HomeMy WebLinkAbout2025-03-26-AC-ATM-rptAPPROPRIATION COMMITTEE
TOWN OF LEXINGTON
Ij
°fie '"; ' ll/r%i;, r" ' �,►
APRIL19"7
,.,,.
REPORT TO THE
2025 ANNUAL TowN MEETING
RELEASED MARCH 26, 2025
APPROPRIATION COMMITTEE MEMBERS
Glenn P. Parker, Chair • Sanjay Padaki, Vice Chair • Alan M. Levine, Secretary
Carolyn Kosnoff (ex officio; non-voting) • Anil A. Ahuja • John Bartenstein
Eric J. Michelson • Sean D. Osborne • Vinita Verna • Lily Manhua Yan
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
Table of Contents
Summary of Warrant Article Recommendations ii
Preface 1
Introduction 2
Warrant Article Analysis and Recommendations 6
2025 ANNUAL TOWN MEETING
Article 4 Appropriate FY2026 Operating Budget 6
Article 5 Appropriate FY2026 Enterprise Funds Budgets 17
Article 6 Amend FY2025 Operating, Enterprise and CPA Budgets 21
Article 7 Sustainable Projects 22
Article 8 Appropriate Funding to Construct a Playground in Fletcher Park (Citizen Petition) ............ 22
Article 9 Establish and Continue Departmental Revolving Funds 22
Article 10 Appropriate for the FY2026 Community Preservation Committee Operating Budget and CPA
Projects 23
Article 11 Appropriate for Recreation Capital Projects 28
Article 12 Appropriate for Municipal Capital Projects and Equipment 29
Article 13 Appropriate for Water System Improvements 29
Article 14 Appropriate for Wastewater System Improvements
Article 15 Appropriate for School Capital Projects and Equipment
Article 16 Appropriate for Public Facilities Capital Projects
Article 17 Appropriate to Post Employment Insurance Liability Fund
Article 18 Rescind Prior Borrowing Authorizations
Article 19 Establish, Amend, Dissolve and Appropriate To and From Specified Stabilization Funds
Article 20 Appropriate for Prior Years' Unpaid Bills
Article 21 Appropriate for Authorized Capital Improvements
Article 23 Dispose of 116 Vine Street
Article 26 Local Voting Rights for Lawful Permanent Residents (Citizen Petition) ................... .
Article 27 Allow 16 Year Olds Voting Rights in Municipal Elections (Citizen Petition) ............... .
APPENDICES
Appendix A: 5 -Year Budget Projections
Appendix B: Enterprise Funds
Appendix C: Revolving Funds
Appendix D: Tax Relief Programs
Appendix E: Specified Stabilization Funds
Appendix F: Other Post Employment Benefits
30
31
32
32
33
33
34
34
34
35
36
37
44
45
46
48
51
I
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
Summary of Warrant Article Recommendations
Abbreviations
EF Enterprise Fund RE
Retained Earnings
CPF Community Preservation Fund RF
Revolving Fund
GF General Fund SF
Stabilization Fund
IP A motion to Indefinitely Postpone is expected SRF
Special Revenue Fund
2025 ANNUAL TOWN MEETING
Art
Title
Funds
Funding
Committee
icle
Requested
Source
Recommendation
4
Appropriate FY2026 Operating Budget
See below
See below
Approve (9-0)
$11,838,918
Water EF
Appropriate FY2026 Enterprise Funds
$12,145,735
Wastewater EF
5
Budgets
$3,291,976
Recreation EF
Approve 9-0
pp ( )
$254,213
Tax Levy
6
Amend FY2025 Operating, Enterprise and
$60,000
Recreation EF RE
Approve (9-0)
CPA Budgets
7
Sustainable Projects
$24,000
Free Cash
Approve (9-0)
8
Appropriate Funding to Construct a
None
N/A
IP (9-0)
Playground in Fletcher Park (Citizen Petition)
9
Establish and Continue Departmental
See below
See below
Approve (9-0)
Revolving Funds
Appropriate for the FY2026 Community
CPA, GF,
10
Preservation Committee Operating Budget
See below
GF Debt
Approve (9-0)
and CPA Projects
11
Appropriate for Recreation Capital Projects
$70,000
Recreation EF RE
Approve (9-0)
12
Appropriate for Municipal Capital Projects
$11,617,306
See below
Approve (9-0)
and Equipment
$1,134,940
Water EF RE
13
Appropriate for Water System Improvements
$1,200,000
Water User Rates
Approve (9-0)
$2,334,940
$682,431
Wastewater EF RE
14
Appropriate for Wastewater System
$600,000
Wastewater User
Approve (9-0)
Improvements
Rates
$1,282,431
15
Appropriate for School Capital Projects and
$1,500,910
Free Cash
Approve (9-0)
Equipment
16
Appropriate for Public Facilities Capital
$5,743,000
See below
Approve (9-0)
Projects
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
2025 ANNUAL TOWN MEETING
Art
Title
Funds
Funding
Committee
icle
Requested
Source
Recommendation
$2,079,721
Free Cash
17
Appropriate to Post Employment Insurance
$3,045
Water EF
Approve (9-0)
Liability Fund
$609
Wastewater EF
$2,083,375
18
Rescind Prior Borrowing Authorizations
See below
See below
Approve (9-0)
$6,563,050
Tax Levy
19
Establish, Amend, Dissolve and Appropriate
Approve 9-0
pp ( )
To and From Specified Stabilization Funds
Affordable
$14,003
Housing SF
20
Appropriate for Prior Years' Unpaid Bills
None
N/A
IP (9-0)
21
Appropriate for Authorized Capital
None
N/A
IP (9-0)
Improvements
23
Dispose of 116 Vine Street
None
N/A
Approve (9-0)
26
Local Voting Rights for Lawful Permanent
None
N/A
No
Residents (Citizen Petition)
Recommendation
27
Allow 16 Year Olds Voting Rights in
None
N/A
No
Municipal Elections (Citizen Petition)
Recommendation
III
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
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 topics.
The discussion for each article presents the prevailing view of the Committee, as well as any other relevant
considerations or cautions. If one or more Committee members are strongly opposed to the majority's position, we
include a brief statement of the opposing view.
The Committee recommends an action on the expected motion for each article. If a motion is amended, the
Committee will provide an updated recommendation during town meeting. Our recommendations are usually to
"Approve" or "Disapprove" the motion, or to "Indefinitely Postpone" the article. The report's recommendations for
each article are displayed in the headers at the start of each article. Voting on each recommendation is displayed as
the number of members in favor of the action, followed by the number of members opposed, and lastly (if
applicable) the number of members abstaining, e.g., "(6-2-1)" indicates six members in favor, two opposed, and one
abstaining. Some vote counts may not reflect the full committee, in which case the total number of votes and
abstentions will be less than nine. For convenience, all recommendations are 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 2026 Recommended Budget & Financing Plan (the "Brown Book"),
dated February 26, 2025, 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 13, 2025
(hereafter the "LPS Budget Book") details the budget plan for Lexington Public Schools.
• The Capital Expenditures Committee (CEC) Report to the 2025 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 2025 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
All other reports for this Town Meeting will be available online at:
https://lexingtonma.gov/2266/2025-Annual-Town-Meeting
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 Steve Bartha; Assistant Town Manager for Finance Carolyn Kosnoff (an
ex officio member of our Committee); Budget Officer Rosalyn Impink; 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.
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.
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
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,
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. In addition to
the timing of this report, the Town's practice has been to publish the Brown Book at least four weeks in advance of
Town Meeting taking up financial articles.
This year the Brown Book was published on Wednesday, February 26, making Wednesday, March 26 the earliest
day that financial articles could be considered. However, per the Moderator's published schedule, financial articles
will first be taken up on Wednesday, April 2. This report was published on Wednesday, March 26, one week prior
to April 2.
Committee Membership and Meeting Practices
The nine current voting members and one non-voting, ex -officio member of this Committee are listed on the cover
of this report. There have been no changes in membership since our last report.
On March 20, 2023, Governor Healey signed legislation to allow remote and hybrid meeting options for public
bodies through March 31, 2025. The Committee has continued to meet remotely using the Zoom application and
occasionally in person.
Reserve Fund
The appropriation to the Reserve Fund in FY2025 was $850,000.
On August 8, 2024, the Committee approved a transfer of $60,000 from the Reserve Fund to the Recreation
Department for repairs to water wells and pumps at Pine Meadows Golf Course. This transfer was in order because
these repairs were considered to be extraordinary and unforeseen expenses, the prerequisite for such a transfer.
Maintenance of recreation facilities is normally funded through the Recreation Enterprise Fund. However, the
situation arose shortly after the start of a new fiscal year, at which time the Reserve Fund was the only ready source
of funding for the repairs. The request was approved with the understanding that the balance of the Reserve Fund
would be restored, and this will be requested as an amendment to the FY2025 budget under Article 6.
Any unused balance in the Reserve Fund will flow to free cash at the end of the fiscal year.
The requested appropriation for the Reserve Fund in FY2026 is $850,000.
Developments Since Adoption of the FY2025 Budget
On July 8, 2024, the Committee reviewed final budget adjustments for FY2024 as recommended by Town staff.
The end -of -year (EOY) budget adjustments were to:
• Transfer $25,000 from "Health Insurance" to "Property & Liability Insurance"
• Transfer $9,500 from "Board of Health Contract Services" to "Board of Health Regular Wages"
• Transfer $96,000 from "Multiple Lines - Town Manager & Land Use" to "Legal Services"
• Transfer $15,000 from "Elections Seasonal P/T Wage" to "Elections Contract Services"
• Transfer $8,000 from Innovation & Technology Townwide Software Support" to "Innovation &
Technology Overtime"
• Authorize an increase to the spending limit of the Compost Operations Revolving Fund by $65,000 from
$875,000 to $940,000.
2
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
• Transfer $13,000 from the Salary Adjustment Account to "Police - Regular Wages"
• Transfer $1,030,000 from the Salary Adjustment Account to "Fire - Regular Wages"
• Transfer $25,000 from the Salary Adjustment Account to "Library - Regular Wages"
The Committee approved the five EOY transfers and the increase for the Compost Operations Revolving Fund. The
transfers from the Salary Adjustment Account were approved by the Select Board and did not require the
Committee's approval.
The November 2024-1 Special Town Meeting included the following actions:
• Article 3 appropriated an additional $4,362,799 from the tax levy into the Capital Stabilization Fund (CSF),
of which $2,526,677 will become a recurring appropriation per the Town Manager's Capital Stabilization
Funding Framework.
Article 4 made minor adjustments to the FY2025 operating budget and enterprise funds. Line 3300
Department of Public Works - Public Grounds was increased by $70,000 to purchase battery -powered
equipment to comply with the noise bylaw. Line 8210-8220 Town Manager Expenses was increased by
$120,000 to fund a Police and Fire staffing study to address heavy use of overtime. Line 8400 Finance was
increased by $25,000 to backfill a position open due to parental leave. Appropriations for the Water and
Wastewater Enterprise Funds were reconciled with the final MWRA assessments, resulting in decreases of
roughly $1,800,000 and $1,000,000 respectively; debt service for each of these enterprise funds was also
slightly decreased.
• Article 5 authorized $1.24 million in debt funding for a solar canopy project at the Police Station.
Article 7 appropriated $100,000 from the tax levy
construction of new athletic fields that may follow the
("old Harrington").
FY2026 Budget
for survey, design, and engineering services for
demolition of the School Administration building
Here we discuss some of the overarching factors that affect our Town finances and the proposed budget for the
upcoming fiscal year.
Budget Overview
The first two tables below are based on the Town Manager's Report in the FY2026 Recommended Budget and
Financing Plan (the "Brown Book"). They provide a comprehensive overview of the estimated revenue and
proposed budget for the coming fiscal year.
Revenue Source
FY2025
FY2026
$
%
% of
Tax Recap
Projected
Change
Change
Revenue
Property Tax Revenue
$
239,713,640
$ 249,002,213
$ 9,288,573
3.9%
79.7%
State Aid
$
20,451,907
$ 21,022,716
$ 570,809
2.8%
6.7%
Local Receipts
$
16,209,388
$ 17,039,873
$ 830,485
5.1%
5.5%
Available Funds
$
17,280,345
$ 25,611,684
$ 8,331,339
48.2%
8.2%
Revenue Offsets
$
(1,953,708)
$ (2,360,640)
$ (406,932)
20.8%
(0.8)%
Enterprise Receipts
$
1,873,817
$ 1,935,189
$ 61,372
3.3%
0.6%
Gross General Fund Revenues
$
293,575,389
$ 312,251,035
$ 18,675,646
6.4%
100.0%
Tax Levy Dedicated to CSF
$
6,563,050
$ 6,563,050
$ —
—%
2.1%
Less - Revenue Set -Aside for
$
21,529,442
$ 27,682,308
$ 6,152,866
28.6%
8.9%
Designated Expenses
Net General Fund Revenues
$
265,482,897
$ 278,005,678
$ 12,522,780
4.7%
89.0%
The gross General Fund Revenue for FY2026 is projected to increase by 6.4%. State aid is projected to grow by
only 2.8% this year. State aid in FY2025 grew by 4.2%, although it was originally projected to grow by only 1.6%.
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 that may be appropriated at a subsequent town meeting.
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
The following table summarizes the FY2026 recommended budget in comparison to FY2025.
Budget Program
FY2025
FY2026
$
%
Appropriated
Recommended
Change
Change
Education 1000
$
143,914,762
$ 149,639,645
$ 5,724,883
4.0%
Shared Expenses 2000
$
72,296,815
$ 77,370,757
$ 5,073,942
7.0%
Municipal Departments 3000-8000
$
49,271,323
$ 50,995,275
$ 1,723,953
3.5%
Subtotal - Operating Budget
$
265, 482, 900
$ 278, 005, 678
$ 12, 522, 778
4.7%
Cash Capital
$
16,875,899
$ 19,524,216
$ 2,648,317
15.7%
Other (Approp. to reserves, misc.)
$
11,216,591
$ 14,721,142
$ 3,504,551
31.2%
Total - General Fund
$
293,575,390
$ 312,251,035
$ 18,675,645
6.4%
Tax Levy Dedicated to the Capital Stabilization Fund (CSF)
The Town continues to follow a budget guideline recommended by the Town Manager's Financial Guideline
Working Group, making annual appropriations into the CSF. The size of the appropriation is based in part on the
cumulative new growth in the tax levy from developments approved by Town Meeting in accordance with a
Preliminary Site Development and Use Plan or in the Hartwell Ave. commercial district since FY2022, and will top
$6.5 million for FY2026. In addition, unused free cash may also be earmarked for the CSF. The CSF will play a
crucial role in mitigating debt service for the Lexington High School project.
ARPA Funds
Lexington was granted about $9.9 million in federal funds under the American Rescue Plan Act (ABPA). These
funds were intended to support the local businesses and residents who were most negatively affected by the
pandemic. The ARPA grant is administered by the Select Board and is not subject to appropriation by Town
Meeting. The Committee has discussed the use of ARPA funds with the Select Board and we have raised no
objections. All remaining ARPA funds have been committed and must be paid out no later than December 31,
2026.
Lexington High School Project
The School Building Committee selected the "Bloom" design in combination with a renovated and expanded field
house. Since that choice was made, that committee has been working with the architects and engineers to further
define the designs which will be used to make more detailed project cost estimates.
The Recommended Budget includes an estimated $654 million to reconstruct Lexington High School. The
appropriation for construction funding is expected to be requested at a special town meeting in the fall of 2025, and
will be contingent on a successful Proposition 2'/2 debt exclusion referendum.
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 comparable to those of the
prior year. Each PIR is a proposal from a Town department to upgrade or initiate 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 LPS 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.
4
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
For FY2026, a total of $2,057,838 in General Fund Program Improvements was requested by Senior Managers.
This total represents a combination of one-time and ongoing expenses. Due to limited capacity in the General Fund
for program improvements this year, the Town Manager has recommended only $20,000 in new ongoing expenses.
Below is a summary of recommended PIRs for the municipal budget using the General Fund. PIRs funded from
other sources, such as free cash and revolving funds, are not listed. PIRs for the LPS are covered in the school
budget.
The Department of Public Facilities proposed $20,000 for ongoing solar -power systems maintenance.
