HomeMy WebLinkAbout2022-03-28-AC-ATM-STM-rptrev APPROPRIATION COMMITTEE
TOWN OF LEXINGTON
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REPORT TO THE
2022 ANNUAL TOWN MEETING, AND
2022- 1 SPECIAL TowN MEETING
RELEASED MARCH 21, 2022
APPROPRIATION COMMITTEE MEMBERS
Glenn P. Parker, Chair • Sanjay Padaki, Vice Chair• Alan Levine, Secretary
Carolyn Kosnoff(ex officio; non-voting) • Anil A. Ahuja • John Bartenstein
Eric Michelson • Meg Muckenhoupt• Lily Manhua Yan
2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
Table of Contents
Summary of Warrant Article Recommendations . u u . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
Prefaceuu . . . . . u . . . . u . . . . u . . . . u . . . . u . . . . u . . . . 0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Warrant Article Analysis and Recommendations . . . . . . . . . . . . 6
2022-1 SPECIAL TOWN MEETING
Article 2 Appropriate for 1575 Massachusetts Avenue/Police Station Replacement 6
2022 ANNUAL TOWN MEETING
Article 4 Appropriate FY2023 Operating Budget 6
Article 5 Appropriate FY2023 Enterprise Funds Budgets 17
Article 6 Appropriate for Senior Services Program 22
Article 7 Climate Action Plan 23
Article 8 Appropriate for Comprehensive Plan Implementation 23
Article 9 Establish and Continue Departmental Revolving Funds 24
Article 10 Appropriate the FY2023 Community Preservation Committee Operating Budget and CPA
Projects 25
Article 11 Appropriate for Recreation Capital Projects 29
Article 12 Appropriate for Municipal Capital Projects and Equipment 29
Article 13 Appropriate for Water System Improvements 30
Article 14 Appropriate for Wastewater System Improvements 31
Article 15 Appropriate for School Capital Projects and Equipment 33
Article 16 Appropriate for Public Facilities Capital Projects 34
Article 17 Appropriate to Post Employment Insurance Liability Fund 34
Article 18 Rescind Prior Borrowing Authorizations 35
Article 19 Establish,Amend, Dissolve and Appropriate To and From Specified Stabilization Funds 35
Article 20 Appropriate for Prior Years' Unpaid Bills 36
Article 21 Amend FY2022 Operating, Enterprise and CPA Budgets 37
Article 22 Appropriate for Authorized Capital Improvements 38
Article 23 Appropriate From Debt Service Stabilization Fund 38
Article 24 Adjust Retirement COLA Base for Retirees 38
Article 25 Appropriate for Worthen Road Recreation and Education District Land Use Concept Plan 40
Article 26 Appropriate for Nexus Studies 41
APPENDICES
Appendix A: 5-Year Budget Projections 42
Appendix B: Enterprise Funds 49
Appendix C: Revolving Funds 50
Appendix D: Tax Relief Programs 51
Appendix E: Specified Stabilization Funds 54
Appendix F: Other Post Employment Benefits 56
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
Summary of Warrant Article Recommendations
Abbreviations
EF Enterprise Fund CPA Community Preservation Act
GF General Fund DSSF Debt Service Stabilization Fund
RE Retained Earnings IP A motion to Indefinitely Postpone is expected
RF Revolving Fund TDM Traffic Demand Management
2022-1 SPECIAL TOWN MEETING
Art- Funds Funding Committee
icle Title Requested Source Recommendation
2 Appropriate for 1575 Massachusetts $ 32,400,000 GF Debt Approve (8-0)
Avenue/Police Station Replacement
2022 ANNUAL TOWN MEETING
Art- Funds Funding Committee
icle Title Requested Source Recommendation
4 Appropriate FY2023 Operating Budget See below See below Approve (8-0)
Appropriate FY2023 Enterprise Funds $ 11,127,383 Water EF
5 Budgets 10,953,238 Wastewater EF Approve (8-0)
$ 3,138,993 Recreation EF
6 Appropriate for Senior Services Program $ 15,000 GF Approve (8-0)
$ 20,570 Free Cash
7 Climate Action Plan $ 30,000 See below Approve (8-0)
$ 50,570
8 Appropriate for Comprehensive Plan None N/A 1P
Implementation
9 Establish and Continue Departmental See below RF Approve (8-0)
Revolving Funds
Appropriate the FY2023 Community [a-j,l-n] Approve
10 Preservation Committee Operating Budget See below CPA (8-0);
and CPA Projects [k] IP
11 Appropriate for Recreation Capital $ 95,000 Recreation EF Approve (8-0)
Projects Ret'd Earnings
12 Appropriate for Municipal Capital $ 14,016,091 See below Approve (8-0)
Projects and Equipment
$ 600,000 Water EF Rates
13 Appropriate for Water System $ 1,600,000 Water EF Ret'd Approve (8-0)
ImprovementsEarnings
$ 2,200,000
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
2022 ANNUAL TOWN MEETING
Art- Funds Funding Committee
icle Title Requested Source Recommendation
$ 1,500,000 Wastewater EF
Debt
Appropriate for Wastewater System $ 1,220 000 Wastewater EF
14 Improvements Ret'd Earnings Approve (8-0)
$ 300,000 Wastewater EF
Rates
$ 3,020,000
15 Appropriate for School Capital Projects $ 1,343,006 GF Approve (8-0)
and Equipment
16 Appropriate for Public Facilities Capital $ 2,611,940 See below Approve (8-0)
Projects
$ 1,179,721 Free Cash
Appropriate to Post Employment $ 750,000 Tax Levy
17 Insurance Liability Fund $ 2,761 Water EF Approve (8-0)
$ 3,004 Wastewater EF
$ 1,935,486
18 Rescind Prior Borrowing Authorizations None N/A Approve (8-0)
Establish,Amend, Dissolve and
19 Appropriate To and From Specified See below See below Approve (8-0)
Stabilization Funds
20 Appropriate for Prior Years' Unpaid Bills $ 6,262 Set-Aside for FY22 Approve (8-0)
21 Amend FY2022 Operating, Enterprise and See below See below Approve (8-0)
CPA Budgets
22 Appropriate for Authorized Capital None N/A IP
Improvements
23 Appropriate From Debt Service $ 191,000 DSSF Approve (8-0)
Stabilization Fund
24 Adjust Retirement COLA Base for None N/A Approve (8-0)
Retirees
Appropriate for Worthen Road Recreation
25 and Education District Land Use Concept None N/A IP
Plan
26 Appropriate for Nexus Studies $ 75,000 GF unreserved Approve (8-0)
in
2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
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 previous annual town meeting, along with 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
report references several appendices at the end of this document that provide a deeper explanation of particular
financial issues.
The discussion for each article presents the prevailing view of the Committee, as well as any other considerations or
cautions that we feel Town Meeting should be informed of If one or more Committee members are strongly
opposed to the majority position, we summarize the opposing perspective. Each article discussion concludes with
the most recent vote of the Committee prior to publication. The vote is summarized by the number of members in
favor, followed by the number of members opposed, and lastly (when applicable) the number of members
abstaining, e.g., "(6-2-1)"indicates six members in favor,two opposed, and one abstaining. It is not always possible
to collect a complete vote for every article from nine voting members. In such instances, the total number of votes
and abstentions published will be less than nine. For convenience, Committee votes are also summarized on the
preceding pages.
This report does not replicate information readily available to Town Meeting members elsewhere. Key documents
that inform our analysis and provide a more thorough picture of the Town finances are:
• The Town Manager's Fiscal Year 2023 Recommended Budget & Financing Plan (the "Brown Book"),
dated February 28, 2022, fully describes the annual budget of the Town. The Brown Book also summarizes
budget laws and bylaws (Appendix B)and includes a glossary of financial terms (Appendix D).
• The Level Service and Recommended Budget of the Superintendent of Schools, dated January 4, 2022
(hereafter the "LPS Budget Book"),which details the budget plan for the Lexington Public Schools.
• The Capital Expenditures Committee (CEC) Report to the 2022 Annual Town Meeting, which provides
recommendations on appropriation requests for capital projects, and an analysis of the Town's long-term
capital planning.
• The Community Preservation Committee (CPC) Report to the 2022 Annual Town Meeting, which details
requests approved by the CPC that can be funded from the Community Preservation Fund.
The LPS Budget Book is available online at:
https://lexingtonma.org/lps-finance-and-operations/fy-23-budget
All other reports for this Town Meeting will be available online at:
https://www.lexingtonma.gov/2022atm
Acknowledgments
The content of this report, except where otherwise noted, was researched, written and edited by Committee
members who volunteer their time and expertise, and with the support of Town staff. We have the pleasure and the
privilege of working with Town Manager James Malloy; Assistant Town Manager for Finance Carolyn Kosnoff(an
ex officio member of our Committee); Budget Officer Jennifer Hewitt; the Capital Expenditures Committee; the
Community Preservation Committee; the School Committee; the Permanent Building Committee; the Planning
Board; Superintendent of Schools Dr. Julie Hackett; Assistant Superintendent for Finance and Operations David
Coelho; and the Lexington Select Board. We thank the municipal and school staff, Town officials, boards and
volunteers who have contributed time and expertise to help us prepare this report. Last but not least, we thank Sara
Arnold,who records and prepares the minutes for our meetings.
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
Introduction
The Appropriation Committee is required to create a report with a review of the budget as adopted by the Select
Board, including an assessment of the budget plan and a projection for future years' revenues and expenses. This
report includes the Committee's analysis and recommendations regarding all anticipated appropriations of funds at
town meetings, and other financial matters that may come before Town Meeting. This report is distributed 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.
The Committee's goal is to publish its report at least one week prior to the start of the Annual Town Meeting
(ATM),with the understanding that financial articles could be taken up on the first night of the ATM.
Previous reports from this committee were created using Microsoft Word. This report was authored using Wdesk, a
cloud-based application from Workiva that the Town licenses for use in producing financial documents. This allows
the report to be integrated directly with the Town's internal finance database, so that budget figures and projections
are updated and presented in a timely fashion.
Committee Membership
Anil A. Ahuja was appointed to the committee shortly before the start of the 2021 Annual Town Meeting. Vineeta
Kumar was appointed to the committee at the same time, but unfortunately, she was unable to serve due to a
conflict with the Town Meeting Member Association's bylaws for its Executive Committee. The Committee
presently has eight voting members with one vacant seat.
Reserve Fund
On March 16, 2022, the Committee approved a transfer of $174,000 from the Reserve Fund to the Recreation
Enterprise Fund to accelerate repairs at the Pine Meadows Golf Club. The balance of the Reserve Fund is currently
$576,000, but adjustments to the FY2022 operating budget under Article 21 will request a matching transfer of
$174,000 from the Recreation Enterprise Fund back to the Reserve Fund. The end result will be that the Reserve
Fund balance is unchanged from its initial appropriation at$750,000. As always, any remaining funds will revert to
Free Cash at the end of the fiscal year.
Zoning Articles
As is frequently the case, the warrant for this annual town meeting includes articles that request changes in
commercial zoning. There are requests from the Town seeking to update the regulation of commercial
development, and there are requests from commercial property owners seeking rezoning. Zoning changes are often
predicted to boost the tax levy in the future, which would in turn affect the overall finances of the Town. In spite of
the potential for financial impacts, this committee does not generally report on zoning articles. The future financial
impact of zoning changes is speculative, and the committee is not equipped to validate such predictions. In addition,
zoning changes often involve tradeoffs in quality of life or personal property rights that are impossible to quantify
in monetary terms. There are some exceptions to this rule, for example when a property owner agrees to make
payments to the Town, or to provide in-kind support for Town needs, such as shuttle services.
Developments Since Adoption of the FY2022 Budget
The Committee has continued to meet virtually using the Zoom application.
At the November 2021-1 Special Town Meeting,the following appropriations were approved:
• $870,000 for Police Station Architectural Design and Swing Space Construction.
• $310,750 for CPA projects.
• $770,000 in supplemental funding for construction of the new Westview Cemetery building.
• $570,300 for the Capital Stabilization Fund.
• $200,000 for the Transportation Demand Management/Public Transportation (TDM/PT) Stabilization
Fund.
With the exception of the TDM/PT, these appropriations used funds derived from additional "new growth" in the
tax levy above the initial projection in the FY2022 budget. The TDM/PT is funded by commercial property owners
under agreements with the Town to support traffic-related work.
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
The Town's Community Center, which had been closed since March 2020, was re-opened to the public on August
18, 2021, soon after the start of FY2022. The Recreation Enterprise Fund has begun to receive revenue from user
fees again,but the Town continued to provide additional support for the Recreation Department during FY2022.
On March 2, 2022, the Massachusetts School Building Authority (MSBA) voted to invite the Town into the first
phase of a collaborative process to fund of the renovation or replacement of Lexington High School. A special town
meeting will be called to request funding for the Feasibility Study phase of the MSBA funding cycle.
FY2023 Revenue and Budget
The main body of this report contains the Committee's analysis of all the appropriation requests that make up the
next fiscal year's budget. Here we discuss some of the overarching trends in Town finance.
The FY2023 Recommended Budget and Financing Plan (the "Brown Book") opens with the Report of the Town
Manager. The first two tables below are taken from that section, which provides a comprehensive overview of the
estimated revenue and proposed budget for the coming fiscal year.
Tax Levy Dedicated to Capital Stabilization Fund
Starting in FY2022,the budget incorporated a new line in the revenue summary for a portion of the tax levy that is
earmarked for the Capital Stabilization Fund. This is based on a recommendation from the Town Manager's
Financial Guideline Working Group which allocates a portion of new growth in the tax levy derived from
development in commercially zoned areas of Lexington. For the prior year and this year, the dollar amounts are
small, but in the coming years this earmark will grow in proportion to commercial development. This guideline will
be suspended once debt service for a new or renovated Lexington High School begins.
Revenue Source FY2022 FY2023 $ % %of Total
Tax Recap Projected Change Change Revenue
Property Tax Revenue $ 204,171,602 $ 212,056,053 $ 7,884,450 3.9% 81.4%
Tax Levy Dedicated to CSF $ 57,138 $ 57,138 $ — -% —%
State Aid $ 16,492,260 $ 16,784,662 $ 292,402 1.8% 6.4%
Local Receipts $ 12,627,933 $ 13,488,108 $ 860,175 6.8% 5.2%
Available Funds $ 17,825,379 $ 18,507,776 $ 682,397 3.8% 7.1%
Revenue Offsets $ (1,961,196) $ (2,331,557) $ (370,361) 18.9% (0.9)%
Enterprise Receipts $ 1,432,356 $ 1,805,613 $ 373,257 26.1% 0.7%
Gross General Fund Revenues $ 250,645,473 $ 260,367,794 $ 9,722,321 3.9% 100.0%
Less-Revenue Set-Aside for $ 16,678,401 $ 19,896,592 $ 3,218,191 19.3% 7.6%
Designated Expenses
Net General Fund Revenues Is 233,967,072 1$ 240,471,202 Is 6,504,130 2.8% 1 92.4%
The Gross General Fund Revenue for FY2023 is projected to increase by 3.9%. State aid is estimated to grow by
1.8%this year,which is largely a result of diminished growth in Chapter 70 aid for education.
Once the Town's "new growth" tax revenue is certified in the fall, the tax levy may increase resulting in higher
gross revenue, and creating free cash in the current fiscal year that may be appropriated at a subsequent special
town meeting.
The following table summarizes the FY2023 recommended budget in comparison to FY2022.
FY2023 %
Budget Program Appropriated Recommended Change Change
Budget
Education 1000 $ 126,507,019 $ 131,478,345 $ 4,971,326 3.9%
Shared Expenses 2000 $ 64,540,037 $ 64,190,302 $ (349,735) (0.5)%
Municipal Departments 3000-8000 $ 42,920,017 $ 44,802,554 $ 1,882,537 4.4%
Subtotal-Operating Budget $ 233,967,073 $ 240,471,201 $ 6,504,128 2.8%
Cash Capital $ 10,136,491 $ 13,491,037 $ 3,354,546 33.1%
Other(Approp.to reserves,misc.) $ 6,541,910 $ 6,405,555 $ (136,355) (2.1)%
Total-General Fund IS 250,645,474 1$ 260,367,793 1$ 9,722,319 3.9%
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2022 ATM,2022-1 STM APPROPRIATION CONMTTEE 21 MARCH 2022
The proposed budget is balanced, as required by law, and it will provide the consistent and reliable level of service
that is expected by residents. The 2.8% growth of the operating budget is low, but it was affected by a short-term
drop in debt service, which is part of the Shared Expenses. The other two categories, Education and Municipal
Departments, are more in line with expectations based on revenue growth. The year-over-year reduction in the
"Other"category is driven largely by a lower contribution to the Capital Stabilization Fund.
Program Improvement Requests
A Program Improvement Request (PIR) is part of the Town's process to develop an annual operating budget. The
Town first develops a "level service" operating budget that supports existing services at rates comparable to those
of the prior year. Each PIR is a proposal from a Town department to update or initiate new services funded by the
operating budget.
The Town Manager reviews and approves PIRs for the recommended municipal operating and shared expenses
budgets, and the Superintendent of Schools does likewise for the school operating budget. Once the complete
operating budget is approved by Town Meeting, the successful PIRs become part of the "level service" operating
budget in subsequent years. Thus, PIRs offer a transparent view into the growth of the budget beyond the core
economic drivers.
Below is a summary of the PIRs related to the municipal budget that have been recommended for approval. PIRs
for the LPS are covered in the school budget and are not listed here.
Department Recommended
Funding
Public Facilities $ 43,796
Public Works $ 26,967
Public Safety $ 144,566
Culture &Recreation $ 127,363
Land Use,Health and Development Department $ 41,184
General Government $ 62,437
Total PIR Requests $ 446,313
Public Facilities
• Department 2600 Public Facilities - $43,796 to enhance the role of the Management Assistant to manage
the new 20-year capital database, increasing the FTE from 0.5 to 1.
Public Works
• Department 3100 DPW Administration & Engineering - $24,471 to make the DPW Management Analyst
full-time.
• Department 3400 Environmental Services - $2,496 to upgrade a W-6 position at the Hartwell Avenue
compost site.
Public Safety
• Department 4100 Law Enforcement - $42,447 to support enhanced police training under the new state
certification requirements.
• Department 4100 Law Enforcement - $45,450 in anticipation of the need for staff to transport detainees to
another location once the police move to their temporary location.
• Department 4100 Law Enforcement - $8,036 to fund a third crossing guard on Marrett Road for the
Hastings Elementary School.
• Department 4200 Fire &Rescue - $48,633 to purchase a training manikin to allow staff to practice their life
support skills.
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
Culture & Recreation
• 5200 Recreation&Community Programs - $47,000 for a vehicle replacement.
• 5200 Recreation&Community Programs - $25,363 for a part-time Recreation Coordinator at the
Community Center.
• 5200 Recreation&Community Programs - $55,000 for printing &mailing a program guide.
Land Use,Health and Development Department
• Department 7120 Administration- $5,000 for reprinting ACROSS Lexington brochures.
• Department 7140 Health -$36,184 to increase the Public Health Nurse position to full-time.
General Government
• Department 8100 Select Board- $20,000 to fund the goal-setting process for the Select Board.
• Department 8500 Town Clerk - $30,500 to purchase electronic poll pads for each precinct in Lexington,
increasing efficiency and reducing the need for paper reports.
• Department 8600 Innovation&Technology- $6,937 to increase the hours for an administrative assistant.
• Department 8600 Innovation & Technology - $5,000 to maintain a redundant network anticipated to be
installed in FY2023 using either capital or ARPA funding.
The Brown Book's Appendix A provides a complete list of PIRs, including those not included in the recommended
operating budget.
Updates
This report presents the official positions of the Committee as of the date of publication. The Committee will
continue to meet as necessary prior to and during Town Meeting and it may revise its official positions based on
new or updated information. In a typical year, the Committee also reports orally to Town Meeting on each article.
The oral report summarizes the Committee's current position, which may have been updated following publication
of this report.
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
Warrant Article Analysis and Recommendations
2022-1 SPECIAL TOWN MEETING
Article 2 Appropriate for 1575 Massachusetts Avenue / Police Station
Replacement
Funds Requested Funding Source Committee Recommendation
$32,400,000 GF Debt Approve (8-0)
This article requests funds to cover construction costs for building a new Police Station. Plans call for a 34,000 sq ft
building to be constructed on the Massachusetts Avenue site of the current station.
The existing police station opened in 1956. It lacks many of the basic amenities found in modern police facilities,
and does not comply with current building codes. For example, the building does not have an elevator nor does it
have a sally port for secure access to the cellblock. The building lacks a fire sprinkler system and does not meet
seismic safety requirements. The indoor firing range is obsolete, and the locker rooms, garage, equipment storage,
evidence storage, and office spaces are inadequate. The bathrooms in the basement and the second floor levels are
not ADA compliant. The heating and cooling systems are inefficient and the building, with electrical service via
two separate systems, suffers from problems during power outages.
The Police Department currently has 73 FTE's including 8 command officers, 34 patrol sergeants and officers, 8
detectives, 10 civilian dispatchers, school crossing guards, and administration staff(see Brown Book p. VI-5).
The new building is designed to correct existing deficiencies, and to meet the current and future needs of the
department. The plan includes properly sized locker rooms and evidence storage. The floor plan accommodates
offices for social service and mental health service personnel who would form part of the police team. An indoor
garage, a two-bay vehicle maintenance area, and appropriately sized and sited equipment storage areas will
facilitate equipment maintenance and prolong equipment life. Additionally, the main entrance will feature a front
desk situated in a spacious foyer with contiguous publically accessible meeting rooms and rest rooms, making it
easier for the community to interact with the department.
Funding for this project started with an appropriation of $65,000 for a Police Station Feasibility Study under
Article 5 of the 2016 September Special Town Meeting. Article 14 of the 2018 Annual Town Meeting appropriated
$1,862,622 for design and engineering of a new station at the current Massachusetts Avenue site. At that time, it
was envisioned that a request for construction funds would be made late in 2019 or in 2020. However, the Select
Board paused the work on the project in reaction to the nationwide discussion on police and policing that stemmed
from the killing of George Floyd. The Select Board then led a community conversation on policing and on what
changes may be desirable in the design of the proposed new station.
Article 5 of the 2021-1 Special Town Meeting appropriated $614,100 of construction funds to convert 173 Bedford
Street to a temporary Police Station, and $254,315 for a supplemental appropriation to pay for additional
architectural work to incorporate the results of the community discussion into the final plan for the new station.
Total costs, including the presently-requested appropriation,will exceed $35 million.
While the Committee agrees that the current size, floor plan, and facilities meet the goals needed in a new Police
Station, we are concerned that acute inflationary trends may result in bids that exceed the requested appropriation.
