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AC
PPROPRIATION OMMITTEE
TL
OWN OF EXINGTON
REPORT TO THE
NOVEMBER 2011 SPECIAL TOWN MEETING
Released November 10, 2011
Appropriation Committee MembersFiscal Year 2012
Glenn Parker, Chair , Vice Chair/Secretary Vice Chair
Robert N. Addelson Mollie Garberg
(ex-officio; non-voting)
Alan Levine
APPROPRIATION COMMITTEE REPORT TO NOVEMBER 2011 STM
Contents
Contents ........................................................................................................................................................ 1
commendations ................................................................................. 2
.......................................................................................................................................................... 3
................................................................................................................................................. 4
................................................................................ 6
Article 2: Appropriate for Bridge and Bowman Schools Reconstruction ........................................ 6
Article 3: Appropriate for Fire Communications System ................................................................ 9
Article 4: Amend FY2012 Operating and Enterprise Fund Budgets ............................................. 10
Amendments to the General Fund Operating Budget ............................................................... 10
Amendments to Water and Sewer Enterprise Fund Budgets .................................................... 12
Article 5: Establish and Appropriate to Specified Stabilization .......................................... 15
Article 6: Appropriate to Stabilization Fund .................................................................................. 16
Article 7: Appropriate for Authorized Capital Improvements ....................................................... 16
Page 1
APPROPRIATION COMMITTEE REPORT TO NOVEMBER 2011 STM
Abbreviations: GF = General Fund; EF = Enterprise Fund; RF = Revolving Fund;
CPA = Community Preservation Act Fund; BAN = Bond Anticipation N;
DSSF = Debt Service Stabilization Fund
An entry of Indefinitely Postpone in the right-hand column merely signifies our expectation.
Arti- Committee
Title
cle Req Recommendation
Appropriate for Bridge and
2 $21,670,000DebtApprove (9-0)
Bowman Schools Reconstruction
Appropriate for Fire
3 $180,000 GF Approve (9-0)
Communication System
Amend FY2012 Operating and
Approve (9-0)
4 ($176,800) GF
Enterprise Fund Budgets
(see article)
Establish and Appropriate to
5 $417,305 (see Article) Approve (9-0)
Specified Stabilization Funds
Appropriate to Stabilization
6 none n/a IP
Fund
$65,000
GF
Appropriate for Authorized
$35,000
7 CPA Approve (9-0)
Capital Improvements
$100,000
Page 2
APPROPRIATION COMMITTEE REPORT TO NOVEMBER 2011 STM
This Preface describes the structure and stylistic conventions used in this r. It is followed by an In-
troduction discussing changes in the Towns financial status since the mostTown Meeting
in May 2011, and issues pertinent to the Towns 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 tn-
siderations or cautions that we feel Town Meeting should be info
committee members are strongly opposed to the majority position, we summarize the opposing perspec-
tive. Each Article discussion concludes with the most recent votication.
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:
, dated February 28, 2011, commonly known as
FY2012 Recommended Budget & Financing Plan
the Brown Book, which documents the complete municipal budget of the Town of Lexington.
The Brown Book also summarizes budget laws and bylaws (Appendix
of financial terms (Appendix D).
commonly known as
Fiscal Year 2012 School Committee Annual Town Meeting Budget Request,
the Blue Book, which details the budget plans for the Lexingto
(November 2011), published by the Town Meeting Members
TMMA Warrant Information Report
Association.
Capital Expenditures Committee (CEC)
Report to the 2011 Special Town Meeting.
Community Preservation Committee
Report to the 2011 Annual Town Meeting.
Acknowledgements
The content of this report, except where otherwise noted, was re
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
new Budget Officer, Theo Kalivas; the Capital Expenditures Committee; the Community Preservation
Committee; the School Committee; the Superintendent of Schools, Paul Ash; the Assistant Superin-
tendent for Finance and Operations, Mary Ellen Dunn; and the Boaunic-
ipal and school staff, Town officials, boards and volunteers who have contributed time and expertise in
support of our work.
Page 3
APPROPRIATION COMMITTEE REPORT TO NOVEMBER 2011 STM
I
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. The report is published and distributed to the members of Town Mting as a printed document
and as an electronic document via the Town website. The Committe
Town Meeting, including recommendations on appropriations and other matters fort-
tees formal position was pending at the time of publication.