Recurring General Fund Expenses
Line Program Description Funding
2600 Facilities Solar Systems Maintenance $ 20,000
TOTAL Recurring Expenses $ 20,000
Two one-time projects are proposed to be funded with free cash. The first project would perform tree pruning and
removal for $200,000. The second project would analyze six Town -owned parking lots to assess their suitability for
solar canopies at some future date for $24,000.
One -Time General Fund Expenses
Line Program Description
Funding
3320 Facilities Tree Removal & Pruning
$ 200,000
8200 Sustainability & Resilience Solar Assessments
$ 24,000
TOTAL One -Time Expenses
$ 224,000
The Finance Department has proposed using $50,000 from the Water and Wastewater Enterprise Funds to study
water and sewer rates.
Finally, $80,000 from the Recreation Enterprise Fund was proposed for drainage improvements at the first and
second fairways of Pine Meadows Golf Course.
Appendix A in the Brown Book provides a complete list of submitted PIRs, including those not incorporated into
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. The Committee also reports orally to Town Meeting on each article. The oral report
summarizes the Committee's final recommendation.
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
Warrant Article Analysis and Recommendations
2025 ANNUAL TOWN MEETING
Article 4 Appropriate FY2026 Operating Budget
Funds Requested Funding Source Committee Recommendation
See below See below Approve (9-0)
The Operating Budget
category is divided into
parentheses).
Education (1000)
consists of three major categories: Education, Shared Expenses, and Municipal. Each
items that are described by a name and a corresbondiniz budizet line number (shown in
The Education budget funds Lexington Public Schools and the Town's annual assessment for Minuteman Regional
High School.
Lexington Public Schools (I 100)
Per the revised revenue allocation for the Lexington Public Schools (LPS) operating budget, an appropriation of
$146,033,333 is recommended for FY2026. The request represents an increase of 3.93% over the FY2025
appropriation.
The appropriation under this article does not include:
• The school portion of Shared Expenses (2000), below, including public facilities, employee and 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.
In those fiscal years when the requested budget is intended to support an increase in the total number of LPS
personnel, the revenue allocation process includes amounts for health insurance, Medicare, worker's compensation,
and other employee benefit costs associated with the new positions. Those funds are then appropriated in the Shared
Expenses of the operating budget. The requested LPS budget for FY2026 is intended to support 3.67 fewer full-
time -equivalent (FTE) positions than in the FY2025 adjusted budget. Hence the requested amount for this line item
reflects the full amount from the revenue allocation process.
Further information about the budget request may be found in the "Education" section of the Brown Book and in
the LPS Budget Book, both of which are referenced in the Preface.
A breakdown of this operating budget into salaries and wages, and expenses is shown below.
Category FY2025
Budget
FY2026
Recommended
$
Change
%
Change
Salaries & Wages $ 120,852,942
$ 127,183,816 $
6,330,874
5.2 %
Expenses $ 19,655,425
$ 18,849,517 $
(805,908)
(4.1)%
1100 Lexington Public Schools $ 140,508,367
$ 146,033,333 $
5,524,966
3.9 %
0
2025 ATM
School enrollments
APPROPRIATION CONMTTEE 26 MARCH 2025
The student population that the district serves includes the following categories:
• Pre -K in -district including special education and tuition -paying general education students;
• K-12 in -district general education and special education (including METCO);
• Pre -K-22 out -of -district placement.
The following table shows student enrollments for the past three years and the projected enrollment for the fall of
2024 (since we do not have a projection of pre -K enrollment, the entry with an asterisk is simply assumed to be the
same as on October 1, 2024). In the first year or two after the beginning of the pandemic, it was difficult to put
enrollment projections on a sound basis. However, as the following table shows, the student enrollment changes in
the last few years have been modest, which suggests that the projection for next year is unlikely to be very high or
low.
It should be noted that the preschool program at Lexington Children's Place is near capacity; in the past few years
several pre -K students have been sent out -of -district due to space limitations. LPS reports that while the tuition -
paying general education LCP slots are filled at present, there may be one or two special education slots that are
open. All four of the pre -K students who are presently in out -of -district placements are there because of their
intensive needs rather than space limitations.
Salaries and Wages
Salaries and wages are recommended to increase by $6,330,874 (5.24°/x) and make up 87% of the FY2026 request.
The net decrease of 3.67 full time equivalent (FTE) positions results from the elimination of 20.7 existing positions
and the creation of 0.75 positions in the base program, 12.48 positions due to enrollment changes, and 3.8 positions
to satisfy legal requirements or contractual obligations (all numbers are FTEs).
Salary and wage changes result from changes in the number of employees, step increases, cost of living adjustments
(COLA), and position reclassifications. The FY2026 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 on page 10 of the LPS Budget Book.
Expenses
Expenses make up 13% of the FY2026 budget request. Special education out -of -district tuition is the largest single
line in the expense budget (see the table on page 13 of the LPS Budget Book). Transportation costs for special
education students and the transportation costs for regular day students are the next two largest expense lines. After
these three expense lines, each of the others is much smaller, though there are many of them. We note that both this
and previous school appropriated budgets are based on projected net expenses after the application of revenue that
is not appropriated. Such revenue includes "Circuit Breaker" special education reimbursements and substantial
special education grant funds.
Funding Sources Not Subject To Appropriation
While a large fraction of the School Department's annual budget is funded by appropriations made by town
meeting, LPS also receives substantial funding from state, federal and other sources that are not subject to
appropriation and are therefore not included in the request under this article. The amounts of these funds vary year
to year. Detailed information on grant revenue may be found on pages 178-197 in the LPS Budget Book. The
following is a brief summary of grants anticipated for FY2026.
• Federal Grants — In previous budget years (FY2024 and FY2025), the Town and schools benefited from
Covid-19 related aid through the federal CARES and ARPA acts. In FY2026, no funding will be available
through those programs. The LPS Budget Book describes the federal grants anticipated to be received for
7
Oct. 1, 2022
Enrollment
Oct. 1, 2023
Enrollment
Oct. 1, 2024
Enrollment
Projected FY2026
Enrollment
Early Childhood
75
76
70
70*
Elementary
2,702
2,674
2,541
2,503
Middle School
1,765
1,737
1,732
1,741
High School
2,303
2,318
2,405
2,395
Total
6,845
6,805
6,748
6,709
It should be noted that the preschool program at Lexington Children's Place is near capacity; in the past few years
several pre -K students have been sent out -of -district due to space limitations. LPS reports that while the tuition -
paying general education LCP slots are filled at present, there may be one or two special education slots that are
open. All four of the pre -K students who are presently in out -of -district placements are there because of their
intensive needs rather than space limitations.
Salaries and Wages
Salaries and wages are recommended to increase by $6,330,874 (5.24°/x) and make up 87% of the FY2026 request.
The net decrease of 3.67 full time equivalent (FTE) positions results from the elimination of 20.7 existing positions
and the creation of 0.75 positions in the base program, 12.48 positions due to enrollment changes, and 3.8 positions
to satisfy legal requirements or contractual obligations (all numbers are FTEs).
Salary and wage changes result from changes in the number of employees, step increases, cost of living adjustments
(COLA), and position reclassifications. The FY2026 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 on page 10 of the LPS Budget Book.
Expenses
Expenses make up 13% of the FY2026 budget request. Special education out -of -district tuition is the largest single
line in the expense budget (see the table on page 13 of the LPS Budget Book). Transportation costs for special
education students and the transportation costs for regular day students are the next two largest expense lines. After
these three expense lines, each of the others is much smaller, though there are many of them. We note that both this
and previous school appropriated budgets are based on projected net expenses after the application of revenue that
is not appropriated. Such revenue includes "Circuit Breaker" special education reimbursements and substantial
special education grant funds.
Funding Sources Not Subject To Appropriation
While a large fraction of the School Department's annual budget is funded by appropriations made by town
meeting, LPS also receives substantial funding from state, federal and other sources that are not subject to
appropriation and are therefore not included in the request under this article. The amounts of these funds vary year
to year. Detailed information on grant revenue may be found on pages 178-197 in the LPS Budget Book. The
following is a brief summary of grants anticipated for FY2026.
• Federal Grants — In previous budget years (FY2024 and FY2025), the Town and schools benefited from
Covid-19 related aid through the federal CARES and ARPA acts. In FY2026, no funding will be available
through those programs. The LPS Budget Book describes the federal grants anticipated to be received for
7
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
FY2026. The total value of the federal grants is expected to be $2,437,696 including $100,000 in a
"Comprehensive School Health Services" grant which, in the LPS Budget Book, is stated to be federally
funded even though it is listed under state grants.
• State Grants — The School Department projects that it will receive $1,846,430 in FY2026 from the METCO
program, which represents no change from the amount budgeted for FY2025. 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 — We list Circuit Breaker funds here even though they are considered to
be reimbursements rather than grants. Circuit Breaker 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. A detailed exposition of the LPS Circuit Breaker funding may be found in the LPS Budget
Book on pages 36-39 and 86-89.
• Other Grants — The School Department also receives a number of modest -size grants from the Lexington
Education Foundation; the total amount of those expected to be received for FY2026 is $44,881.
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 on pages 39 and
207-208 of the LPS Budget Book.
Commentary
A decision by the Superintendent in December 2024 to impose a discretionary spending freeze is indicative of the
challenges to the LPS operating budget in the current fiscal year. The FY2026 operating budget appears to be
significantly tighter than the previous year's. The actions taken by the School Administration to fit the requested
appropriation to the amount allocated for the school budget are described in the Superintendent's Budget Message
published in the School Budget Book.
We note that the FY2026 projected reduction of 3.67 FTEs is relative to the current FY2025 (adjusted) number of
1259.55 FTEs. The original FY2025 budget projected 1232.47 FTEs, 27 fewer than the current number. A similar
statement applied to the FY2025 budget request, which projected a reduction of 8.61 FTEs relative to an adjusted
FY2024 number (1241.08) which was about 37 FTEs higher than that projected in the FY2024 approved budget
(1203.91). We understand that the additional staff were hired because of increased student needs for special
education services, English language support, mental health resources, and other specialized services, rather than
for discretionary program improvements.
One of the LPS budget reduction actions involves removing students from the "high-risk list." The "high-risk list"
refers to in -district SPED students who currently receive additional support within LPS, but whose level of need
means they are at risk of needing out -of -district placement, which would trigger a large increase in the cost of
service. This list was also trimmed in the FY2025 budget.
The reductions in the expense budget were limited to items judged to be discretionary rather than mandatory, and
they come at a time when the costs of products and services have been subject to significant inflationary increases.
As a result, LPS's ability to procure discretionary products and services will be more limited in the coming year.
Two reserves provide backup in the event of an unexpectedly large increase in special education costs. The Special
Education Stabilization Fund had a balance of $1,232,548 as of June 30, 2024. Transfers from this stabilization
fund require a two-thirds majority vote of Town meeting. The Special Education Reserve Fund has a balance of
about $750,000 and the balance carries over from year to year. The FY2026 recommended budget proposes to
appropriate an additional $700,000 into the reserve fund. Transfers from this reserve fund require approval from the
School Committee and Select Board, but not from Town Meeting.
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
Even if there is no need for a budget supplement during the course of the school year, the apparent reduction in
budgetary margin suggests that the turn back of unexpended funds at the end of the year will be limited. A smaller
turn back would, in turn, contribute less to the free cash that flows from the net results of the fiscal year.
Furthermore, we note that the plan to increase the use of Circuit Breaker and transportation revolving account funds
in FY2026 will not support LPS budgets for FY2027 and later years that fit within budget allocations.
Special Education Reserve Fund (1150)
The request under this article includes $700,000 to be transferred into the Special Education Reserve Fund, a
continuing balance account that has a balance at present of $750,000. Please see the discussion above under line
item 1100.
Regional High School (1200)
Lexington's FY2026 projected assessment for the Minuteman Regional High School (MRHS) of $3,606,312
represents an increase of $199,918 (5.9%) from FY2025. It follows on the prior year's decrease of 2.7% and an
increase of 8.6% from FY2023 to FY2024. Lexington's four year rolling average enrollment, the enrollment
number that our assessment is based on, grew from 74.75 to 78.5 students, and our assessment increase is higher
than the increase in the District budget because Lexington's four year rolling average enrollment growth is larger
than that of other in -district towns.
The District's Budget Overview
The Minuteman Regional High School (MRHS) Committee approved a FY2026 budget of $32,461,056, a 3.0%
increase over FY2025. The increase is the net effect of a 6.1% increase in the cost of operations and a 9.4%
decrease in the School Building Project debt costs. Debt service is 18% of the total budget, and salaries comprise
over 47.7% of the budget. Unlike the Lexington Public Schools operating budget, this budget includes debt service
for major capital projects.
According to FY2023 state data, MRHS continued to have the highest average per -pupil operating costs of any
Massachusetts regional vocational district (RVD). The cost drivers include a low FY2023 student/teacher ratio of
8.3 (the lowest, compared to an average of 10.67 for all RVDs), a very high enrollment rate in special education of
45.3% (the highest rate across all RVDs in the state, the next closest is 33.8%), and a high average teacher
compensation of $108,735 (the highest across all RVDs, compared to an overall average pay of $94,457).
District Developments
Current high school enrollment is 669 students, in a building with an 85% design capacity of 628 students. Of the
total, 632 students come from the nine member towns of the school district, and the remaining 37 students come
from out -of -district communities. While the number of applications for the incoming freshman class from in -district
towns has stabilized, in -district students seeking admission continue to exceed the available seats for the incoming
freshman class. The just enrolled freshman class was mostly made up of in -district applicants. with a small number
of out -of -district students included. Out -of -district enrollment in FY2026 is estimated to be 21, made up of just
currently enrolled students. Based on applications received to date, total school enrollment is expected to remain
stable in September 2025.
Enrollment at Minuteman Regional High School
Enrollment
FY 21
FY 22
FY 23
FY 24
FY 25
FY26 est.
In -district
467
538
610
649
632
647
Out -of -district
167
117
82
37
37
21
Total
634
655
692
686
669
668
The District School Committee reviewed space utilization and decided on limiting enrollment to accommodate
graduating classes of up to 175 students, for a maximum total of 700 students, to match school building and
learning space. The school moved their Animal Science Program to their 20 Mill St building, where the students
run a Puppy Daycare and Grooming service. The program also has partnerships with a Veterinary Clinic where
students train.
0
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
The District closed out their Massachusetts School Building Authority (MSBA) building project in August 2024.
They have received their final MSBA reimbursement and paid off the outstanding Bond Anticipation Note (BAN).
The District has increased the contribution to their Capital Stabilization Fund to $950,000 to be in a position to
maintain the potential use of their other buildings without incurring any additional debt, and to save for future
maintenance needs as the building ages.
The District continues to develop their partnership with Lesley University to build Phase 2 of the Athletic Facility.
Currently, Lesley uses the facility as its "home field", has first priority on booking the facility after the District uses
it, and pays the regular hourly rental fee for its use of the facility. Details have still not been settled on how Lesley
will participate in Phase 2. Phase 2 of the District's athletic facilities project includes a $15 million project with a
field house, six tennis courts, stadium seating (approx. 1,200 seats) with a press box, a building containing locker
rooms, bathrooms, a concession stand with a kitchen, storage spaces, and mechanical rooms. Phase 2 will be done
at no cost to the District members. Rental income will be posted to the district's Facilities Revolving Fund and the
revolving fund revenue will be used to pay the debt service and maintenance of the athletic facility.
The district's long-term capital and debt obligations last through FY2050 and are summarized in the chart below.
7,500,000
5,000,000
2,500,000
HUMS District Debt Service FY2024—FY2051
'rvi' �a'1 P"•�� UJ C7'v C"> �--; e^1 e+'? •-1- ua"a P"•�� UJ C7'v C"> �--; e^1 e+'? •-1- ua"a P"•�� UJ C7'v C"> .-�+
.:Ly .:Ly .:L.., .:L.., .:L.., .:L.., .:L.., .:L.., .:L.., .:Ly .:Ly .:L..a .:L.., .:L.., .:L.., .:L.., .:L.., .:L..a.:.L..a .r..,6:.r.., .:L.., .:L.., .:L.., .:L.., .:L.., .:L.., .:L..a
❑ School Bldg ❑ Athletic Facility 0 ESCO Lease
The obligations comprise 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 (for equipment in the prior school building) ended
in FY2025. As stated above, member towns will not be assessed for the Athletic Facility debt, as revenue from the
facility rentals will be used to pay that debt.
