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TOWN OF LEXINGTON
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REPORT TO THE
MARCH 2012 ANNUAL TOWN MEETING
AND SPECIAL TOWN MEETING
Released March 27, 2012
Appropriation Committee Members — Fiscal Year 2012
Glenn Parker, Chair • John Bartenstem, Vice ChairlSecretary • Joe Pato, Vice Chair
Robert N. Addelson (ex-officio; non-voting) • Robert Cohen • Mollie Garberg
Alan Levine • Eric Michelson • Richard Neumeier • Jomna Schonfeld
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
Contents
Contents 1
Summary of Warrant Article Recommendations 2
Preface 4
Introduction 5
Warrant Article Analysis and Recommendations 7
-SPECIAL TOWN MEETING- 7
Article 2 Appropriate for New Estabrook School 7
-ANNUAL TOWN MEETING- 9
Article 4 Appropriate FY2013 Operating Budget 9
Article 5 Appropriate FY2013 Enterprise Funds Budgets 20
Article 6 Appropriate for Senior Service Program 24
Article 7 Establish and Continue Departmental Revolving Funds 25
Article 8 Appropriate the FY2013 Community Preservation Committee Operating
Budget and CPA Projects 26
Article 9 Land Purchase—Off Grove Street 30
Article 10 Land Purchase—Off Grove Street 30
Article 11 Appropriate for Recreation Capital Projects 31
Article 12 Appropriate for Municipal Capital Projects and Equipment 32
Article 13 Appropriate for Water System Improvements 33
Article 14 Appropriate for Wastewater System Improvements 35
Article 15 Appropriate for School Capital Projects and Equipment 36
Article 16 Appropriate for Public Facilities Capital Projects 37
Article 17 School Bus Transportation Subsidy (Citizen Article) 39
Article 18 Appropriate to Post Employment Insurance Liability Fund 41
Article 19 Rescind Prior Borrowing Authorization 42
Article 20 Authorize the Establishment of a Minuteman Stabilization Fund 42
Article 21 Establish and Appropriate to Specified Stabilization Funds 42
Article 22 Appropriate to Stabilization Fund 43
Article 23 Appropriate from Debt Service Stabilization Fund 43
Article 24 Appropriate for Prior Years' Unpaid Bills 44
Article 25 Amend FY2012 Operating and Enterprise Budgets 44
Article 26 Appropriate for Authorized Capital Improvements 44
Article 27 Establish Qualifications for Tax Deferrals and Exemptions 45
Article 28 Accept MGL Chapter 200A Section 9A 45
Appendix A 3-Year Budget Projection 47
Appendix B. Enterprise Funds 51
Appendix C:Revolving Funds 52
Appendix D. Senior Tax Relief 53
Appendix E Specified Stabilization Funds 55
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APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
Summary of Warrant Article Recommendations 1
Abbreviations GF = General Fund, EF =Enterprise Fund, RF= Revolving Fund,
CPA= Community Preservation Act Fund, BAN =Bond Anticipation Note,
DSSF =Debt Service Stabilization Fund
An entry of IP for Indefinitely Postpone"in the right-hand column merely signifies our expectation
—SPECIAL TOWN MEETING—
Arti- Funds Funding Committee
cle
Title Requested Source Recommendation
2 Appropriate for New $39,742,248 See motion Approve (9-0)
Estabrook School
—ANNUAL TOWN MEETING—
Arti- Funds Funding Committee
cle
Title Requested Source Recommendation
4 Appropriate FY2013 See Report See motion Approve (9-0)
Operating Budget
Appropriate FY2013 Water EF
5 Enterprise Funds Budget $17,882,661 Wastewater EF Approve (9-0)
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 (except Line 1100)
Line 1100. School Bus
7 $830,000 RF Pending
Transportation
Appropriate the FY2013
8 Community Preservation See Report CPA Approve (9-0)
Committee Operating Budget [except 8(d)]
and CPA Projects
9 Land Purchase—Off Grove Unknown CPA Debt Pending
Street
10 Land Purchase—Off Grove Unknown GF Debt Pending
Street
11 Appropriate for Recreation $291 000 Recreation EF Approve (9-0)
Capital Projects GF
Appropriate for Municipal Free Cash
12 Capital Projects and $4,786,586 GF Debt Approve (9-0)
Equipment
13 Appropriate for Water System $940,500 Water EF(debt) Approve (9-0)
Improvements
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APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
Arti- Funds Funding Committee
cle Title Requested Source Recommendation
14 Appropriate for Wastewater $1,340,500 Wastewater EF Approve (9-0)
System Improvements (Debt)
15 Appropriate for School Capital 1 085 000 GF Debt Approve (9-0)
Projects and Equipment Tax Levy
16 Appropriate for Public $2 200 711 GF Debt Approve (9-0)
Facilities Capital Projects Free Cash [except 16(e)]
17 School Bus Transportation $316,250 GF Approve (5-4)
System (Citizen Article)
Appropriate to Post
18 Employment Insurance $500,000 Free Cash Approve (9-0)
Liability Fund
19 Rescind Prior Borrowing None N/A Approve (9-0)
Authority
Authorize the Establishment of
20 a Minuteman Stabilization None N/A IP
Fund
21 Establish and Appropriate to See Report See Report Approve (9-0)
Specified Stabilization Funds
22 Appropriate to Stabilization None N/A IP
Fund
23 Appropriate from Debt Service $124,057 DSSF Approve (9-0)
Stabilization Fund
24 Appropriate for Prior Years' Unknown Unknown Pending
Unpaid Bills
25 Amend FY2012 Operating and Unknown Unknown Pending
Enterprise Budgets
Appropriate for Authorized Insurance
26 $200,000 i Approve (9-0)
Capital Improvements Proceeds
27 Establish Qualifications for None N/A IP
Tax Deferrals and Exemptions
28 Accept MGL Chapter 200A None N/A Approve (9-0)
Section 9A
1 By State law,insurance proceeds greater than$20,000 are always subject to appropriation
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APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
Preface
This Preface describes the structure and stylistic conventions used in this report It is followed by an
Introduction discussing changes in the Town's financial status since the most recent Annual Town
Meeting in May 2011, and issues pertinent to the Town's general financial situation The main body of
this report contains article-by-article discussions and recommendations on those articles that, in our
opinion,have substantial financial relevance
The discussion for each article presents the consensus view of the Committee, as well as any other
considerations or cautions that we feel Town Meeting should be informed of In the case where one or
more Committee members are strongly opposed to the majority position, we summarize the opposing
perspective Each Article discussion concludes with the most recent vote of the Committee prior to
publication This is summarized by the number of members in favor, followed by the number of members
opposed, and lastly (when applicable) the number of members abstaining, e g "(6-2-1)" indicates six
members in favor, two opposed, and one abstaining For convenience, Committee votes are also
summarized on the preceding page
This report does not replicate information readily available to Town Meeting members elsewhere Key
documents that inform our analysis and provide a more thorough picture of the Town finances are
• FY2013 Recommended Budget&Financing Plan, dated March 2, 2012, commonly known as the
"Brown Book", which documents the complete municipal budget of the Town of Lexington The
Brown Book also summarizes budget laws and bylaws (Appendix B) and includes a glossary of
financial terms (Appendix D)
• School Committee Fiscal Year 2013 Annual Town Meeting Budget Request (the "Gray Book"),
which details the budget plans for the Lexington Public School System
• TMMA Warrant Information Report (March 2012), published by the Town Meeting Members
Association
• Capital Expenditures Committee (CEC)Report to the 2012 Special Town Meeting
• Community Preservation Committee (CPC)Report to the 2012 Annual Town Meeting
Acknowledgements
The content of this report, except where otherwise noted, was researched, written and edited by members
of the Committee with support from town staff Our Committee has the pleasure and the privilege of
working with Town Manager, Carl Valente, Assistant Town Manager for Finance, Rob Addelson, our
Budget Officer, Theo Kalivas, the Capital Expenditures Committee, the Community Preservation
Committee, the School Committee, the Superintendent of Schools, Dr Paul Ash, the Assistant
Superintendent for Finance and Operations, Mary Ellen Dunn, and the Board of Selectmen We thank the
municipal and school staff, Town officials, boards and volunteers who have contributed time and
expertise in support of our work
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APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
Introduction
The Appropriation Committee is required to create a report with a review of the budget as adopted by the
Board of Selectmen, including an assessment of the budget plan and a projection for future years'
revenues and expenses This report includes the Committee's advice and recommendations regarding all
appropriations of Town funds that are anticipated in the Town Warrant, and other municipal matters that
may come before Town Meeting This report is published and distributed to the members of Town
Meeting as a printed document and as an electronic document via the Town website The Committee also
makes presentations during Town Meeting, including recommendations on appropriations and other
matters for which the Committee's formal position was pending at the time of publication
Developments Since Adoption of the FY2012 Budget
The actual "new growth" figure for FY2012 was $3,346,536, an increase of$1,546,536, or almost twice
the original FY2012 budget estimate of$1,800,000 It is the Town staff's practice to use a conservative
estimate for new growth, meaning that the estimate tends to be lower than the actual result Nevertheless,
this was a significant deviation contributing to additional revenue in FY2012 and raising the Town's levy
limit for FY2013 and beyond
November 2011 Special Town Meeting —As a consequence of the increased revenue from new growth
and a late-in-the-year reduction in the FY2012 health insurance budget of$1 25 million (resulting from a
lower than expected increase in health care costs), an additional $2 8 million of revenue was available for
appropriation to the FY2012 budget at the fall Special Town Meeting held on November 10, 2011 Of that
amount,just a little over $1 million was actually appropriated, leaving an FY2012 surplus of nearly $1 8
million that will flow to Free Cash at the end of the current fiscal year and be available for appropriation
for FY2014 at the 2013 Annual Town Meeting(or for FY2013 if a special town meeting is held in the fall
of 2012)
Bridge/Bowman and Estabrook Debt Exclusions — At the November 2011 Special Town Meeting, the
main action taken was to appropriate funds for the Bridge and Bowman Elementary School renovation
projects The request for a borrowing authorization totaling $21,670,000 was contingent on the approval
of a debt exclusion referendum by a vote of the Town residents A special election was held on January
24, 2012, to present questions for two debt exclusions, one for the Bridge and Bowman projects and
another for the reconstruction of the Estabrook Elementary School Both debt exclusions were approved,
granting the Town the right to borrow in excess of the limits established by Proposition 2'/2 to fund these
construction projects The actual amounts that can be borrowed for the Estabrook project will be
determined by an appropriation request to be made under Article 2 of the Warrant for the Special Town
Meeting to be held on April 2, 2012
Reserve Fund—At the November 2011 Special Town Meeting, a supplemental appropriation of$350,000
to the Reserve Fund was approved in order to simplify the funding of the snow and ice budget This
raised the total FY2012 appropriation for the Reserve Fund from $550,000 to $900,000 The same, larger
amount will be requested for the Reserve Fund in the budget for FY2013 to help address potential
overruns in FY2013 snow and ice costs (in spite of the uneventful winter of 2011-2012), and also to
hedge against potential large shifts in fuel prices during the coming year
On December 21, 2012, the Committee authorized a$40,000 Reserve Fund transfer to mitigate hazardous
conditions at a private home at 80 Oak Street pursuant to a determination by the Building Commissioner
and others that the property posed a threat to general health and safety To date this has been the only use
of the Reserve Fund, leaving the balance at $860,000 for FY2012 If not needed by the end of the fiscal
year,this amount will flow to free cash and be available for appropriation for FY2014
Employee Health Insurance — At the end of January, 2012, the Town concluded a successful coalition
bargaining process with the Lexington Public Employee Committee Under the resulting agreement, the
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APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
Town's self-insured benefits program will be terminated as of July 1, 2012, and benefits-eligible Town
employees will have the option to subscribe to one of several health insurance plans offered by the
Massachusetts Group Insurance Commission (GIC) The Town will use the GIC for at least the following
three years, after which time the Town will have the option to renew its contract with the GIC for three
more years The financial impact of this change on the Town budget will largely depend on how many
employees enroll in the GIC and which plans they choose, but we have been advised by the Town
Manager that there will be a significant reduction in costs —in the vicinity of$3 million—for each of the
fiscal years FY2013-2016 For more details, see the discussion of Program 2000 Shared Expenses under
Article 4
The FY2013 Budget
The Town Manager has estimated new growth conservatively at $2,000,000 this year, a 10% increase
over last year's original estimate The Town's Free Cash certified as of June 1, 2011, was approximately
$8 1 million, up about 15% from last year Overall, the Town's projected revenue for FY2013 is growing
by 4 7%over FY2012
Town staff have proposed a level-service budget without the need for an operating override The revenue
allocation model used as a starting point for the level-service budget began by funding shared expenses,
then allocating 71 9% of available new funds to the schools, and the remaining 28 1% to municipal
departments
Overall, the proposed FY2013 budget has increased 5 9% over the previous year, but this large growth
rate requires some explanation The full budget is inclusive of the operating budget (education, shared
expenses and municipal departments) and cash capital, senior tax work-off and OPEB Cash capital is
being used as a temporary parking place for the $3,379,821 surplus that resulted from the reduction in the
health insurance budget (this occurred late in the budgeting process when the Town entered the State
GIC), and the $1,254,980 residual balance of free cash that has been set aside for as yet unidentified
capital spending The annual increase for the operating budget alone is 2 6%
The appropriation request for schools represents an increase of 4 3% The Town's assessment for
Minuteman Regional School fell by over 17% due to a decrease in the enrollment (particularly in the
post-graduate program) of students from Lexington The request for shared expenses represents a smaller
than average increase of 1 3% (see the discussion under Article 4) In aggregate, the requests for all
municipal departments increased by 3 17%
When preparing the budget, the Town Manager must make an estimate of the year's State aid well before
the amount is finalized by the State government This year's recommended budget assumes that FY2013
State aid will be level-funded, i e , the same as the amount of State aid actually received in FY2012
Based on the State's budget situation, Town staff foresees a possibility that FY2013 State aid will be flat
or declining The motion under Article 4 will likely include a provision to set aside funds as a hedge
against reductions in State aid This provision would allow some or all of these funds to be applied
without requiring a Special Town Meeting to appropriate them
The Town's debt service will rise slightly in FY2013 as the Town begins to pay off debt incurred for the
initial design and engineering work at Bridge and Bowman Elementary Schools Assuming that the
construction of a new Estabrook Elementary School proceeds as planned, the Town will issue more debt
for all three school construction projects during FY2013 This will significantly increase the Town's debt
service obligations in FY2014
In the budget being considered by this Town Meeting, the Town still faces some unresolved questions on
how best to use over $4 5 million in unallocated funds The Committee hopes to discuss this at a budget
summit prior to action on the financial articles by Town Meeting
6
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
Warrant Article Analysis and Recommendations 1
—SPECIAL TOWN MEETING—
Article 2: Appropriate for New Funds Funding Committee
Requested Source Recommendation
Estabrook School
$39,742,248 Excluded Debt Approve (9-0)
This Article is a request from the School Committee to appropriate funds to 1) complete design and
construction documents, build, equip, furnish, and commission a new Estabrook School and 2) raze the
existing building and restore the site to the desired condition The amount requested represents the entire
balance of estimated costs beyond the $1,050,000 appropriated at the 2011 Annual Town Meeting to
cover the feasibility study and schematic design costs The total project cost will, therefore,be the sum of
$1,050,000 plus the amount appropriated under this Article
The United States Environmental Protection Agency has taken the position that the current building
should not be used beyond December 2014 because it is contaminated with polychlorinated biphenyls
(PCBs), even though the concentration of the PCBs in the air in the school is being controlled The
removal of the PCBs is apparently not feasible at a reasonable cost This situation has created an urgent
need to replace the building and led the School Department to submit a Statement of Interest(SOI) to the
Massachusetts School Building Authority (MSBA) for a school construction grant The feasibility and
schematic design process has been completed Thus, much of the design process has proceeded according
to MSBA requirements, and MSBA personnel have been active participants It is expected that on March
28, 2012,the MSBA will vote their final approval of the terms of the construction grant and the amount to
be appropriated for the project
In an estimate dated February 2, 2012, the total cost including contingency amounts is $40,792,248, and
the MSBA grant would be limited to no more than $13,132,418, an amount equal to 37 27% of the
eligible costs or about 32% of the overall project cost (Approximately $5,500,000 of the total cost is not
eligible under MSBA rules for the partial reimbursement) It is our understanding that no changes have
been made to these figures, and that they will be presented to the MSBA Board for approval on March 28
Note that the appropriation must include the amounts that will be covered by the MSBA grant
Why is the anticipated cost much higher than the cost of building the new Harrington and Fiske Schools?
