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HomeMy WebLinkAbout2017-12-07 BOS Packet - Released , Fiscal Years 2019-2021 December 7, 2017 Indicator Analysis: Fiscal Years 2000-2017 see Summit I Documentation Financial Summit III Town of Lexington For Revenue and Expenditure Projections: Table of Contents Town of Lexington Summit III –December 7, 2017 1 Introduction Town of Lexington Summit III –December 7, 2017 Indicator Analysis: Fiscal Years 2000-2017 Financial Summit III Town of Lexington 2 Indicator Summary ÏFY2014-2017 Town of Lexington Summit III –December 7, 2017 3 Indicator Dashboard ÏFY2015-2017 Uncollected Taxes as % of Net Prop. Tax Levy Indicator I.3: Revenues Related to Economic GrowthIndicator I.5: Uncollected Property Taxes Town of Lexington Summit III –December 7, 2017 Favorable Indicators Indicator I.1: Revenues Indicator I.4: Property Tax Revenues Property Tax Revenues (constant dollars Ïin millions) % Change In Net Operating Revenues (constant dollars) 4 Indicator Dashboard ÏFY2015-2017 Indicator I.7: Personnel Costs Personnel Costs as % of Operating Expenses Town of Lexington Summit III –December 7, 2017 Favorable Indicators Indicator I.10: Pension Liability Indicator I.6: Expenditures per Department 5 Indicator Dashboard ÏFY2015-2017 Town of Lexington Summit III –December 7, 2017 Favorable Indicators Indicator I.12: Long Term Debt Long Term Debt as % of Assessed ValuationLong Term Debt Per Household 6 Indicator Dashboard ÏFY2015-2017 Reserves as % of Operating Revenue Indicator I.13: Reserves and Fund Balance Town of Lexington Summit III –December 7, 2017 Favorable Indicators 7 Dashboard Highlights ÏFY2015-2017 State Aid as % of Operating Revenue Indicator I.2: State Aid Town of Lexington Summit III –December 7, 2017 Indicator I.8: Employee Benefits Medical and Retirement Benefits as % of Wages & Salaries 8 Indicator Dashboard ÏFY2015-2017 Indicator I.14: Population Town of Lexington Summit III –December 7, 2017 Marginal Indicators 9 Indicator Dashboard ÏFY2015-2017 Residential Share, Net Debt Service per Household Town of Lexington Summit III –December 7, 2017 Indicator I.11: Debt Service Net Debt Service as a % of General Fund Revenue Marginal Indicators 10 Indicator Dashboard ÏFY2015-2017 Indicator I.9: Participants in the Lexington Retirement System Town of Lexington Summit III –December 7, 2017 Unfavorable Indicators 11 Indicator I.1: Revenues A decrease in net operating revenues (constant dollars) is considered a warning indicator. some fluctuations in revenues in Town's ability to maintain existing this decade; despite this, growth has Town of Lexington Summit III –December 7, 2017 Revenue growth is one measure of the service levels. Lexington has witnessed constant dollars during the first half of for the most part been positive. 12 age of operating revenues Indicator I.2: State Aid Reduced State Aid as a percentis considered a warning indicator, particularly if the Town does not have adequate reserves to offset reductions. Town of Lexington Summit III –December 7, 2017 While the Town does not rely significantly on State Aid, any dependence on such aid may be difficult to manage when there is a reduction in State funding. In order to protect itself, the Town has a contingency plan for reductions in State Aid. The Board of Selectmen adopted the recommendation of the 2006 Ad Hoc Financial Policy Committee to create reserves capable of offsetting cyclical downturns in State Aid and Local Receipts. On a constant dollar basis, State Aid steadily increased from FY2004-09, before decreasing in FY2010-12 as a result of the economic downturn. However, it increased substantially in FY2013-15, to reach a more moderate level of growth in FY2016. Recent growth in FY2017 is largely due to increased Education Aid, which is based, in part, on the state’s efforts to meet its minimum financing requirements (Foundation Budget) under the Chapter 70 formula. It appears that this state funding requirement has been met in FY2018 (data not shown). See Appendix A-2 for further information. 13 nues, as a percentage of net lated to Economic Growth Decreasing economic growth reveoperating revenues, is considered a warning indicator. Indicator I.3: Revenues Re Town of Lexington Summit III –December 7, 2017 Economic growth revenues are responsive to changes in the economy. A balance between growth and other (non-economic growth) revenues mitigates the effects of economic growth or decline. During a recession, a high percentage of non-economic growth revenue is an advantage. During a slowing economy, the Town should maintain sufficient reserves to protect against slowing revenue growth. A decrease in building permit fees may also be a leading indicator of smaller future increases in the tax levy. The increases in FY2011-13 Industrial/Commercial levy growth is partially a result of large expansions at Shire HGT and Cubist. The FY2016 increase in Fees and Permits is partially a result of new construction on Hartwell and Hayden Avenues. 