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HomeMy WebLinkAbout2023-01-30 FY2024 Budget Summit IV-min FY2024 Budget Summit IV Select Board, School Committee, Appropriation Committee Capital Expenditures Committee January 30, 2023 The remote participation Budget Summit IV meeting was called to order by Select Board Chair Jill Hai with a roll call at 7:01 p.m. on Monday, January 30, 2023 via hybrid meeting services. Present for the Select Board (SB): Ms. Hai, Chair; Mr. Lucente, Vice Chair; Mr. Pato; Ms. Barry; and Mr. Sandeen as well as Mr. Malloy, Town Manager; Ms. Axtell, Deputy Town Manager; Ms. Katzenback, Executive Clerk. Ms. Cuthbertson, Chair of the Lexington School Committee, called the meeting of the School Committee to order with a roll call. Mr. Parker, Chair of the Appropriation Committee called the meeting of the Appropriation Committee to order with a roll call. Mr. Lamb, Chair of the Capital Expenditures Committee, called the meeting of the Capital Expenditures Committee to order with a roll call. Present for the School Committee (SC): Ms. Cuthbertson, Chair; Ms. Jay; Ms. Lenihan; Ms. Sawhney, Vice Chair; Mr. Freeman; Dr. Hackett, Superintendent of Schools; and Mr. Coelho, Director of Finance for Lexington Public Schools. Present for the Appropriation Committee (AC): Mr. Parker, Chair; Mr. Padaki, Vice Chair; Mr. Ahuja; Mr. Bartenstein; Mr. Levine; Mr. Michelson, Mr. Ahuja. Present for the Capital Expenditures Committee (CEC): Mr. Lamb, Chair; Mr. Kanter, Vice Chair and Clerk; Mr. Cole; Ms. Rhodes; Ms. Beebee; Mr. Boudett. Also present: Ms. Kosnoff, Assistant Town Manager for Finance; Ms. Labrecque, Budget Officer Ms. Hai stated that the meeting was being conducted via hybrid services as posted, with the agenda on the Town’s website. Ms. Hai provided directions to members of the public watching or listening via the Zoom application, regarding the procedure for making a public comment. Ms. Hai reminded Board members, staff, and members of the public about Lexington’s Standard of Conduct regarding civil discourse during Town Government meetings. ITEMS FOR INDIVIDUAL CONSIDERATION FY2024 Budget Summit IV  FY2024 Preliminary Budget and Financing Plan  Capital Expenditures Committee - Preliminary Report: FY2024 Proposed Capital Projects  Review 2023 Annual Town Meeting Articles Ms. Kosnoff presented the White Book to the groups. She noted that this is a balanced budget, including the Town, School, and shared expenses. Overall, the general fund budget is proposed to go up approximately $9M, or 3.4%, compared to FY2023. The tax levy, the biggest portion of the revenue, is projected to go up 3.9%. This reflect a basic 2.5%, plus the new growth factor being used for the year. Local receipts have started to recover from the pandemic and are projected to go up 5.3%. The revenue offsets look to be decreasing. This is due to the snow and ice deficit in FY2023, and an attempt to build that back into the budget for FY2024. The total revenue is projected to increase 3.4%. Expenses are also proposed to increase 3.4%. The Lexington Public Schools budget is proposed just under $5 million (M) more than FY2023, which is a 3.9% increase. The Minuteman High School increase is primarily due to the increasing enrollment of Lexington students at Minuteman High School. T he municipal budget is shown to be increasing by approximately 4.7%. This is primarily due to the extraordinarily large trash contracts that expire at the end of this year, which were renegotiated for FY2024. There is also a one-time expense proposed for a municipal wage study. Those two items are proposed to cost approximately $395,000 and will be recommended to be funded from one-time funds. Next year's budget will not be proposed to be balanced with free cash, as the municipal side will reabsorb the cost of the trash contract. Without those two shared expenses, the municipal department budget would also be going up 3.9%. In FY23, an extraordinary amount was placed into the Capital Stabilization Fund. For this first round of the budget, the amount proposed to be placed into the Capital Stabilization Fund is lower than in prior years, with a recommended $1.7M, per the fiscal guideline. Ms. Kosnoff noted that, back in November, the School Department’s budget was short by approximately $710,000 and the municipal side was short by approximately $1.8M. Changes have been made to allocate more revenue to both sides, including $347,000 from additional State aid. Additionally, reductions have been made to the shared expenses. The new revenue that can be allocated is $6.7M. This is a 3.9% increase in revenue from last year to be split between Town and School, using a 74/26 split. This leads to the School Department getting $4.9M more than last year and the municipal side getting $1.75M more than last year. This leads to the School Department bring short $352,000 and the municipal side having a shortfall of $395,000. The School Department has indicated that it can make up the shortfall in their expense budget and balance the budget. The municipal side will try to address its shortages using one- time revenues. Ms. Kosnoff noted that, as a compromise with the School Department in balancing its budget, there is a recommendation to set aside $1.25M into two different funds to help address special education needs if those arise during the year. Regarding shared expenses, Ms. Kosnoff explained that there has been an indication that health insurance premiums may be increasing close to 6.5%- 7%. The Facilities Department budget is proposed to increase 6.74%, mostly due to energy costs for both gas and electric rising. She noted that there is a bit of debt financing recommended in the capital plan this year. There is