District Budget Details
The teachers' contract, settled in FY2024, specifying a 3.0% increase plus step and lane changes, amounts to an
increase of $361,828. This one item is 85% of the increase in the FY2026 school budget. One FTE, a special
education position, will be eliminated.
Heating costs increase by $50,000 due to a contracted rate increase. A new Pupil Transport contract is about to be
awarded and the budget increases to $212,500 to cover a 5% increase seen in the bids returned and to cover
increases in costs for unhoused, foster care, and special education students. While health insurance rates are
projected to rise, the health insurance budget is level funded because the actual FY2025 total premiums were lower
than budgeted. Cybersecurity enhancements are a major part of a $152,000 increase in the Building Technology
budget. A $605,000 payment (+$290,000) will be made toward the funding of the district's $23,685,851 Other
Post -Employment Benefits (OPEB) unfunded liability. This large increase in OPEB funding is possible due to the
expiration of the annual ESCO lease payment of $582,808. Also, this budget increases the Stabilization Fund
budget by $100,000.
10
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
Roughly 18.0% of the revenue in the MRHS FY2026 budget comes from a combination of state aid, reserves, and
fees shown in the table below, up from 15.3% in FY2025, mainly due to increased Chapter 70 aid and
transportation aid. In total, this non -assessment revenue increases by $992,882 in FY2026. Chapter 70 funds and
transportation aid are estimated based on the Governor's H-1 budget. MRHS's Chapter 70 aid is projected to
increase by 36.4% over the FY2025 budgeted amount due to increased per -student reimbursement. Transportation
Aid is expected to increase by 20.0%.
Revenue Sources
Enrollment Basis
FY2025 FY2026
FY2025
Assessment Components
FY2025 FY2026
FY2026
Change $
Chapter 70
$
2,998,383
$
3,094,404
$ 96,021
Transportation Aid
$
969,305
$
1,129,911
$ 160,606
Prior Year Tuition
$
818,824
$
809,464
$ (9,360)
Excess and Deficiency (E&D) Funds
$
650,000
$
650,000
$ —
Current Year Nonresident Capital Fee
$
277,084
$
255,341
$ (21,743)
Facilities Revolving Fund
$
113,700
$
115,200
$ 1,500
Assessments
$
25,689,923
$
26,406,736
$ 716,813
TOTAL
$
31,517,219
$
32,461,056
is 943,837
Lexington's Assessment
The revenue not raised through other sources, $26,406,736, will be raised through assessments on member towns.
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 Minimum Required Contribution (MRC) set annually by the DESE,
2. Transportation costs that are allocated based on the four-year average student enrollment,
3. An additional charge for operating costs in excess of the MRC and Transportation that is also allocated
based on the four-year average student enrollment,
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 three-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 50% of the most recent four-year
rolling average of student enrollment and 41 % of the State's "combined effort" factor as determined by the Chapter
70 formula.
A breakdown of the Town's FY2025 and FY2026 MRHS assessments is shown below. The projected assessment
for FY2026 is $3,606,312, an increase of $199,918 (5.9%) from the final FY2025 assessment.
Projected Lexington Assessment – Based on Unapproved House -1 Budget Bill
TOTAL ASSESSMENT I $ 3,406,3941 $ 3,606,3121
Annual % increase (decrease) -2.7% 5.9%
* 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 FY2026 operating cost assessment per student (excluding debt service) works out to $32,075 (based on
Lexington's October 2024 enrollment of 86 students), an increase from last year's per -student cost of $29,866 This
is comparable to the $32,075 average assessment for in -district students. Due to the assessment formula, during
periods of growing enrollment the assessed per -student amount lags behind short-term enrollment trends.
11
Enrollment Basis
FY2025 FY2026
Assessment Components
FY2025 FY2026
Per -Student
FY2026
State -Required Minimum
82
86
$
1,395,070 $
1,539,304
$ 1,539,304
Regular Day Students
74.75
78.5
$
968,913 $
1,056,777
$ 1,056,777
Transportation
74.75
78.5
$
85,012 $
101,000
$ 101,000
Total Operating Costs*
$
2,448,9951$
2,697,081
Debt Service
74.75
78.5
$
95713991$
909,231 $
909,231
TOTAL ASSESSMENT I $ 3,406,3941 $ 3,606,3121
Annual % increase (decrease) -2.7% 5.9%
* 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 FY2026 operating cost assessment per student (excluding debt service) works out to $32,075 (based on
Lexington's October 2024 enrollment of 86 students), an increase from last year's per -student cost of $29,866 This
is comparable to the $32,075 average assessment for in -district students. Due to the assessment formula, during
periods of growing enrollment the assessed per -student amount lags behind short-term enrollment trends.
11
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
Enrollment from other member towns can also affect this figure, as Lexington's percentage of the total member
enrollment changes.
Changes to the projected revenues and budgeted expenses in the MRHS budget may follow publication of this
report. It is possible that the assessment will be adjusted prior to being presented to Town Meeting.
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 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, 69.0% 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 of 19.6% supports facilities managed by the Public Facilities Department
for use by LPS and municipal departments. The third largest line item of 7.7% 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 FY2026, the appropriation for the Reserve Fund has been kept level from the prior year at $850,000. For a
longer-term history, see Brown Book Appendix C, "Summary of Reserve Fund Transfers."
Program
2000
Description
Amount
FY2025
Restated
FY2026
Budget
% of
Shared
Expenses
$
Change
Change
2100
Employee Benefits & Insurance
$
48,921,971
$ 53,368,693
69.0
% $
4,446,722
9.1 %
2200
Property & Liability Insurance
$
1,340,800
$ 1,477,696
1.9
% $
136,896
10.2 %
2300
Solar Producer Payments
$
390,000
$ 390,000
0.5
% $
%
%
2400
Within -Levy Debt Service
$
6,123,352
$ 5,983,068
7.7
% $
(140,284)
(2.3) %
2500
Reserve Fund
$
850,000
$ 850,000
1.1
% $
%
%
2600
Facilities
$
14,565,854
$ 15,189,172
19.6
% $
623,318
4.3 %
3450
Refuse & Recycle Collection
$
104,839
$ 112,128
0.1
% $
7,290
7.0 %
$
Total
$
72,296,816
$ 77,370,757
100.0 %$
5,073,941
7.0 %
The recommended total Shared Expenses budget for FY2026 is $77,370,757, representing an increase of
$5,073,941 or 7.0% from the restated amount for FY2025.
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 $53,368,693, a $4,446,722 (9.09°/x) increase over the FY2025 appropriation. The table below provides
a breakdown of the benefits budget by category.
Benefits Category
Amount
$ Change from
prior year
% Change from
prior year
percent of Total
Retirement
$
11,521,504
$
778,428
7.25
%
21.59
%
Medicare
$
2,420,282
$
115,252
5.00
%
4.54
%
Health Insurance
$
37,401,396
$
3,453,507
10.17
%
70.08
%
Dental Insurance
$
1,300,511
$
99,535
8.29
%
2.44
%
Life Insurance
$
25,000
$
%
0.05
%
Unemployment
$
200,000
$
%
0.37
%
Workers Compensation
$
500,000
$
%
0.94
%
Total
$
53,368,693
$
4,446,722
9.09 %
100%
12
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
All of the appropriation for retirement will go toward the contributory retirement (pension) program, i.e., into the
Retirement Fund; as of FY2025, there are no retirees who receive non-contributory retirement benefits. 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, $1,060,000 of new levy growth
from Takeda personal property taxes was dedicated to the Retirement Fund in FY2023. Based on the last actuarial
assumptions, the Retirement Board estimates that the Retirement Fund will be fully funded by 2030. A new
actuarial valuation will be performed as of January 1, 2025 and will be reflected in the FY2027 budget. For
FY2026, the recommended contributory retirement appropriation is increasing to $11,521,504. Of that amount,
$400,000 will be funded from Free Cash, as was done for FY2025. In the Retirement Board's present plan the
appropriations under this line item will increase by about 2.5% per year until 2030. Once the full 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 and continues to be a concern for the
Town. The FY2026 request for health insurance is $37,401,396, which represents a 10.17% increase over the
revised appropriation for FY2025. The FY2026 budget is based on a projected increase of 11% in health insurance
premiums across all plans at November 2024 enrollment levels, and the projected addition of eighty (80)
subscribers (new enrollees to health coverage, either from new retirees, active employees electing to begin or
resume coverage, and active employees switching from individual to family plans). The Town remains a member of
the State's Group Insurance Commission (GIC) health insurance program, which has helped slow the rate of cost
increases. The Town has an agreement with the Public Employment Committee (PEC) to remain in the GIC until
June 30, 2025. Since joining the GIC program in FY2016, the split of healthcare premiums between employer and
subscribers has been 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 FY2021.
Property & Liability Insurance (2200)
This line item covers the costs to insure all Town owned property and equipment. The total request for Property and
Liability Insurance is $1,477,696, a $136,896 (10.21°/x) increase over the FY2025 appropriation. There are two
elements under this program: (a) Property and Liability Insurance and (b) Uninsured Losses. For FY2026, the
Property and Liability Insurance premiums are projected to increase by $136,896 (12.00°/x). Note: a portion of the
Deputy Town Manager's salary is charged to this line item in recognition of the ongoing support provided.
Uninsured Losses is a continuing balance account and the recommendation is to continue with a level funding of
$200,000. As of June 30, 2024, the balance in this fund is $966,346 which is in line with staff recommendations.
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. Netting out expenses, the array is projected to
generate a positive contribution to the General Fund of $496,000.
Note that 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 requirements of the Massachusetts
Department of Revenue. The Brown Book tables on p. IV -11 present a more complete set of estimates for the
Town's solar installations, with projected net revenues of $700,400 in FY2026.
Debt Service (2400)
Line item 2400 covers annual payments for within -levy debt service. Gross within -levy debt service is projected to
be $5,983,068, a $140,284 (2.29°/x) decrease from the FY2025 appropriation. With the goal of saving interest costs,
the Town in recent years has reduced the issuance of new within -levy debt and increased the cash capital program.
The Town must also make annual payments for the debt service on excluded debt, i.e., debt that was excluded from
the limits of Proposition 2'/2 by town -wide referendum. The FY2026 gross exempt debt service is projected at
$16,290,441 which represents a decrease of $593,728 (3.52%) due to the declining interest payments of prior
issuances. The funds for these payments are not appropriated by Town Meeting but are set aside by the Select
13
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
Board to provide sufficient funding when it sets the property tax rate. The Town may draw on the Capital
Stabilization Fund (CSF) to mitigate the impact of excluded debt service, effectively providing tax relief by
lowering the total tax levy that must be collected. No appropriation from the CSF is planned for FY2026.
The Town continues to plan for a large-scale reconstruction of Lexington High School with an estimated $654
million in project costs. The appropriation for construction funding is expected at a special town meeting in the fall
of 2025, and will be contingent on a successful Proposition 2'/2 debt exclusion referendum, which is also expected
to occur in the fall of 2025. If approved, the Town expects that the Massachusetts School Building Authority
(MSBA) will contribute approximately $100 million to the project which will reduce the amount the Town must
borrow. Debt service will begin to be recognized in FY2027 and will increase in the following years, likely peaking
in FY2030—FY2032. The Town's fiscal policy guideline is to use the CSF and set-aside tax levies from new
development to partly offset exempt debt service beginning in FY2028.
Reserve Fund (2500)
The Reserve Fund is reserved for time -critical, extraordinary and unforeseen expenses. Once appropriated, it can be
used during the fiscal year without further approval from Town Meeting. Requests for transfers from this fund are
generally initiated by Town staff, LPS staff or the Select Board but require approval by the Appropriation
Committee.
The FY2026 requested appropriation for the Reserve Fund is $850,000.
At the end of the fiscal year any unused funds in the Reserve Fund flow to Free Cash.
Public Facilities (2600)
The Department of Public Facilities manages the operation, maintenance, utilities, and custodial services for
Lexington's municipal and school buildings. It also manages the maintenance of roofs, building envelopes, and all
building systems, including HVAC, as well as other priority facility -related projects. Finally, the Department
supports the planning of major renovations, building replacement, and new building construction. The FY2026
Public Facilities General Fund operating budget of $15,189,172 represents a $623,318 (4.28°/x) increase over
FY2025.
Municipal (3000-8000)
The municipal operating budget comprises all line items from 3000 to 8999. As shown in the table below, the
FY2026 recommended budget of $50,995,275 represents a $1,723,953 or 3.50% increase. The largest components
within the municipal budget are Public Safety, Dept. of Public Works, and General Government.
Municipal Budgets
FY2025
Restated
FY2026
Recommended
$
Change
%
Change
3000 Public Works
$
13,085,106
$ 13,971,800
$
886,693
6.78%
4000 Public Safety
$
18,826,223
$ 19,204,966
$
378,743
2.01%
5000 Culture & Recreation
$
3,460,565
$ 3,691,461
$
230,896
6.67%
6000 Human Services and Health
$
2,059,087
$ 2,264,621
$
205,534
9.98%
7000 Land Use, Housing & Development
$
2,442,606
$ 2,465,236
$
22,630
0.93%
8000 General Government
$
9,397,735
$ 9,397,192
$
(543)
(0.01)%
Total
$
49,271,323
$ 50,995,275
$ 1,723,953
3.50%
Public Works (3000)
This article covers the portions of the Public Works budget lines 3100-3500 that are supported through the General
Fund. Spending for Public Works operations in these areas is also covered by several revolving funds, with
authorization provided under Article 9. The budgets for the Water and Sewer Divisions, lines 3600 and 3700, which
are part of the respective enterprise funds, will be acted on under Article 5.
The recommended appropriation of $13,971,800 for Public Works under this article represents a 6.78% increase
over FY2025. Of the total, $12,664,887 is covered by the tax levy, $652,612 is covered by payments from the
14
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
enterprise funds for services rendered, and the remainder, i.e., about $650,000, comes from other sources, primarily
fees and the Cemetery Trust Fund. About 40% of the recommended budget is for compensation, i.e., salaries and
wages, while the remaining 60% is for expenses. The FY2026 request includes funding a one-time expense from
Free Cash for additional work to prune or remove trees on Town property including street trees.
The net increase in compensation of $192,345 (3.67%) from FY2025 is attributable to the cost of contractually
obligated step increases and cost of living adjustments.
The net increase in expenses is $694,348 (8.85°/x) from FY2025
Public Safety (4000)
Public Safety covers Law Enforcement (4100) and Fire and Rescue (4200). Of the total recommended appropriation
of $19,204,966, about 51 % is for Law Enforcement and 49% for Fire and Rescue.
The recommended FY2026 appropriation for Law Enforcement is $9,745,978 which is a 2.20% increase over the
FY2025 budget. About 87% of the budget is for compensation and approximately 13% is for expenses. The net
increase in compensation of $131,832 (1.58°/x) meets contractually obligated step increases, cost of living
adjustments, stipend increases, and education incentives for contracts that recently settled. The net increase in
expenses of $77,823 (6.47°/x) reflects current prices of equipment, contract services, and vehicle replacement.
The recommended FY2026 appropriation for Fire and Rescue is $9,458,988, which is a 1.82% increase over the
FY2025 budget. About 90% of the budget is for compensation while approximately 10% is for expenses. The net
increase in compensation is $77,689 (0.92°/x). The recommended budget for expenses has increased by $91,399
(10.30°/x) due to anticipated price increases in contract services, gear and equipment, equipment repair, and EMS
supplies.
Culture and Recreation (5000)
Culture and Recreation covers Cary Memorial Library and Recreation and Community Programs. The FY2026
recommended appropriation of $3,691,461 represents a 6.67% increase over the FY2025 budget. About 80% of the
recommended budget is for compensation while the remaining 20% is for expenses. 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 mainly by the Recreation Enterprise Fund and, to a lesser extent, by the tax levy.
Human Services and Health (6000)
The recommended appropriation for Human Services and Health of $2,264,621 represents a 9.98% increase from
the FY2025 budget. The Human Services General Fund appropriation request of $1,703,597 reflects an increase of
$189,658 (12.53°/x). Of the total, 44% is for compensation and 56% is for expenses. In addition to this
appropriation, Human Services is funded by a Massachusetts Executive Office of Aging and Independence (EOAI)
grant, Veteran's Services Regional Funding, an MBTA Suburban Transportation grant, and the Senior Services
Revolving Fund (see Article 9).