DevelopFY2012
Work has proceeded on the design and engineering for the proposed renovations at the Bridge and Bow-
man Elementary Schools. The November 2011 Special Town Meeting (a-
tion of funds for the construction phase of this project under A
exclusion override. Work on the design and engineering for the proposed replacement
School has also proceeded on schedule; however, the appropriatio
not be requested until the annual town meeting next spring since the final cost and the share to be paid by
the Massachusetts School Building Authority (MSBA) have yet to bn-
dum covering both the Bridge and Bowman and the Estabrook projec
Town voters in late January 2012.
The Town endured two significant bouts of severe weather: Hurric
snow storm of October 29. Each produced widespread power outages
and trees. The Board of Selectmen have requested an appropriation under Article 4 to cover some
costs of the recovery.
The Board of Selectmen will also take this opportunity to proposr-
ating and capital budgets under Article 4.
The Town enters this STM with approximately $2,820,000 available for appropriation. This is comprised
of $1,700,000 in revised revenue estimates above those presentedimately
$1,970,000 in reduced expenses, less approximately $650,000 for the FY11 Snow and Ice deficit, and less
$200,000 used to increase the overlay account.
The major driver of the revenue increase is attributable to new
$1,465,000 greater than the original estimate. New growth is subject to final approval b
Revenue which is anticipated in late November or early December e-
lease of the set-aside of $300,000 for the anticipated FY11 Snow and Ice deficit.
The reductions in expenses result from two events. With Town Meeg-
nize a savings of $1,250,000 on town employee health insurance c
to reduced claims in the prior year. The Town will also release the set-aside of $727,628 intended to off-
set any reductions in State Aid for FY12. This set-aside is technically similar to the FY11 Snow and Ice
set-aside, but for presentation purposes it has been treated as an e State Aid was
reduced by only $67,214 and the Town received a supplemental pay
negated this shortfall.
These positive events were modestly offset by a reduction in est
This reduction is driven by a more up-to-date analysis using the actual experience from FY11, but rough-
ly one third of the shortfall ($46,000) resulted from the Schoolreduce school
music fees by 50%.
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APPROPRIATION COMMITTEE REPORT TO NOVEMBER 2011 STM
The FY11 Snow and Ice deficit is $654,053. This amount will be raised without appropriation from avail-
able funds, i.e., without any further action required by Town Me-asides,
including the original $300,000 for the FY11 Snow and Ice budgetcomplish this.
The Overlay Account is an annual budget set-aside required by law to cover the cost of property tax
abatements and exemptions that are awarded to taxpayers during t
year for the Town, which may lead to an increase in these costs, Town staff has recommended increasing
the set-aside by roughly $200,000. The Overlay Account is currently budg
The following table summarizes the sources and changes to funds available for appropriation at Town
Meeting.
Comments
Increased revenue from new growth above budgeted
Property Tax Levy
$1,465,000
projections
State AidReduced State Aid
($67,214)
State Aid Restoration State payment mitigating reduced FY11 State Aid
$93,726
$46,000 reduced school music fees,
Local Receipts
($124,860)
$42,000 municipal receipts, $36,000 fines and forfeits
Available Funds No change in transfers from Available Funds
$0
$300,000 set-aside for FY11 Snow and Ice deficit,
$330,953
and small revisions to Cherry Sheet assessments
Set-aside for potential reductions in State Aid
$727,628
Revenue Offsets
FY11 Snow and Ice Deficit
($654,053)
Increase to Overlay Account
($200,000)
Enterprise Fund Receipts No change in transfers from Enterprise Funds
$0
Surplus from lower than expected increase health
Health Insurance
$1,250,000
insurance costs ()
requires appropriation
TOTAL $2,821,180
As of publication, our Committee is aware of proposals for approximately $1,320,000 in new and/or sup-
plemental appropriations from the General Fund to fund capital projects, and to make adjustments in the
Towns operating budget. If these appropriations are all approve1,700,000 will remain
available.
Any unappropriated funds will flow to Free Cash at the end of FY12 and beca-
tion after Free Cash is certified in the fall of 2012 (mid-FY13). Town Meeting would be then able to ap-
propriate them during FY13 at a fall 2012 Special Town Meeting (if necessary) or for the FY14 budget at
the 2013 Annual Town Meeting.
Free Cash for FY11 has been certified at approximately $8.1 mill
appropriation in the upcoming FY13 budget.
Details about proposed appropriations are covered in the article discussions that follow.
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APPROPRIATION COMMITTEE REPORT TO NOVEMBER 2011 STM
Committee
Recommendation
$21,670,000 Approve (9-0)
In 2006 and 2009 and in earlier years, the Lexington Public Schools adopted strategic facility master
plans to guide the process of renovating current facilities and building new facilities. The objective of
each plan was to ensure that the facilities adequately support the School Systems educational program
goals.