some non-tax revenue support proposed in the FY2024 budget. Also, $11.2M of free cash is being allocated to cash capital. The current Special Education Stabilization Fund sits at $660,000. If the additional proposed appropriation is approved, it would bring the balance in the Special Education Stabilization Fund to approximately $1.12M. This new fund would be different than the Stabilization Fund in that, once established, funds do not need to go before Town Meeting to be appropriated. Once in this reserve, funds can be allocated by a vote of the School Committee and the Select Board, allowing for additional flexibility. Ms. Kosnoff noted that $16M of free cash was projected when developing this budget, but the certification just came in at $17.1M. The recommendation is to use that one-time revenue as cash capital for this budget. Mr. Bartenstein (AC) asked about the decision to place the extra $1.1M into cash capital instead of adding it to the Capital Stabilization Fund, essentially preferring current capital over future capital. Ms. Kosnoff explained that there is currently approximately $22M in the capital budget being recommended from the general fund, approximately $7M of which is recommended to be debt financed. Staff is proposing to do as much as possible with cash capital. There will likely be some additional new growth this coming fall that can be allocated into the Capital Stabilization Fund. At this time, it seems to make sense to reduce future interest costs and future debt service costs for the general fund. It will continue to create more capacity there. In response to a question from Mr. Levine (AC) regarding item 15, Ms. Kosnoff explained that a couple of years ago a new pension evaluation was done, and the liability went up for a variety of reasons. At that time, the Town decided to get a bit more aggressive with the funding plan in order to meet the 2030 pension funding date. T he total pension is $9.M, coming from the tax levy, with the exception of $400,000 coming from free cash. Dr. Hackett (SC) stated that this budget addresses the basic needs the schools have, without adding more to address the pandemic situation. There is currently a national shortage in teachers and staff members. In Massachusetts alone, per an article today in The Boston Globe, there are 112,000 fewer workers. The State needs to determine how to create more pathways to attract people to these positions. Educators desire compensation and good leadership to make them stay in a school system. The School Department is grateful that this budget addresses the special education dilemma, though not entirely comfortable that it is outside of the operating budget. This problem is not likely to go away. Ms. Kosnoff reviewed the municipal budget. The budget, in total, Is projected to increase 4.7% or $2.1M, compared to FY2023. The Department of Public Works budget shows a $770,000 increase, or 6.4%. This is mostly due to the rising cost of supplies and the trash contract. The Police budget is proposed to increase by 9.5%, mostly due to the contract settled in FY2022. The Health Department is increasing 15.2%. It is important to note that the Health Department was previously part of the Land Use, Health, and Development Department (LUHD). The Town Manager budget is increasing 8.5%. There are two Program Improvement Requests (PIRs) technically included in the Town Manager’s budget section. The Salary Adjustment account is decreasing, as a couple of contracts were settled this year. The Town Clerk’s budget is decreasing by 4.8%, due to fewer elections in FY2024. The IT budget is increasing 9.4%, reflective of general increases, especially in software costs. Ms. Kosnoff explained that no new funds for housing are appropriated in this budget. The LUHD has been renamed to the Land Use, Housing, and Development Department. She noted that the State has put new regulations in place that certain items cannot be disposed of for free anymore, including mattresses. Previously, curbside collection for mattresses, bulky goods, white goods, etc., was part of the Town's general services and included in the operating budget. While regular trash and recycling will remain that way, the recommendation is to pull out mattresses, bulky, and white goods and place them into a Refuse Collection Revolving Funds. This would pass through the cost to the user. Ms. Kosnoff explained that, in prior budget years there were two separate revolving funds for Liberty Ride and the Visitor Center. This budget recommends combining those two items together into one Tourism Revolving Fund. This will allow for some administration benefits, along with better timing and budget flexibility. Mr. Michelson (AC) stated that, per Chapter 90 of the Town bylaws, Section 9 reads the Select Board shall provide and maintain under their care and supervision, some suitable place or method for free public disposal for the inhabitants of the Town to deposit ashes, cinders, papers, and other refuse and rubbish in accordance with such rules, regulations that a Select Board may from time to time make. He asked how the Refuse Collection Revolving Funds will be in compliance with this bylaw. Mr. Malloy explained that he spoke with Town Counsel, and it is believed that this bylaw reads that the Town is required to provide a place, such as the compost facility, but is not required to provide curbside service for free. Mr. Padaki (AC) asked why the Town is getting involved in refuse collection and creating a fund for it. Mr. Malloy stated the residents will still have the option of contacting a company directly to remove these items. However, a lot of those companies charge a fair amount of markup on removing these items. The intention is to charge only