The net increase in compensation for Human Services is $2,668 (0.36°/x). The net increase in expenses of $186,990
(24.50°/x) reflects the new contract with the Town's current vendor for Lexpress. The contract has been extended
through June 30, 2030. In FY2025, the Town was awarded a $200,000 Community Transit grant which offset part
of the funding for Lexpress from the General Fund. As of the date of publication of this report, we are not aware
that this grant will be renewed for FY2026.
In FY2024, the Health Department was moved from the Land Use, Health, and Development Department to a
stand-alone department alongside Human Services.
The recommended appropriation for Health of $561,024 represents a 2.91% increase from the FY2025 budget.
About 84% of the recommended budget is for compensation while 16% is for expenses. The increase in
compensation of $15,426 (3.37%) is due to the cost of contractually obligated step increases and cost of living
adjustments.
The Health Department's work is also funded through the Health Programs Revolving Fund and its regulatory work
is partly funded through the Lab Inspections Revolving Fund.
15
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
Land Use, Housing, & Development (7000)
The recommended appropriation of $2,465,236 represents a 0.93% increase over the FY2025 budget. About 83% of
the recommended budget is for compensation while 17% is for expenses. The net decrease in compensation of
$20,810 (1.01°/x) is driven by staff turnover offsetting contractual step changes and cost of living adjustments. The
net increase in expenses of $43,440 (11.23°/x) is due to an increase in contract expenses for regional housing
services. In addition to this appropriation, Land Use, Housing and Development is funded by the Tourism,
Residential Engineering Review, and Wetland Protection Revolving Funds detailed under Article 9.
General Government (8000)
General Government covers six different budgeting units. The recommended appropriation of $9,397,192
represents a (0.01)% decrease from the FY2025 budget.
Program 8000 General Government
FY2025
Restated
FY2026
Budgeted
$
Change
%
Change
8100 Select Board
$
1,388,634
$
1,439,529
$ 50,895
3.67%
8200 Town Manager
$
1,959,019
$
1,609,722
$ (349,298)
(17.83)%
8300 Town Committees
$
72,910
$
73,120
$ 210
0.29%
8400 Finance
$
2,172,178
$
2,206,218
$ 34,040
1.57%
8500 Town Clerk
$
680,819
$
692,479
$ 11,660
1.71%
8600 Innovation & Technology
$
3,124,175
$
3,376,124
$ 251,949
8.06%
Total
$
9,397,735
$
9,397,192
$ (543)
(0.01)%
The Select Board budget increase is primarily due to increased expenses for LexMedia, the Town's public access
television provider as well as an increase of $3,000 in the contracted expense for the Town's annual financial audit.
The FY2026 recommended budget for the Town's annual contract with LexMedia for broadcasting public meetings
and events is $764,757, which is a $49,533 or 6.93% increase from FY2025.
Line 8200 Town Manager reflects a 17.83% decrease primarily driven by reduced expenses of $140,152 (26.20%)
due to a one-time PIR and the police/fire staffing study that was appropriated in the FY2025 budget. Compensation
has increased by $85,034 (7.53%) which is due to annual step increases and the new town manager contract. Note
that the Salary Adjustment Account (Line 8230) has $0 appropriated for FY2026. 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 to certain employees at retirement. Staff believe the current
balance of the Salary Adjustment Account is sufficient to cover any adjustments that may be needed in FY2026.
Line 8600 Innovation & Technology has an increase of $251,949 or 8.06% to cover a number of changes in
technology purchases. Please see the Brown Book (p. X-24) for details.
16
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
Article 5 Appropriate FY2026 Enterprise Funds Budgets
Funds Requested Funding Source Committee Recommendation
$11,838,918 Water EF
$12,145,735 Wastewater EF
$3,291,976 Recreation EF Approve (9-0)
$254,213 Tax Levy
The current appropriation requests and requests from the past two years are summarized in the following table.
Enterprise Fund FY2024 FY2025 FY2026
Appropriated Appropriated Requested
5(a) Water
Personal Services
$892,639
$971,418
$1,074,990
Expenses
$577,500
$614,400
$675,100
Debt Service
$2,375,661
$1,368,116
$1,438,006
MWRA Assessment
$8,832,742
$8,432,204
$8,650,822
Total Water Enterprise Fund
$12,678,542
$11,386,138
$11,838,918
5(b) Wastewater
Personal Services
$421,922
$464,858
$497,353
Expenses
$517,400
$536,400
$617,100
Debt Service
$1,406,381
$1,569,746
$1,672,086
MWRA Assessment
$8,861,891
$9,153,352
$9,359,196
Total Wastewater Enterprise Fund
$11,207,594
$11,724,356
$12,145,735
5(c) Recreation and Community Programs
Personal Services
$1,682,935
$1,824,916
$1,875,354
Expenses
$1,588,814
$1,579,751
$1,670,835
Total Recreation and Community
$3,271,749
$3,404,667
$3,546,189
Programs Enterprise Fund
This article addresses the operating budget 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 it 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
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, if such
funding is not available, from the Recreation Fund's retained earnings or the General Fund.
Water and Wastewater Enterprise Funds
Most of the costs in the water and wastewater operating budgets are appropriated under this article, per the table
above. Certain other recurring costs, however — including "indirect expenses" (for support services provided by
other Town departments), costs for continuous system capital improvements to be raised in the rates, and
contributions to the post -employment health benefits (OPEB) fund — are addressed in other articles. For
completeness, the table below summarizes all of the line items which comprise the annual water and wastewater
operating budget, showing changes from the prior fiscal year and the articles under which each item is appropriated.
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).
17
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
Further details may be found in the Brown Book, pp. V-29, 33. Including these changes more accurately reflects the
actual year -over -year increases in the water and wastewater budgets.Z
Water Enterprise Fund
FY2025
Appropriated
FY2026
Requested
FY2026
Requested
$
Change
%
Change
Compensation
$
971,418
$
1,074,990
$ 103,572
10.66 %
Expenses
$
614,400
$
675,100
$ 60,700
9.88 %
Debt Service
$
1,368,116
$
1,438,006
$ 69,890
5.11 %
MWRA Assessment
$
8,432,204
$
8,650,822
$ 218,618
2.59 %
Total Requested in Article 5
$
11,386,138
$
11,838,918
$ 452,780
3.98 %
Indirect Expenses (Article 4)
$
968,301
$
1,002,244
$ 33,943
3.51 %
Cash Capital (Article 13)
$
1,000,000
$
1,200,000
$ 200,000
20.00 %
OPEB Contribution (Article 17)
$
3,045
$
3,045
$
%
Total Water Enterprise
$
13,357,484
$
14,044,207
$ 686,723
5.14 %
Wastewater Enterprise Fund
FY2025
Appropriated
FY2026
Requested
$
Change
%
Change
Compensation
$
464,858 $
497,353 $
32,495
6.99%
Expenses
$
536,400 $
617,100 $
80,700
15.04%
Debt Service
$
1,569,746 $
1,672,086 $
102,340
6.52%
MWRA Assessment
$
9,153,352 $
9,359,196 $
205,844
2.25%
Total Requested in Article 5
$
11,724,356 $
12,145,735 $
421,379
3.59%
Indirect Expenses (Article 4)
$
596,525 $
614,684 $
18,159
3.04%
Cash Capital (Article 14)
$
500,000 $
600,000 $
100,000
20.00%
OPEB Contribution (Article 17)
$
609 $
609 $
%
Total Wastewater Enterprise
$
12,821,490 $
13,361,028 $
539,538
4.21%
On a combined basis, these "adjusted" water and wastewater budgets are increasing by 4.68%. The most significant
components of the increase are addressed briefly below.
MWRA 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 about 65% of the total combined
budget. As shown in the table immediately above, those assessments are changing by relatively modest amounts
this year, for a combined increase of 2.41%. The Town is assessed a share of the MWRA's total FY2026 water
budget based on its proportionate usage in the most recent full calendar year (CY2024) relative to other towns in
the MWRA community. (The wastewater share formula is similar but a bit more complicated.) Lexington's system
share in calendar year 2024 was slightly smaller than it was the previous year.
Transition to Cash Capital. Beginning in FY2021, 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"). The cash component is treated as an ongoing operational cost at
rate -setting, much like debt service, even though applied to capital investment and appropriated in Articles 13 and
14. See Brown Book, pp. V-28, 33. 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-28 and V-32. The transition is now in its sixth year. 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. Once it is completed, the issuance of debt by the
water and wastewater enterprise funds should be necessary only for major, one-time projects.
2 This table differs from the Brown Book by replacing the FY2025 debt service with revised appropriations made at the fall
STM.
18
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
Water and Wastewater Rate -Setting Issues
Because the operating budgets of the water and wastewater enterprises approved at this annual town meeting will
ultimately form the basis of the FY2026 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
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
FY2011 through FY2024, combined rate increases fluctuated between -1.9% and 12.6% for an average annual rate
increase of 4.0%. If there are no significant changes in projected usage in FY2025, this fall's rate increase should be
about 5%, in the middle of this range. 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 FY2026.
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 FY2026.
Retained Earnings: Appropriations and Year -End Balances
Annual Town Meeting
2022
2023
2024
2025
Water
Starting Balance (I)
$
3,537,851
$
769,999
$
3,216,062
$
2,813,094
Appropriation for Rate Relief
—
—
—
—
Appropriation for Capital (2)
$
1,820,000
$
575,000
$
1,488,900
$
1,434,440
Projected End Balance (3)
$
1,717,851
$
194,999
$
1,727,162
$
1,378,654
Wastewater
Starting Balance (I)
$
2,565,157
$
1,807,854
$
1,625,447
$
1,617,019
Appropriation for Rate Relief
—
—
—
—
Appropriation for Capital (2)
$
1,365,000
$
715,404
$
310,000
$
809,931
Projected End Balance (3)
$
1,187,665
$
1,092,450
$
1,315,447
$
807,088
(1) Certified retained earnings as of the end of the prior fiscal year (for this year, 6/30/2024) and available for
appropriation at this annual town meeting
(2) Proposed appropriations for capital projects for the next fiscal year (FY2026 at this ATM). Note that such
appropriations must be deducted as a liability from the projected retained earnings as of the end of the current
fiscal year even though the funds appropriated will not be spent until the following year.
(3) 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).
19
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
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 entirely 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 comprises four divisions: Recreation, Pine Meadows Golf Club, Community Center, and the
Administrative Division.
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 $254,213 is requested this year, a modest increase over ten years.
The proposed appropriations for FY2026, and changes from the prior fiscal year, are shown in the table below. The
total FY2026 budget is about $150,000, or 4%, more than the appropriated FY2025 budget. The main contributor to
the change is a 5.8% increase in expenses.
Recreation and
Community Programs
FY2024
Actual
FY2025 FY2026
Approp. Requested
$
Change
%
Change
Compensation
$
1,530,004 $
1,824,916 $
1,875,354 $
50,438
2.76%
Expenses
$
1,359,301 $
1,579,751 $
1,670,835 $
91,084
5.77%
Debt Service
-
-
- $
—
Total Requested in Article 5
$2,889,305
$3,404,667
$3,546,189 $
141,522
4.16%
Indirect Expenses (Article 4)
$
294,687
$308,991 $
318,261 $
9,270
3.00%
Total
$
3,183,992 $
3,713,658 $
3,864,450 $
150,792
4.06%
The sources of funds to support the FY2026 operating budget of the Department, including the tax levy, are as
follows:
Funding Source
Amount
Recreation retained earnings
$
455,000
Recreation user charges
$
1,663,737
Community Center user charges
$
369,000
Pine Meadows Golf Club user charges
$
1,100,000
Therapeutic Recreation user charges
$
22,500
Tax levy
$
254,213
Recreation and Therapeutic Recreation user charges are projected to be flat, but golf user charges are projected to
increase by 9.4%, reflecting strong demand for golfing recreation, and Community Center charges are expected to
increase by 12%.
The projected distribution of expenses in FY2026 among the four divisions of the department is as follows:
Expense
Amount
Recreation
$
1,417,362
Pine Meadows Golf Club
$
719,100
Community Center
$
683,156
Administration
$
582,106
Therapeutic Recreation
$
144,465
Indirect Expenses
$
318,261
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
20
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
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.
Retained Earnings. The Recreation Fund's retained earnings, certified as of the end of FY2024 (6/30/24), are
$2,201,101, compared with $1,913,671 as of the end of FY2023. As is customary, $375,000 of the retained
earnings are requested for appropriation under this article to fund the operating budget, in addition to a one-time
program improvement for $80,000 to support drainage improvements at Pine Meadows Golf Club. The FY2026
budget also reflects a transfer of $100,000 from the Recreation Enterprise under Article 4 (Operating Budget) to
partly support debt service for capital improvements to recreation facilities that were approved in the General Fund
in prior years. Lastly, $70,000 is requested for appropriation under Article 11 (Recreation Capital) to fund ongoing
Pine Meadows equipment replacements.
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 $3,547,904 are sought under Article 10, consist of Lincoln Field improvements,
replacement of the Center Playground, and construction of fields at the old Harrington School. 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. This year, the portion of the Lincoln Field improvements which relate to the
installation of artificial turf, and thus are not CPA -eligible, are proposed for funding by Free Cash. 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 $70,000 in retained earnings for
course equipment.
Looking Forward. Concerns were expressed in previous years that additional tax levy support, beyond that required
for the operations of the Community Center, might be required due to the stress placed on the Recreation Enterprise
Fund by closures required during the pandemic. With a strong recovery from the pandemic, however, these
concerns have largely been alleviated and changes in the funding of the Town's recreational programs and services
through the Recreation Enterprise fund are not actively being considered at this time.
Article 6 Amend FY2025 Operating, Enterprise and CPA Budgets
Funds Requested Funding Source Committee Recommendation
$60,000 Recreation EF RE Approve (9-0)
This article allows needed revisions to current year operating, enterprise, and CPA budgets.
This article requests the transfer of $60,000 from the Recreation Enterprise Fund retained earnings to the Reserve
Fund. In August 2024, a Reserve Fund transfer in the amount of $60,000 to the Recreation Enterprise Fund was
used for repairs to irrigation equipment at the Pine Meadows Golf Course. The situation was regarded as an
emergency because the equipment failures impacted the ability to operate the golf course.
Two parts of the irrigation system needed repairs. The first was the variable frequency drive (VFD) that controls
two 25 hp horizontal pumps that pump water from the upper pond to the lower pond. Water from the lower pond
then supports the irrigation needs of the course. The VFD subsystem has needed maintenance and repairs since its
installation in 1996 and was in need of full replacement. The second part involved two wells located along the
second fairway. The wells collect ground water which is used to support the irrigation of the course. The wells had
failed and needed to be rebuilt.
This request will in effect shift the full cost of those repairs back to the Recreation Enterprise Fund. It will increase
the total FY2025 appropriation to the Reserve Fund to $910,000, while restoring the current balance of the Reserve
Fund to $850,000, as it was originally appropriated for FY2025.
21
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
Article 7 Sustainable Projects
Funds Requested Funding Source Committee Recommendation
$24,000 Free Cash Approve (9-0)
This is a program to fund sustainable capital initiatives including solar panels, battery storage, electric vehicle (EV)
charging equipment and related infrastructure. This program may also include the study, design and construction of
rooftop solar or solar canopies, and other projects identified by the Sustainability and Resilience Officer to move
the Town towards achieving its sustainability goals.
The FY2026 request of $24,000 would be used to assess the technical and economic feasibility of installing solar
power canopies at six town parking lots where repaving will be needed in the next few years. This will facilitate
coordination of the use of lots for parking and for solar power generation, and could help, e.g., avoid a situation
where new pavement is laid down in a parking configuration that is not conducive to or compatible with the
installation of posts that would support solar canopies. The assessment would also consider the potential
construction of taller buildings around each of the six lots and how such buildings, if any, would cast shadows on
solar canopies in the lots.
Article 8 Appropriate Funding to Construct a Playground in Fletcher
Park (Citizen Petition)
Funds Requested Funding Source Committee Recommendation
None N/A IP (9-0)
This article is expected to be indefinitely postponed.