We have been assured that the architect's cost estimate was completed very recently, and we hope that it
incorporates factors driving the price volatility in the construction market.
If this appropriation is approved by Town Meeting, the funding will be contingent on a successful town-wide
referendum to approve the exclusion of the debt service from the usual limitations of Proposition 2'/2, anticipated to
be held early in June of 2022. Requests for bids will not go out until after a successful vote. If all approvals are
received, construction on the Police Station would begin in the fall of 2022.
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
2022 ANNUAL TOWN MEETING
Article 4 Appropriate FY2023 Operating Budget
Funds Requested Funding Source Committee Recommendation
See below See below Approve (8-0)
The Operating Budget is broken out by major categories based on budget line numbers below.
Education (1000)
Program 1000 Education FY2022 FY2023 % of $ %
Budget Recommended Education Change Change
1100 Lexington Public Schools $ 123,376,981 $ 128,254,447 97.5 % $ 4,877,466 4.0 %
1200 Regional High School $ 3,130,038 $ 3,223,898 2.5 % $ 93,860 3.0 %
1000 Total Education $ 126,507,019 $ 131,478,345 100.0 % $ 4,971,326 3.9 %
Lexington Public Schools (1100)
The School Committee has voted to recommend an appropriation of$128,254,447 for the Lexington Public Schools
(LPS) operating budget for FY2023. This amount does not include:
• The school portion of Shared Expenses (2000), below, including public facilities, employee & retiree
benefits,pension, debt service, liability insurance, and reserve funds.
• Revenue from federal, state, local, and private grants, or revolving and donation fund activity, none of
which are subject to appropriation by Town Meeting.
The request represents an increase of 3.9%over the FY2022 appropriation.
Further information about the budget request may be found in the "Education" section of the Brown Book and in
the LPS Budget Book.
A breakdown of this operating budget into salaries and wages, and expenses is shown below.
Category FY2022 FY2023 $ %
Budget Recommended Change Change
Salaries &Wages $ 102,654,658 $ 106,450,152 $ 3,795,494 3.7 %
Expenses $ 20,722,323 $ 21,804,295 $ 1,081,972 5.2 %
1100 Lexington Public Schools $ 123,376,981 $ 128,254,447 $ 4,877,466 4.0 %
Source:Lexington Public Schools FY2023 Superintendent's Recommended Budget,January 5, 2022;Budget Overview-page 10
School enrollments
The student population that the district serves includes the following categories:
• PreK in-district including special education and tuition-paying general education students;
• K-12 in-district general education and special education(including METCO);
• PreK-22 out-of-district placement.
The following table shows student enrollments for the past three years and the projected enrollment for the fall of
2022. In more normal years, enrollment figures have been somewhat volatile, and trends are difficult to spot. This
applies even more strongly this year, so a generous level of flexibility is warranted. That said, school enrollment
may be leveling off. Some grade levels have rebounded from the 2020 pandemic-related drop (Lexington High
School),but other grades have not(elementary schools).
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
Oct. 1,2019 Oct. 1,2020 Oct. 1,2021 Projected FY2023
Enrollment Enrollment Enrollment Enrollment
Early Childhood 68 57 67 67
Elementary 3,019 2,790 2,709 2,637
Middle School 1,828 1,793 1,748 1,728
High School 2,275 2,261 2,273 2,272
Total 7,190 6,901 6,797 6,704
Salaries and Wages
In FY2023, salaries and wages increased by $3,795,494 (3.7%) as a result of cost of living adjustment increases for
current personnel, lane changes, and step increases. Salaries and wages make up 83% of the FY2023 request, the
same percentage as in FY2022. A net decrease of 1.3 full time equivalent(FTE) employees reflects consolidation of
positions and departments where appropriate. See the LPS Budget Book page Recommended Budget for a list of
positions that will be consolidated, eliminated, or created.
Salary and wage changes result from changes in the number of employees, step increases, cost of living adjustments
(COLA), and position reclassifications. The 2023 budget includes both anticipated collective bargaining unit
settlements and increases for non-union positions. The effective dates of the most recent collective bargaining
agreements may be found in the LPS Budget Book on page Budget Overview–10.
Expenses
Expenses make up 17%of the FY2023 budget request. The increase of$631,630, to $9,420,447 (7.2%), in special
education out-of-district tuition is the largest increase for any single line in the detailed expense budget (see the
Expenses section of the LPS Budget Book). We note that both this and previous school budgets are based on
projected net expenses after the application of revenue that is not appropriated. Such revenue includes "Circuit
Breaker" funds and substantial special education grant funds, but not monies from stabilization funds which do
require appropriation.
A detailed picture of the funding for out-of-district tuition may be found in the LPS Budget Book on page 9000
Programs with Other School Districts-6. There, one may see that the net total of out-of-district tuition in FY2022 is
$813,367 lower than was projected. For FY2023, projected net tuition is rebounding to $15,872,941—an increase
of $1,372,381 (9.5%) over FY2022, or $559,214 above FY2022 projected levels. This increase is partly due to
increases in tuition by private special-education schools. For FY2022, tuition increased by $8,300, and was limited
to a single school attended by a Lexington student. For FY2023, five schools attended by twelve Lexington students
have given notice of tuition increases,with a potential total increase estimated at$90,000.
Lexington currently is a member of the LABBB Collaborative, and the District also sends students to other non-
member collaborative programs. For the last several years, a 4% annual increase has been assumed for
Collaborative tuition. Additionally, a 4% increase has been assumed for out-of-state private schools approved by
OSD (Operational Services Division, a Massachusetts state agency) as these rates are governed by the respective
state agency where the school is located. Hourly rates for 1:1 aides at out-of-district schools are also increasing
more than usual in FY2023, likely due to COVID-related staffing shortages. Lexington Public Schools have
budgeted for a 4%increase in aides' compensation.
The expense budget also includes sizable increases for transportation costs for regular education students
($143,943) and special education students ($375,296), as well as emergency planning and training ($100,500).
Benefits
The cost of the benefits for school staff is included under Shared Expenses (see below). The total cost of these
benefits is based on the number of employees, individual benefits choices, and per employee benefits costs. In most
recent years, the net number of school positions has increased, contributing to an increase in the total cost of
benefits.
Funding Sources Not Subject To Appropriation
The majority of the School Department's annual budget is funded by appropriations made by Town Meeting.
However, LPS also receives substantial funding from state, federal and other sources that are not subject to
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appropriation by Town Meeting and are therefore not included in the request under this article. The amounts of
these funds vary year to year.
• Federal Grants—In the current budget year(FY2022),the Town and schools have benefited from Covid-19
related aid through the federal CARES act. For FY2023,the School Department does not expect to receive
this funding again; however it does expect to receive $2,239,084 in other federal grants. For details, see the
LPS Budget Book Grant Fund Summary 2.
• State Grants — The School Department projects that it will receive $1,767,131 in FY2023 from the state
METCO program,which represents no change from FY2022. Based on the 2021-2022 METCO enrollment
of 220 students, the projected state aid averages to $3,372 per METCO student. Cherry-sheet local aid for
education, i.e., Chapter 70 aid, is treated as General Fund revenue and is not included in state grants.
• "Circuit Breaker"Reimbursements— Reimbursements are received from the state when the costs of special
education services for an individual student, whether in-district or out-of-district, exceed a multiple of four
times the statewide foundation budget. In the past, reimbursement rates have varied between 35%and 75%
of the tuition cost. Circuit Breaker reimbursement funds are paid to the district quarterly based on the prior
year's approved claims. Funds received go into the Circuit Breaker Revolving Account, do not require
further appropriation, and must be expended by June 30 of the following fiscal year. The Lexington Public
Schools' current practice is to apply a large fraction of the funds received in a given fiscal year (based on
SPED expenses in the prior fiscal year) as a revenue offset in the following fiscal year. For example, LPS
will receive (or has received) a reimbursement in FY2022 based on FY2021 SPED expenses, and will use
most of that reimbursement to offset SPED costs in FY2023.
A detailed exposition of the LPS Circuit Breaker funding may be found in the LPS Budget Book on page Revenue
Offsets-5. In brief, the District projected a 70% reimbursement rate for FY2022, yielding an FY2022 Circuit
Breaker reimbursement of $5,115,409, of which $866,580 was spent in FY2022. The remaining $4,248,829
received during FY2022 is budgeted for use in FY2023. The Circuit Breaker reimbursement for FY2023 is
projected to be $4,548,402, of which another $866,580 will be applied to the FY2023 budget, leaving $3,681,822
for use in FY2024.
Fee Programs
Fees for participation in certain programs, such as preschool, athletics, and transportation, support those programs
in whole or in part. Detailed information about the fees and proposed fee changes may be found in the "Revenue
Offsets" section of the LPS Budget Book.
Regional High School (1200)
Lexington's FY2023 projected assessment for the Minuteman Regional High School (MRHS) of $3,223,898
represents an increase of $93,860, or 3%, over FY2022. It follows on the prior year's increase of 9% and an
increase of 15.9% from FY2020 to FY2021. While Lexington's four year rolling average enrollment, the
enrollment number that our assessment is based on, grew from 59.38 to 63 students, our assessment increase is
modest because Lexington's enrollment growth is lower,percentage wise,than the district average.
The District's Budget
The Minuteman Regional High School (MRHS) Committee has approved a FY2023 budget of $29,010,622, a
$1,370,034 increase (5.0%) over FY2022. The increase is the net effect of a 7.2%increase in the cost of operations
and a$33,000 decrease in debt costs attributable to construction of the new MRHS building and athletic fields.
This budget funds the fourth year of operations in the new school building, which was designed for an enrollment
of up to 628 students. Response to the new facility has been very strong and current high school enrollment is 655
students. Of the total, 538 students come from the nine member towns of the school district, and the remaining 117
students come from out-of-district communities.
District Developments
While it was anticipated that the new school building would drive increased applications, the success continues to
exceed expectations. For the last three years, and for the upcoming year, more than 200 applications have been
received from in-district students. In-district students are given priority, and for three consecutive years almost all
of the incoming freshman class will be in-district. This enrollment trend means that by FY2025 the school
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enrollment will consist entirely of in-district students. Based on applications received to date, total school
enrollment is expected to near 700 students in September 2022.
Enrollment FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 *FY 20 FY 21 FY 22 FY 23 est
In-district 409 437 410 391 347 337 354 395 467 538 621
Out-of-district 340 356 332 277 271 231 162 207 167 117 80
Total 749 793 742 668 618 568 516 602 634 655 701
*new school occupied
This strong enrollment has the district planning to increase school capacity to 800 students, with graduating classes
in the range of 200 students. The flexible design of the school's technical training spaces would allow this higher
capacity, so the limiting factor is providing sufficient academic space. In anticipation of accommodating future
enrollment needs a total annual contribution of$500,000 is budgeted for the Capital Stabilization Fund, $150,000
more than FY2022 contribution.
By FY2025 it is estimated that MRHS operations and debt service will be fully funded by assessments from
member towns. The decline of out-of-district enrollment will reduce revenue from out-of-district tuition and capital
fees that partially offset member town assessments. This will lead to higher total assessments to member towns
while lowering the per-student assessment. It is important to note that out-of-district tuition, with rates that are set
by the state, does not cover the full per-student cost at MRHS. In addition, Chapter 70 State Aid for out-of-district
students goes directly to the student's town or city,not to MRHS.
In November 2020 the District School Committee selected an athletic field plan that included lighting the fields.
This feature satisfies the school's requirements, and also allows the fields to be available for rental to local teams
and leagues outside of school hours. Member towns approved an additional $1,900,000 in debt to fund the
enhanced project,with the understanding that the rental income could significantly offset the field maintenance and
debt service. The fields should be completed by April 2022 and rentals will commence in the spring. Rental income
will be posted to the district's Facilities Revolving Fund.While this revenue will not show in their revenue plan,the
revolving fund revenue will be used to offset overhead and will result in a reduction in that line item starting with
the FY2024 budget.
The district's long-term capital and debt obligations last through FY2050 and are summarized in the chart below.
MRHS District Debt Service -FY2023-FY2051
$7,500,000
$5,000,000
$2,500,000
$0 .........
....r IP'} IX.) 1.,...... 00 (T CD C"3 e+'? ....r I!'} V.:.? �.,...... CY.J (T (..� �—' C"'� er' .r I!'} �.f'.? l..... 00 (T CD —+
❑ School Bldg ❑ Athletic Facility ESCO Lease
It is comprised of three components, with differing terms. The debt on the school building ends in FY2050,that on
the athletic facility ends in FY2041, and the ESCO Lease ends in FY2026. The annual ESCO Lease payments of
over $550,000 is for equipment used in the prior school building and is paid with assessments from all member
towns that were in the district when the lease began.
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The debt service for both the school building and the athletic facility project is funded via assessments to district
members and by a new state-authorized facilities fee for capital costs charged to non-member towns that enroll
students at the school. This fee is set by the Department of Elementary and Secondary Education (DESE) and towns
are classified by whether they offer at least five Chapter 74 (vocational-technical) programs. Of the facilities fees
collected in FY2022, $289,332 is available to be applied to the FY2023 budget. Additionally, $300,000 of
anticipated FY2023 collections will be used to directly fund the FY2023 budget. The per-student charge in FY2023
has still not been set by DESE. For towns lacking adequate access to vocational-technical education programs,this
per-student charge is estimated to be $8,900,versus $6,700 for towns with programs.
According to FY2020 state data, MRHS continued to have the highest average per-pupil costs of any Massachusetts
regional vocational district (RVD). The drivers include a high teachers/100 students ratio of 11.8 (the second
highest, compared to an average of 9.47 for all RVDs), a very high 47% enrollment rate in special education (the
highest rate across all RVDs in the state), and an average teacher compensation of$112,834 (the highest across all
RVDs, compared to an overall average pay of$87,615,with the second highest district average pay at$99,469).
Towns sending out-of-district students are responsible for providing transportation to their students and are subject
to additional fees beyond the base tuition. In addition, these towns are assessed a per-student "facilities fee"which
represents a share of their debt service for the new building. This facilities fee revenue is applied to that debt
service, reducing assessments for member towns. Sending towns are also assessed tuition for supplemental SPED
services when their students require them. The district will be recommending to DESE that the out-of-district per-
student SPED tuition be increased to $7,100 in order to cover actual costs. DESE set the base out-of-district tuition
rate at$18,679 per student in FY2022 with an expected increase for FY2022 to be recalculated in March. This does
not cover the full cost of a district education, nor is the State Chapter 70 aid for out-of-district students sent to
MRHS.
Dr. Edward Bouquillon will retire as superintendent at the conclusion of the 2021-2022 school year. The district
will welcome Dr. Kathleen Dawson as its new superintendent starting in the fall of 2022.
District Budget Overview
The FY2023 budget includes efforts to handle continuing growth in enrollment and reductions in revenue from out-
of-district tuition and fees, all while addressing student educations and wellness needs in the post-pandemic world.
The district will also be monitoring the facilities needs of the new building in an effort to properly budget for
ongoing operational costs. In this budget, there are multiple instances where staff positions have been reclassified
under different line items.
Overall staffing will see a net increase of 1.5 FTEs. These changes include the addition of 2.0 FTEs Student
Support Professionals (guidance counselors), 1.0 FTE Robotics/Automation Aide, and 0.5 FTE Reading Aide, and
the reduction of 1.0 FTE ISS Professional, and 1.0 FTE Logistics Engineering Teacher. Also budgeted is an
additional 2 FTEs for substitute teachers.
Debt service is almost 24% of the total budget, and salaries comprise almost 46% of the budget. (This ratio is
atypical because unlike most public schools, this budget includes major capital expenses.) Contractual obligations
include a cost-of-living increase of 2%with a net growth in teachers' salaries of$65,872. Funding for technology,
allowing each student to have a computer and to provide for remote learning,will increase by$20,871. Utilities and
heating expenses will increase $46,300, and a commitment to provide proactive facilities maintenance increases
those line items by$36,000.
While health insurance rates are projected to rise 10%, the budget reflects a slight net decrease because the actual
FY2022 total expenses declined due to the introduction of lower rates negotiated after the budget was accepted.
Transportation costs have grown $97,000 (6.62%) due to a 5% CPI increase in the bus contract and an increase in
the number of in-district students. A $60,000 payment will be made toward the funding of the district's
$26,124,691 Other Post-Employment Benefits (OPEB)unfunded liability.
Roughly 23% of the revenue in the MRHS FY2023 budget comes from a combination of state aid, reserves, and
fees shown in the table below, down from 30% in FY2022, due to reduced out-of-district enrollment. In total, this
non-assessment revenue decreases by $464,315 in FY2023. Chapter 70 funds and transportation aid are estimates
based on the Governor's H-1 budget. MRHS's share of Chapter 70 aid increases 2.1% and Transportation Aid
increases 32.6%, due to increased in-district enrollment. Chapter 70 aid is based on October 2021 enrollments, and
Transportation Aid is based on bussing expenses incurred in FY2021.
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Revenue Sources FY2022 FY2023 Change $
Chapter 70 $ 1,986,977 $ 2,028,744 $ 41,767
Transportation Aid $ 776,382 $ 1,029,441 $ 253,059
Pii or Year Tuition $ 2,695,837 $ 1,367,364 $ (1,328,473)
Current Year Tuition $ 1,080,000 $ 950,000 $ (130,000)
Excess and Deficiency(E&D)Funds $ 540,000 $ 650,000 $ 110,000
Current Year Nonresident Capital Fee $ 508,033 $ 289,332 $ (218,701)
Prior Year Nonresident Capital Fee $ 591,967 $ 300,000 $ (291,967)
Assessments $ 19,461,392 $ 22,395,741 $ 2,934,349
TOTAL $ 27,640,588 $ 29,010,622 $ 1,370,034
Lexington's Assessment
The remainder of the revenue is raised through assessments on member towns and tuition for out-of-district
students. Member towns are assessed a share of the District's total costs for the upcoming year, net of the District's
non-assessment revenue,based on four components:
1. The State-Required Minimum (SRM)per-student tuition cost set annually by the DESE,
2. An additional charge for operating costs in excess of the SRM that is allocated based on the four-year
average student enrollment,
3. Transportation costs,
4. Debt service costs from capital projects.
The first three assessment components fund the member's share of the school's operating costs. Debt service is
charged to member towns using a two-part formula. One percent of the debt service cost is assessed equally to each
of the nine member towns, and the remaining 91% is apportioned based on the most recent four-year rolling
average of student enrollment and the State's "combined effort"factor as determined by the Chapter 70 formula.
A breakdown of the Town's FY2022 and FY2023 MRHS assessments is shown below. The projected assessment
for FY2022 is $3,223,898, an increase of$93,860 (3%) over the final FY2022 assessment.
Projected Lexington Assessment—Based on Unapproved House-2 Budget Bill
Enrollment Basis Assessment Components Per-Student
FY2022 FY2023 FY2022 FY2023 FY2023
State-Required Minimum 77 68 $ 1,156,993 $ 1,158,939 $ 17,043
Regular Day Students 59.38 63 $ 935,559 $ 969,283 $ 15,385
Transportation 77 68 $ 109,594 $ 78,524 $ 1,155
Total Operating Costs* $ 2,202,146 $ 2,206,746
Debt Service 59.38 63 $ 927,892 $ 1,017,152 $ 16,145
TOTAL ASSESSMENT $ 3,130,038 $ 3,223,898
Annual%increase (decrease) 9.32% 3.00%
*Starred rows in this table use average enrollment over the prior 4 years, while non-starred rows use current
enrollment. The respective per-student amounts cannot be combined arithmetically.
The FY2023 operating cost assessment per student (excluding debt service) works out to $32,452 (based on
Lexington's October 2021 enrollment of 68 students), an increase from last year's per-student cost of$31,016. Due
to the assessment formula, during periods of growing enrollment the assessed per-student amount lags behind short-
term enrollment trends. A rising enrollment will tend to lower per-student costs (and vice versa) until the 4-year
average stabilizes. Enrollment from other member towns can also affect this figure, as Lexington's percentage of
the total member enrollment changes.
We anticipate further changes to the projected revenues and budgeted expenses in the MRHS budget following
publication of this report. It is likely that the assessment will be adjusted prior to being presented to Town Meeting.
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Shared Expenses (2000)
Shared Expenses covers appropriations for various activities that serve multiple departments but are managed or
carried out by a single office. Although these amounts do not appear in the budgets of LPS or individual municipal
departments, most are driven primarily by the complement of employees of or the facilities and capital equipment
used by the various departments. Others, including insurance premiums and payments related to solar energy
facilities, concern the overall operation of the Town.
As shown in the table below, 65.0% of shared expenses fund employee benefits, which are administered by
municipal staff, but which are driven by current and past staffing decisions made by both LPS and the municipal
departments. The second largest line item supports facilities managed by the Public Facilities Department for use
by LPS and municipal departments. The third largest line item is within-levy debt service, which is administered by
the Finance Department. Debt service is driven by current and past capital expenditures and financing decisions.
For FY2023,the $750,000 appropriation for the Reserve Fund is at the same level as in FY2022. For a longer-term
history, see Brown Book Appendix C, "Summary of Reserve Fund Transfers."
Program 2000 Shared Expenses FY2022 FY2023 %of Shared $ %
Restated Budget Expenses Change Change
2100 Employee Benefits &Insurance $ 39,754,560 $ 41,744,415 65.0% $ 1,989,855 5.0%
2200 Property &Liability Insurance $ 1,095,000 $ 1,095,000 1.7% $ %
2300 Solar Producer Payments $ 390,000 $ 390,000 0.6% $ %
2400 Within-Levy Debt Service $ 10,397,112 $ 7,541,580 11.7% $ (2,855,532) (27.5)%
2500 Reserve Fund $ 750,000 $ 750,000 1.2% $ %
2600 Facilities $ 12,153,365 $ 12,669,307 19.7% $ 515,942 4.2%
TOTAL $ 64,540,037 $ 64,190,302 100.0% $ (349,735) (0.5)%
The recommended total Shared Expenses budget for FY2023 is $64,190,303, representing a decrease of$349,735
or 0.5%from the restated amount for FY2022.
Employee Benefits & Insurance (2100)
As shown in the table below, Line 2100 includes costs for retirement; health, dental, and life insurance; workers'
compensation, unemployment insurance, and the Medicare tax. The total request for Employee Benefits and
Insurance is $41,744,415, a $1,989,855 (5%) increase over the FY2021 appropriation. The table below provides a
breakdown of the benefits budget by category.
