supplemental Annual Allowance None N/A Approve (9-0) This article proposes the acceptance of a local option recentl` made available under Chapter 32 of the General Laws to increase from $9 000 to $12,000 the annual survivor s allowance that is currentl` paya- ble b\ the Lexington Retirement System to the widows of certain deceased Town employees Massachusetts G L c 32, §101 provides for the payment b\ a commumh s retirement system of an an- nual allowance to widows of former public employees who were unable under the rules applicable at the time of their retirement, to provide for an annual survivor s allowance and either (a) retired as a result of injuries sustained while in the performance of official duties, or (b) retired for ordman disabilrt\ (Alt- hough the statute refers b\ its terms onl` to widows, it has been interpreted b\ the Attorne` General to appl` to widowers as well.) Prior to 1995 the amount of the allowance was $3 000 and in 1995 the amount was increased to $6 000 The benefit is paid monthl` and the base amount is adjusted annuall` b` a COLA. In 2010 the legislature amended the statute to allow communities, b\ vote of their retirement board and subject to approval of Town Meeting, to adopt a supplemental allowance that would bring the total al- lowance to $9 000 The supplemental allowance was automaticall` applied to the state teachers and state 36 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM employees retirement systems The Lexington Retirement Board voted to accept this local option and it was approved at the 2011 Annual Town Meeting. In 2012, the legislature again amended the statute to allow communities, b\ vote of their retirement board and subject to approval of Town Meeting, to adopt an alternative supplemental allowance that would bring the total allowance to $12,000 This higher amount was automaticall` applied to the state teachers and state employees retirement systems The Lexington Retirement Board has voted to accept the local option to increase the allowance from $9 000 to $12,000 and recommends its approval b\ Town Meeting. Currentl` five widows of former Town of Lexington employees receive a Section 101 allowance from the Lexington retirement system and receive no other benefits from the Town. Approving this request would bring the annual cost of the benefit for all current recipients from approximatel` $45 000 to $60 000 an increase of$15 000 In addition to the five current recipients, there are four other spouses of current retirees who ma` become eligible in the future to receive this annual allowance Retirement bene- fits available to active employees now include alternative provisions for a surviving spouse so no other potential recipients of a Section 101 allowance are anticipated going forward. The Committee recommends approval of this article by a vote of 9-0. Article 17: Accept MGL Chapter Funds Funding Committee 32, Section 12(2)(d paragraph Requested Source Recommendation 11): Increasing Minimum None N/A Approve (9-0) Monthly Allowance This article proposes the acceptance of a local option recentl` made available under Chapter 32 of the General Laws to increase from $250 to $500 the minimum monthl` survivor benefit payable to the spous- es of Town employees who die before retirement. This is a different group of potential beneficiaries from those addressed b\ Article 16 which applies to the spouses of Town employees who die after retirement and for whom no other survivor benefit is available G.L c 32, §12(2)(d) provides for a monthl` benefit to be paid to the spouse or other nominated benefi- ciar. of an employee if the employee has selected a joint and last survivor allowance option and the employee dies before retirement. In 2011 the legislature amended the statute to add a new paragraph 11 increasing the minimum monthl` benefit from $250 to $500 for members of the state teachers and state employees retirement system. The amendment also allowed the retirement system of an other political subdivision to adopt a similar increase b\ majorih vote of its retirement board and local legislative both The Lexington Retirement Board has voted to accept the local option provided b` G.L c 32, §12(2)(d ¶11) and recommends its approval b\ Town Meeting. At present, this increase of the monthl` survivor benefit would affect three widows and result in an addi- tional annual cost to the Retirement System of$9 000 The Committee recommends approval of this request (9-0). 37 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM Article 18: Appropriate to Post Funds Funding Committee Requested Source Recommendation Employment Insurance Liability Fund $775,000 GF Approve (9-0) At the 2012 Annual Town Meeting, $500 000 was appropriated into the Post Employment Insurance Lia- bilit` (PEIL) Fund' A proposal to appropriate an additional $500 000 into the Fund was defeated at the November 2012 Special Town Meeting. As of December 31 2012, the balance in the Fund was $2,822,738 In FY2012, the Town received $465,544 in Medicare Part D reimbursements The proposal under this article is to appropriate a total of$775 000 to the PEIL Fund. The funding sources are free cash ($525 000) and the tax le`\ ($250 000) During the past year a working group consisting of the Town Manager the Assistant Town Manager for Business and Finance representatives from the Appropriation Committee and a representative from the Board of Selectmen discussed issues in regard to funding of the Town s OPEB liabilities The members of the working group agree that the Town should annuall` put monies into the PEIL Fund for the next few decades to prefund the Town s OPEB liabilities However the\ did not reach complete consensus in re- gard to a long-term funding polic` and schedule The Town s OPEB liabilities ma` be affected this year b\ state legislation. The Commonwealth of Mas- sachusetts `Special Commission to Stud\ Retiree Healthcare and Other Non-Pension Benefits issued its final report on Januar\ 11 2013 The report recommends legislative changes that would reduce future growth of municipal retiree health care costs primaril` b\ instituting changes in age and years of service needed for retirement. The Town of Lexington OPEB working group is awaiting action b\ the state legis- lature on these recommendations and intends to reconvene to discuss long term funding policies for the Town later this year The working group and this Committee recommend approval of the request under this article The re- quested amount is larger than that appropriated in previous years, but remains below the amount recom- mended to achieve full funding within 30 years. The increase from $500 000 to $775 000 is reasonable and prudent given the revenues projected to be available in FY2014 and the sense that there will be suffi- cient resources to support all high priorit items The Committee recommends approval of this request (9-0). Article 19: Rescind Prior Funds Funding Committee Requested Source Recommendation Borrowing Authorization None N/A Pending Town staff has informed the Committee to expect a motion under this Article but no further details were available at the time of publication. The Committee has taken no position on this request. Also known as the Post Retirement Insurance Liability Fund' or the OPEB trust fund' 38 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM Article 20: Establish and Funds Funding Committee Requested Source Recommendation Appropriate To and From Specified Stabilization Funds $950 000 Free Cash $1,234 000 Tax Levy Approve (9-0) $67 760 TDM Payments $2,184,000 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 multiple separate stabilization funds for specified purposes Creating these funds, altering their specified purpose and appropriating into or out of them, requires a two-thirds vote of Town Meeting. Lexington 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 Each specified stabilization fund' holds monies for one or more purposes that were specified when the fund was created. This Article is now routmel` included on the Warrant to give Town Meeting the oppor- tumh to create new specified stabilization funds, and to appropriate monies into or out of, such funds Appropriations into specified stabilization funds are not normal expenditures,but rather transfers of funds into accounts for specified future uses Once transferred into a fund, these monies can onl` be appropriat- ed out of the fund in accordance with the purposes specified at the creation of the fund. Status of Funds and Appropriation Requests The current balance of each fund, the amount currentl` available for appropriation into each fund, and the amounts proposed to be withdrawn from each fund, are as follows Specified Stabilization Fund Current Deposit Withdraw Warrant Balance Article Avalon Ba` School Enrollment $298 837 $0 $250 000 4 Mitigation S.F Center Improvement District S F $86 112 $0 $0 N/A School Bus Transportation S.F $18 $0 $0 N/A Section 135 Zoning S F $0 $0 $0 N/A Special Education S F $1 068 744 $0 $0 N/A Traffic Mitigation S F $96,557 $0 $96 000 10(s) Transportation Demand Management $305,561 $67 760 $106 000 4 /Public Transportation S F Transportation Management Overla` $10 724 $0 $0 N/A District S F Capital Projects/Debt Service $1 600 768 $2,184 000 $1 600 000 20 Reserve/Building Renewal S F This Article proposes to appropriate $2,184 000 into the Capital Projects Debt Service Reserve Building Renewal S.F and also to appropriate $1 600 000 out of that same fund for the purpose of mitigating the Town s debt service on excluded debt i.e debt incurred via a debt exclusion override allowing the Town s tax lev\ to exceed the limits under Proposition 2'/2. We note that this fiscal year s withdrawal matches the amount that was appropriated into the fund in the prior fiscal year The result of the appropriation out of this stabilization fund would be to reduce the total tax lev\ during FY2014 b` $1 600 000 The amount to be appropriated into the fund would be available in future years, subject to Town Meeting s approval,to serve the specified purposes of the stabilization fund. 39 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM The Town has collected a total of$67 760 in payments from Shire Pharmaceuticals, Watertown Savings Bank, and Avalon Ba` as part of zoning agreements with the Town. This Article requests Town Meeting to appropriate these funds into the Transportation Demand Management/Public Transportation S F The other withdrawals summarized above and not discussed here are covered under the indicated Articles The Committee recommends approval of this request (9-0) Article 21: Appropriate to Funds Funding Committee Requested Source Recommendation Stabilization Fund 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 historn can be found in the appendices of the Town Manager s FY201-1 Recommended Budget&Financing Plan pg. C-8 The Committee anticipates the indefinite postponement of this request. Article 22: Appropriate from Debt Funds Funding Committee Requested Source Recommendation Service Stabilization Fund $124,057 DSSF Approve (9-0) The 2009 Annual Town meeting voted to establish a new specified stabilization fund under G.L c 40 Section 5b called the Debt Service Stabilization Fund (DSSF) The purpose of the fund is to provide a vehicle to allow the Town to invest bond proceeds beyond the one-year arbitrage limit that would other- wise appl` An initial appropriation of $1 739 894 was approved at the 2009 Annual Town Meeting with funds re- maining from a set-aside in FY2007 when the monies were mitiall` received. In August 2006 the Town received reimbursement of approximatel` $14 million from the Massachusetts School Building Authority for construction projects completed at Clarke and Diamond Middle Schools and Lexington High School. The funds were in excess of the amount necessary to rep` a note that was due and were set aside as re- imbursement for the exempt costs of the High School project per a directive from the Massachusetts De- partment of Revenue The balance ($1 499 107) is to be drawn down over the life of the bond related to the High School construction project, payable through 2023 This article requests that $124 057 be appropriated from the Debt Service Stabilization Fund to offset the debt service in fiscal year 2014 for this same High School construction project. The Committee recommends approval of this request (9-0). Article 23: Appropriate for Prior Funds Funding Committee Requested Source Recommendation Years' Unpaid Bills Unknown Unknown Pending The Committee has not been informed of an need to take action under this Article but consideration of the Article is normall` deferred until the end of Town Meeting to allow for the possibiht\ of a motion if it is deemed necessary 40 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM The Committee has taken no position on this request. Article 24: Amend FY2013 Funds Funding Committee Requested Source Recommendation Operating and Enterprise Budgets Unknown Unknown Pending Town staff has informed the Committee to expect a motion under this Article but no further details were available at the time of publication. Consideration of this Article which is included in even Annual Town Meeting Warrant, is normall` deferred until the end of Town Meeting to allow Town staff to coor- dinate the final adjustments to the prior year s budget into a single motion. The Committee will report further on this article if the Town staff recommends am changes to the FY2013 operating or enterprise budgets The Committee has taken no position on this request. Article 25: Appropriate for Funds Funding Committee Requested Source Recommendation Authorized Capital Improvements Unknown Unknown Pending The Committee has not been informed of