The 2009 Facility Master Plan identified the Bridge and Bowman Elementary Schools, among others, as
buildings that require significant capital investment. The Bridge and Bowman buildings are 45 and 44
years old, respectively. Many of the building systems have not been updated since the original construc-
tion. Evaluation during the master planning found that the basic struc
most part sound, and that there is no need to replace them. However, the roof of the Bowman School and
the HVAC and other mechanical systems of both schools are at or beyond their useful lives and it was
recommended that they be replaced to maintain the schools in a condition suitable for education.
The School Committee followed up on the Master Plan in 2010 by requesting that design funds be appro-
priated, and that the Department of Public Facilities and the Permanent Building Committee suppor
development of detailed plans, for the renovation of Bridge and Bowman. At the 2010 Annual Town
Meeting, $750,000 in Design and Engineering (D&E) monies was appropriated to plan for renovations
that would extend the useful lives of the buildings by about 10 . This plan, called the base scope,
covers a new roof for Bowman, and new windows, HVAC systems, boilers, andhandi-
capped accessibility in both buildings.
Later in 2010, the School Committee voted to enlarge the scope ofor Bridge and
Bowman to extend the useful lives of the buildings for 20 to 25 years, rather than just 10 years, and to
1
address overcrowding concerns. The enlarged scope includes all the items in the base scope and adds:
the installation of sprinklers; floor plan changes to address security and administrative needs; upgraded
plans for HVAC and lighting systems; the conversion of existing spaces to classrooms (four in each
building); and new small-group instructional spaces in each school. The 2011 Annual Town Meeting ap-
propriated $280,000 to augment the previously appropriated D&E monies so that the design could address
the enlarged scope.
The design process has proceeded, and the School Committee is now requesting appropriation of the
funds necessary to carry out the project. As of the time of writing, the total estimated project cost is ap-
proximately $22,639,000. This total includes contingencies, i.e., amounts to cover cost increases in case
the bids received or the actual costs of construction exceed the estimates. It also includes the
$1,030,000 previously appropriated for D&E costs. This article requests an appropriation of $21,670,000,
the difference of the total estimated cost less the prior appropriation, rounded up for purposes of borrow-
ing. The appropriation will be contingent upon the passage of a debt exclusion override referendum to be
held in January 2012. Details of the project financing are described below.
1
As of August 31, 2011, Bowman had 517 students and Bridge had 513 students enrolled. Each school has 24
classrooms. Currently the schools are over their designed capacity, and teachers rooms and closets have been
converted for use as programmatic spaces.
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APPROPRIATION COMMITTEE REPORT TO NOVEMBER 2011 STM
The Capital Expenditures Committee report provides additional information and perspective on the ra-
2
tionale for and composition of the project. The report is available on the Town website.
As noted above, Town Meeting has already appropriated a total of $1,030,000 for D&E work in prepara-
tion for the construction phase of the project. The Town has raised these funds through short-term bor-
rowing; these funds have largely been spent or committed in preparing project plans,s-
timates, etc. If Town Meeting appropriates the construction funds and the debtsion referendum is
successful, the short-term notes will be re-characterized as exempt debt and both the principal and interest
will be fully repaid in FY13 outside the tax levy. If the project does not receive the necessary Town Meet-
ing and referendum approvals, the notes will be rolled over and the debt will be repaid over multiple years
within the levy.
If Town Meeting approves this Article and the exclusion of the p
$21,670,000 in funds needed for the construction phase would be raised through the issuance of twenty-
year bonds. The first payment on these bonds would be due in FY14. Principal payments would be con-
stant through the life of the bonds. The first interest payment e sub-
sequent payments would then decrease over the 20-year period. Payments would continue through
FY2033. The projections shown below assume an interest rate of 4
successful bond offerings completed by the Town.
Table 1 shows the Towns estimated debt service payments for the first 10 years of a 20-year term. The
table includes data for the Bridge and Bowman projects as well as the pending Estabrook reconstruction
project that will not be considered by Town Meeting until the 2012 Annual Town Meeting. Taxpayers
would see the greatest financial impact in FY14 and declining impact from this debt over the 20 years.
