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Financial Summit I Sept 2007
MW Town o • 5177SR A Town of Lexington APR 19- a 6 � o 3 z � � �Fx,N Summit I - September 26, 2007 Summary Indicator Analysis I.1 Revenues per Household I.2 State Aid I.3 Revenues Related to Economic Growth I.4 Property Tax Revenues I.5 Uncollected Property Taxes I.6 Expenditures per Household I.7 Personnel Costs I.8 Employee Benefits I.9 Unfunded Liabilities I.10 Participants in Lexington Retirement System I.11 Pension Liability I.12 Debt Service I.13 Long -Term Debt I.14 Reserves /Fund Balance I.15 Population Revenue and Expenditure Projections FY 2009 -2011 Projection - Introduction Revenue /Expenditure Projection - FY 2009 -2011 FY 2009 Policy Issues Calendar & Budget Process Appendicies A Chapter 70 Assistance B Pupils as a Percentage of Population C OPEB D Average Residential Tax Bill E Revenue /Expenditure History Page 2 of 27 TOC Summit I oa� �W =� > Town of Lexington sf Summit I - September 26, 2007 AP 19'" XI RIL NGT � � This packet of information is designed to achieve three goals: a) Evaluate the fiscal health of the Town of Lexington through a series of financial indicators and comparative benchmarks, where appropriate; b) Present athree -year projection of Revenues &Expenditures; and c) Outline the FY 2009 Budget Calendar &Issues The goal of this material is to provide policymakers with an informed snapshot of where Lexington stands financially heading into the FY 2009 Budget Process. It is not the purpose of this exercise to propose a budget or recommended level of services; rather it is to evaluate Lexington via a series of benchmarks, including measures such as revenues and expenditures per household, benefit costs, both funded and unfunded liabilities incurred by the Town, debt service, reserve position and population. Using a series of recognized metrics from professional organizations, including the International City /County Management Association, (ICMA), the Government Finance Officer's Association (GFOA), Moody's Investor's Service, and data from the Town of Lexington, Mass. Department of Revenue, the Mass. Department of Education, and the U.S. Census Bureau, Town staff has compiled 15 indicators with which to evaluate the Town's fiscal health. In evaluating Lexington's financial condition, staff has found that the Town is fiscally healthy overall. In particular, Lexington is strong in tax collections, stable labor costs as a percentage of total operating costs, adequate retirement funding, revenues realted to economic growth, and low debt service. Lexington is satisfactory in the areas of revenues and expenses per household and levels of reserves. Lexington is unsatisfactory in the areas of state aid and employee liabilities (with the exception of retirement). In particular Lexington continues to witness significant increases in benefit costs, and modest increases in state aid. Lexington has witnessed a significant demographic shift over the course of the last decade and one -half. Notwithstanding these measures, there is no suggestion from outside rating agencies (I.e Moody's Investor Service) that these various downward trends will jeopardize our Aaa credit rating. The three -year projection of expenses and revenues is designed to provide a reasonable estimate for revenue and expenditure growth in Fiscal Years 2009, 2010 and 2011. It is designed to show recurring revenues and expenditures while segregating out unknown costs. These unknown costs include items such as collective bargaining settlements, new capital projects and the implications of implementing the recommendations of the Selectmen's 2006 Ad Hoc Financial Policy Committee. Introduction Page 3 of 27 Summit VS MON N ` "S Town of Lexington Indicator I.1 f7 P Z�m Wa C � R1L19TM S ummit I - September 26, 2007 ��XIrvGS A decrease in net operating revenues per household (constant dollars) is considered a warning indicator. Lexington Trend favorable marginal x unfavorable uncertain Revenues per Household: Revenues per household is one measure of the Town's ability to maintain existing service levels. For most government services, service costs increase as the number of households increase. For education, the number of students is a more appropriate measure. Lexington has witnessed fluctuations in revenues per household during the first half of this decade. Although this growth has, for the most part, been positive, growth was neglible in half of the years. In 2004, unanticipated reductions in state aid and local receipts resulted in declining net revenues. Formula: Net operating revenues (constant dollars) / Households Fiscal Year Percentage Change - Revenues per Household (constant dollars) 10.0 2002 ° 2004 8.0 /° 2006 2007* 9.44% $ 81,597,556 .-. 0 6.0% $ 94,989,268 $ 99,075,365 $ 100,005,960 $ 107,961,955 ... 4.0% 5.90% Less: Excluded Debt $ 120,000 $ 950,625 2.00% $ 1,567,988 0.95% 3.80 °l° $ 5,325,085 $ 4,943,313 0.0% Net Operating Revenues 0.18% - 0.08% $ 90,011,308 $ 93,281,068 L $ 95,816,622 $ 102,636,870 $ 105,893,419 $ 117,603,950 a -2.0% 183.6 - 4.42% 196.5 203.9 209.5 216.4 223.1 226.2 CPI -U, adjustment for constant dollars -4.0% 95.9% 93.4% 90.0% 2001* 2002 2003 2004 2005* 2006 2007* 82.3% Fiscal Year Formula: Net operating revenues (constant dollars) / Households Fiscal Year 2000 2001* 2002 2003 2004 2005* 2006 2007* Gross operating revenue /transfers $ 81,597,556 $ 90,961,933 $ 94,989,268 $ 99,075,365 $ 100,005,960 $ 107,961,955 $ 110,836,732 $ 122,731,206 Less: Excluded Debt $ 120,000 $ 950,625 $ 1,708,200 $ 1,567,988 $ 4,189,338 $ 5,325,085 $ 4,943,313 $ 5,127,256 Net Operating Revenues $ 81,477,556 $ 90,011,308 $ 93,281,068 $ 97,507,377 $ 95,816,622 $ 102,636,870 $ 105,893,419 $ 117,603,950 CPI -U, 2000 base year 183.6 191.5 196.5 203.9 209.5 216.4 223.1 226.2 CPI -U, adjustment for constant dollars 100% 95.9% 93.4% 90.0% 87.6% 84.8% 82.3% 81.2% Net Operating Revenues (cons dollars) $ 81,477,556 $ 86,298,048 $ 87,157,273 $ 87,799,678 $ 83,971,035 $ 87,080,080 $ 87,144,920 $ 95,455,726 Households 10,780 10,782 10,787 10,847 10,854 10,865 10,882 10,892 Net Operating Revenues per Household (cons. dollars) $ 7,558 $ 8,004 $ 8,080 $ 8,094 $ 7,736 $ 8,015 $ 8,008 $ 8,764 Percent Change from prior year 5.90% 0.95% 0.18% -4.42% 3.60% -0.08% 9.44% Notes: *Denotes Fiscal Year where Proposition 2 1/2 Override was approved by voters. Number of Households determined through information provided by the Town Clerk's Office, Assessor's Office and the Finance Department Page 4 of 27 1.1 Revenues per Household Summit I ` Mn ` "S ° Town of Lexington 6 m a s z Summit I - September 26 2007 APRIL I9"' � a Indicator I.2 Reductions in State Aid, as a percentage of operating revenues, is considered a warning indicator particularly if the Town does not have adequate reserves to offset reductions. Lexington Trend favorable 2001 marginal x unfavorable x uncertain 2007 While the Town does not have a significant reliance on State Aid, any dependence on such aid may be difficult to manage when there is a reduction in this funding. In order to State Aid as a % of operating revenues 10.00% 8.00% 8.21 8. 