an need to take action under this Article but consideration of the Article is normall` deferred until the end of Town Meeting to allow for the possibilrt\ of a motion if it is deemed necessan The Committee has taken no position on this request. Article 26: Establish Qualifications Funds Funding Committee Requested Source Recommendation for Tax Deferrals None N/A Approve (9-0) 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 $60 000 to $65 000 Under the deferral program, qualifying resi- dents age 65 or older can defer payment of some or all of their propert\ taxes, in an amount up to half the value of their home until the propert\ is sold or otherwise disposed of For general background on Clause 41A and other programs offering propert\ tax relief to seniors,please see Appendix D to this Report.6 The 41A Program and the Home Rule Amendment Under generall` applicable state law the highest income threshold a Town ma` adopt for participation in the 41A program is the limit established b` the DOR each year under the state s Circuit Breaker program 6 For more detailed mfoimation, an excellent resource is a booklet prepared by the Selectmen s Tax Deferral and Exemption Study Committee entitled Properly Tax Relief for Seniors—Fiscal Fear 2013 which can be found on the Town web site at http //www l exi ngtonma gov/finance/assessor cfm 41 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM for single filers not a head of household, $53 000 for calendar year 2012.71n 2008 Lexington obtained a home rule amendment allowing it to expand eligibilit\ beyond that permitted under the general laws The special act permits the Town, b\ vote of Town Meeting and with the approval of the selectmen, to set its own income limit for deferrals Town Meeting previousl` approved increases in the income threshold from $50 000 to $51 000 in 2010 and from $51 000 to $60 000 in 2012.8 The Proposed Increase This year the Tax Deferral and Exemption Stud\ Committee (DESC) has recommended that the Town increase the threshold b\ an additional $5 000 to $65 000 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 Although the number of households eligible to defer propert\ taxes is now substantial (estimated to be well over 1 000 based on state tax statistics) and might increase slightl` with this change it is unlikel` that the change will result in a major growth in the number of deferrals or have a material impact on the Town s finances Utilization of the program has traditionall` been low because senior citizens who have paid off their mortgages have been reluctant to place a new hen on their home and accumulate debt, or to reduce the value of an asset that can be passed on to their heirs After previous increases in the income threshold, utilization levels grew onl` slightl` as shown in the ta- ble below An amendment to the general laws that allowed the Town to lower the interest rate from 8%to a floating rate based on Lexington s cost of funds beginning in 2007 ma` have had a greater impact on the increase in participation but the growth has nevertheless been quite modest. The cumulative total of deferrals outstanding, currentl` $695 000 has been relativel` stable for several years Fiscal Threshold Interest Number of Total Average Year Rate Deferrals Deferred Deferral 2001 $40 000 8 00% 23 $80,946 $3,519 2002 $40 000 8 00% 24 $91,582 $3 816 2003 $40 000 8 00% 21 $80 459 $3 831 2004 $40 000 8 00% 23 $80 459 $3 498 2005 $40 000 8 00% 16 $74,998 $4 687 2006 $40 000 8 00% 16 $73,964 $4 623 2007 $40 000 4 77% 15 $73,578 $4,905 2008 $40 000 4 92% 20 $101 833 $5 092 2009 $40 000 1 66% 26 $154,380 $5,938 2010 $50 000 0 68% 28 $169 043 $6 037 2011 $51 000 0 34% 28 $177,391 $6,335 2012 $60 000 0.26% 29 $191 458 $6 602 2013 $60 000 0 18% data not yet available The Circuit Breaker program allows low and moderate-income residents to claim a refundable credit on their state income tax equal to the amount by which their rent, or their local property taxes plus water and sewer charges, exceed 10% of their total income for the tax year up to a limit in 2012 of $1 000 The 2012 Circuit Breaker threshold for a single filer who is a head of household is $67 000 and the threshold for a married couple filing jointly is$80 000 8 The 2008 Home Rule Amendment also allows the Town to lower the age threshold below 65 and to condition eligibility for deferral by those under 65 on objective crrtena of hardship or disability but the Town has not yet made any such changes. 42 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM In preparing this year s recommendation, the DESC surveyed a group of peer and neighboring towns. Two other towns that have also obtained home rule legislation have established sigmficantl` higher in- come thresholds of $78 000 (Sudbury) and $70 000 (Weston) Lincoln and Newton have thresholds of $60 000 Several other communities surveyed are at or about the $53 000 maximum threshold now al- lowed under the general laws (Belmont, Concord, Arlington, Hingham, Needham, Wellesle` and Win- chester) The rest are at or just under the previous state maximum of$40 000 (Acton, Bedford, Billerica, Burlington,Natick,Waltham,Watertown,Wa`land and Woburn) The Committee believes that the proposed increase in the threshold from $60 000 to $65 000 is a reasona- ble one that will enable some moderate-income senior homeowners who cannot now take advantage of the deferral program to obtain needed propert\ tax relief. Given the nature of the program, which essen- tiall` involves well-secured temporar\ loans b\ the Town,the financial risk to the Town is minimal. The Committee recommends approval of this request (9-0). Article 29: Amend General Bylaws Funds Funding Committee Requested Source Recommendation — Contracts and Deeds (Solar Energy Purchasing) None N/A Approve (9-0) This article seeks to change Town bylaws to allow the Town to enter into contracts for the purpose of in- stalling solar energy facilities and purchasing solar electricit for terms up to 20 years At present, such contracts are limited to terms of not more than 5 years Each year the Town uses approximatel` 9,200 000 kWh at a cost of approximatel` $1 700 000 Most of this electricit is generated using fossil fuels that result in the emission of large quantities of greenhouse gasses into the atmosphere These gasses are one of the main drivers of global climate change It is there- fore desirable to reduce the Town s use of fossil fuels and to reduce the Town s expenditures for electrici- t\ Approving this article would make it easier for the Town to take advantage of solar photovoltaic technol- ogto generate electricit from sunlight. This would reduce the Town s use of fossil fuels and provide a portion of the Town s electricrt\ needs at a reduced rate Prelimmarn assessments indicate that photovoltaic arrays could be installed on top of a number of munic- ipal and school buildings It