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HomeMy WebLinkAbout2025-11-20 Finance SummitFinance Summit I Select Board, School Committee, Appropriation Committee, Capital Expenditures Committee November 20, 2025 7:00 PM Estabrook Hall, Cary Memorial Building Financial Summit I was called to order by Select Board Chair Jill Hai at 7:00p.m. on Thursday, November 20, 2025, via a hybrid meeting platform in Estabrook Hall, Cary Memorial Building, 1605 Massachusetts Avenue. Present for the Select Board (SB): Ms. Hai, Chair; Mr. Pato; Mr. Lucente; and Mr. Sandeen, as well as Mr. Bartha, Town Manager; Ms. Axtell, Deputy Town Manager; Ms. Kosnoff, Deputy Town Manager for Finance; and Ms. Katzenback, Executive Clerk Present for the School Committee (SC): Ms. Jay, Chair; Ms. Cuthbertson; Ms. Lenihan; Ms. Carter (7:05pm arrival); as well as Dr. Hackett, Superintendent of Schools; Dr. Scully, Assistant Superintendent for Finance and Operations Present for the Appropriation Committee (AC): Mr. Parker, Chair; Mr. Bartenstein; Mr. Levine; Mr. Michelson; Mr. Padaki; and Mr. Osborne (7:05pm arrival) Present for the Capital Expenditures Committee (CEC): Mr. Lamb, Chair; Ms. Beebee; Mr. Cole; Ms. Rhodes; and Mr. Rubenstein All boards and committee called their groups to order with a roll call of attendance. ITEMS FOR INDIVIDUAL CONSIDERATION 1. Overview of FY2027 Revenue Projections, Budget Drivers, Current-Year Challenges, Policy Considerations, and Proposed Approaches to Closing the Budget Gap Carolyn Kosnoff, Assistant Town Manager for Finance, reviewed the revenue projections. The revenue came in at a surplus of approximately $8.1M. The operating expenses for FY25 are broken down into three categories: education, shared expenses, and the municipal budget.The School Department turned back approximately $84,000. Shared services turned back a total of approximately $2.9M. The municipal side turned back approximately $1.4M. The total turn backs were approximately $4.4M, which is slightly less than what was turned back in prior years.The Town ended last year with just over $24M worth of free cash. Approximately $5M of that was left unallocated last year and this rolled forward into the current fiscal year’s estimated amount of $20M. Free cash is pending certification from DOR. Mr. Bartenstein (AC) asked why $5M was left unallocated at the end of last year. Ms. Kosnoff explained that the Town typically leaves $1M of unallocated revenue in the event of an emergency. Last year, $2.7M was left instead. On top of that, at the time there was discussion regarding the Harrington Field project and how it would be funded. There was consideration to build the fields with synthetic turf, which would not have fully qualified for CPA funds. An additional $2M was carried forward in the event that it was needed for this purpose, but ultimately, the decision was to move forward with grass fields. This amount will thus return to free cash. She noted that last year's free cash allocation was significantly higher than in prior years for a variety of reasons. Ms. Kosnoff reviewed the FY27 budget. She explained that the largest source of revenue is the property tax levy. The projections show this going up by 3.7%. In addition, $3M of new growth has been built into the budget. There is very little commercial growth in the pipeline at this time. State aid shows a 3.1% increase. This includes both Chapter 70 and the unrestricted Local Government Aid. Overall, the total general fund operating revenues are going up 2.3%. This is the total revenue available. Revenues have been strong. The Town is seeing a bit of headwind in the new growth and commercial growth categories, and it will be important to be cautious regarding how to apply interest income. Mr. Lamb (CEC) asked if the State Aid number is solid or could it go down. Ms. Kosnoff stated that this number is not guaranteed. There was discussion regarding how extra revenue from permits for Hartwell Avenue could increase the amount of free cash available at the end of this fiscal year. Ms. Kosnoff explained that the total amount of revenue projected for the year is approximately $320,164,000. Based on the revenue allocation model of 2.4%, there is approximately $4.6M of new revenue available to cover the FY27 increases, level service budget, and other new items. For the municipal departments, this is an extra $1.2M worth of revenue and for the schools, it is approximately $3.5M. In terms of the initial budget requests, the school department requested a 4.6% increase, and the municipal departments have requested a 5.1% increase. This leads to a shortfall of approximately $4.7M in total. Ms. Kosnoff explained that, overall, the shared expenses are going up 9.45%, which is a very large increase. In total, shared expenses are