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HomeMy WebLinkAboutFY 2002 Description of RevenuesDescription of Revenues Funding for services provided to Lexington residents comes from a variety of sources. The Town strives to maintain a diversified and stable revenue system that will provide shelter from short-nun fluctuations in any one revenue source and ensure the ability to provide ongoing services. Total budgeted revenue, regardless of the source, is equal to $110,449,046. Descriptions of each revenue category are provided below. GENERAL FUND General Fund available resources for FY2002 are anticipated to be $94,307,467. Property taxes revenues are the largest source of funding for the Town of Lexington general fund (73.8 %), followed by state aid (11.4 %) and local receipts (11 %). These revenues help support school, police, fire, public works, library, and general governmental services to the community. General Fund accounting is done on a modified accrual basis meaning that revenues are recognized when they become measurable or available (cash basis), while expenditures are accounted for in the accounting period incurred (accrual basis). Property Tax Chapter 59, Section 21C, of the Massachusetts General Laws, a statute commonly known as "Proposition 2' /z ", limits the incremental increase in property taxes that may be assessed in any town to not more than 2' /z% of the previous year's tax levy (real estate and personal property) plus new construction. This level of overall growth determines the tax levy limit. Lexington's general practice has been to raise the property tax levy to the limit in accordance with Proposition 2' /z. However, the Town has departed from this trend the last two years as a result of receiving unanticipated additional new growth property tax revenue, and raised the property tax levy at a level approximately $178,000 below the statutory limit in FY2000 and $47,600 in FY2001. The FY2002 budget moves part of the refuse disposal budget to a Pay As You Throw program and raises $747,000 less than the levy limit to offset this new initiative. Two provisions within Proposition 2' /z allow the citizens of a community to raise revenues outside of the tax limitation by popular vote. An override vote allows a predetermined sum of tax revenues to be generated over and above the normally allowable growth in the previous year's tax levy limit. This sum is then added to the base levy for the next fiscal year and this becomes a permanent addition to the tax levy limit. A debt exclusion is a specific voter approved bond authorization with a debt schedule that is funded outside the tax levy limit. These funds are raised and are tracked separate from those subject to the levy limit. They are not added to the tax levy limit for the following fiscal year. Lexington property owners pay taxes to the Town based on the assessed value of their real and/or personal property. Each year a tax rate is established for both residential and commercial property. The Town Assessor assesses real estate in order to properly reflect fair market value. In addition to real estate, businesses also pay a personal property tax (at the commercial rate) based on the value of their equipment, furniture, fixtures, and inventory used in conducting their business. The amount of taxes a property owner pays is determined by multiplying the applicable tax rate by each thousand dollars of assessed value. For example, if the tax rate is $10 and a property's assessed value is $100,000, the property owner will pay $10 times $100,000 /1,000, or $1,000. The table below provides a history of the average residential tax bill (just single family dwellings which are state class 101), the average residential valuation, and the residential tax rate for the Town of Lexington. The funds listed below provide a steady source of revenue, and have notfluctuated in some time. 1996* 1997 1998 1999* 2000 2001 Average Bill $4,288.80 $4,416.26 $4,541.30 $4,603.81 $4,688.55 $5,171.00 Average Value $306,125 $318,174 $338,146 $359,954 $382,739 $427,000 Tax Rate 14.01 13.88 13.43 12.79 12.25 12.11 " Note: nh wasaDepzrtmentofReienwwwluati ywr. State Aid The Commonwealth allocates a portion of generated revenue to municipalities each year for education and general governmental expenditures. These payments are derived primarily from the State Lottery and a percentage of State taxes including: personal income, sales and use, and corporate excise tax. The amount of state aid each community will receive is determined by formula and itemized in a financial statement, referred to as the cherry sheet, and traditionally printed on cherry colored paper. In FY2002 the Town of Lexington expects to receive $10,773,599 in state aid, which makes up 9.7% of the Town's revenue. Local Receipts 1. PAYT Revenue The 2001 Annual Town Meeting voted to institute a Pay As You Throw program for the first time in FY 2002. The hope is to reduce trash at the curbside and increase recycling by charging citizens a fee per bag or per barrel for a portion of their trash disposal costs. 2. School Revenue Revenue received by Lexington Public Schools from athletic fees, rental of school facilities, and bus transportation fees is included in this category. 3. Investment Income The Town eams interest on cash invested in short-term securities. The investment goal is to generate revenue while minimizing risk and ensure the availability of cash to meet expenditures. The amount of investment income is a function of the amount of funds invested and the interest rate. 4. Fines & Forfeitures Revenue collected from court fines, penalty charges for overdue taxes, non - criminal fines, and other minor property forfeitures, is included in this category. 5. Other Excise (Hotel/Motel & Jet Fuel) Lexington hotels and motels charge a 9.7% room tax to guests in accordance with local option legislation. The Town of Lexington receives 4% of this tax in semi- annual installments. Additionally, the State collects revenue from a jet fuel tax. Part of this revenue is re- apportioned to the towns whose property contains these airfields. 