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HomeMy WebLinkAbout2024-11-20 FY2026 Financial Summit III-min Finance Summit III Select Board, School Committee, Appropriation Committee, Capital Expenditures Committee, November 20, 2024 The Finance Summit was called to order by Select Board Chair Doug Lucente at 7:00 p.m. on Wednesday, November 20, 2024, via remote meeting services. Present for the Select Board (SB): Mr. Lucente, Chair; Mr. Pato; Ms. Hai; Mr. Sandeen and Ms. Barry (8:00pm arrival) as well as Mr. Bartha, Town Manager; Ms. Axtell, Deputy Town Manager; Ms. Kosnoff, Deputy Town Manager for Finance; Ms. Impink, Budget Officer; and Ms. Katzenback, Executive Clerk Present for the School Committee (SC): Ms. Jay, Chair; Ms. Sawhney; Ms. Lenihan; and Mr. Freeman Present for the Appropriation Committee (AC): Mr. Parker, Chair; Mr. Bartenstein; Mr. Levine; Mr. Michelson; Mr. Ahuja; Ms. Verma; and Mr. Padaki Present for the Capital Expenditures Committee (CEC): Mr. Lamb, Chair; Mr. Kanter; Ms. Beebee; Mr. Cole; Ms. Rhodes; Mr. Boudett Also Present: Ms. Kosnoff, Assistant Town Manager for Finance; Ms. Impink, Budget Officer; Dr. Hackett, Superintendent of Schools; David Coelho, Assistant Superintendent for Finance and Operations All boards and committee called their groups to order with a roll call of attendance. ITEMS FOR INDIVIDUAL CONSIDERATION 1. FY2026 Financial Summit III  School Building Committee update Ms. Jay recused herself from this item. Dr. Hackett gave a brief update on the High School project. She explained that the School Building Committee (SBC) made a determination regarding its preferred massing concept as the C5B Bloom, which is a build on fields project. The plan is to have the children remain in the current High School during construction. When the new construction is complete, the children will move over. The current High School will then be demolished with fields built in its place. The base project shows 460,000 s.f. for the new High School. The SBC also voted on the add/reno field house version, with 48,000 s.f. instead of the 34,000 s.f. proposed in the renovation only version. The proposed field house has 1,500 bleacher seats, and potentially a 200-meter track. This item can be part of the debt exclusion vote. The SBC decided not to reserve land for a new larger field house, after receiving input from various boards and committees. Dr. Hackett explained that a letter was sent to the MSBA requesting reconsideration of some calculations for enrollment as it relates to financing. Specifically, the request asked for credit for building in ways to expand and flex the project, and consideration to credit the LABBB space with consideration for the reimbursement rate of some of the over 70 other communities served by the program. There was also a request to consider reimbursing the Town for the square footage of the field house, as well as the square footage designated for Central Office/additional classrooms. A meeting was held with the MSBA, and they indicated that to entertain a change in design enrollment numbers, the Tow would need to go back to the beginning of the process, which would slow the project and have no guarantees of increased enrollment allowance. The delay could cost approximately $20M which would likely exceed any amount of money that could be received through any additional enrollment allowed. It does not seem prudent to go back to eligibility, so the recommendation is to proceed with the current design enrollment of 2,395 students.  Superintendent's Budget Drivers Dr. Hackett stated that, for FY26, a total School allocation of $147,500,319 is proposed. This is for a level services budget. Approximately 85% of the budget is in salaries and approximately 15% is in expenses. For the next five years, the budget will manage to stay less than a 5% increase. Lexington’s per pupil costs are $23,842 for FY23. Adding out of district students to that leads to a per pupil cost of $25,167. The budget assumes that there will be a COLA for negotiated contracts through the current expiration date of their collective bargaining agreement. The budget assumes that there will be an average increase of approximately 4.56%-4.75%. The budget also projects a $1.1M turn back in the budget and anticipates circuit breaker reimbursement of approximately 6.6 million. Dr. Hackett explained that some of the budget drivers include Special Education, which has been increasing both for in district and out of district students. Contract negotiations, and displaced student impacts are also drivers. She stated that there is approximately $750,000 in the Special Education Reserve Fund, and the proposal is