14 A decline in property tax revenues (constant dollars) is considered a warning indicator. Indicator I.4: Property Tax Revenues ately because they are the Town's ed for their impact on taxpayers' ing and capital spending. Increases growth continues favorably into FY2017. basis, Lexington has seen consistent Town of Lexington Summit III –December 7, 2017 Property tax revenues are analyzed separprimary revenue source for both operatdue to operating overrides should be notability to pay. On a constant dollar growth in this area since 2000. This 15 tax levy) of 5-8 ting organizations. of the property cator by bond ra Indicator I.5: Uncollected Property Taxes tor 4 for a number inclusive of both) Uncollected property taxes (as a percentpercent is considered a warning indi ty Preservation Act Surcharge (see Indica property taxes may indicate an Town of Lexington Summit III –December 7, 2017 Includes exempt debt, but excludes Communi 1 An increase in uncollected inability by property owners to pay their taxes due to economic conditions. Additionally, as uncollected property taxes rise, liquidity decreases, resulting in less cash on hand for the Town to invest. Bond rating agencies generally consider uncollected taxes in excess of 5% as a warning trend. Lexington has consistently maintained a strong position on this indicator, even during economic downturns. 16 Indicator I.6: Expenditures Per Department Increasing operating expenditures, in constant dollars, may be a warning indicator if increases are the result of fixed or unsustainable costs. cs of the Town indicate that the cost of spending in related services. he Town's ability to pay. Increasing hat the demographi Town of Lexington Summit III –December 7, 2017 Increasing operating expenditures can providing services is exceeding texpenditures may also indicate tare changing, requiring increased 17 Indicator I.7: Personnel Costs Increasing personnel costs as a percentage of total spending is considered a warning indicator. the Town's infrastructure. ing capital and maintenance in and compensation level of l expenditures have remained relatively as a percent of operating expenditures are cent of operating expenditures may be an tor of deferred maintenance of that the Town is not sacrific it may point to future pension and health insurance costs are related to the number Town of Lexington Summit III –December 7, 2017 Increasing salaries and wages as a perindicator of two trends: First, since both of these items employees. Second, if salaries and wages increasing, it may be an indicaWages and benefits as a percentage of totaconstant, a positive indication order to fund personnel. 18 sts as a percentage of Indicator I.8: Employee Benefits Increasing employee benefit cowages and salaries is considered a warning indicator. 's operating costs. While tired in 2024. For an explanation of wages and salaries has almost doubled the Town joined the Group Insurance unding schedule, the Lexington Retirement ficant share of the Town ssessment, please see Indicator 10. Town of Lexington Summit III –December 7, 2017 Fringe benefits represent a signibenefit spending as a percentage of since 2000, it has leveled off since Commission (GIC) in 2013. Note that per the current pension fSystem's unfunded pension liability will be rethe increase in the Pension A 19 tSystem (MTRS). is considered a warning trend. is no data for 2000 –2011. ticipants, without fully funding the Indicator I.9: Retirement Participants of the Massachusetts Teacher Retiremen r this indicator. As a result, there An increase in retirement system parassociated post-retirement health costs, its (OPEB), please Retirement System, and are instead members to funding its pension liabilities, creasing number of retirees places ve and retired teachers had not been compiled fo begin to slowly fund its post- budget. For more information on the Employment Benef Town of Lexington Summit III –December 7, 2017 Note: Teachers do not belong to the Lexington Prior to 2012, data for the number of acti Lexington has an aggressive approach and recently implemented a plan toemployment health liabilities. The inpressure on the health insurance Town's obligations for Other Postrefer to Appendix C, OPEB. 20 Indicator I.10: Pension Liability An unfunded pension liability or increase in the unfunded liability is considered a warning indicator. was 87.0% funded. is projected to fully assets of the Lexington tional information regarding the on and the System actuarial valuation of annual appropriations, Lexington Town of Lexington Summit III –December 7, 2017 As of January 1, 2016, the Retirement System was $153.8 milliAt the current level of fund its pension system in 2024.Also see Appendices C and F for addiLexington Retirement System. 