46% 8.80 °10 8.35 6.00% - ° 6.84% 8.38 °1° 6.66% 6.90 /° 4.00% L a 2.00% 0.00% 2000 2001 2002 2003 2004 2005 2006 2007 Fiscal Year protect itself in this situation, the Town has a contingency plan for downturns Formula: State Aid / Operating Revenues in State Aid. The Board of Selectmen adopted the recommendation of the 2006 Ad Hoc Financial Policy Committee to create reserves capable of handling cyclical downturns in state aid and local receipts. State Aid has steadily increased over the last three years - both in terms of percentage of operating revenues and in real dollars. But even with the increased committment from the Commonwealth the amount of aid recieved by Lexington is still lower than five years ago as a percentage of operating revenues, which increases reliance on other sources of revenue to maintain services. Fiscal Year 2000 2001 2002 2003 2004 2005 2006 2007 Net Operating Revenues $ 81,477,556 $ 90,011,308 $ 93,281,068 $ 97,507,377 $ 95,816,622 $ 102,636,870 $ 105,893,419 $ 117,603,950 Cherry Sheet Revenues $ 7,553,282 $ 8,481,889 $ 9,072,805 $ 8,301,564 $ 6,737,418 $ 6,737,138 $ 7,239,935 $ 8,304,953 Less: School Building Reimbursements $ 863,984 $ 863,984 $ 863 $ 161,487 $ 185,819 $ 187,696 $ 187 $ 187 Net State Aid Revenues $ 6,689 $ 7,617,905 $ 8,208 $ 8,140,077 $ 6,551,599 $ 67549,442 1 $ 7,052,239 $ 8,117,257 State Aid as a % of operating revenues 1 8.21%1 8.46%1 8.80% F 8.35 T/oT 6.84%1 6.38%1 6.66%1 6.90% Notes: Source: Massachusetts Department of Revenue "Cherry Sheets" (one page summarizing all state aid to a municipality), FY 2000 -2007. Data shown above excludes money appropriated for METCO. Although part of annual State Aid appropriation to the Town for the purpose of funding targeted educational programs, the Department of Revenue no longer includes METCO funding on the Cherry Sheet. Page 5 of 27 1.2 State Aid Summit �5 M°BN�N • "'S Town o Lexington Indicator I.3 Summit I - September 26 2007 APRIL I9'" ING� Decreasing economic growth revenues, as a percentage of net operating revenues, is considered a warning indicator. Lexington Trend favorable x marginal unfavorable uncertain Revenues Related to Economic [; rnwth Economic growth revenues are responsive to changes in the economic base and inflation. A balance between growth and other (non - growth) revenues mitigates the effects of economic growth or decline. During a recession, a high percentage of non - growth revenues is an advantage. During a slowing economy, the Town should maintain sufficient reserves to protect against slowing revenue growth. A decrease in building permit fees may also be a leading indicator of smaller future increases in the tax levy. Economic Growth Revenues as a % of Operating Revenues 9.00 /o 8.00% 7.00% 7.94% 6.00% 7.28 ° l0 6.91 6.97% ° 6.77 6.68°/0 5.00% 6.32 6.7510 4.00% i 3.00% CL 2.00% 1.00% 0.00% 2000 2001 2002 2003 2004 2005 2006 2007 Fiscal Year Formula: Economic Growth Revenues / Operating Revenues Fiscal Year 2000 2001 2002 2003 2004 2005 2006 2007 Net (non- exempt) operating revenues $ 81,477,556 $ 90,011,308 $ 93,281,068 $ 97,507,377 $ 95,816,622 $ 102,636,870 $ 105,893,419 $ 117,603,950 Building Related Fees & Permits $ 853,523 $ 1,096,060 $ 1,092,409 $ 904,346 $ 1,012,417 $ 1,278,649 $ 1,077,150 $ 1,929,130 Motor Vehicle Excise $ 3,642,106 $ 3,921,089 $ 3,782,090 $ 3,905,206 $ 3,543,225 $ 4,179,205 $ 4,233,625 $ 3,891,369 Levy Growth from New Construction $ 1,251,649 $ 914,451 $ 759,592 $ 937,048 $ 962,008 $ 1,186,446 $ 1,164,525 $ 1,093,643 Levy Growth from Personal Property $ 719,000 $ 621,000 $ 814,000 $ 413,000 $ 953,565 $ 505,674 $ 689,801 $ 943,146 Total: Economic Growth Revenues $ 6,466,278 1 $ 6,552,600 $ 6,448,091 1 $ 6,159,600 $ 6,471,215 $ 7,149,974 $ 7,165,101 $ 7,857,288 Economic Growth Revenues as a % of Operating Revenues 7.94% 7.28% 6.91% 6.32% 6.75% 6.97% 6.77% 6.68% Notes: Building Related Fees & Permits inclusive of all Building, Wiring, Gas & Plumbing permits, FY 2000 -2007 Page 6 of 27 1.3 Rev. Related to Econ. Grow. Summit VS MoRN�ti • " Town o Lex Indicator I.4 v z p Summit I - September 26 2007 �R��,9m INGS A decline in property tax revenues (constant dollars) is considered a warning indicator. Lexington Trend favorable 2001* marginal x unfavorable x uncertain 2007* Property Tax Revenues: Property tax revenues are analyzed separately because they are the Town's primary revenue source for both operating and capital spending. Any decrease in property tax revenues Property Tax Revenues (constant dollars) $80,000,000 $75,824,839 $72 $65,033,606 $66 $66 $68,359,036 O $60,000,000 cn $61,322,549 W $50,000,000 2000 2001* 2002 2003 2004 2005* 2006 2007* Fiscal Year should be monitored to ensure that collections are at a high level. Increases due to operating overrides should be Formula: Property Tax Revenues (constant dollars) noted for their impact on taxpayers ability to pay. This analysis shows that the only significant increases in constant dollars from year to year occurred when overrides were passed by the community. Fiscal Year 2000 2001* 2002 2003 2004 2005* 2006 2007* Property Tax Levy Limit $ 61,442,549 $ 68,782,518 $ 72,809,482 $ 75,796,850 $ 82,191,615 $ 91,192,619 $ 94,811,902 $ 101,074,790 Less: debt exemptions $ 120,000 $ 950,625 $ 1,708,200 $ 1,567,988 $ 4,189,338 $ 5,325,085 $ 4,943,313 $ 5,127,256 Less: Comm. Pres. Act surcharge N/A N/A N/A N/A N/A N/A N/A $ 2,529,288 Net Property Tax Revenues $ 61,322,549 $ 67,831,893 $ 71,101,282 $ 74,228,862 $ 78,002,277 $ 85,867,534 $ 89,868,589 $ 93,418,246 CPI -U, 2000 base year 183.6 191.5 196.5 203.9 209.5 216.4 223.1 226.2 CPI -U, adjustment for constant dollars 100% 95.9% 93.4% 90.0% 87.6% 84.8% 82.3% 81.2% Property Tax Revenues (constant dollars) $ 61,322,549 $ 65,033,606 $ 66,433,564 $ 66,838,740 $ 68,359,036 $ 72,852,492 $ 73,957,297 $ 75,824,889 Percent increase over prior year (constant dollars) N/A 6.1% 2.2% 0.6% 2.3% 6.6% 1.5% 