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HomeMy WebLinkAbout2019-06-05-CEC-min �y w-AOR yrry. Minutes of the s \�� Lexington Capital Expenditures Committee (CEC) Meeting Y ry June 5, 2019 APRIL&", II,E XI NGT'O Location and Time: Town Office Building, Reed Room (111); 7:45 A.M. Members Present: Charles Lamb, Chair; David Kanter, Vice-Chair & Clerk; Sandy Beebee; Wendy Manz; Frank Smith Member Absent: Rod Cole Others Present: Kate Colburn, Vice-Chair, School Committee; Sara Arnold, Recording Secretary Documents Presented: • Notice of CEC Meeting, June 5, 2019 • Draft #3 Minutes of the CEC Meeting, May 13, 2019 • Draft Minutes of the CEC Meeting held as part of the Financial Summit, May 15, 2019 • Fiscal Policy Review Memorandum from Jim Malloy, Town Manager; Carolyn Kosnoff, Assistant Town Manager for Finance; Jennifer Hewitt, Budget Officer, to Board of Selectmen; Appropriations [sic] Committee, Capital Expenditures Committee, School Committee, May 7, 2019 Call to Order: Mr. Lamb called the meeting to order at 7:47 A.M. Approval of Minutes: Mr. Kanter discussed proposed amendments for the Draft #3 Minutes of the CEC Meeting, May 13, 2019. He moved that the Draft #3 Minutes for the CEC meeting on May 13, 2019, be approved as amended, and the Motion was seconded. Vote: 5-0 Mr. Kanter moved that the Draft Minutes for the CEC meeting on May 15, 2019, be approved as presented, and the Motion was seconded. Vote: 5-0 Follow-up Discussion of the Financial Summit Meeting held on May 15, 2019: Mr. Kanter praised the Fiscal Policy Review Memorandum prepared by staff, expressing particular appreciation for its organization and thoroughness. In addition to outlining the planned discussion for the May 15th Summit, the document was created to provide the basis for more in-depth discussion by a working group that is being created by Mr. Malloy to review, clarify, and potentially make recommended changes/additions to current policies. Mr. Kanter initiated a page-by-page review of this document, which resulted in comments that included, but were not limited to, the following- 1. Overarching ollowing:(. Overarching Policies: • Page 3; a: Long-Term Forecast-10-15 Years: Mr. Kanter endorsed an effort to produce 10-15 year forecasts. The document did not mention the five-year plan prepared by this Committee for its report to the Annual Town Meeting. The document also did not identify plans for projecting multiple year forecasts for the operating budget. • Page 3; is Pension funding: Mr. Kanter said he did not expect all the Massachusetts municipalities to be fully funded by the current legislated date of 2040, but would expect that date would be moved out as has been done in the past. Currently the Town is allocating approximately $4.0 million into this fund annually. Lexington expects to be fully funded by 2024. Page 1 of 4 Minutes of the Lexington Capital Expenditures Committee (CEC) Meeting June 5, 2019 • Page 4; ii: Other Post-Employment Benefits (OPEB) Funding: Mr. Kanter noted that the Town is not following policy guidelines that were identified in 2014 by the Board of Selectmen for funding this obligation. That policy was based on the Generally Accepted Accounting Principles, which are being changed. Currently there are no statutory requirements associated with funding OPEB obligations by a certain date, but the liability must be included in the Town's annual records, which could influence the Town's bond rating. The Committee discussed the impacts of the Town's actions related to this liability and recommendations that might be made. Options include paying off the Pension Fund before 2024 or paying off callable bonds, which would increase flexibility in the use of discretionary funds. It was agreed that more information is necessary, including information on what other towns are doing, before the Committee would take a position. • Page 5; iii: General Stabilization Fund: The Town is not meeting its stated policy for maintaining this Fund, but the financial landscape has changed since the policy was adopted. It was agreed that the policy should be updated with an attainable goal based on current practices. Mr. Kanter supported the concept of requiring a plan to correct shortfalls in maintaining the new goal, should they occur. • Page 6; iv: Capital Stabilization Fund (CSF): Allocating funds to the CSF has been touted as a method for off-setting large increases in the tax levy when exempt debt has been approved. It has also been used to keep the within-levy capital expenses to about 5%. This has required taxing to the levy limit. There was discussion about that 5% policy and whether that number should be increased. It was agreed that more information is needed to understand the consequences of changing the 5%. • Page 7; CSF continued: The Committee needed information on why, in the History of CSF table, the Ending Balance is shown as being left at the FY2025 level $5,085,527. • Pages 7-8; v; Other Stabilization Funds: ➢ Special Education Stabilization Fund: This fund has not been used since it was established, which