Benefits Category Amount Percentage
Retirement $ 8,176,027 19.6%
Medicare $ 2,054,651 4.9%
Health Insurance $ 29,554,494 70.8%
Dental Insurance $ 1,109,243 2.7%
Life Insurance $ 25,000 0.1%
Unemployment $ 200,000 0.5%
Workers Compensation $ 625,000 1.5%
TOTAL $ 41,744,415 100%
Virtually all of the appropriation for retirement will go toward the contributory retirement (pension) program, i.e.,
into the Retirement Fund; a very small portion will go toward non-contributory retirement benefits for the few
employees who retired prior to the establishment of the contributory retirement program. The appropriation will
address both current year payouts from the Retirement Fund and an amount that moves the Fund toward full
funding of the Town's pension liabilities. To fully fund these liabilities, the Retirement Board has increased the
planned appropriations into the Retirement Fund and has stretched out the funding schedule by two years, i.e., to
2030. For FY2023, the recommended contributory retirement appropriation is increasing by 10.0%to $8,159,250.
Of that amount, $400,000 will be funded from Free Cash, as was done for FY2022. In the Retirement Board's
present plan the appropriations under this line item will increase by $750,000 per year until 2030. Once the full
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funding goal is reached, and, assuming the full-funding status is maintained, the annual costs for contributory
retirement will be significantly lower.
Health insurance costs make up the bulk of the Employee Benefits budget. The FY2023 request for health insurance
is $29,554,494, which represents a 4.5% increase over the estimate for FY2021. The Town remains a member of
the State's Group Insurance Commission (GIC) health insurance program, which has helped hold down the rate of
cost increases. Since joining the GIC program in FY2016, the FY2023 split of healthcare premiums between
employer and subscribers is 82/18 or 75/25 depending on the health plan chosen by the employee (the town pays a
larger share for employees who choose a lower cost plan). The Brown Book, on pp. IV-6 and IV-7, contains a
discussion of health-benefit costs, including changes in the numbers of subscribers since FY2017. The projected
number of subscribers used for the FY2023 budget represents a 2%increase over FY2022 and a 12%increase since
FY2017.
Solar Producer Payments (2300)
This line item reflects payments for the installation and operating costs of the solar array at the Hartwell Ave
compost facility. Against the annual cost of$390,000, which covers both the initial capital cost and maintenance
costs, staff estimates that the array will generate net-metering credit payments from the electric utility Eversource,
payments in lieu of taxes, and a small amount of lease income, so the array is projected to generate a net
contribution to the General Fund of$336,400.
Note this budget item does not include the Town's rooftop solar arrays and payments in lieu of taxes for the solar
operations, which are recorded under personal property taxes per the Massachusetts Department of Revenue. The
Brown Book includes tables on p. IV-11 that present a more complete set of estimates for the Town's solar
installations,with projected net revenues of$492,900 in FY2023.
Debt Service (2400)
Line item 2400 covers annual payments for within-levy debt service. Gross within-levy debt service is projected to
decrease by about 27%as indicated in the table above because the debt incurred for the purchases of real estate on
Pelham Rd. and Bedford Street has been retired. When the set asides for the payments stemming from these real
estate purchases as well as certain cemetery revenues are removed from the FY2022 gross debt service totals, the
net amount debt service is projected to decrease by 6.2%, which is, of course, below the Town's target annual
growth ceiling of 5.0%, so there is no recommendation to use the Capital Stabilization Fund as a funding source
this year(FY2023).
The Town also makes annual payments for exempt debt service, but these payments are not appropriated by Town
Meeting. Every project funded with exempt debt must be approved by a majority of voters in a town-wide
referendum, after which the Select Board sets the tax levy to provide sufficient funding. The portion of the tax levy
raised for exempt debt service is exempt from the limits imposed by Proposition 2'/2. There is a recommendation to
appropriate $800,000 from the Capital Stabilization Fund to mitigate the exempt debt portion of the property tax.
See pp. IV-12 and IV-13 in the Brown Book for details on exempt debt.
Staff estimates that the combined gross debt service for exempt and non-exempt debt will decrease by 13.4% from
the prior fiscal year. For more details, see the Debt Service section in the Brown Book.
Reserve Fund (2500)
The Reserve Fund is a small fund reserved for time-critical, extraordinary and unforeseen expenses. Once
appropriated, can be used during the fiscal year without further approval from town meeting. Requests for transfers
from this fund require formal approval by the Appropriation Committee,but they are generally initiated by Town or
LPS staff or the Select Board.
The FY2023 requested appropriation for the Reserve Fund is $750,000, the same amount as appropriated in
FY2022. In FY2019 the fund remained unused. In FY2020, $100,000 was transferred to the Fire Department to
offset increases in spending due to the Town's response to the COVID-19 pandemic. In FY2021, $15,000 was
transferred to the Conservation Department in response to a Letter of Map revision from the Town of Belmont, i.e.,
to potential changes in areas that are designated to be at high risk of flooding. As discussed in the preface, the
Committee approved a transfer of$174,000 in FY2022 to the Recreation Enterprise Fund, which amount will be
restored under Article 21 of this town meeting.
At the end of the fiscal year any unused funds in the Reserve Fund flow to Free Cash.
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Public Facilities (2600)
The Department of Public Facilities manages the operation, maintenance, utilities, and custodial servicing for
Lexington's municipal and school buildings. This Department also manages recurring maintenance of roofs,
building envelopes, and all building systems including HVAC, as well as other priority facility-related projects.
Finally, the Department supports efforts to plan major renovations, building replacement, or new building
construction. The FY2023 Public Facilities General Fund operating budget is $12,669,307,which represents a 4.3%
increase over FY2022. The budget request includes $27,000 in this line item and $16,796 in benefits to upgrade an
administrative position from part-time to full-time.
Municipal (3000-8000)
The municipal operating budget comprises all line items from 3000 to 8999. As shown in the table below, the
FY2023 recommended budget of $44.8 million represents a $1.9 million or 4.39% increase. The largest
components within the municipal budget are Public Safety, Dept. of Public Works,and General Government.
FY2022 FY2023 $ %
Municipal Budgets Restated Recommended Change Change
3000 Public Works $ 11,528,143 $ 11,968,145 $ 440,002 3.82%
4000 Public Safety $ 16,113,457 $ 16,333,845 $ 220,388 1.37%
5000 Culture &Recreation $ 3,156,348 $ 3,336,219 $ 179,871 5.70%
6000 Human Services $ 1,277,465 $ 1,527,421 $ 249,956 19.57%
7000 Land Use,Health&Development $ 2,693,989 $ 2,792,613 $ 98,624 3.66%
8000 General Government $ 8,150,615 $ 8,844,311 $ 693,696 8.51%
TOTAL $ 42,920,017 $ 44,802,554 $ 1,882,537 4.39%
Note:FY2022 Restated values include a net S80,870 decrease that was appropriated at STM2021-1.
Public Works (3000)
The recommended appropriation for Public Works of$11,968,145 represents a 3.82% increase over FY2022. Of
the total, 91.8% is covered by the tax levy, 5.1% is covered by payments from the enterprise funds for services
rendered, and 3.1% comes from other sources, primarily fees and the Cemetery Trust Fund. About 41% of the
recommended budget is for compensation, i.e., salaries and wages,while the remaining 59%is for expenses.
The net increase in compensation of $182,799 (3.89%) from FY2022 is attributable to the cost of contractually
obligated step increases and cost of living adjustments, as well as the inclusion of a program improvement to
expand the hours of the DPW management analyst.
The net increase in expenses is $257,203,up 3.76%from FY2022.
Public Safety (4000)
Public Safety covers Law Enforcement(4100) and Fire and Rescue (4200). Of the total recommended appropriation
of$16,333,845, about 51%is for Law Enforcement and 49%for Fire and Rescue.
The recommended FY2023 appropriation for Law Enforcement is $8,265,377 which is a 1.49% increase over the
FY2022 budget. About 87% of the budget is for compensation and approximately 13% is for expenses. The net
increase in compensation of$50,309 (0.71%) reflects savings due to staff turnover offset by contractually obligated
step increases, a program improvement to support enhanced police training under the new state certification
requirements, a second program improvement which anticipates the need for staff to transport detainees to another
location once the police move to their temporary location, and a third program improvement to fund a third crossing
guard on Marrett Road for the Hastings Elementary School. The net increase in expenses is $70,921 (6.92%) of
which nearly $30,000 is due to anticipated increases in the regional gasoline contract. The majority of the
remaining increase is due to the purchase of two Hybrid vehicles, increased costs associated with supplies and
ammunition, increased training and mileage costs, and an increase for the contract with the Town of Bedford to
fund the Animal Control Officer.
The recommended FY2023 appropriation for Fire and Rescue is $8,068,468, which is a 1.24% increase over the
FY2022 budget. About 90% of the budget is for compensation while approximately 10% is for expenses. The net
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increase in compensation of$22,464 (0.31%) is driven by contractual cost of living adjustments. The budget for
expenses has increased by $76,694 (10.62%) which includes anticipated increases in diesel fuel costs ($12,400),
increases in maintenance costs ($10,000) for fire apparatus, ambulance and fleet vehicles; enhanced
communications costs ($2,400) to house the Emergency Command Center at fire headquarters, and a program
improvement request($48,633)for a training mannequin to allow staff to practice their life support skills.
Culture and Recreation (5000)
Culture and Recreation covers Cary Memorial Library and Recreation and Community Programs. The FY2023
recommended appropriation of $3,336,219 represents a 5.70% increase over the FY2022 budget. Note that the
budget to be appropriated under this article is only for the Cary Memorial Library. The Recreation and Community
Programs budget is funded under Article 5 by the Recreation Enterprise Fund and, to a lesser extent, by the tax
levy. About 79%of the recommended budget is for compensation while the remaining 21%is for expenses.
The net increase in compensation of$112,101 (4.44%) is driven by contractual cost of living adjustments. The net
increase in expenses of $67,770 (10.74%) is primarily driven by increases for supplies and materials and
contractual services.
Human Services (6000)
The recommended appropriation for Human Services of$1,527,421 represents a 19.57%increase from the FY2022
budget. About 47%of the recommended budget is for compensation while the remaining 53%is for expenses.
The net increase in compensation of$27,176 (3.94%) is driven by contractual cost of living adjustments. The net
increase in expenses of$222,780 (37.95%) reflects an increase for contractually obligated Lexpress costs, as well
as the restoration of $200,000 in Town funding that was provided in FY2022 by a one-time operating grant to
Lexpress. For FY2023, funding for the William James Interface Mental Health Referral Service will be shared
between the municipal and school budgets.
In addition to the General Fund appropriation requested here, Human Services will also be funded by $320,509
from revolving funds (Article 9) and grants.
Land Use, Health, & Development (7000)
Land Use, Health, & Development covers six different budgeting units. The recommended appropriation of
$2,792,613 represents a 3.66% increase over the FY2022 budget. About 84% of the recommended budget is for
compensation while the remaining 16%is for expenses.
The net increase in compensation of$166,974 (7.69%) is driven by contractual cost of living adjustments as well as
a program improvement to make the public health nurse a full-time position in Lexington along with a transfer of
the Visitors Center manager from the Visitors Center Revolving Fund to the General Fund, partially offset by
transferring the Battle Green Guides to the Visitors Center Revolving Fund, and more fully offset by a reduction in
expenses to support the Visitors Center.
The net decrease in expenses of$68,350 (-13.08%) reflects shifting $74,000 in ongoing support for the Visitors
Center to compensation in the Economic Development portion of the budget, offset by several small increases.
Land Use,Health, &Development will also be funded by$506,600 of revolving funds (Article 9).
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General Government (8000)
General Government covers six different budgeting units. The recommended appropriation of $8,844,311
represents a 8.51%increase from the FY2022 restated budget.
Program 8000 General Government FY2022 FY2023 $ %
Restated Budget Change Change
8100 Select Board $ 1,259,808 $ 1,298,802 $ 38,994 3.10%
8200 Town Manager $ 1,529,243 $ 2,072,175 $ 542,932 35.50%
8300 Town Committees $ 65,233 $ 70,160 $ 4,927 7.55%
8400 Finance $ 2,004,608 $ 2,048,151 $ 43,543 2.17%
8500 Town Clerk $ 502,431 $ 627,297 $ 124,866 24.85%
8600 Information Technology $ 2,789,292 $ 2,727,727 $ (61,565) (2.21)%
TOTAL $ 8,150,615 $ 8,844,311 $ 693,696 8.51%
The primary driver of the total net increase of$693,696 is the Salary Adjustment Account, line 8230 in the Town
Manager's budget. The amount budgeted for this item varies from year to year depending on the status of collective
bargaining settlements, other anticipated wage increases, and compensated leave payments due certain employees
at retirement. Nine employee union contracts will expire by the end of FY2022, including those with the Lexington
Police Supervisors and Patrol Officers, Dispatchers, Firefighters, Town Custodians, Crossing Guards, Municipal
Managers and Municipal Clerks.
An additional driver is the Town Clerk's obligation to administer the state primary in September 2022 and the state
general election in November 2022.
Article 5 Appropriate FY2023 Enterprise Funds Budgets
Funds Requested Funding Source Committee Recommendation
$11,127,383 Water EF
$10,953,238 Wastewater EF Approve (8-0)
$3,138,993 Recreation EF
This article addresses 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.' Enterprise funds allow a
municipality to account separately for certain "business operations"in which a fee is charged in exchange for goods
or services, and may or may not receive support from the tax levy. For an overview of the legal framework and
accounting concepts that apply to the operation of an enterprise fund,please see Appendix B.
The operating and capital costs of the Water and Wastewater enterprises are funded exclusively by rates and fees
charged to users, with no support from the tax levy or General Fund. The operating costs of the Recreation Fund
enterprise are funded to the extent feasible by user fees, but also receive subsidies from the General Fund.
Recreation capital projects are funded from the Community Preservation Fund whenever feasible, and in certain
instances from the Recreation Fund's retained earnings or the General Fund.
Water and Wastewater Enterprise Funds
A breakdown of the funding request for the Water and Wastewater Enterprise Funds, and changes from the prior
fiscal year, are shown below. Further details may be found in the Brown Book, pp. V-27, 31. Although most of the
costs in the water and wastewater operating budgets are appropriated under Article 5, certain others—including
"indirect expenses" (for support services provided by other Town departments), cash to be raised in the rates in
FY2023 for continuous system capital improvements, and contributions to the post-employment health benefits
(OPEB) fund—are addressed in other articles as indicated in the table.
' Capital appropriations for the enterprise funds are addressed in Articles 10(CPA), 11 (Recreation Capital), 12(Municipal
Capital), 13 (Water System Improvements)and 14(Wastewater System Improvements).
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Water Enterprise Fund FY2022 FY2023 $ %
Appropriated Requested Change Change
Compensation $ 865,454 $ 875,670 $ 10,216 1.18 %
Expenses $ 514,300 $ 533,500 $ 19 3.73 %
Debt Service $ 1,179,794 $ 1,224,746 $ 44,952 3.81 %
MWRA Assessment $ 8,743,912 $ 8,493,467 $ (250,455) (2.86)%
Total Requested in Article 5 $ 11,303,460 $ 11,127,383 $ (176,077) (1.56)%
Indirect Expenses (Article 4) $ 918,245 $ 977,093 $ 58,848 6.41 %
Cash Capital (Article 13) $ 400,000 $ 600,000 $ 200,000 50.00 %
OPEB Contribution (Article 17) $ 2,761 $ 2,761 $
Total Water Enterprise $ 12,624,466 $ 12,707,237 $ 82,771 0.66 %
Wastewater Enterprise Fund FY2022 FY2023 $ %
Appropriated Requested Change Change
Compensation $ 389,779 $ 399,848 $ 10,069 2.58%
Expenses $ 454,650 $ 458,400 $ 3,750 0.82%
Debt Service $ 1,464,513 $ 1,595,417 $ 130,904 8.94%
MWRA Assessment $ 8,177,213 $ 8,499,573 $ 322,360 3.94%
Total Requested in Article 5 $ 10,486,155 $ 10,953,238 $ 467,083 4.45%
Indirect Expenses (Article 4) $ 514,111 $ 542,416 $ 28,305 5.51%
Cash Capital (Article 14) $ 200,000 $ 300,000 $ 100,000 50.00%
OPEB Contribution (Article 17) $ 3,004 $ 3,004 $
Total Wastewater Enterprise $ 11,203,270 $ 11,798,658 $ 595,388 5.31%
With a water fund increase of 0.66% and a wastewater fund increase of 5.31%, the percent increase in the budget
for the water and wastewater funds over FY2021 on a combined basis is 2.85%. Compared with last year's increase
of 6.61%,this is very modest. The most significant components of the budget increase are addressed briefly below.
The first, an unusually small increase in the Town's MWRA assessment, has a positive impact. The second, the
continuation of a long-term plan to transition the funding of the enterprises' recurring capital investment programs
from debt to cash raised in the rates, increases the combined budget by about 1.25%, but should ultimately result in
cost savings to rate-payers.
NIWRA Assessment. The largest component of both the water and wastewater budgets is the assessment charged by
the Massachusetts Water Resources Authority (MWRA), which now represents approximately 70% of the total of
each fund. The Town is assessed a share of the MWRA's total FY2023 water budget based on its proportionate
usage in the most recent full calendar year(CY2021) relative to other towns in the MWRA community. In CY2021,
Lexington's water system share decreased by about 7%, compared with a 5% increase the year before. This change
results primarily from Lexington's pattern of fluctuating irrigation usage, compared with other more urban towns in
the MWRA community where water usage is more stable. In CY2020, Lexington's water consumption was much
higher than normal due to extraordinary irrigation usage during that year's dry summer. In CY2021,with a very wet
summer, the irrigation pattern turned around, resulting in a substantial decrease in Lexington's system share. As a
consequence of the share reduction, Lexington's combined preliminary MWRA assessment for FY2023 is just
0.4%over the prior the year, compared with a system-wide MWRA increase of 3.4%.
Transition to Cash Capital. Two years ago, a plan was initiated to transition the funding of regularly recurring
capital investments in the Town's water and wastewater systems (targeted at $2,200,000 annually for the water
system and $1,000,000 annually for the wastewater system) from borrowing to cash raised in the rates (referred to
in the Brown Books as "cash capital"). Since the intent is ultimately to raise the same amount each year to
continuously maintain the system, this amount is treated as an annual operating cost at rate-setting, even though
applied to capital investment and appropriated in Articles 13 and 14. See Brown Book, pp. V-27, 30. To minimize
the impact of the changeover on rates - which would be significant if done on a one-time basis - the transition is
being phased in gradually: in the case of the water fund, by adding an additional $200,000 in cash capital each year
for eleven years; and in the case of the wastewater fund, $100,000 per year for ten years. See the Brown Book, pp.
V-26-27 and V-30-31. The transition currently adds about 1.5%to the increase in the water fund budget and 1%to
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
the increase in the wastewater rate budget, for a combined impact of 1.25%. As the phase-in proceeds,the reduction
in debt service will gradually offset the increase in cash capital costs, reducing the impact on annual budget
increases and saving interest costs.
Water and Wastewater Rate-Setting Issues
Because increases to the operating budgets of the water and wastewater enterprises approved at this annual town
meeting will ultimately translate into increases to the FY2023 water and wastewater rates when set later in the year,
a brief comment on the rate-setting process and the impact of this year's budget is in order.
Next fall, the Select Board will conduct rate hearings and set water and wastewater rates for FY2023. Two main
components factor into the rates: (1) the approved budget for the fiscal year; and (2) estimates of the amount of
water which will be consumed during the fiscal year by Lexington residents at each of the three graduated "tiers"of
usage2, as well as by certain other users for which Lexington serves as a conduit, primarily the Town of Bedford,
the Bedford VA hospital, and Hanscom Air Force Base/Lincoln Labs.
The goal at rate-setting is to establish rates which will generate sufficient revenue, given the anticipated usage, to
cover the budget established by Town Meeting for the fiscal year. If projected water usage is unchanged from the
prior fiscal year, then the required rate increase for each enterprise should generally match the year-over-year
increase in the budget approved by Town Meeting. If anticipated water usage increases from the prior fiscal year,
the required rate increase may be lower than the increase in the budget; and if anticipated water usage decreases,the
rate increase must be higher since most of the water and wastewater funds' costs are fixed,not variable.
By and large, water and wastewater rate increases have been relatively modest for more than a decade. From
FY2008 through FY2021, combined rate increases fluctuated between -3.8%and 12.6%for an average annual rate
increase of 3.0%. Last year (FY2022), the combined rate increase was 6.1% (which closely mirrored FY2022's
budget increase). For FY2023, with a combined budget increase of 2.85%, a significantly lower rate increase than
last year can be expected if projected water usage does not change. It should be noted, however,that there has been
a recent trend of declining water usage for non-irrigation purposes as plumbing fixtures are modernized and
residents pay more attention to water conservation. If that trend continues, a somewhat higher rate increase could be
required in FY2023.
As noted above, there is substantial volatility in rate increases from year to year as a result of weather-dependent
fluctuations in irrigation water usage. One way to reduce that volatility, and to simplify the rate-making process,
would be consistently to use a five or ten-year average to project irrigation water usage instead of trying to predict
actual usage. Surpluses earned in above-average irrigation years could then be "earmarked" as a sort of
"stabilization fund"to offset losses in below-average irrigation years.
To minimize the risk of an operating loss, anticipated water usage is estimated conservatively. This means that the
water and wastewater funds typically generate revenue in excess of the amount assumed for the budget. The
disposition of that surplus revenue, or"retained earnings,"is discussed below.
Water and Wastewater Retained Earnings
Accumulated surpluses resulting from the operations of an enterprise fund, referred to as "retained earnings",
remain with the fund as a reserve, and may be used only for capital expenditures of the enterprise, subject to
appropriation, or to reduce user charges. See Appendix B. Deficits must be funded with existing reserves or, in the
absence of such reserves, made up in the following year's rates. The Town's policy is to maintain a balance of
approximately $1 million of retained earnings in each fund as a buffer against revenue shortfalls resulting from
unexpected reductions in usage or unanticipated extraordinary expenditures. Retained earnings in excess of that
amount are now typically applied to help fund capital projects in lieu of debt. The table below shows how the
balance of retained earnings has been deployed over the past several years and their proposed appropriation at this
ATM for FY2023.
2 For the vast majority of Lexington residents who have sewer connections,wastewater charges are billed based on the amount
of water consumed by the household,not including irrigation water metered separately. Water used for irrigation is billed at
the highest of the three-tiered water rates.
