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HomeMy WebLinkAbout2019-01-31 Summit III-min Page 1 of 5 Financial Summit Meeting III Board of Selectmen, School Committee, Appropriation Committee and Capital Expenditures Committee Thursday, January 31, 2019 A Financial Summit meeting was held on Thursday, January 31, 2019 at 7:05 p.m. at the Samuel Hadley Public Services Building Cafeteria, 201 Bedford Street. Present for the Board of Selectmen (BOS) were Ms. Barry (Chair); Mr. Pato; Mr. Lucente; Mr. Malloy, Town Manager; Ms. Kosnoff, Assistant Town Manager for Finance; Ms. Hewitt; Budget Director; and Ms. Siebert, Recording Secretary. Ms. Hai was absent. Present for the School Committee (SC) were Ms. Jay (Chair); Mr. Alessandrini; Ms. Colburn; Ms. Lenihan; Ms. Sawhney; Dr. Hackett, Superintendent of Schools; and Mr. Rowe, Assistant Superintendent of Schools for Finance and Operations. Present for the Appropriation Committee (AC) were Mr. Parker (Chair); Mr. Bartenstein; Mr. Michelson; Mr. Levine; Mr. Padaki; Ms. Yan (late arrival); Mr. Neumeier; Ms. Basch; Mr. Nichols. Present for the Capital Expenditures Committee (CEC) were Mr. Lamb (Chair); Mr. Kanter; Mr. Cole; Ms. Beebee; Ms. Manz; and Mr. Smith. FY2020 Preliminary Budget and Financing Plan Mr. Malloy, Town Manager presented the preliminary FY2020 Operating and Capital Budget recommendations. The FY2020 budget is balanced. Revenue sources are projected to total $229,136,434, an $8,011,622 change over FY2019. The total Tax Levy projection for FY2020 is $183,792,412, an increase of $6,987,835 over FY2019. State Aid is projected at $16,211,973, an increase of $215,638 over FY2019. Local Receipts are projected at $14,086,885, an increase of $486,165. The recommended expenditures totals $229,136,434, an increase of $8,029,397over FY2019. It was noted that actual revenue has followed projected revenues over time, for the most part. Expenditures for the Lexington Public Schools in FY2020 are projected at $113,970,176, an increase over FY2019 of $5,858,731 over FY2019. Minuteman High School expenses are projected to be $2,489,979, an increase of $362,762 over FY2019. Municipal Department expenditures are projected at $40,264,265, and increase of $1,982,230 over FY2019. Shared expenses are expected to be $60,303,768, an increase of $794,910 over FY2019. Mr. Malloy highlighted a set-aside new line item in the summary: “Transition Free Cash Out of Operating Budget” for $700,000 and said that Moody’s, the bond rating agency, states that one- time revenue should not be used in support of the Operating Budget. Mr. Malloy recommends that the Town incrementally reduce its reliance over 5 years of Free Cash revenue in the Operating budget. Mr. Malloy noted two new anticipated sources of revenue: a 6% short-term rental room tax, from Airbnb-type properties, in the form of Local Receipts from the State; and a fee from third party Page 2 of 5 reviews of proposed residential development and the effects on abutting properties. Mr. Malloy said for FY2021 he will recommend the creation of an Enterprise Fund using an additional development fee. The Fund will assist the Town with stormwater management costs and National Pollution Discharge Elimination System (NPDES) compliance. Mr. Malloy noted several recommended expenditures that furthered identified Selectmen goals: Police Station Facility Construction Funds (Goal 3): $25,651,792; Pedestrian, Bicycle and Vehicle Safety on Town Roads (Goals 7 and 10): $9,273,880; Collaboration with Minuteman on Recreation Fields (Goal 1) $4,900,000; Cemetery Building Construction and Review of Crematorium (Goal 12) $2,800,000; Community Mental Health Programs (Goal 10) with funds from the School Department budget in FY2020. Mr. Malloy reported that the Town is considering decreasing the estimate on the number of employees that are expected to enroll in the Health Insurance Benefit Program. This action is based on trends over the last few years and would in FY2020 decrease the Health Insurance appropriation by $115,000. This action would provide an additional $85,000 for the School Department and about $30,000 for the Municipal Departments in the revenue allocation model; on the Municipal side, the funds would provide support for the Town’s Mental Health initiatives. Mr. Malloy presented breakdown summaries of budget allocations and shared expenses for