2.5% *Denotes Fiscal Year where Proposition 2 1/2 Override was approved by voters. Page 7 of 27 1.4 Property Tax Revenues Summit VS MORNi,�, • " Town o Lex Indicator I.5 v z p Summit I - September 26 2007 �R��,9m INGS Uncollected property taxes (as a percent of the property tax levy) of 5 -8 percent is considered a warning indicator by the Bond rating organizations Lexington Trend favorable x marginal unfavorable uncertain Uncollected Property Taxes: An increase in uncollected property taxes may indicate an inabil b Y tY Y property owners to pay their taxes due to economic conditions. Additionally, as uncollected property taxes rise, liquidity decreases, resulting in less cash on hand for the Town to invest. Bond rating organizations generally consider uncollected taxes in excess of five percent as a warning trend. Lexington has maintained a strong position on this indicator, regardless of economic circumstances. Uncollected Taxes as a Percentage of Net Property Tax Levy 2.50 2.00% 2.36% 1.50% 1 1.38% .00% 0.94Q /o a 0.50% 0.74/ - - - -- 0.58 °l 0.05% 0.31 1, o 0.00% - 0.32 °l0 -0.50 2000 2001 2002 2003 2004 2005 2006 2007 Fiscal Year Formula: Uncollected Property Taxes / Net Property Tax Levy Fiscal year 2000 2001 2002 2003 2004 2005 2006 2007 Property Tax Levy $ 61,144,139 $ 68,734,888 $ 72,062,482 $ 75,795,919 $ 82,189,495 $ 91,192,659 $ 94,740,661 $ 101,074,790 Reserved for Abatements & Exemptions $ 852,347 $ 448,648 $ 852,347 $ 372,620 $ 500,142 $ 899,183 $ 504,780 $ 602,579 Net Property Tax Levy $ 60,291,792 $ 68,286,240 $ 71,210,135 1 $ 75,423,299 $ 81,689,353 1 $ 90,293,476 1 $ 94,235,881 $ 100,472,211 Uncollected Taxes as of June 30 $ 1,423,622 $ 503,413 $ (228,427)1 $ 1,038,101 $ 771,177 $ 525,029 $ 290,636 $ 48,603 Uncollected Taxes as a Percentage of Net Property Tax Levy 2.36% 0.74% -0.32% 1.38% 0.94% 0.58% 0.31% 0.05% Page 8 of 27 1.5 Uncollected Property Taxes Summit ` Mn ` "S ° Town of Lexington 6 m a s z Summit I - September 26 2007 APRIL I9"' � a Indicator I.6 Increasing net operating expenditures per household, in constant dollars, may be considered a warning indicator. Lexington Trend favorable 2001 marginal 2003 unfavorable x uncertain x Expenditures per Household: Increasing operating expenditures per household can indicate that the cost of providing services is outstripping the Town's ability to pay, especially if spending is increasing faster than household income. Increasing expenditures may also indicate that the demographics of the Town are changing, requiring increased spending in related services. Operating Expenses Per Household (constant dollars) $8,500 $8,400 $8,000 $8,057 $7,500 $ 7,816 $7,900 $7,918 $7,491 $7,512 $7,000 $7,165 $6,500 2000 2001 2002 2003 2004 2005 2006 2007 Formula: Net Operating Expenditures and Transfers (constant dollars) / Households Fiscal year 2000 2001 2002 2003 2004 2005 2006 2007 Education $ 45,998,542 $ 49,952,648 $ 52,865,651 $ 55,075,534 $ 54,865,939 $ 57,637,773 $ 61,482,994 $ 63,436,428 Shared Expenses (Benefits, Debt) $ 12,548,933 $ 13,544,972 $ 16,891,994 $ 17,573,396 $ 18,650,411 $ 22,013,459 $ 22,433,112 $ 25,481,057 Public Works $ 6,537,136 $ 7,918,446 $ 7,099,203 $ 8,312,366 $ 7,047,542 $ 7 $ 8,106,383 $ 8,267,110 Public Safety $ 7,287,524 $ 7,516,477 $ 7,809,073 $ 8,246,907 $ 7,297,867 $ 8,385,478 $ 8,798,303 $ 9,139,072 Library $ 1,354,201 $ 1,420,459 $ 1,617,964 $ 1,789,903 $ 1,537,002 $ 1,726,755 $ 1,754,474 $ 1,906,172 Social Services $ 412,759 $ 448,301 $ 459,557 $ 455,749 $ 362,058 $ 508,214 $ 399,114 $ 580,902 Community Development $ 875,758 $ 883,887 $ 934,034 $ 1,049,775 $ 802,195 $ 850,236 $ 931,287 $ 1,044,281 General Government $ 2,224,652 $ 2,558,681 $ 2,556,354 $ 2,660,626 $ 2,476,938 $ 2,472,879 $ 2,635,386 $ 2,866,743 Total Operating Expenses $ 77,239,505 $ 84,243,871 $ 90,233,830 $ 95,164,256 $ 93,039,952 $ 101,404,076 $ 106,541,053 $ 112,721,765 CP1-U, 2000 base year 183.6 191.5 196.5 203.9 209.5 216.4 223.1 226.2 CPI -U, adjustment for constant dollars 100.0% 95.9% 93.4% 90.0% 87.6% 84.8% 82.3% 81.2% Operating Expenses (cons. doll.) $ 77,239,505 $ 80,768,536 $ 84,310 $ 85,689 $ 81,537 $ 86,034 $ 87,677 $ 91,492 Households 10,780 10 10 10 10 10 10 10 Oper. Exp. Per Household $ 7,165 1 $ 7 1 $ 7,816 1 $ 7,900 1 $ 7,512 1 $ 7,918 1 $ 8,057 $ 8,400 Notes: FY 2007 amounts unaudited. Page 9 of 27 1.6 Expenditures per Household Summit uS Mo'? a "'S °� Town o Lexington Indicator I.7 ti p A a a W a Summit I - September 26, 2007 APRIL r I Z� � f X NG� Increasing personnel costs as a percentage of total spending is considered a warning factor. Lexington Trend favorable marginal x unfavorable uncertain Dorcnnnm rnctc■ Increasing salaries and wages as a percent of operating expenditures may be an indicator of two trends: 1) First, it may point to future pension and health insurance costs since both of these items are related to the number and compensation level of employees. 2) Second, if salaries and wages as a percent of operating expenditures are increasing, it may be an indicator of deferred maintenance of the Town's infrastructure. Total labor costs have increased since 2000, however they have remained relatively constant since 2002. Formula: Salaries & Wages / Operating Expenditures Fiscal Year 2000 Total Personnel Costs as a Percentage of Operating Expenses 2002 0 100.0 /o 2004 2005 90.0% 2007 Operating Expenditures $ 77,239,505 $ 84,243,871 $ 90,233,830 $ 95,164,256 $ 93,039,952 $ 101,404,076 $ 106,541,053 $ 112,721,765 Municipal Wages $ 13,153,420 $ 13,825,245 $ 14,408,917 $ 15,302,418 $ 13,226,616 $ 14,675,347 $ 15,499,278 $ 16,141,524 80.0% $ 36,641,456 $ 38,998,899 $ 41,716,051 $ 43,900,810 $ 44,584,245 $ 46,185,654 $ 47,255,639 $ 49,061,328 Benefits $ 9,108,833 $ 9,667,767 $ 13,204,489 $ 14,620,463 $ 14,574,454 $ 17,511,374 $ 19,128,260 $ 21,720,732 Total Wage & Benefit Costs $ 58,903,709 70.0% 1 $ 69,329,457 $ 73,823,691 1 $ 72,385,315 $ 78,372,375 $ 81,883,177 $ 86,923,584 Salaries & Wages as a percentage of jC Operating Expenditures I 62.7% ca 60.0% 62.1% 60.0% 58.9% 57.8% Benefits as a percentage of Operating 11.8% 11.5% 14.6% 15.4% 15.7% 50.0% 18.0% 19.3% Expenditures 1 Total Wage & Benefit Costs as a 40.0% 76.3% 74.2% 76.8% 77.6% 77.8% 77.3% 76.9% 77.1% percentage of Operating Expenditures a 30.0% 64. 5% 62.7`/0 62. 2% 62. 