HomeMy WebLinkAbout2007 AC Rpt2APPROPRIATION COMMITTEE
TOWN OF LEXINGTON
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2 nd REPORT TO THE
2007 ANNUAL TOWN MEETING
(Supplement to I" Report, Released April 4, 2007)
Released April 21, 2007
Appropriation Committee Members — Fiscal Year 2007
Alan M. Levine Chair • Deborah Brown Vice -Chair
Robert N. Addelson (ex- officio; non - voting) • John Bartenstein • Rodney E. Cole
Richard Enrich • Pam Hoffman • David G. Kanter • Michael J. Kennealy • Eric Michelson
APPROPRIATION COMMITTEE 2 " REPORT, April 21, 2007, TO 2007 ATM
Summary of Warrant Article Recommendations
Abbreviations: GF = General Fund EF = Enterprise Fund; RF = Revolving Fund
CPA = Community Preservation Act Fund BAN = Bond Anticipation Note
An entry of `Indefinitely Postpone" in the right -hand column merely signiflies our expectation.
Ar-
Funds Requested
Funding
Committee
ticle
Title
Source
Recommendation
(Lexington Public
Multiple
To be addressed in a
Schools)
subsequent report
$56,331,435
Appropriate FY2008
(Minuteman Regional
21
Operating Budget
High School, Shared
$56,331,435 ($794,544
Expenses, &
Multiple
contingent on an
Municipal) ($794,544
override) (7 -0)
contingent on an
override)
36
Appropriate for Public
TBD
Excluded Debt
To be addressed in a
Works Facility
subsequent report
37
Appropriate for Post
GF
Indefinitely Postpone
Employment Benefits
(7 -0)
38
Rescind Prior Borrowing
($3,000,000)
Debt
No Position (7 -1)
Authorizations
Indefinitely Postpone
Establish and
See details below
39
Appropriate to Specified
regarding four new
GF
Approve (7 -0)
Stabilization Funds
Stabilization Funds
40
Appropriate to
$1,000,000
GF
$1,000,000 (7 -0)
Stabilization Fund
41
Appropriate for Prior
$50,531
GF
$50,531 (7 -0)
Years' Unpaid Bills
42
Amend FY2007
$40,000 (Municipal;
Transfer) +
GF (Transfer)
To be addressed in a
Operating Budget
$625,538 (Schools)
TBD (Schools)
subsequent report
$15,000 CPA
Appropriate for
Transfer +
$15,000 (7 -0) +
43
Authorized Capital
$15,000 + TBD
TBD
TBD (Pending)
Improvements
Additional
Excluded Debt
44
Use of Funds to Reduce
GF
Indefinitely Postpone
the Tax Rate
(7 -0)
Page 2 of 24
APPROPRIATION COMMITTEE 2 " REPORT, April 21, 2007, TO 2007 ATM
Table of Contents
Summary of Warrant Article
Developments from the 2006 Annual Town Meeting Until Now ........................ ..............................4
Reserves.................................................................................................................. ............................... 5
FY2008 ................................................................................................................... ..............................7
FY2009 and Beyond ............................................................................................. ............................... 8
Updated Committee Positions or Information Since 1" Report .............................. ..............................9
Warrant Article Analysis and Recommendations ..................................................
.............................10
Article 21: Appropriate FY2008 Operating Budget ........................................... ...............................
10
(a) Lexington Public Schools ........................................................................ .............................
10
(b) Minuteman Regional High School ........................................................ ...............................
10
(c) Shared Expenses ..................................................................................... ...............................
12
(d) Municipal ................................................................................................ ...............................
14
Article 37: Appropriate for Post Employment Benefits .................................... ...............................
14
Article 38: Rescind Prior Borrowing Authorizations ......................................... ...............................
15
Article 39: Establish and Appropriate to Specified Stabilization Funds .......... ...............................
16
Article 40: Appropriate to Stabilization Fund .................................................... ...............................
17
Article 41: Appropriate for Prior Years' Unpaid Bills ...................................... ...............................
17
Article 43: Appropriate for Authorized Capital Improvements ........................ ...............................
18
Article 44: Use of Funds to Reduce the Tax Rate .............................................. ...............................
19
Appendix A: Estimated Impact of a Possible Override and Other Factors on Single - Family -Home
Taxesfor FY2008 .............................................................................................. ...............................
Appendix B: Financial Forecasts for FY2009— FY2011 ................................... ...............................