6. Motor Vehicle Excise All vehicle owners who have their vehicle(s) registered in the State of Massachusetts pay an annual motor vehicle excise tax to the city or town in which they reside. The Registry of Motor Vehicles creates a listing of all vehicles registered in Lexington and the book value assigned to each vehicle. The Town uses this information to bill all owners an annual tax equal to 2' /z percent or $25 for each $1,000 of the vehicle's value. 7. Other Fees & Charges Revenue is received from fees or charges by the Office of Community Development, Planning Department, Engineering, and the Department of Public Works. Also included in this category are collections from licenses and permits, ambulance fees, municipal liens, and building rentals. ENTERPRISE REVENUE Enterprise revenues for FY2002 are anticipated to be $16,191,579. The Town created enterprise funds for water and sewer operations in 1988. A similar fund was established for Recreation services when the Town purchased the Pine Meadows Golf Club. Enterprise funds are used for activities that are fully financed through user charges. Thus, all direct and indirect costs of the operation for the water and sewer functions, and all direct and most indirect costs of the recreation enterprise have been built into the fees /rates charged. The three Enterprise Funds -- Recreation, Water and Sewer -- are each operated as distinct, self - supporting entities. In each case, operating expenses are balanced against revenues generated from user fees over the long inn. In most cases, capital projects have also been supported by Enterprise revenues with the purchase of Pine Meadows Golf Club being the major exception. Budgeting for all Enterprise Funds is done on a GAAP (Generally Accepted Accounting Principles) or fun accrual basis. This means that expenditures and revenues are accounted for in the accounting period incurred. Water and Sewer Users of sewer and water services provided by the Town pay charges depending upon metered water consumption. Since FY1988, water and sewer operations have been financially accounted for by the Town on an Enterprise Fund basis. Revenue received from charges for sewer and water services is used to fully support the costs of the utility operation, such as Massachusetts Water Resources Authority (MWRA) assessments, debt service obligations, personal service costs, and capital projects. Charges for services are based on a rate structure corresponding to usage. Charges rise as usage increases. The Board of Selectmen sets the water and sewer rates to cover expenditures. Actual revenues oscillate with the level of consumer use, depending on variables such as the weather. The Town pays the MWRA assessments to supply quality water and dispose of Town sewage. In FY2001, the MWRA rate was assessed at $1,205.72 per million gallons. Recreation The Recreation Enterprise Fund includes Pine Meadows Golf Club, a nine -hole golf course purchased by the Town in 1988, and town wide recreational facilities including aquatics and tennis. Users of Town recreational facilities and teams participating in Town sponsored sports pay fees for these services. Revenue collected from these fees covers part of the cost of maintaining facilities, providing instructors, coaches, and referees, recreation program management, as well as some recreation related capital improvements for revenue - producing recreation facilities. SPECIAL REVENUE FUNDS Special Revenues have a revenue source that is restricted to a specific purpose for expenditure by law. Various state and federal grants such as State Aid to Libraries and Chapter 90 Highway funds fall under this category. Many grants from the state and federal government, which are listed in this section (pp. 18 -20) do not require Town Meeting appropriation. Most notable and largest of the special revenue funds is the Parking Meter Fund. Parking Meter Fund Revenue from town parking meters and parking lot stickers is deposited into the Parking Fund. This fund helps pay for LEXPRESS transportation services, police personal services, parking lot maintenance costs, and Department of Public Works expenses directly related to the maintenance of parking lots. OTHER AVAILABLE REVENUE FUNDING "Free Cash" The surplus of revenue over expenditures at the end of each fiscal year less all outstanding tax receivables is called unreserved fund balance or "free cash." The "free cash" amount is certified annually by the Department of Revenue as of July 1. Town Meeting may appropriate these funds as a resource for the following fiscal year's operations. A surplus is generated when actual revenues exceed those estimated and/or expenditures are less than appropriations. Stabilization Fund The Town accumulates funds for multi -year capital projects, particularly equipment needs, through the use of the Stabilization Fund. Any money voted to the Stabilization Fund remains in the Fund until Town Meeting appropriates the money, and does not close out at the end of the fiscal year. In addition, any interest earned remains in the fund and is re- invested in capital projects. Town Meeting approved the establishment of this fund in FY1998 with an initial appropriation of $100,000, and approved the same amount of $100,000 again in FY1999. These monies were approved by Town Meeting in April of 1999 to be used toward the purchase of afire ladder truck in FY2000. In FY2001, $123,050 was appropriated to the stabilization fund toward replacement of an ambulance. Article Transfers and Trusts Projects from previous year Town Meeting article appropriations often have unexpended balances not required once the project is complete. The unexpended balance becomes available for future Town Meeting appropriation. Trust fund monies will occasionally be released by the Trustees of Public Trusts to support approved recreation, human services, cemeteries or library programs.