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HomeMy WebLinkAbout2020-08-20-AC-min 08/20/2020 AC Minutes Minutes Town of Lexington Appropriation Committee (AC) August 20, 2020 Place and Time: Remote Participation: in accordance with the Governor's March 12, 2020 Order Suspending Certain Provisions of the Open Meeting Law; communication took place via a Zoom teleconferencing session that was open to the public; 7:00 p.m. Members Present: Glenn Parker, Chair; Sanjay Padaki, Vice-Chair; Alan Levine, Secretary; John Bartenstein; Eric Michelson; Meg Muckenhoupt; Lily Manhua Yan; Carolyn Kosnoff, Assistant Town Manager, Finance (non-voting, ex officio) Member(s)Absent: None Other Attendees: Charles Lamb, Chair, Capital Expenditures Committee(CEC); David Kanter, Vice-Chair and Clerk, CEC; Frank Smith, CEC; Deepika Sawhney, School Committee Using the Remote Meeting Prologue as a guide, Mr. Parker confirmed attendance by roll call and reviewed the section entitled Introduction to Remote Meeting, noting that the meeting was being called to order at 7:17 p.m. on August 20, 2020 and that the meeting was being recorded to assist in the writing of minutes. He also reviewed the section entitled Meeting Protocol and noted that materials for the meeting were available on-line. Announcements and Liaison Reports Ms. Muckenhoupt reported that the Select Board (SB) had created an ad hoc Stone Building Feasibility/Reuse Committee. Mr. Parker reported that Ms. Yan had volunteered to be the AC liaison. There were no objections. Mr. Bartenstein reported that Dan Fenn, a longtime resident and civic leader in Lexington, had passed away. Mr. Michelson reported that two high school sophomores were working with the Lexington Economic Development Department, the Lexington Retailers' Association, and the Chamber of Commerce to encourage local shopping. The website ShopLexingtonFirst.com describes the Step Up for Lexington program. When shopping at local stores between now and mid-October, a card is stamped and after ten stamps, the shopper receives a gift. Mr. Parker noted that with Nick Nichols' departure from this Committee, a new liaison to the CEC was needed. He volunteered to assume this responsibility. Final FY2020 Budget and Possible Adjustments to the FY2021 Budget Ms. Kosnoff reported that, at its meeting this Monday, August 24, the Select Board (SB) would receive an official update on plans to rebalance the FY2021 budget and a presentation on preparations for the FY2022 budget. She then provided a review of the FY2020 and FY2021 budgets, as follows: FY2020: ended June 30th • The Town closed the year in a good financial position, with Free Cash likely to be, when certified, approximately $15 million deriving from: ➢ Approximately $1.5 million more in revenue than had been projected when the budget was prepared a year ago in spite of revenue losses, particularly in local receipts from the 1 08/20/2020 AC Minutes Recreation Department and hotel/motel taxes, because of strong contributions from state aid and the local property tax; ➢ Approximately $10.5 million being turned back from the combination of town and school operating budgets because non-essential expenses were curbed and expenses for operating facilities and overtime were low given that many buildings were closed during the last quarter of FY2020; ➢ Approximately $3.0 million in postponed FY2021 appropriation requests from the FY2020 year-end free cash balance. • In response to questions, Ms. Kosnoff reported the following: ➢ Most contractors were not paid if their work was not performed; the exceptions were for transportation (school buses and Lexpress)because of the potential for increased bid prices if needing to go out to bid again. ➢ The Liberty Ride and Visitors' Center had small deficits. ➢ The only furloughs were for about a dozen people who were running programs in the Recreation Department. ➢ No retirement incentives were adopted, and Ms. Kosnoff was not aware of any positions being eliminated. ➢ New hires included as program improvement requests for FY2021 were put on hold. ➢ The Town is eligible for approximately $5.0 million in Federal Cares Act funding and some other smaller funding programs, but these funds cannot be used to offset lost revenue. They can only be used for COVID-related expenses in excess of amounts budgeted. Approximately $300,000 in eligible expenses were incurred in FY2020, including preparation for the spring virtual Annual Town Meeting (ATM), some overtime associated with COVID-related quarantines, and the Police detail used at the hotel that was used for homeless COVID patients. Eligible expenses in FY2021 include or will include building modifications, purchases of personal protective equipment, substitute teachers who are covering for COVID-related absenteeism, or for an additional school bus that is needed to provide adequate physical distancing of riders. The Town was required to establish separate accounts for Cares Act-related expenses and receipts. Reimbursements are expected to be received in FY2021. Currently the availability of the CARES Act funds expires on December 31, although that termination date may be extended. Other grant monies may become available. FY2021 General Fund, based on information included in material that Ms. Kosnoff shared on the screen: • New growth is expected to be