Article 9 Establish and Continue Departmental Revolving Funds
Funds Requested Funding Source Committee Recommendation
See below See below Approve (9-0)
This article seeks reauthorization of all existing revolving funds. 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 funds 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 FY2024 and the first half of FY2025 can be found in Appendix C of the Brown
Book.
22
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
Program or Purpose for Revolving Funds
FY2026
Authorization
School Bus Transportation
$ 1,300,000
Building Rental
$ 648,000
Lexington Tree Fund
$ 150,000
DPW Burial Containers
$ 60,000
DPW Compost Operations
$ 955,000
Minuteman Household Hazardous Waste Program
$ 250,000
Senior Services
$ 75,000
Residential Engineering Review
$ 57,600
Health Programs
$ 110,000
Lab Animal Permits
$ 80,000
Tourism Revolving Fund
$ 562,000
Refuse and Recycling Collection
$ —
The Refuse and Recycling Collection Revolving Fund was created two years ago to receive fees for certain types of
refuse collection, but the Select Board has not established any new fees. This fund is not used as a revenue source
in the FY2026 budget.
Article 10 Appropriate for the FY2026 Community Preservation
Committee Operating Budget and CPA Projects
Funds Requested Funding Source Committee Recommendation
See below CPA, GF, Approve (9-0)
GF Debt
Community Preservation Act (CPA) projects are funded using the Community Preservation Fund (CPF), which is
managed as four separate sub -funds for Affordable Housing, Open Space, 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 17 years
since the Town enacted the CPA, the state match has averaged out to roughly 36%, and only once met the full
100% allowed by the Community Preservation Act. Fiscal pressures have resulted in a disappointingly low State
match for FY2025 with an even lower projection for FY2026.
The funds available for appropriation in the CPF includes an anticipated carry -forward balance of $2,923,289 from
FY2025. The local surcharge revenue and an estimated FY2026 state match of 15% results in budgeted revenue of
$8,290,000, and total available funds of $11,213,289. The CPF appropriations requested in this article total
$7,645,844, of which $150,000 is for administrative expenses, which would leave a balance of $3,567,445. This
conforms to CPC policy to maintain a balance of around $2 million or more as a reserve for unanticipated requests
during the year.
23
2025 ATM
4,000,000
2,000,000
0
APPROPRIATION CONMTTEE
Annual CPA Revenue & State Matching Rate
26 MARCH 2025
100%
75%
50%
25%
0%
❑ Local Surcharge State Match Match°/o
Lexington has received $1,234,313 in matching funds in FY2025, an 18.73% match from the state.
Funding requests for the FY2026 CPA projects are detailed below.
Article
Item
Funding
Funding Source
___ ,,,,,,___
Request ,,,,,,___
--,""I'll".___...
10(a)
Cotton Farm/Community Center Connector
$
300,000
CPA
10(b)
Simond's Brook Conservation Area Trail Design & Engineering
$
75,000
CPA
10(c)
Document Conservation
$
21,000
CPA
10(d)
Hancock -Clarke House Roof Replacement
$
57,800
CPA
10(e)
Affordable Housing Trust Funding
$
3,000,000
CPA
10(f)
LexHAB Affordable Housing Support, Restoration, Preservation,
$
494,140
CPA
and Decarbonization
10(g)
Park and Playground Improvements - Center Playground
$
1,490,000
CPA
10(h)
Park Improvements - Athletic Fields - Harrington
$
1,197,904
CPA
$
860,000
CPA
10(i)
Lincoln Park Field Improvements 43
$
1,090,000
General Fund
$
1,950,000
Total I0(i)
100)
Administrative Budget
$
150,000
CPA
10(a) Cotton Farm/Community Center Connector
This request is to appropriate $300,000 to fund the Surveying, Engineering, and Design plans for a trail connection
(Universally Accessible (UA) if feasible) between the Cotton Farm and the Lexington Community Center. This trail
addition would add approximately 0.4 miles to the existing trail system within Lexington. The timeframe of this
project would be for Design and Engineering Plans and Bid Documents to be prepared in FY26, with Phase II
Construction Fund Request in FY28.
10(b) Simond's Brook Conservation Area Trail Design & Engineering
This request is for $75,000 to fund the Surveying, Engineering and Design Plans for a new trail connection in the
Simond's Brook Conservation Area between the end of Rangeway Street and an existing trail entering from Grove
Street, in order to close and restore an existing section of environmentally sensitive wetlands trail currently in very
poor condition. The trail will also accommodate a new ACROSS Lexington route in the northwest section of
Lexington. The project requires a future second phase for construction in FY2027 at the estimated cost of $172,500.
24
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
10(c) Document Conservation
This request is for $21,000 for the continuing conservation and preservation of historic municipal documents and
records. This project will allow for the conservation and preservation of a Marriage Intention Ledger from 1909-
1913, a Marriage Intention Ledger from 1913-1918, an Accounting Journal Cash Book from 1895-1896, Sanborn
maps of Lexington from 1935, a Town Treasurer Accounting Ledger from 1880-1889, an Expenses Accounting
Journal from 1885-1891, and a Cash Book from 1882-1887. These documents have been determined to be
"Historic Resources" by the Lexington Historical Commission. Once preserved, the historic paper documents and
records will be digitized and entered into the Town's digital archives. The documents will be sent to the Northeast
Document Conservation Center in North Andover for preservation and digitization.
10(d) Hancock -Clarke House Roof Replacement
This request is for $57,800 to replace the roof of the historic Hancock -Clarke House, which is owned and managed
by Lexington History Museums (formerly the Lexington Historical Society). The current roof shingles are in a state
of decay, causing moisture and leaks that threaten both the structural integrity of the building and the historical
artifacts it contains. The project will replace the existing pine shingles with more durable cedar shingles.
10(e) Affordable Housing Trust Funding
The Affordable Housing Trust (AHT) seeks $3,000,000 to fund the trust. Established by Town Meeting at Special
Town Meeting 2022-3, the AHT acts as a funding entity for the Town's affordable housing needs. This money
would be added to the trust's current fund balance of $3,784,463 (as of 1/31/25) and support its goal of creating
cost-effective affordable units and increasing the diversity of housing choices in Lexington.
The AHT has received funding from multiple sources. Its CPA funding includes; $1,500,000 in FY2024, and
$3,200,000 in FY2025. In FY2024 the balance of the Affordable Housing Stabilization Fund (AHSF) was
transferred to the AHT. Another transfer from the AHSF is requested this year under Article 19. The AHSF
currently collects revenue from Short Term Rental fees.
Their FY2026 revenue plan includes, in addition to the $3,000,000 of CPA funds, about $130,000 of the
Brookhaven mitigation payment and $14,003 from Short Term Rental fees. They are also pursuing State and
Federal grants. Their financial plan and 5 -year Capital Plan can be found on the Brown Book Appendix C pages
C-4 & C-5.
As of press time their FY2025 commitments are an agreement to offer a $500,000 loan to Causeway Development,
the developer of Parcel 68-44 (intersection of North St and Lowell St), and $20,000 budgeted for administrative
expenses. The loan offer is as part of the financing package to create 100% affordable housing and was
incorporated into the Land Disposition Agreement. If the developer chooses to exercise this option, would close at
the completion of construction, so this loan will remain pending for a few years.
Potential AHT FY2026 projects include: supporting LexHAB acquisition of properties on the open market;
subsidizing construction of affordable housing at 116 Vine St; creating a resident support subsidy; and subsidies to
increase affordable housing units in future MBTA Communities or SRD zoning developments. Their FY2026
budget also shows an increase of administrative expenses to $100,000, partially due to increased legal expenses.
The state requires the Town to set aside at least 10% of total CPA revenue for Community Housing. Over the full
life of the CPA, support for Community Housing in Lexington has accounted for 16.02% of all spending. Over the
past 10 years, the ratio of CPA support for Community Housing increased only slightly, reaching 18.96% of a total
$53.8 million in CPA appropriations. Over the past five years, Community Housing funding was 18.4% of the $36
million in spending. During the same 5 -year period, 36.88% of appropriated CPA funds went to Recreation
facilities and 28.22% funded Historic Resources, primarily for the rehabilitation of municipal facilities. The AHT
expects to continue making regular annual CPA requests.
This request is consistent with the presentations to the Town Meeting during debate of the AHT's approval.
Additionally, their goals, restrictions, and operating methods are as presented. This request is on a scale of what
could be anticipated considering the low level of past affordable housing spending and the goals that Town Meeting
supported when approving the Trust.
10(f) LexHAB Affordable Housing Support, Restoration, Preservation, and Decarbonization
This appropriation requests $494,140 to support LexHAB's affordable housing. LexHAB, originally established as
a quasi -municipal organization, became an independent non-profit organization on September 4, 2024 with the
25
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
same mission to provide affordable housing in Lexington. This change in organizational structure now means that
this appropriation would grant CPA funds to a private organization, similar to how it has funded Lexington
Historical Society projects, which is an allowable use of CPA funds,
This CPA request has four components:
• Preservation, rehabilitation and restoration for 1 CPA -funded unit
• Preservation for 52 non -CPA -funded units
• Decarbonization initiatives for 4 CPA -funded units
• A subsidy for the rents of LexHAB's lowest income tenants
LexHAB is looking to expend a total of $1,0695,140 for these projects in FY2026, combining this appropriation
with funds from Mass Save, a MA CEC grant and LexHAB's reserves.
This request will use $221,000 to fund capital projects like those funded in prior years with CPA money. CPA
funds of $18,000 will be used for preservation, rehabilitation, and restoration of 1 CPA -funded unit.3 CPA funds of
$203,000 will be used for preservation of 52 non -CPA funded units.4 The work on both these types of unit includes
exterior painting; exterior and interior door, roof, driveway, exterior stairs, deck and retaining wall replacement;
tree work; regrading and landscaping; and installation of gutter guards.
CPA funds of $63,000 will fund decarbonization by replacing aged HVAC heat pumps on 3 units and converting
gas to electric heating in 1 units.5
This year's rent subsidy request, using rental income shortfalls from 2024, is for $139,140, up from last year's
request of $115,740. The shortfall occurs because LexHAB caps a tenant's rent at 30% of that tenant's income.
LexHAB also has a minimum rent policy where incoming tenants will only be accepted if they can afford to pay a
rent that is at least 30% of the Area Median Income (AMI). However, tenants who were residents prior to the
policy's creation were granted an exception and continue to pay rent capped at 30% of their income, even if it is
below 30% AMI. LexHAB seeks CPA funds to fill the gap between the rents that "extremely low income" tenants
pay and their prescribed minimum.
Most other housing organizations that cap rent payments based on tenant income also receive outside subsidies to
their operating budgets, but LexHAB does not currently receive any outside subsidies. LexHAB's change in
organizational status to a private non-profit organization will now allow them to access state and federal subsidies.
We look forward to seeing LexHAB obtain these other subsidies. Until then, LexHAB's many tenants who qualify
as "extremely low income" create a revenue shortfall that would threaten the funding used for regular maintenance
and repairs in LexHAB's housing stock.
This request for the CPA to subsidize LexHAB will recur annually. The size of the request will be based on current
rent shortfalls, less any outside funding obtained.
10(g) Park and Playground Improvements - Center Playground
This request is for $1,490,000 to update and replace the playground equipment and install safety surfacing at the
Center Playground at the Center Recreation Complex. The Center Playground is one of two community
playgrounds in Lexington. The new playground will feature poured -in-place safety surfacing (as compared to the
engineered wood fiber that is there currently) and will provide universal access to the play components and
elements to ensure the playground is welcoming and accessible to individuals of all ages and abilities. Once the
new playground has been installed, an inspection by an independent, third -party company will be completed. The
playground equipment at the Center Playground was last replaced in 2006. Play structures typically have a life
cycle of 15-20 years based on use.
10(h) Park Improvements - Athletic Fields - Harrington
This request is for $1,197,904 to fund the design work, engineering and initial site work for the construction of new
athletic fields at 146 Maple Street, the current location of the LPS Central Office Building. In the 2021-2022
3 The one CPA funded unit: 241 Grove St.
4 The 19 non -CPA funded units are: 8 Emerald St; 11 Fairview Ave; 22 Hamblen St; 165 Waltham St; Garfield Common; 14
Woodland Rd; and gutter guards at 33 single family and 2 multifamily units.
5 Gas to electric conversion at 5 Keeler Farm Way and 3 HVAC heat pump replacements at Muzzey Condominiums.
26
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
Comprehensive Study of Athletic & Outdoor Recreation Facilities, an annual deficiency of 6,000 hours between
available field hours as compared to the field hours needed was identified. This money is the first phase of funding
for a project that depending on design, could exceed $6 million. This project is contingent on the demolition of the
current Lexington Public Schools administrative offices. Sitework and construction could not begin until the full
project has been approved by Town Meeting.
This project plans for the installation of two full-size multi-purpose fields (330' x 195'). In concept, these fields
would include lighting and other amenities, such as expanding the parking area outside of school traffic lanes and
constructing ADA accessible pathways that connect the parking areas to the different fields throughout the site. The
configuration of facilities and fields would allow for independent and concurrent field use. If the fields were
surfaced in artificial turf it is estimated that approximately 4,600 hours of field use would be gained as a result of
this project, so it would help to address the Town's field shortage and reduce the impact from the loss of 4-5 years
of field use at the Center Recreation Complex during the LHS construction project.
After a final project design has been agreed upon, additional funds will be requested to complete the project at a
future Town Meeting. If artificial turf has been selected as a playing surface, then about $2 million in General Fund
money will also be required to pay for the installation of turf.
106) Lincoln Park Field Improvements #3
This request is for $860,000 CPA funds and $1,090,000 of General Fund money to conduct a turf replacement for
Lincoln Field 43 at Lincoln Park. The field is approaching its end of life and must be replaced to ensure safe use.
These improvements will help to limit the shortfall in availability now experienced by the Town. This deficit is
expected to become far more acute with the loss of fields at the Center Recreation Complex associated with the
Lexington High School construction. Lincoln Field # 1 and 42 were similarly replaced in the past two years.
The project includes a professional evaluation to determine if subsurface/base "pad" can be reused or if a
replacement is required for safety. The project then comprises removal of the existing surface turf "carpet" at
Lincoln Field 43, laser grading of the subsurface, inspection and repair (as needed) of the drainage system,
replacement of the base "pad" if indicated by the aforementioned study, replacement/recycling of the infill material,
replacement of the surface turf, replacement of the (wood) anchors and edging around the immediate field
perimeter, and restoration of the walkways, guardrails, and plantings surrounding the field.
The General Fund money is needed because in accordance with the Community Preservation Act's requirements
and recent case law, no CPA funds can be used for the installation of synthetic turf material or related site
preparations.
10(j) Administrative Budget
This appropriation of $150,000, made annually, would be used to fund the Committee's administrative assistant,
member dues to the non-profit Community Preservation Coalition, administrative expenses, legal and
miscellaneous expenses and land planning, appraisal and legal fees for open space proposed to be acquired using
CPA funds. The budget for this money is mostly unknown and most of it is contingency money limited to the
purposes outlined above. Since the 2007 acceptance of CPA, the average annual administrative expenditures have
been $70,762, and $1,192,810 of the total amount of appropriated administrative money has been returned and then
made available to fund other projects.
27
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
Article 11 Appropriate for Recreation Capital Projects
Funds Requested Funding Source Committee Recommendation
$70,000 Recreation EF RE Approve (9-0)
For basic capital requests, the Appropriation Committee defers to the report of the Capital Expenditures Committee
when there is general agreement on our committees' recommendations to Town Meeting.
The requested appropriations are listed below together with a funding breakdown. Additional information on the
items in this request is available in the Brown Book (relevant pages for each item are cited below).
Funding Brown
krticle Description Amount Source Book
Page
I 1 Pine Meadows Equipment $ 70,000 Recreation RE XI -16
Article 12 Appropriate for Municipal Capital Projects and Equipment
Funds Requested Funding Source Committee Recommendation
$11,617,306 See below Approve (9-0)
For basic capital requests, the Appropriation Committee defers to the report of the Capital Expenditures Committee
when there is general agreement on our committees' recommendations to Town Meeting.
The requested appropriations are listed below together with a funding breakdown. Additional information on the
items in this request is available in the Brown Book (relevant pages for each item are cited below).
28
Brown
Article
Description
Amount
Funding Source
Book
Page
$ 61,957
Free Cash
12(a)
Transportation Mitigation
$ 18,043
TNC Spec. Rev.