Existing
Fiscal Bridge/Bowman Estabrook
Exempt Debt Total
Year Debt Service Debt Service
Service
2012 $5,728,255 $5,849,706
2013 $4,792,384 $1,049,000* $5,841,384*
2014 $4,663,204 $1,950,300 $2,295,000 $8,908,504
2015 $4,324,377 $1,906,960 $2,244,000 $8,475,337
2016 $4,189,516 $1,863,620 $2,193,000 $8,246,136
2017 $3,672,145 $1,820,280 $2,142,000 $7,634,425
2018 $3,540,570 $1,776,940 $2,091,000 $7,408,510
2019 $3,303,431 $1,733,600 $2,040,000 $7,077,031
2020 $3,151,065 $1,690,260 $1,989,000 $6,830,325
2021 $2,977,522 $1,646,920 $1,938,000 $6,562,442
2022 $2,869,925 $1,603,580 $1,887,000 $6,360,505
2023 $2,750,703 $1,560,240 $1,836,000 $6,146,943
Notes:
(1) * Includes repayment of $1,030,000 in principal and approximately $19,000 in interest on the short-term debt issued for the
Bridge/Bowman D&E.
(2) The Estabrook debt service was estimated assuming a loan of $25,500,000 (total cost less Massachusetts School Buil
Authority reimbursement) over 20 years with a 4% interest rate.
Table 2 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
tax bill that could be attributed to the exempt debt for a resident whose property was assessed at $697,000
in FY11. The total tax bill in FY11 for this average taxpayer was $9,936.
2
CEC Report to the 2011 STM -
http://www.lexingtonma.gov/towngovernment/CECfinalReport2011STM.
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APPROPRIATION COMMITTEE REPORT TO NOVEMBER 2011 STM
Table 2 shows that in FY14, the combined Bridge/Bowman project would have an estimated c
$153 to the average taxpayer, and the Estabrook project would have an estimated cost of $181. If both the
Bridge/Bowman and the Estabrook projects are approved, the total
This amount added to the $362 for existing for exempt debt service in FY14 would total $696. The total
exempt debt service would decline thereafter as illustrated in t, unless and until additional
excluded debt projects, such as the proposed reconstruction of tpproved in the
future.
Table 2
Existing
Fiscal Year Exempt Debt Bridge/Bowman Estabrook Total
Service Debt Service Debt Service
2012 $460 $460
2013 $377 $83 $460*
2014 $362 $153 $181 $696
2015 $342 $146 $174 $662
2016 $328 $146 $174 $648
2017 $286 $139 $167 $592
2018 $279 $139 $167 $585
2019 $258 $139 $160 $557
2020 $244 $132 $153 $529
2021 $237 $125 $153 $515
2022 $223 $125 $146 $494
2023 $216 $125 $146 $487
* See notes on Table 1.
The estimates for the impact of exempt debt service listed above
The Bridge and Bowman renovation project, as envisioned in the ri-
ately targeted to meet the educational needs of each school by remedying key deficiencies ind-
ing systems and relieving overcrowding. The plan would achieve ap-
grading of basic systems which are in present need of replacemen ongoing repair re-
quirements and negative impact on the educational program. Both n-
dows are original to the buildings and well beyond their project
Bridge is also original, and the Bowman roof needs to be replaced. In past years, classrooms have b
closed due to roof leaks and the heating and ventilating systems have operated unreliably.
The project will also address the overcrowded conditions by creating four ad-size classrooms
within each school and by making more efficient use of space within each school. The new classrooms
Page 8
APPROPRIATION COMMITTEE REPORT TO NOVEMBER 2011 STM
will be used for activities that require classroom-size spaces but that are currently being performed under
non-ideal conditions in smaller rooms. The project will include renovation of the modular classrooms at
Bowman and will also provide for improved safety, security, and accessibility at
Finally, the renovation should have a positive impact on currentefficient
systems are expected to provide long-term savings in energy usage and associated costs estimated at
$50,000 per year per building at current energy prices. It is our understanding that there is no plan to in-
crease staff when the project is completed on account of the reconfigurations of space.
Considering the present needs, the risks associated with postponand the current favorable con-
struction market and low interest rates, renovating the schools The consequences of post-
poning a comprehensive renovation of these two buildings could incld-
dition to unpredictable failures in aging building systems. A mastlier
renovations, and the educational program would likely be severely disrupted in the meantime. In addition,
unexpected and significant repair costs would generally be paid p-
tion to finance a major repair through excluded debt might not be available.
A decision to renovate the existing Bridge and Bowman School buildings rather than n-
sible, even though new buildings would have many obvious advantad-
ing would likely be comparable to the cost of replacing Estabroo, which is currently estimated at
roughly $35,000,000. The prospects of receiving State reimbursem
Bowman are unlikely for a number of reasons, and there is no expm-
prove in the foreseeable future. Thus, the net cost to the Lexington taxpayer of repla
and Bowman buildings ($70,000,000) would be more than three time
project (approximately $22,000,000) that will result in extendin useful lives of the two buildings by
20 to 25 years. Both the justification of full replacement of thsing
$70,000,000 or more are doubtful at best.