higher than earlier projections. • Although FY2021 budget projections included increases in State aid, the sizable State revenue losses because of COVID suggest there might be a significant decrease in this revenue source. Fortunately, the State recently reported plans to provide level funding of Chapter 70 and Unrestricted aid. Thus, the current projected revenue loss for State aid is small. • Local receipts, which include revenue from meals and hotel/motel taxes, building permits, Recreation Department programs, and other departmental revenue are projected to decrease by approximately $2.1 million. This will have the most significant negative impact on the FY2021 budget. • There were no snow removal deficits carried from FY2020 into FY2021; $400,000 appropriated to cover those potential expenses has been released. 2 08/20/2020 AC Minutes • It is projected that there will be a $1.2 million revenue reduction as compared to the revenue projection used to prepare the approved FY2021 budget, but that is offset by the decision at the ATM to postpone previously-planned appropriations of$2.9 million into the OPEB trust fund and the Capital Stabilization Fund. • The result is a projected $1.7 million in revenue less expenses, which means the Town can avoid cutting operating expenses or making program cuts. • Assuming the Town continues to tax to the levy limit, it must be determined how the net revenue will be used; options include, but are not limited to, offsetting the Town's Other Post-retirement Employee Benefits obligations and/or adding to the Capital Stabilization Fund. Other FY2021 Funds: • The Visitors' Center and Liberty Ride experienced revenue losses but their expenses were also reduced, which avoided significant deficits. • The Recreation Enterprise Fund experienced significant losses in FY2020 and a significant portion of its $699,000 in retained earnings has been used. The Fund needs a cash infusion to remain solvent in FY2021, which indicates the need for some policy decisions. Some of the FY2021 $1.7 million in net revenue could be used. Ultimately, it may also be advisable to restructure the way the Recreation Enterprise Fund operates because the Recreation Department incurs many expenses, such as maintenance of recreation facilities, even when programs at those facilities are cancelled. This requires a lot more discussion. General discussion about the FY2021 budget included: • Current plans do not include: ➢ Incorporating COVID impacts on a line-by-line basis in the budget; ➢ Layoffs in FY2021; ➢ Tapping into the approximately $10 million that is in the reserve fund. • There are many uncertainties, particularly as related to the schools. The situation needs continuous monitoring. Pension Fund Updated Projections Ms. Kosnoff reported that the Town's budget has been including approximately $6.7 million for short- and long-term pension liabilities. Preliminary analyses of the pension's long-term liability by the Town's actuary, indicate that the unfunded liability has increased significantly due to recent increases in staffing and increases in actuarial life expectancy as well as for several other reasons, but not from changes in the assumed discount rate. If the schedule for annual appropriations to the Fund are not changed, full funding would be delayed from 2024 to 2030. It is anticipated that the 2024 target for a fully funded system will have to be pushed out to avoid a major burden on the operating budget, but probably not as far forward as 2030. The impact has not yet been incorporated into five-year projections, but it is expected to create an additional demand on the projected FY2021 $1.7 million revenue surplus. Future Dates for Financial Summits and Special Town Meeting (STM) Ms. Kosnoff identified the following schedule: • August 24 SB meeting: A draft warrant for a fall STM is being submitted to the SB tomorrow in preparation for their meeting. Articles include many that were postponed during the 2020 ATM, some"housekeeping" items, an adjusted FY2021 budget, and a 3 08/20/2020 AC Minutes Community Preservation Act article for a land purchase that is still being negotiated in executive session. A long warrant is expected. • August 30: Closing the books for FY2020. • September 10: Financial Summit; a FY2021 revised budget is being prepared for presentation. • Early October and late October: two additional financial summits. • October 14: Begin a STM for two weeks; two weeks off for the election; resume the STM until business is complete. It has not been determined whether this will be broken into two STMs. Future Meeting Schedule and Report Planning for STM 2020 It was noted that because many of the articles are being carried forward from the 2020 ATM, much of the work for this Committee's report to the STM has already been prepared. It was agreed that this Committee would meet at 7:30 p.m. on September 2, 16 and 24, with October 7 targeted for publishing the report. Approve minutes of prior meetings A motion was made and seconded to approve this Committee's July 8, 2020 minutes. There was a roll call vote. The motion passed. VOTE: 7-0 The meeting adjourned at 7:40 p.m. Respectfully submitted, Sara Arnold Approved: September 2, 2020 Exhibits • Agenda, posted by Mr. Parker, Chair • Remote Meeting Prologue • Revenue Impact Memo, 8/12/20, Presented by Ms. Kosnoff 4