XI -15
$ 80,000
12(b)
Fire Pumper Truck
$1,100,000
Free Cash
XI -16
$ 1,816,000
Free Cash
$ 224,500
Water RE
12(c)
Equipment Replacement
$ 127,500
Sewer RE
XI -17
$ 2,168,000
12(d)
Sidewalk Improvements
$ 870,000
Free Cash
XI -17
$ 75,000
Free Cash
XI -19
12(e)
Hydrant Replacement
$ 75,000
Water RE
$ 150,000
12(f)
Street Improvements
$ 2,726,806
Free Cash
XI -18
12(g)
Stormwater Management Program
$ 2,642,500
Free Cash
XI -19
12(h)
New Sidewalk Installations - Study and Design
$ 150,000
Free Cash
XI -20
12(1)
Intersection Improvements - Adams St. at East St. &
$ 325,000
Free Cash
XI -20
Hancock St.
120)
DPW Building Improvements
$ 120,000
Free Cash
XI -21
12(k)
Lincoln Park Parking Lot - Design
$ 375,000
Free Cash
XI -16
28
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
Brown
Article Description Amount Funding Source Book
Page
12(1) Municipal Technology Improvement Program $ 150,000 Free Cash XI -21
12(m) Network Redundancy & Improvement Plan $ 760,000 Free Cash XI -21
Article 13 Appropriate for Water System Improvements
Funds Requested Funding Source Committee Recommendation
$1,134,940 Water EF RE
$1,200,000 Water User Rates Approve (9-0)
$2,334,940
This article addresses proposed capital expenditures to be made during FY2026 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, see Appendix B and the discussion under Article 5.
Work to Be Done and Funding
Annual Distribution System Improvement Plan. A total of $2,334,940 is requested this year to fund an 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 project can be found in the Brown Book, p. XI -20. Capital appropriations for
similar purposes, and in similar amounts, 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,
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). The Town's five-year capital plan
anticipates similar annual expenditures going forward, growing at the rate of 2% per year. See Brown Book, p.
XI -23.
The funding proposed for this year's program is a combination of user charges raised in the rates ($1,200,000) and
retained earnings ($1,134,940). The user charge component continues a plan initiated six years ago gradually to
transition the funding of the water system improvement program from debt to cash by an additional $200,000 each
year. The goal is to reduce debt service costs associated with borrowing. To mitigate pressure on water rates in the
short term, the changeover is being phased in over eleven years, and this is the sixth such increase. See the
discussion under Article 5 above and the Brown Book, pp. V-28, XI -20. The Town continues to use retained
earnings, when adequate amounts are available, to reduce the need for debt and associated interest costs.
Miscellaneous Appropriations under Other Articles. For completeness, certain capital items necessary for the
operations of the water department, such as trucks and equipment, are typically funded under other articles,
particularly Article 12 (Municipal Capital). This year, an appropriation of $224,500 is requested from water
retained earnings under Article 12(c) including $127,500 to cover half the cost of a rubber tired excavator that will
be shared with the sewer department, and $97,000 for the purchase of valve turner equipment. See Brown Book, p.
XI -17. Also, an appropriation of $75,000 is requested from water retained earnings under Article 12(e) to cover half
the cost of the Town's annual hydrant replacement program. See Brown Book, p. XI -19. The rationale for sharing
this cost with the general fund is that the hydrants are used not only for fire prevention but also for water system
flushing purposes.
29
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
Committee Recommendation
The Committee recommends approval of both the appropriation amount and the funding methods 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 transitioning the funding from debt to cash raised
directly in the rates as the investment programs are a regularly recurring expense of each enterprise. The
changeover results in somewhat higher water and wastewater rates in the short run as it requires funding an
increasing portion of current capital investment with cash while continuing to pay the debt service costs of prior
borrowing. As the prior debt is retired, however, and the associated debt service costs diminish, the pay-as-you-go
model will more transparently and directly reflect the current cost of system upgrades and maintenance at the time
of rate -setting, and it will also save interest costs.
Article 14 Appropriate for Wastewater System Improvements
Funds Requested Funding Source Committee Recommendation
$682,431 Wastewater EF RE
$600,000 Wastewater User Rates Approve (9-0)
$1,282,431
This article addresses proposed capital expenditures to be made during FY2026 as part of a continuing program to
upgrade and keep current the assets of the Wastewater Enterprise Fund, including both sewer mains and pumping
stations. For general background on the enterprise funds, and the relationship between the budget process and the
water rate -setting process, 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 $1,082,431 is requested this year 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 be funded with a combination of
wastewater retained earnings ($482,431) and user charges ($600,000).
The user charge component continues a plan initiated six years ago gradually to transition the funding of the
wastewater maintenance and improvement program, about $1,000,000 per year, from debt to cash, increasing cash
and reducing debt by an additional $100,000 each year. The goal is to reduce interest costs associated with
borrowing. To mitigate pressure on rates in the short term, the changeover is being phased in over ten years, and
this is the sixth such increase. See the discussion under Article 5 above and the Brown Book, pp. V-32, XI-19—
XI-20. The Town continues to use retained earnings, when adequate amounts are available, to reduce the need for
debt and associated interest costs.
Pump Station Building Improvements. The Town recently completed a plan to upgrade the Town's ten sewer pump
stations in accordance with an asset management plan developed in 2013 by the Wright -Pierce engineering firm.
Going forward, investments will be made to support building renovations of those pump stations; in FY2026,
windows and doors at the main station will be replaced. It is proposed to fund the entire project with an
appropriation of $200,000 from the wastewater fund's retained earnings.
Miscellaneous Appropriations under Other Articles. Certain capital items necessary for the operations of the sewer
department, such as trucks and equipment, are typically funded under other articles, particularly Article 12
(Municipal Capital). This year, an appropriation of $127,500 from wastewater retained earnings is sought under
Article 12(c) for the purchase of a rubber tired excavator, split -funded with the water enterprise fund.
Committee Recommendation
The Committee recommends approval of both the appropriation amount and the funding methods 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 transitioning the funding from debt to cash raised
30
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
directly in the rates as the investment programs are a regularly recurring expense of each enterprise. The
changeover results in somewhat higher water and wastewater rates in the short run as it requires funding an
increasing portion of current capital investment with cash while continuing to pay the debt service costs of prior
borrowing. As the prior debt is retired, however, and the associated debt service costs diminish, the pay-as-you-go
model will more transparently and directly reflect the current cost of system upgrades and maintenance at the time
of rate -setting, and it will also save interest costs.
Article 15 Appropriate for School Capital Projects and Equipment
Funds Requested Funding Source Committee Recommendation
$1,500,910 Free Cash Approve (9-0)
This request of $1,500,910 addresses the School Department's strategic goal of enhancing the capacity to utilize
technology as an instructional and administrative tool. The request will continue to support student access to
devices for innovative learning methods that integrate supportive technologies, problem -solving based approaches,
and higher order thinking skills. It also maintains and improves, when needed, current infrastructure such as
networks, access points and servers. This is an ongoing annual request. Detailed information is available in the
Brown Book pp. XI -13, XI -14.
Description
Amount
Tech Workstations
$
213,150
PreK-5 Mobile Devices
$
299,000
1:1 Middle School Program
$
209,000
1:1 Lexington High School
$
211,250
STEM/Art/Computer Science
$
51,000
Interactive Projectors/Whiteboard Units and Document Cameras
$
228,910
District and Building Network Infrastructure
$
268,600
Server/Storage Infrastructure
$
20,000
Total Amount Requested:
$
1,500,910
31
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
Article 16 Appropriate for Public Facilities Capital Projects
Funds Requested Funding Source Committee Recommendation
$5,743,000 See below Approve (9-0)
For basic capital requests, the Appropriation Committee defers to the report of the Capital Expenditures Committee
when there is general agreement on our committees' recommendations to Town Meeting.
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 the Brown Book pp. XI -14, XI -15.
Item
Description
Free Cash
Tax Levy
16(a)
Public Facilities Bid Documents
$ 125,000
$ —
16(b)
Public Facilities Interior Finishes
$ 468,000
$ —
16(c)
School Paving and Sidewalks
$ 200,000
$ —
16(d)
Municipal Building Envelopes and Associated Systems
$ 863,579
$ 236,421
16(e)
Central Administration Building Demolition
$ 3,550,000
$ —
16(f)
Estabrook Elementary School Nurse Bathroom Renovation
$ 300,000
$ —
Totals
$ 5,506,579
$ 236,421
Article 17 Appropriate to Post Employment Insurance Liability Fund
Funds Requested Funding Source Committee Recommendation
$2,079,721 Free Cash
$3,045 Water EF Approve (9-0)
$609 Wastewater EF
$2,083,375
This article requests the appropriation of $2,083,375 into the Post Employment Insurance Liability (PEIL) Fund. Of
the requested amount, $2,079,721 would come from free cash, $3,045 from the Water Enterprise Fund, and $609
from the Wastewater Enterprise Fund.
The amounts requested from the two enterprise funds are based on 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
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 total amount of the unfunded liabilities grows by the present value
of future benefits earned during the current year, less the value of benefits provided to retirees 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 that earn a
higher return than most 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.
The PEIL Fund balance was $37,933,022 as of December 31, 2024.
32
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
Article 18 Rescind Prior Borrowing Authorizations
Funds Requested Funding Source Committee Recommendation
See below See below Approve (9-0)
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. Rescinding
these authorizations is the final bookkeeping task for every debt -based appropriation.
The staff recommends the following borrowing authorizations for rescission. The projects are complete, staff has
reconciled the accounts and verified that all bills have been paid.
Article Town Meeting Project Description Rescission
10(o) 2014 ATM Replace Townwide Telephone Systems — Phase III $60,000
16(b) 2017 ATM Lexington High School Air Conditioning $4,190
Article 19 Establish, Amend, Dissolve and Appropriate To and From
Specified Stabilization Funds
Funds Requested Funding Source Committee Recommendation
$6,563,050 Tax Levy
$14,003 Affordable Housing SF Approve (9-0)
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. Appendix E summarizes the laws
governing specified stabilization funds and provides a brief history and description of each of the Town's funds.
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. Town Meeting may also direct
specific revenue sources to be deposited directly into a stabilization fund, bypassing the need for Town Meeting to
formally appropriate those revenues into the fund. Appropriations into specified stabilization funds do not authorize
expenditures, but rather put aside funds for specified future uses. Additions or withdrawals for stabilization funds
not specifically requested in other warrant articles are acted on under this article.
This article requests an appropriation of $6,563,050 into the Capital Stabilization Fund (CSF) from the tax levy.
The Capital Stabilization Fund holds monies that are used to reduce the impact of borrowing for major capital
projects. The balance has been growing from regular annual appropriations, but the future intent is to use the
balance to cover portions of the annual debt service for the project to replace or renovate Lexington High School.
With this appropriation, the balance in the Capital Stabilization Fund is expected to be $48,405,239 by the end of
FY2026 excluding investment income.
The amount requested for appropriation corresponds to the revenue that is generated under a policy proposed by the
Town Manager and adopted by the Select Board in 2022. This policy calls for the new property tax revenue from
projects that are approved via a rezoning by town meeting on the basis of a Preliminary Site Use and Development
Plan (PSDUP), or are pursuant to the recent changes in the dimensional controls in the Hartwell Avenue zoning
district, to be earmarked for the CSF. This policy creates a source of recurring annual revenue and it enables steady
appropriations into the CSF that will increase in size each year based on the Town's commercial development
activity.
The article also requests an appropriation of $14,002.80 from the Affordable Housing Stabilization Fund (AHSF) to
the Affordable Housing Trust (AHT). The AHSF was established to automatically receive fees derived from Airbnb
and similar short-term rental providers. With the more recent creation of the AHT, this stabilization fund is no
longer required, but the Town must wait three years before redirecting the revenue from these fees. At next year's
33
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
annual town meeting, it will be possible to eliminate the AHSF and automatically deposit the fees into the AHT
instead.
Article 20 Appropriate for Prior Years' Unpaid Bills
Funds Requested Funding Source Committee Recommendation
None N/A IP (9-0)
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.
There are no unpaid bills from the prior fiscal year at press time, and no action is required under this article.
Article 21 Appropriate for Authorized Capital Improvements
Funds Requested Funding Source Committee Recommendation
None N/A IP (9-0)
This is an annual article to request supplemental funding for ongoing capital projects that were approved during
previous town meetings.
There are no requests for supplemental funding of existing capital projects at this time.
Article 23 Dispose of 116 Vine Street
Funds Requested Funding Source Committee Recommendation
None N/A Approve (9-0)
This article does not request funding, but seeks Town Meeting's approval to dispose of the lot at 116 Vine St, the
Leary Farm, through the Request for Proposal (RFP) process that would result in the creation of 100% affordable
housing on the property. Town Meeting purchased this land with CPA funds for the specific purpose of creating
affordable housing and this action would be the next step to achieving this goal after a 15 year delay. The RFP
would allow proposals for leasing or purchasing of the property.
The property was purchased using an appropriation of $2,763,100 from the CPF under Article 12 of the 2009
Annual Town Meeting (ATM). The 116 Vine St house lot of 30,000 sq. ft. was split off from the 14.2 acre "Leary
Farm" specifically for affordable housing. Under Article 10 (m)(1) of the 2020 ATM, $75,000 from the CPF was
appropriated to select a design team to work with all stakeholders to move the project forward. LexHAB was tasked
with developing the lot, but after the Town received unusually high bids for the construction the development was
put on hold until LexHAB could transition from a quasi -government entity to a private nonprofit.
Following approval from the state legislature in 2024, LexHAB reincorporated as a private nonprofit. The belief is
they can now create housing at a lower cost than the Town. However, the Town must now follow a formal RFP
process to select a developer for 116 Vine St., similar to the process used for Parcel 68-44 (intersection of North St
and Lowell St). If this article is approved, the Select Board will work with Town staff to develop and publish an
RFP, after which LexHAB and other qualified developers will be able to bid on it.
Based on prior experience, it is no longer financially prudent to have the Town directly fund construction of
affordable housing. Instead, the best and highest use of the land occurs when the Town grants the right to develop
the property, thus gaining 100% affordable housing to add to its registry. Town Meeting is being asked to grant the
34
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
Select Board the right to pursue this option. The Select Board, who will control the development parameters, have
been responsive to the community while using the same process to develop the Lowell St project.
It is likely that the successful bidder will turn to either the Affordable Housing Trust or the Community
Preservation Committee to request a contribution as part of the financing plan. Projects with a small number of
units often have difficulty financing an entire project due to the limited cash flow from rents. Such a contribution
would be in keeping with Town Meeting's request to develop affordable housing on this land.
Article 26 Local Voting Rights for Lawful Permanent Residents
(Citizen Petition)
Funds Requested Funding Source Committee Recommendation
None
N/A
No Recommendation
Article 26 and 27 asks the Town to file a Home Rule petition to enlarge Lexington's Voter Franchise for local
elections, outside of what is allowed by State and Federal law. While these articles do not include an appropriation,
enacting them would come at a cost. Here we examine the implementation and ongoing expenses of the proposed
bylaw.
Any incurred expenses arise because these franchise changes would be unique to Lexington's local voting events,
requiring a separate voter roll to be developed, tracked and maintained. It is illegal for these residents to participate
in State or Federal elections, so Lexington would need to take extraordinary measures to prevent voters from
mistakenly voting in unauthorized elections.
Additionally, it is important to consider these costs in relation to how many new voters could be enfranchised.
Census data does not easily provide exact numbers, but we estimate the number of lawful permanent residents (for
Article 26) at approximately 4,500, and the number of 16 and 17 year olds (for Article 27) at approximately 1,250.
We cannot predict how many of these people would choose to participate in voting, so it is impossible to get an
accurate cost per new voter. However, the Town Clerk has provided the following examples of costs that they
believe will be necessary if this program is to be implemented.
Fixed Costs
New Voter Logs: Creating and maintaining separate voter logs will require setting up a new database. This process
is projected to demand 3-6 months of IT staff and development time. The exact cost will depend on the complexity
of the setup and staff availability.
New Registration System: Developing a registration system specifically for each new classes of voters will likely
incur costs associated with programming a separate module for our election tabulators. This has been estimated at
$2,000 to $3,000 by our vendor.