2% 62. ° l0 60.0 °l0 58.9% 57.8% 20.0% 10.0% 0.0% 2000 2001 2002 2003 2004 2005 2006 2007 Fiscal Year Salaries & Wages as a percentage of Operating Expenditures M Benefits as a percentage of Operating Expenditures Formula: Salaries & Wages / Operating Expenditures Fiscal Year 2000 2001 2002 2003 2004 2005 2006 2007 Operating Expenditures $ 77,239,505 $ 84,243,871 $ 90,233,830 $ 95,164,256 $ 93,039,952 $ 101,404,076 $ 106,541,053 $ 112,721,765 Municipal Wages $ 13,153,420 $ 13,825,245 $ 14,408,917 $ 15,302,418 $ 13,226,616 $ 14,675,347 $ 15,499,278 $ 16,141,524 School Wages $ 36,641,456 $ 38,998,899 $ 41,716,051 $ 43,900,810 $ 44,584,245 $ 46,185,654 $ 47,255,639 $ 49,061,328 Benefits $ 9,108,833 $ 9,667,767 $ 13,204,489 $ 14,620,463 $ 14,574,454 $ 17,511,374 $ 19,128,260 $ 21,720,732 Total Wage & Benefit Costs $ 58,903,709 1 $ 62,491,911 1 $ 69,329,457 $ 73,823,691 1 $ 72,385,315 $ 78,372,375 $ 81,883,177 $ 86,923,584 Salaries & Wages as a percentage of Operating Expenditures 64.5% 62.7% 62.2% 62.2% 62.1% 60.0% 58.9% 57.8% Benefits as a percentage of Operating 11.8% 11.5% 14.6% 15.4% 15.7% 17.3% 18.0% 19.3% Expenditures 1 Total Wage & Benefit Costs as a 76.3% 74.2% 76.8% 77.6% 77.8% 77.3% 76.9% 77.1% percentage of Operating Expenditures Page 10 of 27 1.7 Personnel Costs Page 10 of 27 Summit �5 MO RNi N • "'S Town o Lexington Indicator I.8 Summit I - September 26 2007 APRIL I9'" ING� Increasing benefit costs as a percentage of wages and salaries is considered a warning indicator. Lexington Trend favorable marginal unfavorable x uncertain Employee Benefits: Fringe benefits represent a significant and increasing share of the Town's operating costs. Further, this analysis may understate certain fringe benefits such as sick leave buy -back liabilities and vacation accruals. Regardless, benefit spending as a percentage of wages and salaries has almost doubled since 2000. Formula: Employee Benefits / Wages & Salaries Fiscal Year 2000 2001 2002 2003 2004* 2005 2006 2007 Medical Benefits $ 6,442,875 $ 6,879,090 $ 10,457,499 $ 11,775,697 $ 12,947,995 $ 14,415,298 $ 15,851,874 $ 18,394,804 Retirement Benefits $ 2,665,958 $ 2,788,677 $ 2,746,990 $ 2,844,766 $ 1,626,459 $ 3,096,076 $ 3,276,386 $ 3,325,928 Wages & Salaries - Municipal $ 13,153,420 $ 13,825,245 $ 14,408,917 $ 15,302,418 $ 13,226,616 1 $ 14,675,347 $ 1 15,499,278 $ 16,141,524 Wages & Salaries - Schools $ 36,641 $ 38,998,899 $ 41,716,051 $ 43,900,810 $ 44,584,245 $ 46,185,654 $ 47,255,639 $ 49,061,328 Total Wages & Salaries $ 49,794,876 $ 52,824,144 $ 56,124,968 $ 59,203,228 $ 57,810,861 $ 60,861,001 $ 62,754,917 $ 65,202,852 Benefits Spending as a percentage of Wages & Salaries 12.94% 13.02% 18.63% 19.89% 22.40% 23.69% 25.26% 28.21% Retirement Spending as a percentage of Wages & Salaries 5.35% 5.28% 4.89% 4.81% 2.81% 5.09% 5.22% 5.10% Total Benefits Spending as % of Wages 1 18.29%1 18.30%1 23.53%1 24.70%1 25.21%1 28.77%1 30.48%1 33.31% Notes: *Pension holiday taken by Town in FY 2004. Page 11 of 27 1.8 Employee Benefits Page 11 of 27 Summit I uS MOq Y O °p6O 1 775N %�p Town of Lexin ton Indicator I.9 AP ILir a a I Z =� Summit I - September 26 2007 �FXNG Increasing unfunded liabilities per municipal employee is considered a warning indicator. Lexington Trend favorable marginal unfavorable x uncertain Unfunded Liabilities: The Town allows employees to accumulate a portion of unused vacation and sick leave, to be paid at termination or retirement (for retirees, some contracts provide for a one -time attendance benefit based upon the last three years of service). Lexington's unfunded sick /vacation liability is decreasing over the course of the last couple of years. Beginning in FY 2006, attempts were made to cover contractual obligations for vacation time within the budget. In FY 2007, the amount budgeted for municipal "vacation buy- back" is $35,000 and for sick -leave incentive is $15,000. Accounting for the Town's unfunded liabilities and creating adequate reserves to meet those liabilities was a recommendation of the Financial Policy Committee. Accrued Unfunded Sick/Vacation Liability Per Employee $1,800 $1,600 $1,400 $1 ,505 $1,534 - - -- $1,200 $1,404 $1483 $1472 $1,532 $1 , , $1,000 $800 $600 $400 $200 F F 2000 2001 2002 2003 2004 2005 2006 2007 Formula: Accrued Sick & Vacation Leave / Number of Employees Fiscal Year 2000 2001 2002 2003 2004 2005 2006 2007 Unfunded sick and vacation leave $ 1,549,398 $ 1,607,949 $ 1,701,629 $ 1,744,958 $ 1,568,142 $ 1,611,624 $ 1,744,247 N/A Amount funded $ - $ - $ - $ - $ - $ - $ - $ 50,000 Net unfunded liability $ 1,549,398 $ 1,607,949 $ 1 $ 1,744,958 $ 1,568 $ 1,611,624 $ 1,744,247 N/A Total Employees (Gen. Fund FTE 1103.9 1106.2 1130.5 1137.5 1057.6 1094.78 1138.79 1185.16 Accrued Unfunded Sick/Vacation liability per employee $ 1,404 $ 1,454 $ 1,505 $ 1,534 $ 1,483 $ 1,472 $ 1,532 N/A Notes: FY 2007 data unavailable at this time. Page 12 of 27 1.9 Unfunded Liabilities Summit I u5 MOq °te 1 775 Town o Lexing Indicator I.10 t zw s f Summit I - September 26 2007 � APRIL I9'" IN � XGT Increasing numbers of participants in the retirement system, without fully funding the associated post- retirement health costs, is considered a warning trend. Lexington Trend favorable marginal x unfavorable uncertain Retirement Participants: All employees except teachers belong to the Lexington Retirement System as required by the Commonwealth of Massachusetts. Systems facing increases in numbers of employees and retirees without corresponding increases in funding associated liabilities is problematic. Lexington has an agressive approach to funding its pension liabilities, but does not have a plan to fund its post - employment health liabilities. For more information on the Town's Other Post Employment Liabilities, (OPEB), please refer to Appendix C, OPEB. Formula: Number of Participants Calendar Year ( as of December 31) 2000 2001 2002 2003 2004 2005 2006 Number of School employees* N/A N/A N/A N/A N/A 296 325 Number of Municipal employees N/A N/A N/A N/A N/A 284 293 Subtotal: Active Participants 670 690 692 647 584 580 618 Number of Retirees 351 363 361 389 385 390 381 Total 1021 1053 1 1053 1036 969 970 999 *Non- teachers Page 13 of 27 1.10 Retirement Participants Summit s M °RN, T own Lexing � ' " o Indicator I.11 Q Z � Summit I - September 26 2007 � APRIL I9'" YINGT � An unfunded pension liability or increase in the unfunded liability is considered a warning indicator Lexington Trend favorable x marginal unfavorable uncertain Pension Liability: One of the strongest financial entities affiliated with the Town of Lexington, the Lexington Retirement System continues to be among the healthiest retirement systems in the Commonwealth. Despite taking a pension holiday and accommodating an early retirement