to use $500,000 of that for net supplemental positions. This would increase the total budget by $500,000 and the total allocation in that case would increase from $147,500,319 to $148,319,000. Dr. Hackett reviewed the current enrollment numbers. There is a large decline being seen in K-5 elementary enrollment. Enrollment for grades 6-8 is projected to remain flat. Enrollment at the High School seems to be increasing just slightly. Dr. Hackett stated that there will likely be a potential funding gap between $1.37M-approximately $2M. The total allocation would be in the range of approximately 3.45%-4.7% through the revenue allocation model. In order to bridge the gap, the Schools can look at either increasing revenues or decreasing expenses. In response to a question from Mr. Kanter (CEC), Ms. Kosnoff explained that the turn backs from prior years become free cash, which is considered a one-time revenue. The line items that are generating the turn backs could be tightened up a bit in the regular budget. It is not the Town’s practice to use free cash from a prior year in order to balance the current year’s operating budget. Mr. Levine (AC) stated that the proposal to use $500,000 from the Special Education Reserve Fund could be problematic if the expectation is that Special Education costs are going to increase steadily from year to year. The Fund was not built for permanent cost increases.  FY2026 Revenue Projections Ms. Barry joined the meeting at 8:00pm. Ms. Kosnoff stated that, for FY26, the total projected levy limit is $249M before exempt debt service, and with debt exempt service is $265M. Overall, the tax levy is proposed to increase by $9.2M or 3.8% for the year. Since FY23, the Town has had a lot of commercial growth. Residential and personal property new growth are projecting $3.2M for FY26 and this will likely be static for the next few years. Regarding State aid, approximately $60 per head is being set aside as expected minimum aid. For local receipts, these are proposed to increase close to $1M, but the intention is not to overestimate these. The free cash estimate is currently projected to be $23M, which is by far the highest amount of free cash that the Town has ever had.  FY2026 Revenue Allocation Model Ms. Kosnoff stated that the total projected general fund revenue for FY26 is $310,899,763. In starting off with a revenue of $310M, removing a number of shared expenses and other set asides, and beginning with last year's budgets, the new revenue that is able to be allocated is $6.7M. This is split between the municipal and school departments according to our formula. For the municipal side this equals a $1.7M increase to provide a level service budget, plus any potential program improvements. On the school side, this is $4.95M of new incremental revenue. Both of those are 3.5% increases over last year's budget. Free cash is then set aside for one-time expenses. Regarding Dr. Hackett’s projection to use some of the Special Education Reserve Fund to balance the budget for FY26, the proposal is to take an equal amount of free cash and put it back into the Reserve Fund. Using the $500,000 to essentially balance the operating budget with a one-time revenue is not generally a great idea but can be done to close the gap this year. This year there are $22.5M of general fund requests which means that, even with the extraordinary amount of free cash, there would still be a need to debt finance $4M-$5M. She suggested not allocating all of the free cash amount this year. This would lead to closely considering the capital budget and deferring certain items.  Update on Capital Stabilization Fund & Debt Service Projections Ms. Kosnoff explained that the projection for the Capital Stabilization Fund at the end of FY25 is $41M. For the next two fiscal years, the intention is to continue to set aside $6.5M for new growth projects. For FY26 and 27, the Town will continue to put money aside into the Capital Stabilization Fund for the High School project. FY28 will depend on the construction schedule, FY29 is when the debt service is going to hit the maximum peak, and the Town will want to start drawing down larger amounts from the Capital Stabilization Fund to mitigate the impact to the taxpayers. DOCUMENTS: FY26 LPS Budget Summit II_11-14-2024, FY2026 Peliminary Revenue Report, FY2026 Summit II Presentation, FY2026 Preliminary Revenue Allocation Model ADJOURN Upon a motion duly made and seconded, the Select Board voted 5-0 by roll call to adjourn the meeting at 9:27p.m. The Appropriation Committee, Capital Expenditures Committee and School Committee followed suit. A true record; Attest: Kristan Patenaude Recording Secretary