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Retained Earnings: Appropriations and Year-End Balances
Annual Town Meeting 2019 2020 2021 2022
Water
Starting Balance $ 1,612,998 $ 1,346,448 $ 1,737,914 $ 3,537,851
Appropriation for Rate Relief 77 — — — —
Appropriation for Capital(3) $ 775,000 $ 130,000 $ 520,000 $ 1,820,000
Projected End Balance $ 837,998 $ 1,216,448 $ 1,217,914 $ 1,717,851
Wastewater
Starting Balance(I) $ 1,521,373 $ 998,736 $ 1,297,665 $ 2,565,157
Appropriation for Rate Relief — — — —
Appropriation for Capital $ 700,000 — $ 110,000 $ 1,365,000
Projected End Balance --T 821,373 $ 998,736 $ 1,187,665 $ 1,200,157
(1) Certified retained earnings as of the end of the prior fiscal year (for this year, 613012021) and available for
appropriation at this annual town meeting
(2) The Town's formerpractice of appropriating from retained earnings to subsidize the next fiscal year's operating
budget has been discontinued since FY2015(see discussion below).
(3) Proposed appropriations for capital projects for the next fiscal year (FY2023 at this ATM). Note that such
appropriations must be deducted as a liability from the projected retained earnings to be certified as of the end of
the current fiscal year even though the funds appropriated will not be spent until the following year.
(4) The projection of the retained earnings balance available at the end of the fiscal year assumes break-even
operational results, i.e., no surplus or deficit. A higher (lower) starting balance available for appropriation the
following year indicates that the current year's operating results were higher(lower) than were projected at rate-
setting,resulting in an operating surplus(deficit).
As can be seen from the table, the water and wastewater retained earnings balances as of the end of FY2021 and
available for appropriation at this annual town meeting are unusually high, roughly double the amounts available
for appropriation in prior years. In the case of the water fund, the reason for the large balance is an FY2021
operating surplus of nearly $2.5 million, attributable primarily to extraordinarily high irrigation usage during the
very dry summer of 2020. In the case of the wastewater fund, the large balance is attributable to an FY2021
operating surplus of about $500,000 and the recent reallocation to retained earnings of about $800,000 from a
reserve account no longer needed.
The exclusive use in recent years of retained earnings in excess of the "buffer" of$1,000,000 per fund has been for
capital projects. From roughly 2009 to 2014, such "excess" retained earnings were appropriated on a regular basis
to mitigate water and sewer rate increases in the next fiscal year. That practice was discontinued in 2015, however,
as it provided only temporary rate relief and added to the rate increase required the following year unless the
retained earnings subsidy was repeated. Since that time, consistent with recommendations made by this Committee,
excess retained earnings,the availability of which cannot be guaranteed,have been used primarily for non-recurring
capital investments of the enterprises, thereby lowering debt service costs and required future rate increases over a
more extended period of time, as well as saving interest cost.
Consistent with this practice, substantial excess water and wastewater retained earnings available this year are
proposed for appropriation under other articles to fund, or help fund, the following FY2022 capital projects: under
Article 12 (Municipal Capital), $145,000 each from the water and wastewater funds for maintenance equipment,
and $75,000 from the water fund for the hydrant replacement program; under Article 13 (Water System
Improvements), $1,600,000 from the water fund for the annual water system investment program; and under Article
14 (Wastewater System Improvements), $720,000 from the wastewater fund for system improvements and
$500,000 for pump station replacements. See Brown Book, pp. XI-16, XI-18. An unusually large amount of excess
retained earnings is being maintained in reserve due to uncertainties about FY2022 operating results.
Recreation Enterprise Fund
The Recreation Enterprise Fund, or Recreation Fund for short, has for many years been the principal source of
funding for the Town-sponsored recreational programs for residents, most of which are fee-generating. Prior to
2015, recreation activities were managed by the Recreation Department and both the Department and the activities
were financed through the enterprise fund. In 2015, following the inauguration of the Lexington Community Center
(LCC),the Recreation Department was reorganized to include responsibility for the community center and renamed
the Department of Recreation and Community Programs (the Department, or DRCP). The Department now
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2022 ATM,2022-1 STM APPROPRIATION CONMTTEE 21 MARCH 2022
comprises four divisions: Recreation, Pine Meadows Golf Club, Community Center, and the Administrative
Division. The enlarged Department is still funded largely through the enterprise fund, which receives income from
a wide range of fee-supported programs. The Department receives supplementary support from the tax levy.
Historically, the Recreation Fund's operating budget was supported solely by program and facility fees. With the
opening of the LCC, however, which added the cost of several full-time employees to provide programming
available to all residents that is not generally supported through fees, a decision was made to appropriate from the
tax levy the additional amount necessary to cover those costs. The original appropriation from the tax levy for this
purpose in FY2016 was $217,000, and similar amounts have been appropriated from the tax levy each year since.
The advent of the pandemic midway through FY2021 had a significant impact on recreation operations, activities,
and fee income. With the suspension of many recreational and Community Center activities and the consequent
decimation of program and facility fees, it became necessary to augment the amount from the Recreation Fund with
additional funds from the tax levy. At the fall 2020 Special Town Meeting, an additional $400,000 was
appropriated from the tax levy for this purpose. Combined with the prior appropriation at the annual town meeting
for LCC staffing of$218,916,the total tax levy subsidy in FY2021 was $618,916.
The FY2022 budget, as approved at the 2021 Annual Town Meeting, included a direct transfer from the tax levy of
$509,215, inclusive of the usual transfer for LCC staffing. This amount anticipated that the effects of the pandemic
might continue through at least part of the fiscal year, and aimed to offset revenue losses, maintain core Department
functions, and enable the Department to resume full operations if and when the pandemic subsided. The FY2022
budget also suspended the Recreation Fund's annual payment of indirect expenses to the General Fund, which was
$277,771 in FY2021, for a total effective FY2022 tax levy subsidy of approximately$800,000.
The proposed appropriations for FY2023, and changes from the prior fiscal year, are shown in the table below. The
total FY2023 budget is about $835,000, or 32%, more than the appropriated FY2022 budget. The increases are
largely due to recovery from the effects of the pandemic in the prior two fiscal years, and these include the costs of
the program improvement requests for a part-time recreation coordinator and printing and mailing of a program
brochure. The amount of$47,000 for replacement of a vehicle is also included via a program improvement request.
Recreation and FY2021 FY2022 FY2023 Dollar %
Community Programs Actual Revised Requested Increase Change
Compensation $ 896,659 $ 1,342,201 $ 1,567,753 $ 225,552 16.80%
Expenses $ 892,248 $ 1,247,735 $ 1,571,240 $ 323,505 25.90%
Debt Service - - - - -
Total Requested in Article 5 - $ 2,589,936 $ 3,138,993 $ 549,057 21.20%
Indirect Expenses (Article 4) $ 277,771 - $ 286,104 $ 286,104 100.00%
Total $ 2,066,678 $ 2,589,936 $ 3,425,097 $ 835,16132.20%
The sources of funds to support the FY2023 budget of the Department, including the tax levy, are as follows:
• Enterprise Fund retained earnings, $375,000
• Projected recreation user charges, $1,461,752
• Projected Community Center user charges, $445,555
• Projected Pine Meadows Golf Club user charges, $900,000
• Tax levy, $242,790.
The projected distribution of funding in FY2023 among the four divisions of the Department is as follows:
• Recreation, $1,426,153
• Pine Meadows Golf Club, $550,800
• Community Center, $629,962
• Administration, $532,078.
Fee-Setting. The Director of Recreation and Community Programs and the Recreation Committee set fees from
time to time for use of the Town's playing fields, gyms, other recreational facilities, and for certain recreational
programs with the goal of covering all operating costs of those fee-generating activities. The proposed fees are
subject to the approval of the Select Board. If actual revenues come in higher than projections,the resulting surplus
becomes part of the Recreation Enterprise Fund's retained earnings and can be used for future operating expenses,
capital costs of the enterprise,to lower fees, or to absorb future losses.
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2022 ATM,2022-1 STM APPROPRIATION CONMTTEE 21 MARCH 2022
Capital Costs. The capital costs of the Recreation Fund are covered, to the extent projects are eligible under the
Community Preservation Act (CPA), by the Community Preservation Fund. This year's CPA-funded projects, for
which appropriations totaling $4,509,591 are sought under Article 10, consist of playground pour-in-place surfaces
and other improvements, the renovation of the Fiske School field, renovation of the basketball court and tennis
courts off of Worthen Rd., and the formulation of a master plan for Lincoln Park. CPA funds ($915,000) are also
sought to renovate the building housing the Center recreation complex bathrooms, but that project would be
managed by the Department of Public Facilities. For more detail on these projects, see the discussion of Article 10
(CPA)below.
Capital projects not eligible for CPA funding may receive support from the General Fund through the appropriation
of free cash, within-levy debt or excluded debt, and may also be supported by the Recreation Fund's retained
earnings to the extent feasible. Capital costs of the Pine Meadows Golf Club are typically funded from retained
earnings attributable to golf user fees, as is the case this year with the proposed appropriation under Article 11
(Recreation Capital)of$95,000 for course improvements.
This past winter the drain that keeps the lower level of the club house at the Pine Meadows Golf Course apparently
collapsed, and water rose above the floor causing damage to golf carts and the building water heater. At press time,
the Recreation Department has stated that it intends to seek a Reserve Fund transfer of about $131,000 so that a
new drain may be installed and the water heater repaired or replaced (and possibly address other damaged items)
before the beginning of the upcoming golf season. The intent would then be to request a transfer of an equal amount
from the Recreation Enterprise Fund to the Reserve Fund via an appropriation for the current fiscal year under
Article 21.
Looking Forward. As noted above, the operations of the Community Center for which fees are not charged are
supported by the tax levy, and additional support from the tax levy has recently been required due to the stress
placed on the Recreation Fund by the pandemic. Looking ahead, the Town Manager has convened a Financial
Policy Working Group which will examine, among other things, the funding of the Town's recreational programs
and services, and whether the use of an enterprise fund for this purpose continues to make sense.
Article 6 Appropriate for Senior Services Program
Funds Requested Funding Source Committee Recommendation
$15,000 GF Approve (8-0)
This article seeks an appropriation for the Town's Senior Service Program of$15,000. The current amount in the
continuing balance account for this program is $29,550. This includes $18,883 carried over from prior years and
$15,000 appropriated for FY2022,minus year-to-date spending of about$4,000.
Spending on this program has been minimal in the last two years due to the pandemic,which has made it difficult to
accommodate volunteer work for seniors. The $15,000 funding request for FY2023 will assure adequate funding
following a return to normal participation levels, and provide flexibility for potential enhancements.
The Senior Service Program
The Senior Service Program allows a limited number of low to moderate income seniors (age 60 and over) to
perform volunteer work for the Town in exchange for a reduction in their property tax. Reductions earned under
this program supplement any other statutory exemptions for which the participant qualifies. For more information
on the Senior Service Program and other property tax relief options available to seniors, including exemptions and
deferrals,please see Appendix D,or the Town website at http://www.lexingtonma.gov/taxrelief
Benefits and Criteria for Participation
The Select Board is responsible for setting the age and income criteria for participation, the wage rate, and the
maximum credit allowed. Under current guidelines, the program is available for persons age 60 years and older
with household income up to $90,000. The maximum tax reduction which may currently be earned is $1,755 per
household per year.
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Funding Requirements and Requested Appropriation
The program operates as a continuing balance account, and unexpended funds carry over from year to year. When
first adopted, appropriations were made annually to fund the program. More recently, with declining participation
(and a suspension of the program for most of calendar year 2020 due to the pandemic), carryover account balances
have been sufficient to fund the program for multiple years.
Although the Senior Service Program has been less popular in recent years than in the past, it is nevertheless an
important and useful program as it provides an opportunity for socialization and meaningful property tax relief for
participants in the context of a productive contribution to the Town.
Article 7 Climate Action Plan
Funds Requested Funding Source Committee Recommendation
$20,570 Free Cash
$30,000 See below Approve (8-0)
$50,570
This request would fund planning and outreach to update the Town's Sustainable Action Plan with a Climate
Action Plan.
Under Article 7 of the 2018 Annual Town Meeting, Town Meeting appropriated $40,000 for the "Getting to Net
Zero" project. Phase I of that project included stakeholder identification and baseline data collection, and is now
completed. The current request will support Phase II, engaging stakeholders, and Phase III, creating a Climate
Action Plan in partnership with the Metropolitan Area Planning Council.
The budget from the 2018 appropriation for Phase I has a remaining balance of $30,000 which will be re-
appropriated for this article. The remaining $20,570 would be funded from Free Cash.
The Town has also been awarded a grant of$50,000 from the Massachusetts Executive Office of Environmental
Affairs to support this work.
Article 8 Appropriate for Comprehensive Plan Implementation
Funds Requested Funding Source Committee Recommendation
None N/A IP
The Committee anticipates that the motion under this article will be for indefinite postponement, and that the Select
Board will introduce an article at a future special town meeting to fund completion of the Town's Comprehensive
Plan.
The Comprehensive Plan (CP) is a document developed by the Town to inform land use policy, regulation and
potential by-law changes. This request would have funded a Housing Needs Assessment based on
recommendations in the CP. The Housing Needs Assessment would identify what types of housing are needed and
how creating such housing would work in Lexington with the resources we have, i.e., transportation, human
services and economic development.
The CP is re-evaluated on a regular basis and was last updated in 2002. The current update of the CP was funded by
a $302,000 appropriation under Article 7 of the 2017 Annual Town Meeting. The Planning Board appointed the
Comprehensive Plan Advisory Committee to work with a consultant, reach out to the community stakeholders, and
develop the plan. An updated CP is now in the final stages of preparation.
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
Article 9 Establish and Continue Departmental Revolving Funds
Funds Requested Funding Source Committee Recommendation
See below RF Approve (8-0)
This article seeks to establish FY2023 spending limits for all existing revolving funds, as shown in the table below.
Generally speaking, a revolving fund allows Town Meeting to dedicate in advance a specific source of anticipated
revenue from fees and charges to pay expenses for services associated with those fees and charges without the need
for further appropriation. Town Meeting is required each year to vote a limit on the total amount that may be
expended from each revolving fund in the ensuing fiscal year. Expenditures may not be made, nor liabilities
incurred, in excess of such limit or the balance of the fund except with the approval of the Select Board and this
Committee. More detailed information regarding the nature and purpose of revolving funds can be found in
Appendix C of this report.
The spending limit proposed for each of the Town's existing funds, as set forth in the table below, 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. A summary of the historical receipts, expenditures, and balances for each fund during FY2021 and the
first half of FY2022 can be found in Appendix C of the Brown Book. No new revolving funds are proposed to be
established this year.
Authorized FY2022 FY2023
Program or Purpose Representative or Departmental Receipts Request Request
Board
School Bus Transportation School Committee School Bus Fees $ 1,150,000 $ 1,150,000
Building Rental Revolving Fund Public Facilities Dir. Building Rental Fees $ 570,000 $ 586,000
Regional Cache—Hartwell Participating
$ 50,000 $ 50,000
Avenue Municipality Fees
Lexington Tree Fund Gifts and Fees $ 70,000 $ 75,000
DPW Burial Containers Public Works Dir. Sales $ 50,000 $ 60,000
DPW Compost Operations Sales and Permits $ 790,000 $ 855,000
Minuteman Household Fees from Consortium
$ 260,000 $ 260,000
Hazardous Waste Program Towns
Senior Services Programs Human Services Dir. Program Fees and Gifts $ 75,000 $ 75,000
Residential Engineering Review Engineering Dir. Fees Paid by Developers $ 57,600 $ 57,600
Health Programs Health Director Medicare $ 45,000 $ 45,000
Reimbursements
Lab Animal Permits Public Health Dir. Lab Animal Permit Fees $ 40,000 $ 40,000
Tourism/Liberty Ride Economic Liberty Ride Receipts $ 194,000 $ 104,000
Visitors Center Development Dir. Sales,Program Fees and $ 247,000 $ 260,000
Donations
With the exception of the Liberty Ride (tourism was significantly affected by the pandemic),the proposed spending
limits have not changed substantially from those approved last year.
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
Article 10 Appropriate the FY2023 Community Preservation Committee
Operating Budget and CPA Projects
Funds Requested Funding Source Committee Recommendation
See below CPA [a-j,l-n] Approve (8-0);
[k] IP
Community Preservation Act (CPA) projects are funded using the Community Preservation Fund (CPF), which is
managed as four separate sub-funds: Affordable Housing, Open Space & Recreation, Historic Resources, and
Unbudgeted Reserves.
As stipulated by the Community Preservation Act, the CPF has two sources of revenue; a 3% surcharge applied to
property tax bills, and a variable annual state match of surcharge revenues collected by the Town. In the 15 years
since the Town enacted the CPA, the state match has averaged out to roughly 38%, and only once met the full
100% allowed by the Community Preservation Act. Increases in the fees charged on all real estate transactions, as
well as a FY2021 state budget surplus,have boosted the total match of FY2021 surcharges to over 45%.
The funds available for appropriation in the CPF total $16,523,252. The reduced spending in FY2022 resulted in a
carry-forward balance of$8,387,252. The local surcharge revenue and an estimated FY2023 state match of 38%
results in budgeted revenue of$8,136,000. The CPC appropriations requested in this article total $7,873,191, which
would leave a balance of over $8.5 million. This conforms to the CPA policy to maintain a minimum $3 million
balance in reserve for unanticipated time-sensitive requests, such as purchasing a parcel of land for conservation.
Annual CPA Revenue& State Matching Rate
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$8,000,000
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$6,000,000
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❑ Local Surcharge ❑ State Match Match%
Lexington has received$2,500,261 in matching funds for FY2022, a 45.5%match from the state. This exceeded the
30%rate projected in the FY2022 budget, and it is the highest percentage match since FY2014. Revenues in excess
of the budget projections will be appropriated as an adjustment to the FY2022 budget under Article 21.
Funding requests for the FY2023 CPA projects are detailed below. It is noteworthy that none of these requests will
rely on debt-financing. CPA expenditures from the prior year were well below normal, resulting in large cash
balances in each of the four CPA accounts.
Art- Item Funding CPF
icle Request Funding Account
10(a) Archives and Records Management $ 20,000 Historic Resources
10(b) Wright Farm Barn Stabilization $ 155,000 Historic Resources
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
Art- Item Funding CPF
icle Request Funding Account
10(c) West Farm Meadow Preservation $ 28,175 Open Space
10(d) Playground Improvements–Pour-in-Place Surfaces $ 1,459,591 Unbudgeted Reserve
10(e) Center Playground Bathrooms and Maintenance Building $ 680,000 Undesignated Fund Balance
Renovations
10(f) Playground Improvements–Hard Courts Surfaces $ 2,500,000 Unbudgeted Reserve
10(g) Park and Playground Improvements–Kinneens Park $ 200,000 Unbudgeted Reserve
10(h) Park Improvements–Athletic Fields–Fiske Field $ 250,000 Unbudgeted Reserve
10(i) Lincoln Park Master Plan $ 100,000 Unbudgeted Reserve
100) LexHAB–Preservation and Rehabilitation $ 234,000 Community Housing
10(k) LexHAB– 116 Vine Street Construction Funds $ —
10(1) Lexington Housing Authority–Vynebrooke Village– $ 160,790 Community Housing
Preservation
$ 324,500 Open Space
10(m) CPA Debt Service $ 773,000 Historic Resources
$ 838,135 Unbudgeted Reserve
$ 1,935,635
10(n) Administrative Budget $ 150,000 Unbudgeted Reserve
TOTAL $ 7,873,191
10(a)Archives and Records Management
This $20,000 request is for the conservation and preservation of historic municipal documents and records. The
ongoing project will fund the conservation and preservation of older documents and make them available in the
Town's digital archives. Documents to be conserved under this funding request include the 1927 blueprints for the
Cary Memorial Building; Tax Warrants and Acts of Massachusetts, 1778-1823; and a police department journal for,
1874-1909. This request is made by the Town Clerk's office and would be funded from the Historic Resources
Reserves.
10(b)Wright Farm Barn Stabilization
This $155,000 request would fund repairs need to stabilize the barn located on the Wright Farm property. The
Wright Farm was purchased in 2016 using CPA money for both conservation and affordable housing use.While the
farm house has been renovated by LexHAB, the barn has remained in its original dilapidated condition. The
proposed repairs would stabilize the building against the weather and prevent further decay. Long-term plans would
renovate this structure for use by the community. This request is being made by the Land Use, Health &
Development Department and would be funded from the Historic Resources Reserves.
10(c)West Farm Meadow Preservation
This $28,175 request would extend the conservation meadow preservation program to approximately 10 acres of
the West Farm Meadow conservation land. Work done will improve the land for passive recreation, wildlife
management, scenic enjoyment, and preservation of Lexington's agricultural history. Started in FY2015, this CPA
funded program has restored meadow lands at Hennessey Field, Joyce Miller's Meadow, and Wright Farm, and will
soon do so at Willard's Woods and Daisy Wilson Meadow. This request is being made by the Land Use, Health &
Development Department and would be funded from the Open Space Reserves.
10(d)Playground Improvements -Poured-in-Place Surfaces
This $1,459,591 request would improve the playgrounds at the Bowman, Bridge, and Estabrook schools by
removing the current bark mulch safety surfacing around the play equipment and installing Pour-In-Place safety
surfacing, and installing a completely new playground at Fiske School. Pour-In-Place is a impact-absorbing rubber/
urethane surface that is easy to maintain,has a 15-year life, and creates accessible access to the play area. For these
reasons Lexington is installing it in all new playgrounds. This project would complete the last of the school
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
playgrounds with the next anticipated replacements being in 2033. This project is requested by the Department of
Public Facilities and would be funded from the Unbudgeted Reserves.
10(e) Center Playground Bathrooms and Maintenance Building Renovation
This $680,000 request is for construction funds to renovate the bathrooms and DPW maintenance building at the
Center Playground. Funds to design and engineer this project were appropriated in FY2021, although questions
raised at Town Meeting about the proposed design prevented construction money from being approved. Based on
community and stakeholder input,this project is moving forward with a reduced scope limited to renovation of the
existing building.
This building supports the users of the Center Playground facility, many of whom pay permit fees for access to the
field, tennis courts, and track complex. Delaying necessary renovations could lead to reduction in permit revenue.
This project is requested by the Department of Public Facilities and would be funded from the Undesignated Fund
Balance.
10(1) Playground Improvements- Hard Court Surfaces
This $2,500,000 request is for renovation of the Farias Basketball Courts and the Gallagher Tennis Courts. This is a
large project which involves resurfacing hard basketball, tennis and pickleball surfaces and equipment, new
fencing, tennis backboards and site amenities. This would complete, at least until 2028, the Hard Court surfaces
program which began in FY2016. This project is requested by the Recreation and Communities Programs
Department and would be funded from the Unbudgeted Reserves.
10(g) Park and Playground Improvements- Kinneens Park
This $200,000 request would improve the Kinneens Park neighborhood park on Burlington St.. Work includes
updating and replacing playground equipment and safety surfacing and installing fencing, signage, park benches,
and a bike rack. This project is requested by the Recreation Committee and follows on similar CPA-funded
playground improvements projects from FY2016, 2017, 2018, 2021, and 2022. This project would be funded from
the Unbudgeted Reserves.