The new Harrington School was completed in 2005 at a cost of approximately $13M and the new Fiske
School was completed in 2007 at a cost of approximately $18M The cost to build the new Estabrook
School will be higher because of
• the escalation of construction costs over 7 or 9 years
• differences in building capacity and size
• the need to demolish and remove the existing school building
• the necessity of removing PCB-contaminated building and soil materials,
• the complexity of working on an occupied site with special traffic considerations and with a
restricted construction laydown area,
• a tight construction timetable dictated by the need to get the new building completed before
December 2014 and preferably by the beginning of September 2014
• a more complete accounting for building commissioning costs
• changes in building codes
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APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
• increased requirements for computer and telephone connectivity, systems controls, and energy
efficiency
• the Lexington requirement to build in conformance with LEED Silver specifications
There are, undoubtedly, other factors beyond these that come into the present cost equation, and that did
not fully affect the costs of building Harrington or Fiske
The Turner Construction Cost Index shows that construction costs have typically, on a national average
basis,risen by 32% or so from 2003 (about the time when the construction started on the new Harrington
School) and by 15% or so from 2005 to the 4th quarter of 2011 It is possible that local costs have risen
more sharply (but this Committee does not have ready access to local construction cost indices) The new
Estabrook School is being designed for a capacity of 540 students, and the latest drawings comprise a
gross floor area of about 91,500 square feet, whereas the gross floor area of the new Harrington School is
about 75,000 square feet and that of the new Fiske School is about 78,800 square feet
Although the task of fully explaining the increase in costs by analysis is beyond our capability, it is
possible to do one simple rough calculation for purposes of illustration When the factors of general cost
escalation and building size given above are applied to the $18M cost of building the new Fiske School,
the result is $24M to $29M Given this range, and the above list of factors that tend to lead to higher
costs, one can begin to understand why the total cost may be about$40M Another assurance that the cost
is not unreasonably high comes from the MSBA approval of the cost, the MSBA is a professionally-
staffed organization that has an interest in holding down costs so as to hold down the amounts that it
reimburses to individual communities, and that would not approve the project if the cost were
unreasonably high Indeed, we understand that as part of the MSBA process, a firm acting as a
representative of the Town estimated the entire project cost, and the architect was required to hire an
independent party to make a similar estimate The two parties then sat down together and reviewed the
two sets of estimates in detail and came to a consensus on the final estimate We also note that the
estimated cost of the new Estabrook School is comparable to the costs of other MSBA elementary school
projects in Andover, Belmont, Hopkinton, Billerica, and Woburn
The full MSBA reimbursement to the Town will be made soon after the project commences The funds
for the balance of the project will be borrowed and repaid over 20 years as 20 equal principal payments
plus interest payments which decline from one year to the next The interest rate will not be known until
the bonds are issued, but the Town has been obtaining favorable interest rates in the last few years Table
1 shows the Town's estimated debt service payments for the first 10 years of a 20-year term assuming, we
believe very conservatively, a 4%interest rate
The following table shows the estimated impact of the exempt debt for a "tax bill on a residence of
average value" over the first 10 years of the 20-year term The dollar amounts are the component of a
residential property tax bill that could be attributed to the exempt debt for a resident whose property was
assessed at$697,000 in FY2011 The total tax bill in FY2011 for this"average taxpayer"was $9,936
Approximate Exempt Debt Service and Tax Impact—new Estabrook School
Fiscal Year Debt Service Tax Impact
2014 $2,432,000 $188
2015 $2,378,000 $184
2016 $2,324,000 $180
2017 $2,270,000 $176
2018 $2,216,000 $171
2019 $2,162,000 $167
2020 $2,107,000 $163
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APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
1 Fiscal Year Debt Service Tax Impact 1
I 2021 $2,053,000 $159
I 2022 $1,999,000 $155
I 2023 $1,945,000 $151
Notes
(1) The debt service was estimated assuming a 4% interest loan of$27,025,000 (total cost less
Massachusetts School Building Authority reimbursement)payable over 20 years
(2) The tax impact is the portion of the debt service that would be seen on the tax bill of the
owner of a residence with an assessed value of$697,000 in FY2011
Additional information may be found on the Lexington Public Schools web site at
http//lps lexingtonma org/ (click on "Facilities" in the "Administration" pull-down menu) Renderings
and other material may be found at http//www estabrookschoolbuildmgproject com/
The Board of Selectmen has taken under advisement the recommendations of the Estabrook School ad
hoc Access Task Force regarding work on the roads and intersections in the Estabrook area Any
appropriations for that work will be covered under Article 12(n) during the Annual Town Meeting
The Committee recommends approval of this request (9-0).
—ANNUAL TOWN MEETING—
Article 4: Appropriate FY2013 Funds Funding Committee
Requested Source Recommendation
Operating Budget
See Below See motion Approve (9-0)
Each major section of this request is discussed separately below
Funds Funding
Program 1100 Lexington Public Schools Requested Source
$76,628,356 See motion
The School Committee has voted to recommend an FY2013 appropriation of$76,628,356 This request
represents an increase of $3,483,471 or 4 76% above the FY2012 appropriation Under the School
Committee's guidance, the budget represents a level service budget and a supplemental request to address
high priority needs within the school department by adding staff in selected areas
The budget also eliminates full-day kindergarten fees and music fees and includes a one-time request of
$229,024 outside the Town's revenue allocation model $79,024 to partially fund the elimination of full-
day kindergarten fees and $150,000 to reduce transportation costs for Estabrook students by 50% during
the first year of the new school's construction
The primary drivers underlying budget increases are 1)increased personnel costs (6 3%) from salary and
step increases that are mandated by negotiated contracts with various bargaining units in addition to 18 1
FTE's newly reflected in the budget request(See "Staffing"below), and 2) continued increases in special
education costs mitigated in part by cost saving strategies previously implemented by the school
department To compare the FY2013 request with the appropriations from recent years one also needs to
9
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
understand the appropriation request in the context of revenue sources that include funds from state,
federal, and other sources that do not have to be appropriated
Three non-grant revenue sources, outside the tax levy, are the Avalon Bay Mitigation Fund, the LABBB
credit and the Special Education Circuit Breaker Reimbursement funds
• The FY2013 school budget appropriation includes $250,000 to be transferred from the Avalon Bay
Student Mitigation Fund This appropriation will offset projected declines in state and federal title
grants of about the same amount After this transfer, the Fund will have a balance of approximately
$297,000 available for FY2014
• In FY2013 the School System will also use a $250,000 credit from the LABBB program in partial
payment of Lexington's LABBB bills Lexington, Arlington, Burlington, Bedford, and Belmont
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
uncommitted balance that was allocated to the participating towns Lexington's current LABB credit
is approximately $600,000
• The FY2013 budget includes a projected Special Education Circuit Breaker Reimbursement rate of
60% While this estimated rate for FY2013 is somewhat lower than the present actual 65%
reimbursement rate, it is significantly higher than the 40% reimbursement rate assumed in the
FY2012 budget The Circuit Breaker revenues in FY2013 will allow the district to reduce the
appropriation for out of district placements by $760,000 in comparison to FY2012, though out-of-
district tuition expenses continue to grow
With regard to federal grants,the Town is losing the American Reinvestment and Recovery Act($37,654)
and Education Jobs Fund Program ($548,918) federal grant funds in FY2013 However, increased
Chapter 70 and Special Education Circuit Breaker funds are compensating for these losses
It should be noted that the FY2013 budget includes a projected Special Education Circuit Breaker
Reimbursement rate of 60% allowing the district to reduce the appropriation for out of district placements
by $760,000 in comparison to FY2012, though out-of-district tuition expenses continue to grow The
estimated 60% reimbursement rate for FY2013 is lower than the present actual 65% reimbursement rate
and higher than the 40%reimbursement rate assumed in the FY2012 budget
Fee Reductions
Eliminate Full-Day Kindergarten Fees
Since kindergarten is considered to be a core instructional program, the School Committee seeks to
eliminate full-day kindergarten fees In FY2012, almost all kindergarten students in the district attended
the full-day program, and the fees were $1,075 per child
In recent years, the full-day kindergarten program has relied on two funding sources a $270,000
kindergarten grant from the State and $378,400 in parent fees Under the proposed FY2013 budget, the
fees will be eliminated The school department has asked for a one-time appropriation of$79,024 from
the Town to help cover the loss of fee revenue in FY2013 (which will not alter the revenue allocation
formula) Kindergarten funding will also use a State kindergarten grant of$230,000, and the remainder
will come from the school operating budget
The State's formula for Chapter 70 aid counts a student paying a fee for half of their school time as only
half a student By eliminating the kindergarten fee the Town will be able to claim full credit for its
kindergarten students and this will boost Chapter 70 aid However,the additional aid will be delayed until
FY2014 because of a lag in the way Chapter 70 aid is calculated and distributed The increased aid
starting in FY2014 would be more than double the one-time appropriation for FY2013 Nevertheless, the
Town may need to reassess the funding for kindergarten if the State kindergarten grant is lost
10
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
Elimination of Elementary Instrumental Music Fees-$63,260
Similar to full-day kindergarten, the School Committee views music as a core instructional offering and
seeks to eliminate the fees for school-day instrumental music instruction When the fee was reduced in
2012, enrollment increased 16% The FY2013 budget seeks to eliminate this fee entirely The School
Department is absorbing this revenue reduction It should be noted that the elimination of music fees is
not expected to increase the number of music teachers
Reduction of Estabrook Bus Fees by 50%-$150,000
This reduction would encourage families with students in the Estabrook School to use the school buses
and partially mitigate traffic problems during the construction of the new school building This request
covers only the first of two years of construction and the School Committee expects to request a similar
amount next year These funds will not change the percentage the School Department receives as part of
the revenue allocation model
The School Department also suggests that reducing the bus fees at Estabrook by half may help the town
decide whether lowering school bus fees for all schools would increase bus ridership Please see the
discussion under Article 17 for a related proposal
Special Education
Out of District Placements
The total tuition amount for out of district placements is projected to increase from $7,890,419 in the
FY2012 budget to $8,157,380 in FY2013, which is a 3 38% increase However, the operating budget
portion of the tuition account is projected to decrease by almost 12% due to the increase in Circuit
Breaker reimbursement and use of the LABBB credit
Diamond Intensive Learning Program -$105,516
This is to begin an Intensive Learning Program (ILP) at Diamond Middle School to meet the needs of
students moving up from the Fiske ILP Program The FY2013 budget would add a 0 4 increase in Board
Certified Behavior Analysts and a 0 36 increase in Student Support Instructors The cost includes
furniture, supplies and materials If this request is rejected, the district will incur out-of-district placement
and transportation costs in excess of the request
Staffing
Personnel costs (exclusive of benefits) make up 84% of the school budget The FY2013 salaries and
wages budget for the School Department builds on the staffing levels in the FY2012 Annual Town
Meeting School Committee request A total of 18 1 new positions are reflected in the operating budget
this year
• During the 2011-2012 school year, the actual FTE allocation levels were increased to address the
district's daily program needs, including enrollment increases These FY2012 staffing modifications
represent a net 4 90 positions that are included in the FY2013 recommended level service budget
• A supplemental staffing request of $541,137 will fund a net addition of 7 41 new positions These
positions reflect priorities that maintain or improve services This supplemental request will support,
in whole or in part, teachers (World Language and Physics), support personnel for recess, lunch and
transition management, department head administrative time at Clarke and Diamond, an Instructional
Technology Specialist, and an Assistant Director of Guidance at LHS
• The final staffing changes reflected in the budget($378,400)represent transferring 5 8 FTEs full day
kindergarten teachers (20 teachers x 0 3 FTEs) from a revolving fund to the operating budget due to
the elimination of full-day kindergarten fees
Full details of the school department's FY2013 budget may be found the "School Committee Budget
Document, as voted 2/14/12"available online at http //lexingtonps schoolwires net/Page/1457
11
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
Funds Funding
Program 1200• Regional Schools Requested Source
$1,407,978 GF
The Minuteman Regional High School (MRHS) Committee has accepted a budget for FY2013 of
$17,251,713, an $816,241 or 4 97%budget increase over FY2012 This budget is a level services budget,
designed to continue efforts to reduce high per-pupil expenditures and to raise unnecessarily low
student/teacher ratios The school has seen a reversal of declining in-district enrollment and has enrolled
its largest freshman class in seven years
Due to lack of consensus among the District member towns, the school still remains unable to initiate a
major capital program to address unmet needs in Career and Technical Education facilities and
equipment The school administration FY2013 budget document states "our capital needs are reaching a
critical point and will be significant if not addressed in this coming year" An example of these critical
needs is a must-do fix to address a failure in fire-code compliance that occurred this year and for which an
additional appropriation is being sought under Article 25 To build consensus for a capital program and to
ensure future district operations are sustainable, the District School Committee is undertaking a feasibility
study The study's goals include defining enrollment trends, potential program changes, and regional
agreement revisions
This budget assumes level out-of-district enrollment and a small growth of in-district students Eighty
percent of the total budget increase occurs in salaries, health benefits and contracts in place Salaries,
which make up 56% of the budget, increased $403,332 (4 37%) The school continues its commitment to
small-scale infrastructure renewal with an annual capital budget of$370,000
As of October 1, 2011, 652 full-time students were enrolled Roughly 57% of these students are from in-
district towns and 43% 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 by 27 students (4 3%) In-
district enrollment decreased by just 1 student and out-of-district enrollment increased by 28 students
(11%) Special education students comprise 46 9% of the school's FTE enrollment
The FY2012 non-resident tuition rate, capped by the State, was set at $18,375 per student It is expected
to rise to $19,000 for FY2013 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 an additional $3,100 average
transportation cost is assumed by the sending community
FY2012 was the first year that in-district Post Graduate (PG) students, like out-of—district PG students,
were charged a tuition fee The sum total of these fees is used to offset the cost charged to member towns
for their PG students Of the 126 PG students,PG in-district enrollment dropped 20%while out-of-district
enrollments grew 26%, yielding a total PG enrollment increase of 6 students FY2013 revenue from PG
fees is budgeted to increase to $125,000
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 by the combination of
(1) all other projected revenues, and (2)member towns' State Required Minimum (SRM) per-student
payments This year's assessments are based on an MRHS budget funded with a projected $2,110,172 of
Chapter 70 money and $600,000 in transportation aid These estimates are based on the Governor's H-2
budget, which indicates level funding in Chapter 70 aid and $50,000 more in transportation aid compared
with FY2012 All of these figures, with the exception of the bottom line MRHS total, are preliminary
until final approval of the State's FY2013 budget
12
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
The Application of Out-of-District Tuition Revenue
Total Minuteman FY2008 FY2009 FY2010 FY2011 FY2012 FY2013
Current Year Tuition 375,392 382,181 888,363 1,541,984 1,480,984 900,000
Prior Year Tuition 3,112,724 3,473,927 3,457,303 2,888,748 2,793,400 3,700,000
Our last two reports included a criticism of the use of prior year and current year tuition money Up until
FY2002 the school budgeted very conservatively, considering anticipated but uncollected tuitions to be
too speculative, and only 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 current tuition then began a potentially dangerous increase (see table above) that trended
towards a point where eventually all anticipated tuition revenue would be applied We are pleased to
report that the continued increase in out-of-district enrollment continues to create surplus tuition
collections This surplus, combined with higher than anticipated FY2012 State Aid, has allowed for a
two-year reversal of the trend of the escalating use of current year tuitions
Minuteman's Projected Assessment- based on unapproved House-2 budget
FTE BASIS AVG.PER PUPIL ASSESSMENT
ENROLLMENT* CHARGE
PROGRAM FY2012 FY2013 FY2012 FY2013 FY2012 FY2013
Grades 9-12:
Regular Day Students 62 5 54 $5,668 $5,762 $354,248 $311,159
Special Education Assessment 25 22 $4,500 $4,500 $112,500 $99,000
State Required Minimum for 78 60 $13,801 $14,266 $1,076,493 $855,942
Lexington
Totals, grades 9-12(incl SPED) 62 5 54 $24,692 $23,446 $1,543,241 $1,266,101
Post Graduate Programs 21 9 $4,500 $3,000 $94,500 $27,000
TOTAL OPERATING 83 5 63 $19,614 $21,518 $1,637,741 $1,355,606
Special Assessments (based on enro led 9-12)
Capital Assessment $1,043 $970 $65,189 $52,372
Debt&Feasibility Study Interest $1,158 $3,259 $62,505
TOTAL ASSESSMENT $20,433 $22,349 $1,706,189 $1,407,978
Percentage increase(decrease)over prior year (2 59%) 9 37% 10 67% (17 48%)
* -prior year's enrollment as of October 1
A breakdown of the full assessment is given above The preliminary FY2013 assessment for Lexington is
$298,211 (-17 48%) less than the FY2012 actual assessment This is primarily due to the drop in our
enrollment of full-time high school students The Regular Day Student and Capital and feasibility study
assessments are based on Lexington's FY2012 Base Enrollment (as of October 1, 2011) of 54 full-time
regular students in grades 9-12 This is 8 5 FTE students fewer than last year This has decreased our total
full-time student operating-share assessment slightly to $311,159, with a per-pupil increase of 1 6% The
main driver of our decreased assessment is the $220,551 (-20%) reduction in our total State Required
Minimum payment While Lexington's per-student SRM cost increased, this payment is based on a
different census number (as defined by the Mass Department of Education) which decreased by 18