Recommendation
The Appropriation Committee considers the renovation of both Bridge and Bowman School buildings to
be the most fiscally prudent way to preserve and leverage our ca
schools. If the project is not carried out, there will be signifthat
could disrupt the operation of the schools, require emergency ex
total cost over the long term of maintaining these buildings. Furthermore, the overcrowded conditions of
the buildings would not be addressed this would undoubtedly continue to have some impact, even if
hard to quantify, upon the educational programs in these buildings. This also appears to be an opportune
time for the Town to get good value for its construction dollars.
recommends approv (9-0).
Committee
Recommendation
$180,000 GF Approve (9-0)
The current radio system presents a life safety risk to firefighy because it does not
meet the needs of the Fire Department. The Fire Department began
2006 in an attempt to comply with upcoming FCC regulations and i
aid departments. The change in frequency and power transmission resulted in a loss in coverage both i
the street reception and efforts to communicate from within buil
copper lines which often cause interference and render the systeeventing the officer or
firefighter from being able to speak to the dispatch center.
Page 9
APPROPRIATION COMMITTEE REPORT TO NOVEMBER 2011 STM
There have been other failures during severe weather due to down
are only partially addressed by the updates proposed here.
A local consultant and two engineering resources evaluated the system and
existing receivers with hardware by the same manufacturer as the
allowing better programing and troubleshooting capabilities. To improve coverage in weaker areas, two
new repeater sites are recommended. To reduce radio interference
replaced with fiber optic lines beginning with the installation at Estabrook School. Equipment currently
housed in the attic space of the Harrington Administration building willg-
ton School for better climate control of the equipment.
This is a stopgap measure. We anticipate a request for a comprehrgen-
cy communication infrastructure in FY13, with requests for addition
follow. However, given the present risks created by an unreliabl
to begin addressing this now instead of waiting until the 2012 Annual Town Meeting.
-0).
Committee
Article 4: Amend FY2012
Recommendation
($376,800)
Approve (9-0)
GF
(see below)
(see below)
This Article is routinely included on the Warrant for Special Town Meetings to give Town Meeting an
opportunity to make adjustments and/or additions to the previousr-
prise fund budgets for the current fiscal year (FY12).
The vote to recommend approval was unanimous (9-0) for all items in this request, except for the pro-
posed appropriation of $20,000 to Town Manager Expenses for a Police Sergeant Assessment Center.
The vote for this item was (8-1).
Amendments to the General Fund Operating Budget
The following table provides a summary of the anticipated proposals for operatdments as
of publication. A more detailed discussion follows. Note that the-
duction in Health Insurance costs, resulting in a net reduction in the operating budget
Page 10
APPROPRIATION COMMITTEE REPORT TO NOVEMBER 2011 STM
Comments
Potential FY12 Snow and Ice spending in excess
Reserve Fund
$350,000
of current budget
Human Services Expenses Veterans Benefits have increased substantially
$100,000
Human Services Salary State-mandated Veterans Agent
$30,000
Community Development Expenses Consulting services for Noise Bylaw enforcement
$5,000
Town Clerk Expenses Special Election for Debt Exclusion
$20,000
Community Development Salaries Recording Secretary Historical Commission
$1,800
Fire Dept. Expenses Emergency repairs to Ladder truck
$60,000
Facilities Dept. Expenses Revise budget for sewer fees; higher price for oil
$36,400
Legal fees for Assessing Dept., Appellate Tax
Finance Expenses
$50,000
Board cases
Town Manager Expenses Police Sergeant Assessment Center
$20,000
Department of Public Works October 2011 Storm Cleanup
$200,000
TOTAL APPROPRIATIONS $873,200
Health Insurance Reduced budget based on lower Health Insurance
($1,250,000)
costs
NET BUDGET DECREASE ($376,800)
As snow removal costs have increased, and the Town has experiencccount that
can be financially disruptive, there is a general consensus that it would be prudent to set aside additional
funds for this purpose. However, the chaotic history of the Snow and Ice budget establis
of forecasting the required amount from year to year. While it iable amount to
cover the maximal expense, State law only allows the Town to run
amount budgeted for snow and ice removal was not decreased from The ability to run a
deficit is preserved by avoiding a future situation where the snow and ice budget would need to be de-
creased. Town staff have therefore recommended appropriating an
Fund in place of augmenting the snow and ice budget as an additicus-
tomary $300,000 revenue set-aside) to hedge against the risk of a sizeable shortfall in the
Ice budget.