10(h)Park Improvements-Athletic Fields- Fiske Field
This $250,000 request would renovate the Fiske School Fields with irrigation upgrades, laser grading and the
installation of new natural grass, and installation of backstops, fencing,and signage. This project is requested by the
Recreation Committee and follows on similar CPA funded field improvements projects from FY2016, 2017, 2018,
2020, 2021 and 2022. This project would be funded from the Unbudgeted Reserves.
106) Lincoln Park Master Plan
This $100,000 request would create a master plan for future improvements at Lincoln Park, a recreation area with
both active and passive recreation uses. Our five-year capital plan currently has six possible projects bookmarked
for this facility, and the proposed master plan should create a coordinated, holistic approach to implementing the
enhancements and upgrades that stakeholders envision. This project is requested by the Recreation and
Communities Programs Department and would be funded from the Unbudgeted Reserves.
10(j) LexHAB-Preservation and Rehabilitation
This $234,000 request is for preservation and rehabilitation/restoration projects in Lexington Housing Assistance
Board (LexHAB) managed affordable housing units. Nine of these units were acquired with CPA funding, and
three unit were acquired solely with LexHAB funds. This funding enables LexHAB to keep its entire stock of 78
units of affordable housing available to serve the needs of the community. This project is requested by LexHAB
and would be funded from the Community Housing Reserves.
10(k)LexHAB- 116 Vine Street Construction Funds
Leary Farm, a 14.2 acre parcel at 116 Vine Street, was acquired in 2009 using CPA funds. At the time, 2'3 acre was
set aside for affordable housing, and the balance of the property was preserved as conservation land. This item
initially planned to request $5.3 million in construction funds for six units of affordable housing to be built on the
property. The funding would have come from the Community Housing Reserves and Undesignated Fund Balance
of the CPA Fund.
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
LexHAB recently received an updated estimate for construction costs of$5.7 million, after which they asked that
this item be indefinitely postponed.
10(1) Lexington Housing Authority- Vynebrooke Village-Preservation
This $160,790 request is for a preservation project at the Lexington Housing Authority's Vynebrooke Village.
These funds would supplement a $3.8 million grant the Authority received from the Massachusetts Department of
Housing and Community Development. This project would modernize the kitchens and bathrooms of the 48 units at
the Village as well as convert three units to fully accessible housing, and this CPA appropriation would specifically
finance fire and safety systems upgrades.This project is requested by LexHAB and would be funded from the
Community Housing Reserves.
10(m) CPA Debt Service
Projected debt service on CPA projects is outlined in the following table. Two different types of debt instruments
are used: bond anticipation notes (BANS), and multi-year municipal bonds. BANS provide interest-only borrowing
at a lower rate for a term of up to one year. BANS provide ready access to capital, are routinely issued for individual
projects prior to bundling the debt from several projects into a single multi-year bond.
Project Total Total FY2023
TM Approval Final Payment Appropriation Debt Financing Debt Service
Wright Farm Purchase $ 3,072,000 $ 2,950,000 $ 324,500
ATM 2012 FY2024
Community Center Acquisition $ 10,950,000 $ 7,390,000 $ 808,500
STM 3/2013 FY2024
Cary Memorial Building Upgrades $ 8,677,400 $ 8,241,350 $ 733,600
STM 3/2014 FY2025
Community Center Renovation $ 6,297,184 $ 30,225 $ 30,427
STM 6/2014 FY2023 (BAN)
Cary Memorial Building Construction $ 8,677,400 $ 38,350 $ 38,608
STM 3/2014 FY2023 (BAN)
TOTAL $ 37,673,984 $ 18,649,925 $ 1,935,635
The debt service for the Wright Farm purchase will be paid from the Open Space Reserve; the Community Center
Acquisition debt service will be paid from the Historic Resource Reserve; and the remaining debt service payments
will be paid from the Unbudgeted Reserves.
While the CPA statutes limits a community's CPA debt to a level that can be serviced by annual revenue, the
practice of the Town, based on recommendations from the Appropriation Committee and Capital Expenditures
Committee, is to limit the size and duration of debt funded by the CPA to the practical minimum. This practice
reduces the potential for long-term financial commitments that would linger should the residents vote to rescind the
CPA surcharge in the future. Additionally, if too much of the CPA annual revenue were consigned for debt service,
the ability of the CPC to fund new projects directly with cash would be stifled.
10(n)Administrative Budget
The Community Preservation Act permits up to 5% of annual CPA funds to be spent on the operating and
administrative costs of the CPC. The CPC may pay for staff salaries, mailings, public notices, overhead, legal fees,
membership dues, and other miscellaneous expenses related to CPA projects. As in past years, the CPC is
requesting an appropriation of$150,000, which is well below the 5%cap of$400,000. This money will be used to
fund the Committee's part-time administrative assistant, membership dues to the nonprofit Community
Preservation Coalition, administrative expenses, legal and miscellaneous expenses, land planning, appraisals, and
legal fees for open space proposed to be acquired using CPA funds. Funds appropriated for administrative expenses
are from the Unbudgeted Reserves and money not spent in a given fiscal year reverts to the CPA Undesignated
Fund Balance at year's end.
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
Article 11 Appropriate for Recreation Capital Projects
Funds Requested Funding Source Committee Recommendation
$95,000 Recreation EF Approve (8-0)
Ret'd Earnings
Item Amount Funding Source Brown
Book p.
Pine Meadows Improvements $ 95,000 Recreation RE XI-15
This request will fund installation of new fairway bunkers on the 2nd and 7th holes, as well as a greenside bunker at
the 8th hole, reconstruction of the bunker on the 9th green, expansion of the tee at the 9th hole, reconstruction of the
middle tee on the 8th hole, and completion of the design and engineering work associated with the cart path
restoration and renovation on the 5th hole.
The Recreation Enterprise Fund is funded by user fees. Information on the available balance for this and other
enterprise funds may be found in the discussion of Article 5.
Article 12 Appropriate for Municipal Capital Projects and Equipment
Funds Requested Funding Source Committee Recommendation
$14,016,091 See below Approve (8-0)
This article requests funding for municipal capital projects and equipment. In the first table below, the requested
appropriations are categorized by funding source. The Capital Expenditures Committee Report to the 2022 Annual
Town Meeting contains further discussion of these capital requests.
Item Request Funding Source
e,f g,h,i,j,k,m1 $ 6,817,577 Free Cash
n,o,p,q,r,s,t
n $ 3,615,000 GF Debt
1 $ 2,669,767 Tax Levy
b,c $ 240,000 Traffic Stabilization Fund
h $ 236,923 Prior Year Debt
g,m $ 220,000 Water RE
g $ 145,000 Sewer RE
a $ 65,000 TMOD Stabilization Fund
d $ 6,824 TNC Spec. Revenue Fund
$ 14,016,091 TOTAL
For a discussion of the items in this request,please see the referenced pages in the Brown Book.
Item Description Amount Funding Source Brown
Book
a Hartwell District Signage $ 65,000 TMOD Stabilization Fund XI-14
b Townwide Pedestrian &Bicycle Plan $ 65,000 Traffic Stabilization Fund XI-15
c South Lexington and Forbes-Marrett Traffic $ 175,000 Traffic Stabilization Fund XI-15
Mitigation Plans
d Transportation Mitigation $ 6,824 TNC Spec. Revenue Fund XI-15
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
Item Description Amount Funding Source Brown
Book
e Replace Pumper Truck $ 650,000 Free Cash XI-15
f Townwide Culvert Replacement $ 390,000 Free Cash XI-16
$ 1,246,000 Free Cash
g Equipment Replacement $ 145,000 Water Ret'd Earnings XI-16
$ 145,000 Wastewater Ret'd Earnings
h Sidewalk Improvements $ 800,000 Free Cash/Prior Bond Auth. XI-17
I Townwide Signalization Improvements $ 125,000 Free Cash XI-18
Storm Drainage Improvements and NPDES
$ 570,000 Free Cash XI-18
Compliance
k Comprehensive Watershed Stormwater Management $ 390,000 Free Cash XI-18
1 Street Improvements $ 2,669,767 Tax Levy XI-18
in Hydrant Replacement Program $ 75,000 Free Cash XI-20
$ 75,000 Water Ret'd Earnings
n Battle Green Streetscape Improvements $ 3,615,000 GF Debt XI-20
$ 1,360,000 Free Cash
o Municipal Parking Lot Improvements $ 60,000 Free Cash XI-20
p Public Parking Lot Improvement Program $ 100,000 Free Cash XI-20
q New Sidewalk Installations $ 75,000 Free Cash XI-20
r Application Implementation $ 158,500 Free Cash XI-20
s Network Redundancy&Improvement Plan $ 945,000 Free Cash XI-20
t Scanning -Electronic Document Management $ 110,000 Free Cash XI-21
Article 13 Appropriate for Water System Improvements
Funds Requested Funding Source Committee Recommendation
$600,000 Water EF Rates
$1,600,000 Water EF Ret'd Earnings Approve (8-0)
$2,200,000
This article addresses proposed capital expenditures to be made during FY2023 as part of a continuing program to
upgrade and maintain 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.
Work to Be Done and Funding
Annual Distribution System Improvement Program. A total of$2,200,000 is requested this year to fund an ongoing
annual program to replace unlined or inadequate water mains and deteriorated service connections and to eliminate
dead ends in water mains. The details of the projects can be found in the Brown Book, p. XI-19. Capital
appropriations for similar purposes have been made in most years over the last decade. The goal is to assure
dependable service with high water quality, pressure, and volume for domestic needs, commercial needs, and fire
protection, as well as to minimize water main breaks.
Historically,the annual amount requested for this program was $1,000,000. Beginning in FY2020,that amount was
increased to $2,200,000, a higher level of capital investment which was expected to continue indefinitely. The
substantial increase was based on an asset management study completed in 2017 by the Wright-Pierce
environmental engineering firm, which recommended an ongoing annual expenditure of this magnitude to keep
Lexington's water system safe and reliable. The asset management plan identified areas of vulnerability, aging pipe,
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
and areas with low volumes and pressures; and it recommended the replacement of 1%of the Town's water mains
on an annual basis (based on an estimated system useful life of 100 years).
Last year,the requested appropriation for the ongoing program was backed down temporarily to $1,110,000.With a
large number of other capital projects under way, including the installation of a new automated meter-reading
system approved by Town Meeting in 2019, the Engineering Department and the Department of Public Works
determined that the Town did not have the capacity to manage additional projects. This year, it is proposed to return
to the higher amount of$2,200,000, and the Town's five-year capital plan anticipates similar annual expenditures
going forward, see Brown Book,p. XI-22.
It is proposed that the funding for this year's maintenance and upgrade work include $600,000 raised in the rates,
up from $400,000 last year. This financing arrangement continues a plan initiated several years ago gradually to
transition the funding of the ongoing water distribution system maintenance and improvement program from debt to
cash, increasing cash and reducing debt by an additional $200,000 each year. To mitigate pressure on water rates in
the short term, the changeover is being phased in over eleven years. See the discussion of Article 5 above and the
Brown Book,p. XI-19.
Although the balance of$1,600,000 would ordinarily be funded with debt, it is proposed this year to fund it entirely
from retained earnings. This strategy is made possible by the existence of an extraordinary balance of
approximately $3,500,000 in water fund retained earnings at the end of FY2021. See the discussion under Article 5.
Although the availability of retained earnings of this magnitude is a one-time event not likely to be repeated, its use
this year in lieu of debt will put the "excess" retained earnings to a productive use and benefit future rate payers by
reducing future debt service costs.
Miscellaneous Appropriations under Other Articles. For completeness, it should be noted that appropriations for
certain other capital expenses of the Water and Wastewater Enterprise Funds are requested in Article 12 (Municipal
Capital Projects and Equipment). The purchase of a six-wheel dump truck with a snow plow and a utility service
truck used in water and sewer maintenance operations would be shared between the two funds, with $145,000 from
water fund retained earnings and $145,000 from wastewater fund retained earnings. (An additional $50,000 in free
cash from the general fund would be applied toward the purchase of the dump truck due to its availability for town-
wide use as a snow plow.) Also, as has been the case for many years, half of the cost of the Town's annual hydrant
replacement program would be funded by an appropriation of $75,000 from water fund retained earnings; the
rationale for sharing this cost is that the hydrants are used not only for fire prevention but also for water system
flushing purposes.
Committee Recommendation
The Committee recommends approval of both the appropriation amount and the funding method requested in this
article. It supports the principle of continuous capital investment to assure the safety, soundness and longevity of
the Town's water and wastewater infrastructure. It also supports funding the cost of the ongoing system
maintenance and improvement program—essentially, a required annual expense of the enterprise fund—with cash
raised directly in the rates, supplemented by "excess" retained earnings as available, rather than by debt. Although
the gradual changeover to cash will result in somewhat higher rate increases in the short run, in the long run it will
more transparently and directly reflect the true current cost of system upgrades and maintenance when rates are set,
and it will also save interest costs.
Article 14 Appropriate for Wastewater System Improvements
Funds Requested Funding Source Committee Recommendation
$1,500,000 Wastewater EF Debt
$1,220,000 Wastewater EF Ret'd Earnings
$300,000 Wastewater EF Rates Approve (8-0)
$3,020,000
This article addresses proposed capital expenditures to be made during FY2023 as part of a continuing program to
upgrade and keep current the assets of the Wastewater Enterprise Fund, including both sewer mains and pumping
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
stations. 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.
Work to Be Done and Funding
Annual Sanitary System Investigation and Improvement program. A total of$1,020,000 is requested as part of an
ongoing annual program to investigate the condition of and rehabilitate sanitary sewer infrastructure. The goal is to
improve the system's operation, reduce backups and potential overflows, prevent malfunctions, and reduce
infiltration,thereby lowering measured flows through the MWRA meter. A description of the program can be found
in the Brown Book,p. XI-19.
It is proposed that this year's program costs be funded with a combination of retained earnings ($720,000) and cash
raised in the rates ($300,000). Although the balance of $720,000 would ordinarily be funded with debt, it is
proposed this year to fund it entirely from retained earnings (similar to the water distribution improvements). This
strategy is made possible by the existence of an unusually large balance of approximately $2.5 million in
Wastewater Fund Retained Earnings at the end of FY2021. This is the third year of a ten-year plan to transition the
funding of the ongoing wastewater system maintenance and improvement program from debt to cash. The plan will
increase the use of cash by an additional $100,000 while reducing debt by an equal amount each year, in order to
mitigate pressure on water rates in the short term. See the discussion of Article 5 above and the Brown Book, p.
XI_19.
Pump Station Upgrades. An additional $2,000,000—$1,500,000 funded by wastewater debt and $500,000 from
wastewater retained earnings—is requested to help bring to a conclusion a multi-year project to upgrade
Lexington's ten sewer pumping stations. The details of the project, including this year's expected work sites, can be
found in the Brown Book, p. XI-8. Capital appropriations for pump station upgrades have been made for several
years, and the project is now nearing completion. See the 5-year capital plan, Brown Book, p. XI-22. Because the
project is not part of a continuous investment program which will continue indefinitely, but will nevertheless
provide an ongoing benefit to future users, it is appropriately funded with debt, as well as by retained earnings
available to be deployed for this purpose.
It should be noted that this year's requested appropriation of$2,000,000 for pump station upgrades is significantly
larger than the amounts requested in prior years, generally in the range of$400,0004800,000. The reason is that
two projects are planned—the Hayden Avenue station, which has already been designed and bid, and the North
Street station, for which design is underway—and the anticipated cost of these projects has increased significantly.
It was originally thought that a balance of approximately $2,000,000 of authorized debt from prior years, plus an
additional authorization of$575,000 this year, would be sufficient to cover the construction costs of both projects.
However, given the recent extraordinary inflation in construction costs, the lowest bid for the Hayden Avenue
station upgrade came in last fall substantially higher than projected. It is anticipated that when the North Street
station is put out to bid this spring, the bids will be in a similar range, and that the final cost of completing both
projects will be 50% higher than originally projected, i.e., approximately $4,000,000. Because the equipment
involved is beyond its useful life, and the pumping stations are essential to health and safety, deferral of the projects
in the hope of a future reduction in costs is not warranted.
Miscellaneous Appropriations under Other Articles. For completeness, it should be noted that appropriations for
certain other capital expenses of the Water and Wastewater Enterprise Funds are requested in Article 12 (Municipal
Capital Projects and Equipment). The purchase of a six-wheel dump truck with a snow plow and a utility service
truck used in water and sewer maintenance operations would be shared between the two funds, with $145,000 from
water fund retained earnings and $145,000 from wastewater fund retained earnings. (An additional $50,000 in free
cash from the General Fund would be applied toward the purchase of the dump truck due to its availability for
town-wide use as a snow plow.)
Committee Recommendation
The Committee recommends approval of both the appropriation amount and the funding method requested in this
article. It supports the principle of continuous capital investment to assure the safety, soundness and longevity of
the Town's water and wastewater infrastructure. It also supports funding the costs of the ongoing system
maintenance and improvement program—essentially an annual operating expense of the enterprise funds—with
cash raised directly in the rates rather than by debt. Although the gradual changeover to cash will result in
somewhat higher rate increases in the short run, in the long run it will more transparently and directly reflect the
true current cost of system upgrades and maintenance when rates are set, and it will also save interest costs.
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
Article 15 Appropriate for School Capital Projects and Equipment
Funds Requested Funding Source Committee Recommendation
$1,343,006 GF Approve (8-0)
The requested funds will be used to purchase equipment to aid the Lexington Public Schools' (LPS) staff in
teaching and administration, to provide devices to be assigned to students to allow for innovative learning methods
that integrate supportive technologies, problem-based approaches and higher order thinking skills, and to maintain
and upgrade LPS information technology infrastructure.
We note that the funding strategy for annual school technology requests has transitioned from debt to cash capital,
which is reasonable given the relatively limited lifetimes of the hardware.
School capital requests for FY2023 are detailed below:
Description Funding Funding
Request Source
Tech Workstations $ 173,400 GF
PreK-5 Mobile Devices $ 105,300 GF
1:1 Middle School Program $ 212,610 GF
1:1 at Lexington High School $ 180,480 GF
Science/Technology/Engineering/(Art)/Math(STEM/STEAM)/ $ 80,800 GF
Computer Science
Interactive Projectors/Whiteboard Units and Document Cameras $ 240,416 GF
District and Building Network Infrastructure $ 330,000 GF
Server/Storage Infrastructure $ 20,000 GF
TOTAL $ 1,343,006
Tech Workstations - Replace Unit A (all classroom teachers, counselors, librarians and staff working under the
teacher contract, "Unit A") workstations and peripheral devices (laptops, desktops, printers and monitors). Staff
workstations were primarily replaced from FY2020 funds, thus minimal replacements are budgeted for this cycle.
(150 laptops � $1,075 each, 5 laptops/workstations � $1,000 each, 10 printers � $440 each, and 10 monitors
$275 each)
PreK-5 Mobile Devices - Replace 260 Grade 1 iPads across all district Grade 1 classes due to current devices
having reached their end of life. (260 iPads � $405 each)
1:1 Middle School Pro. - Purchase 570 Chromebooks for 6th graders entering Diamond and Clark Middle
Schools. All middle school students have 1:1 devices, and the devices follow them through middle school (three-
year life span).
1:1 at Lexington. gh School -Purchase 640 Chromebooks for 9th graders.All high school students, once provided
a device in 9th grade or upon entering the high school, have the device through their senior year (four-year life
span).
Science/Technology/Engineering/(Art)/Math. (STEM/STEAM)/Computer Science -Update district computer labs at
Middle School/High School level and to purchase STEM/STEAM based curricular materials. (two labs @ $37,400
each, $6,000 for STEM/STEAM Materials)
Interactive Projectors/Whiteboard Units and Document Cameras - Replace 48 interactive projectors districtwide.
This equips buildings with a touch-activated interactive system with a new ceramic whiteboard and soundbar. The
replacements will begin with the oldest model per school until all systems are within a 5-year window with all of
the same functionality. The request will also replace 28 document cameras at middle schools, with remaining
schools planned in future years. As part of new school construction, some schools have newer document cameras
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
and other schools have had document cameras replaced prior to this year. (48 projectors (a, $4,640 each, 28
document cameras @$632 each)
District and Building Network Infrastructure - Replace switches at the high school that control Internet and internal
connections ($40,000), replace switches districtwide that support internal connections in schools ($90,000), and
replace the electronic devices that support the schools'virtual networks ($200,000).
Server/Storage Infrastructure -Maintain and upgrade server-related hardware.
Article 16 Appropriate for Public Facilities Capital Projects
Funds Requested Funding Source Committee Recommendation
$2,611,940 See below Approve (8-0)
This article requests funds for the facilities projects summarized below. For further discussion of these items,please
see the report of the Capital Expenditure Committee and the referenced Brown Book pages. The Committee
concurs with the discussion presented by the Capital Expenditure Committee in its report.
Art- Item Funds Funding Brown
icle Requested Source Book
16(a) Public Facilities Bid Documents $ 100,000 Free Cash XI-13
16(b) Building Flooring $ 150,000 Free Cash XI-13
School Paving and Sidewalks $ 145,000 Free Cash XI-13
16(c) Mechanical/Electrical Systems Replacements $ 787,000 Free Cash XI-13
16(d) Municipal Building Envelopes and Associated Systems $ 219,540 Tax Levy XI-13
16(e) Townwide Roofing $ 428,000 Free Cash XI-7
16(f) School Building Envelopes and Associated Systems $ 251,400 Free Cash XI-14
16(g) High School Equipment Emergency Funds $ 500,000 GF Debt XI-7
16(h) Town Pool Water Heater Replacement $ 31,000 Free Cash XI-14
TOTAL $ 2,611,940
Article 17 Appropriate to Post Employment Insurance Liability Fund
Funds Requested Funding Source Committee Recommendation
$1,179,721 Free Cash
$750,000 Tax Levy
$2,761 Water EF Approve (8-0)
$3,004 Wastewater EF
$1,935,486
This article requests the appropriation of$1,935,486 into the Post Employment Insurance Liability(PEIL) Fund. Of
the requested amount, $1,179,721 would come from free cash, $750,000 from the tax levy, $2,761 from the Water
Enterprise Fund, and $3,004 from the Wastewater Enterprise Fund. The tax levy amount corresponds to the
withdrawal of an equal amount, $750,000, from the Health Claims Trust Fund under Article 4 to support the
employee benefits line of the operating budget. The amounts requested from the two enterprise funds are based on
the benefits earned by the employees of the Water and Wastewater Departments.