approximately 26%-29% of the total budget. Health insurance, in particular, is challenging. Last year, there was an 11% increase in health insurance costs. The Town was told to expect a 15% increase in premiums for this year. It was also noted that the Town should not expect health insurance to level off next year, and that this increase trend may continue. Mr. Lucente (SB) asked when the health insurance increase will be solidified. Ms. Kosnoff explained that this is usually in late January. This is also around when the State Aid number will be released. There was discussion regarding how to close the budget gap. Ms. Kosnoff explained that there is currently a $4.7M budget gap projected. The gap could be closed by estimating more revenues or decreasing expenses.Historically, the annual revenue allocation percentages have been somewhere in the range of 3.6%-4.2%. Oftentimes, the initial budget requests are over that range, and things are done to scale back into that range. Given that the current allocation percentage is 2.4%, it does not seem that the budget gap will be able to be closed. The Town will likely have to dip into some of its one-time revenues in order to help close the gap for this year. Revenues will likely need to be adjusted in a range of between $2M-$3M in order to bring the allocation between 3.4%-3.9%. If the Town uses $2M of free cash or other one-time revenues this year, it will start the budget development next year at a $2M deficit. Other potential revenue adjustment items were reviewed. Mr. Bartha explained that there is a $4.7M gap between what the departments have put forward as level service budget and what is available revenue. In terms of health insurance, there are some items that can considered per Chapter 32B of Mass General Law. The Town last went out for a competitive bid process for health insurance approximately 15 years ago. Options include an RFP process, plan design, and employer contribution. The challenge with using free cash is that Lexington, like many towns, relies heavily on certified free cash this year in order to fund its capital and reserves the following year. Mr. Lucente asked about the option to potentially defer capital projects. Ms. Kosnoff explained that one of the most important things in terms of future capital planning is maintaining the Town’s existing assets versus creating new ones. Ms. Kosnoff explained that the new pension valuation was completed on January 1, 2025, and the Town continues to make progress on its target. The estimates and projections for this could be volatile though. There should be further discussion during midterm planning regarding where the Town wants to get with its pension fund. The groups discussed an interim summit meeting in early January. Mr. Levine (AC) suggested a menu of choices for review. Dr. Hackett presented on the school information. She explained that there is a request for 4.6% increase for the school budget. This does not include a $750,000 curricular adoption, which is on the path to being mandated by the Senate. Dr. Scully, Assistant Superintendent for Finance and Operations, explained that one item being budgeted for this year is an increased use of circuit breaker funds. Special education reimbursement funds from the State, commonly called circuit breaker funds, are certain special education fund expenses that are reimbursed each year. This year, the District is using funds that are being received at a higher percentage than in past years. Also last year, the District had a significant reduction in FTE, largely based on enrollment and other efficiencies. He reviewed other proposed reductions. Dr. Hackett noted that a report on the recently completed special education analysis will be released shortly. Mr. Michelson (AC) asked about which factors have been used to account for the opening of the new high school in terms of the operating budget in the five-year projection. It was explained that the tech capital budget has been reviewed for when the school comes online. Classroom sizes and enrollment numbers are being reviewed. Mr. Levine (AC) asked about the reductions made. Dr. Hackett explained that the schools had to balance the budget by reducing 12 full-time equivalents, for approximately $1M. The schools also identified through attrition a number of additional positions, for a total of 26 reductions. DOCUMENTS: FY 2027 Budget Summit 1 – Presentation; FY 27 LPS Budget Summit Presentation_November 2025; Revenue Report - FY 2027; FY 2027 Summit I Indicators_11.20.2025 ADJOURN Upon a motion duly made and seconded, the Select Board voted 4-0 by roll call to adjourn the meeting at 9:10p.m. The Appropriation Committee, Capital Expenditures Committee and School Committee followed suit. A true record; Attest: Kristan Patenaude Recording Secretary