Ongoing Maintenance: Maintaining the new voter log, processing registrations, sending out vote -by -mail ballots,
and ensuring accurate record retention will require additional staff hours, and may require an additional staff
member, in the Clerk's Office. The salary and terms will depend on budget approval and the job description.
Per Voter Costs
Ballots: For elections with both municipal and state or federal components, additional specialized ballots will be
required. The costs could range from $300 to $500, plus increased expenses for the Annual Town Election
coinciding with the Presidential Primary every four years.
Mailing: Mailing and printing expenses will increase due to the need to send confirmation letters to new voters,
remote voting request cards, and remote voting ballots.
Additional Unknown Costs
Changes to Reporting Information: While the reporting of information in the Annual List of Persons for those 17
years of age or over is not anticipated to change, maintaining privacy for voters under 17 remains a challenge both
during the election day period and beyond as voters must state their name and address before receiving a ballot.
This may require additional resources or adjustments.
35
2025 ATM
APPROPRIATION CONMTTEE
26 MARCH 2025
Verifying Voter Eligibility: Currently the Town Clerk is unfamiliar with the process that would be required to
verify lawful residency and is unable to estimate cost or complexity of this task.
Updated Software: New software may be necessary to handle the increased complexity and ensure efficient
operation and data management.
Personnel: Additional staffing, particularly in the Clerk's Office and IT, may be required to support these changes.
Additional election personnel may be required to handle increased vote -by -mail requests.
Conclusion
We offer this initial summary of potential financial impacts based on discussions with the Town Clerk, who is
responsible for administering elections. The relatively small number of new voters would limit per -voter costs, but
the potential need for more staff time in the Town Clerk's office is significant. It is also worth noting that other
municipalities have forwarded similar home rule petitions to the state legislature, and none have succeeded. A lack
of practical examples suggests that we may have failed to envision all the necessary changes.
Article 27 Allow 16 Year Olds Voting Rights in Municipal Elections
(Citizen Petition)
Funds Requested Funding Source Committee Recommendation
None N/A No Recommendation
Please see the report for Article 26 above.
36
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
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 Proiections
Table A-1 summarizes total revenues and expenses, showing actual results for FY2023 and FY2024, revised
budgeted figures for FY2025 (still underway), the proposed budget for FY2026 presented in the Brown Book, and
projected figures for FY2027-FY2030. The bottom line shows net surpluses (deficits).
For FY2023 and FY2024 the Town ran substantial overall surpluses, about 7.5% of expenses in FY2023 and about
6.3% in FY2024. These surpluses flowed to free cash in the following year, and were available to fund one-time
expenses. For the current fiscal year (FY2025), 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,
FY2025, 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 FY2026 is balanced, and it seems likely that the final actual figures will
result in a surplus due to the Town's conservative budgeting policy. However, future budgets may remain affected
by persistent inflation that drives expenses to rise at greater than 2.5% annually. If so, surpluses may decrease and
contribute to less Free Cash being available in the out -year budgets.
It is also important to point out that these projections do not attempt to capture the effects the MBTA Communities
developments may have on future revenues or expenses. While it is acknowledged that they will have an effect, at
this time the range of estimates are too large to determine a number with any accuracy. Below you will find
references to items that may be important for future projections to capture, and once some of these developments
are constructed and occupied will enough information be available to gauge their affects.
Table A-1. Actual and Projected Revenues and Expenses ($1,000s)
FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY2029 FY2030
Revenue Category
Actual
Actual
Revised
Proposed
Projection
Projection
Projection
Projection
Total Revenues
$ 274,892
$ 290,054
$ 293,575
$ 312,251
$ 309,130
$ 315,514
$ 323,626
$ 333,449
Total Expenses
$ 255,736
$ 272,821
$ 293,575
$ 312,251
$ 314,722
$ 326,694
$ 340,530
$ 357,327
Revenue - Expenses $ 19,156 $ 17,233 $
As % of expenses 7.5 % 6.3 %
$ — $ (5,592) $ (11,180) $ (16,904) $ (23,878)
% — % (1.8)% (3.4)% (5.0)% (6.
The projections beyond the FY2026 budget under consideration show projected expenses exceeding projected
revenues, yielding deficits ranging from 1.8% of expenses in FY2027 to 6.7% in FY2030. 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 78% of total revenues in FY2024 (actuals) rising to
86% in the projection for FY2030. As a result, the assumptions concerning property tax revenues are critical to the
37
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
projections. Not captured in the revenue projections are the increased revenues in the areas of Local Receipts
(building permits, excise taxes) or Property Tax that future MBTA Communities development will generate.
Table A -2a. Projected Revenues by Category ($1,000s)
Revenue Category
annually.
FY2023
Actual
FY2024
Actual
FY2025
Revised
FY2026
Proposed
FY2027
Projected
FY2028
Projected
FY2029
Projected
FY2030
Projected
1
Property Tax
$
216,187
$ 227,334
$ 239,714
$ 249,002
$ 257,727
$ 266,670
$ 275,837
$ 285,233
tied to those areas.
Levy
$800K for overlay (property tax abatement and exemptions) in FY2027-30. $400K set-
1.1%
aside for snow & ice deficit annually; Also includes Cherry Sheet Assessments increasing
3
at 3.5% annually and Cherry Sheet Offsets (State Aid to Public Libraries).
6 Other Revenues
Water, Wastewater and Recreation FY2025 Enterprise Indirects increasing by 3% annually.
5.1%
1.7%
2
State Aid
$
17,095
$ 19,696
$ 20,452
$ 21,023
$ 21,204
$ 21,446
$ 21,686
$ 21,928
3
Local Receipts
$
23,992
$ 25,615
$ 16,209
$ 17,040
$ 17,336
$ 17,559
$ 17,787
$ 18,022
4
Available Funds
$
17,643
$ 17,329
$ 17,280
$ 25,612
$ 13,326
$ 10,286
$ 8,747
$ 8,681
5
Revenue Offsets
$
(1,831)
$ (1,814)
$ (1,954)
$ (2,361)
$ (2,441)
$ (2,484)
$ (2,529)
$ (2,575)
6
Other Revenues
$
1,806
$ 1,894
$ 1,874
$ 1,935
$ 1,977
$ 2,036
$ 2,097
$ 2,160
Total Revenues
S
274,892
S 290,054
S 293,575
S 312,251
S 309,130
S 315,514
S 323,626
S 333,449
All dollar amounts shown in thousands. Source: Lexington Finance Department
Notes on assumptions
1 Property Tax Reflects statutory allowable growth of 2.5% and assumed new growth of $2.5 million
Levy
annually.
2 State Aid
Increases at $30 per pupil for FY2026-30. (minimum aid). School enrollment for
FY2027
Projected
FY2025-2027 is from School Dept budget documents. UGGA projected to increase by 2%
FY2029
Projected
per year.
3 Local Receipts
Assumes modest growth in local receipts based on evaluation of historical averages.
4 Available Funds
Free Cash estimate of $12,000,000 available for FY2027, $9,000,000 for FY28, and
3.9%
$7,550,000 for FY2029-2030. Annual contribution of $171,000 from TDM Stabilization
3.5%
Fund to support Lexpress and the Alewife Shuttle. Includes $50,000 in grant funding to
3.4%
support Visitor Center operations for FY2024-FY2027. Further annual contributions from
State Aid
PEG Special Revenue Fund and Cemetery Sale of Lots Fund reflect anticipated spending
3.8%
tied to those areas.
5 Revenue Offsets
$800K for overlay (property tax abatement and exemptions) in FY2027-30. $400K set-
1.1%
aside for snow & ice deficit annually; Also includes Cherry Sheet Assessments increasing
3
at 3.5% annually and Cherry Sheet Offsets (State Aid to Public Libraries).
6 Other Revenues
Water, Wastewater and Recreation FY2025 Enterprise Indirects increasing by 3% annually.
Table A -2b shows the projected year-to-year percentage increases in the various revenue categories. Note that the
Property Tax Levy grows more slowly from FY2027-FY2030 than in the earlier years. The substantial growth rate
in FY2024 Chapter 70 State Aid was a one-off occurrence that is not expected to reoccur, although it is still
uncertain how revenue generated by the Fair Share Amendment, aka the "Millionaire's Tax", will affect
Lexington's future aid and this is not factored in this projection. Local Receipts also are greatly reduced from the
proposed FY2026 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, and may actually trend
lower due to growing budgetary constraints.
Table A -2b. Annual Rates of Increase in Revenues
Revenue Category
FY2024
Actual
FY2025
Revised
FY2026
Proposed
FY2027
Projected
FY2028
Projected
FY2029
Projected
FY2030
Projected
1
Property Tax Levy
5.2%
5.4%
3.9%
3.5%
3.5%
3.4%
3.4%
2
State Aid
15.2%
3.8%
2.8%
0.9%
1.1%
1.1%
1.1%
3
Local Receipts
6.8%
(36.7)%
5.1%
1.7%
1.3%
1.3%
1.3%
4
Available Funds
(1.8)%
(0.3)%
48.2%
(48.0)%
(22.8)%
(15.0)%
(0.7)%
5
Revenue Offsets
(0.9)%
7.7%
20.8%
3.4%
1.8%
1.8%
1.8%
6
Other Revenues
4.9%
(1.1)%
3.3%
2.2%
3.0%
3.0%
3.0%
Total Revenues
5.5%
1.2%
6.4%
(1.0)%
2.1%
2.6%
3.0%
Note: Each entry shows the percentage change from the previous year, calculated from Table A -2a.
38
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
It is important to note that the use of Free Cash to supplement the operating budget was phased out under a 5 -year
program. The FY2019 budget used $3.74 million, and this amount was reduced by $700,000 per year, with the
program suspended in FY2022 due to the pandemic, then completed in FY2023. 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. The increased use of cash for capital projects has reduced within -levy debt and the
associated interest costs. The Town does not intend to use Free Cash for operating expenses in future fiscal years.
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/or 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 available for general fund
operations will be $2.5 million per year in future years. This projections is slightly lower than the $2.75 million
assumed in FY2021-2023 and $3 million projected for FY2024-2025 as commercial and industrial new growth has
slowed and is not expected to trend back up for several years. As shown in the figure below, this assumption is
conservative in the sense that actual new growth has been higher than projections in nine of the last ten fiscal years.
Projected growth does not consider new growth that may result from MBTA residential development.
New Growth Levy: Budgeted vs. Actual ($1,000s)
8,000
7,000
6,000
5,000
4,000
3,000 -------------
2,000 - -
1,000
0
5�5�5�5��5��$,5� h� h5\5575r�r«��7
— New Growth for Opera6i oris ... TOW New Growth - - Bijdget Asswup6 ori for New Growth
Based on a fiscal guideline adopted in 2022, the New Growth resulting from PSDUP rezonings or that occurs in the
Hartwell Overlay District, is to be appropriated to the Capital Stabilization Fund to be used to offset future debt
service payments made on the Lexington High School project. Of the $6,774,000 New Growth in FY2025,
$2,527,000 was in this category. The difference between total New Growth and the amount set -asides into the CSF.
is the new growth for operations which was $4,247,000 for FY2025. New growth each year becomes a permeant
increase in the tax levy for future years, and the adopted fiscal guideline assumes that the amount of new growth
dedicated to the CSF each year will also be set aside in future years. The annual amount of tax levy set-aside to the
CSF has accumulated to $6,563,050 from FY2022-FY2025. In FY2023 $1,060,000 in new growth resulted from a
one-time change in tax status at Takeda Pharmaceutical company in regards to their personal property assets. This
unexpected revenue from Takeda was set-aside into the Pension Fund.
39
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
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 that has used to fund the
operating budget.
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 (FY2022-FY2024), actual revenues have been
higher than projected, especially for projections made several years in advance. For example, projections for
FY2023 made in 2019 were 9.8% below actuals and those for FY2024 made in 2020 were 5.6% 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)
Expense Category
FY2023
Actual
FY2024
Actual
FY2025
Revised
FY2026
Projection
FY2027
Projection
FY2028
Projection
FY2029
Projection
FY2030
Projection
Education
S
128,392
S 137,704
S 143,915
S 149,640
S
157,230
S
165,208
S 173,595
S 182,411
8
LPS Wages
$
106,161
$ 114,299
$ 120,853
$ 127,184
$
133,543
$
140,220
$ 147,231
$ 154,593
9
LPS Expenses
$
19,007
$ 19,903
$ 19,655
$ 18,850
$
19,792
$
20,782
$ 21,821
$ 22,912
10
Minuteman
$
3,224
$ 3,502
$ 3,406
$ 3,606
$
3,895
$
4,206
$ 4,543
$ 4,906
Municipal
S
55,585
S 59,918
S 64,215
S 66,551
S
69,177
S
71,926
S 74,807
S 77,824
11
Municipal Wages
$
35,895
$ 38,240
$ 39,872
$ 40,506
$
42,329
$
44,234
$ 46,224
$ 48,304
12
Municipal Expenses
$
19,690
$ 21,677
$ 24,343
$ 26,045
$
26,848
$
27,693
$ 28,582
$ 29,520
Shared Expenses
S
18,317
S 18,522
S 18,896
S 19,584
S
21,806
S
22,983
S 23,770
S 25,223
13
Debt Service
$
7,168
$ 6,558
$ 6,123
$ 5,983
$
7,405
$
7,782
$ 7,769
$ 8,421
14
Mitigate Within Levy
-
15
OPEB
$
1,930
$ 1,980
$ 2,030
$ 2,080
$
2,130
$
2,180
$ 2,230
$ 2,280
16
Retirement
$
9,219
$ 9,985
$ 10,743
$ 11,522
$
12,272
$
13,022
$ 13,772
$ 14,522
Benefits
S
30,864
S 32,346
S 37,479
S 41,147
S
43,950
S
46,945
S 50,147
S 53,570
17a
Medicare
$
2,089
$ 2,272
$ 2,305
$ 2,420
$
2,565
$
2,719
$ 2,883
$ 3,056
17b
Health Insurance
$
27,712
$ 29,000
$ 33,948
$ 37,401
$
40,019
$
42,821
$ 45,818
$ 49,026
17c
Dental
$
1,045
$ 1,057
$ 1,201
$ 1,301
$
1,340
$
1,380
$ 1,421
$ 1,464
17d
Life
$
18
$ 17
$ 25
$ 25
$
25
$
25
$ 25
$ 25
18
Reserve Fund
$
-
$ -
$ 850
$ 850
$
850
$
850
$ 850
$ 850
19
Workers' Comp.
$
625
$ 500
$ 500
$ 500
$
500
$
500
$ 500
$ 500
20
Unemployment
$
119
$ 49
$ 200
$ 200
$
200
$
200
$ 200
$ 200
21
Property & Lib. Ins.
$
933
$ 1,017
$ 1,141
$ 1,278
$
1,367
$
1,463
$ 1,565
$ 1,675
22
Uninsured Losses
$
200
$ 200
$ 200
$ 200
$
200
$
200
$ 200
$ 200
23
Solar Production
$
341
$ 352
$ 390
$ 390
$
390
$
390
$ 390
$ 390
24
Capital
$
14,251
$ 16,342
$ 16,876
$ 19,524
$
11,259
$
8,236
$ 6,713
$ 6,691
25
Other
$
592
$ 1,438
$ 515
$ 3,124
$
230
$
230
$ 230
$ 230
26
Approp. to Capital Stab
$
3,785
$ 396
$ 1,836-
27
Unallocated Revenue
$
-
$ -
$ -
$ 2,700
$
1,000
$
1,000
$ 1,000
$ 1,000
28
Tax Levy Dedicated to
$
1,733
$ 4,036
$ 6,563
$ 6,563
$
6,563
$
6,563
$ 6,563
$ 6,563
CSF
Total Expenditures
$
255,736
$ 272,821
$ 293,575
$ 312,251
$
314,722
$
326,694
$ 340,530
$ 357,327
Note: Amounts in italics are subtotals.
40
2025 ATM APPROPRIATION COXMTTEE 26 MARCH 2025
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 Assumes 5% increase
9 LPS Expenses Assumes 5% increase
10 Minuteman FY2027-30 projections increase by 8%.
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
2% for all other expenses.
Shared Expenses
13 Debt Service Within levy debt service from General Fund debt table. Includes projections on all authorized unissued debt
service, plus an increase of 5% in newly authorized debt funded projects each year. (This is a maximum
amount of in -levy debt for existing authorizations).