students (23%) Additional savings are seen in a $67,000 reduction in our PG program costs, where the
number of students enrolled in post-graduate programs as well as their per-student costs (due to the Post
Graduate fee)have decreased
13
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
Funds Funding
Program 2000 Shared Expenses Requested Source
$44,638,734 See Motion
Shared Expenses encompasses Line 2100, Employee Benefits, Line 2200, Debt Service, Line 2300,
Reserve Fund, and Line 2400, Public Facilities See pages IV-1 to IV-21 in the Brown Book for more
information
Line 2100 Employee Benefits This line includes the costs of pensions for retired employees, an amount
for future pension costs, health and dental insurance for current and retired employees, premiums for
property and liability insurance policies, and potential unemployment and workers compensation
expenses Funding of future health benefits for current retirees is covered under Article 18
Health Benefits The largest single component of employee benefits expenses is the Town's contribution
to health insurance for current and retired employees (Line 2130) The FY2013 projected budget for line
2130 is $21,000,000, a decrease of$1,546,814 (-6 86%) from the FY2012 restated budget This amount
reflects the effects of joining the Commonwealth of Massachusetts Group Insurance Commission (GIC),
it supersedes the preliminary estimated amount of$24,379,821 that is given in the Brown Book since the
Brown Book was published before the GIC rates for FY2013 were available
Transfer of Coverage to the GIC The GIC provides health benefits for state and participating
municipalities' employees, retirees and their dependents — to over 200,000 enrollees The GIC offers a
wide range of health insurance plans that typically have higher copays and calendar-year deductibles for
the subscribers than the plans offered by the Town in FY2012 The higher copays and deductibles shift
some costs onto subscribers by increasing out of pocket expenses The GIC plans also feature a tiered
provider model On the other hand, when the plans currently offered by the Town are compared with the
most similar GIC plans, the premiums for the GIC plans are, at least in the most important cases,
substantially lower The GIC plan rates for FY2013 are, on average, 1 43% higher than the FY2012 GIC
rates
Changes to Massachusetts General Laws Chapter 32b Sections 21-233 enacted in 2011 give municipalities
the authority to unilaterally transfer health benefit subscribers to GIC plans or to change, within limits,
health insurance plan designs Rather than act under the provisions of the revised statute, the Town
Manager and other responsible officials chose to negotiate with the Lexington Public Employee
Committee (the Coalition) under the pre-existing coalition bargaining statute in order to arrive at a plan
that would be most acceptable to the employees while achieving the same net savings for the Town that
would have obtained by unilateral action In February 2012, the Town and the Coalition entered into an
agreement The following points summarize the main aspects of employee health insurance under the
agreement
• The Town will transfer its subscribers to the GIC as of July 1, 2012 and, per GIC rules, is
committed to remain a participating municipality for at least 3 years, i e , through the end of
FY2015
• Each benefits-eligible employee and retiree may choose a plan from the GIC plan menu
• The premium contribution rate split will return, 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
active employee subscribers and 80% l 20% for retirees (but see the discussion below about the
HRA and Part B subsidy)
2 The FY2012 health insurance appropriation was reduced from $22,546,814 to $21,997,896 due to the use for
health insurance of $548,918 from the EdJobs federal stimulus grant received by the School Department This
comparison is based on the$22,546,814 total(final appropriation plus the EdJobs grant)for the FY2012 budget
3 http//www malegislature gov/Laws/GeneralLaws/PartUTitleIV/Chapter32B/Section21
14
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
• A Health Reimbursement Account(HRA)desired by employees will be established
• A Medicare Part B subsidy will be provided to retirees
• The HRA and Medicare Part B subsidy will be funded by contributions from both the Town and
the employees Please see the discussion below
The HRA and Medicare Part B Subsidy Most employees will see decreases in their total health insurance
costs including both their share of the premiums and out-of-pocket costs However, subscribers who
heavily utilize medical services may have higher than average out-of-pocket costs The newly established
HRA will serve to moderate the total costs to such subscribers
Funding for the HRA and the Medicare Part B subsidy will come from several sources, but will not
increase costs to the Town beyond what would have been paid if the transfer to the GIC was made via
unilateral decision The funding sources are listed below
1) The agreement requires that the Town make 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 This provision is similar to one in the new MGL 32b Sec 21 statute
that applies in cases where unilateral action is taken by a municipality The one-time payment is
included in the $21,000,000 estimated budget for line 2130
2) The Town will contribute to the mitigation fund each year 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
contribution rate (e g, indemnity 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 by the Town This contribution is cost neutral to
the town as it is equal to the excess amount collected in subscriber premium contributions 4
3) Additional funding will come from a transfer of a portion of the Health Insurance Claims Trust
Fund The amount of the transfer will be equal to the premiums paid by employees but not yet
spent to cover claims under Lexington's existing self-insured health plan That portion of the
HICTF would otherwise have to be distributed to the employees
The Town will have no obligation to provide for mitigation or otherwise expend any funds which exceed
the amounts to be raised per these provisions in the agreement
Projecting Health Benefits Costs and Enrollments Under Lexington's current self-insured health
insurance framework, costs result from the actual claims made by our subscribers moderated by insurance
taken to hedge against extraordinary claims Projecting costs for the next year is essentially a process of
using the recent history of claims, factoring in the prevailing increase in medical care costs, and
estimating enrollment numbers Under the GIC, Lexington's actual claim history is no longer a direct
factor in projecting costs Lexington's costs are now driven by the GIC rates which reflect the overall GIC
claims history as well as how our subscribers choose among the various plans offered by the GIC The
total enrollment remains a critical variable,but the choices of plans by subscribers are also important For
4 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
subscnbers 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
15
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
estimating FY2013 expenses, the Town has used a distribution of plan choices informed by how
subscribers from other municipalities migrating to the GIC have chosen among the menu of options
As presented in Table 1 on page IV-7 of the Brown Book, actual November enrollments have held fairly
steady over the past 5 years Having changed from a low of 2066 in FY2008 to a high of 2125 in FY2012,
the actual enrollment count increased by 59 (2 86%) For the last four years, FY2009-FY2012, the
enrollment rate has remained essentially flat
Additions to enrollments can occur, as shown in Table 1 (Brown Book p IV-7), when open positions are
filled, during the open-enrollment period after the end of Town Meeting, or as a result of a qualifying
event (e g, addition of dependent, change in marital status, etc) during the year The FY2013 budget is
designed to accommodate an enrollment reaching 2191, an increase of 66 subscribers (3 11%) This
increase allows for changes in enrollments due to new hires to fill currently open positions or newly
created positions and provides a buffer for new subscribers among present employees
For FY2012, the highest enrollment level through February 2012 has been 2133 This is below the
budgeted level of 2190 and suggests that this buffer is larger than needed Economic conditions remain
mixed, however, with a reasonable probability of employees electing to take the Town's coverage or
opting to switch from individual to family coverage as a spouse or dependent loses their coverage The
size of the buffer (2 59% of actual enrollment and —25% of potential enrollees) is consistent with the
observed fluctuation in monthly enrollment levels during the past two years (2 50%) and we continue to
believe it is prudent
There is little down-side in projecting enrollments conservatively While a conservative projection ties up
funds in the operating budget, the amount has been less than 3% of the line 2130 budget Any unspent
amount will become available for use in subsequent years after it has become part of certified free cash
The uncertainties in projecting enrollments are aggravated by the switch to the GIC As discussed above,
the choice of plan by subscribers is also a critical factor in determining the Town's cost of healthcare
benefits We do not have a history of Town of Lexington employees selecting among the various GIC
plans to guide expectations and therefore recommend that FY2013 enrollments be projected
conservatively
General Comments on Health Insurance We commend the Town, its employees, and retirees for having
reached a constructive agreement on health benefits This agreement reduces costs borne by taxpayers and
premiums paid by subscribers It also provides mitigation of high out-of-pocket costs incurred by
subscribers needing greater medical care We also welcome the respite in rapidly increasing underlying
health care costs This good fortune, however, may be transient While the size of the GIC subscriber
population may provide greater negotiating power than was available to Lexington's former self-insured
plan, it does not change the underlying cost structure of the health care system Fundamental changes in
the provision of health care which are beyond the GIC's control are needed to truly control increases in
cost
Line 2100 in aggregate The total amount budgeted for Line 2100 is $29,017,728 Line 2130 is
$23,166,458 As previously mentioned employee/retiree health insurance is $21,000,000 Dental
insurance is $851,197, an increase of 8 9% in the negotiated premium Medicare tax, which the Town
pays for all Town and School Department employees hired after 1986, is $1,295,261, a 6 38% increase
over last year The remaining$20,000 is for life insurance
The FY2013 budget includes a figure of $290,000 for line 2140, Unemployment Benefits, to fund the
Town's statutory liability for unemployment compensation payments for employees who may be laid off
This is a 6 45% reduction from FY2012 reflecting a reduction in the number of employees eligible for
unemployment insurance benefits
16
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
The Workers Compensation recommended appropriation in Line 2150, $608,333, is a 12 10% increase
over FY2012 and continues the Towns 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, Contributory Retirement, $4,205,537 This
represents a 2 99%increase over the amount appropriated in FY2012 The sum is paid by the Town to the
Lexington Retirement Trust Fund,which is managed and overseen by the Lexington Retirement Board, to
fund the Town's pension payments to retirees in FY2013 as well as to help fund liabilities for future
payments due to current or past obligations Every three years the Town has consultants make an actuarial
determination of the total amount of the future pension liabilities
The Commonwealth of Massachusetts had required that municipalities fully fund all such liabilities by
2028 Because of the economic difficulties over the past few years, that deadline was extended to 2040
Based on the annual payments the Town has made, and is projected to continue to make,the Trust Fund is
expected to be fully funded by 2020 "Full funding" is somewhat of a mercurial concept, since it must
necessarily encapsulate a number of disparate and constantly changing factors Primarily due to judicious
investment and management decisions by the Lexington Retirement Trust Fund and a seemingly never-
ending robust economy, the Trust Fund was fully funded as of January 1, 2008 At that time, the value of
the Trust Fund was approximately $120 million However, the economic downturn dramatically affected
the value of the Fund so that, as of January 1, 2009, it had fallen by one-third, to approximately $80
million
Despite that drop, the appropriation requests over the last two years coupled with the resurgence of the
stock market and the Fund's other investments have restored the Fund to where it is again on track to be
fully funded by 2020 This year's appropriation is intended to continue that process
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
projects, building maintenance, and custodial services The DPF operates under the direction and control
of a Public Facilities Board, composed of the Town Manager and the Superintendent of Schools The
Department management is located in the Public Services Building near the Department of Public Works
This facilitates communication and coordination on projects
Overall, DPF expenses are projected to increase by 2 06% from FY2012 to $9,807,061 This reflects an
overall increase of 5 79% in compensation and a decrease of 0 81% in expenses The department
operations are primarily funded (96%) through the tax levy with an additional 4% of funding from
revolving funds and the balance from indirect enterprise fund transfers
Personal Services (salaries & wages and overtime combined) is expected to increase by approximately
$241,935 The department is adding a new full-time municipal custodian and eliminating a part-time
position Rents collected for the use of Town facilities pays for 4 6%of salaries
Additionally, a Clerk of the Works position has been included as a contract position in the headcount for
FY2013 and is expected to be filled during FY2013 to implement the Estabrook/Bridge/Bowman school
renovation projects This position would be funded from the capital budget
Expenses are expected to decrease by approximately $44,242 on an overall basis A $270,000 reduction in
energy cost due to a favorable natural gas contract has been partially offset by increased use of electricity
and increased heating oil prices, yielding a budgeted energy savings of $124,890 In order to take
advantage of this shift in energy costs, all school will be converted from heating oil to natural gas by
2014 Contracts for electricity (through December 2015 —extended prior to the end of the current contract
as rates were favorable), natural gas (through September 2012) and oil (annual through a multi town
consortium) are in place
The department is increasing the custodial and maintenance supplies budget by 19 2% as it shifts more
responsibilities to internal staff and away from contractors Their use of work orders and a preventive
17
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
maintenance program continues to improve equipment reliability Additionally, the department supports
the town-wide goal of energy efficiency resulting in a town-wide reduction in facility energy
consumption See Table 7 in the report from the Town Manager in the Brown Book for a comparison of
energy costs from FY2010 through the FY2013 recommended budget
A critical challenge facing the department is the management of the upcoming school building projects
These projects are very time-sensitive, as they are designed to work around ongoing school operations
Unless the oversight of these projects is conducted at the highest level of vigilance, bidding laws which
force us to hire less qualified low-bidders increase the chance of delay, cost overruns and shoddy
workmanship Effective project oversight by the department is the only tool available to avoid
unnecessary downtime in the schools and the additional expense of litigation, which is a costly remedy
for poor contractor performance
Funds Funding
Program 4000• Public Safety Requested Source
$11,464,266 GF
Note that the Parking Management budget will be transferred out of the Public Works budget to the
Police under the Public Safety budget this year
Funds Funding
Line 6210: Veteran's Services Requested Source
$195,200 GF
The Veteran's Services line item shows a dramatic increase because the Town of Lexington is following
the State mandate to hire a full time Veterans' Services Officer (VSO) The previous VSO position was a
stipend position without health benefits
The request for Veterans' benefits has increased substantially over the last several of years The VSO
serves as the initial point of contact for all Lexington veterans, families and survivors The VSO
administers the MA Chapter 115 program, and helps get veterans referred to other Federal Veterans
Administration (VA) programs Chapter 115 is based on financial need The VSO is also responsible for
parades, special services and placing flags on Memorial Day
The Veterans Services expenses in 2011 were nearly $50,000, and this amount continues to grow
Authorized expenses are reimbursed to the Town by the State at 75%
There continues to be a steady increase in demand for Veterans' Services —this follows a national trend
and the belief is that there is a marked increase in seniors requesting financial assistance (especially
surviving spouses) and increased awareness that the State VA will pay a portion of the premiums for
medical insurance and drug plans Some towns are also noting a high number of veterans from our current
wars who are requesting assistance
The current appropriation is requested to increase by approximately $44,000 over FY2012
Funds Funding
Requested Source
Line 6300• Transportation Services
$554,910 GF(Fares)
TDM/PT SF
Lexpress has been serving Lexington since 1979 and is one of the oldest suburban public transportation
systems in Eastern Massachusetts Lexpress provides six (6) fixed route for this minibus service This
18
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
transportation system allows all of Lexington's neighborhood to be connected to all Town services and
the various shopping centers located throughout the entire town The Lexpress service came into being in
the late 1970's as an answer to the high gas prices of the day (a gallon of gas in 1979 cost less than one
dollar—only $0 86), to encourage Lexington residence to leave their private vehicles at home when they
were just driving to and from locations within Lexington The system was originally established with
eight(8)routes, though was later reduced to only the six(6) it has today Last year approximately 70,000
people used the Lexpress service The system is funded by multiple sources The tax levy provides the
majority of the funding, while other sources historically have included Lexpress fares, an annual grant
from the MBTA,the Transportation Demand Management Stabilization Fund, and private donations
For the FY2013 budget cycle, the costs for Transportation Services provided by the Town will now reside
in the Human Services portion of the budget The Transportation Services division will focus on the
operation of Lexpress and other transportation services for Lexington residents This transition of
Transportation Services from the DPW to Human Services will result in $554,910 being added to line
6300 to reflect this move
In previous years the MBTA has helped to fund Lexpress with an annual grant of $80,000 Due to a
difficult financial situation there is a good chance that the MBTA will terminate this grant in FY2013
The recommended Lexpress budget was designed with that assumption
The reorganization of the Transportation Services division to the Human Services Department has also
resulted in a modest decrease in administration expenses Thus the $554,910 budget is actually slightly
lower than the $558,757 that what was appropriated for FY2012
Funds Funding
Program 8600 Management Information Requested Source
Systems
$908,280 GF
The Management Information Systems Department (MIS) is responsible for managing all of the Towns
Information Technology (IT) Lexington's IT group has taken on ever increasing responsibilities, as the
Town's technological needs have increased Today the IT group handles not only hardware and software
items, they conduct training for all end users, they maintain the MUNIS system (a tool that handles
financial management items for both Municipal and School requests), they handle the
telecommunications (VoIP) infrastructure and applications, as well as the Town's local network
connecting all 27 Town and School buildings
Given the size and scope of the Town's Municipal and School IT needs, it is an amazing accomplishment