The PEIL Fund holds funds that will be used in the future to pay for health care benefits for retirees. These benefits
make up most of the "other post-employment benefits" (OPEB) that the Town provides as part of the total
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
compensation for its employees. For a detailed discussion of OPEB, the present status of the PEIL Fund, and
related issues,please see Appendix F.
The Town of Lexington's future OPEB liabilities are not fully funded. The unfunded liability is the sum of the
actuarially determined obligations incurred during current and prior fiscal years that have not been funded (via
contributions to the PEIL Fund). Every year, the unfunded liabilities grows by the present value of future benefits
earned during the current year, less the value of benefits provided to retires during the current year through the
operating budget, and less any contribution to the PEIL Fund for future liabilities.
One benefit of contributing to the PEIL Fund is that, like the pension fund, it can be invested in equities and earn a
higher return than typical Town-managed funds, thus reducing future liabilities. Although the Committee
recognizes that there are valid alternative priorities to which some portion of these funds could be allocated, such as
additional bolstering of our Capital Stabilization Fund to help address significant upcoming capital investment
challenges, it supports this year's proposed PEIL appropriation request.
Article 18 Rescind Prior Borrowing Authorizations
Funds Requested Funding Source Committee Recommendation
None N/A Approve (8-0)
State law requires that Town Meeting vote to rescind the unissued portions of borrowing authorizations
(appropriations funded by debt)that are no longer required for the purpose stated in the authorization. The amounts
shown below were never borrowed and do not represent funds in Town accounts. Rescinding these authorizations is
the final bookkeeping task for every debt-based appropriation.
The following rescissions have been recommended by Town staff:
Town Meeting Article Project Description Amount
2014 STM 10 Community Center Renovations $ 10,453
2015 STM 4 Pelham Road Accessibility Study $ 41,340
2017 ATM 12(1) Dam Repair $ 126,284
2019 ATM 16(1) DPW Equipment $ 98,445
2019 ATM 27 Visitors Center Supplemental $ 70,947
Article 19 Establish, Amend, Dissolve and Appropriate To and From
Specified Stabilization Funds
Funds Requested Funding Source Committee Recommendation
See below See below Approve (8-0)
State law authorizes towns to create and maintain a general purpose stabilization fund (in Lexington, the
"Stabilization Fund"), and stabilization funds for specified purposes, e.g., the "Capital Stabilization Fund". Funds
created for specified purposes may only be used to fund those purposes. The Town currently has eight such funds.
Appendix E summarizes the laws governing specified stabilization funds and provides a brief history and
description of each of the Town's funds,along with the most recent fund balances available.
Town Meeting may create a new specified stabilization fund, alter a fund's specified purpose, approve
appropriations into a fund, appropriate money from a fund, or dissolve a fund. Appropriations into specified
stabilization funds do not authorize expenditures, but rather put aside funds for specified future uses. Additions or
withdrawals not addressed by other specific warrant articles are approved in this article.
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
The following transfers are proposed under this article:
(a) That$800,000 be withdrawn from the Capital Stabilization Fund (CSF)to mitigate debt service for projects
exempt from Proposition 2'/2;
(b) That $3,142,434 be appropriated into the Capital Stabilization Fund, with $57,138 to come from the tax
levy and the balance, $3,085,296,to be taken from the General Fund unreserved fund balance (free cash);
(c) That $107,554 from the Transportation Management Overlay District Special Revenue Fund be
appropriated into the Transportation Management Overlay District Stabilization Fund.
Items 19(a) and 19(b) may seem to be at cross purposes, with the first withdrawing from and the second adding to
the Capital Stabilization Fund. This approach to the fund management offers transparency regarding the use of
funds.
The proposed $800,000 to be withdrawn will be used to partially mitigate an increase in exempt debt service costs.
While these funds are not earmarked for specific projects, exempt debt service is still increasing to meet the costs
associated with the new Hastings School, construction of the Lexington Children's Place School, and the new Fire
Station. The appropriation into the fund recognizes that there will be significant increases in debt service for future
projects,particularly the replacement or reconstruction of Lexington High School.
The appropriation of$57,138 in tax levy funds into the CSF follows from the recently adopted policy to save the
new growth in the tax levy from PSDUP-process rezonings and construction in the Hartwell Innovation District for
later use in mitigating the tax impacts of a project to rebuild or renovate Lexington High School. These particular
tax levy funds are derived from the new growth associated with the developments at 186 Bedford St. and on
Watertown St.
The transfer described in item (c) is to appropriate portions of one-time payments received in association with
special permits for projects at 3 Maguire Road and 91 Hartwell Avenue.
The table below summarizes the various requests regarding stabilization funds at this town meeting.
Estimated
Stabilization Fund Deposit
FSource/Destination Article
Fund Balance* (Withdrawal)
(12/31/2021)
Capital $21,672,549 $3,142,434 Tax levy and General Fund unreserved balance Article 19
($800,000) Exempt debt payments
Debt Service $191,080 ($191,112.60) Exempt debt payments for 2003 school projects Article 23
TDM/PT $1,091,909 ($141,000) Lexpress and contribution to Rev Shuttle Article 4
TMOD $99,629 $107,554 Mitigation payments from zoning special Article 19
permit applications
TDM PT:Transportation Demand Management/Public Transportation;TMOD:Transportation Management Overlay District
*This is the end of FY2021 balance adjusted for the appropriations into or out of each fund at the 2021 ATM or the 2021-1 STM,which
are not reflected in those balances,other contributions into the funds that did not require appropriation,and estimates of interest
earnings. The amount to be withdrawn from the Debt Service Stabilization Fund under Article 23 is the January 31, 2022 balance.
Article 20 Appropriate for Prior Years' Unpaid Bills
Funds Requested Funding Source Committee Recommendation
$6,261.75 Set-Aside for FY22 Approve (8-0)
This is an annual article to request funds to pay bills after the close of the fiscal year in which the goods were
received or the services performed and for which no money was encumbered.
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2022 ATM,2022-1 STM APPROPRIATION CONMTTEE 21 MARCH 2022
This year, the Town will be paying Bay State Consultants $6,261.75 for services rendered in 2021. In previous
years, Bay State Consultants' fee for procuring the Town's gas contracts was paid by the utility. In 2022,the billing
process changed, and the Town was responsible for paying the charge directly,but Bay State Consultants neglected
to invoice the Town for the charges. The Town was notified of the outstanding invoice for October 20, 2020—June
30, 2021 in January, 2022; the invoice was submitted on March 1, 2022. The bill will be paid from Free Cash set
aside for the current year's needs.
Article 21 Amend FY2022 Operating, Enterprise and CPA Budgets
Funds Requested Funding Source Committee Recommendation
See below See below Approve (8-0)
This article allows needed revisions to current year operating, enterprise, and CPA budgets. This article is generally
acted upon late in town meeting in case a need for additional revisions arises. As of press time, the following
revisions have been proposed.
Previous Line Description Budgeted Change Revised
Articles Item Amount Amount
CPA Allocation to Community Housing Reserve $ 743,000 $ 79,026 $ 822,026
2021 ATM CPA Allocation to Historic Resources Reserve $ 743,000 $ 79,026 $ 822,026
Article 10 CPA Allocation to Open Space Reserve $ 743,000 $ 79,026 $ 822,026
CPA Allocation to Unbudgeted Reserve $ 5,201,000 $ 553,183 $ 5,754,183
2021 ATM 2510 Reserve Fund $ 750,000 $ 174,000 $ 924,000
Article 4 8500 Town Clerk Personal Services $ 404,181 $ 18,711 $ 422,892
8500 Town Clerk Expenses $ 98,250 $ 25,738 $ 123,988
Community Preservation Act (CPA)
The State's matching contribution for the CPA surcharge exceeded the FY2022 budget projection by $790,261.
This request appropriates 30% of this amount divided equally, i.e., 10%, into each of the three designated CPA
reserves,with the remaining 70%going to the CPA Unbudgeted Reserve.
Recreation Enterprise Fund and the Reserve Fund
The drainage pipe that allows groundwater to flow away from the Pine Meadows Golf Club clubhouse collapsed
this past winter. This resulted in flooding of the lower level, i.e., the garage,that, in turn, resulted in damage to the
electric golf carts and a water heater that are housed in that garage. Both the replacement or reconstruction of the
drainage pipe and the equipment repairs will be funded from the Recreation Enterprise Fund under the FY2022
operating budget. However, if the drainage pipe is not replaced before the start of the golf season, the work will
negatively impact the use of the golf course.
In the hope of avoiding an opening delay at the start of the season,this Committee approved a transfer of$174,000
from the Reserve Fund to a Pine Meadows repair account prior to the start of this Annual Town Meeting. This will
allow the drainage work to commence earlier than it would if done directly via an appropriation under this article.
The appropriation proposed under this article will reimburse the Reserve Fund from the Recreation Enterprise
Fund.
Town Clerk
The cost of administering a town-wide debt exclusion referendum for the new police station will fall to the Town
Clerk's office. This request increases the personal services and expenses line items to cover the additional expenses.
The funds for the increases will come from free cash.
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
Article 22 Appropriate for Authorized Capital Improvements
Funds Requested Funding Source Committee Recommendation
None N/A 1P
There are no requests for supplemental funding of existing capital projects at this time.
Article 23 Appropriate From Debt Service Stabilization Fund
Funds Requested Funding Source Committee Recommendation
$191,000 DSSF Approve (8-0)
In August 2006, the Town received a lump-sum reimbursement of approximately $14 million from the
Massachusetts School Building Authority (MSBA) to cover its remaining obligation for construction projects
previously completed at Clarke and Diamond Middle Schools and Lexington High School. The Massachusetts
Department of Revenue required the Town to set aside the excess funds from this upfront reimbursement for these
school construction projects, and to apportion those funds over the life of the bonds related to the projects to help
fund the debt service.
The 2009 Annual Town Meeting voted to establish a specified stabilization fund under G.L. c. 40 Section 5B called
the Debt Service Stabilization Fund (DSSF). The $1,739,894 remaining from the FY2007 set-aside was then
appropriated into the DSSF. This fund allows the Town to invest the set-aside funds beyond the one-year arbitrage
limit that would otherwise apply.
The bonds for the subject school construction projects mature in 2023, so this will be the final appropriation from
the DSSF.
This appropriation will be incorporated into a much larger final debt service payment. There is a complication here,
because the DSSF is an investment fund that may not be closed out until the bonds are fully paid. Since the DSSF
continues to earn a variable amount interest each month, it will be impossible for the requested appropriation to
exactly use up the fund balance. The remaining balance, expected to be less than $100, may be applied to the final
payment in FY2023 via an appropriation at a special town meeting, or closed to the General Fund balance.
Article 24 Adjust Retirement COLA Base for Retirees
Funds Requested Funding Source Committee Recommendation
None N/A Approve (8-0)
This article requests Town Meeting approval of an increase from $14,000 to $15,000 of the maximum base amount
upon which a retiree's pension cost-of-living adjustment ("COLA") is calculated. Because the immediate cost of
making this change has already been incorporated in the proposed FY2023 operating budget to be appropriated
under Article 4,no separate appropriation is requested here.
Background
The Town of Lexington has a Retirement Board that manages the pension fund for the Town's municipal and non-
educational school employees. (Teachers' pensions are managed by the State.) The Retirement Board establishes
the amount the Town must contribute each year to cover both the "normal cost" of funding employees' future
retirement benefits earned in the current year, and also the amount the Town must contribute annually to amortize
the Town's unfunded liability for retirement benefits earned in prior years but not yet funded.
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
Per the most recent actuarial valuation, done in January 2021, the pension fund's unfunded liability of
approximately $60,000,000 is scheduled to be fully funded by FY2030. Between FY2023 and FY2029,the Town's
annual contributions for the combined normal cost and amortization of the unfunded liability are scheduled to
increase from $8,250,000 in FY2023 to $12,750,000 in FY2029. If full funding is achieved in FY2030, the Town
will then be obligated to contribute only its share of the normal cost, and the annual assessment will drop to a little
over$3,000,000 in FY2031.
Lexington retirees currently receive an annual cost-of-living adjustment(COLA) of 3%on the first$14,000 of their
pension benefits (the "COLA base"). The Retirement Board may elect to increase that COLA base,but this election
must be approved by Town Meeting. An increase in the COLA base increases both the annual normal cost of
funding future benefits earned by current employees each year and the unfunded liability for benefits earned in
prior years.
History of COLA's
Historically, both state and municipal pension COLA's were determined by the state legislature. The first COLA
law, passed in 1966, provided for a COLA to be paid only to retirees receiving a pension of $5,000 or less.
Subsequently, COLA benefits were expanded; however, because any enhancement of pension benefits can have a
significant effect on unfunded liabilities,that expansion was gradual and sometimes controversial.
In 1971, the legislature increased the COLA base to $6,000 and made COLA's available to all pension recipients,
not just those receiving less than the base. In 1980, following the passage of Proposition 2'/2, the State began
picking up the expense for local boards, but because of the impact on the state's unfunded liability, only three
COLA's were approved between 1989 and 1997.
In 1997, at the urging of the retirees' association, the legislature transferred responsibility for both awarding and
funding COLA's to local boards, subject to local acceptance, and increased the COLA base, then at $9,000, to
$12,000. The relevant statutes, G.L. c. 32, §§ 21 and103, provide for an annual COLA on that base "equal to the
percentage increase in the Consumer Price Index or 3 percent, whichever is less." However, in 1999, a special act
was passed allowing state and local boards to award a COLA exceeding the CPI but not exceeding 3%, subject to
local acceptance. Lexington accepted the option in 1999 and, since that time,the Retirement Board has consistently
adopted an annual COLA of 3%.
In 2010, the legislature amended G.L. c. 32, §103 to allow an increase in the maximum base amount on which the
COLA is calculated, in multiples of$1,000, subject to a majority vote of the local retirement board and approval of
Town Meeting. An increase in the base, once adopted, is irrevocable.
In 2015, Lexington, Town Meeting voted to approve an increase in the COLA base from $12,000 to $13,000; and
in 2017 it approved an increase from $13,000 to $14,000. The current base in other localities with retirement boards
ranges from $12,000,to $18,000.3 The state-administered COLA base currently applicable to Lexington teachers is
$13,000,4 although there are legislative initiatives to increase that base as well going forward.
Current Request
This article seeks Town Meeting's approval of an election by the Lexington Retirement Board to increase the
COLA base from $14,000 to $15,000. With the current COLA base of $14,000 and a COLA of 3%, a benefit
recipient's allowance would increase by a maximum of$420 per year. With an enhanced COLA base of$15,000
and a COLA of 3%, a benefit recipient's allowance would increase by a maximum of$450 per year, i.e., $30 more.
The current median employee pension payment is $22,445 and the average is $28,000. For a retiree receiving the
average annual benefit of$28,000, the current COLA base of$14,000 reduces the cost-of- living adjustment from
the nominal 3%to an effective rate of 1.5% since it applies to only half the benefit. An increase in the COLA base
to $15,000 would slightly increase the COLA adjustment for the average retiree to 1.6%. The effective COLA
adjustment for retirees who receive pensions in an amount higher than the average is even smaller.
3 See website of the Public Employees Retirement Administration Commission(PERAQ,which publishes a compendium of
local option acceptances. https://www.mass.gov/service-details/increase-cola-base
4 See Mass Retirees website,article dated 1/26/2022: http://www.massreti rees.com/article/issues/cola/cola-rising-
inflation-adds-urgency
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
About one-third of the Town's current 471 retirees and beneficiaries receive pensions of$15,000 or less. Most of
these recipients would not be affected by this article, at least in the short run, as the 3% COLA already applies to
their entire pension payments.
Analysis
Adoption of the COLA base increase would increase the Town's scheduled annual assessment for normal cost by
about $30,000 in FY2023, increasing to about $40,000 in FY2030. This is not a substantial amount. However, the
change would also increase the Town's unfunded pension liability by approximately $1,200,000, requiring a
significant increase in amortization payments in the near term. The current plan is to amortize the additional
unfunded liability resulting from the COLA base increase with a single assessment of approximately $2,500,000 in
FY2030. Thereafter,the Town would be responsible only for the annual normal cost of the enhanced benefit.
Because the normal costs of the proposed increase in the COLA base in FY2023 have already been incorporated in
the proposed operating budget(line 2100, "Employee Benefits"), and the scheduled one-time amortization payment
is deferred until FY2030, there is no immediate appropriation associated with this request. However, if the COLA
base increase is not approved by Town Meeting, the budgeted amounts would be freed up and could be
appropriated for other purposes.
It should be noted that there may be future requests for increases to the COLA base, with similar impacts on the
pension fund's normal costs and unfunded liability.
Recommendation of the Committee
There is a compelling logic to the concept that a pension should not lose value due to changes in the cost of living,
and the Committee is supportive of steps that will bring the municipal pension COLA into closer alignment with
CPI changes. For the last several years,with very small increases in the Consumer Price Index(CPI),the maximum
3% COLA has not been unreasonable, even with the limited COLA base. However, as inflation re-emerges—the
CPI adjustment this year for Social Security beneficiaries was 5.9%—the combined effect of the limited COLA
base and the maximum 3% COLA will impose a hardship which this article will help, at least in small part, to
mitigate.
Article 25 Appropriate for Worthen Road Recreation and Education District
Land Use Concept Plan
Funds Requested Funding Source Committee Recommendation
None N/A 1P
This citizen's article was placed on the Warrant to fund studies that would outline the implications of the eventual
reconstruction or renovation of Lexington High School (LHS), and answer other outstanding questions in regard to
the project. The article sponsors described the goal as the development of a Land Use Concept Plan for the LHS
property and several adjacent Town-owned parcels, dubbed the Worthen Road Recreation and Education District.
The Plan would have identified logistical challenges, and developed solutions for a unified approach to school
district and recreation needs.
The timing of an invitation from the Massachusetts School Building Authority (MSBA) to collaborate on the
renovation or reconstruction of Lexington High School (LHS) was unknown when this article was placed on the
Warrant. Given past experience with the MSBA, it was reasonable to suppose that such an invitation could be
delayed by one or more years, but the Town has now received the MSBA invitation and expects to initiate a
Feasibility Study module (see Article 2022-1.2 above) in FY2023. This work, as part of a larger process, will
examine many of the concerns initially raised by the proponents of this article. Therefore, the proponents have
agreed to move for indefinite postponement.
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
Article 26 Appropriate for Nexus Studies
Funds Requested Funding Source Committee Recommendation
$75,000 GF unreserved Approve (8-0)
This article requests $75,000 for consultant services to perform two "nexus" studies for the implementation of
development "linkage" fees. These fees would be enabled by special legislation that was requested under STM
2020-2 Article 6 and ATM 2021 Article 36. The special legislation is currently pending in the 192nd session of the
Massachusetts General Court.
The Committee had some initial reservations about this request, but supports the motion now that it includes a
contingency that these funds not be expended until the special legislation passes.
The nexus studies would establish a link between commercial and residential development and the impact on
housing supply and demand, and define an impact mitigation fee that is tailored to local trends and conditions.
Study costs were derived from discussions with nexus study experts in neighboring communities.
This surcharge would apply to all new commercial construction with over 30,000 square feet (sf) in gross floor
area, and to modifications of existing structures that increase the gross floor area to more than 30,000 sf In all cases
the surcharge is applied to the resulting gross floor area less an exemption of 30,000 sf. Similar surcharges on
commercial development to support affordable housing have been adopted in Boston, Cambridge, Somerville,
Barnstable and Everett, some of which have been in effect for over three decades.
Given that any surcharge would increase the cost of commercial construction in Lexington, and that none of our
directly neighboring communities impose a surcharge, this could negatively impact the market for commercial
development in the Town. Commercial development is sensitive to macro-economic factors, and a surcharge could
impact the Town's commercial tax base, thus lowering the total surcharge revenue. However, if the surcharge rate
is set with care,the impact on development could be limited while still helping to mitigate the increased demand for
nearby housing by employees of businesses in Lexington.
Housing mitigation requires a long-term multifaceted approach and acting now will ensure than an implementation
planning can move forward. Having a detailed analysis of the housing impacts from commercial development will
help the Town better negotiate housing impact mitigation fees in MOUS.
The Committee acknowledges the acute and growing need for affordable housing across the entire region, and its
importance for building economic diversity within the Town. There is great potential for concrete benefits for
Lexington's future residents, and if the surcharge appears to be a barrier to commercial development, the Select
Board can adjust or rescind it in response to economic conditions.
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Appendix A: 5-Year Budget Projections
The Town's Finance Department prepares a 5-year forecasts for use in the Budget Summit process to develop a
budget for the next fiscal year. This report summarizes the Finance Department's projections and discusses their
implications in planning for future Town budgets.
All budget figures in the tables in this appendix are given in thousands of dollars.
Summary of Projections
Table A-1 summarizes total revenues and expenses, showing actual results for FY2020-21, revised budgeted figures
for FY2022 (still underway), the proposed budget for FY2023 presented in the Brown Book, and projected figures
for FY2024-FY2027. The bottom line shows net surpluses (deficits).
For FY2020 and FY2021 the Town ran substantial overall surpluses, about 6.3%of expenses in FY2020 and about
5.4% in FY2021. These surpluses flowed to free cash in the following year, and were available to fund one-time
expenses. For the current fiscal year (FY2022), the revised budget shows income and expenses in balance, as
required under state law. After the tax levy new growth and Free Cash have been certified, the current year,
FY2022, may also show a surplus. Normally, fiscal years will end with a surplus because Town budgets are
developed conservatively—they avoid overestimating revenues or underestimating expenses, limiting the chance
that the Town be short of funds for budgeted expenses. Towns may not run a deficit during the fiscal year, except in
very limited circumstances.
Similarly, the recommended budget for FY2023 is balanced, and it seems likely that the final actual figures will
result in a surplus due to the Town's conservative budgeting policy.
Table A-1. Actual and Projected Revenues and Expenses ($1,000s)
FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027
Revenue Category Actual Actual Revised Proposed Projection Projection Projection Projection
Total Revenues $ 231,987 $ 237,804 $ 250,645 $ 260,368 $ 262,081 $ 269,065 $ 277,971 $ 287,095
Total Expenses $ 218,250 $ 225,582 $ 250,645 $ 260,368 $ 262,746 $ 274,188 $ 285,130 $ 296,422
Revenue-Expenses $ 13,737 $ 12,222 $ — $ — $ (665) $ (5,122) $ (7,160) $ (9,328)
As%of expenses 6.3 % 5.4 % —% —% (0.3)% (1.9)% (2.5)% (3.1)7
The projections beyond the FY2023 budget under consideration show projected expenses exceeding projected
revenues, yielding deficits ranging from 0.3%of expenses in FY2024 to 3.1%in FY2027. However, any projection
of revenues or expenses is subject to considerable uncertainty, as we discuss in greater detail below. When the time
comes to prepare a budget for one of those years, if the projection still indicates a deficit, changes will be made to
bring budgeted expenses and revenues in line. This can be accomplished with a combination of adjustments,
including limited program improvements and increasing the use of available funds.