what it costs to Town do remove the items, plus a 10% administrative fee. This should be a less expensive option for residents and will be a wash for the Town as far as the revenue and expenditures. Ms. Kosnoff reviewed a proposed future revenue source, the Stormwater Enterprise Fund. This would be an additional charge to residents, based on the impervious surface of their properties. Currently, between both the operating and capital budgets, there is approximately $2.5M of expenses related to stormwater mitigation. As Department of Environmental Protection (DEP) regulations become more stringent, this cost could increase. At some point it may not be sustainable to keep managing this in the Town's general fund budget. This would be charged as part of the other two utility bills for water and sewer and there would be an offsetting reduction in the general fund expenses. This is not built into the FY2024 budget but will be proposed to establish potentially in the fall. In response to a question from Mr. Padaki (AC), Mr. Malloy explained that the Lexington Department of Public Works (DPW) is testing out a new webpage that will allow residents to enter an address in Town. This will then tell them what the impervious surface area is for that site, what the equalized residential units are, and an estimated cost of the stormwater enterprise fee for that site on an annual basis. This will apply to everybody in Town, residential, commercial, and non-taxpaying entities. In response to a question from Mr. Michelson (AC), Mr. Malloy explained that there have been discussions amongst the Select Board regarding the potential of having an underride for the amount that gets transferred from the general fund to the Stormwater Enterprise Fund. Ms. Kosnoff reviewed a number of items in the proposed budget to help meet the Select Board’s goal of sustainability. This includes implementing the electric vehicle policy as part of the Town's regular replacement program. There were two potential items in the capital budget under the DPW Equipment line to purchase large electric equipment vehicles, which are not being recommended in this budget. It is recommended that, due to cost, those two vehicles remain gas powered at this time. The budget is recommending upgrading the DPW facility regarding electric service, in order to be able to support a level one charger and potential purchase of these pieces of equipment in the future. Also, a $3.4M capital project to install solar panels on the roof of the new Police Station and over the municipal parking lot. Ms. Kosnoff explained that another priority, new this year, is maintaining public access television. Currently, revenue from cable fees goes into a special revenue Public Educational & Government (PEG) Access Fund. Everyone in Town that has cable pays a fee to the cable company to support public access television, and that revenue comes to the Town. This revenue has been declining, and projections are that the fee will not be able to continue to sustain public access television. Beginning with the FY2024 budget, some of that funding will be moved into the general fund and not be funded by the PEG Access Fund. This will be a long, slow transition. The recommendation for this budget is $100,000. The total budget cost is approximately $650,000 per year. Ms. Kosnoff explained that, regarding pedestrian, bicycle, bicycle and vehicle safety, the Town continues to dedicate funding, such as $5.1M this year, to those collective efforts in a variety of places. Ms. Kosnoff stated that the Town Manager has recommended a number of items for this budget in terms of program improvement requests (PIRs) that were requested. On the municipal side, there were approximately $1.5M, of program improvements, including the PEG Access funding of $100,000. In total, the Town Manager has recommended $189,000 of PIRs in the general fund. There are a few other PIRs recommended to come out of dedicated revenue sources, including $76,000 into the Tourism Revolving Fund. This PIR will reinstate a previously furloughed staff member as a Tour Services Coordinator. Some of the other PIRs in the budget include a sealer of weights and measures. The Town will partner with Burlington to share the expense for this item. Also, a municipal classification and compensation study is proposed as a one-time expense at $30,000. Finally, a full-time administrative assistant for Human Resources. This is due to a dire position in this department which needs to be addressed. Ms. Kosnoff stated that the budget does not propose to use any of the Capital Stabilization Fund to offset within the levy debt service. The Town is looking to start issuing debt for the Police Station project. Advice from financial advisors was that it may be better to issue the entire amount of that bond now, as the Town will get a more favorable interest rate now than in the future. This, this February, it is being proposed to issue the majority of the bond for the Police Station project; a total of approximately $30M. This will accelerate the need for the Capital Stabilization Fund into FY2024, instead of FY2025. Regarding the capital budget, Ms. Kosnoff explained that there is $22M worth of projects being recommended from the general fund. The Community Preservation Committee (CPC) cash capital plan has $13.9M in project requests for this year, two of which are recommended to be financed with debt. There is nothing in the FY2024 capital plan to address construction or renovation of Lexington High School. Funding will likely be needed in FY2025 and FY2026. The capital plan for FY2024 includes the solar canopy project outside of the Police Station, a new sidewalk for the entirety of Cedar Street, the Bedford Street/Hartwell