that a team consisting of only three professionals has been able to handle it to date The IT department is
comprised of a MIS Director who oversees 2 FTE's, one is the Network Administrator and the second is
the GIS/Database Administrator
In FY2012, the MIS department had a total budget of $615,905 and the proposed FY2013 budget
increases that to $908,280 The difference of $292,375 is a 47% increase from the previous year The
main driver for this increase is the addition of IT Support Staff and a full-time Webmaster position These
staff additions will account for approximately half of the total budget increase in line 8600 Roughly a
third of the increase covers rising costs for annual software maintenance (attributable to additional Town-
wide document management software, new Microsoft software assurance licensing, and an overall
increase in fees for software support) The remainder of the increase resulted from a need to replace a
larger than usual number of PC workstations that will reach their end of useful life
The Committee recommends approval of this request (9-0)
19
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
Article 5: Appropriate FY2013 Funds Funding Committee
Requested Source Recommendation
Enterprise Funds Budgets
$7,489,719 Water EF
+$8,598,633 Wastewater EF
+$1,794,329 Recreation EF Approve (9-0)
$17,882,661
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 apply to the operation of an enterprise fund, please refer to
Appendix B The following discussion will focus on the anticipated expenses and revenues of the
enterprise funds for FY2013 and issues they raise
A breakdown of the funding request for this article is shown in the following tables
Water Enterprise Fund FY2011 FY2012 FY2013 %
Actual Appropriated Requested Change
Personal Services $616,920 $641,423 $647,687 1 0%
Expenses $377,431 $384,400 $389,590 1 4%
Debt Service $1,137,075 $1,258,968 $1,299,091 3 2%
MWRA Assessment $4,745,093 $5,049,999 $5,153,351 2 0%
Total Requested in Article 5 $6,876,519 $7,334,790 $7,489,719 2.1%
Indirect Expenses $743,400 $704,624 $665,848 -5 5%
Total Water Enterprise Budget $7,619,919 $8,039,414 $8,155,567 1 4%
Wastewater Enterprise Fund FY2011 FY2012 FY2013 %
Actual Appropriated Requested Change
Personal Services $230,457 $275,369 $276,184 3%
Expenses $218,401 $330,450 $333,200 0 8%
Debt Service $791,777 $879,713 $956,855 8 8%
MWRAAssessment $6,405,931 $6,802,875 $7,032,394 3 4%
Total Requested in Article 5 $7,646,566 $8,288,407 $8,598,633 3.4%
Indirect Expenses $668,990 $646,217 $623,444 -3 5%
Total Wastewater Enterprise Budget $8,315,556 $8,934,624 $9,222,077 3 2%
Recreation Enterprise Fund FY2011 FY2012 FY2013
Actual Appropriated Requested Change
Personal Services $601,119 $643,143 $645,145 0 3%
Expenses $892,387 $966,745 $1,018,584 5 4%
Debt Service $137,200 $131,500 $130,600 -0 7%
Total Requested in Article 5 $1,630 706 $1,741,388 $1,794,329 3 0%
Indirect Expenses $203,583 $213,600 $223,600 4 7%
Total Recreation Enterprise Fund $1,834,289 $1,954,988 $2,017,929 3 2%
20
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
Note that this table differs from that contained in the warrant in several respects the MWRA assessments
for water and wastewater reflect the MWRA's preliminary assessments issued in February rather than
placeholders assumed in the warrant, the figures for water and sewer debt service have been adjusted to
reflect the actual, higher amounts, and indirect expenses that will be charged to the enterprise funds,
although appropriated separately 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 by the Massachusetts Water Resources Authority (MWRA) The Town
will be assessed a share of the MWRA's total FY2013 water and sewer budgets based on the Town's
proportionate water and sewer usage in the prior calendar year (CY2011), compared with other towns in
the MWRA community Preliminary assessment figures are published in February of each year and final
assessments 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 2012
preliminary assessment estimates, as shown in the following table
MWRA Assessments
Fund FY2012 Warrant % FY2013 %
Actual Placeholder Change Prelim.Assmt. Change
Water $5,049,999 $5,512,091 9 1% $5,153,351 2 0%
Sewer $6,802,875 $6,866,826 1 0% $7,032,394 3 4%
Combined $11,852,874 $12,378,917 4 4% $12,185,745 2 8%
The final MWRA assessments issued in June, which are typically somewhat lower than the preliminary
assessments, will be used to set water and sewer rates during the Town's FY2013 rate-setting process in
the fall If a special town meeting is held in the fall, the appropriation for MWRA costs may be adjusted
upwards or downwards, as necessary, as a"housekeeping"matter
Direct Town Costs In addition to the MWRA assessments, the expenses of the Water and Wastewater
Fund budgets include direct costs incurred by the Town, primarily for (1) the wages and salaries of the
employees in the DPW's Water and Sewer Divisions, (2) the expenses of the water and sewer
maintenance activities and equipment, and (3) debt service on prior borrowings for water and sewer
enterprise capital improvements All of these direct costs are increasing very modestly (see Brown Book,
pp V-27, V-29) with the exception of debt service costs which continue to grow at a comparatively
higher rate (3 2% for water, 8 8% for sewer)
As this Committee has noted in past reports, the growth of debt service costs is a predictable consequence
of a transition made five or six years ago from an earlier practice of funding ongoing capital
improvements and repairs to the water and wastewater infrastructure with a combination of debt and cash
capital to a practice of funding them primarily with debt See the discussion of Articles 13 (Water Capital)
and 14 (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 temporary lowering of current-
year capital costs As interest payments and principal repayments come due on the higher levels of debt
incurred, however, the annual capital costs of the enterprise funds that must be captured in the water and
sewer rates are gradually growing back to their original levels In addition, the Water and Sewer
Enterprise Funds' debt service burden has been increased by their assumption of responsibility for
approximately 25% of the debt service costs for the construction of the new DPW facility (17% and 7%
respectively,based on their usage of that building)
Indirect Town Costs The Water and Sewer Enterprise Fund budgets also include indirect costs for
services provided by other Town departments to support water and sewer operations, such as insurance
costs (health and liability),retirement funding, engineering costs, and the cost of services provided by the
Comptroller, the Management Information Systems (MIS) Department, and the Revenue Department In
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APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
2006, following up on a recommendation made in the final report of the Water and Sewer Rate Study
Committee, Town staff conducted an analysis of the basis for the indirect charges, and concluded that the
indirect expenses charged to the Water and Wastewater Enterprise Funds were higher than could be
justified To address this issue without causing undue disruption to the Town Budget, it was decided to
implement a gradual phase-down of the indirect expenses charged to the Water and Wastewater Funds to
the levels supported by the Town staff's analysis Consistent with this multi-year phase-down plan, the
recommended budget for FY2012 contemplates continued modest reductions in the levels of indirect
expenses charged to the Water and Wastewater Funds of-5 5% and -3 5%respectively
Rate-Setting, and Reserves
As discussed in Appendix B,the state statute governing enterprise funds, G L c 44, § 53F'/2,requires that
accumulated surpluses resulting from the operations of an enterprise fund,referred to as retained earnings,
remain with the fund as a reserve, and that they be used only for capital expenditures of the enterprise,
subject to appropriation, or to reduce user charges Deficits must be funded with existing reserves or, in
the absence of such reserves,made up in the following year's rates
During the early 2000s, difficulties in forecasting usage and other accounting issues resulted in rates
being 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 ability to measure
and forecast water and sewer usage, and thereby to anticipate revenues and reserve levels, has improved
significantly This has enabled the Town to restore and stabilize the water and sewer enterprise fund
reserve balances,' and indeed more recently 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
FY07 FY08 FY09 FY10 FY11 FY2012
Water
Rate Rel.App. $500,000 $362,570 $463,046 $525,000 $450,000 $650,000
End Balance $2,496,655 $2,537,249 $2,113,729 $1,622,052 $1,952,253
Sewer
Rate Rel.App $0 $0 $0 $625,000 $400,000 $300,000
End Balance $2,137,540 $2,763,179 $1,831,967 $1,525,612 $1,168,190
Combined
Rate Rel App $500,000 $362,570 $463,046 $1,150,000 $850,000 $950,000
End Balance $4,634,195 $5,300,428 $3,945,696 $3,147,664 $3,120,443
At the Annual Town Meeting last spring, adopting what has now become a regular recommendation,
Town Meeting appropriated $450,000 in retained earnings of the water fund and $300,000 in retained
earnings of the sewer fund to provide "rate relief," a e , to lower the increase in the FY2012 water and
sewer rates that would otherwise be required to cover anticipated increases in operating and capital costs
Last fall, faced with an unexpectedly large proposed rate increase (the reasons for which are explained in
this Committee's Report to the November 10, 2011 Special Town Meeting), the Board of Selectmen
'In view of the steadily increasing levels of reserves,which as of the end of FY2008 had grown to about 35%of the
annual budget for each fund, net of indirect costs, this Committee 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
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APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
voted to apply an additional $200,000 of retained earnings from the water enterprise fund to mitigate the
rate increase A follow-up appropriation in that amount was made at the 2011 fall special town meeting,
bringing the total FY2012 appropriation of retained earnings to $950,000 $650,000 from the water fund
and $300,000 from the sewer fund As a consequence of this supplemental appropriation, the amount of
the water fund's FY2011 year-end retained earnings balance that remains available for appropriation at
this year's Annual Town Meeting is $1,752,253 instead of the $1,952,253 shown in the table above
Once a practice of making recurring appropriations of retained earnings for rate relief is adopted,it can be
difficult to unwind Even if there were no increase in water and sewer costs this year, reducing the
subsidy for FY2013 water rates would trigger a rate increase of 1 35% for every $100,000 of subsidy
eliminated Completely eliminating the subsidy this year would raise the water rate by about 9%, all else
being equal 6 A similar impact would occur if subsidies were eliminated in the wastewater fund
Accordingly, although not addressed in the Brown Book, we understand that the Town Manager intends
to recommend an appropriation of retained earnings at the same level as last year's annual town meeting
$450,000 from the water fund and $350,000 from the sewer fund, or a total of$750,000 This represents a
small reduction from the final total subsidy of$950,000 in retained earnings that was applied last year
While the Committee supports an appropriation of retained earnings if necessary to avoid an unreasonably
large increase in the FY2013 water and sewer rates, we urge the Town Manager to consider whether this
would be a good year to more substantially reduce the Town's dependence on recurring rate subsidies
given this year's relatively modest increases in the water and sewer expense budgets of 1 4% and 3 4%
respectively
On a broader note, the Committee also questions the wisdom of routinely appropriating retained earnings
for"rate relief' at the Annual Town Meeting, well before much of the information necessary to determine
the need for a subsidy, or the impact it will have on the enterprise funds' year-end reserve position, is
known'Instead, it might be better to defer this decision until the rate-setting process in the fall when the
selectmen will be armed with better knowledge about actual usage during the summer (the least
predictable season for water usage) The Town could then follow up with the necessary appropriation at a
subsequent Special or Annual Town Meeting, as occurred last fall when a supplemental appropriation was
made to implement the Selectmen's decision during the rate-setting process to apply $200,000 more in
retained earnings than was appropriated at the spring Annual Town Meeting
As an alternative to using retained earnings for rate relief, this Committee has advocated applying
retained earnings that accumulate above the amounts needed to maintain adequate reserves to address the
capital needs of the Water and Sewer Enterprise funds By lowering future debt service costs, such
funding would enhance long-term rate stability instead of short-term rate relief
Recreation
This budget represents an increase of$62,840 (3 21%) from last year Wages and salaries have increased
very slightly ($901 00, 0 30%) for five full-time staff and $175 +/- seasonal staff Debt services decreased
slightly ($900 00)
Of the total revenue for the Recreation Enterprise Fund Operating Budget, $1,156,028 (56%) will come
from user fees for fields and registration fees for programs All programs offered by the Recreation
6 This calculation assumes that the water usage estimates for FY2013 remain unchanged If water usage estimates
increase,the rate increase would be smaller, and if water usage estimates decrease,the rate increase would be larger
For example, it will not be known until after this coming summer whether the usage estimates on which the
FY2012 rates were based require revision, or whether anticipated FY2013 revenues will be affected upwards or
downwards by a"wet," "dry" or "average" summer, and therefore to what extent it may be desirable to subsidize
FY2013 rates In FY2010, for example, the selectmen voted to reduce the water and sewer rates by 3 8% on a
combined basis, even though costs had increased by 2 9%,because Town Meeting had previously appropriated over
$1,000,000 in retained earnings at the annual town meeting for rate relief
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APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
Department are designed to be revenue-neutral with charges to users matching the program's operating
costs The other main source of revenue, $816,800, is from golf course fees and is budgeted for no
increase
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)
Since 2006, the Town has operated its own Senior Service Program, under which low-to-moderate-in-
come seniors may perform volunteer work for the Town in exchange for a reduction in their property tax
The Town adopted this program, in substitution for a similar program previously operated under G L c
59, § 5K, to allow it more flexibility 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 overlay
account, the Senior Service Program is funded by direct appropriation from the tax levy For general
background on the Senior Service Program and other property tax relief options available to seniors,
including exemptions and opportunities for deferral,please refer to Appendix D
In its report on the original article creating this program in 2006,this Committee observed that
"The cost of the proposed program is amply justified, indeed a bargain Not only does
it provide participating residents a productive way to become involved in the community,
while at the same time alleviating some of the burden of their local property taxes, it also
provides the Town with valuable and necessary services Making a direct appropriation
for this program, rather than funding it through the overlay account, [increases]
transparency and [gives] Town Meeting more control over the budget"
These observations continue to apply
Benefits and Criteria for Participation
The maximum amount of the tax reduction that may now be earned, under guidelines that have been
established by the Selectmen, is $935 (110 hours at $8 50 per hour, slightly above the current minimum
wage of$8 00) for an individual and $1,190 (140 hours at$8 50 per hour) for a couple These guidelines
have been in place for several years now, and should be reexamined Participants may receive property
tax reductions under this program in addition to any other exemption for which they qualify, such as the
$1,000 Clause 41C exemption, and may also defer the balance of their taxes under Clause 41A if they are
eligible to do so Current income eligibility criteria are set forth in Appendix D
Funding Requirements and Requested Appropriation
The program operates as a continuing balance account, and unexpended funds carry over from year to
year When first established in FY2007, the program was funded at $25,000, an amount slightly higher
than the average annual amount that had been expended from the overlay account under the pre-existing
state program during the 2004-2006 fiscal years In anticipation of higher usage, the annual appropriation
was subsequently 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
eligible applicants who wished to participate in the program Despite efforts to expand participation,
including increases in the income threshold, the numbers have been stable (34 in FY2007, 34 in FY2008,
30 in FY2009, 31 in FY2010, 32 in FY2011, and 33 in FY2012 to date) and annual expenditures have
ranged from $22-28,000 Accordingly, no appropriation was required for FY2011 and subsequent
24
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
appropriation requests have been scaled back to reflect realistic funding requirements and the amount of
carryover funds available The appropriation that will be requested this year is $20,000 instead of the
$45,000 amount stated in the warrant Combined with an anticipated carryover balance of$20-25,000,the
reduced appropriation should be more than sufficient to cover current program needs and also allow for
enhancement of benefits and expansion of participation
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)
(except Line 1100)
Fund Program or Authorized FY2013
Departmental FY2012
# Purpose Representative or Requested
Receipts Authorization
Board to Spend Authorization
1100 School Bus School Committee School bus fees $830,000 $830,000
Transportation
2400 Public Facilities Public Facilities Building Rental Fees $325,000 $375,000
Director
3320 Trees Board of Selectmen Gifts, fees and fines $20,000 $20,000
3330 DPW Burial Public Works Sale of Grave Boxes $35,000 $35,000
Containers Director and Burial Vaults
DPW Compost Public Works Sale of compost and
3420 Operations Director loam,yard waste $499,000 $400,000
permits
Minuteman
3420 Household Public Works Fees paid by $175,000 $175,000
Hazardous Waste Director consortium towns
Program
6120 Council on Aging Human Services Program fees and gifts $100,000 $100,000
Programs Director
7140 Health Programs Health Director Medicare $10,000 $10,000
reimbursements
Liberty Ride receipts,
7320 Tourism/Liberty Town Manager and including ticket sales, $199,000 $285,000
Ride Tourism Committee advertising revenue and
charter sales
8140 PEG Access Board of Selectmen License fees from cable $430,000 $450,000
and Town Manager TV providers
Public Works User fees from
3110 Regional Cache Director participating $20,000 $20,000
municipalities
Reauthorization of all existing municipal revolving funds is requested for FY2013 as shown in the table
above The spending limit proposed for each of the funds is based on a reasonable estimate of the fees and
charges likely to be received, as well as of the expenditures likely to be required
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APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
Changes in Authorization Levels from FY2012
The Public Facilities Revolving Fund authorization request is increasing by $50,000 (15 38%) to more
accurately reflect the anticipated expenditures in this fund
The DPW Compost Operations Revolving Fund authorization request is decreasing by $99,000 (19 84%)
with the completion of the Hartwell Avenue Culvert Replacement design Article 12(d) is a capital
request for funding replacement of these culverts
The Tourism/Liberty Ride Revolving Fund authorization request is increasing by $86,000 (43 21%) due
to an expansion of service to include an additional bus/trolley
The PEG Access Revolving Fund authorization request is increasing by $20,000 (4 65%) This increase
recognizes the Town's obligations for "common" expenses for LexMedia's studio facilities located at
Kline Hall at Avalon Bay
As of publication, the Committee was unable to consider Line 1100 School Bus Transportation because a
new service contract was still being negotiated
The Committee recommends approval of this request (except Line 1100) (9-0).