ma` also be possible to locate facilities on the ground at some locations. This article does not address the specifics of an proposed installation. In practice the Town would engage a compan` specializing in solar-energ\ development to install and operate photovoltaic arrays at one or more sites The Town would enter into a contract, known as a Power Purchase Agreement (PPA) that would obligate the Town to pa` the compan` for a certain minimum number of kilowatt hours of electricrt\ at a price specified in the contract. The compan` would maintain ownership of the equipment it installed and would be responsible for its maintenance The Town would receive net metering credits from NSTAR at rates above those paid b\ the Town under the PPA. Under reasonable economic assumptions,this would result in a net reduction in electricrt\ costs for the Town. Because of the need to amortize the capital investment of creating a new photovoltaic facilrt\ a PPA gen- erall` requires a customer to make a commitment of roughl` 20 years This article would allow the Town to make such a commitment, and the Committee agrees that this is a reasonable change in the b\laws The Committee recommends approval of this article (9-0). 43 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM Appendix A: 3-Year Budget Projection This projection can help us understand the challenges that Lexington will face if, e g. revenues do not keep pace with expenses in a level service budget. The projection is also an opportunrt\ to obtain a bet- ter qualitative as well as quantitative understanding of known trends and cost drivers Creating a revenue and expense projection differs in both method and purpose from creating a balanced budget. In a budget, one plans conseryatiyel` to avoid both over-spending and under-funding, either of which could necessitate harsh financial remedies during a fiscal year For a projection, one makes rough estimates about future revenue and expenses regardless of how the` might impact the overall fund bal- ance The resulting figures do not represent actual revenue or spending targets We have adopted some km assumptions as the basis for the projection presented herein using limited in- vestigations to establish their plausibilih We note below the most important aspects In regard to revenue we assume that the econom in FY2015 will show modest growth, and that the Town s revenue stream will recover full` in FY2016 and FY2017 We caution the reader that it is unclear if our detailed assumptions capture this intent. The following points outline the basis of our assumptions regarding revenue changes • The tax ley` is assumed to grow annuall` M. 2 5% of the previous year s base and M. an added amount for new growth No amounts are included for Proposition 2'/2 operational overrides • New growth (the increase in the tax ley` from new construction) in FY2015 is assumed to be 2% less than the average over the 5-year period ending with FY2012 (the reduction is due to the loss of the majorrt\ of Shire s TIF delayed growth) and then, for FY2016 and FY2017 is assumed to increase M. 2 5%per year • State aid in FY2015 is assumed to be equivalent to the anticipated FY2014 plus and additional $240 000 due to increased Chapter 70 all-da`-kindergarten funding and then, for FY2016 and FY2017 is assumed to increase M. 5% annuall` • Available funds include free cash as well as amounts in the Parking Fund and the Cemete. Fund. The amounts in the latter two categories are assumed to be $335 000 and $105 000 respectiyel` and free cash is assumed to total $4 000 000 for FY2015-17 Included in available funds are transfers from the Debt Service/Capital Projects/Building Renewal (DECAPREN) Stabilization Fund. In FY2015 $900 000 is anticipated to be used to offset exempt debt payments, and we pro- ject that$900 000 in F2016 and$700 000 in FY2017 will be transferred towards capital projects These assumptions impl` that available funds will be lower than the corresponding totals for the previous five fiscal years (FYs 2010 through 2014) which ranged from a low of approximatel` $6,200 000 for FY2010 to as high as $13,300 000 for FY2014 We note that the average available funds for FY2004 through FY2009 were lower than$3,300 000 • Revenue offsets include amounts from cher. sheet assessments that are assumed to grow M. 3 5% annualh amounts for the Assessors oyerla` ($750 000 annuall` in FY2016-2017 and $900 000 in FY2015 a revaluation year) and $300 000 that is set aside annuall` for potential deficits in the snow and ice budget. • Water and Wastewater Enterprise Fund indirect expenses are now in line with actual costs Rec- reation Enterprise Fund indirect expenses are assumed to increase M. $5 000 per year The major assumptions that we made regarding expenses are as follows • Line items do not include am increases for as of now unsettled cost-of-living adjustments (CO- LAs) for salaries and wages. Settled contracts for FY2015 onl` are the LEA at 2 75% and the 44 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM Public Facilities Department at 2% The potential impact of COLAs is summarized below the main projection. • The Lexington Public Schools personnel costs are assumed to increase b\ 2% annuall` for step changes, and 1%for enrollment driven increases • The Lexington Public School expenses for items other than special education are assumed to in- crease b\ 2% per year Special education expenses for out-of-district tuition are net the State Circuit Breaker reimbursement and are assumed to increase b\ 5% annuall` while the expenses for SPED consultants and out-of-district transportation are assumed to increase b\ 3%per year • Municipal personnel costs are assumed to increase b\ 1 3% annuall` for step changes • Municipal expenses are assumed to increase b\ 3%per year • The assessment for Lexington s share of expenses for Minuteman Career and Technical High School is assumed to increase b\ 4 5%per year • Appropriations for current and future pension payments are assumed to follow a schedule set up b\ the Retirement Board following the most recent actuarial evaluation of pension costs • Health insurance costs are assumed annual premium increases are 5% • Non-exempt debt service costs are assumed to grow 5%, in order to mirror the growth of revenue • Dept. of Public Facilities costs include salaries and wages (assumed to grow b\ 1 3% annuall` for step changes) utility bills (assumed to increase b\ 3% based on long term contracts) and other expenses (assumed to grow b\ 3% annuall`) • Expenses for cash capital are assumed to include amounts for road and building envelope mainte- nance (following from overrides) that increase annuall` b` 2 5% as well as transfers from the DECAPREN Stabilization Fund of $900 000 in 2016 and 700 000 in FY2017 as well as $1 700 000 from Free Cash for other capital expenses • We assume that no new funds are appropriated into