prompted discussion about whether it would be advisable to leave it or withdraw some funds. Ms. Colburn commented that the Special Education is affected by Federal policy. ➢ Traffic Mitigation Fund: Mr. Kanter noted that the Town has not realized any large funding from developers on Hartwell Avenue, although access to Hartwell Avenue needs attention. ➢ Transportation Demand Management Fund: In two places, it needs to be identified by its full name by appending "/Public Transportation" so its primary use will be identified. • Page 9; vii: Continuing Accounts ➢ Uninsured Losses: Mr. Kanter expressed interest in understanding how the balance is made between the insurance covering more of the liability costs with small deductibles and higher deductibles with lower premiums. • Page 10; viii. Free Cash: Mr. Kanter noted that in the past the Town has produced conservative budgets that usually resulted in significant Free Cash at the end of the Page 2 of 4 Minutes of the Lexington Capital Expenditures Committee (CEC) Meeting June 5, 2019 year, but it needs to be clear whether Mr. Malloy is suggesting a less-conservative budget process that could then allow additional funds to be appropriated into the CSF. II. Operating Budget • Page 11: b. Tax to the Levy Limit: There was considerable discussion about the pros and cons of taxing to the limit. Mr. Lamb asked about establishing how excess levy capacity would be used if the Town did not tax to the limit. Ms. Beebee asked what other towns are doing. It isn't clear how Mr. Malloy would use excess tax revenue if budgets are less conservative, but the Town continues to tax to the levy limit. In the past, the Town has added available funds to the CSF for future use, but Mr. Malloy may be wanting to use such funds for the operating budget. • Page 12; d. Personal Property New Growth: Mr. Kanter noted that there is no real audit of Personal Property. The others present suggested that it was best to leave this as it is currently handled. • Page 14; g: Within Levy Debt Service: Mr. Kanter noted that this again raises the question of taxing to the levy limit. • Page 15; is Revenue Allocation Model: Mr. Kanter suggested that this needs to be better understood, noting that both the municipal and school departments fully budgeted their allocated revenue for FY2020. This was not the case in prior years when excess Allocated Revenue provided for additions to the CSF. • Page 16; I: School Enrollment Projections: Mr. Kanter wondered what projections Mr. Malloy believes should be used. • Page 16; m: Snow and Ice Budget: Mr. Kanter needed clarification of how the end-of-year use the Reserve Fund, controlled by the Appropriation Committee, for covering expenses that exceed the amount in the Town-Meeting approved budget would affect the next year's Operating Budget, as dictated by State regulations. He noted that the fund has had $900,000 allocated to it in recent years, but these funds have rarely been completely, or even seriously, tapped. III. Capital Budget • Page 17; a: Definition of Capital Project: Mr. Kanter noted that the $25,000 expenditure minimum can be an aggregated cost, such as for computer equipment. • Page 17; b: Prioritized Capital Plan: Mr. Kanter expressed interest in understanding the criteria that Mr. Malloy plans to use for prioritizing projects and suggested that the Capital Improvement Project (CIP) forms that are prepared by staff may need to extend beyond five years if the Town is going to make 5-10 year projections. He noted that new CIP software is expected (if not already in use) and wondered if this Committee could have input into the CIP design changes—some of which have been long-term requests by this Committee. Ms. Colburn noted that other towns have score sheets, which may be useful to review. With the page-by-page overview completed, it was agreed that, based on a unanimous straw vote, the Committee supported taxing to the levy limit and not changing the process for the Personal Property tax determination. The Committee emphasized that more information is Page 3 of 4 Minutes of the Lexington Capital Expenditures Committee (CEC) Meeting June 5, 2019 needed on the impact of changing the current practice for funding OPEB. In particular, the Committee is interested in learning how this might affect the Town's bond rating. After discussion, a Motion was made and seconded to appoint Mr. Lamb and Mr. Kanter to serve as CEC liaisons to the Working Group that will be reviewing and making recommendations related to the Town's financial policies. Vote: 5-0 Member Concerns and Liaison Reports: Mr. Lamb initiated discussion about the officers of the Committee. No one expressed interest in changing them; Mr. Lamb and Mr. Kanter agreed to continuing serving in their current capacities. A Motion was made and seconded to re-appoint Mr. Lamb Chair and Mr. Kanter Vice-Chair and Clerk as the officers of the CEC. Vote: 5-0. Adjourn: A Motion was made and seconded at 9:40 A.M. to adjourn. Vote: 5-0. These Minutes were approved by the CEC at its meeting on June 19, 2019. Page 4 of 4