Article 8: Appropriate the FY2013 Funds Funding Committee
Requested Source Recommendation
Community Preservation
Committee Operating Budget see Below CPA Approve (9-0)
and CPA Projects [except 8(d)]
The Community Preservation Act (CPA) is a state statute that allows municipalities to raise a surcharge
on property taxes for local use for purposes related to historic preservation, open space (including
recreation), 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,
including mortgage refinancing
While the CPA provides broad guidance on the appropriate use of funds, it allows for a considerable
measure of local control by 1) establishing a local Community Preservation Committee (CPC) to review
and make recommendations on candidate CPA projects to Town Meeting and 2) authorizing Town
Meeting to approve CPC-recommended projects Town Meeting may not increase a CPC-recommended
appropriation, nor may it alter the stated purpose of an appropriation, but it may amend to decrease an
appropriation
Communities adopting the CPA have each implemented the statute in a way that reflects local
opportunities, priorities and needs One of Lexington's opportunities lies in the inventory of municipal
and school buildings that qualify as historic buildings and which are therefore eligible for CPA funding
These projects can be funded through a combination of Lexington taxpayers' CPA surcharges and State
matching funds Of the $22 6 million of CPA funds appropriated by Lexington, the CPC and Town
Meeting have designated $3 8 million for the Towns' building renewal program, and almost$3 5 million
has gone for recreation projects The balance of CPA funds has been used for historic preservation,
acquisition and preservation of land for open space and recreational uses, and for providing affordable
housing
The State Match
The state match awarded for FY2007, the first year following Lexington's adoption of the CPA, was
100% of Lexington's 3% surcharge, as it had been since the CPA was enacted in 2001 (Note that state
matching funds are disbursed to communities in the fall of the fiscal year after the surcharge revenues are
raised For example, Lexington will receive state funds to match its FY2011 surcharge revenues in the fall
26
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
of FY2012) However, as real estate transaction revenue has declined with the economy, and as more
communities have adopted the CPA, the matching level has since gone down In October 2011, the first
round match awarded to all CPA communities for FY2011 was 26 6% Because Lexington adopted CPA
with a full 3% surcharge, it received additional funding in the second and third round distributions,
bringing its total match for FY2011 to 27 62%
Funds Available for Appropriation
There is over $5,700,000 in CPA funds available for appropriation at this Town Meeting with over
$1,499,000 in carry-forward reserves and $4,263,000 in FY2013 anticipated revenues The latter includes
anticipated FY2013 surcharge collections of$3,478,000 and a State match of about $768,000 (estimated
at 22 9%of the collected FY2012 surcharges) and $17,000 interest income
The Motion
To prevent some of the past confusion caused by the wording of this article's motion, we present a brief
description of its structure The motion under Article 8 will be in two parts, the first section will distribute
the anticipated revenue between the different Reserve Funds and the second part will appropriate funds
for the individual projects as outlined in the Warrant As specified by the State Statute, 10% of annual
anticipated revenue of$4,263,000 will be allocated to each of the required three Reserve Funds, the Open
Space Reserve, the Historic Resources Reserve and the Community Housing Reserve The remaining
70% of anticipated revenue will be allocated to the Unbudgeted Reserve Appropriations will then be
made under sections 8(a)-8(1), with each project section specifying funding from a particular Reserve
Fund and/or the Unbudgeted Reserve
This Year's Requests
As of press time the CPC has requested that Town Meeting appropriate $5,529,092 of the available CPA
funds However, we anticipate that Article 8(d) Cary Memorial Building Upgrades will be amended to
request the reduced amount of$75,000, so the requested CPA funds would total $5,054,092
The projects which the CPC has recommended for funding in FY2011 under Article 8 are listed in the
following table
Project Description Funds Funding Committee
Requested Source Recommendation
8(a)Archives and Records Management/Conservation $150,000 CPA Approve (9-0)
8(b)Paint Mine Barn Preservation $34,770 CPA Approve (9-0)
8(c)Muzzey Senior Center Upgrades $561,518 CPA Approve (9-0)
8(d) Cary Memorial Building Upgrades
CPC original motion $550,000 CPA Disapprove (0-8-1)
BoS amended motion $75,000 CPA Approve (8-0-1)
8(e) Center Playfields Drainage—Phase III $605,718 CPA Approve (9-0)
8(f) Battle Green Master Plan Implementation $143,845 CPA Approve (9-0)
8(g) LexHAB— Set Aside for Housing Acquisition $450,000 CPA Approve (9-0)
8(h) Buckman Tavern Historic Structures Report/
Restoration Plan $65,000 CPA Approve (9-0)
8(i) Historic Society—Historic Records Preservation $77,268 CPA Approve (9-0)
8(1) Greeley Village Accessible Housing Project $810,673 CPA Approve (9-0)
8(1) Busa Farm Debt Service $930,300 CPA Approve (9-0)
8(k) Cotton Farm Debt Service $1,000,000 CPA Approve (9-0)
8(1)Administrative Budget $150,000 CPA Approve (9-0)
Article 8(a) Archives and Records Management/Conservation $150,000 This request will provide
funding for year 5 of a projected 5-year project for conservation and preservation of historic municipal
documents and records This project will include conservation/preservation, equipment and supplies,
27
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
microfilming and/or digitalization, consulting services, computerization and data migration The emphasis
for FY2012 will be on digitization for ready access of selected at-risk historical records and records
conserved and preserved
Article 8(b) Paint Mine Barn Preservation $34,770 This project entails replacing the roof, doors and
windows, installing electricity and a phone line to provide security, installing crushed stone for ramp
access, and a few minor repairs In 2009 the Conservation Commission determined that they owned this
property, not an abutting property owner on Mountain Road After making these improvements, the
Conservation Commission will use this Barn for the storage of tools, lumber, supplies and other
equipment for the Conservation Commission Minuteman Technical High School will provide the labor
on this project,thus the only costs will be for materials
Article 8(c)Muzzey Senior Center Upgrades $561,518— This request will fund the first of two phases of
upgrades the Senior Center These upgrades are a result of a study funded by CPA funds appropriated by
the 2010 Annual Town Meeting Included in this appropriation are design development and construction
documents as well as construction of the items in this phase
Article 8(d) Cary Memorial Building Upgrades $550,000 — This request is to fund complete design
development and construction documents for a $7 7M renovation to the Cary Memorial Building These
improvements were identified by a CPA funded building study approved by the 2010 Annual Town
Meeting Since being approved for funding by the CPC, questions about the scope of the project and the
project's priority relative to other capital needs have arisen We anticipate that an amendment will be
offered by the Board of Selectman to reduce the funding to $75,000 and change the scope to enable the
town to reconsider the scale of the project The new request is for a 30% design development process and
"value engineering" of the recommended improvements The results will produce to a more thorough
review of the project scope $50,000 of this request will be applicable to future steps in the project
implementation process The Committee supports the anticipated amendment for a $75,000 appropriation
and does not support the original request for$550,000
Article 8(e) Center Playfields Drainage -$605,718 This request is for Phase 3 of a three phase project
to correct drainage and grading issues at the Center Playfields The entire Center Playfields Complex
approximates 23 acres and has been seriously affected by poor drainage conditions for many years The
result is standing water, soft field areas and reduced turf cover and quality that leads to unsafe and
unusable playing fields The complex is the most heavily used recreation area in town It is used by the
schools, adult and youth leagues, and the general public This Phase III request for FY2013 will be used
to implement the drainage improvements on the practice field area along Worthen Road, the little league
baseball/JV softball field, parking area, and the center track area as outlined in the Stantec study The
work will involve installing new drain systems and grading in an effort to move water off of the fields and
collect it so that flooding and standing water conditions do not occur This will allow fields to dry faster
and improve playability and safety The project will be overseen by the town engineer This project will
have a positive effect on the operating budget by reducing the amount of drying agent needed to make the
fields playable
Article 8(J) Battle Green Master Plan Implementation - $143,845 A draft master plan for the Battle
Green area has been issued (12/6/2010) and contains recommendations for site improvements Phase 1 of
this project was funded in FY2012 This is Phase 2 of this master plan and will address the paths around
the Battle Green and Belfry Hill, granite at the Obelisk and the fence at Ye Olde Burying Ground It is
anticipated that a Phase 3 request will be made for additional work next year
Article 8(g)LexHAB Set Aside for Housing Acquisition -$450,000 LexHAB has requested funding for
the acquisition of additional housing units The funds that were approved for FY2012 have been mainly
depleted because LexHAB successfully has started the process of acquiring a single-family home with
these "Set-Aside Funds" Once LexHAB identifies an additional housing unit or land for acquisition with
these new FY2013 monies, it has agreed to submit a proposal to the CPC and CEC for comment prior to
submitting the purchase to the Board of Selectmen for approval (Board of Selectmen approval is required
28
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
for any LexHAB Purchase of a unit or land) in addition to complying with other guidelines agreed upon
jointly with the CPC
In the past LexHAB had committed to housing purchases prior to seeking funding from CPA funds In its
report to the 2010 Annual Town Meeting, this Committee noted that it instead favored an annual
appropriation of CPC funds, placed under CPC's control, for use by LexHAB The appropriated amount
would be sufficient to fund LexHAB's anticipated purchase(s) of existing housing stock for the coming
year We also indicated we believed LexHAB should notify the community of its intent to purchase a
property using CPA funds with sufficient time to reasonably allow finance committee members, Town
Meeting members and others to give meaningful input to the CPC and Board of Selectmen prior to their
decision to approve or disapprove the purchase
Article 8(h) Buckman Tavern Historic Structures Report/Restoration Plans- $65,000 The Lexington
Historical Society has requested this appropriation to restore Buckman Tavern so that it will be sound for
future generations Even though the Town has approved monies in the past to study the Tavern, a
definitive study of its architectural and human history is needed before further work on the Tavern can
commence Dendrochronology, a dating method that uses the growth rings of long-lived trees as a
calendar, is necessary to definitively date the various parts of the Tavern This project will result in
construction plans that would permit construction to occur during 2013
Article 8(i) Historical Society Historic Records Preservations - $77,268 The Lexington Historical
Society (LHS) has requested these funds for this project due to the upcoming 300th anniversary of the
Town of Lexington The LHS is one of the main repositories of historic records in Lexington The LHS is
working with the Town Clerks office in anticipation of the Town's 300th anniversary on this project to
conserve and digitize some of the most important historic records they have in their collections The
Town Clerk's office is providing the leadership to create a virtual records "portal" that would enable
everyone to view the Town's historic documents The LHS has also been working with Northeast
Document Conservation Center on an evaluation of these documents If funding is approved, this project
will be completed by year-end of 2012, in time to incorporate the digitized records in the Town portal for
the 300th anniversary celebrations scheduled for 2013
Article 80) Greeley Village Accessible Housing Project- $810,673 The Lexington Housing Authority
(LHA) has requested these funds to build four (4) one-bedroom handicap accessible units on the grounds
of the Greeley Village (GV) complex GV has one hundred one-bedroom apartments for low-income
seniors and people with disabilities The Commonwealth mandates that 5% of public housing units should
be designed specifically for those who need special accommodations There are currently no units within
Lexington's public housing inventory that were built to meet these guidelines The construction of these
new units will help bring Lexington closer to these State mandated guidelines As with all of the LHA
units,those who live or work in Lexington would be given preference as tenants for these apartments
Article 8(k)Busa Farm Debt Service -$930,300 - The Busa Farm property was purchased for $4,197,000
under Article 6 of the 2009 spring Special Town Meeting A consensus among the Board of Selectmen
and the Appropriation, Capital Expenditures and Community Preservation Committees yielded a decision
to bond the entire purchase using a three-year bond with a high principal payment in the first year This
article appropriates money for the final debt payment
Article 8(l) Cotton Farm Debt Service - $1,000,000 - The Cotton Farm was purchased for $3,800,000
under Article 9 of the 2010 Annual Town Meeting Final negotiations resulted in the following funding
plan, $1,500,000 was paid at closing, and the seller would hold an interest free bond for the balance The
first bond payment of $1,297,400, which was discounted by the seller from the original $1,300,000 to
allow the Town to absorb the short term interest payment, was paid to the seller on 1/11/11 using a Bond
Anticipation Note (BAN) (at 0 7% interest) This note was paid on 7/1/11 using a$500,000 LAND Grant
(approved under Article 33 of the 2011 Annual Town Meeting) and CPA Trust Funds This final payment
of$1,000,000 is due on 8/1/12
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APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
Article 8(m) CPC Administrative Budget- $150,000 - This year's request of$150,000 for administrative
expenses is identical to the amount requested and appropriated in FY2011 and FY2012 The CPA statute
permits the appropriation of up to 5% of the anticipated CPA revenue for the year, i e , $212,300 for
FY2013, to be appropriated for administrative expenses to pay for staff salaries, mailings, public notices,
overhead, legal fees, membership dues, and other miscellaneous expenses related to CPC projects Any
funds that are not expended close to the undesignated CPA account at the end of the fiscal year
The requested funds are budgeted for 3 areas 1) $50,000 for staff salary and benefits, and general
administrative expenses, 2) $50,000 for the course of preparation for the possible purchase of two parcels,
and includes funding due diligence, surveys and appraisals, of potential land purchases, and 3) sufficient
funds for legal expenses for rulings on project eligibility, drafting conservation and deed restrictions,
drafting grant agreements for historic and affordable housing projects, and interpreting court rulings on
CPA issues
The CPC's FY2012 anticipated general administrative expenses, which include 3/5 of a staff member's
salary and benefits (this full-time employee is shared with other departments), dues for membership in the
Community Preservation Coalition, CPA project signs and office supplies, totaled less than $50,000 The
potential land purchase expenses as of now, are $8,800 and legal costs (for work done through January)
were $3,855
The Committee recommends approval of this request except item 8(d) (9-0).
Article 9: Land Purchase — Off Funds Funding Committee
Requested Source Recommendation
Grove Street
Unknown CPA Debt Pending
This Article would allow the Town to purchase the Wright Farm or a portion of the Wright Farm Please
see the TMMA Warrant Information Report for background information, including a short description of
the property and a map As of publication, there was no agreement between the Town and the property
owners, nor had the CPC made a recommendation to use CPA funds for this purpose Until an agreement
is completed and the CPC proposes an appropriation,the Committee can take no position on this Article
The Committee has not taken a position on this request.
Article 10: Land Purchase — Off Funds Funding Committee
Requested Source Recommendation
Grove Street
Unknown GF Debt Pending
This Article is very similar to Article 9, except that it was inserted into the Warrant at the request of the
Conservation Commission rather than the Community Preservation Committee Please see the write up
under Article 9
The Committee has not taken a position on this request
30
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
Article 11: Appropriate for Funds Funding Committee
Requested Source Recommendation
Recreation Capital Projects
$46,000 Recreation EF
+$120,000 GF
+$65,000 GF Approve (9-0)
+$60 000 GF
$291,000
11(a) Pine Meadow Equipment The Recreation Committee requests $46,000 to purchase a Toro or
Jacobsen Fairway mower to replace the existing 2003 Jacobsen 3400 mower This machine is used three
times a week to cut approximately 13 acres of fairway throughout the season The existing mower is
beyond its useful life of more than ten years The Committee would like to purchase the mower in July
after approval by Town Meeting and estimates that it will have to be replaced in seven years
11(b) Park Improvements Hardcourt Resurfacing The Recreation Committee requests $120,000 to
institute and carry out a hard court resurfacing program This will include resurfacing and painting the
hard court surfaces at recreation facilities, including neighborhood basketball courts, the center track and
the tennis courts at the center complex and the Clarke Middle School The center track is made of all-
weather resilient track surface that was installed in 1982 The track was resurfaced in 2000, however, it is
beginning to show significant signs of wear This is the last resurfacing that the track can undergo and
should give it five to six years more of life before it needs to be totally reconstructed
11(c)Park and Playground Improvements The Recreation Committee requests $65,000 to renovate the
playground equipment at Adams Playground, located behind the Waldorf School on Massachusetts
Avenue The improvements will include construction of a new ADA compliant play structure for children
ages 5 — 12, a new swing set and installation of appropriate safety surfacing under and around the
playground structure and swings The town will work with the Waldorf School to partner resources for
the playground renovations The Recreation Committee estimates this equipment will last 20 years This
is an annual improvement to parks and playgrounds The Adams playground was installed in 1984 The
structure is used by children in the east Lexington neighborhood, Waldorf students during recess and after
school, and throughout the fall and spring by families of the young soccer players before, during, and
after practices and games Playgrounds need to comply with Consumer Product Safety Commission,
American Society for Testing and Materials, and the Americans With Disability Act Standards and
Guidelines
11(d) Park Improvements Athletic Fields The Recreation Committee requests $60,000 tax levy to
install a new in-ground irrigation system at Garfield Park and add additional irrigation lines at the Clarke
and Diamond School play fields The Recreation Department and Public works Department oversee the
maintenance of the school and town athletic facilities The Town of Lexington athletic fields receive
frequent use and irrigation improvements are critical to provide adequate and timely watering for the turf
grass Garfield Park will receive a new system for the baseball field area with a controller, timer, and rain
sensors Clarke and Diamond will have the irrigation systems added to the baseball and softball fields to
provide complete coverage for the fields This is an ongoing capital program to address safety and
playability concerns in order to provide adequate, safe fields for youth, adult, recreation, and school
programs The Lexington athletic fields are constantly used by recreation, school, youth, and adult
groups They are in need of major repair that cannot be completed within the operating budget The
estimated life of this replacement work is ten years
The Committee recommends approval of this request (9-0).