The Town is obligated by law to provide Veterans Assistance on e-
ment from the State for any financial assistance it renders. The budget for Vet
was $100,186, which includes the costs of assistance payments an
we noted in our previous report, the demand for Veterans Assistance has been accelerating and the Town
is already spending slightly ahead of the projected rate. This rr-
ans Assistance sufficient to cover the needs for the rest of FY
Veterans Agent
The State recently mandated that all municipalities with over 12,000 residents must hir-time Veter-
ans Agent. The Town currently uses part-time staffing to administer Veterans Assistance and the level
of demand in Lexington does not necessitate a full-time position. The Town has appealed to the Attorney
General for an exemption to this requirement, nevertheless this
budget pending a decision regarding the exemption.
Page 11
APPROPRIATION COMMITTEE REPORT TO NOVEMBER 2011 STM
Special Election
The original FY12 budget covered the costs of two elections: the Annual Town Election and the March
Presidential Primary. Moving the Town Election to the same time/date as the Presidentis-
day, March 6, 2012) will save the town approximately $15,000.
The Debt Exclusion Election planned for January 2012 was not part of the FY12 budget and is projected
to cost $35,000. The additional $20,000 requested is the difference between the total cost of the debt ex-
clusion and the anticipated savings from conducting two elections at the same time.
Legal Fees
The Town is currently litigating multiple cases before the Appelrequire legal
representation that was not anticipated when the legal budget was adopted at the 2011 Annual Town
Meeting. A supplemental appropriation of $50,000 is estimated to be sufficient to cover these litigation
costs.
Police Sergeant Assessment Center
An Assessment Center is a formal examination process used to establish a Civil Service list to select a
Police Sergeant. It substitutes for the traditional written exam process used by the Civil Service. The cost
is driven by the number of candidates who apply and the number of professional assessors needed to con-
duct the examinations. Estimates from two consulting firms were used to derive the $20,000 request.
The Police Chief anticipates a retirement in the spring of 2012. Due to contractual language, the Town
must begin the RFP process for selecting a consultant to perform this examination six months in advance.
The early winter storm has put a strain on the budget for the Department of Public Worke-
partment of Public Facilities. Since we are only just entering t
to add $200,000 to the DPW budget to cover these extraordinary cw is a prudent one so that we are
better prepared for the coming months.
Amendments to Water and Sewer Enterprise Fund Budgets
The paragraphs immediately below describe the three categories oFY12
water and sewer enterprise budgets previously approved at the 2011 Annual Town Meeting.
1. As is customary, the MWRA water and sewer expense line items in r-
Housekeeping Changes.
prise fund budgets approved at the 2011 Annual Town Meeting were
published early in the year by the MWRA. The rates set by the Board of Selectmen on October 24, 2011
were based on final assessments that the MWRA published in June. Town Meeting is now requested, as a
housekeeping matter, to amend the original MWRA estimates to reflect the final assessments, as follows:
FY12 MWRA Assessments
Final
$5,012,091 $5,049,999 $37,908
Water
$6,866,826$6,802,875 ($63,951)
Sewer
$11,878,917 $11,852,874 ($26,043)
Combined
2. . The FY12 water and sewer enterprise fund budgets presented at the
Revision of Debt Service Costs
2011 Annual Town Meeting contained estimates of certain anticipa
is now asked to amend the original budgets to reflect the actuald after the
issuance of bonds in February and notes in June. The original se
include approximately $170,000 in debt service cost for an inter-free MWRA loan for a project target-
Page 12
APPROPRIATION COMMITTEE REPORT TO NOVEMBER 2011 STM
3
ing the elimination of infiltration and inflow (I/I) into the sewer system. The proposed adjustments to
debt service, which were taken into account this fall in settingFY12 water and sewer rates, are as fol-
lows:
FY12 Debt Service Costs
$1,202,906 $1,258,968 $56,062
Water
$683,223$879,713 $196,490
Sewer
3. Continuing a practice that has now been followed for
Appropriation of Additional Retained Earnings.
several years, a portion of the certified retained earnings in brprise funds
$450,000 from the water fund and $300,000 from the sewer fund was appropriated at the 2011 Annual
Town Meeting to provide rate relief, i.e.,to lower the increase in the FY12 water and sewer rates that
would otherwise be required to cover anticipated increases in operating and capital costs.