the main Stabilization Fund. • Other expenses are assumed to include $45 000 annuall` for the senior tax work-off program, 500 000 of revenue set aside as a hedge for State or Federal aid reductions an annual 5% to the FY2014 contribution of$775 000 to the trust fund for future costs of health insurance for retired employees • The offsetting revenues and expenses for Revolving Funds, Grants and Enterprise Fund Opera- tions are projected using the 5-year trend from FY2010-2015 Enterprise capital is projected using the five averages for FY2010-2014 • No potential expenses for unidentified new programs are built into these projections The projection for FY2015 shows a decrease of approximatel` $1 000 000 in total general fund revenue This increase is far below the projected $6 600 000 increase in the tax le`\ revenue because we assume that there will be a large decrease in free cash (the major part of the available funds line) from that availa- ble for FY2014 We do not expect large amounts of free cash like that certified last November will con- tinue to be certified even fall. Traditionall` when additional Free Cash materializes it is not used to fund operating expenses, but is applied to one-time expenses such as capital projects or stabilization funds Free cash is built b\ an excess of actual revenues over actual expenditures. This makes it particularl` dif- ficult to project, and the uncertainh in the number is significant. The projection shows overall revenue growth of$7 800 000 in FY2016 and$7 700 000 in FY2017 The budget s bottom line is still being positivel` affected b\ favorable GIC health insurance rates, which came into effect in FY2013 Analysis of employee enrollments will have to be conducted to understand 45 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM the duration and magnitude of the future savings. Additional)` it is possible that operating expenses could increase for the Human Services and Recreation departments if the 33 Marrett Road properh is purchased and programmatic changes require additions to current staffing levels Due to contracts alread` settled for FY2015 a 1% COLA on salaries and wages in FY2015 would onl` additional)` impact the Lexington Public Schools and municipal salaries and wages lines b\ $18 000 and $205 000 respective)` COLAs of 1% in FY2016-2017 for the schools, municipal and Public Facilities Department would in- crease their respective budgets b\ $720 000 $207 000 and $50 000 COLAs for salaries and wages would increase the total personal expenses and reduce an surpluses for FY2015-2017 We expect that the actual range of uncertamt, of this bottom line figure considering the universe of possible factors is ver. rough)` one to three million dollars REVENUE SUMMARY FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 Actual Recap Budgeted Pro(ected Pro(ected Proiected Property Tax Properly Tax Leri- $122,259 637 $128,662 664 $135 418 717 $140 804 184 $147 468 557 $154 378 145 11lowable 2 5%incr $3 056 491 $3 217107 $3 385 468 $3 520 105 $3 686,714 $3 859 454 New Tax Levi-Growth $3 346 536 $3 560 545 $2 000 000 $3 144 268 $3 222,874 $3 303 446 Excess Levi-C'apacil $(46 950) $(53 534) $- $- $- $- Tax levy $128,615,714 $135,386,782 $140,804,184 $147,468,557 $154,378,145 $161,541,045 State Aid $8,401 617 $9 410 134 $9 410 134 $9,65( 134 $10 132,641 $10,639,273 Local Receipts $12,340,329 $10 188,649 $10,525,979 $10,683,869 $10,844 127 $11,006 789 Available Funds $7,975,216 $7 499 653 $13,339,510 $5 426,150 $5 426,150 $5,226,150 Revenue Offsets $(2,474,521) $(1 645,350) $(1,953 751) $(2,071 470) $(1,951,971) $(1,983,540) Enterprise Funds(Indirect) $1,564 441 $1,512,892 $1 497 405 $1,502,405 $1,507 405 $1,512,405 Total General Fund $156,422,796 $162,352,760 $173,623,461 $172,659,644 $180,336,496 $187,942,121 Other Revenues Revolving Funds $2,244 151 $2,368,300 $2,807 431 $2,402,270 $2,471,839 $2,541 409 Grants $169,363 $91,284 $338,953 $132,949 $133,935 $134,922 Enterprise Funds $17,812,456 $17 429,804 $19,686,870 $17 724 064 $18,051,220 $18,378,376 Exempt Debt $5 721,834 $6,642,450 $8,381,309 $8,555 459 $8,310 046 $8,073 649 Sub-Total Other Revenues $25,947,804 $26,531,838 $31,214,563 $28,814,741 $28,967,040 $29,128,355 NOTAL REVENUE $182,370,600 $188,884,598 $204,838,024 $201,474,386 $209,303,536 $217,070,4751 46 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM EXPENSE SUMMARY FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 Actual Recap Budgeted Proiected Proiected Proiected Education Lex.Pub Schools[rages $60 894 680 $64 481 249 $68 649 329 $72 013 146 $74 029 514 $76 102 341 Lex.Pub Schools Expenses $6,934 780 $5 900 555 $6 716,822 $6 851 158 $6 988,182 $7 127 945 Out-of-District SPED $4 442 912 $6 246,552 $5 947 812 $6 494 103 $6 804 800 $7 130 611 Sub-Total Lex.Pub. Schools $72,272,372 $76,628,356 $81,313,963 $85,358,407 $87,822,496 $90,360,897 Minuteman Reg School $1 702 930 $1 407 979 $1 474 266 $1 540 608 $1 609 935 $1 682,382 Sub-Total Education $73,975,302 $78,036,335 $82,788,229 $86,899,015 $89,432,431 $92,043,280 Municipal iIunicipal iT ages $18,798 530 $20 110 595 $20 373 565 $20 638 421 $20 906 721 $21 178 508 iIunicipal Expenses $8,779 459 $9 794 058 $10 168 907 $10 473 974 $10 788 193 $11 111 839 Sub-Total Municipal $27,577,989 $29,904,653 $30,542,472 $31,112,396 $31,694,914 $32,290,347 Shared Expenses Benefits&Insurance $28,380 746 $30 052 729 $29 688 138 $31 162 359 $32 715 724 $34 248 250 Debt(within-levt) $4 849 052 $5 669 343 $5 534 823 $5 811 564 $6 102,142 $6 407 249 Reserve Fund $- $900 000 $900 000 $900 000 $900 000 $900 000 Facilities $9 242 458 $9 431 662 $9 760 460 $10 080 350 $10 311 079 $10 547 634 Sub-Total Shared Expenses $42,472,256 $46,053,734 $45,883,421 $47,954,273 $50,028,946 $52,103,133 Capital&Reserves Cash Capital $2,627 174 $4 152,794 $7,853,842° $3 437 143 $3 456,821 $3,276,992 Stabilization Fund $- $- $- $- $- $- Debt Svc Stab Fund $- $1,600 000 $2,184 000 $600 000 $600 000 $600 000 PEIL Fund(OPEB) $500,000 $500 000 $775 000 $813 750 $854 438 $897 159 Other $226,885 $336,250 $3,596,497 $545 000 $545 000 $545 000 Sub-Total Cap.&Res. $3,354,059 $6,589,044 $14,409,339 $5,395,893 $5,456,259 $5,319,151 Total Op.,Cap.