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APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
Article 12: Appropriate for Funds Funding Committee
Requested Source Recommendation
Municipal Capital Projects and
Equipment $4,786,586 Free Cash Approve (9-0)
GF Debt
The items in this request are briefly summarized below, prefaced by the amount requested for the item,
the source of funds, and the page where the request is summarized in the Brown Book
12(a) Public Safety Radio Connectivity $50,000 (Free Cash), XI-19 Consultant to reassess current
needs,including redundant systems for Fire,Police, and Public Works Departments
12(b)Hydrant Replacement Program $50,000 (Free Cash/Water RE), XI-17 Routine maintenance
12(c) Street Improvements and Easements $1,956,193 (Tax Levy/Chapter 90), XI-17 Routine
maintenance
12(d) Townwide Culvert Replacement $390,000 ($325,000 Compost RF, $65,000 Free Cash), XI-13
Repair culverts under the access road to the Hartwell Avenue Compost Facility and design repairs for
culverts at other locations (Valleyfield Road, Revere Street)
12(e) DPW Equipment Replacement $595,000 ($85,390 Tax Levy, $358,610 GF Debt, $70,000 Free
Cash, $40,500 Water Debt, $40,500 Wastewater Debt), XI-5 Equipment to be replaced Three-yard
rubber tire front end loader — Highway Division, Ford F450 truck with utility body, lift gate and plow —
Water and Wastewater Divisions, Rack body truck with crane — Forestry Division, John Deere tractor
with attachments—Park Division,Ford F450 truck with plow—Park Division
12(f) Comprehensive Watershed Stormwater Management System $165,000 ($65,000 GF Debt,
$100,000 Free Cash), XI-6 $100,000 for the third of three studies (Mystic River Watershed) and $65,000
for design of projects identified by previous studies (Charles River and Shawsheen Watersheds)
12(g)Dam Repair— $260,000 (GF Debt), XI-5 Physical improvements to the Butterfield Dam (near the
Middlesex Turnpike (Lowell Street) south of I 95/Route 128)
12(h) Storm Drainage Improvements and NPDES Compliance $340,000 (GF Debt) XI-5 $70,000 for
the design of projects needed to satisfy EPA requirements and$270,000 for drainage system repairs
12(i) Battle Green Area Master Plan —Parking, Traffic Calming and Safe Pedestrian Access Study
Phase 1 Conceptual Plan $60,000 (Free Cash), XI-17 Parking, traffic and crosswalk study near the
Battle Green along Massachusetts Avenue and Bedford Street
120) Townwide Signalization Improvements $125,000 (GF Debt) XI-6 Update traffic and pedestrian
signals (intersection at Waltham Street&Worthen Road)
12(k) Sidewalk Improvements and Easements $300,000 (GF Debt), XI-6 Routine maintenance
12(1) Concord Avenue Sidewalk Engineering and Easements $250,000 (TMSF) XI-19 Survey and
design in preparation for building 1 1 miles of sidewalk between Spring Street and Waltham Street, which
will be a roughly $2,000,000 construction project
12(m) Street Betterment Improvements and Easements IP There are no requests under this item
12(n) Estabrook School Off-site Street Engineering, Improvements and Easements $170,000 (Free
Cash) Improve traffic flow near Estabrook School and improve alternate access onto the school site
12(o) Center Business District Streetscape Engineering $240,000 (GF Debt), XI-7 Design to 25% level
for a major upgrade of Center sidewalks and roadways, leading to an estimated $4 million construction
project starting in FY2014
32
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
12(p) Telephone System Replacements Townwide $591,000 (GF Debt), XI-5 Multi-year program to
convert telephone systems to"Voice over IP" (VoIP) as older systems reach their end of life
12(q) Townwide Electronic Document Management System $145,000 (Free Cash), XI-19 Additional
scanning to populate the electronic document database and funds for training and software customization
The Committee recommends approval of this request (9-0)
Article 13: Appropriate for Water Funds Funding Committee
Requested Source Recommendation
System Improvements
$900,000 Water EF Approve (9-0)
(Debt)
This Article addresses proposed capital expenditures to be made during FY2013 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 5
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
requests for appropriations from the water fund will be made under Article 12 (Municipal Capital)
$25,000 from the water fund's retained earnings will be requested under Article 12(b) to fund half the
cost of an ongoing hydrant replacement program that is shared 50-50 with the general fund, and $40,500
in water fund debt will be requested under Article 12(e) to cover half the cost to replace a pickup truck
used by the water and sewer divisions that has reached its end of life
The costs of this year's system improvements will be funded entirely by borrowing, although part of the
funding may come from MWRA grants or loans The resulting debt service costs will be borne by the
operating budget for the Water Enterprise Fund in FY2013 and in future years until the debt is retired (see
Brown Book,p XI-9, 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 ready), as illustrated in the table below The goal is to keep
the system current so the Town can assure dependable high water quality, pressure, and volume for
domestic needs, commercial needs, and fire protection as well as minimization of water main breaks
Water Capital Improvements History
Fiscal Year Purpose Cash Borrowing Total 1
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
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APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
2011 Water Dist Improvements $0 $900,000
Water Tank Rehab $0 $160,000 $1,060,000
2012 None $0 $0 $0
2013 Water Dist Improvements $0 $900,000 $900,000
(recommended)
Prior to FY2006, as shown in the table above, capital expenditures for water distribution and related
improvements were funded by a combination of enterprise fund cash capital, which was raised in the
rates, and borrowing Since then, there has been a transition to funding these ongoing improvements
exclusively with debt While the transition to debt financing in the enterprise funds mitigated the need for
rate increases early on, that change, together with the fund's allocated contribution to the debt service for
the new DPW facility, has steadily 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 $1,258,968 $8,039,413 15 7%
2013 $1,299,091 $8,124,846 16 0%
Recent borrowings, including the water fund's 17% contribution to the financing of the new DPW
facility, 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
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 As noted in the discussion of Article
5,judicious use of some of the fund's accumulated retained earnings could help defray the impact of these
growing capital costs and help to maintain long-term rate stability
The Committee notes that the cost of acquiring a new F450 pickup truck for use by the water and sewer
divisions of the DPW, a total of$81,000, will be borne equally by debt of the water and sewer enterprise
funds The cost of a plow setup for this truck, however, will be funded by general fund debt, presumably
because it is expected that the truck will be used at least some of the time during winter months to plow
town streets and roads See Brown Book, pp XI-5, XI-10 If part of the intended use of the truck is for
non-enterprise fund operations, some consideration should be given to sharing the cost of the truck itself
with the general fund, if not through a sharing of the acquisition costs, at least through an offset to
indirect costs charged by the general fund to the enterprise fund in the operating budget
The Committee recommends approval of this request (9-0)
34
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
Article 14: Appropriate for Funds Funding Committee
Requested Source Recommendation
Wastewater System
Improvements $1,340,500 Wastewater Approve (9-0)
EF(debt)
This Article addresses proposed capital expenditures to be made during FY2013 as part of a continuing
program to upgrade and keep current the assets of the Wastewater 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 5
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, particularly 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-10-11) An additional appropriation of $40,500 in
wastewater fund debt will be requested under Article 12(3) (Municipal Capital) to cover half the cost to
replace a pickup truck used by the water and sewer divisions that has reached its end of life
All of the system improvements will be funded entirely by borrowing, although part of the funding may
come from MWRA grants or loans The resulting debt service costs will be borne by the operating
budgets for the Wastewater Enterprise Fund in FY2013 and in future years until the debt is retired (see
Brown Book,p XI-9, Table III), and will be included each year as a component of the sewer rates
Capital appropriations for similar purposes have been made in most years (except for FY2006, when
engineering studies were not ready, and FY2011, when only pump 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 $0
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 $1,300,0001
2013 (rec) Sewer Improvements $0 $1,300,000 $1,300,000
Prior to FY2007, as shown in the table above, capital expenditures for sewer distribution improvements
were funded primarily by enterprise-fund cash capital Since then, there has been a transition to funding
these ongoing improvements primarily with debt While the transition to debt financing in the enterprise
funds mitigated the need for rate increases early on, that change, together with the fund's allocated
contribution to the debt service for the new DPW facility, has steadily increased the annual debt-service
costs of the sewer enterprise fund,both in dollar and percentage terms, as illustrated below
35
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
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%
This phenomenon of steadily increasing debt service costs is likely to result in growing pressure on the
sewer rates until a new equilibrium is reached and the amount of debt retired each year more closely
balances the level of new debt incurred For this reason, the Committee continues to advocate that
retained earnings, where available, be appropriated for capital projects, which will help to generate long-
term rate stability and not merely short-term rate relief
The Committee notes that the cost of acquiring a new F450 pickup truck for use by the water and sewer
division of the DPW, a total of$81,000, will be borne equally by debt of the water and sewer enterprise
funds The cost of a plow setup for this truck, however, will be funded by general fund debt, presumably
because it is expected that the truck will be used at least some of the time during winter months to plow
town streets and roads See Brown Book, pp XI-5, XI-11 If part of the intended use of the truck is for
non-enterprise fund operations, some consideration should be given to sharing the cost of the truck itself
with the general fund, if not through a sharing of the acquisition costs, at least through an offset to
indirect costs charged by the general fund to the enterprise fund in the operating budget
The Committee recommends approval of this request (9-0).
Article 15: Appropriate for School Funds Funding Committee
Requested Source Recommendation
Capital Projects and Equipment
$833,676 GF Debt
+$168,324 Tax Levy Approve (9-0)
+$83,000 GF Debt
1,085,000
•
A more detailed description of these requests, approved by the School Committee and submitted for
Town Meeting approval, can be found in the Budget(Brown) Book Section XI (Capital) (School Projects,
pages XI-9) Additionally, the TMMA Warrant Information Report contains a comprehensive review of
Article 15
15(a) Systemwide Technology is a request for funds to support the Lexington Public School's Strategic
Goal of enhancing the capacity to utilize technology as an instructional and administrative tool The funds
are for replacement of the oldest desktops and laptops, increasing the number of student workstations at
the High School and middle schools to meet instructional needs in general education and special
education classrooms, replacement of printers and peripherals, maintaining and updating the LPS local
area networks, installing a managed wireless network in two elementary schools and providing interactive
whiteboards with integrated projection systems in sixty-five of the Grade 3-12 classrooms
36
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
15(b) Classroom and Administrative Furniture is an annual request for replacement of furniture that has
reached the end of its useful life, particularly in buildings that have not been renovated and need to have
classroom furnishings replaced
Two school capital items that were part of the initial FY2013 budget proposal will be completed with
FY2012 available funds, and thus are no longer part of this request Those two requests are
• Hearing Impaired Student Services—Assessment of Needed Room Modifications ($40,000)
• Diamond Intensive Learning Programs—Modification of Existing Classrooms ($32,685)
The Committee recommends approval of this request (9-0)
Article 16: Appropriate for Public Funds Funding Committee
Requested Source Recommendation
Facilities Capital Projects
$2,200,711 GF Debt Approve (9-0)
Free Cash [except 16(e)]
The requests in this article are covered in detail below
Description Funds Funding
Requested Source
16(a) School Building Envelope and Systems $215,000 Free cash
16(b) Middle Schools Science Labs and
Performing Art Spaces—Evaluation $35 000 Free cash
16(c) Diamond Middle School Energy
Improvements $25,000 Free cash
16(d) Municipal Building Envelope and
Systems $169,711 Free cash
16(e)White House Stabilization (see discussion
below) $0 N/A
$322,315 Free cash
16(f) Extraordinary School Repair Projects (see +$287,685 GF Debt
details below) $610,000
16(g) Department of Public Facilities Bid
Documents $75,000 Free cash
16(h) Hastings School Natural Gas Conversion $65,000 Free cash
16(i) Townwide Facility Master Plan $80,000 Free cash
16(j) Grounds Vehicle Replacement $80,000 GF debt
16(k) Lexington High School Overcrowding
Phase II Renovations $400 000 GF debt
16(1) School Paving Program $100,000 GF debt
Article 16(f). Extraordinary school repair projects
Description Funds
Requested
School building flooring program $125,000
1 School window treatments $50,000
School locker replacement program $150,000
Hastings Elementary School improvements $87,000
37
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
Description Funds
Requested
1 Clarke gymnasium storage area $28,000
Convert space for Pre-K occupational therapy $60,000
Convert computer lab to classroom -Fiske $60,000
Sound proofing classrooms for hearing impaired
$50,000
—Diamond
16(a) School Building Envelope and Systems involves performing annual prioritized design, repairs and
modifications to prevent deterioration of school building exteriors and building systems This includes
repair of damaged panels and siding, re-caulking and weatherproofing windows and doors,repainting the
wood exterior, and extraordinary repairs to mechanical systems FY2013 priorities will include repairing
the exterior of Diamond, particularly its spalled concrete roofline, construction of a loading dock at the
Central Office building, and costs of making space modifications because of enrollment changes
Engineering design and preparation of bid documents are included in the request for funding Small,
individual items will continue to be funded through the operating budget
16(b)Middle Schools Science Labs and Performing Art Spaces —Evaluation is for funding to evaluate the
adequacy of existing science laboratories, performing arts spaces and associated systems and equipment
to meet programmatic needs and make recommendations for enhancements to meet those needs The
middles schools were renovated 10 years ago, and school administrators are concerned theses spaces
longer adequately support the programs
16(c) Diamond Middle School Energy Improvements requests funds to perform an in-depth energy audit
of major mechanical systems that will result in a Mechanical Master Plan anticipated to be implemented
over a five-year period Diamond is second to the High School with the highest energy use per square
foot Previously, the Massachusetts Department of Energy Resources and National GRID have conducted
low cost energy audits,without realizing identifiable projects to improve efficiencies
16(d) Municipal Building Envelope and Systems is an ongoing capital request that includes design and
construction repair/replacement projects for the maintenance and upgrade of municipal buildings and
systems Repairs to roofs, windows, mechanical and electrical systems, and interior finishes are required
on a continual basis to maintain town facilities for their intended function The projects within this
program do not increase the size of the public building stock and therefore do not result in increased
utility usage or maintenance costs Projects already identified for FY2013 include the replacement of
Cary Library sidewalks and the addition of ventilation to the Cary Library chiller for improved servicing
and maintenance
16(e) White House Stabilization — We anticipate that the Board of Selectmen will move to indefinitely
postpone item 16(e), but that the Capital Expenditures Committee may offer a substitute motion to fund
the work for$381,000 as originally requested by the DPF The amount would cover$148,590 for a partial
demolition and $232,410 for stabilization of the remaining structure The Committee has not reached a
consensus on a recommended plan for the White House, but our position is that we do not favor
appropriating any funds for the stabilization of the White House until there is a clear plan for its future
use
The Committee supports indefinite postponement of 16(e) by a vote of 6-3, and would recommend
disapproval of a request for $381,000 by a vote of 2-7
16(J) Extraordinary School Repair Projects include out of the ordinary projects that address specific
needs within the schools, including measures that improve current physical and learning environments
and enhance pace utilization
38
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
16(g) Department of Public Facilities Bid Documents is for funds for professional services to produce
design development, construction documents, and/or bid administration services for smaller school
projects in anticipation of requests for construction funding at town meeting that have a high probability
of approval Approving funds for related bid documents will ensure approved projects are completed in
the upcoming short construction season, between the end of school in June 2012 and the beginning of
school in August 2012
16(h)Hastings School Natural Gas Conversion is for funding to convert the boiler at the Hastings School
from oil to natural gas and to remove the existing buried oil tank This conversion is projected to save an
estimated $9,400 and perhaps as much as $20,000 per year in fuel costs, considering the current low price
of natural gas
16(i) Townwide Facility Master Plan is for funds for consulting services to assist the Board of Selectmen
in developing a Town Wide Facility Master Plan The selected consultant would help the Town develop
an integrated Facilities Master Plan taking into consideration the recommendations from individual
facility studies conducted over the last three years, the priorities of the Town, the need for efficient
sequencing of projects to take advantage of available swing space, the relocation of services to improve
adjacencies, and the financial capacity for the Town to implement the projects Individual facilities with
already completed studies include
Fire Headquarters, Police Headquarters, Human Services, the Stone Building, the White House, Town
Office Building and Cary Memorial Building These studies provide recommendations for facility
renovations and/or replacements to meet departmental needs and/or to preserve Town assets
160) Grounds Vehicle Replacement is to fund the replacement of one of two existing vehicles used to
maintain the grounds around school buildings and transport items among the schools The vehicles are
beyond their useful lives and require increasingly expensive repairs that result in excessive downtime
affecting operations It is proposed to replace the 2000 GMC Sierra in FY2013 and a request will be made
for FY2014 to replace the 2000 Chevy GMT400 The vehicles will be replaced with Ford F350 4x4
trucks equipped with plows, spreaders, lift gates, and heavy-duty platform bodies with stake sides
16(k)Lexington High School Overcrowding Phase HRenovations follows up on the $175,000 of funding
authorized at the 2011 Annual Town Meeting for design services and renovation costs to improve space
utilization at LHS and reduce overcrowding, where feasible Phase II will consolidate information
technology staff at the central office and return LHS space to educational use which will require
additional classrooms in 2012-2013 Four additional classrooms will be created from existing space at the
High School
16(l) School Paving Program is for funds for design and construction to maintain school parking and
paved pedestrian surfaces in a condition suitable for public use Funds will focus primarily on repaving
needs due to heavy loads at the Harrington school
All of these items are detailed in the FY2013 Recommended Budget & Financing Plan (the "Brown
Book"), Section XI Capital
The Committee recommends approval of this request except item 16(e) (9-0).
Article 17• School Bus Funds Funding Committee
Requested Source Recommendation
Transportation Subsidy
(Citizen Article) $316,250 GF Approve (5-4)
This article seeks to increase bus ridership and reduce the use of private vehicles for daily transportation
of students to school by decreasing per-rider fees for the school bus transportation system Recent surveys
of parents of Lexington students have found that fees are the primary reason students are not registered to
39
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
ride the bus In FY2012 the per-rider fee is $5508 and about 31% of enrolled students use the school bus
This contrasts to FY2002 when the per-rider fee was $200 and 40%of enrolled students rode the bus
This article would set aside funds intended to reduce the per-rider fee to an amount no lower than $300
The amount requested is based on providing up to a $250 subsidy for each of the existing 1,265 full-fee
riders The actual funds needed to achieve this goal will depend on the popularity of the program As
more students elect to ride the bus, more rider fees are collected to defray the costs of operating buses As
long as the increase in ridership does not trigger a need for additional buses the subsidy amount needed
decreases with each additional rider
The total cost to the Town, however, could increase beyond the proposed subsidy as a result of this
initiative Any program designed to increase bus ridership will eventually increase costs due to the need
for a larger bus fleet Projecting these costs depends on how increases in ridership are distributed across
the student population Elementary school buses are currently nearest to full utilization but are below 80%
of capacity Increases in ridership in that group would most quickly require additional buses, but would
be largely offset by fees collected from new riders High school bus usage is sparse and could
accommodate a substantial increase in ridership before additional buses were needed Absent any request
for a Reserve Fund transfer,the added costs of a larger bus fleet would be borne within the school budget
The committee acknowledges the value of increasing bus ridership and reducing the number of
automobiles transporting students to and from school Benefits would include improved traffic flow near
schools during rush hour, a safer environment for students walking or biking to school, as well as reduced
fuel consumption and automobile emissions
It is difficult to predict how effective this fee-reduction initiative will be The only data we have at the
moment are the Town's experience with declining bus ridership from 2002 to 2012 as the bus fee
escalated, and the recent survey feedback from parents High fees are cited as the primary reason parents
do not avail themselves of the bus, but other factors such as convenience, work and school activity
schedules, and even discipline on the buses factor into the decision about using the school bus
The separate plan to reduce fees by 50% for Estabrook students during the new school construction
project, as explained under Article 4, may provide some insight into price sensitivity,but that information
would not be available until later this year Using the Estabrook experience as an experiment is also
problematic because the ongoing construction may strongly influence decisions to use the bus, which
would obscure the impact of lower pricing
While the committee is unanimous in its desire to see an increase in bus ridership, opinions ranged
broadly as to the best way to accomplish the goal Some felt the fee should be set even lower or
eliminated, others felt that a program that includes charging a fee for automobile access to the schools
may be a better and more equitable approach to reducing traffic Some members of the committee are also
concerned about funding the reduction of bus fees through the municipal budget For a long-term
program, the committee would prefer the complete costs of school transportation, including the cost of
any fee reductions to remain in the school department budget and continue to be managed by the School
Committee
The vote on this recommendation illustrates some unresolved concerns within our Committee It also
reflects a willingness among some members to perform a meaningful experiment in the coming year that
will inform future policy discussions, and hopefully reduce the car traffic at our schools immediately
The Committee recommends approval of this request (5-4)
8 The per-rider fee rises to $600 if paid after July 1 The pre-July 1 price is used for comparison in this discussion
Families are only required to pay up to$1600 for bus transportation each year
40
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
Article 18: Appropriate to Post Funds Funding Committee
Requested Source Recommendation
Employment Insurance Liability
Fund $500,000 Free Cash Approve (9-0)
The Town of Lexington is required by State law to provide health benefits to retired employees that are
comparable to those provided for active employees Much of the cost of retiree health insurance is borne
by Medicare,but the Town must provide supplementary coverage and coverage for retired employees not
on Medicare Since the Town is obligated to provide this benefit on an ongoing basis, the cost that will be
incurred over the lifetimes of the current and future retirees represents a liability The actuarial value of
this liability must be included in the Town's financial statements and is in the hundreds of millions of
dollars In FY2013 the Town will pay upwards of$6,000,000 for current year retiree health benefits costs
This payment will retire part of the liability that is presently on the books, but, over the course of
FY2013, the liability will grow because additional employees will earn rights to receive retirement
benefits The general escalation of health care costs makes it almost certain that the net effect will be an
increase in the actuarial value of the liability
While the Town has a legal obligation to provide health benefits to present retirees, it has no legal
obligation to fund any future liability, i e , to set aside funds for the specific purpose of covering the costs
of the future obligations and thereby assuring its ability to satisfy them Nonetheless, the Town has taken
modest steps toward that goal A Post Employment Insurance Liability (PEIL) Fund was created in 2007
and, in each of the last four years (FY2009-2012), Town Meeting has approved an appropriation 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 go into the General
Fund and become part of the following year's Free Cash balance In FY2012, the appropriation was
rounded up to $500,000 The balance in the PEIL Fund is now about $2,034,000 The Town received
approximately $395,000 in Medicare Part D reimbursements in FY2011 The proposal under this article is
to appropriate $500,000 from Free Cash to the PEIL Fund
Below,we attempt to frame some issues regarding the PEIL Fund
There are at least four points in favor of funding the liability First, any monies in the PEIL Fund provide
assurance that the Town will be able to satisfy some portion of its future liability Bond rating agencies
look favorably upon this, although it is unclear how large an amount or, if in fact, any amount is
necessary to maintain a AAA bond rating Second, we recognize that building up a liability is equivalent
to borrowing, and that reduction of future liabilities or, equivalently, funding them by putting aside
reserves, is important to moving toward a truly balanced budget and maintaining future fiscal strength
Third, the balance in the Fund is invested and earns income, which could serve as a partial hedge against
future increases in health insurance costs and inflation Fourth, the Fund could be used as a reserve, e g,
to fund present retiree health costs in a particularly challenging fiscal year
However, money invested in the PEIL Fund will be unavailable for other uses and this represents an
opportunity cost to the Town One may ask whether funding the PEIL should take priority over other
liabilities such as the anticipated costs of maintaining or replacing roads and buildings in a timely manner
Choosing the latter might generate significant future savings
Even if the liability is fully funded some day, the Town would still need to make substantial annual
appropriations for retiree health benefits
Finally,no plan to appropriate monies from the PEIL Fund has been put forward as yet
The Committee recommends approval of this request (9-0)
41
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
Article 19: Rescind Prior Funds Funding Committee
Requested Source Recommendation
Borrowing Authorization
None N/A Approve (9-0)
Town staff recommends the following bond authorization rescissions based on confirmation from the
project managers that the projects are completed and no additional funds need to be borrowed
Town Meeting Article Project Manager Amount
2009 ATM 11(1) Fire Department Headquarters Renovation Pat Goddard $19,164
and Presentation Study
2010 ATM 16(b) Clarke Middle School Auditorium Safety and Pat Goddard $15,790
Technology Update
2010 ATM 12(d) DPW Equipment Bill Hadley $3,375
2011 ATM 13(g) Hastings School Playground Expansion Pat Goddard $8,146
The total of all the recommended rescissions is $46,475
The Committee recommends approval of this request (9-0)
Article 20: Authorize the Funds Funding Committee
Requested Source Recommendation
Establishment of a Minuteman
Stabilization Fund None N/A IP
The Minuteman Regional High School must gain approval from all of its district member towns in order
to establish this Stabilization Fund Lexington has already granted its approval under Article 27 of the
2009 Annual Town Meeting and no further action is required by the Town
The Committee anticipates the indefinite postponement of this request.