14 Mitigated Within Debt service increases in FY2027-2030 above 5% may be mitigated by use of the Capital Stabilization Fund.
Levy Debt Service (N/A)
15 OPEB Continued funding of OPEB with a $50,000 annual increase.
16 Retirement Contributory Retirement assessment (based on 2030 amortization of unfunded liability and 7.25% interest rate
assumption).
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.
The effects that upcoming MBTA Communities developments will have on expenses is not included in these
projections. Once these projects start to be occupied the Town will be better able to enumerate and extrapolate how
municipal, school, shared expenses and capital projects will change.
41
Benefits
17a
Medicare
6% increase in Medicare, reflecting an increase in the number of eligible employees and increases in wages.
17b
Health Insurance
FY2026, growing at 7% annually.
17c
Dental
FY2026, growing at 3% annually.
17d
Life
Level Funding
18
Reserve Fund
Level Funding
19
Workers' Comp.
Level Funding.; to maintain account balance of approx. $2 million
20
Unemployment
Level Funding.
21
Property & Lib. Ins.
FY2026, growing at 7% annually.
22
Uninsured Losses
Level Funding. Staff may recommend further reductions in out -years to maintain fund balance at $1 million.
23
Solar Production
Payments to Syncarpha for construction costs of Hartwell Ave. solar arrays. Level Funding.
24
Capital
Assumes all available Free Cash not set aside for pension, current year needs or unallocated will be used for
cash capital, plus, $2.71M for Street Improvement and $231K for Municipal Building Envelope, portions of
which grow at 2.5% through FY2030.
25
Other
Reflects various warrant articles such as Senior Tax Work -Off and $200K in unanticipated needs in
FY2026-30
26
Approp. to Capital
Reflects past and projected transfers to continue funding the Capital Stabilization Fund to cover the high school
Stab. Fund
project.
27
Unallocated Revenue
Proposed allocation set-aside for yet to be determined priorities.
28
Tax Levy Dedicated
Set-aside of tax levy tied to commercial new growth for Capital Stabilization Fund. Anticipated to grow in
to CSF
future years, tied to new revenue that is not captured in this model.
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.
The effects that upcoming MBTA Communities developments will have on expenses is not included in these
projections. Once these projects start to be occupied the Town will be better able to enumerate and extrapolate how
municipal, school, shared expenses and capital projects will change.
41
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
Table A -5a. Expense Projections Aggregated
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
Expense Category
FY2023
Revised
FY2023
FY2024
FY2026
Projection
FY2025
FY2026
FY2027
FY2028
FY2029
FY2030
Expense Category
5.1%
Actual
Actual
5.1%
Revised
Projection
Projection
Projection
Projection
Projection
Education
S
128,392
S 137,704
S
143,915
S 149,640
S 157,230
S 165,208
S 173,595
S 182,411
LPS
$
125,168
$ 134,202
$
140,508
$ 146,033
$ 153,335
$ 161,002
$ 169,052
$ 177,504
Minuteman
$
3,224
$ 3,502
$
3,406
$ 3,606
$ 3,895
$ 4,206
$ 4,543
$ 4,906
Municipal
S
55,585
S 59,918
S
64,215
S 66,551
S 69,177 S
71,926
S 74,807 S
77,824
Shared Expenses
S
73,493
S 79,235
S
85,446
S 96,061
S 88,315
S 89,560
S 92,129
S 97,091
OPEB
$
1,930
$ 1,980
$
2,030
$ 2,080
$ 2,130
$ 2,180
$ 2,230
$ 2,280
Capital
$
14,251
$ 16,342
$
16,876
$ 19,524
$ 11,259
$ 8,236
$ 6,713
$ 6,691
Capital Stabil. Fund
$
5,518
$ 4,433
$
8,399
$ 6,563
$ 6,563
$ 6,563
$ 6,563
$ 6,563
Other
$
51,794
$ 56,480
$
58,141
$ 67,894
$ 68,363
$ 72,581
$ 76,623
$ 81,558
Grand Total
S
257,469
S 276,857
S
293,575
S 312,251
S 314,722
S 326,694
S 340,530
S 357,327
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
Expense Category
FY2023
Revised
FY2024
Proposed
FY2025
Projection
FY2026
Projection
FY2027
Projection
FY2028
Projection
FY2029
Projection
Education
7.3%
4.5%
4.0%
5.1%
5.1%
5.1%
5.1%
LYS
7.2%
4.7%
3.9%
5.0%
5.0%
5.0%
5.0%
Minuteman
8.6%
(2.7)%
5.9%
8.0%
8.0%
8.0%
8.0%
Municipal
7.8%
7.2%
3.6%
3.9%
4.0%
4.0%
4.0%
Shared Expenses
7.8%
7.8%
12.4%
(8.1)%
1.4%
2.9%
5.4%
OPEB
2.6%
2.5%
2.5%
2.4%
2.3%
2.3%
2.2%
Capital
14.7%
3.3%
15.7%
(42.3)%
(26.9)%
(18.5)%
(0.3)%
Capital Stabilization Fund
(19.7)%
89.5%
(21.9)%
_%
_oho
_%
_%
Other
9.0%
2.9%
16.8%
0.7%
6.2%
5.6%
6.4%
Grand Total
7.5%
6.0%
6.4%
0.8%
3.8%
4.2%
4.9%
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 significantly from zero dollars in FY2021 to $3.8 million in FY2022,
$5.5 million in FY2023 and then $4.4 million in FY2024. It drops to $4 million in FY2025 and for the last 4 years
of the projection, which represents only the current amount dedicated from tax levy new growth as outlined earlier
in this section. The amount set aside from tax levy new growth in future years is expected to increase, and the Town
may also elect to appropriate free cash or other available funds to the Capital Stabilization Fund, neither of which
are reflected in this projection. Capital spending is projected to drop off in FY2026, which correlates to the decrease
in projected free cash available in those periods. However capital spending is prone to actually increase when one-
time sources of revenue such as Free Cash exceed projections and are applied to expand this annual program. 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
complicate matters, we know that these projections may not take fully into account the probability that the current
high inflation environment will exceed projections. 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.
Additionally, it is unclear how long high interest rates will persist and increase the carrying cost of our debt
42
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
funding. Nor does it attempt to capture how MBTA Communities development will change revenues and expenses.
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.
43
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
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 1980s. 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" 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 the enterprise fund.
The funds accumulated (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 retained earnings), 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, and that certain other components of the budget, including
contributions to OPEB and funding for capital projects and programs, are appropriated in other articles. For the
complete operating costs of the enterprise funds, including indirect costs, OPEB contributions and cash applied
toward capital projects„ 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 our
write-up of the enterprise fund operating budget article have been expanded to show all components of the budget,
however appropriated.
44
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
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, Town Meeting may establish a revolving fund by by-law, which
obviates the need for annual reauthorization. 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; and
• any other reporting requirement the Town may impose
The revolving funds the Town of Lexington has established, with their purposes and sources of funds, can be found
at Section 110-1 of the Code of Lexington, https: //ecode360. com/32569540.
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
during the fiscal year, except with the approval of the Select Board and this Committee. In any event, expenditures
may not exceed the existing balance of the fund. Any balance remaining in a fund at the end of a fiscal year 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.
45
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
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, obtaining 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.
A brief description of each of the programs follows. Detailed and up-to-date information about eligibility criteria,
the amount of relief available, and which programs may be combined can be found in a brochure on the Town
website entitled Property Tax Relief Programs which is updated annually by the Assessor's office. See https:
www.lexingtonma.gov/168/Elderly-Other-Tax-Relief.
State Income Tax "Circuit Breaker"
The "Circuit Breaker" provides state income tax relief to low- and moderate -income homeowners and renters age
65 and over. Qualified homeowners are entitled to a refundable dollar -for -dollar credit on their state income tax to
the extent that their real estate taxes and one half of their water and sewer bills exceed 10% of their income.
Qualified renters are entitled to the credit to the extent that 25% of their annual rent exceeds 10% of their income.
This program is administered by the Massachusetts Department of Revenue and has no direct impact on Town
finances.
The "41A" Deferral Program
This property tax deferral program, available to low and moderate -income homeowners 65 and over, is authorized
by state law, G.L. c. 59, § 5, Clause 41A, and administered at the local level. Although not widely used, it offers
immediate and substantial property tax relief to seniors who may be having trouble paying their taxes. Those who
qualify may defer any part or all of their property tax in any given year, up to a cumulative total of half the assessed
valuation of the property. The deferred taxes do not have to be repaid until 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 interest rate is a floating Treasury rate, updated annually, which is intended to be
equivalent to the Town's return on its funds in the year of deferral. The rate set each year remains in effect for the
life of deferrals granted in that year.
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 State partially reimburses the Town
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
for exemptions granted, subject to appropriation. Exemptions not reimbursed by the State are funded from the
Town's overlay account.
Prior to 2004, the credit was limited to $500 per year and eligibility criteria were quite restrictive. Since then, the
Town has increased the exemption to $2,000 and taken a number of steps to expand eligibility, taking advantage of
local options made available by the legislature from time to time.
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 Property Tax Relief Programs
brochure mentioned above.
The Senior Service Program
The Senior Service program allows low-income seniors to perform volunteer work for the Town in exchange for a
reduction in their property tax. This program is locally controlled. Eligibility criteria, the "wage" rate, and the
maximum amount which may be worked off are established by the Select Board from time to time. 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.
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.
47
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
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:
The 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. The 2016 Annual Town Meeting extended the purpose to "supporting the planning and operations of
transportation services to serve the needs of town residents and businesses."
The Traffic Mitigation (TM) S.F. holds 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.
The School Bus Transportation S.F. was created to support 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.
The Section 135 Zoning Bylaw S.F. was 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 2021 annual town meeting, $500,000 was transferred from this fund under article 4 to support the
Lexington Public Schools operating budget. The transferred funds were not spent, so under Article 19 at the 2023
annual town meeting $500,000 was transferred into the fund.
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.
The Debt Service Stabilization Fund was also created at the 2009 Annual Town Meeting. It was used to hold
proceeds from bonds issued to support addition/renovation projects at the Diamond Middle School, Clarke Middle
School, and Lexington High School. The balance in the fund was withdrawn over a number of years and put toward
the debt service for the associated bonds. The final withdrawal was made and the stabilization fund was dissolved
under Article 3 at the 2022-3 Special Town Meeting.
At the 2011 Annual Town Meeting two more funds were created:
The Avalon Bay School Enrollment Mitigation Fund was 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
48
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
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.
The Transportation Management Overlay District Fund (TMOD) was 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."
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. Withdrawals from the Capital Stabilization Fund allow 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 Ambulance Stabilization Fund was established under Article 8 of the 2018-1 Special Town Meeting for the
purpose of funding the purchase of ambulances. The fund was created in anticipation of payments from National
Development in connection with rezoning on Watertown St. Under Article 3 of the 2022-3 Special Town Meeting,
$250,000 was put into the fund.
The balances in the general as well as the specified stabilization funds may be found in the Brown Book on page
C-3.
Affordable Housing Trust
Lexington's Affordable Housing Trust (AHT) is a municipal entity that accumulates and distributes funds to
support affordable housing in the Town. The AHT is not a stabilization fund, per se, but it does act as a reserve
fund to support affordable housing.
The AHT was created by Article 12 of the 2022-3 Special Town Meeting. Primary funding for the trust comes from
the Community Preservation Act and affordable housing mitigation payments made by developers. The AHT has a
Board of Trustees that provides oversight and administers grant making, while the Town Finance Department
handles its accounting. AHT funds are managed by the Town Treasurer using a conservative investment policy that
prioritizes liquidity and stability.
AHT funds are not subject to further appropriation by Town Meeting, therefore the AHT can act independently
whenever opportunities arise. A limit on the total annual grants made by the AHT is set by the Select Board. The
Affordable Housing Trust Study Committee has recommended setting this limit to the median sales price of a home
in Lexington. Grants in excess of the annual limit are subject to Select Board approval.
The AHT does not develop or own housing units. Instead, the trust provides grants for the creation of affordable
housing to private developers (either nonprofit or for-profit), including LexHAB. Such housing may be new
construction, or use existing housing that is acquired and converted. Projects funded by the AHT are subject to
existing bylaws that govern development in the Town.
49
2025 ATM APPROPRIATION COXMTTEE 26 MARCH 2025
In addition to creating affordable housing, the trust may:
• Increase affordability in existing and future housing developments
• Preserve properties faced with expiring affordability restrictions
• Assist low- and moderate -income homebuyers
• Help low- and moderate -income families make health and safety repairs
• Educate and advocate to advance affordable housing initiatives
• Hire administrative staff, consultants, housing specialists, and contractors
Future revenue supporting the AHT could include funds generated from special legislation. Currently Lexington is
waiting for legislative approval for two such home rule petitions: Bill H.3891 An Act to Establish a Surcharge on
Specific Commercial Development Activities for the Purpose of Funding the Creation of Community Housing, and
Bill H.4314 An Act Authorizing a Development Surcharge for Community Housing.
The primary source of AHT funding is through annual CPA requests for prefunding monies. While prefunding will
allow the AHT uses its funds without further appropriation by town meeting, Article VIII of the Trust document has
the following controls:
1. The Lexington Town Treasurer shall be the custodian of the funds and shall maintain separate accounts
and records for the funds;
2. The Trust's approved annual budget and revisions shall be submitted to the Select Board and recorded by
the Town Treasurer;
3. The books and records of the Trust shall be audited annually by an independent auditor and a copy
provided to the Select Board,
4. The Trust shall provide to the Select Board a report of its activities at the end of every fiscal year.
5. The Trust must receive prior approval by the Select Board of purchases of real estate that exceed the
average sale price of a single family home in Lexington.
The AHT is also required to report on all expenditures of CPA funds to the CPC. The prior year's CPA spending is
detailed in the AHT's annual application for new CPA funding.
50
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
Appendix F: Other Post Employment Benefits
The OPEB Liabilit
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 FY2023 is
approximately $8.2 million and the projected cost for FY2024 is approximately $8.7 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 prefunding, the projected fully -loaded cost of services is accounted and paid for in the current year.
Even partial prefunding 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.
51
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
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.
Since 2014 the Town has made annual contributions of roughly 25% to 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. Investment earnings have also added significant amounts to the PEIL Fund, especially in
recent years as the Fund balance has grown.
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. Town Meeting may only appropriate monies out of the PEIL Fund 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.
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.
52
2025 ATM APPROPRIATION CONMTTEE 26 MARCH 2025
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, received in July, 2024, presents the picture of the Town's OPEB liabilities
and funding as of June 30, 2023. This and several previous reports are available on the Town's Finance Department
web page under "Finance Documents". The actuarial firm used a discount rate calculated according to GASB
directives. For this analysis, the actuaries used a discount rate of 5.12% which is the equivalent of a 6.75% rate for
a certain interval (roughly 35 years) followed by a 3.65% rate. Using this discount rate, the total OPEB liability as
of June 30, 2023, was estimated at approximately $268 million. Since the balance in the PEIL Fund on June 30,
2023, was approximately $28 million, the net liability was about $240 million. The actuarial analysis was done to
satisfy GASB requirements, not to generate data that is appropriate for determining a funding schedule. The Town's
OPEB liabilities for policy -setting purposes could be lower than those in the actuarial report because different
assumptions, especially with regard to the discount rate, would likely be used.
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 fluctuate up and down, but will generally be significantly larger than the sum of
past appropriations into the Fund. The balance was, as of December 31, 2024, reported to be $37,933,022, while the
sum of the previous appropriations is $21,087,516.
Appropriations Into the PEIL Fund
I Appropriation Approved Amount I
2008 Annual Town Meeting
$ 400,000
2009 Annual Town Meeting
$ 440,690
2010 Annual Town Meeting
$ 479,399
2011 Annual Town Meeting
$ 500,000
2012 Annual Town Meeting
$ 500,000
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
53
Appropriation Approved Amount I
2018 Annual Town Meeting
$ 1,842,895
2019 Annual Town Meeting
$ 1,885,486
2020 Annual Town Meeting
$ 750,000
2021 Annual Town Meeting
$ 1,885,486
2022 Annual Town Meeting
$ 1,935,486
2023 Annual Town Meeting
$ 1,985,486
2024 Annual Town Meeting
$ 2,083,375