TableB -1: Budget Drivers ..................................................................................... .............................23
Table B -2: Projection Summary ............................................................................ .............................23
Figure B -1: Annual Budget Exclusive of Exempt Debt ...................................... .............................23
Table B -3: 3 -Year Budget Projections from the Appropriation Committee .... ............................... 24
Page 3 of 24
APPROPRIATION COMMITTEE 2 " REPORT, April 21, 2007, TO 2007 ATM
Introduction
This is our second written report to the 2007 Annual Town meeting. In the interest of brevity, we will, in
general, not repeat material from the first report. This and our other reports will be available on -line at
http://www.lexingtontliu
The topics covered in this report include our recommendations on most elements of the Operating Budget
(Article 21) and on Articles 37 41 and 43 44. A third report, to be issued early next week, will address
our recommendations on the Department of Public Works (DPW) Facility project (Article 36). A fourth
and final report, to be issued later next week, will address the School Department operating budget and
related Shared Expenses for health benefits (Article 21, lines 1100 and 2130) and Article 42.
This report is organized as follows. We begin in this Introduction with an overview of recent financial
developments, the status of the Town's financial reserves, the proposed FY2008 budget, and the financial
outlook for FY2009 and beyond. We then provide updates on our positions and information since our first
report. Next we provide our analysis and recommendations on individual articles. Finally, we present in
two appendices information on the expected impact of an operating override on tax bills in FY2008
(Appendix A) and projections of the Town's finances in future years (Appendix B).
Developments from the 2006 Annual Town Meeting Until Now
Four override questions were put to the voters in June, 2006. Questions I and 2, which sought additional
funds for the operation of the Lexington Public Schools, were not approved. Question 3, which sought
increased funds for salaries and expenses for municipal and school facilities maintenance, was approved.
Question 4, which sought additional funds for the municipal operations budget, was also approved. The
outcome of this referendum has had major effects on the budgets that have been developed for FY2008.
Two Special Town Meetings were convened last fall. At the first (Special Town Meeting No. 1, convened
on November 29, 2006), a number of financial actions were taken, including: appropriations to augment
the FY2007 school budget to cover new and unexpected special education (SPED) costs; adjustments to
the Water and Sewer Enterprise Funds budgets; appropriations from the Community Preservation Act
(CPA) Fund for three historical preservation projects; appropriation of funds received from Brookhaven
for use by LexHAB; and a small supplemental appropriation for the Senior Service Program. In addition,
that Special Town Meeting gave its preliminary approval for the consolidation of school and municipal
facilities maintenance programs into a joint facilities department. Details may be found in our "Report to
the 2006 Special Town Meeting #I" at the above web site.
Of the General Fund appropriations made at Special Town Meeting No. 1, the only one of real
significance was that required to cover the increase in SPED cost; the others were either housekeeping
actions or small in magnitude. The supplemental school appropriation of $824K was covered for the most
part by an increase in Chapter 70 State Aid, which came in significantly above the amount that had been
projected during the 2006 budget process. The balance of the supplemental school appropriation was
covered by new tax -levy growth in excess of that projected in March 2006. Thanks to these late- breaking
additional revenues, it was not necessary to appropriate any Free Cash at Special Town Meeting No. 1.
The second Special Town Meeting (Special Town Meeting No. 2) —convened right after the first, but
with debate held on December 2, 2006 —considered an appropriation for the construction of a new
Department of Public Works (DPW) facility. Rather than appropriate the complete funds necessary for
the construction of the facility, then estimated to be about $30.5 million, that Special Town Meeting made
a more limited appropriation of $1.6 million to fund the design process through 50% completion of the
construction drawings. The objective was to allow further analysis of the building needs and possible
Page 4 of 24
APPROPRIATION COMMITTEE 2 " REPORT, April 21, 2007, TO 2007 ATM
cost reductions, and to enable a more reliable cost estimate to be presented to this year's Annual Town
Meeting, without significantly delaying the construction schedule.