Article 21: Establish and Funds Funding Committee
Requested Source Recommendation
Appropriate to Specified
Stabilization Funds See Below See Below Approve (9-0)
This Article is routinely included on the Warrant to give Town Meeting the opportunity to appropriate
money into stabilization funds created for specified purposes These appropriations are not expenditures,
but rather transfers of funds that Town has been holding temporarily into the proper accounts
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
This article requests Town Meeting to appropriate funds received from developer payments and other
sources into the town's specified stabilization funds
42
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
Status of Funds and Appropriation Requests
The current balance of each fund,the amount currently 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
Balance (this Article) (other Articles)
Avalon Bay School Enrollment
$547,693 35 $0 $250,000
Mitigation S F
Center Improvement District S F $85,875 28 $0 $0
School Bus Transportation S F $17 66 $0 $0
Section 135 Zoning S F $0 $0 $0
Special Education S F $1,065,807 58 $0 $0
Traffic Mitigation S F $346,420 74 $0 $250,000
Transportation Demand Management $297,530 03 $87,572 $85,160
/Public Transportation S F
Transportation Management Overlay
$10,695 26 $0 $0
District S F
Avalon Bay School Enrollment Mitigation SF An appropriation of $250,000 from this fund for the
school budget is requested under Article 4
Traffic Mitigation S F Article 12 requests $250,000 to be appropriated for a survey and design for
sidewalks along Concord Avenue
Transportation Demand Management/Public Transportation SF A total of $87,572 is available to
appropriate into the fund using payments received from Cubist Pharmaceuticals ($25,000), Shire
Pharmaceuticals ($22,322) and Avalon Bay ($40,250) An appropriation of $85,160 from the fund is
requested under Article 4 to support the Transportation Fund(including the operation of Lexpress)
The Committee recommends approval of this request(9-0)
Article 22: 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
anticipated indefinite postponement of this article A fund history can be found in the "Brown Book"
FY2013 Recommended Budget&Financing Plan pg C-5
The Committee anticipates the indefinite postponement of this request.
Article 23: 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
43
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
vehicle to allow the Town to invest bond proceeds beyond the one-year arbitrage limit that would
otherwise apply
An initial appropriation of $1,739,894 was approved at the 2009 Annual Town Meeting with funds
remaining from a set-aside in FY2007 when the monies were initially received In August 2006, the Town
received reimbursement of approximately $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 repay a note that was due and were set aside as
reimbursement for the exempt costs of the High School project per a directive from the Massachusetts
Department 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 2013 for this same High School construction project
The Committee recommends approval of this request (9-0).
Article 24: Appropriate for Prior Funds Funding Committee
Requested Source Recommendation
Years' Unpaid Bills
Unknown Unknown Pending
The Committee has not been informed of any need to take action under this Article, but consideration of
the Article is normally deferred until the end of Town Meeting to allow for the possibility of a motion if it
is deemed necessary
The Committee has taken no position on this request.
Article 25: Amend FY2012 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 every Annual
Town Meeting Warrant, is normally deferred until the end of Town Meeting to allow Town staff to
coordinate 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 any changes to the FY2012 operating or
enterprise budgets
The Committee has taken no position on this request.
Article 26: Appropriate for Funds Funding Committee
Requested Source Recommendation
Authorized Capital
Improvements $200,000 Insurance Approve (9-0)
Settlement
The Town received an insurance settlement in the amount of $200,000 for a claim against the original
design firm for the Samuel Hadley Public Services Building The claim was regarding problems with the
wash bay in the building This request would allow the Town to apply these funds to correct the problems
44
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
with the wash bay State law requires the Town to submit any insurance settlement funds in excess of
$20,000 for appropriation at Town Meeting
Additional funds will be required to complete this task, along with other betterments to the wash bay
requested by the DPF These additional funds (estimated to be no more than $100,000) will come from
the unspent balance of the previous appropriations for the construction of the building These funds do not
require appropriation by Town Meeting
The Committee recommends approval of this request (9-0).
Article 27: Establish Qualifications Funds Funding Committee
Requested Source Recommendation
for Tax Deferrals and
Exemptions None N/A IP
The Committee anticipates the indefinite postponement of this request
Article 28: Accept MGL Chapter Funds Funding Committee
200A Section 9A Requested Source Recommendation
None N/A Approve (9-0)
This article proposes that the Town accept the provisions of MGL c 200A, § 9A as amended by the
Municipal Relief Act of 2010 Acceptance of this statute would allow the Town to adopt a more
streamlined procedure than was previously available for resolving claims to abandoned funds resulting
from the failure of third parties to cash Town checks, and more quickly to regain the use of those funds if
no valid claim is presented
In 1950, the legislature enacted the Massachusetts Abandoned Property Act, MGL c 200A, §1 et seq
(the "Act") The purpose of the Act is to protect the interests of the rightful owners of abandoned property
if and when they appear, and to provide additional revenue to the Commonwealth if they do not The Act
broadly defines "abandoned property" to include bequeathed property, bank deposits, dividends,
insurance proceeds, security deposits, gift certificates — and all manner of other property, both tangible
and intangible—held for the benefit of another and not claimed within a specified period of time Persons
or entities holding such"abandoned property" are required to file an annual report with the state treasurer,
and to turn over all property listed in the report They also must notify "apparent owners" of unclaimed
property valued over $100 how to make a claim to the state for the funds The state treasurer holds the
property that is turned over in a fund for payment to future claimants (there is no statute of limitations),
and whenever the amount in the fund exceeds $500,000, transfers the excess to the state's treasury for
public use
In 1983, the Supreme Judicial Court ruled that uncashed checks were "intangible personal property"
within the meaning of Section 5 of the Act, that the obligation represented by such checks must be
deemed"held"by the issuer for the benefit of the payee, and that the issuer must presume abandoned, and
report and turn over to the state treasurer, the amounts represented by any such checks not cashed within
the time limit specified by section 5 (currently three years)9
9Treasurer and Receiver General v John Hancock Mutual Life Insurance Co, 388 Mass 410 (1983) This
obligation was found to exist notwithstanding that a bank has no obligation to pay any check presented more than
six months after its date, which is considered a"stale" check, although"it may charge its customer's account for a
payment made thereafter in good faith" MGL c 106, § 4-404 In effect, therefore, the Act gives the State rights in
an uncashed, stale check superior to those of the payee
45
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
In 1987, apparently in response to this ruling, the legislature added a new Section 9A to the Act
exempting cities and towns from any obligation to report and turn over funds resulting from uncashed
checks to the state treasurer if they elected to follow an alternative claims procedure Under the original
version of Section 9A, towns could comply with the Act by notifying the "apparent owner,"by first class
mail and conspicuous posting on the town's web site, of the existence of uncashed checks "deemed
abandoned under section 5," and the procedure for claiming the funds If no response was received within
60 days, the town treasurer could then immediately credit checks under $100 back to the general treasury
of the town For checks over $100, the town treasurer was required to follow up with a newspaper notice
and wait for an additional year before crediting the funds back to the town treasury
The New Section 9A
In 2010, as part of the Municipal Relief Act, the legislature amended section 9A to allow cities and towns
to adopt, by local option, a new and different"alternative procedure" for recovering funds represented by
uncashed checks instead of turning them over to the state
Under the new version of Section 9A, a town treasurer may presume checks issued by the town to be
abandoned if not cashed within one year (instead of three years) as long as the check bears upon its face
the statement"void if not cashed within 1 year from date of issue " The treasurer may then cause the bank
to stop payment on such checks but must notify apparent owners, either by mail or by posting a notice on
the town's web site, of the existence of such checks and"the appropriate method for claiming the funds"
If no response to the initial notice is received within 60 days, the treasurer must then provide notice by
newspaper publication with a new deadline (unspecified) If there is still no response, and the check is for
an amount over $100, the treasurer must follow up with a second newspaper publication setting forth an
extended deadline of at least an additional year from the date of publication to claim the funds If no valid
claim has been made before all applicable deadlines have passed, the treasurer may then credit the funds
back to the town treasury
The amended version of Section 9A does not Just allow towns to regain the use of unclaimed funds In a
departure from the previous practice,the amended version of Section 9A provides that once the applicable
claim deadlines have elapsed, the town's obligation"for the underlying liability for which the funds were
originally intended"is extinguished and deemed to"escheat"back to the town
Consequences of Non-Acceptance
Acceptance of the amended version of Section 9A will allow the Town periodically to initiate a process to
recover and re-credit to the General Fund the amounts of checks that have not been cashed within one
year, i e ,two years earlier than heretofore allowed If no valid claims are made within a year or so of the
commencement of the process, or a considerably shorter period of time in the case of checks under $100,
the obligation will be extinguished,the funds will escheat to the Town, and they can then be redirected for
any purpose This will allow for a more prompt cleanup of old and unclaimed payables
Because of an apparent drafting glitch in the amending legislation,failure to accept the amended version
of Section 9A could present a problem The legislature presumably intended in this portion of the
Municipal Relief Act of 2010 to give cities and towns the option to speed up the recovery of uncashed
checks, in default of which the procedures in place since 1987 would continue to apply However,
because the amended version of Section 9A supersedes the prior version in its entirety, the 1987 process
is no longer available Unless Town Meeting votes to accept the amended version, therefore, the Town
will no longer be able to reclaim its own uncashed checks and will be obligated instead to report and turn
them over annually to the state
The Committee recommends approval of this request (9-0).
46
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
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 opportunity to obtain a
better 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 conservatively 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 they might impact the overall fund
balance The resulting figures do not represent actual revenue or spending targets
We have adopted some key assumptions as the basis for the projection presented herein using limited
investigations to establish their plausibility We note below the most important aspects
In regard to revenue, we assume that the economy in FY2014 will show modest growth, and that the
Town's revenue stream will recover fully in FY2015 and FY2016 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 levy is assumed to grow annually by 2 5% of the previous year's base and by an added
amount for"new growth" No amounts are included for Proposition 2'/2 operational overrides
• New growth (the increase in the tax levy from new construction) in FY2014 is assumed to be
equal to the average over the 5-year period ending with FY2011 (FY2011 new growth is reduced
by $1M to adjust for Shire's TIF delayed growth), and then, for FY2015 and FY2016, is assumed
to increase by 10%per year
• State aid in FY2014 is assumed to be equivalent to the anticipated FY2013 and then, for FY2015
and FY2016,is assumed to increase by 5% annually
• Available funds include free cash as well as amounts in the Parking Fund and the Cemetery Fund
The amounts in the latter two categories are assumed to be $340K and $120K, respectively, and
free cash is assumed to total $3M for FY2014, increasing to $3 2M in FY2015 and FY2016 In
the FY2014 available funds line, we include $250K to capture the anticipated transfer of funds
from the Avalon Bay Student Mitigation Fund These assumptions imply that available funds will
total$3 71M,i e ,lower than the corresponding totals for the previous five fiscal years (FYs 2009
through 2013) which ranged from a low of approximately $5 6M for FY2009 to as high as $8 7M
for FY2013 We note that the average available funds for FY2002 through FY2007 were much
lower than$3 9M
• Revenue offsets include amounts from cherry sheet assessments that are assumed to grow by
3 5% annually, amounts for the Assessors' overlay ($750K in FYs 2014 and 2016 and $900K in
FY2015, a revaluation year), and $300K that is set aside for deficits in the snow and ice budget
• Water and Wastewater Enterprise Fund indirect expenses are now in line with actual costs
Recreation Enterprise Fund indirect expenses are assumed to increase by $10K per year
The major assumptions that we made regarding expenses are as follows
• Line items do not include any increases for as of now unsettled cost-of-living adjustments
(COLAs) for salaries and wages The potential impact of COLAs is summarized below the main
prod ection
• The Lexington Public Schools personnel costs are assumed to increase by 1 5% annually for step
changes
47
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
• The Lexington Public School expenses for items other than special education are assumed to
increase by 2%per year Special education expenses for out-of-district tuition are "net" the State
Circuit Breaker reimbursement and are assumed to increase by 8% annually (3 year average
annual growth was 12 6%, 5 year average annual growth was 8%), while the expenses for SPED
consultants and out-of-district transportation are assumed to increase by 3%per year
• Municipal personnel costs are assumed to increase by 1 3% annually for step changes
• Municipal expenses are assumed to increase by 3%per year
• The assessment for Lexington's share of expenses for Minuteman Career and Technical High
School is assumed to increase by 4%per year
• Appropriations for current and future pension payments are assumed to follow a schedule set up
by the Retirement Board following the most recent actuarial evaluation of pension costs
• Health insurance costs for FY2013 are estimated GIC rates This is the introduction year of this
policy and although rates are known, we don't have history on which policies will be taken by
employees The assumed annual premium increases are 5% The FY2013 expense is increased by
a one-time $1 12M payment to a fund to smooth employee health care costs The FY2014
expense is then reduced by that amount prior to applying the annual premium increase
• Non-exempt debt service costs are assumed to remain near the projected FY2014 level of about
$5 7M per year
• Dept of Public Facilities costs include salaries and wages (assumed to grow by 1 3% annually for
step changes), utility bills (assumed to increase by 6%), and other expenses (assumed to grow by
3% annually)
• Expenses for cash capital are assumed to include amounts for road and building envelope
maintenance (following from overrides) that increase annually by 2 5%, as well as $850K for
other capital expenses
• We assume that no new funds are appropriated into the main Stabilization Fund
• Other expenses are assumed to include $45K annually for the senior tax work-off program, an
annual contribution of $500K 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
Operations are projected using the 5-year trend from FY2009-2013 Enterprise capital is
projected using the five averages for FY2009-2013
• No potential expenses for unidentified new programs are built into these projections
The projection for FY2014 shows an increase of approximately $2 1M in total general fund revenue This
increase is far below the projected $6 3M increase in the tax levy revenue because we assume that there
will be a large decrease in free cash (the major part of the available funds line) from that available for
FY2013 We do not expect large amounts of free cash like that certified last November will continue to be
certified every fall Traditionally when additional Free Cash materializes it is applied to one-time
expenses such as capital projects or stabilization funds Free cash is built by an excess of actual revenues
over actual expenditures This makes it particularly difficult to project, and the uncertainty in the number
is significant The projection shows overall revenue growth of$7 4M in FY2015 and$8 2M in FY2016
Note that the FY2013 budget and the projections or FY2014-16 contains a $3M surplus due to the
recently recalculated health insurance expense As of publication there has been no discussion on how to
use these surplus funds The recapped FY2013 budget will most likely appropriate the majority of this
48
APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
surplus among both recurring and one-time expense items These decisions will significantly alter the
optimistic picture shown in this projection
A 1% COLA on salaries and wages in FY2014 would impact the Lexington Public Schools, municipal,
and facilities salaries and wages lines by $655K, $200K, and $43K, respectively Similar amounts would
apply to COLAs in FYs 2015 and 2016 COLAs for salaries and wages would increase the total personal
expenses and reduce any surpluses for FY2014, 2015, and 2016 We expect that the actual range of
uncertainty of this bottom line figure considering the universe of possible factors is very roughly one to
three million dollars
REVENUE SUMMARY FY2011 FY2012 FY2013 FY2014 FY2015 FY2016
Actual Recap Budgeted Proj ected Proj ected Proj ected
Property Tax
Previous Year's Levy Limit $115,934,719 $122,259,637 $128,662,664 $133,879,231 $140,219,669 $147,017,964
2%2%Annual Increase $2,898,368 $3,056,491 $3,216,567 $3,346,981 $3,505,492 $3,675,449
New Growth $3,426,550 $3,346,536 $2,000,000 $2,993,457 $3,292,803 $3,622,083
Excess Levy Capacity ($46,950)
Tax Levy $122,259,637 $128,615,714 $133,879,231 $140,219,669 $147,017,964 $154,315,496
State Aid $8,506,691 $8,441,625 $8,441,625 $8,863,706 $9,306,892 $9,772,236
Local Receipts $11,991,001 $9,767,252 $10,188,650 $10,545,253 $10,914,337 $11,296,338