initiative in FY 2004, the retirement system is approaching its funding level before the economic downturn of the early 2000's. The next actuarial study will be complete as of January 1, 2008. Given the overall health of the fund, continual funding of the Town's Liability and performance of markets, it is anticipated that the official percent funded amount will increase by next January. Formula: Pension Assets /Pension Liability Actuarial Date 1/1/1996 1 /1 /1999 1/1/2002 1 /1 /2004 1/1/2006 Total Liability $ 55 $ 74 $ 86 $ 98 $ 111 Pension Assets $ 44, 348, 000 $ 71, 069, 000 $ 77, 015, 000 $ 83, 050, 000 $ 98, 759, 000 Pension Liability (unfunded) $10,792,000 $ 3,293,000 $ 9 $14,981,000 $ 12 Percent Funded 0.4% 80.4%1 5.6% 95.6%1 3 / ' . T 84.7%1 88.4% Page 14 of 27 1.11 Pension Liability Summit I VS MoRN�ti • " Town o Lex Indicator I.12 v z p Summit I - September 26 2007 �R��,9m INGS Debt Service exceeding 20 percent of operating revenues is considered a warning indicator by the credit rating organizations. Lexington Trend favorable x marginal unfavorable uncertain Debt Service: Over the course of the last ten years, the Town of Lexington has invested extensively in new capital projects. Five separate school reconstruction projects, new athletic fields and a street reconstruction project have been funded through the successful passage of debt exclusion votes by the citizens of Lexington. This increase in exempt debt service has resulted in increases in the budget and consequently in taxes to Lexington citizens. Within -levy debt has fluctuated slightly 2000 2001 2002 2003 2004 2005 2006 2007 2008 Exempt Debt Service throughout the last five years, $ 950,625 $ 1,708,200 $ 1,567,988 $ 4,180,558 $ 5,325,094 $ 4,943,313 $ 5,126,256 $ 5,556,709 Within Levy Debt Service $ 3,419,863 dependent upon the short -term capital $ 3,687,505 $ 2,952,933 $ 4,135,120 $ 3,994,668 $ 3,490,750 $ 3,720,061 $ 3,798,137 Total Debt Service $ 3 $ 4,827,830 needs of the community. However, Formula: Debt Service / General Fund Revenue or Per Capita /Household $ 9,319,762 $ 8,434,063 $ 8,846,317 $ 9,354,846 since FY 2004 the amount of debt per $ 81,597,556 $ 90,961,933 $ 94,989,268 $ 99,075,365 $ 100,005,960 $ 107,961,955 $ 110,836,732 $ 122,731,206 $ 132,579,127 Population capita and per household has Fiscal Year 31,211 2000 30,949 2001 29,771 2002 30,002 2003 10,780 2004 10,787 2005 10,854 2006 10,882 2007 10,892 2008 remained relatively steady. 5.31% 5.68% 4.56% 8.32% 8.63% 7.61% 7.21% 7.06% Debt Service per Capita $ 116.62 $ 158.07 $ 172.88 $ 149.80 $ 268.69 $ 302.93 $ 283.30 $ 294.86 $ 311.81 Debt Service per Household Notes: FY 2008 Exempt Debt Service estimated. Final exempt debt amount To Be Determined for purposes of tax rate setting in December 2007. Page 15 of 27 1.12 Debt Service Summit Exempt Debt Service $ 120,000 $ 950,625 $ 1,708,200 $ 1,567,988 $ 4,180,558 $ 5,325,094 $ 4,943,313 $ 5,126,256 $ 5,556,709 Within Levy Debt Service $ 3,419,863 $ 3,877,205 $ 3,687,505 $ 2,952,933 $ 4,135,120 $ 3,994,668 $ 3,490,750 $ 3,720,061 $ 3,798,137 Total Debt Service $ 3 $ 4,827,830 $ 5,395,705 $ 4,520,921 $ 8,315,678 $ 9,319,762 $ 8,434,063 $ 8,846,317 $ 9,354,846 Gross Operating Revenue $ 81,597,556 $ 90,961,933 $ 94,989,268 $ 99,075,365 $ 100,005,960 $ 107,961,955 $ 110,836,732 $ 122,731,206 $ 132,579,127 Population 30,355 30,542 31,211 30,179 30,949 30,765 29,771 30,002 30,002 Households 10,780 10,7821 10,787 10,847 10,854 10,865 10,882 10,8921 10,892 Debt Service as a % of General Fund Revenue 4.34% 5.31% 5.68% 4.56% 8.32% 8.63% 7.61% 7.21% 7.06% Debt Service per Capita $ 116.62 $ 158.07 $ 172.88 $ 149.80 $ 268.69 $ 302.93 $ 283.30 $ 294.86 $ 311.81 Debt Service per Household $ 328.37 $ 447.77 $ 500.20 $ 416.79 1 $ 766.14 $ 857,781 $ 775.05 1 $ 812.18 1 $ 858.87 Notes: FY 2008 Exempt Debt Service estimated. Final exempt debt amount To Be Determined for purposes of tax rate setting in December 2007. Page 15 of 27 1.12 Debt Service Summit p' ° "S Town of Lexington Indicator I.13 ti 9 a W � V � R1L19m Summit I - September 26, 2007 � GS � Overall debt exceeding 10 percent of assessed valuation is considered a warning indicator by bond rating agencies. Lexington Trend favorable x marginal unfavorable uncertain Long -Term Debt: These financial indicators are evaluated by the credit rating organizations because they are measures of both the communitiy's debt burden as well as its level of effort in investing in its capital facilities. On both measures, Lexington has a strong profile. Long -Term Debt as a % of Assessed Valuation 0 1.20 /o 1.00% 2002 2003 2004 2005 2006 2007 Bonds Outstanding (all funds) $ 17,686,201 $ 13,577,173 $ 11,064,571 $ 59,025,821 $ 61,377,927 0.80% $ 56,019,434 0.97% Assessed Valuation $ 4,506,277,290 $ 5,015,313,290 $ 5,618,141,550 $ 6,083,572,560 $ 6,911,176,060 $ 7,146,167,360 $ 7,686,268,530 $ 8,059,234,580 0 30,355 30,542 31,211 0.89% 30,949 30,765 29,771 30,002 Long -Term Debt as a % of Assessed Valuation 0.39% 0.27% 0.60 /0 0.40% 0.97% 0.89% 0.74% 0.73% 0.70% 0.74% $ 582.65 0.73 $ 354.51 0.70% $ 1,983.20 $ 1,726.77 $ 1,881.68 $ 1,876.69 0.20% 0.00% 0.39 ©.27% 0.20 010 2000 2001 2002 2003 2004 2005 2006 2007 Long -Term Debt per capita $ 2 , 500.00 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... $2,000.00 $1,500.00 $1,955.86 $1,983.20 $1,726.77 $1,$81.6$ $1,876.69 $1,000.00 $500.00 $582.65 $444.54 354 51 2000 2001 2002 2003 2004 2005 2006 2007 Formula: Outstanding Long -Term Debt/ Assessed Valuation or Per CapitE Fiscal Year 2000 2001 2002 2003 2004 2005 2006 2007 Bonds Outstanding (all funds) $ 17,686,201 $ 13,577,173 $ 11,064,571 $ 59,025,821 $ 61,377,927 $ 53,124,210 $ 56,019,434 $ 56,304,583 Assessed Valuation $ 4,506,277,290 $ 5,015,313,290 $ 5,618,141,550 $ 6,083,572,560 $ 6,911,176,060 $ 7,146,167,360 $ 7,686,268,530 $ 8,059,234,580 Population 30,355 30,542 31,211 30,179 30,949 30,765 29,771 30,002 Long -Term Debt as a % of Assessed Valuation 0.39% 0.27% 0.20% 0.97% 0.89% 0.74% 0.73% 0.70% Long -Term Debt per capita $ 582.65 $ 444.54 $ 354.51 $ 1,955.86 $ 1,983.20 $ 1,726.77 $ 1,881.68 $ 1,876.69 Notes: Sources: Outstanding Long -term Debt & Assessed value information from Bond Prospectus & Operating Statements Populaiton from U.S. Census Bureau, Town of Lexington annual census Page 16 of 27 1.13 Long -Term Debt Summit VS MOAN/ 177S °� Town of Lexington Indicator I.14 ° 9 m z a INC, Summit I - September 26, 2007 Declining reserves as a percentage of operating revenues is considered a warning indicator. The Government Finance