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Home My WebLink About2017-09-14-AC-min 09/14/2017 AC Minutes Minutes Town of Lexington Appropriation Committee (AC) September 14, 2017 Place and Time: Parker Room, Town Office Building, 7:30 p.m. Members Present: John Bartenstein, Chair; Alan Levine, Vice-Chair & Secretary; Ellen Basch; Eric Michelson; Richard Neumeier; Sanjay Padaki; Andrei Radulescu-Banu; Jian Helen Yang; Carolyn Kosnoff, Assistant Town Manager, Finance (non-voting, ex-officio) Member(s) Absent: Lily Manhua Yan Other Attendees: None The meeting was called to order at 7:35 p.m. 1. Minutes A motion was made and seconded to approve minutes for August 31, 2017. The motion passed. VOTE: 8-0 2. Announcements and Liaison Reports Mr. Bartenstein reported the following: As noted by Mr. Neumeier at the last meeting, the Supreme Judicial Court of MA agreed to hear an appeal of a Superior Court ruling against the Board of Selectmen (BoS) of the Town of Wayland for violation of the Open Meeting Law (OML) premised on the advance circulation employee evaluations by email. Town citizens initially filed a complaint with the Attorney determined that actions taken were not in violation of the OML. In a subsequent court action, the Superior Court determined otherwise. A decision by the Supreme Judicial Court is likely in the winter. The Massachusetts Municipal Association (MMA) would be the most effective entity to file an amicus brief on behalf of Massachusetts towns. Mr. Bartenstein will contact the MMA to see if it has any plans or interest in this regard. The Association of Town Finance Committees, of which Lexington is a member, will hold its annual meeting on Saturday, October 21, in Franklin. The topics to be addressed include the use of electronic communication methods as they relate to the OML and Public Records Law. Mr. Bartenstein may attend; he will circulate the notice, and any other members interested in attending should contact Mr. Bartenstein and Ms. Kosnoff. The September 11 BoS meeting included an initial staff presentation on FY2018 water/sewer rates. A rate increase of approximately 1.4% is currently proposed on a combined basis. Because FY2018 irrigation use is expected to be substantially lower wet summer, a 3.5% water rate increase is proposed even though water fund costs are down slightly. Evaluation of Section One meter readings, which are currently underway for the past summer, could result in further downward revision of the FY2018 irrigation usage estimate and a slightly higher water rate increase. 1 09/14/2017 AC Minutes Although both the water and sewer funds had positive operating results, there was a cash deficit of approximately $200,000 in the sewer fund because approximately $700,000 in FY2017 payments were not received until early July. This will result available for appropriation in the coming fiscal year, which must be calculated on a cash basis as of the end of the fiscal year, even though the cash is now in hand. In the water fund, on the other hand, there was a cash operating surplus of approximately $1.5 million due primarily to record irrigation water usage. The operating surplus is even higher if payments made after the close of the fiscal year, as noted above, are considered. The surplus will substantially as of the end of FY2017 to an amount approaching $3 million. Mr. Bartenstein made two suggestions for future consideration: o For purposes of reporting to the Selectmen, accrual accounting, which is permitted in an Enterprise Fund for financial reporting, would show year- to-year operating results more accurately even if retained earnings must be calculated on a cash basis; o Combining the water and sewer enterprise funds, which the Department of Revenue has indicated is permissible, could help to even out variations in cash results between the two funds and allow periodic irrigation-driven water fund surpluses to support the entire system. Mr. Bartenstein has asked Ms. Kosnoff whether there are any outstanding, callable bonds on which the Town is paying an interest rate higher than the approximately 1.0% interest earned on funds in the Capital Stabilization Fund (CSF). If so, it might be cost-effective to use the CSF to pay off some of those bonds. Ms. Kosnoff said that she would ask First Southwest, bond advisor, to research this question. The Town has approximately $200 million in outstanding debt. 3. September 13, 2017 Capital Summit Issues: Debt Exclusion Questions Several issues relating to the proposed fall 2017 debt exclusion referendum were discussed, in particularly whether the appropriation requested at the upcoming Special Town Meeting (STM) for the Hastings School replacement project