Available Funds $6,819,892 $7,733,170 $8,709,260 $3,710,000 $3,660,000 $3,660,000
Revenue Offsets $(1,687,257) $(2,463,101) $(1,861,713) $(2,045,595) $(1,925,191) $(1,955,823)
Enterprise Funds(Indirect) $1,615,973 $1,564,441 $1,512,892 $1,522,892 $1,532,892 $1,542,892
Total General Fund $149,505,937 $153,659,101 $160,869,945 $162,815,924 $170,506,892 $178,631,140
Other Revenues
Revolving Funds $2 224 936 $2 326 969 $2 416 106 $2 501 441 $2 588 854 $2 676 266
Grants $113,475 $136,920 $136,920 $142,509 $149,378 $156,247
Enterprise Funds(Direct) $17,905,852 $17,748,076 $17,770,196 $18,040,568 $18,260,120 $18,479,671
Exempt Debt $5,871,767 $5,721,833 $6,642,450 $8,555,459 $8,310,046 $8,073,649
Sub-total Other Revenues $26,116,030 $25,933,798 $26,965,672 $29,239,978 $29,308,398 $29,385,834
TOTAL REVENUE $175,621,967 $179,592,899 $187,835,617 $192,205,902 $199,665,290 $208,016,973
EXPENSE SUMMARY FY2011 FY2012 FY2013 FY2014 FY2015 FY2016
Actual Recap Budgeted Proj ected Proj ected Proj ected
Education
Lex Pub Schools Wages $58 026 383 $60 636 052 $64 481 249 $65 448 468 $66 430 195 $67 426 648
Lex Pub Schools Expenses $4,923,330 $5,297,430 $5,543,155 $5,654,018 $5,767,098 $5,882,440
Out-of-District SPED $6,293,813 $7,211,403 $6,603,952 $7,081,518 $7,595,767 $8,149,588
sub-total Lex Pub Schools $69,243,526 $73,144,885 $76,628,356 $78,184,004 $79,793,060 $81,458,676
Minuteman Reg School $1,538,811 $1,702,930 $1,407,979 $1,464,298 $1,522,870 $1,583,785
Sub-total Education $70,782,337 $74,847,815 $78,036,335 $79,648,302 $81,315,930 $83,042,461
Municipal
Municipal Wages $18 552 836 $19 254 851 $19 757 842 $20 014 694 $20 274 885 $20 538 458
Municipal Expenses $8,610,022 $9,553,157 $9,946,811 $10,245,215 $10,552,572 $10,869,149
Sub-total Municipal $27,162,858 $28,808,008 $29,704,653 $30,259,909 $30,827,457 $31,407,607
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APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
FY2011 FY2012 FY2013 FY2014 FY2015 FY2016
Actual Recap Budgeted Proj ected Proj ected Proj ected
Shared Expenses
Benefits&Insurance $28,063,123 $29,684,424 $29,037,728 $29,311,005 $30,308,409 $31,663,079
Debt(within-levy) $4,675,175 $5,002,111 $5,269,343 $5,700,000 $5,700,000 $5,700,000
Reserve Fund $900 000 $900 000 $900 000 $900 000 $900 000
Facilities $9,756,143 $9,274,368 $9,431,663 $9,736,743 $10,072,663 $10,424,039
Sub-total Shared Expenses $42,494,441 $44,860,903 $44,638,734 $45,647,748 $46,981,072 $48,687,117
Capital&Reserves
Cash Capital(inc of roads) $1,983,112 $2,627,174 $4,171,306 $1,617,944 $1,637,142 $1,656,821
Stabilization Fund $710,000
Other(Sr WorkOff OPEB) $829 399 $726 885 $939 096 $545 000 $545 000 $545 000
Sub-total Capital&Reserves $3,522,511 $3,354,059 $5,110,402 $2,162,944 $2,182,142 $2,201,821
Total Oper,Cap&Res $143,962,147 $151,870,785 $157,490,124 $157,718,903 $161,306,601 $165,339,006
Revolving Funds $2,224,936 $2,326,969 $2,416,106 $2,501,441 $2,588,854 $2,676,266
Grants $113,475 $136,920 $136,920 $142,509 $149,378 $156,247
Enterprise Funds
Water $7,651,830 $7,240,820 $7,476,998 $7,523,876 $7,572,670 $7,621,464
Wastewater(Sewer) $8,329,733 $8,155,868 $8,427,970 $8,619,358 $8,782,371 $8,945,383
Recreation $1 834 289 $1 741 388 $1 794 228 $1 807 334 $1 815 079 $1 822 824
Enterprise Capital $90,000 $610,000 $71,000 $90,000 $90,000 $90,000
Sub-total Enterprise Funds $17,905,852 $17,748,076 $17,770,196 $18,040,568 $18,260,120 $18,479,671
Exempt Debt $5,871,767 $5,721,833 $6,642,450 $8,555,459 $8,310,046 $8,073,649
TOTAL EXPENSES $170,078,177 $177,804,583 $184,455,796 $186,958,880 $190,614,999 $194,724,840
FY2011 FY2012 FY2013 FY2014 FY2015 FY2016
Actual Recap Budgeted Proj ected Proj ected Proj ected
BALANCE (DEFICIT) $5,543,790 $1,788,316 $3,379,821 $5,247,021 $9,050,291 $13,292,133
without COLA
COLA Projection BALANCE(DEFICIT)with various COLA rates
1%COLA for schools $655,000 1%COLA $4,349,021 $7,245,311 $10,571,104
1%COLA for municipal $200,000 2%COLA $3,451,021 $5,422,371 $7,795,655
1%COLA for public facilities $43,000 3%COLA $2,553,021 $3,581,471 $4,965,249
1%COLA for all departments $898,0001
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APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
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
municipal 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
activities" and are accounted for on an accrual basis DOR Enterprise Funds Manual (April 2008) An
enterprise 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 may be
operated on a stand-alone basis or subsidized by the General Fund
The Water and Wastewater Enterprise Funds operate on a completely stand-alone basis These funds do
not rely on any tax-levy revenues,but cover their complete operating and capital needs with user charges
and fees The Recreation Enterprise Fund is only partially stand-alone It covers its operating costs with
user charges and fees and contributes to the debt service on certain recreation capital projects (in
particular,the Lincoln Field restoration project) Most recreation capital costs, however, are subsidized by
the General Fund through a combination of within-levy borrowing, Community Preservation Act (CPA)
funding, and debt exclusion funding
Establishing the Enterprise Fund Budgets
At the Annual Town Meeting each year, Town Meeting appropriates a budget for each of the three
enterprise funds for the upcoming fiscal year Later in the year (in the early fall in the case of the Water
and Wastewater Enterprise Funds), user charges are set that are designed, based on projections of usage
for the fiscal year, to be sufficient to cover the appropriations made by Town Meeting to run the
enterprises
Depending on the accuracy of the usage projections, the actual revenue realized by the enterprise during
the year may exceed or fall short of the appropriated amount Any operating surplus must be retained in
reserve in the enterprise fund The funds accumulated in that reserve (referred to as "retained earnings")
may be applied only to meet the capital needs of the enterprise or to reduce user charges Any operating
loss (after applying any accumulated reserves in the fund), must be made up in the succeeding fiscal
year's appropriation
Since FY2007, the Annual Town Meeting Warrant has contained a separate Article for the appropriation
of the enterprise fund operating budgets (previously, appropriations for the enterprise funds were
commingled with those for the General Fund) This presentation makes it easier to understand the
operating budgets of the enterprise funds However, it should be noted that certain indirect costs that are
charged by the General Fund to the enterprise funds (see discussion below) are still appropriated as part
of the municipal operating budget, this year in Article 4 For the complete operating costs of the
enterprise funds, including 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
included in the write-up of this article have been expanded from those presented in the Warrant to show
the indirect as well as the direct costs of the funds Debt service costs for previously approved capital
expenditures are shown in the enterprise fund operating budgets However, it should be noted that
appropriations for capital needs of the enterprises, whether funded by cash or borrowing, are addressed in
separate capital warrant articles
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APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
Appendix C: Revolving Funds
Ordinarily, revenue received by any municipal department must be deposited in the General Fund, and
cannot be expended for any purpose without further appropriation by Town Meeting A revolving fund
allows Town Meeting to dedicate in advance a specific source of anticipated revenue from fees and
charges, on an ongoing basis and without the need for further appropriation, to pay expenses for rendering
the services for which those fees and charges are collected
Revolving funds managed by municipal departments are generally governed by G L c 44, § 53E1/2
(There are also a number of revolving funds managed by the School Department, such as the School
Lunch Fund, which are governed by other statutes and are not within the control of Town Meeting)
Under Section 53E1/2, a municipal revolving fund can be established only by vote of Town Meeting
That authorization must be renewed prior to each succeeding fiscal year The authorization must specify
• the purpose(s)for which monies deposited in the fund may be used
• the source(s) of funds to be deposited
• the board, department or officer authorized to expend monies from the fund
• a limit on the total amount that may be expended from the fund in the ensuing fiscal year
Expenditures may not be made, nor liabilities incurred,in excess of the balance of the fund If a revolving
fund is reauthorized, any balance in the fund may be carried over to the next fiscal year If a revolving
fund is not reauthorized, or if the purposes for which the money in the fund may be spent are changed,the
balance in the fund reverts to the General Fund at the end of the fiscal year unless Town Meeting votes to
transfer the funds to another duly established revolving fund
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APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
Appendix D: Senior Tax Relief
In early 2004,the Board of Selectmen created an ad hoc Tax Deferral and Exemption Study Committee to
explore ways in which the property tax relief available to senior citizens and other needy residents could
be enhanced and made more accessible Since then, Town Meeting has taken a succession of steps to
expand such relief, for the most part maximizing the options that the Town is allowed to adopt under
existing state law and, in some cases, increasing opportunities for tax relief beyond those that would
ordinarily be available under state law
The principal programs for property 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 may deduct $1,000 from their annual property tax, G L c
59, § 5, cl 41C ("the 41C Program"),
• a Community Preservation Act surcharge exemption program, under which low-to-moderate income
homeowners age 60 or over, and low-income homeowners under age 60, may obtain a 100%
exemption from the CPA surcharge on their property tax,
• a locally-controlled Senior Service program, adopted by Town Meeting in 2006 to replace the
preexisting state program, under which low-income seniors may perform volunteer work for the
Town in exchange for a reduction in their property tax, currently up to a maximum credit of$935or a
maximum credit of$1,190 for a two-person household,
• a tax deferral program, under which low-to-moderate-income homeowners age 65 or over may defer
any or all of their property tax due, after applying any available exemptions, up to half the value of
their house, at an interest rate equal to the Town's cost of funds (34% for FY2012 deferrals and 17%
for FY2013 deferrals), until the house is sold or transferred, G L c 59, § 5, cl 41A ("the 41A
Program"), 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 ($729,000
for tax year 2011), may obtain a tax credit on their state tax returns (up to $980 for tax year 2011) for
the amount that their property tax, plus half their annual water and sewer bill, exceeds 10% of their
annual income, G L c 62, § 6(k)
Funding of the Programs
Each of these programs is funded in a slightly different way 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 overlay account and reduce
the amount that may 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 by the
amount of the exemptions The Senior Service program, formerly funded from the overlay, is now funded
as part of the Town's annual budget The 41A deferral program does not affect the amount of revenue that
the Town may appropriate under Proposition 2'/2, and it is essentially revenue-neutral over an extended
period of time,though there may be short-term cash flow implications if deferrals are taken out faster than
they are repaid The Circuit Breaker program is funded entirely by the state
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APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
The 41A Pro2ram and the Home Rule Amendment
Under generally applicable state law, the highest income threshold a Town may adopt for participation in
the 41A program in FY2012 is $52,000 10 However, in 2008, Lexington obtained a home rule amendment
allowing it to expand eligibility beyond that permitted under the existing state law The special act
permits the Town,by vote of Town Meeting and with the approval of the selectmen,to set its own income
limit for deferrals, to lower the age limit (which would otherwise be 65 years of age), and to condition
eligibility for deferral by those under 65 on objective criteria of hardship or disability At the 2011 Annual
Town Meeting, Lexington's threshold was increased from $51,000 to $60,000
The 41C Exemption Pro2ram
For many years, the Town has made available to qualifying seniors an exemption from the property 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 eligibility criteria were quite restrictive Since then, the Town has taken
a number of steps to expand both eligibility and the credit amount
Taking advantage of new local options made available by the legislature in 2002, Town Meeting voted in
2004 to (a) increase the amount of the credit to $750, (b) lower the age of eligibility from 70 to the
minimum of 65, (c) increase the income threshold from $13,000(single)/$15,000(married couple) to the
maximum 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
provisions of G L c 59, § 5, Clause 41D, which automatically adjusts the income and asset limits for
Clause 41C (but not the exemption amount) by a COLA established annually by the Department of
Revenue For FY2012, the income limits are $24,097/$36,148 and the asset limits are $48,195/$66,269
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, by accepting G L c 59, § 5K, to offer residents, age
60 and over, the opportunity to reduce their property-tax obligation by as much as $500 in exchange for
community service 11 Lexington, which had earlier maintained its own program, accepted this statute
shortly 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 hourly credit to the state's minimum
wage, currently $8 per hour In 2006, Town Meeting voted to rescind its acceptance of the statewide
senior property tax work-off program under Chapter 59, Section 5K of the General Laws and to replace it
with a locally controlled program This gave the Town the flexibility to allow participation by persons
under age 60, such as the disabled and handicapped, who might be able to benefit from the program, pay
a wage in excess of the minimum wage, allow a higher amount to be credited against a participant's
property tax bill The most recent set of guidelines, which became effective in FY2008, are as follows
Income eligibility is $46,300 for single taxpayers or$52,950 for a couple, hourly 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 authority to expand eligibility to persons under age
60 who are disabled or handicapped,it has not yet done so
to Pnor to 2008, the highest income threshold towns could adopt under the 41A program was $40,000 In 2008, the
legislature amended Clause 41A generally to pennit towns to adopt an income limit equal to the Circuit Breaker
threshold for a single filer that is not a head of household That threshold was$49,000 for tax year 2008, $51,000 for
tax year 2009, $51,000 for tax year 2010, and $52,000 for tax year 2011 The 2011 Circuit Breaker threshold for a
single filer who is a head of household is$65,000, and the threshold for a married couple filing jointly is$78,000
11 In 2002,the maximum amount of the Section 5K credit was increased to $750 In 2009 it was increased to$1,000,
and the 2010 Municipal Relief Act added a provision allowing towns to adopt a local option to set the limit at 125
hours of service at the prevailing minimum wage (now $8 00 per hour), which would automatically increase the
limit if the minimum wage increases
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APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM&STM
Appendix E: Specified Stabilization Funds
The state statute authorizing towns to create and maintain a stabilization fund, G L c 40, section 5B, was
amended in 2003 to permit the creation of multiple, separate stabilization funds for specified purposes
The creation of such funds, the specification of their purpose, any alteration of their purpose, and any
appropriation into or out of the funds, must be approved by a two-thirds vote of Town Meeting at an
Annual or Special Town Meeting To supplement its general Stabilization Fund Lexington has created
several specified stabilization funds,which are described below
At the 2007 Annual Town Meeting, four specified stabilization funds were established to replace certain
pre-existing special revenue accounts Monies in the special revenue accounts, funded by negotiated
payments from developers, had previously been spent without specific appropriation In order to comply
with Massachusetts Department of Revenue guidelines, and to make the existence and use of the funds
more transparent, monies in the special revenue accounts were transferred to the following specified
stabilization funds,where they are now subject to review and appropriation by Town Meeting
Transportation Demand Management/Public Transportation (TDM/PT) S F Contains payments
negotiated 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
previously contained in the Avalon Bay TDM special revenue account
School Bus Transportation S F Supports daily school bus operations, and was originally funded with
$200,000 contained in the Avalon Bay School Bus Transportation special revenue account
Section 135 Zoning By-Law S F Created to finance public improvements using monies contributed by
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
reserves to help cover unexpected out-of-district special education expenses that exceed budget A related
goal was to enhance transparency around the out-of-district special education budget component by
segregating this expense item and bringing budget overruns to Town Meeting for its approval This fund
was created in FY2009 with an initial appropriation of$350,000 and another $350,000 was appropriated
to the fund at the spring 2009 Annual Town meeting The current target level for this fund is $1,000,000
At the 2009 Annual Town Meeting the Center Improvement District Stabilization Fund was created and
was funded by a $100,000 payment received from the developer of Lexington Place in FY2010 The
funds may be used for projects such as tree planting, sidewalk improvements to the abutting connector
between the parking lot and the sidewalk None of these funds have been appropriated yet
At the 2011 Annual Town Meeting two more funds were created
Avalon Bay School Enrollment Mitigation Fund funded with a $418,900 payment received from Avalon
Bay pursuant to an Education and Trust Fund Escrow Agreement dated May 31, 2006 The terms of that
agreement called for the establishment of an escrow fund in the amount of$750,000 with disbursements
made to the Town annually if the number of students residing at the development (Avalon at Lexington
Hills) exceeded 111 The amount payable per student in excess of 111 is $7,100 This fund is expected to
be depleted in FY2014
Transportation Management Overlay District Fund(TMOD) funded by payments from those developers
who choose to pay a transportation mitigation fee rather than taking responsibility for improving all the
intersections in the area to a certain level as provided in Section 135-43 C of the Zoning Bylaw Per
Section 135-43 C(5)(c) "any transportation mitigation fees paid to the Town are intended to be used to
fund infrastructure improvements that are necessitated by the proposed development of the applicant"
55