21 the credit rating organizations. nt of operating revenues is Indicator I.11: Debt Service Debt Service exceeding 20 perceconsidered a warning indicator by tal projects –multiple Bowman and Estabrook payments were projected to he last five years, dependent the approval of debt service of the 9 schools, including new provements to Lincoln Park, a street extensively in new capi on votes by residents. The increase in net increases in taxes to Lexington citizens. Net ublic Services Building have been funded clusion for the Bridge/ uctuated slightly throughout t needs of the community. Debt ct was reduced as a result of ects with investments at most Town of Lexington Summit III –December 7, 2017 Over the last 20 years, Lexington has invested school reconstruction projschools for Fiske, Harrington and Estabrook, imreconstruction program, and a $26 million Pthrough the successful passage of debt exclusiexempt debt service (Row C) has resulted in within-levy debt (Row F) has flupon the shorter term capital increase with the approval of the Debt Exschool projects, but that effemitigation by Town Meeting, detailed above.(Rows B and E) 22 construction, Police and Fire Proposed Projects include Hastings Indicator I.11(a): Projected Exempt Debt Service outstanding as of June 30, 2017. ed on modeling done debt service, and ty. Issued debt reflects debt e and the Residential share. Like in l class debt burden is isolated from the (noted in green) bas story of exempt breaks out separately Commercial/ ober 2017. The graph on the left shows is Residential share that is used to determine the Children's Place construction. on Lexington households. Town of Lexington Summit III –December 7, 2017 Notes: “C/I/P” stands for Commercial/Industrial/Personal properstation renovations and Lexington This indicator shows Lexington’s hiprojects its growth into Fiscal 2020 by the Finance Department in Octtotal Net Exempt Debt Service, butIndustrial/Personal Property (CIP) sharthe previous Indicator, the ResidentiaCIP classes, and it is theffect of Exempt Debt 23 tor by bond rating agencies. Indicator I.12: Long-Term Debt Overall debt exceeding 10 percent of assessed valuation is considered a warning indica renovation of the ington has a strong rating organizations FY2012 to FY2013 is the as well as its level of effort in formation from Bond Prospectus & Operating Statements mond expansion projects as well onstruction of the Estabrook ed by the credit which financed the om FY2016 to FY2017 reflects voter- On both measures, Lex Bridge, Bowman and Fiske. substantial increase from Town of Lexington Summit III –December 7, 2017 Sources: Outstanding Long-term Debt & Assessed value in These financial indicators are evaluatas measures of a community's debt burdeninvesting in its capital facilities. profile. Note that the result of voter-approved exempt debtBridge and Bowman schools, and the recschool. Similarly, the increase frapproved exempt debt for Clarke and Diaas modular classrooms at 24 Indicator I.13: Reserves and Fund Balance Declining reserves as a percent of operating revenues is a warning indicator. The Government Finance Officers Association (GFOA) recommends an undesignated fund balance between 5-15 % of operating revenues. hened its reserve position by augmenting and Town of Lexington Summit III –December 7, 2017 The Town of Lexington has several types of reserves. Historically, the Town had relied upon Free Cash as its primary source of reserves. The Selectmen's Ad Hoc Financial Policy Committee recommended a number of actions to further strengthen the Town's fiscal position and create a series of targeted reserves for specific purposes. In recent years, the Town has strengttransferring money into the Stabilization Funds. This adds financial flexibility to the Town's operations and provides a buffer against economic downturns. (See Indicator I.2) 25 As a means of offsetting the impact of a number of anticipated construction projects, Lexington has been building a balance in it’s Capital Stabilization Fund. Indicator I.13(a): Use of Capital Stabilization Fund mitigate increases in exempt Town of Lexington Summit III –December 7, 2017 This indicator shows the projected use of the Capital Projects Stabilization Fund to debt service for proposed new building projects. The mitigation will reduce the annual impact on Lexington taxpayers. 