The allowable increase in property -tax revenue for FY2007 resulting from new construction ( "new
growth ") was certified in December 2006 at $2,036,789, higher than the values of $1,675,000 assumed
for the budget presented to the 2006 Annual Town Meeting and $1,875,000 assumed at the time of the
November 2006 Special Town Meetings. State aid for FY2007, net of Cherry Sheet assessments and
offsets, also came in higher than anticipated at $7,565,717, which was $708,962 more than the
$6,856,755 projected in early 2006. (Note that these numbers do not reflect certain aid, e.g., for the
METCO program, that is not reported on the Cherry Sheets.) The voters' approval of Questions 3 and 4
on the June 2006 override referendum resulted in about $1.8M in new tax levy revenue beyond the
ordinarily allowable 2.5% increase. The success of Questions 3 and 4, the higher new growth, the increase
in State aid, and increases in various types of local receipts yield a projection by the Town Manager and
staff in the Fiscal Year 2008 Recommended Budget & Financing Plan, March 23, 2007 ( "Brown Book "),
of FY2007 non - exempt General Fund revenue that is about $3.5M, or approximately 3 %, higher than the
corresponding figure in the April 6, 2006 (Blue) Budget Book.
The Schools Department has reported that it will require an additional appropriation of $50,531 to cover
unpaid bills from FY2006 and that there will be an additional deficit in its FY2007 budget of about
$625,000. It is anticipated that supplementary appropriations to cover the FY2006 unpaid bills and part of
the FY2007 budget deficit will be requested under Articles 41 and 42, to be funded by $260K in Free
Cash. It is expected that the balance of the FY2007 Schools budget deficit will be covered by a request for
$300,000 from the Reserve Fund and a transfer under Article 42 of about $110,000 from the salary
adjustment account. For additional information, see the discussion under Article 41 in this report and the
discussion under Article 42 in our subsequent report.
Finally we note that, as of April 18, 2007, the expenditures on snow removal during FY2007 are over the
budgeted amount of $610K by about $50K, but are expected to be handled within the existing DPW
budget.
Reserves
Financial reserves are an important component of the Town's financial picture. They serve multiple
purposes, nearly all of which are to provide funds on a temporary basis to help solve an acute problem.
Reserves do not solve the Town's dominant, long -term, financial problem— expenses growing more
rapidly than revenues—although they can help to buffer a revenue shortfall in a particularly bad year.
Building and /or replenishing reserves requires the appropriation of funds which otherwise might be used
to address a gap between revenues and expenses in the current fiscal year. Further information on the
reasons and purposes for reserve building may be found in our Report to the 2005 Annual Town Meeting
and the Report of the Ad Hoc Financial Policy Committee (2006). We note here that the Ad Hoc
Financial Policy Committee recommended that the Town's general - purpose reserves should be large
enough to help bridge a two- or three -year downturn in revenue from State aid and local receipts. Though
no precise target for the Town's reserves has been officially adopted by the Board of Selectmen or this
Committee, there seems to be a sense that it should be about 10% of the Town's annual General Fund
Revenue, or about $10-11 M.
The Stabilization Fund has not been used to fund operating expenses or other recurring expenses on an
annual basis. It is therefore generally agreed that the balance in the Fund is a genuine general - purpose
reserve. On the other hand, appropriations from Free Cash have regularly been used to fund operating
expenses, as well as capital and other non - recurring expenses. We include both Free Cash and the
Stabilization Funds in this discussion of reserves. Any discussion of reserves should also consider the
Reserve Fund, although it is generally fully depleted at the end of each fiscal year. The reader must be
careful to understand that different reserve "buckets" have different characteristics, and that the dynamics
of their increases and decreases must be evaluated in the context of the purposes and limitations of each
type.
Page 5 of 24
APPROPRIATION COMMITTEE 2 " REPORT, April 21, 2007, TO 2007 ATM
The total of the Free Cash and Stabilization Fund balances grew substantially over the past year, in part as
a result of actions taken at the 2006 Annual Town Meeting. The balances going into this Town Meeting
are given in Table 1. We also note that, for FY2007, no transfers have yet been made from the Reserve
Fund, the balance of which remains at $400,000. However, we expect that, with the approval of this
Committee, most or all of that balance will be transferred prior to June 30 to municipal and/or school line
items to help cover FY2007 budget overruns.
Table 1: Free Cash and Stabilization Fund Balances
As of:
March 1, 2006
March 1, 2007
Free Cash
$4,447,520
$3,802,347
Stabilization Fund
$1,592,731
$4,393,000*
Total
$6,040,251
$8,195,000*
*With an approximate amount included for accrued interest
Of the $3,802,347 in Free Cash that is available, the Town Manager has recommended the use of $50,531
to fund FY2006 unpaid bills, $209,469 to supplement FY2007 operating expenses, $1,887,347 for
FY2008 operating expenses, and $655,000 for FY2008 capital projects. He has recommended that the
balance of $1,000,000 be transferred under Article 40 to the Stabilization Fund. The latter transfer has no
material effect upon the Town's fiscal condition because, from a reserves - balance perspective, the
differences between Free Cash and a stabilization fund are not major. Two of the procedural differences
are: (1) Free Cash is not available during the annual certification process from July I until the Town is
notified by the State of the certified value, whereas a stabilization fund provides a continuously available
reserve with a definite value; and (2) the appropriation of funds from Free Cash requires a simple
majority vote, whereas that from a stabilization fund requires a two - thirds majority.