At this falls rate-setting, faced with an unexpectedly large proposed rate increasethe Board of Select-
men voted to mitigate that increase by applying an additional $2om the wa-
ter enterprise fund, above and beyond the amounts already approp
bringing the total retained earnings draw to $650,000 from the w
fund. This had the effect of lowering the necessary water rate increase from 7.3% to 3.9% and the com-
bined water and sewer rate increase from 12.8% to 11.8%. Town Me
additional retained earnings required to implement that decision
Given a recent history of relatively modest water and sewer rate increases, the much larger incre
year received some publicity and may have come as a surprise to a-
nation of why this years water and sewer rate increase was unex
As reflected in the table below, increases in water and sewer rates
years until this year averaging only about 1.5% per year, well below t
assessments and Town operating costs, which together have averaged about 4% per year.
Combined Water/Sewer Cost and Rate Increases
FY07 FY08 FY09 FY10 FY11 FY12
7.0% 0.9% 6.9% 3.0% 3.9% 6.3%
MWRA Cost
10.3% -6.7% 5.7% 2.9% 1.9% 4.7%
Town Cost
8.1% -1.63% 6.5% 2.9% 3.3% 5.8%
Total Cost
6.6% 0.0% 2.9% -3.8% 1.7% 11.8%
Rates
Several factors have combined to keep the rate increases low during this time period:m-
ination of PILOT payments to the general fund (begun in FY07 and completed in FY10); (2) the gradual
reduction of indirect costs paid to the general fund to more closely reflect the enterprise
Town services (begun in FY07 and to be completed in FY12); (3) the shift of capital expenditures from
largely cash capital to largely borrowing, which has had the effect of temporarily reducing capital costs;
(4) earlier reliance on a conservative set of usage assumptions resulting in-than-
projected revenue, boosting the funds retained earnings; and (5) the initiation of
3
Debt service attributable to the same MWRA loan, in the amount of approximately $140,000, was also omitted
from the FY11 budget and in FY11 rate-setting. This cost was effectively covered by the sewer enterprise funds
retained earnings during FY11, even though not appropriated, and the retained earnings balance in the sewer fund as
of the end of FY11 (see Table below) is net of that amount.
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APPROPRIATION COMMITTEE REPORT TO NOVEMBER 2011 STM
4
FY07 of appropriating at the annual town meeting some of the resulting exc to
lower those balances and provide rate relief, as shown in the ta
Retained Earnings: Appropriations for Rate Relief and Year-End Balances
5
FY07 FY08 FY09 FY10 FY12
FY11
Water
$500,000 $362,570 $463,046 $525,000 $450,000 $450,000
Rate Rel. App.
$2,496,655 $2,537,249 $2,113,729 $1,622,052 $1,950,000
End Balance
Sewer
$0 $0 $0 $625,000 $400,000 $300,000
Rate Rel. App
$2,137,540 $2,763,179 $1,831,967 $1,525,612 $1,120,000
End Balance
Combined
$500,000 $362,570 $463,046 $1,150,000 $850,000 $750,000
Rate Rel. App.
$4,634,195 $5,300,428 $3,945,696 $3,147,664 $3,070,000
End Balance
Since many of these rate-suppressing factors were temporary in nature, they could not keep rate increases
low indefinitely. In fact, the 1.7% combined rate increase adopt
to a rate-setting error. When the FY11 rates were set in the fall of 2010,
been used to set rates for FY07 through FY10 were updated to reflect the average of actual usages over
the previous six years. However, an inadvertent error in the int
an overstatement of water and sewer usages at the higher rate tiers (Tiers 2 and 3) and an understatement
6
of the usage projected at the lowest rate tier (Tier 1). As a consequence, revenues for FY11 (except for
irrigation water revenues) came in lower than projected.
As of the end of FY11, the sewer fund experienced an operating deficit that effectively was drawn from
that funds retained earnings. The water fund would have experie
billings came in substantially over projection due to the hot and dry summer of 2010, which more than
7
offset the loss.
Because the FY1l rates would have been inadequate to cover the c
fund in a year with average rainfall, using corrected usage projc-
tively had to be set high enough to make up for this shortfall and account for
Although the projected MWRA and Town costs collectively increase
FY12, the rate increases necessary to break even (even after therate subsidies of $450,000 from water
4
Although the Board of Selectmen has yet to adopt a policy for re
Town Manager has suggested that an appropriate target of retained earnings to maintain for emergency purposes
would be about 15% of the annual budget, or approximately $1,000
5
Retained earnings balances as of the end of FY11 are estimated. FY12 appropriations are before the $200,000
supplemental water fund appropriation requested in this article.