Projections, particularly those several years out and those made in times of uncertain inflationary pressures, are
subject to substantial uncertainties, however the projected deficits suggest a modest revenue increase and the need
to control costs.We present the projections in more detail below.
Projected Revenues
Table A-2a shows projections of various revenue categories and provides notes on the assumptions behind those
projections. Property taxes dominate revenues, accounting for 80% of total revenues in FY2020 (actuals) rising to
86%in the projection for FY2027. As a result, the assumptions concerning property tax revenues are critical to the
projections.
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
Table A-2a. Projected Revenues by Category ($1,000s)
FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027
Revenue Category Actual Actual Revised Proposed Projection Projection Projection Projection
1 Property Tax $184,822 $ 194,330 $ 204,229 $ 212,113 $ 220,166 $ 228,420 $ 236,881 $ 245,553
Levy
2 State Aid $ 16,256 $ 16,335 $ 16,492 $ 16,785 $ 16,990 $ 17,196 $ 17,403 $ 17,611
3 Local Receipts $ 16,824 $ 15,358 $ 12,628 $ 13,488 $ 13,813 $ 14,018 $ 14,229 $ 14,447
4 Available Funds $ 14,264 $ 11,805 $ 17,825 $ 18,508 $ 11,625 $ 9,931 $ 9,945 $ 9,959
5 Revenue Offsets $ (1,875) $ (1,774) $ (1,961) $ (2,332) $ (2,373) $ (2,416) $ (2,460) $ (2,506)
6 Other Revenues $ 1,696 $ 1,749 $ 1,432 $ 1,806 $ 1,860 $ 1,916 $ 1,973 $ 2,032
7 Total Revenues $231,987 S 237,804 S 250,645 S 260,368 S 262,081 S 269,065 S 277,971 S 287,095
Notes on assumptions
1 Property Tax Reflects statutory allowable growth of 2.5%and assumed new growth of$2.75 million annually.
Levy
2 State Aid Assumes FY2022 Chapter 70 aid level-funded,then increasing at$25 per pupil Minimum Aid in
FY2023-26.Decrease in Veterans Benefit reimbursements in FY2022.
3 Local Receipts Assumes modest growth in local receipts based on evaluation of historical averages,with near full
return of local excise in FY2023.
4 Available Funds Free Cash estimate of$10,500,000 available for FY2023 and$9,000,000 for FY2024-2026.Annual
contributions of$141,000 from TDM Stabilization Fund to support Lexpress and the Alewife Shuttle,
$385,000 from Parking Fund to support Traffic Bureau and snow removal;and$50,000 from
Cemetery Fund to support Cemetery Division.In FY2022-2023,$750,000 annually from balance of
Health Claims Trust Fund to be used to fund health insurance,resulting in an equal amount in the tax
levy becoming available to fund contributions to OPEB Trust per Select Board policy.Includes in
FY2022-FY2026 use of Capital Projects Stabilization Fund to offset within-levy debt service,as
detailed under Line 14 in the Expense summaries below.
5 Revenue Offsets $750K for overlay(property tax abatement and exemptions)in FY2022-26.$400K set-aside for snow
&ice deficit annually;Also includes Cherry Sheet Assessments increasing at 3.5%annually and
Cherry Sheet Offsets(State Aid to Public Libraries).
6 Other Revenues Assumes FY2022 Water and Sewer Indirects increasing by 3%annually.
All dollar amounts shown in thousands.Source:Lexington Finance Department
Table A-2b shows the projected year-to-year percentage increases in the various revenue categories. Keep in mind
that many sources of FY2021 and FY2022 revenues were heavily impacted by the pandemic. Note that the Property
Tax Levy grows more slowly from FY2023-FY2027 than in the earlier years. Local Receipts also are greatly
reduced from the proposed FY2023 levels. In both cases,the differences appear to reflect conservative assumptions,
which we discuss in more detail below for property tax revenues. The other notable change is in Available Funds,
which shrink in the projected years due to conservative budgeting which lowers levels of free cash.
Table A-2b. Annual Rates of Increase in Revenues
FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027
Revenue Category Actual Revised Proposed Projection Projection Projection Projection
1 Property Tax Levy 5.1% 5.1% 3.9% 3.8% 3.7% 3.7% 3.7%
2 State Aid 0.5% 1.0% 1.8% 1.2% 1.2% 1.2% 1.2%
3 Local Receipts (8.7)% (17.8)% 6.8% 2.4% 1.5% 1.5% 1.5%
4 Available Funds (17.2)% 51.0% 3.8% (37.2)% (14.6)% 0.1% 0.1%
5 Revenue Offsets (5.4)% 10.6% 18.9% 1.8% 1.8% 1.8% 1.9%
6 Other Revenues 3.1% (18.1)% 26.1% 3.0% 3.0% 3.0% 3.0%
7 Total Revenues 2.5% 5.4% 3.9% 0.7% 2.7% 3.3% 3.3%
Note:Each entry shows the percentage change from the previous year, calculated from Table A-2a
It is important to note that the use of Free Cash to supplement the operating budget is being phased out under a 5-
year program, and this is reflected in the decline of Available Funds during FY2024 and FY2025. This program
was suspended for the FY2022 budget, so the FY2021 and FY2022 operating budgets each relied on$2.2 million of
Free Cash. Starting in FY2023 this will be reduced by $700,000 annually, with $1.5 million to be used in FY2023,
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2022 ATM,2022-1 STM APPROPRIATION CONMTTEE 21 MARCH 2022
$700,000 in FY2024, and only $100,000 in FY2025. This transition has the net effect of having $700,000 more
available in each of these years to fund non-recurring items such as Cash Capital, OPEB, or the Capital
Stabilization Fund.
Proposition 2'/2 limits growth in the property tax levy to 2.5%each year plus the additional revenue resulting from
"New Growth" in the tax base. This New Growth is the incremental tax revenue from the assessed value of a
property following capital investment, e.g., construction and renovation. The limit on the tax levy may be
temporarily exceeded to cover debt service on projects that are deemed exempt from Proposition 2'/2 as the result of
a town-wide referendum. In addition, a successful operating override referendum can permanently increase the tax
levy limit.
Leaving aside exempt debt service and operating overrides, New Growth is a key determinant of increases in
property tax revenue. The Finance Department's projections assume that New Growth will be $2.75 million per
year,up slightly from the $2.5 million assumed in recent prior years. As shown in the figure below,this assumption
is conservative in the sense that it has been lower than the actual new growth in nine of the last ten fiscal years.
New Growth Levy: Budgeted vs. Actual ($1,000s)
$5,000
$4,000
$3,000 ......................
$2,000
$1,000
$0
Amount ..... Assumed POr k.)recast
The average for New Growth over the last ten years was $3.54 million. If we use this average rather than the
assumed $2.75 million, this results in an additional $790,000 per year in projected revenue, which is further
compounded by the baseline 2.5%annual increase in the tax levy limit.
The Finance Department's projection assumes that the conservative figure assigned for New Growth in the budget
can be used as a valid projection, but in the long run this will underestimate future tax revenue. The budget for New
Growth is intentionally set well below the expected value as a safeguard against a budget shortfall, which could
result if actual New Growth fell below the budgeted amount. A more realistic projection should instead be based on
measurable trends, including,but not limited to,the long-term average for New Growth.
Table A-3 shows the cumulative increase in projected revenues over five years, which grows to $4,153,000 by
FY2027. This represents roughly 44.5%of the projected revenue gap shown in Table A-1.
Table A-3. Impact of Using Historical Average of New Growth Levy
Rather than Assuming $2.75 million per Year
FY2023 FY2024 FY2025 FY2026 FY2027
Annual increment $ 790 $ 790 $ 790 $ 790 $ 790
Cumulative impact $ 790 $ 1,600 $ 2,430 $ 3,281 $ 4,153
Notes: Annual increment=dijjerence between historical average and value assumed in projection
Cumulative impact—prior balance x 1.025+annual increment
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It is more difficult to evaluate the assumptions regarding the projections of other revenue categories, but we note
that past forecasts for those other categories have not been consistently low or high.
However, for total revenues in the last three completed fiscal years (FY2019-FY2021), actual revenues have been
higher than projected, especially for projections made several years in advance. For example, projections for
FY2021 made in 2017 were 5.4% below actuals and those for FY2020 made in 2016 were 7.2% lower than the
actual.
Projected Expenses
Table A-4a shows the Finance Department's expense projections by category.
Table A-4a. Projections of Expenses (figures shown in$1,000's)
FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027
Expense Category Actual Revised Proposed Projection Projection Projection Projection
Education S 118,138 S 126,507 S 131,478 S 137,449 S 143,457 S 149,608 S 156,126
8 LPS Wages $ 96,736 $ 102,655 $ 106,450 $ 110,070 $ 114,011 $ 117,929 $ 122,091
9 LPS Expenses $ 18,538 $ 20,722 $ 21,804 $ 23,832 $ 25,545 $ 27,387 $ 29,315
10 Minuteman $ 2,863 $ 3,130 $ 3,224 $ 3,546 $ 3,901 $ 4,291 $ 4,720
Municipal S 51,239 S 55,583 S 57,715 S 58,875 S 60,586 S 62,347 S 63,926
11 Municipal Wages $ 33,666 $ 35,329 $ 36,530 $ 37,082 $ 38,154 $ 39,245 $ 40,117
12 Municipal Expenses $ 17,573 $ 20,254 $ 21,185 $ 21,793 $ 22,432 $ 23,103 $ 23,808
Shared Expenses S 17,683 S 19,711 S 17,647 S 18,824 S 20,020 S 21,236 S 22,473
13 Debt Service $ 7,834 $ 8,077 $ 7,542 $ 7,919 $ 8,315 $ 8,730 $ 9,167
14 Mitigate Within Levy $ - $ - $ - $ - $ - $ - $ -
15 Land Purchase Note $ 2,403 $ 2,320 $ - $ - $ - $ - $ -
16 OPEB $ 750 $ 1,880 $ 1,930 $ 1,980 $ 2,030 $ 2,080 $ 2,130
17 Retirement $ 6,695 $ 7,434 $ 8,176 $ 8,926 $ 9,676 $ 10,426 $ 11,176
18 Benefits S 28,362 S 31,371 S 32,743 S 34,367 S 36,071 S 37,862 S 39,743
18a Medicare $ 1,908 $ 1,982 $ 2,055 $ 2,178 $ 2,309 $ 2,447 $ 2,594
18b Health Insurance $ 25,448 $ 28,270 $ 29,554 $ 31,032 $ 32,584 $ 34,213 $ 35,924
18c Dental $ 986 $ 1,093 $ 1,109 $ 1,131 $ 1,154 $ 1,177 $ 1,201
18d Life $ 20 $ 25 $ 25 $ 25 $ 25 $ 25 $ 25
19 Reserve Fund $ - $ 750 $ 750 $ 750 $ 750 $ 750 $ 750
20 Workers'Comp. $ 875 $ 750 $ 625 $ 500 $ 450 $ 400 $ 400
21 Unemployment $ 64 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200
22 Property&Lib.Ins. $ 791 $ 845 $ 895 $ 940 $ 987 $ 1,036 $ 1,088
23 Uninsured Losses $ 250 $ 250 $ 200 $ 200 $ 200 $ 200 $ 200
24 Solar Production $ 368 $ 390 $ 390 $ 390 $ 390 $ 390 $ 390
25 Capital $ 7,812 $ 10,136 $ 13,491 $ 9,214 $ 10,039 $ 10,064 $ 10,090
26 Other $ - $ 365 $ 341 $ 230 $ 230 $ 230 $ 230
27 Approp.to Capital Stab $ - $ 3,731 $ 3,085 $ - $ - $ - $ -
28 Unallocated Revenue $ - $ - $ 750 $ 750 $ 750 $ 750 $ 750
29 State Aid Reserve $ - $ 57 $ 57 $ 57 $ 57 $ 57 $ 57
30 Total Expenditures S 225,582 S 250,645 S 260,368 S 262,746 S 274,188 S 285,130 S 296,422
Note:Amounts in italics are subtotals.
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Table A-4b below provides the department's notes on the assumptions underpinning the projections.
Table A-4b.Notes on Projected Expenses
Expense Category Notes on Assumptions
Education
8 LPS Wages Illustrates a level-services budget and does not include program improvements.Includes a 2.5%increase on
base budget for step increases,current known salary COLA adjustments on settled contracts,and($850,000)
for annual staff turnover savings.Assumes anticipated funding for unsettled contracts in FY2023-27.Includes
additional staffing due to projected enrollment increases in FY2024-27 based on preliminary FY2022
Enrollment projections from Oct. 1 data.Recurring additional staff-related costs are inclusive of benefits,
workers comp.,and Medicare.
9 LPS Expenses Program budget per pupil rates are adjusted by 4%Consumer Price Index(CPI)in FY2023 and 2.00%in
FY2024-27;applied against preliminary projected enrollment levels.All other lines adjusted by 4%in FY2023
and 2.0%in FY2024-27.Special Education Out-of-District Tuition and Transportation lines are projected
based on program trends.Approximately 81-85%of total expense line increases are driven by these budget
lines(FY2023-27).
10 Minuteman FY2024-27 projections increase by 10%.
Municipal
11 Municipal Wages Projections based on step increases for current staff,settled collective bargaining contracts,and anticipated
contract settlements for out-years.
12 Municipal Expenses Level-service budget using CPI of 7%for electricity,5.5%for natural gas, 10%for IT software expenses,and
1.8%for all other expenses.
Shared Expenses
13 Debt Service Within levy debt service is projected to grow by 5%annually. Amounts above that will be mitigated by use of
the Capital Stabilization Fund.
14 Mitigated Within Within levy debt service mitigated by use of the Capital Stabilization Fund. FY2023-27 left as$0 to not dilute
Levy Debt Service the rest of the projections.
15 Land Purchase Note Use of Free Cash to pay down short-term notes issued to pay for the land purchases at 173 Bedford St.and
Retirement Pelham Rd.
16 OPEB Continued funding of OPEB with a$50,000 annual increase-future funding levels under review by Town
Manager's Fiscal Guideline Working Group.
17 Retirement Contributory Retirement assessment(based on 2030 amortization of unfunded liability and 7.25%interest rate
assumption)plus Non-Contributory payments
18 Benefits
18a Medicare 6%increase in Medicare,reflecting an increase in the number of eligible employees and increases in wages.
18b Health Insurance FY2023,growing at 5%annually.
18c Dental FY2023,growing at 2%annually.
18d Life Level Funding
19 Reserve Fund Level Funding
20 Workers'Comp. Gradual reduction planned to maintain fund balance of$2 million. Staff will continue to monitor and adjust
out-year projections as needed.
21 Unemployment Level Funding.
22 Property&Lib.Ins. FY2022,growing at 5%annually.
23 Uninsured Losses Level Funding. Staff may recommend further reductions in out-years to maintain fund balance at$1 million.
24 Solar Production Payments to Syncarpha for construction costs of Hartwell Ave.solar arrays. Level Funding.
25 Capital Includes$5.6M in cash capital in FY2023 carried over from FY2022,plus an additional$2.1M in excess Free
Cash leftover from the land purchases. Reflects addition of$700K and$800K in FY2024 and FY2025 from
transition of Free Cash for operating budget. FY2023 also includes$548K from from Non-GF sources and
prior bond authorizations,$2.67M for Street Improvement and$219K for Municipal Building Envelope,
portions of which grow at 2.5%through FY2027.
26 Other Reflects various warrant articles such as Senior Tax Work-Off and$200K in unanticipated needs in
FY2023-27.
27 Approp.to Capital Reflects past and projected transfers to continue funding the Capital Stabilization Fund to cover the high school
Stab.Fund project.
28 Unallocated Revenue Proposed allocation set-aside for yet to be determined priorities.
29 State Aid Reduction Set-aside of tax levy tied to commercial new growth for Capital Stabilization Fund. Anticipated to grow in
Reserve future years,tied to new revenue that is not captured in this model.
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It is important to note that these projections were made prior to the strong inflationary trends currently affecting the
world economy. The 12-month increase in inflation for February 2022 was 7.9%, the highest 12-month increase
since 1982. This was higher than the 7.5% 12-month increase in inflation that was reported for January 2022. The
trend could necessitate an update to assumptions about future costs used in this projection.
To simplify the discussion of the expense projections, Table A-5a aggregates the expense categories from Table
A-4a. The three major groupings are Education, Municipal, and Shared Expenses. For Education,we show LPS and
Minuteman separately.We provide a further breakdown for shared expenses,breaking out appropriations for capital
projects and to the Capital Stabilization Fund and OPEB, all three of which are determined by explicit policy
decisions, some of which are made after the Town knows actual new growth and the amount by which actual
expenses are less than budgeted. The "other" shared expenses are dominated by employee benefits, the largest
component of which is Health Insurance costs.
Table A-5a. Expense Projections Aggregated
FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027
Expense Category Actual Actual Revised Proposed Projection Projection Projection Projection
Education S 112,079 S 118,138 S 126,507 S 131,478 S 137,449 S 143,457 S 149,608 S 156,126
LPS $ 109,609 $ 115,275 $ 123,377 $ 128,254 $ 133,902 $ 139,556 $ 145,317 $ 151,406
Minuteman $ 2,470 $ 2,863 $ 3,130 $ 3,224 $ 3,546 $ 3,901 $ 4,291 $ 4,720
Municipal S 48,371 S 51,239 S 55,583 S 57,715 S 58,875 S 60,586 S 62,347 S 63,926
Shared Expenses S 57,800 S 56,205 S 68,556 S 71,175 S 66,422 S 70,144 S 73,175 S 76,371
OPEB $ 1,880 $ 750 $ 1,880 $ 1,930 $ 1,980 $ 2,030 $ 2,080 $ 2,130
Capital $ 8,137 $ 7,812 $ 10,136 $ 13,491 $ 9,214 $ 10,039 $ 10,064 $ 10,090
Capital Stabil.Fund $ 2,269 $ - $ 3,731 $ 3,085 -
Other $ 45,514 $ 47,643 $ 52,809 $ 52,669 $ 55,228 $ 58,076 $ 61,032 $ 64,151
Grand Total S 218,250 S 225,582 S 250,645 S 260,368 S 262,746 S 274,188 S 285,130 S 296,422
Note:Amounts in italics are subtotals.Source:Aggregation of values in Table A-4a
Table A-5b shows the year-to-year percentage increases in the various aggregated categories. Education expenses
are projected to grow more rapidly than municipal expenses. Within education, the Town's contribution to
Minuteman is projected to rise substantially more rapidly than the budgets for LPS. The Town plans to grow the
size of its annual OPEB contribution by$50,000 each year, a modest annual rate of about 2.5%.
Table A-5b. Annual Rates of Increase in Expenses
FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027
Expense Category Actual Revised Proposed Projection Projection Projection Projection
Education 5.4% 7.1% 3.9% 4.5% 4.4% 4.3% 4.4%
LPS 5.2% 7.0% 4.0% 4.4% 4.2% 4.1% 4.2%
Minuteman 15.9% 9.3% 3.0% 10.0% 10.0% 10.0% 10.0%
Municipal 5.9% 8.5% 3.8% 2.0% 2.9% 2.9% 2.5%
Shared Expenses (2.8)% 22.0% 3.8% (6.7)% 5.6% 4.3% 4.4%
OPEB (60.1)% 150.6% 2.7% 2.6% 2.5% 2.5% 2.4%
Capital (4.0)% 29.8% 33.1% (31.7)% 8.9% 0.3% 0.3%
Capital Stabilization Fund (100.0)% ** (17.3)% (100.0)% ** ** **
Other 4.7% 10.8% (0.3)% 4.9% 5.2% 5.1% 5.1%
Grand Total 3.4% 11.1% 3.9% 0.9% 4.4% 4.0% 4.0%
Note:Each entry shows the percentage change from the previous year, calculated from Table A-5a.
Planned contributions to the Capital Stabilization Fund to reduce the future impacts on taxes of the High School
project show the greatest volatility, increasing from zero dollars in FY2021. They then drop to $0 in the last 4 years
of the projection. Capital spending levels off in FY2023 as the land-purchase notes are fully retired in FY2022 and
that money is then directed to new projects. Other shared expenses are projected to rise at relatively low rates.
Concluding Remarks
The Finance Department's projections appear to suggest that over the next five years, the Town will have to find
ways to reduce expenses or increase revenues to maintain a balanced budget as required by state law. To further
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2022 ATM,2022-1 STM APPROPRIATION COXMTTEE 21 MARCH 2022
complicate matters, we know that these projections do not take into account the probability that the current high
inflation environment will persist. Due to rises in the costs of materials and labor, the Town has received bids for
performing capital projects that greatly exceed the appropriations made to fund them. Energy prices have also been
rising rapidly, which will generally increase the cost of goods and services. An extended period of inflation could
also trigger wage increases that are much larger than those assumed by these projections. However, our review
suggests that the impact of these problems may be partially mitigated by the Town's conservative approach in
forecasting revenues.
To address the financial strains suggested by the projections, some combination of actions may be needed to meet
balanced budget requirements, such as:
1. Improving efficiency so that the same services can be provided with fewer resources. Such
opportunities may well prove elusive.
2. Creating additional sources of revenue. There may be opportunities to increase some fees or add new
ones,but it is not clear that there are opportunities for significant increases.
3. Reducing service levels.
4. Relaxing of some of the goals embodied in the Town's fiscal policies, e.g., curtailing contributions to
the Capital Stabilization Fund or other reserves.
5. Passing Proposition 2'/2 operating override(s)to permanently boost annual property tax revenue.
Each of these alternatives involves policy tradeoffs for which this Committee offers no specific guidance.
It is also important to note that actions to reduce operating expenses, or to increase recurring annual revenues in one
year will generally carry forward to reduce future deficits. For example, reductions in service levels, if not restored,
will lower expenses in future years with no further action.
However, actions to eliminate a projected operating deficit using non-recurring revenue, particularly Free Cash,
generally will not carry forward. Such actions tend to reduce the Free Cash that carries over into the next fiscal
year. In successive years,the prior year's "solution"becomes increasingly difficult to implement as Free Cash and
other non-recurring revenue is consumed but not replaced.