FY2020. He recommended that $1,885,486 be appropriated into the Reserve Fund for Post- Employment Benefit (OPEB) and $1,600,000 into the Reserve Fund for Capital Stabilization. Mr. Malloy noted that $106,000 of the Facilities Department increase is related to utility prices, particularly for new buildings that will not immediately have solar power generating systems installed. Mr. Malloy reported the Center Streetscape Improvements project may be eligible for funding through the Mass Works grant program. He recommends the Town continue to move forward with funding for the project but said it should postpone the project for a year to pursue the grant as secured local funding is a prerequisite of the Mass Works grant process. The timing of the debt for the project, should borrowing ultimately be necessary, would also coincide with the end of payments for land purchases and would therefore be more advantageous vis-à-vis the debt burden. Continuing policy issues center around: the Capital Stabilization Fund; OPEB; unallocated revenues for contingencies; Hartwell Avenue re-development; Personal Property New Growth; reduction of Free Cash use for the Operating budget; reduction of debt service reliance for Capital projects; and a re-evaluation of the Liberty Ride. About the reduction of debt service reliance for Capital projects, Mr. Malloy said Free Cash funds that have been going toward the Operating Budget could instead be used for short lifespan Capital expenses, like technology purchases, rather than those funds being borrowed. Page 3 of 5 Some key upcoming dates in the pre-annual Town Meeting budget process include: February 22, 2019 - Approval of recommended Operating and Capital Budget by the Selectmen; March 1, 2019 - Distribution of Selectmen’s recommended budget to financial committees/Town Meeting members; April 1, 2019. Earliest date Town Meeting will consider financial articles. Mr. Kanter (CEC) asked if paydown of current debt for the Pelham Road and Bedford Street land purchases could be done more quickly. Mr. Malloy will examine. Mr. Pato (BOS) asked that the concept of not taxing to the full extent possible be considered; specifically that currently unallocated funds would not be applied to the budget as a way of offering some residential tax relief. Mr. Kanter (CEC) said he encourages consideration of the concept but asked that the funds also be considered as way to accelerate the pension payoff date. Mr. Levine (AC) said he does not agree that Free Cash is one-time revenue since it recurs. However, he does not have a problem with redeploying Free Cash to support cash capital expenditures but doing so should result in a compensatory reduction of debt service allocation. He asked that a plan be developed for how this affects within-levy debt service. Mr. Bartenstein (AC) said, if the current annual amount of $2M spent on stormwater management becomes something that is covered by fees, it would in effect provide an additional $2M in the tax base without an override. He suggested that a baseline of $1M be kept in the budget and that the fees cover amounts over the $1M. Mr. Michelson (AC) asked, related to the idea of not taxing to the full extent possible, that a policy be developed to protect residents from a jump in taxes in the event that the unused levy capacity suddenly be needed. Mr. Padaki (AC) asked how the third-party review subcontractor would be chosen to assess development abutter impact. Mr. Malloy said the Town would select the company and the developer would pay the cost. Mr. Padaki (AC) asked if alternative funding sources for the Visitors Center project have been identified. Ms. Kosnoff said the Town has applied for grants that have not yet materialized. However, the State has provided $200,000 towards the project and there have been about $8,000 in donations. Mr. Alessandrini (SC) said that the School Committee is considering raising student athletic fees by $50. He asked whether, instead, a proportion of funds might be diverted from OPEB. Mr. Malloy said that, as more employees are hired, the Town’s OPEB liability increases. He added that bond rating agencies scrutinize how a town handles its pension and OPEB liabilities; putting part of the OPEB funding toward a different project would postpone the impact of meeting the obligation. Ms. Colburn (SC) said the Schools are not funding $370,000 in