long range transportation plan, Lincoln Park field improvements, and the lead and copper program. The CPC plan for FY2024 includes projects such as the Munroe Center for the Arts, a prefunding of the Affordable Housing Trust, Willards Woods site improvements, several trail improvements, and the Lincoln Park improvements. In response to a question from Mr. Kanter (CEC), Mr. Pinsonneault stated that the estimate for the lead and copper program is based on what was discovered through the meter replacement program. A design engineer is also working on this item, and the estimate is somewhere around 300 services. Regarding the Capital Stabilization Fund, Ms. Kosnoff explained that approximately $4M was appropriated in FY2023, and an additional $1.7M, from dedicated new growth, will be carried forward into FY2024. It is expected that this amount will increase. Other than the dedicated new growth for this budget, there are no recommendations for any additional free cash to go into the Stabilization Fund at this time. The recommendation is that the rest of the free cash be used for cash capital. As far as the dedicated new growth, FY2025 estimates $3M. Ms. Kosnoff explained that the intention is to bring the program summary to the Select Board on Monday, February 13, 2023, to be voted on. Assuming the timeline works out, the final Book would be published by Friday, February 17, 2023. Mr. Lucente (SB) asked what might happen if the State aid number changes from what is anticipated in this budget development. Ms. Kosnoff explained that this could be part of the fall Special Town Meeting budget adjustments, if needed. She noted that she does believe there will be some new growth revenue, hopefully a bit above and beyond what is projected. Mr. Lucente (SB) noted that there were several PIRs supported by the Select Board that did make it into the budget. Two in particular, to get additional help for the Conservation Department and the Fire Department, are frustrating. He stated that he believes those two items would directly have a positive impact on the commercial tax revenue. In response to a question from Mr. Michelson (CEC) regarding the schedule for budget approval by the th School Committee, Dr. Hackett stated that there is a Committee meeting on February 7. She previously th asked the School Committee to delay the vote until after this meeting. At the meeting on February 7, she will make the recommendation to approve the budget. Ms. Cuthbertson (SC) noted that she is thankful to see funds for special education placed a capital stabilization fund. However, items are also needed in the operating budget that do not necessarily come out of special education fund but do help to serve students prior to them needing special education services. Early intervention saves money over time, and it is important for educators to have the funding to address those critical items as well. Mr. Pato (SB) echoed Mr. Lucente’s concerns regarding the PIRs that are not included in the budget. He also has concerns regarding the upcoming waste contract discussion and organic waste disposal. Ms. Sawhney (SC) noted that this process has been quite challenging. She believes that part of this is due to the fact that, on the School side, there is a responsibility internally and externally, to be measured on the operations. Whereas on the municipal side, there is a similar responsibility internally and externally to be measured not only on operations, but also on savings. Operations and savings tend to be somewhat in conflict with each other Ms. Sawhney (SC) asked if it would be possible for it to be a priority to fully fund the new Special Education Reserve Fund, as the 2.2% of net school spending. Mr. Sandeen (SB) echoed Mr. Pato’s and Mr. Lucente’s comments regarding the PIRs. Mr. Lamb (CEC) stated that the CEC reviewed the CIPs and provided comments to the Town Manager and Finance staff. In its review, the group found that several CIPs had flat outyear projections. In those programs, projected future funding requests are not well defined. It is incumbent to try to project future capital budgets, especially given that cash capital funding from free cash is often one of the first things to be sacrificed when gaps need to be closed. It is hard to believe that some increases will not be needed in future years in order to maintain at least a constant level of service in those programs. This lack of clarity symbolizes the high degree of uncertainty that the CEC, and presumably the staff, have in any five-year plan. The roots of this uncertainty come not only from jittery inflation, but the large number of big-ticket capital projects on the radar screen this year. There are large capital projects which may not be entirely funded using the general fund and excluded tax levies. The CEC is not passing judgment on the validity of these projects, but rather highlighting them as being relatively new, perhaps unprioritized and definitely large dollar figures. These new big-ticket items, combined with the difficulty in creating a structurally sound, balanced budget over the past several years, leads the concerns regarding the anticipated debt exclusion in the FY2027 timeframe. DOCUMENTS: FY2024 Preliminary Budget & Financing Plan Presentation, Capital Expenditures Committee FY2024-FY2028 Capital Improvement Projects, Final 2023 ATM warrant voted/posted, FY2024 Preliminary Budget & Financing Plan White Book v2 ADJOURN Upon a motion duly made and seconded, by roll call, the Select Board voted 5-0; the School Committee voted 6-0; the Appropriation Committee voted 7-0; and the Capital Expenditures Committee voted 6-0 to adjourn the meeting at 9:02 p.m. A true record; Attest: Kristan Patenaude Recording Secretary