26 Indicator I.14: Population Rapid changes in population which may affect service levels may be considered a warning indicator. seen its 60-69 year old demographic increase by Town of Lexington Summit III –December 7, 2017 A steady change in both population demographics and public school enrollment may signal a need for increased service delivery and programs. Since 2000, Lexington has seen an increase in its under-20 demographic of 16%, which is an indicator for increasing financial burden on the public school system, likewise reflected in the steady increase in school enrollment. Additionally, the town has also 31.1%, and its over 80 demographic by 6.0%. An increasing senior population is likewise indicative of an increasing financial burden on the Town’s ability to provide social services to this group. 27 Indicator I.14A: School Enrollment Rapid changes in school enrollment may affect service levels may be considered a warning indicator. ses in recent years. These Town of Lexington Summit III –December 7, 2017 After years of steady enrollment, Lexington Public Schools have experienced marked increatranslate into a need for additional teachers and support staff, as well as additional classrooms and expanded school buildings. The Town has taken steps to plan for this growth by building up fiscal reserves. Appendices Financial Summit III Town of Lexington 28 Appendix A-1: Chapter 70 Comparative Data below the average aid for comparable he table at right shows Town of Lexington Summit III –December 7, 2017 The Chapter 70 formula is based on a variety of factors. Tthat Lexington receivesamount of Chapter 70 communities. 29 on is 17.5%, with municipal on has received less than the FY2018 realized state contribution State Aid Contribution Levels Appendix A-2: Historical Chapter 70 state contribution for Lexingt te that historically, Lexingt narrowed in recent years, and g 82.5%. The graphs above illustra he state. However, the gap has Town of Lexington Summit III –December 7, 2017 The Chapter 70 formula is based on a Foundation Budget. The Targetsources providing the remainintarget level of support from tlevels above the 17.5% target for the first time. 30 Average = 17.6% Average: 18% Appendix B: Per Pupil Population Comparative Data pality (or in the case of (Also see Indicator I.14) pupils as a percentage of has more students as a for similar communities & *Includes combined enrollment and population numbers for both the local and regional districts. Town of Lexington Summit III –December 7, 2017 This chart shows the ratio ofthe total population of a municijoint school districts, municipalities). Compared to the average school systems, Lexington percentage of the population. 31 ed ts that are not associat cipalities begin to fund this Reported OPEBs may include mum, the prior year’s Medicare 45, which requires governments to measure and to fund the Town’s OPEB liability. ility and long-term care benefi Appendix C: Other Post Employment Benefits ment that Massachusetts muni mployment benefits (or OPEB). eeting has appropriated, at a mini vision, life, long-term disab oard issued GASB Statement obligations, there is no require by the federal government to begin he last 4 fiscal years, Town M ed with other (than pension) poste Town of Lexington Summit III –December 7, 2017 The Government Accounting Standards Breport the liabilities associatpost-retirement medical, pharmacy, dental, with a pension plan. Unlike pension liability. Nonetheless, over tPart D payments made to the Town 32 Continuing Balance Accounts Appendix D: Other Reserves and Town of Lexington Summit III –December 7, 2017 33 Appendix E: Average Residential Tax Bill Average: $10,982 Town of Lexington Summit III –December 7, 2017 34 Appendix F: Comparative Pension Liability Funding Town of Lexington Summit III –December 7, 2017 35 venues and Expenditures Appendix G: History of Re Town of Lexington Summit III –December 7, 2017 36 Appendix H: FY2019 Budget Process Town of Lexington Summit III –December 7, 2017 Summit III December 7, 2017 Town of Lexington FY 2019 Revenue Allocation Model 12/7/2017 Financial Summit 3 - Town of Lexington 12/7/2017 2 Financial Summit 3 - Town of Lexington Financial Summit 3 - Town of Lexington 12/7/2017 Financial Summit 3 - Pedestrian, Bicycle and Vehicle Safety on Town - Stormwater Management Mandates - Continuing Policy Issues Town of Lexington Policy Issues for Consideration Financing Plan for Increasing School Enrollments (Limiting Program Improvement Requests)Financing Plan/Property Tax Impact for School and Municipal Capital ProjectsPlanned Use of Capital Stabilization FundCommunity Priorities Roads, Intersections and School Properties; Sidewalk Betterment Evaluation (BOS Goal 7, 10)Financing Options 1.2.3.4.5.12/7/2017 Financial Summit 3 - New Policy Issues Policy Issues for Consideration Town of Lexington Implementation of 20/20 Subcommittee Report/Diversity Advisory Task Force (Goal 18)Community Center Expansion Options (BOS Goal 7)Staffing for Public Information/Citizen Outreach Activities (BOS Goal 9)Community Mental Health Programs (BOS Goal 13; SC Goal)Managing Within Levy Debt 1.2.3.4.5. 12/7/2017