&Res. $147,379,606 $160,583,766 $173,623,461 $171,361,576 $176,612,550 $181,755,912 Revolving Funds $2,244,151 $2,368,300 $2,807,431 $2,402,270 $2,471,839 $2,541,409 Grants $169,363 $91,284 $338,953 $132,949 $133,935 $134,922 Enterprise Funds iT titer $7 274 193 $7 489 719 $7 888,530 $7 462,430 $7 660 263 $7 870 096 iT astewater(Sewer) $8,257 930 $8 598,632 $8 800 750 $8 680 404 $8 972,344 $9 264 283 Recreation $1 670 333 $1 270 453 $1 785 840 $1 181 230 $1 012,613 $843 997 Enterprise Capital $610 000 $71 000 $1 211 750 $400 000 $400 000 $400 000 Sub-Total Enterprise Funds $17,812,456 $17,429,804 $19,686,870 $17,724,064 $18,051,220 $18,378,376 Exempt Debt $5,721,834 $6,642,450 $8,381,309 $8,555,459 $8,310,046 $8,073,649 NOTAL EXPENSES $173,327,410 $187,115,604 $204,838,024 $200,176,317 $205,579,590 $210,884,2661 'Balance(w/out COLA) $9,043,190 $1,768,9941 $01 $1,298,068 $3,723,946 $6,186,2091 COLA Projection FY2015 FY2016 COLA Balance(Deficit)with various COLA rates* 1%COLA for schools* $18,000 $720 000 1% $1,075,068 $3,500,946 $5,737,979 1%COLA for municipal $205 000 $207 000 2% $852,068 $3,277,946 $5,285,289 1%COLA for public facilities* $- $50,000 3% $629,068 $3,054,946 $4,828,139 Total 1%COLA Increment $223,000 $977,000 *takes into consideration contracts ah-each-settled for FY2015 5 9 Includes$2,434 640 allocated to the purchase of the property at 33 Marrett Road. 47 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM 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 '/2, 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. DOR Enterprise Funds Manual (April 2008) An en- terprise fund provides management and taxpayers with information to measure performance analyze the impact of financial decisions, and determine the cost of providing a service Enterprise funds ma` be op- erated on a stand-alone basis or subsidized b\ the General Fund. The Water and Wastewater Enterprise Funds operate on a completel` stand-alone basis. These funds do not rel\ on an tax-ley` revenues, but cover their complete operating and capital needs with user charges and fees The Recreation Enterprise Fund is onl\ partiall\ 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) Most recreation capital costs, however are subsidized b\ the General Fund through a combination of within-ley` borrowing, Communrt\ 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 earl\ 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 b\ Town Meeting to run the enterprises Depending on the accurac` of the usage projections, the actual revenue realized b\ the enterprise during the year ma` exceed or fall short of the appropriated amount. Am operating surplus must be retained in reserve in the enterprise fund. The funds accumulated in that reserve (referred to as retained earnings') ma` be applied onl\ to meet the capital needs of the enterprise or to reduce user charges An\ operating loss (after applying an 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 (preyiousl` 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 b\ 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 preyiousl` 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 b\ cash or borrowing, are addressed in separate capi- tal Warrant articles 48 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM Appendix C: Revolving Funds Ordmaril` revenue received M. an municipal department must be deposited in the General Fund, and cannot be expended for an purpose without further appropriation M. 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 pa` expenses for rendering the services for which those fees and charges are collected. Revolving funds managed M. municipal departments are generall` governed M. G L c 44 § 53E1/2 (There are also a number of revolving funds managed M. the School Department, such as the School Lunch Fund, which are governed M. other statutes and are not within the control of Town Meeting.) Un- der Section 53E1/2, a municipal revolving fund can be established onl` M. vote of Town Meeting. That authorization must be renewed prior to each succeeding fiscal year The authorization must specif` • the purpose(s) for which monies deposited in the fund ma` 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 ma` be expended from the fund in the ensuing fiscal year Expenditures ma` not be made nor liabilities incurred, in excess of the balance of the fund. If a revolving fund is reauthorized, am balance in the fund ma` be carried over to the next fiscal year If a revolving fund is not reauthorized, or if the purposes for which the mone` in the fund ma` 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 dul\ established revolving fund. 49 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM Appendix D: Senior Tax Relief In earl\ 2004 the Board of Selectmen created an ad hoc Tax Deferral and Exemption Stud\ Committee to explore ways in which the propert\ tax relief available to senior citizens and other need\ 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 ordmaril` be available under state law The principal programs for propert\ tax relief now available to Lexington homeowners are • a tax exemption program, under which homeowners age 65 or over with limited income and limited assets other than the value of their home ma` deduct $1 000 from their annual properh tax, G.L c 59 § 5 cl. 41C (The 41C Program') • a Communrt\ Preservation Act surcharge exemption program, under which low-to-moderate income homeowners age 60 or over and low-income homeowners under age 60 ma` obtain a 100% exemp- tion from the CPA surcharge on their propert\ tax, • a locall`-controlled Senior Service program, adopted b\ Town Meeting in 2006 to replace the preex- isting state program, under which low-income seniors ma` perform volunteer work for the Town in exchange for a reduction in their propert\ tax, currentl` up to a maximum credit of$935or a maxi- mum credit of$1 190 for a two-person household, • a tax deferral program, under which low-to-moderate-income homeowners age 65 or over ma` defer an or all of their propert\ tax due after applying an available exemptions, up to half the value of their house at an interest rate equal to the Town s cost of funds (.26% for FY2012 deferrals and 18% for FY2013 deferrals) until the house is sold or transferred, G.L c 59 § 5 cl. 41A (`the 41A Pro- gram') and • an income tax Circuit Breaker program under which low- and moderate-income homeowners age 65 and over whose homes have an assessed valuation not greater than a specified ceiling ($705 000 for tax year 2012) or renters, ma` obtain a tax credit on their state tax returns (up to $1 000 for tax year 2012) for the amount that their propert\ tax, plus half their annual water and sewer bill, or their rent, exceeds 10% of their annual income G L c 62, § 6(k) Fundm2 of the Programs Each of these programs is funded in a slightl` different wa` Under the 41C Program, the Town receives reimbursement from the state for exemptions allowed up to an annual statutory cap ($29,500) subject to appropriation, exemptions beyond this amount are funded from the Town s oyerla` account and reduce the amount that ma` be spent for other purpose under the Proposition 2'/2 limits. Exemptions granted from the CPA s 3% surcharge lower the amount of CPA revenue that the Town would otherwise receive b\ the amount of the exemptions. The Senior Service program, formerl\ funded from the oyerla` is now funded as part of the Town s annual budget, subject to appropriation. The 41A deferral program does not affect the amount of revenue that the Town ma` appropriate under Proposition 2'/2, and