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Appendix B: Enterprise Funds
The Town of Lexington has maintained Water, Wastewater (Sewer), and Recreation Enterprise Funds since soon
after 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,,5 and are accounted for on an
accrual basis. 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, i.e., supported by fees, 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. Before the Community Center began to operate, the
Recreation Department's operating costs were funded by user charges and fees. In the same time period, the
Enterprise Fund contributed to the debt service on certain recreation capital projects, such as the Lincoln Field
restoration project for which the debt has now been fully repaid, but projects, such as the renovation of
playgrounds, that were associated with facilities that do not generate fees were funded by the tax levy. With the
advent of the Community Center, the Recreation Department was reorganized into the Department of Recreation
and Community Programs. Since the Community Center provides a range of fee-free services to the community,the
salaries and benefits of a group of Community Center related employees is now funded through the tax levy. Most
recreation capital costs are subsidized by the General Fund through a combination of tax levy funding, 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 an operating budget and authorizes capital
expenditures 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
are still appropriated as part of the operating budget. 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 the enterprise fund operating budget article have been expanded 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.
5 Dept. ofRevenue Enterprise Funds Manual(April 2008)
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Appendix C: Revolving Funds
Ordinarily, revenue received by any municipal department must be deposited in the General Fund and cannot be
expended for any purpose without further appropriation by Town Meeting. A revolving fund allows Town Meeting
to dedicate in advance a specific source of anticipated revenue from fees and charges, on an ongoing basis and
without the need for further appropriation, to pay expenses for rendering the services for which those fees and
charges are collected.
Revolving funds managed by municipal departments are generally governed by G.L. c. 44, § 53E1/2. (There are
also several 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.
Under the Municipal Modernization Act of 2016, a revolving fund may be established by bylaw and no longer
requires annual reauthorization by Town Meeting. The bylaw 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
• any other reporting requirement the Town may impose
Town Meeting is required each year to vote a limit on the total amount that may be expended from each revolving
fund in the ensuing fiscal year. Expenditures may not be made,nor liabilities incurred, in excess of such limit or the
balance of the fund except with the approval of the Select Board and this Committee. Any balance in the fund may
be carried over to the next fiscal year. If a revolving fund is terminated, the balance in the fund reverts to the
General Fund at the end of the fiscal year.
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Appendix D: Tax Relief Programs
In early 2004, the Board of Selectmen created an ad hoc Tax Deferral and Exemption Study Committee to explore
ways in which the property tax relief available to low and moderate-income senior citizens and other needy
residents could be enhanced and made more accessible. Since then, with the guidance of this committee, 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, using home rule petitions to further increase
opportunities for tax relief.
The principal programs for tax relief now available to Lexington homeowners are:
• A state income tax "Circuit Breaker" program providing a state tax credit for low and moderate-income
homeowners and renters age 65 and over(at no cost to the Town).
• A tax deferral program under which low-to-moderate-income homeowners age 65 or over may defer any or
all of their property tax, after applying any available exemptions,up to half the value of their house. The
deferral need not be repaid until the house is sold or transferred. The interest rate applied to each year's
deferral is a variable rate designed to match the Town's earnings on its funds.See generally G.L. c. 59, §5,
clause 41A.
• 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$2,000 from their annual property tax.See generally G.L. c.
59, § 5, clause 41C.
• A locally-controlled Senior Service program adopted by Town Meeting in 2006.
• A Community Preservation Act surcharge exemption program.
State Income Tax "Circuit Breaker"
Low-and moderate-income homeowners age 65 and over whose homes have an assessed valuation not greater than
an annually adjusted ceiling may obtain a tax credit on their state tax returns (see table below). Low and moderate-
income renters are also eligible for a tax credit. Qualified owners or renters are entitled to a refundable dollar-for-
dollar credit on their state income tax, up to an annually established limit,to the extent that real estate taxes and one
half of water and sewer bills (in the case of homeowners) or rent (in the case of renters) exceeds 10% of the
applicant's income. This program is administered by the Massachusetts Department of Revenue and has no direct
impact on Town finances.
The "41A" Deferral Program
This program is authorized by G.L. c. 59, § 5, Clause 41A. Although not widely used, it is an important tool
because it offers immediate and substantial property tax relief to seniors with significant equity tied up in a
residence. Those who qualify may defer any part or all of their property tax for a given year, up to a cumulative
total of half the assessed valuation of the property. All deferred taxes are eventually paid when the property is sold
or transferred, whether before or after the resident's death. Towns are permitted to set their own interest rates for
this program at any rate up to 8%. Lexington's rate is based on a floating Treasury rate equivalent to the Town's
return on its funds in the year of deferral. In FY2022,the rate is 0.08%. The rate set for each year remains in effect
for the life of deferrals granted in that year.
In 2008, in response to a home rule petition, the state legislature enacted a special law (Chapter 190 of the Acts of
2008) allowing Lexington to establish a more generous income eligibility limit than that permitted under state law
generally. The FY2022 income limit is $90,000 gross income on Calendar Year 2020 income.
The 41A deferral program is an attractive form of tax relief from the Town's point of view because it is essentially
revenue-neutral. While a significant increase in the number of participants could potentially affect the Town's cash
flow, there is little risk of loss since the Town is in effect making well-secured loans. The Town anticipates
repayment of all deferred taxes with interest, and over time an equilibrium should be reached under which as many
deferral agreements are repaid as are entered into.
The "41C" Exemption Program
For many years, the Town has made available to qualifying seniors a property tax exemption under Clause 41 of
G.L. c. 59, §5, and its successor, Clause 41C. Under the "41C" Program, the Town receives partial reimbursement
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from the State for exemptions defined under the program, subject to appropriation. The portions of the exemptions
that are not reimbursed are funded from the Town's overlay account.
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:
• Increase the amount of the exemption to $750.
• Lower the age of eligibility from 70 to the minimum allowed age of 65.
• Increase the income threshold from $13,000 (single)/$15,000 (married)to the maximum allowed amount
of$20,000 (single)/$30,000 (married).
• Increase the threshold for personal assets,not including the home, from $28,000 (single)/
$30,000 (married)to the maximum allowed amount of$40,000 (single)/$55,000 (married).
In 2005, Town Meeting voted to adopt the provisions of G.L. c. 59, § 5, Clause 41D, which automatically adjusts
the income and asset limits for Clause 41 C (but not the exemption amount)by a COLA established annually by the
state Department of Revenue. The current income and asset limits are detailed in the table below.
In 2006, Town Meeting voted to increase the exemption to the maximum allowable amount of$1,000, and in 2018
voted to double it to $2,000 under the provisions of G.L. c. 59, §5, Clause C''/2.
The Senior Service Program
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$1,755 (see table below). The Senior Service program, formerly funded from
the overlay account, is now funded as part of the Town's annual budget and is subject to appropriation.
In 2006, Town Meeting voted to rescind its acceptance of the statewide senior property tax work-off program under
G.L. c. 59, § 5K, and to establish a locally controlled program instead. This gave the Town the flexibility, through
its Board of Selectmen,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 than permitted under state
law.
Although the Select Board has the authority to expand eligibility to persons under age 60 who are disabled or
handicapped, it has not yet done so, nor has it adopted a wage in excess of the state's minimum wage. The current
eligibility qualifications and benefit limits are detailed in the table below.
Since 2006,the State legislature has enacted several amendments to G.L. c. 59, § 5K enhancing the benefits of that
program, but the Town's wage rate and benefit cap have kept pace, and are on a par with the maximum allowed
under the state program.
CPA Surcharge Exemption
Low-to-moderate income homeowners age 60 or over, and low-income homeowners under age 60, may obtain a
100% exemption from the CPA surcharge on their property tax. These exemptions directly reduce the amount of
CPA revenue that the Town receives.
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Tax Relief Programs—Limits and Qualifications as of December 2021
State Income Tax Circuit Breaker
Maximum assessed valuation $884,000
Income limits
• Single individual $62,000
• Head of household $78,000
• Married, filing jointly $93,000
Maximum tax credit $1,170
41A Property Tax Deferral
Income limit(single or married) $90,000
Interest rate for FY2022 0.08%
41C Property Tax Exemption Single Married
Income limit $28,869 $43,305
Assets limit $57,742 $79,39411
Senior Service Program
Income eligibility $90,000
Maximum benefit per household (140 hours) $1,755
Hourly Rate $13.50
Complete details on all tax and utility relief programs available to Lexington residents are set forth in a brochure
entitled Property Tax Relief Programs, available on the Town web site at http://www.lexingtonma.gov/taxrelief.
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Appendix E: Specified Stabilization Funds
The state statute authorizing towns to create and maintain a stabilization fund, G.L. c. 40, section 513,was amended
in 2003 to permit the creation of multiple, separate stabilization funds for specified purposes. It was further
amended by the Municipal Modernization Act in 2016. The creation of such funds, the specification of their
purpose, any alteration of their purpose, and any appropriation out of the funds, must be approved by a two-thirds
vote of Town Meeting. Appropriations into a fund may be approved by a majority vote of Town Meeting; and the
dedication of a recurring revenue stream to a fund, which continues for a minimum of three years until revoked,
may be made by a two-thirds vote of Town Meeting. To supplement its general Stabilization Fund, Lexington has
created a number of 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
accumulated during the year in the special revenue accounts are now transferred periodically by vote at an annual or
special town meeting to the following specified stabilization funds, where their appropriation is now subject to
review by Town Meeting:
Transportation Demand Management/Public Transportation (TDMIPT) S.F.: Contains payments negotiated with
developers to support the operations of transportation services. It was initially created to support the Lexpress bus
service and the 2016 Annual Town Meeting extended the purpose of this fund to "supporting the planning and
operations of transportation services to serve the needs of town residents and businesses."
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. This fund was dissolved at the
2018 ATM.
Section 135 Zoning Bylaw 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.
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. In each year from FY2018-2020, $27,000 was appropriated for the bike share program in Lexington
Center.
At the 2011 Annual Town Meeting two more funds were created:
Avalon Bay School Enrollment Mitigation Fund: funded with a $418,900 payment received from Avalon Bay
pursuant to an Education and Trust Fund Escrow Agreement dated May 31, 2006. The terms of that agreement
called for the establishment of an escrow fund in the amount of$750,000 with disbursements made to the Town
annually if the number of students residing at the development (Avalon at Lexington Hills) exceeded 111. The
amount payable per student in excess of 111 was $7,100. The fund was dissolved at the 2018 ATM.
Transportation Management Overlay District Fund (TMOD): funded by payments from those developers who
choose to pay a transportation mitigation fee rather than taking responsibility for improving all the intersections in
the area to a certain level as provided in Section 135-43.0 of the Zoning Bylaw. Per 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."
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At the 2012 Special Town Meeting, the Capital Stabilization Fund was created to set aside funds for future capital
projects, including but not limited to building renewal projects, and/or to mitigate the impact on taxpayers of debt
service,both excluded and non-excluded, related to capital projects.
After the Town issues a large bond for a project where the debt is exempted under Proposition 2'/2, the Town's
exempt debt service rises sharply, with a direct impact property tax bills. This fund allows the Town to both reduce
the magnitude and smooth the impact of the sudden increases in exempt debt service. Town Meeting can set aside
funds in periods when the Town has a surplus, and in later years these funds can be appropriated to offset a portion
of the exempt debt service. This in turn reduces the amount the tax levy must be raised above the usual limits under
Proposition 2'/2.
This fund may also be used to mitigate sudden increases caused by new within-levy, i.e.,non-exempt, debt.
At the 2018 Annual Town Meeting, three new funds were created with dedicated revenue streams. The Visitor's
Center Capital Stabilization Fund was established to serve as a repository for grants, gifts, or special fees related to
the Visitor's Center building capital project. The Water System Capital Stabilization Fund was established for the
specific purpose of reserving monthly payments received from the Town of Bedford per an agreement for the sale
of water (water from the MWRA goes to Bedford through Lexington's system). The agreement with Bedford has
two components, 1) the cost of water used, and 2) a flat annual fee or "demand charge" that is split into monthly
payments. The annual fee is set so as to cover costs of future infrastructure improvements related to the Lexington-
to-Bedford water connection. It is envisioned that the monthly payments would be put into this stabilization fund
for future capital projects instead of being applied annually for rate reductions. The annual fee for FY2018 was
$62,175 and it will increase each year by a CPI factor. The Affordable Housing Capital Stabilization Fund was
established to reserve payments from Brookhaven for affordable housing, commencing in FY2020 per an
agreement in regard to the rezoning article for Brookhaven's expansion at the 2017 Annual Town Meeting.
The table below shows estimates of the balances in stabilization funds as of December 31, 2021.
Stabilization Fund Balance
Transportation Demand Management/ $1,091,909
Public Transportation
Traffic Mitigation $646,487
Special Education $654,674
Capital $21,672,549
Center Improvement $10,382
TMOD $99,629
Debt Service $191,080
Visitors Center $39,901
Affordable Housing Capital $310,052
Water System Capital $210,912
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Appendix F: Other Post Employment Benefits
The OPEB Liability
The Town of Lexington is required by State law to provide health benefits to retired employees that are comparable
to those provided for active employees. These and other retirement benefits, which are distinct from pension
benefits, are known as "other post-employment benefits" or OPEB for short. Health care benefits are by far the
largest component of OPEB. Currently, all of the Town's retirees are eligible for Medicare and receive Medicare
supplement coverage from the Town.
Because the Town is obligated to provide these benefits in the future, the anticipated costs extending over the
lifetimes of currently vested employees and retirees represent a financial liability. The size of that liability depends
on the number of employees, each employee's number of years of service,the time intervals over which the retirees
are expected to receive retirement benefits, the expected cost of providing those benefits in those future years, and
the present value of those future benefits.
In a hypothetical world where the number of retirees remains constant and annual per-capita medical costs inflate at
a rate close to a general inflation index, the size of the OPEB liability in terms of inflation-adjusted dollars would
be relatively stable, because the increases and decreases would tend to balance out. In practice, however, the
inflation-adjusted value of the OPEB liability often increases each year because of
• real (inflation-adjusted)increases in the cost of health care,
• growth in the number of retirees receiving benefits, and
• actuarial adjustments to the projected longevity of retirees.
Pay-As-You-Go versus Pre-Funding
There are two approaches to funding the OPEB liability. The first is a pay-as-you-go model where annual OPEB
expenses are paid entirely through appropriation from the tax levy. This model uses current dollars to pay for
current expenses related to benefits earned in previous years. The Town's pay-as-you-go OPEB cost for FY2022
was approximately $7.8 million and the projected cost for FY2023 is approximately $8.2 million not including
small amounts for the Town's shares of retiree dental and life insurance.
The other approach is a pre funded model in which expenses are paid from a trust fund called the Post-Employment
Insurance Liability Fund, or PEIL Fund. This fund exists, but it is only partially funded. Once it is fully funded,
withdrawals from the Fund will cover the annual OPEB expenses, and the Town will make annual contributions to
the Fund equal to the "normal cost", or "service cost", i.e., the present value of future benefits earned during the
current year. The balance of the Fund will be maintained at or near the full-funding level by investment returns in
addition to these annual contributions. This model,which pays for future expenses using current dollars, is also how
the Retirement Fund(pensions)will operate once it is fully funded.
The difference between the current balance of the PEIL Fund and the amount needed for it to be considered fully
funded is called the "unfunded liability". Currently, contributions to the PEIL Fund act to reduce the size of the
unfunded liability, and current-year OPEB expenses are funded from the operating budget, i.e., not by withdrawals
from the Fund.
The pay-as-you-go and pre-funded models each have advantages and disadvantages. The pay-as-you-go model is
simpler to administer, but there is no benefit from long-term investment earnings, and no hedge against the higher
inflation of health care costs. In the pre-funding model, once a sufficient trust fund balance is achieved, the
investment earnings pay for a substantial portion of the costs. Building up the trust fund results in higher expenses
during the decades-long transition period, but should eventually result in lower annual appropriations from the tax
levy.
Under pay-as-you-go, there is a large gap between the time when services are rendered and the time when funds
must be raised to pay the benefits associated with those services. This gap can complicate long-term financial
planning.With pre-funding,the projected fully-loaded cost of services is accounted and paid for in the current year.
Even partial pre-funding has some benefits. Any monies in the trust fund provide assurance that the Town will be
able to satisfy at least some portion of its future liability, and the fund is always available as a reserve, e.g.,to fund
a portion of retiree health costs in particularly challenging fiscal years.
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On the other hand, appropriating money into the trust fund for future obligations reduces the funds available to
spend on other items or to be put aside for other purposes. Policy makers must consider whether such funding
should take priority over other liabilities, such as the costs of maintaining or replacing roads and buildings in a
timely manner. In some circumstances, choosing the latter might generate significant future savings.
On March 10, 2014,based on a recommendation from the OPEB Working Group,the Board of Selectmen endorsed
a formal policy for making annual appropriations to the OPEB trust fund:
It is the policy of the Board of Selectmen to recommend to Town Meeting each year a budget
contribution to the OPEB Trust Fund in an amount that ranges from 35 to 100 percent of the full
Normal Cost, with the General and Enterprise Funds bearing their respective shares of those
contributions. This approach will mitigate growth in the Unfunded Actuarial Accrued Liability,
reducing the amount the Town will need to budget for health insurance by approximately one-third,
as the assets of the OPEB Trust Fund will be used to underwrite the annual cost of retiree benefits.
Further, it is recognized that there are competing claims for limited Town funds, which are
considered as part of the annual budget process. Consequently, the annual recommendation for
OPEB funding shall be made in the context of other capital and operating budget needs, such that
recommended OPEB funding shall not have a material, detrimental impact on service delivery or
the maintenance of Town capital assets and infrastructure.
The Committee has supported this policy, and since 2014 the Town has made annual contributions of roughly 35%
of the OPEB normal cost to the PEIL Fund, with the exception of 2020 when the contribution was lower due to
uncertainty about the impact of the Covid-19 pandemic.
In FY2021, the Town Manager assembled a Financial Policy Working Group to review the above policy and
consider possible modifications. To date, the Working Group has considered minor adjustments to the policy, but
has not made any specific recommendations.
The Post Employment Insurance Liability(PEIL) Fund
The Post-Employment Insurance Liability Fund or PEIL Fund was created pursuant to authority granted to the
Town through a special act of the Massachusetts legislature in 2002 (MGL Chapter 317). The Fund was created to
allow the Town, at the discretion of Town Meeting, to earmark and set aside funds to pay for future retiree health
benefits. Once money has been appropriated into the PEIL Fund, Town Meeting may only appropriate monies out
of it to pay for health care costs of retirees.
The Retirement Board is responsible for the management of the PEIL Fund as well as the Retirement Fund, which
supports the Town pension system. The rules governing the management of these two funds are similar. Unlike
most other Town monies, the balance in each of these two funds may be invested in equities with degrees of risk
and rates of return that are suitable for long-term growth.
As articulated in the above policy statement of the Board of Selectmen and as confirmed by the Financial Policy
Working Group,the intention is to continue with the transition to the pre-funded approach. Hence, there have been
appropriations into the PEIL Fund at each annual town meeting since 2008. Until the Town fully funds its OPEB
liability, moving toward the pre-funded model will require the Town to continue paying for a number of years for
annual pay-as-you-go OPEB expenses, while also appropriating funds into the PEIL Fund. This combination of
appropriations could be continued until the PEIL Fund is fully funded.
GASB standards and the determination of the OPEB liability
The Town of Lexington follows standards set by the Government Accounting Standards Board (GASB) in its
"statements". In regard to OPEB accounting, GASB statements 74 and 75 (GASB 74 and GASB 75) lay out the
relevant standards, having superseded the previous set of standards described in GASB statements 43 and 45.
Briefly,these statements require the determination of the actuarial value of the Town's OPEB liability according to
specified metrics every two years, and the inclusion of a summary of the results in the Town's financial statements.
Bond rating agencies consistently ask about the actuarial report, suggesting that the size of the OPEB liability, and
its current funding level, factor into the Town's bond rating.
Estimating the present value of a complicated long-term liability like OPEB involves many actuarial assumptions,
and the final results are very sensitive to some of these factors, especially the discount rate (the rate of return on the
funds to be used to pay the future obligations), the predicted rate of inflation of per-capita medical costs, and the
number of active and retired employees. An understanding of the actuarial analyses in a proper context requires
consideration of the underlying assumptions, and judgment of how well they might mirror real-world conditions.
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Each year, the Town engages an actuarial consultant who must follow the procedures and reporting templates
established by the GASB standards to produce a report. A full actuarial analysis is done every two years. A briefer
update based on the previous year's full analysis is done in each intervening year.
The primary purpose of the actuarial reports is to provide information that is presented in the Town's financial
statements. This information, in turn, informs potential investors about one specific aspect of the present financial
health of the Town, and enables uniform comparisons of the financial health of multiple municipalities.
A secondary use of the actuarial reports is to provide guidance to a municipality when policies regarding the OPEB
liability are considered. A municipality may use additional modeling scenarios with a broader range of financial
assumptions when the formally mandated assumptions used for the report do not fully capture the municipality's
OPEB funding process and liabilities.
Recent Status of OPEB Funding
The most recent full actuarial analysis presents the picture of the Town's OPEB liabilities and funding as of June
30, 2019. An update rolls the analysis forward to June 30, 2020. For these analyses,the actuary used a discount rate
of 7.5%which was considered representative of the long-term growth of an equity-investing account like the PEIL
Fund. Using this discount rate, the total OPEB liability as of June 30, 2020, was estimated at approximately $146
million. Using a 6.5% discount rate (projecting a lower rate of return on investments), the liability would be
approximately $167 million. The normal cost for that fiscal year (FY2020), was estimated, again using the 7.5%
discount rate,to be just over$4.98 million.
History of the PEIL Fund
The history of appropriations into the PEIL Fund is given in the following table. Since the monies in the Fund are
invested, the Fund balance will be significantly larger than the sum of past appropriations into the Fund. At the
close of FY2021,the balance in the PEIL Fund was $24,058,352, which does not include the FY2022 appropriation
of $1,885,486 made at the 2021 Annual Town Meeting. The current fund balance will be the FY2021 closing
balance plus the FY2022 appropriation and any investment earnings or losses since the start of FY2022. The
balance, as of December 31, 2021, is estimated to be $27,906,814.
Appropriations Into the PEIL Fund
Appropriation Approved Amount Appropriation Approved Amount
2008 Annual Town Meeting $ 400,000 2018 Annual Town Meeting $ 1,842,895
2009 Annual Town Meeting $ 440,690 2019 Annual Town Meeting $ 1,885,486
2010 Annual Town Meeting $ 479,399 2020 Annual Town Meeting $ 750,000
2011 Annual Town Meeting $ 500,000 2021 Annual Town Meeting $ 1,885,486
2012 Annual Town Meeting $ 500,000 2022 Annual Town Meeting $ —
2013 Annual Town Meeting $ 775,000
2014 Annual Town Meeting $ 1,119,000
2015 Annual Town Meeting $ 1,200,000
2016 Annual Town Meeting $ 1,512,318
2017 Annual Town Meeting $ 1,842,895
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