positions in FY2020 but it might be a solution to use OPEB funds instead of not filling the positions. Page 4 of 5 Mr. Malloy reported that the Revenue Allocation model shows that the Schools, over the last ten years, have gotten the larger portion of available revenue. He does not recommend that funds be diverted from OPEB. Mr. Lucente (BOS) asked for more information about the $370,000 the Schools wants to raise. Dr. Hackett reported that enrollment over the last ten years has increased by 1000 students. The increase in funds the Schools have received has gone to enrollment and mandate costs, not to program expansion or other educational innovation. The $370,000 is a portion of the $2.4M in Department requests that the School Committee wants to support but does not have the funds to do so. Areas that are affected are: additional support for English language learners; intramural offerings; classroom full time-equivalent personnel (FTEs); and high school guidance counseling FTEs. Ms. Sawhney (SC) asked if School and Municipal revenue allocation trendlines would look similar in comparable towns with enrollment increases. Mr. Malloy said he has not done this analysis, but he noted that Lexington has had a 17% increase in students but a 70% increase in funding over the same ten years. Mr. Bartenstein (AC) said in the future, the revenue allocation model may need to be re- examined as it is not providing adequate funding to the Schools. Ms. Kosnoff presented an update about Debt Service Projections, noting some non-significant, non-structural changes since Summit II. Now reflected in the charts is actual debt to be issued rather then projected numbers. Ms. Kosnoff noted that the totals are the same but the categories have shifted in some cases, as have some of the loan term durations. Past practice of keeping within levy debt and debt service to a 5% increase will be maintained. The Capital Stabilization Fund is being used to keep the tax burden between 3.2% and 3.7%. Ms. Kosnoff projected that by FY2025, the Capital Stabilization Fund will be mostly depleted, including $1.6M to be added in FY2020. Ms. Kosnoff said continuing use of the Stabilization Fund to offset both within levy debt and excluded debt is a subject for discussion; if it is not utilized for within levy debt, greater use of Operating Budget funds would be necessary. Ms. Kosnoff said that by applying the Stabilization Fund, the “average” residential taxpayer would see a $414 increase in FY2020. Mr. Kanter (CEC) said he believes taxpayers expect the Capital Stabilization Fund to be used against the impacts of excluded debt, not within levy debt. He asked how Capital projects can be reconsidered to lessen future tax impacts. Mr. Parker (AC) said lessening the impact would require delay or deferment of projects now on the five-year plan. Ms. Jay (SC) asked if the future high school project is included in the debt model. Ms. Kosnoff said she included it in the debt graphs but not in the taxpayer impact model. Ms. Lenihan (SC) asked what amount the high school project has been assigned. Ms. Kosnoff reported, for the purpose of calculation, she used $350M (borrowed) as a placeholder. Ms. Colburn (SC) reported, as the Statement of Interest is being written now to the Massachusetts School Building Authority (MSBA), it appears possible that the high school Page 5 of 5 project timeline may accelerate, given the level of need. Mr. Malloy said no specific plan with regard to high school debt has been created; he and Dr. Hackett will meet to discuss the associated issues. Ms. Colburn said she believes it is important for Lexington to develop a more comprehensive economic development strategy to mitigate the residential tax impact. Capital Expenditures Committee—Preliminary Report: FY2020 Proposed Capital Projects This item was deferred until Summit IV. Review List of 2019 Annual Town Meeting Articles The group reviewed the Warrant Articles. Ms. Barry noted that Town Meeting Member Information Nights are scheduled for March 13 and March 19, 2019 in Battin Hall in the Cary Memorial Building. Confirm Date for Summit IV February 13, 2019 at 7:00 p.m. at the Samuel Hadley Public Services Building Cafeteria, 201 Bedford Street. Adjourn Upon motion duly made and seconded, the Board of Selection voted 3-0 to adjourn at 8:55 p.m. A true record; Attest: Kim Siebert Recording Secretary