it is essentiall` revenue- neutral over an extended period of time though there ma` be short-term cash flow implications if defer- rals are taken out faster than the\ are repaid. The Circuit Breaker program is funded entirel` b\ the state The 41A Deferral Program The 41A deferral program, although it has not been widel` used, is an important tool in the tax-relief toolbox because it offers immediate and substantial property tax relief to cash-strapped seniors Those who quaff` ma` defer an part or all of their property tax for a given year until the propert\ is ultimatel` disposed of,up to a cumulative total of half the assessed valuation of their house at an interest rate that is now quite reasonable The interest rate formerl\ pegged at 8% is now based on a floating Treasure rate equivalent to Lexington s cost of funds in the year of deferral, but not to exceed 8%, which remains in 50 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM effect for the life of each year s deferral. The interest rate for FY2012 deferrals was 0 26%, and for FY2013 deferrals will be just 18% At the same time the 41A deferral program is an attractive form of tax relief from the Town s point of view because it is essentiall` revenue-neutral. The total amount of deferred taxes now carried b` the Town as accounts receivable is approximatel` $700 000 While the unlikel` event of a significant in- crease in the number of participants in an particular year could potentiall` create a short-term cash flow problem, the Town is in effect making well-secured loans The Town should eventuall` be repaid all the funds that are deferred with interest, and over time an equilibrium should be reached under which as mans deferral agreements are repaid as are entered into The 41C Exemption Pro2ram For mans years, the Town has made available to qualifying seniors an exemption from the propert\ tax under Clause 41 of G.L c 59 §5 and its successor Clause 41C Prior to 2004 the amount of the credit was limited to $500 per year and eligibilit\ criteria were quite restrictive Since then, the Town has taken a number of steps to expand both eligibilit\ and the credit amount. Taking advantage of new local options made available b` the legislature in 2002, Town Meeting voted in 2004 to (a) increase the amount of the credit to $750. (b) lower the age of eligibilit\ from 70 to the min- imum of 65 (c) increase the income threshold from $13 000(single)/$15 000(married couple) to the max- imum of $20 000/ $30 000 and (d) increase the threshold for assets, not including the home from $28 000/$30 000 to the maximum of$40 000/$55 000 In 2005 Town Meeting voted to adopt the provi- sions of G.L c 59 § 5 Clause 41D which automaticall` adjusts the income and asset limits for Clause 41C (but not the exemption amount) b` a COLA established annuall` b` the Department of Revenue For FY2013 the income limits are $24 735/$37 106 and the asset limits are $49 472/$68 025 In 2006 Town Meeting voted to increase the exemption to the maximum allowable amount of$1 000 The Senior Service Pro2ram In 1999 the Legislature authorized cities and towns, b` accepting G L c 59 § 5K, to offer residents, age 60 and over the opportumt\ to reduce their propert`-tax obligation b` as much as $500 in exchange for communih service 1" Lexington, which had earlier maintained its own program, accepted this statute shortl` after it was enacted. The statute allows towns to set their rules and procedures for implementation but limits participation to persons age 60 or over and also limits the hourl` credit to the state s minimum wage currentl` $8 per hour In 2006 Town Meeting voted to rescind its acceptance of the statewide senior propert` tax work-off pro- gram under c 59 § 5K of the General Laws and to replace it with a locall` controlled program. This gave the Town the flexibilit\ to allow participation b` persons under age 60 such as the disabled and handi- capped, who might be able to benefit from the program, pa` a wage in excess of the minimum wage al- low a higher amount to be credited against a participant s propert` tax bill. The most recent set of guidelines,which became effective in FY2012, are as follows Income eligibilit\ is $50 000 for single taxpayers or $52,950 for a couple hourl` rate is $8 50 maximum credit is $935 (110 hours) for one participant or up to $1 190 (140 hours) for a couple living in the same household. Although the Board of Selectmen has the authorit\ to expand eligibilit\ to persons under age 60 who are disabled or handicapped, it has not vet done so 10 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 51 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM 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 an alteration of their purpose and an ap- propriation into or out of the funds,must be approved b\ 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 b\ negotiated payments from developers, had previousl` been spent without specific appropriation. In order to compl` 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 the\ are now subject to review and appropriation b\ 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- 1` contained in the Avalon Ba` TDM special revenue account. School Bus Transportation S.F Supports dail` school bus operations, and was origmall` funded with $200 000 contained in the Avalon Ba` School Bus Transportation special revenue account. Section 135 Zoning By-Law S.F Created to finance public improvements using monies contributed b\ developers 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 transparent` around the out-of-district special education budget component b\ 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 b\ a $100 000 payment received from the developer of Lexington Place in FY2010 The funds ma` 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 Ba` pursuant to an Education and Trust Fund Escrow Agreement dated Ma` 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 annuall` if the number of students residing at the development (Avalon at Lexington Hills) exceeded 111 The amount payable per student in excess of 111 is $7 100 This fund is expected to be depleted in FY2014 Transportation Management Overlay District Fund(TMOD) funded b` payments from those developers who choose to pa` a transportation mitigation fee rather than taking responsibilrt\ for improving all the intersections in the area to a certain level as provided in Section 135-43 C of the Zoning B\law Per Sec- tion 135-43 C(5)(c) an transportation mitigation fees paid to the Town are intended to be used to fund infrastructure improvements that are necessitated b\ the proposed development of the applicant. 