Officers Association (GFOA) recommends that undesignated fund balance be 5 -15 percent of operating revenues. Lexington Trend favorable x marginal 2003 unfavorable 2005* uncertain x Reserves & Fund Balance: The Town of Lexington has several types of reserves. Historically, the Town has relied upon Free Cash as its primary source of reserves. In recent years, the Town has strengthened its reserve position by augmenting and transferring money into the Town's Stabilization Fund. This adds financial flexibility to the Town's operations and provides a buffer against economic downturns. (See Indicator I.2) The Selectmen's Ad Hoc Financial Policy Committee has made a series of recommendations to further strengthen the Town's reserves and creating a series of small, targeted reserves for specific purposes (see Indicator I.9). MINE Formula: Undesignated Fund Balance / Operating Revenues Fiscal Year 2000 2001* 2002 2003 2004 2005* 2006 2007 2008 ** Certified Free Cash $ 2,160,392 $ 3,528,323 $ 5,439,004 $ 2,135,507 $ 1,315,003 $ 2,323,202 $ 5,409,985 $ 3,802,347 $ 3,500,000 Stabilization Fund $ 18,280 $ 149,272 $ 27,243 $ 27,634 $ 138,776 $ 947,119 $ 1,615,948 $ 4,461,675 $ 5,484,444 Net Operating Revenues $ 81,597,556 $ 90,961,933 $ 94,989,268 $ 99,075,365 $ 100,005,960 $ 107,961,955 $ 110,836,732 $ 122,731,206 $ 127,022,418 Free Cash as a % of operating revenue 2.65% 3.88% 5.73% 2.16% 1.31% 2.15% 4.88% 3.10% 2.76% Stabilization Fund as a % of operating revenue 0.02% 0.16% 0.03% 0.03% 0.14% 0.88% 1.46% 3.64% 4.32% Net Reserves as a % of Operating Revenue 2.67% 4.04% 5.75% 2.18% 1.45% 3.03% 6.34% 6.73% 7.07% Notes: *Denotes Fiscal Year where Proposition 2 1/2 Override was approved by voters. ** FY 2008 F.C. Estimate. NOT Certified by Department of Revenue Page 17 of 27 1.14 Reserves & Fund Balance Summit uS MOq Y O °p60 1 775N %�p Town of Lexin ton Indicator I.15 AP Ur a a I Z =� Summit I - September 26 2007 �FXNG Rapid changes in population which may effect service levels may be considered a warning indicator. Lexington Trend favorable marginal unfavorable uncertain x Population: Over the course of the last seven - eight years, Lexington has witnessed a fluctuation of between 3 -7% in total residents, with major decreases in the 20 -39 age range. In addition, the Lexington Public Schools has witnessed small but steady growth in its enrollment over the same time period. This steady change in population demographics, combined with steady enrollment in the public schools, is a leading indicator which policymakers and professionals should use to adequately prepare for and implement changes in service delivery and programs. Formula: Population Calendar Year 2000 2001 2002 2003 2004 2005 2006 2007 Change CY 2000- 2007 Under 20 7 8 7 7 7 8 7 7 2.5% 20 - 39 years old 6 5 5 5 5 4 4 4 -20.1% 40 - 59 years old 10 9 10 9 10 10 9 10 -1.1% 60 - 79 years old 5 5 5 5 5 5 5 5 -4.6% 80+ 1, 929 1, 665 1 1 1 2 2 1 -4.1% Totals 1 31 30 31 30 30 30 29 F -4.8% LPS Enrollment 1 58071 58991 59771 60021 61231 61351 61991 62431 7.5% Notes: Annual Population figures 2000 -2007 come from Town of Lexington, Town Clerk. LPS Enrollment figures for CY 2007 (School Year 2007 -2008) are ESTIMATES. Source: FY 2008 Recommended Budget Page 18 of 27 1.15 Population Summit I \OVS MOgN� 1775 "eoA Town o Lexington r g_ o "w I N C- 3 s �A -�o ' Summit I - September 26, 2007 � X N G"� � Budget decisions that are made within a given fiscal year often have significant implications for subsequent fiscal years. The revenue and expenditure projection within this packet is intended to facilitate discussion among community "stakeholders" with the hope that it will result in the identification of issues that call for further discussion and analysis as the FY09 budget cycle unfolds. This forecast projects general fund revenues and expenditures for the period FY2009 to FY2011. It is important to emphasize that the projection is not a proposed or recommended budget. It is a tool for planning, not budgeting. The forecasting methodology is a maintenance budget approach; that is, the projected increase in costs needed to maintain the Alcu rrent level of services" reflected in the adopted FY08 budget. As a general rule, it only includes increases driven by estimated inflationary pressures, current collective bargaining agreements and other existing purchase of service contracts. Revenues are generally projected based on historical experience. The difference between projected revenues and expenditures is characterized as "surplus /shortfall "; that is, those surplus funds that can be used to " "variable cost drivers ", e.g., finance capital projects, provide for salary increases, restore services eliminated or reduced in a prior fiscal year, fund reserves, etc. Page 19 of 27 Projections - Executive Summary Summit S Mop N � 1 779 "� Town of Lexington Q a� �W APRILI9'" S ummit I - September 26, 2007 �EXINGT 2 Expense Summary A 6 C D D Revenue Summary FY 2008 FY 2009 FY 2009 FY 2010 FY 2011 FY 2011 Projected Projection Appropriated Projection Projection Projection 1 Property Tax Levy $ 103,992,380 $ 108,200,538 $ 112,518,335 $ 117,683,843 Assumes 2.5% and growth annually (2008 Base Year) 2 State Aid $ 9 $ 9 $ 9 $ 9 Assumes increases in FY 2009, 2011 corresponding to elections 3 Local Receipts $ 9 $ 10,084,000 $ 10,012,000 $ 10,133,000 Assumes 5 -year hist. Avg. + decreasing PILOTS (Water /Sewer) & inc. Hotel /Motel (Sheraton) 4 Available Funds $ 2 $ 1 $ 1 $ 1 $1.5 M recurring F.C. in FY09, $1.M annually thereafter. (Also inc. Parking, Cemetery, TDM) 5 Revenue Offsets $ (1 $ (1 $ (1 $ (2,063,647) Inc. of $325K for overlay in 2011, level- funded $300K set -aside for snow & ice deficit annually 6 Other Revenues $ 1 $ 1 $ 1 $ 1 Reduced W/S Indirects as per 6 -year phase -down; growth in Recreation Benefit Costs 7 Non - Recurring Revenues $ 1 $ 2 $ - $ - $2M non - recurring revenues to be used for Reserves, Capital and Medicare Part D Funding Assumes 1.3% Step annually 14 Municipal Expenses $ 8 $ 8 $ 8 9 less non - recurring rev. $ (1,705,000) $ (2,000,000) $ - $ - 0 15 Debt Service $ 3 Expense Summary A_ 6 C D FY 2008 FY 2009 FY 2010 FY 2011 Recurring Cost Drivers Appropriated Projection Projection Projection Education 10 LPS Wages $ 53,934,512 $ 55,552,547 $ 57 $ 58,935,697 Assumes average of 3% Step annually. 