6
When bills are prepared for the owners of multi-unit dwellings, which are typically serviced by a single meter,
has been the Towns practice to override the tier allocations automatically generated by the MUNIS accounting
system and to re-calculate the bill as though each resident of the dwelling had a
water and sewer charges that might be passed on to building tena When the historical usage data was extracted
from the MUNIS system, it was not adjusted to account for this p
7
The sewer enterprise fund had a reported loss for FY11 of $409,791 (an $809,791 operating deficit excluding the
$400,000 subsidy appropriated from retained earnings at the 2010 annual town meeting). The water enterprise fund
had a reported surplus for FY11 of $879,988 (a $429,988 operating surplus excluding the $450,000 subsidy
appropriated from retained earnings at the 2010 annual town meet On a combined basis, the water and sewer
enterprise funds had a nominal surplus of $470,197 but incurred an operating deficit of $379,803 after excluding the
$850,000 in rate subsidies from retained earnings.
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APPROPRIATION COMMITTEE REPORT TO NOVEMBER 2011 STM
retained earnings and $300,000 from sewer retained earnings apprt-
ing) were 7.3% for water and 15.8% for sewer, or a combined ratea-
tion of the additional $200,000 in water retained earnings voted by the Board of ober
24, 2011, the final rate increases set for FY11 (and that have a
were 3.9% for water and 15.8% for sewer, or a combined rate incrase of 11.8%.
-0).
Committee
Recommendation
$417,305 (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. T
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 sta
Creating these funds, altering their specified purpose, and appropriating into or out of them, requires a
two-thirds vote of Town Meeting. At the 2007 Annual Town Meeting, four Specified Stabilization Funds
were established to replace certain pre-existing special revenue accounts.
The amounts and sources for the Specified Stabilization Funds re
the following table:
Traffic Demand Management/Public
Cubist Pharmaceuticals
$10,500
Transportation SF
Traffic Mitigation SF Cubist Pharmaceuticals
$28,500
Avalon Bay School Enrollment
Avalon Bay
$378,305
Mitigation SF
Contains payments negoti-
Transportation Demand Management/Public Transportation (TDM/PT) S.F.:
ated with developers to support the operations of Lexpress. A $10,500 payment from Cubist Pharmaceu-
ticals, as described in Article 3 of the 2009 Fall Special Town
Contains payments negotiated with developers to support traffic mitigation
Traffic Mitigation (TM) S.F.:
projects, such as improvements to signals and pedestrian access intersections, including funds previous-
ly contained in the Avalon Bay TDM special revenue account. A $28,500.01 payment from Cubist Phar-
maceuticals, as described in Article 3 of the 2009 Fall Special Town Meeting, will
fund.
Contains payments received from Avalon Bay pursuant to
Avalon Bay School Enrollment Mitigation S.F.:
an Education and Trust Fund Escrow Agreement dated May 31, 2006 and can be used by the Lexington
Public Schools. The final $378,305.59 payment from Avalon Bay will be transferred to this fund.
-0).
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APPROPRIATION COMMITTEE REPORT TO NOVEMBER 2011 STM
ng Committee
Article 6: Appropriate to
Recommendation
none n/a IP
This Article is routinely included on the Warrant to give Town M
funds to the Stabilization Fund, which is the Towns rainy dayt
helps to ensure the stability and reliability of the Town financ
Stabilization Fund requires a two-thirds majority vote of Town Meeting.
The current balance of the Stabilization Fund is approximately $
There is no proposal to appropriate to the Stabilization Fund at
anticipate that this Article will be indefinitely postponed.
Committee
e Recommendation
$65,000
GF
Improvements
$35,000
CPA Approve (9-0)
$100,000
This Article is routinely included to give Town Meeting the oppoa-
tions for capital projects that have been authorized previously by Town Meeting.
The 2011 Annual Town Meeting appropriated $125,000 of General Fu
a project that would improve the traffic pattern for school buse
The project had two components: (a) corrections to the vehicle travel lanes ant-
ing of 700 feet of sidewalk to enhance pedestrian safety. Bids for the full projx-
pected, so only the first part of the project proceeded. This left $20,000 from the initial appropriation,
which was insufficient for the sidewalk component. This Article
$65,000 for a total of $85,000 to fund the sidewalk component of000
in costs plus a $10,000 contingency.
The 2010 Annual Town Meeting appropriated $100,000 under Articler-
vation Project using CPA funds. This project would convert an exom into a fireproof,
climate-controlled vault for the storage of Town and Library archives. B
$130,000 $163,000. The Public Facilities Department is exploring ways to
they are also seeking an additional $4,151 for archival shelving that was not in the original
specifications. The Community Preservation Committee has recommended an additional $
funds to complete the project. Town Meeting approval is requiredhese funds and allow
the project to move forward.
-0).
Page 16