52 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM At the 2012 Special Town Meeting, the Debt Service Capital Projects Building Renewal SF 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 prod ects Current Town polic` has a goal of keeping debt service at approximatel` 5% of total revenue When the Town must issue a particularl` 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 sharpl` This rise is tvpicall` followed b\ 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 directl` into the tax ley` this fund allows the Town to smooth the impact of sudden increases in debt service on propert\ 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 directl` reduce annual debt service which in turn reduces the amount that must be raised in the tax ley` 53 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM Appendix F: Other Post Employment Benefits The Town of Lexington is required b` 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 b` mans retirees are often called other post-employment benefits or OPEB for short. Health care benefits are b` far the largest component of OPEB Much of the cost of retiree health insurance is borne b` Medicare but the Town must contribute to sup- plementar\ 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 liabilrt` The actuarial value of this liabiht` must be included in the Town s financial statements and is in the hundreds of millions of dollars In FY2014 the Town will pa` approxi- match $5,900 000 for current year retiree health benefits costs At the same time that these payments are retiring part of the current liabiht` employees are earning rights to receive retirement benefits in the fu- ture The general escalation of health care costs makes it almost certain that the net effect is an increase in the actuarial value of the liabilit` It should be noted that an estimate of the present value of the habilrt` involves a large number of as- sumptions and projections about future health care costs, retiree longeyits number of retirees, Town/retiree cost sharing arrangements, and returns on investments Man` of these factors are relatiyel` uncertain. Evers other year the Town engages a firm to make actuarial estimates of the liabiht\ for use in the Town s financial statements. The Government Accounting Standards Board (GASB) has promulgated rules for the computation of these estimates which ma` or ma` not be reasonable in certain important re- spects, and the actuaries making the estimates adopt assumptions which ma` or ma` not be reasonable The rules and assumptions in regard to the so-called discount rate and the time-profile of the amortization of the liabilrts are of particular importance The assumptions used in the previous estimates ma` have led to considerable large inaccuracies in the present value of the liabilrts in those reports One should be care- ful when using the Town s actuarial estimates in discussions of funding police While the Town has a legal obligation to provide health benefits to present retirees, it has no legal obliga- tion to fund an future habilrte i.e to set aside funds for the specific purpose of covering the costs of the future obligations and thereb\ assuring its abilite to satisff them. Nonetheless, the Town has taken mod- est steps toward that goal. A Post Employment Insurance Liabilit\ (PEIL) Fund was created via a home rule petition to the state legislature (the Act is reproduced at the end of this appendix) The rules govern- ing the management of the PEIL Fund are similar to those governing the Retirement Fund. Since long- term growth and investment income are primary goals, the balance in the Fund ma` be invested, unlike most other Town monies, in a relativel\ wide range of investment vehicles including stocks and bonds The Retirement Board is responsible for the management of the Fund. Appropriations from the PEIL Fund ma` be made b` Town Meeting,but onl\ to pas for health care costs of retirees There are at least three lines of argument in favor of funding the liabihte First, an monies in the PEIL Fund provide assurance that the Town will be able to satisff at least some portion of its future liabilit\ Bond rating agencies look favorable upon this, although it is unclear what funding level, if an is neces- sars to maintain a AAA bond rating. Second, the balance in the Fund is invested and earns income The goal is to grow the Fund until the ha- bilite is full` (100%) funded. In the earl` years of growing the Fund, the balance is modest, investment returns are small on an absolute scale and the growth of the balance is dominated b` the inward appropri- ations When the balance becomes large the growth will tend to be dominated b` investment returns Subsequent to reaching full funding, in each year a portion of the investment income is retained in order to maintain full funding, and the remainder is put towards current health care costs for retirees Analyses done b` the OPEB working group suggest that, in the years after full funding is achieved, 20% to 40% of the Town s portion of retiree health care costs could be covered b` investment income Thus, full funding 54 APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM modestl` reduces the need for revenue from taxes (in the years after achieving full funding) and therefore serves as a partial hedge against increases in health insurance costs Third,the Fund could be used as a reserve e g. to fund a large portion of retiree health costs in a particu- larl` challenging fiscal year On the other hand, there are considerations that weigh against funding the liabilit\ or at least against an aggressive funding schedule First, monies invested in the PEIL Fund are unavailable for other uses Thus, the reservation of resources needed to build the Fund has a negative effect on the current budget. One ma` legitimatel` ask whether funding the PEIL should take priorrk over other liabilities such as the anticipated costs of maintaining or replacing roads and buildings in a timel` manner Choosing the latter might generate significant future savings Second, the above paragraph makes it clear that the budgetary benefits of the Fund are not realized until full funding is achieved. Onl` a small fraction of toda` s taxpayers will still be paying taxes in Lexington when full funding is achieved. Third, even if the habihtc is full\ funded some da` the Town would still need to make substantial annual appropriations for retiree health benefits In FY2009 and subsequent fiscal years, Town Meeting approved appropriations into the Fund. In FYs 2009 2010 and 2011 the appropriation 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 reimbursements are not accounted for in the reve- nue projections used for budgeting purposes It has been argued that this effectiyel` reserves the funds for later use in supporting retiree health care expenses The reimbursements go into the General Fund and become part of the following year s free cash balance In each of FYs 2012 and 2013 the amount of $500 000 somewhat greater than the Medicare Part D reimbursements in the previous year was appro- priated into the PEIL Fund.