11 LPS Expenses $ 14,759,946 $ 15,157,294 $ 15,650,183 $ 16,244,876 Assumes average of 3% inc. for Cont. Serv, Transp. & Supplies, 7% inc for non -fixed rate Utilities 12 Minuteman $ 1 $ 1 $ 1 $ 1 Assumes 5% growth annually Municipal 13 Municipal Wages $ 17,545,157 $ 17 $ 18,004,296 $ 18,238,352 Assumes 1.3% Step annually 14 Municipal Expenses $ 8 $ 8 $ 8 $ 9 Assumes average of 3% inc. for Cont. Serv, Transp. & Supplies, 7% inc for non -fixed rate Utilities Shared Expenses 15 Debt Service $ 3 $ 4 $ 3 $ 3 Outstanding Within -Levy Debt (inclusive of 2007 Town Meeting Appropriation) 16 Retirement $ 3 $ 3 $ 3 $ 3 Contrib. & Non - Contrib ( as per PERAC Assessment schedule) 17 Benefits $ 19,869,487 $ 21 $ 23,800,027 $ 26,061,749 10% inc. in health, 5% inc. in Medicare, level- funded dental & life 18 Reserve Fund $ 469,868 $ 500,000 $ 550,000 $ 600,000 $50,000 annual increase until reaching FPC recommendation of 1/2 of 1% of G.F. Revenues 19 Workers Compensation $ 300,235 $ 321 $ 343,739 $ 367,801 Average 7% increase annually 20 Unemployment $ 375,445 $ 100,000 $ 100,000 $ 100,000 Level- Funded at anticipated amount of FY 2008 use 21 Property & Lib. Insurance $ 582,853 $ 617,824 $ 654,894 $ 694 Average of 6% inc. annually for property & liability insurance. 22 Uninsured Losses $ 50,000 $ 75,000 $ 100,000 $ 125,000 $25,000 increase annually due to increase need (2007 - 3 incidents) 23 Capital $ 650,000 $ 697,500 $ 710,313 $ 723,445 $500K - FY01 Roads + Inflation @ 2.5 % /yr., $150K FY07 Build Envelope, $35,000 add. Capital 24 Reserves $ - $ - $ - $ - 25 Other $ 40,000 $ 45,000 $ 50,000 $ 55,000 $40,000 Senior Tax Work -Off annually (inc by $5K annually) 26 Non - Recurring Expenses $ 1 $ 2 $ - $ - $2M non - recurring revenues to be used for Reserves, Capital and Medicare Part D Funding 27 28 less non - recurring exp. $ (1,705,000) $ (2,000,000) $ - $ - 2 Variable Cost Drivers 2009 2010 2011 31 Municipal Wages $ 177 $ 361,348 $ 550,994 Annual cost of every 1% of COLA increase beginning in FY 2009 32 School Wages $ 555,525 $ 1 $ 1,751,131 Annual cost of every 1% of COLA increase beginning in FY 2009 33 New Debt Service $ - $ 140,000 $ 266,000 Cost per $1M of W/L Debt Service annually Notes: Does NOT include Exempt Debt Figures for FY 2008 inclusive of all prospective adjustments to be made at 2007 Special Town Meeting scheduled for October 10, 2007 Page 20 of 27 FY 2009 -2011 Projection Summit `O VS MORN ' "S Town o Lexi S ummit I - September 26 2007 APRIL I9'" INGS � Xt� FY 2009 Budget Policy Issues 1. Wages /Benefits 2. Capital Plan - Cash vs . Debt (Financial Policy Committee Recommendation 3. Funding of Post Employment Benefits 4. Potential Debt Exclusions Roads Community Center School Administration Page 21 of 27 Policy Issues Summit I `p uS MOg pa 1775 tic v � a �w k Town of Lexington d �m S '7 < Summit I - September 26, 2007 US DRAFT - 08/28/07 Budget Schedule 20072008 Significant Dates September 2007 February 4th Summit I - Financial Indicators & Projections - Discuss Guidelines & Drivers September 26th October 2007 February 14th Special Town Meeting (FY 2008 Revisions /Shire) October 10th November 2007 Week of February 17th Summit II - Revenue Model & Revised Projections November 15th December 2007 Municipal Budget Workshops with Selectmen December 3rd -14th January 2008 3rd Week of March Submittal of FY 2008 Manager's Recommended Budget to BOS January 7th Submittal of FY 2008 Superintendent's Recommended Budget to SC January 8th Summit III - Revenue Split, Expense Review & Gap Defining January 17th BOS - Public Hearings on Budget January 23rd & 28th School Committee - Public Hearings on Budget January 15th, 22nd, 29th February 2008 BOS - Public Hearings on Budget February 4th School Committee - Public Hearings on Budget February 5th Summit IV - Progress Report /Official Approval of FY 2009 Rec'd Budget (Municipal /Schools) February 14th Budget Decisions & Deliberations concluded February 14th Budget Printing & Distribution Week of February 17th FY 2008 Recommended Budget Submitted to Town Meeting Februrary 29th March 2008 Municipal Election March 3rd Summit V - Revenue /Expenditure Revisions & TM Planning 3rd Week of March Town Meeting Commences March 31st April 2008 Town Meeting April July 2008 Start of FY 2008 July 1, 2008 Page 22 of 27 FY 2009 Budget Process Summit S MOR NS ° I "5 " Town o Lexington Ap A <FX,Nlcj� Summit I - September 26, 2007 Chaster 70 Assistance: The Chapter 70 formula is based on a variety of educational factors. The table at right shows that Lexington receives slightly below the average amount of Chapter 70 aid for comparable communities. What the table does not show is the small percentage State Aid is of the total per pupil aid given to students in Lexington. Lexington receives only $1,103 /per pupil from the State and spends nearly $11,000 in total per pupil on an annual basis. FY08 FY08 FY08 Foundation Chapter 70 Per Pupil District Enrollment Aid Average ACTON- BOXBOROUGH* 5 $ 11 $ 1 ANDOVER 5 $ 6 $ 1 ARLINGTON 4 $ 5 $ 1 BEDFORD 2 $ 2 $ 1 BELMONT 3 $ 3 $ 1 CONCORD - CARLISLE* 3 3 4 $ 1 Notes: *Includes Ch. 70 aid to both regional & local districts. Source: Mass. Dept. of Education App. A Ch. 70 District LINCOLN - SUDBURY* NEEDHAM NEWTON WELLESLEY WESTON WINCHESTER Page 23 of 27 FY08 FY08 FY08 Foundation Chapter 70 Per Pupil Enrollment Aid Average 5 $ 7 $ 1,316 4 $ 5,124,207 $ 1 11 $12 7 754 1 101 $ 1 4 $ 4 $ 992 2 $ 2 $ 961 3 $ 4 $ 1 Summit I S MOR NS ° I "5 " Town o Lexington Ap B <FX,N1 Summit I - September 26, 2007 Puai/Poaulation Data: This chart shows the ratio of pupils as a percentage of the total population of a municipality (or in the case of joint school districts, municipalities). Compared to the average for similar communities & school systems, Lexington has more students as a percentage of the population. (Also see Indicator 1.15) District LEXINGTON ACTON- BOXBOROUGH* ANDOVER ARLINGTON BEDFORD BELMONT CONCORD - CARLISLE* FY08 Foundation Enrollment Appendix B: Pupil % of Population - Comparative Data District LINCOLN- SUDBURY* NEEDHAM 0 25.0 /o Population 24 28 6 30 5 25 5 33 17.5% NEWTON Lexington: 20.4% 4 41 10.8% WELLESLEY 4 26 2 12 18.5% WESTON 2 11 3 23 15.5% 20.0% 3 21 3 21 17.8% um 15.0% 10.0% 5.0% 0.0% �•�` p� �� Q� � ��� ��Q OQO O�� ��� �0� O `� AG O AG O 0 P FY08 Foundation Enrollment Population Pupils as % of Population 20.4%1 22.6% District LINCOLN- SUDBURY* NEEDHAM FY08 Foundation Enrollment 5 4 Population 24 28 6 30 5 25 5 33 17.5% NEWTON 11 82 4 41 10.8% WELLESLEY 4 26 2 12 18.5% WESTON 2 11 3 23 15.5% WINCHESTER 3 21 3 21 17.8% Notes: *Includes Ch. 70 aid to both regional & local districts. Source: Mass. Dept. of Education, Mass. Dept. of Revenue App. B Per. Pupil Pop. Page 24 of 27 Pupils as % of Population 21.7% 17.0% 14.1% 17.2% 19.8% 18.1% Summit I S MOR NS ° I "5 " Town o Lexington Ap C <FX,Nlcj� Summit I - September 26, 2007 Other Post Employment Benefits ( OPEB): GASB -45 requires that public entities begin accruing the expected future costs of OPEB (medical and life insurance) over the expected future employment period of employees, much like they do now for pension benefits. In FY 2007, the Town had an actuarial performed to determine what the anticipated GASB 45 /OPEB liability is for the Town of Lexington. As of the date of that study, June 30, 2006, The Town provided life, health and dental insurance benefits for active and retired employees and their covered dependents. The Town has 1055 active contracts, 162 pre- Medicare retiree contracts and 505 Medicare retiree contracts. Schedule of Employer Contributions (8.0% Discount Rate) (A) (B) (C) (D) (E) (F) (G) FY Ending Normal Cost Amortization Total Town Retiree H.C. Medicare Annual Payment ARC Appropriation Part D Subsidy Unfunded Liability ( +(D) (D) 2007 $ 3 $ 4 $ 8 $ 4 $ 282 $ 3 2008 $ 3 $ 5 $ 8 $ 5 $ 187 $ 3 2009 $ 3 $ 5 $ 9 $ 5 $ - $ 3 2010 $ 3 $ 6 $ 10 $ 6 $ - $ 3 2011 $ 3 $ 6 $ 10 $ 7 $ - $ 3 Notes: Source: Financial Risk Analysts, Town of Lexington Post - Retirement Benefits Analysis as of June 30, 2006 March 9, 2007. Retiree H.C. Appropriation amount provided from actuarial and inflated by 10% annually. Medicare Part D Subsidy actual receipts, FY 2007 & 2008. Page 25 of 27 App. C OPEB Summit VS MOq ti Qo�QO 1 T75 Nxc a Town o Lexi Ap endix D Q =w� 3 V �A P RI I NGZ L19'"O Summit I - September 26, 2007 � X � Average Tax Bill: This table shows the average single - family tax bill for comparable communities to Lexington for FY 2007. Lexington is slightly above average compared to other communities. Source: Mass. Dept. of Revenue, Div. Of Local Services. Municipality Assessed Value Parcels Average Value Tax Rate Single Family Tax Bill LEXINGTON $ 6 8 $ 728 $ 11.34 $ 8 ANDOVER $ 5 8 $ 591 $ 11.25 $ 6 ARLINGTON $ 3 7 $ 486 $ 10.95 $ 5 BEDFORD $ 1 3 $ 528 $ 11.29 $ 5 BELMONT $ 3 4 $ 803 $ 10.31 $ 8 CANTON $ 2 5 $ 507 $ 8.88 $ 4 CONCORD $ 4 4 $ 922 $ 10.56 $ 9 NATICK $ 4 8 $ 493 $ 9.58 $ 4 NEEDHAM $ 5 8 $ 682 $ 9.35 $ 6 NEWTON $ 13 16 $ 818 $ 9.33 $ 7 NORTH ANDOVER $ 3 6 $ 536 $ 10.45 $ 5 WELLESLEY $ 7 7 $ 1 $ 8.87 $ 8 WESTON $ 4 3 $ 1 $ 10.26 $ 13 WINCHESTER $ 4 5 $ 755 $ 10.33 $ 7 Page 26 of 27 App. D Average Tax Bill Summit Town of Lexington Appendix E: Summit I - September 26, 2007 Revenue Summary FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 Actual Actual Actual Actual Actual Actual Actual Property Tax Levy $ 68,734,888 $ 72,062,482 $ 75,795,919 $ 82,189,495 $ 91 $ 93,955,886 $ 100,432,867 State Aid $ 9,976,815 $ 10,466,658 $ 9,626,097 $ 7,894,598 $ 7,871,465 $ 8,603,524 $ 8,245,295 Local Receipts $ 10,586,536 $ 10,118,108 $ 9,722,316 $ 8,978,316 $ 10,246,954 $ 13,321,875 $ 12,910,181 Available Funds $ 1,663,694 $ 2,379,737 $ 3,557,418 $ 943,551 $ 1 1 728,160 $ 2 $ 4,923,000 Revenue Offsets $ (3,004,290) $ (3,472,633) $ (3,068,211) $ (3,186,402) $ (3,077,283) $ (3,145,438) $ (1,530,137) Total General Fund $ 87,957,643 $ 91,554,352 $ 95,633,539 $ 96,819,558 $ 107,961,955 $ 114,924,029 $ 124,981,206 Other Revenues Revolving Funds $ - $ - $ - $ - $ 78,266 $ 542,343 $ 793,431 Grants $ - $ - $ - $ - $ - $ 173,390 $ 173,390 Enterprise Funds (Direct) $ 14,907,870 $ 11 $ 14,950,432 $ 15,652,349 $ 13,393,865 $ 13,826,318 $ 15,459,138 Enterprise Funds (Indirect) $ 1,174,492 $ 1 $ 1,558,997 $ 1,683,197 $ 1 $ 1,789,916 $ 1,772,313 sub -total Other Revenues $ 16,082,362 $ 13,244,521 $ 16,509,429 $ 17,335,546 $ 15,255,328 $ 16,331,967 $ 18,198,272 Total Revenues $ 104,040,005 $ 104,798,873 $ 112,142,968 $ 114,155,104 $ 123,217,283 $ 131,255,996 $ 143,179,478 Expense Summary FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 Actual Actual Actual Actual Actual Actual Actual Education Lex. Pub Schools Compen. $ 38,998,899 $ 41,716,051 $ 43,900,810 $ 44,584,245 $ 46,185,654 $ 47,255,639 $ 49,061,328 Lex. Pub Schools Expenses $ 10,142,294 $ 10,362,484 $ 10,331,158 $ 9,380,263 $ 10,618,852 $ 13,397,121 $ 13,350,283 sub -total Lex. Pub. Schools $ 49,141,193 $ 52,078,535 $ 54,231,968 $ 53,964,508 $ 56,804,506 $ 60,652,760 $ 62,411,611 Minuteman Reg. School 3 $ 811,455 $ 787 116 $ 843,566 $ 901 $ 833,267 830,234 1,024,817 sub -total Education $ 49, 952, 648 $ 52,865 , 651 $ 55, 075,534 $ 54, 865, 939 $ 57, 637,773 $ 61,482 , 994 $ 63, 436, 428 Municipal Municipal Compen. $ 13,825,245 $ 14,408,917 $ 15,302,418 $ 13,226,616 $ 14,675,347 $ 15,499,278 $ 16,141,524 Municipal Expenses $ 6,921,006 $ 6,067,268 $ 7 $ 6,296,986 $ 7,077,497 $ 7 $ 7,662,756 sub -total Municipal $ 20,746,251 $ 20, 476,185 $ 22,515,326 $ 19,523, 602 $ 21,752,844 $ 22, 624, 947 $ 23,804,280 Shared Expenses Benefits & Insurance $ 9,667,767 $ 13,204,489 $ 14,620,463 $ 14,574,454 $ 17,511,374 $ 19,015,811 $ 21,720,932 Debt (within -levy) $ 3,877,205 $ 3,687,505 $ 2,952,933 $ 4,075,957 $ 4,502,085 $ 3,417,301 $ 3,760,125 Reserve Fund $ - $ - $ - $ - $ - $ - $ - sub -total Shared Expenses $ 13, 544, 972 $ 16, 891, 994 $ 17, 573, 396 $ 18, 650, 411 $ 22, 013, 459 $ 22, 433,112 $ 25, 481, 057 Revolving Funds $ 78,266 $ 542,343 $ 793,431 Grants $ 173,390 $ 173,390 Capital & Reserves Cash Capital (inc of roads) $ 821,419 $ 1 $ 1 $ 796,322 $ 500,000 $ 1 $ 1 Stabilization Fund $ - $ - $ - $ - $ 807,322 603,647 2,650,000 CPA $ - $ - $ - $ - $ - $ - $ 2,320,000 sub -total Capital &Reserves $ 821,419 $ 1,128,723 $ 1,259,500 $ 796,322 $ 1,307,322 $ 1,756,647 $ 6 Enterprise Funds Water $ 4,305,595 $ 4,396,026 $ 4,911,735 $ 5,240,049 $ 5,343,239 $ 5,408,102 $ 5,630,539 Wastewater (Sewer) $ 7,474,202 $ 7,312,908 $ 7,941,089 $ 7 $ 6,673,087 $ 6,279,508 $ 6,686,970 Recreation $ 1,153,925 $ 1 $ 1 $ 1 $ 1,377,539 $ 1,381,912 $ 1 Enterprise Capital $ 590,000 $ 635,000 $ 853,000 $ 710,000 $ - $ 80,000 $ 75,000 sub -total Enterprise Funds $ 13,523 $ 13,502, 025 $ 14, 950, 432 $ 14, 618,288 $ 13,393,865 $ 13,149,522 $ 13,818,370 Exempt Debt Municipal $ - $ - $ - $ 490,200 $ 786,575 $ 771,013 $ 1 School $ 950,625 $ 1 $ 1,567,988 $ 3,699,138 $ 4,538,510 $ 4 $ 3,828,068 sub -total Exempt Debt $ 950,625 $ 1,708,200 $ 1,567,988 $ 4,189,338 $ 5,325,085 $ 4 $ 5,1272 56 Total Expenses $ 99,539,637 $ 106,572,778 $ 112,942,176 $ 112,643,900 $ 121,508,614 $ 127,106,268 $ 138,799,212 Balance $ 4 $ (1 $ (799,208) $ 1 $ 1 $ 4 $ 4 Note: FY 2007 figures unaudited. Preliminary reconciliation only. Page 27 of 27 App. E Revenue - Exp. History Summit