should be made contingent on the successful passage of a debt exclusion referendum vote on this item. Mr. Bartenstein noted that the BoS is still debating this issue and may be interested in input from the finance committees as early as its next scheduled meeting on Monday, September 18. To frame the discussion, Mr. Bartenstein observed that, by the very nature of a debt exclusion referendum, which seeks voter approval of an increase in taxes beyond the Proposition 2 ½ levy limit in order to fund the debt service costs incurred for a capital project, something must be at risk if the vote fails. Traditionally, it is the project itself which is placed at risk: if the voters agree to fund the project outside of the limits of Proposition 2 ½, the project will go forward; however, if the vote is negative, the project 2 09/14/2017 AC Minutes will not go forward as initially presented and must be abandoned, deferred or restructured and re-presented to the voters in a different form. In the case of the Hastings project, concern has been expressed that the prompt completion of this project is too important to be placed at risk in this fashion because the space needs of the schools are urgent and a vote by taxpayers not to support the project could result in the loss of the Massachusetts School Building Authority (MSBA) commitment to contribute $17 million towards the project. A second option, also theoretically possible operating budget at practical risk instead of the project itself. If a Town Meeting appropriation for a capital project is not made contingent on the successful passage of a debt exclusion referendum vote, then even if the referendum is unsuccessful the Town could still proceed to incur the bond indebtedness necessary to proceed with the project but would have to finance the resulting debt service within the levy. In the case of the Ha million after an MSBA contribution of approximately $17 million, this would mean that the Town would have to absorb annual principal and interest payments of approximately $3.5-4.0 million within the levy, placing at risk other items in the operating budget of an equivalent amount. To date, there has been no explicit planning as to what specific items in the annual operating budget might be placed at risk if the Hastings appropriation is made non-contingent and a referendum vote fails. Mr. Padaki noted that a third option which is theoretically possible would be not to include the Hastings project on a debt exclusion referendum ballot at all, but simply to plan to absorb the necessary debt service within the levy even if that might trigger the need, sooner or later, for an operating override. After , including which would allow transmission of the clearest message to voters of the stakes at issue in a debt exclusion referendum, the Committee was not prepared to vote a final position. However, on a straw poll vote, the Committee authorized the Chair to convey to the Board of Selectmen its current inclination to support the first option making the Special Town Meeting vote appropriation for the Hastings project contingent on taxpayer approval of a debt exclusion referendum by a vote of 6-2. One dissenting member preferred to make the STM vote on Hastings non-contingent, and the other preferred to remove the Hastings project from the debt exclusion referendum altogether and absorb the necessary debt service costs within the operating budget. With respect to the fire station project discussion at the Capital Summit, Mr. Padaki raised a concern about the life cycle cost projections that were presented to determine projected savings for some of the proposed add-ons. It was agreed that Jon Himmel, Chair, Permanent Building Committee, should be contacted for additional information. 4. Planning for Report to Fall 2017 STM-2 and STM-3 Assignments for writing the sections of the reports were reviewed. It is expected that STM-3 Article 13: Authorize for Authorized Capital Improvements (Center Streetscape) will be indefinitely postponed. Ms. Kosnoff reported that she is preparing taxpayer impact information for the debt exclusion projects. 3 09/14/2017 AC Minutes 5. Future Meetings th The first FY2018 Budget Summit will be held on October 5, and Ms. Kosnoff plans to have an updated financial model prepared by then. It was agreed that this Committee thrdth would meet on September 26 and October 3, and possibly on October 9 if necessary to vote approval of a final version of a report to the STM and it is possible to get a meeting room on Columbus Day. The meeting adjourned at 9:32 p.m. Respectfully submitted, Sara Arnold, Recording Secretary Approved: October 3, 2017 Exhibits Agenda, posted by John Bartenstein, Chair 4