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Home My WebLink About2019-01-30-AC-min 01/30/2019 AC Minutes DRAFT Minutes Town of Lexington Appropriation Committee (AC) January 30, 2019 Place and Time: Parker Room, Town Office Building, 7:30 p.m. Members Present: Glenn Parker, Chair; Sanjay Padaki, Vice-Chair; Alan Levine, Secretary; John Bartenstein; Eric Michelson; Richard Neumeier; Nick Nichols; Lily Manhua Yan; Carolyn Kosnoff, Assistant Town Manager, Finance (non-voting, ex officio) Member(s)Absent: Ellen Basch Other Attendees: None The meeting was called to order at 7:35 p.m. Announcements and Liaison Reports Based on comments at the January 28, 2019, meeting of the Board of Selectmen (BoS) and input from those present, the following topics were discussed: • Crematorium at Westview Cemetery: Mr. Padaki announced that the Ad hoc Crematory Committee would hold a public hearing on February 7 in order to gather public comments. • Assistant Town Manager report: Ms. Kosnoff reported that Town Manager Malloy gave a preliminary budget report to the BoS. The proposed budget would fund $68 million in capital programs, of which $27 million would be funded using within-levy debt, $25 million through exempt debt for the replacement of the Police Station, and the balance via the Water or Wastewater Enterprise Funds or CPA funds. Mr. Molloy would like to create a new long- term financial plan which would address policy issues such as use of personal property new growth and the use of the Capital Stabilization Fund. Ms. Kosnoff noted that the Town now uses a new tool for budget creation and tracking, WDesk. This tool is still being loaded with financial data. In addition, Mums, the Town's general ledger software, is being updated with a new chart of accounts. • Document-sharing portal: Mr. Parker announced that progress is being made on creating a document-sharing portal to allow Open Meeting Law-compliant distribution of documents among Committee members. He is confident that this tool will be ready in time for the creation of our report to the Annual Town Meeting. White Book Discussion A general discussion of the "White Book"preliminary budget document was conducted. Mr. Parker noted that a concerning trend was emerging in that while the tax levy was increasing 3.9%, and the general fund use was increasing 3.6%, the school budget was increasing 5.42%. Revenue- Mr. Padaki asked if projected revenue included money from the new"AirBnB" tax implemented by the state. It does not. Mr. Parker noted that a storm water enterprise fund has been proposed for future use as a way to collect fees and use the revenues to support storm water management. Ms. Kosnoff noted that the implementation of a proposal for tax relief, either by not taxing to the levy limit or by rolling back the capture of new growth of personal property, will constrain revenues. Additionally, Committee members noted that a change in the use of personal property 1 01/30/2019 AC Minutes new growth would not only reduce annual revenue but would also create a growing amount of unused tax levy that could enable a large spike in the tax rate without a voter referendum. The Town administration is responding to negative comments by the rating agencies about the large amount of Free Cash that has been applied on an ongoing basis to the operating budget by implementing a five-year program to phase out this practice. This year that translates to a reduction of$700,000 of revenue available to support the operating budget. Water& Sewer Enterprise—Mr. Bartenstein noted that the proposed Water and Wastewater Enterprise Fund capital budgets have jumped from about$1.2 million $2.4 million per fund. He inquired whether, and to what extent, the proposed Automated Meter Reading system was responsible for this spike. Ms. Kosnoff noted that the proposed funding for the meter system would be borrowing, not cash, and thus would be responsible, if approved, for a relatively small part of the capital budget increase for FY2020. Ms. Kosnoff noted that alternate ways of funding the meter system are being considered; one option is through the user rates and another is through a new flat fee that might depend on user type. She added that implementation of a new metering system would allow meters to be monitored and billed every three months, reduce the time staff spends reading meters, allow for prompt notification of households where water is being used at unusually high rates, and thus decrease the number of abatement requests. Operating Fund Expenses - It was noted that contract negotiations may become more challenging as the general unemployment level decreases. It was also noted that both the municipal and school budgets have completely used their revenue allocations in the proposed FY2020 budget. Debt Service, Capital Stabilization Fund, and mitigation t�—Ms. Kosnoff reported that due to the proliferation of within-levy debt-funded capital projects, annual within-levy debt payments are growing more than 5%per annum, and thus are inconsistent with a previously adopted goal. In future budgets, funding for baseline capital programs will use the entire 5% growth, leaving no room for new capital requests. This could result in accelerated withdrawals from the Capital Stabilization Fund to mitigate the impacts of the increases in within-levy debt service on the operating budget. It is estimated that to maintain the 5% growth cap for within-levy debt over the next 5 years, S 10-12 million of stabilization funds would be needed to mitigate the cost of within- levy debt service. This would reduce the amount available to mitigate exempt debt. One way to control this growth may be to reevaluate timing and cost containment options for ongoing capital projects. The FY2020 budget's increased expenses have led to a decrease in the recommended appropriation into the Capital Stabilization Fund. If this trend continues, it is possible that there will be no appropriation into the Fund next year. It was noted that the large amounts of Free Cash used to fund the Capital Stabilization Fund in previous years may be partially attributed to end-of-year turn- backs due to conservative budgeting for health insurance and the Lexington Public Schools. Report to the 2019 ATM Mr. Parker asked article authors to suggest people to be invited to future meetings to aid the Committee in its deliberations. Committee members listed the following issues where more information is needed: automated meter reading; Center streetscape; Minuteman High School athletic fields; crematorium; CPA reduction; debt service/Capital Stabilization Fund; and the Sustainability Director. Upcoming Meetings and Report Schedule February 7 2 01/30/2019 AC Minutes Cancel February 14 and reschedule for February 12 or February 13 February 21 Consider moving February 28 to February 27 March 7 March 14 March 21 — approve report March 25— distribute report Minutes The meeting minutes of January 17, 2019 were approved 9-0. The meeting adjourned at 9:12 p.m. Respectfully submitted, Eric Michelson Approved: February 21, 2019 Exhibits Agenda,posted by Mr. Parker, Chair 3