The proposed changes to Free Cash are summarized in Table 2 and the proposed changes to the
Stabilization Fund are surmnarized in Table 3.
Table 2: Proposed Free Cash Changes -2007 Annual Town Meeting
Certified Free Cash, July 1, 2006
$3,802,347
Less 2006 Special Town Meeting appropriation
0
Free Cash as of March 30, 2007
$3,802,347
Less use for FY2006 unpaid bills (Article 41)
($50,531)
Less possible FY2007 supplement (Article 42)
($209,469)
Remaining balance for FY 2008 articles
$3,542,347
Less use for operating budget (Article 21)
($1,887,347)
Less use for capital articles
$655,000
Less transfer to Stabilization Fund (Article 40)
($1,000,000)
Remaining Balance at End of Town Meeting
$0
Table 3: Proposed Stabilization Fund Changes"
Balance July 1, 2006
$4,265,947
Estimated interest received in 2007**
$175,000
Transfer in Article 40
$1,000,000
Projected Balance July 1, 2007 (rounded)
$5,441,000
*The amounts in the special purpose Stabilization Funds to be created at the 2007
Annual Town Meeting are not included.
*Assumes an interest rate of about 4% for March through June 2007
The Town Manager conservatively estimates that Free Cash will be approximately $2M on July 1, 2007
(although determination of the actual value must await certification by the State Department of Revenue).
The total of Free Cash and the balance in the Stabilization Fund is then projected to be approximately
$7.4M on July 1, 2007.
Page 6 of 24
APPROPRIATION COMMITTEE 2 " REPORT, April 21, 2007, TO 2007 ATM
FY 2008
The Town Manager and staff led the development of the FY2008 recommended budget by first
estimating, from the best available information, the amount of revenue that could be expected in FY2008,
taking into account the allowable 2.5% increase in the tax levy, State aid, local receipts and available
funds (principally Free Cash). The next step was to estimate the required expenditures in FY2008 for
shared expenses, including debt service, health benefits and capital. A total was then calculated for the
FY2008 shared expenses and the amounts appropriated in FY2007 for the educational and municipal
operations. The amount by which the projected FY2008 revenue exceeded this total, considered to be
"new revenue," was allocated between the school and municipal budgets on a 72/28 percentage basis
the same proportion as the final FY2007 school and municipal budgets. Although this allocation was, in
principle, merely a starting point for further discussions, there was no strong feeling in the major boards
and finance committees that it should be changed. Thus, it established the amount of expenditures that
could be supported in the school and municipal budgets without, for example, fee increases or an
operating override. The School Committee has, in fact, approved some changes in fees for FY2008 (some
of which depend on the outcome of a June 2007 override referendum).
As noted in the previous section, the revenue model contemplates the use of $1,887,347 of Free Cash for
FY2008 operating expenses, the use of $655,000 of Free Cash for capital expenditures, and the transfer of
$1,000,000 to the Stabilization Fund. The use of Free Cash is summarized in Table 2 above.
The School Committee has requested that an additional amount be appropriated for school operations in
order to maintain services and to restore some important previously lost positions. The additional amount
will be contingent upon approval in a Proposition 2 /z override referendum to be called by the Selectmen
upon favorable action by Town Meeting. The amount of the proposed override is about $3.9M and will be
split between the school budget line item (I 100) and the health insurance line item (2130). The Selectmen
and Town Manager do not plan to seek additional funds for municipal operations through an override this
year.
There have been several late- breaking developments in the budget process, one of which involves State
aid. The Town Manager, in the Brown Book, assumed a net increase of only about $20K in State aid from
FY2007 to FY2008. In early April 2007, the Massachusetts House and Senate approved a joint resolution
in favor of changes in Chapter 70 that would increase aid for education to Lexington beyond the increase
assumed in the Town Manager's March 23 budget by about $640K. At a joint meeting on April 12, 2007,
the Board of Selectmen, School Committee, and this Committee approved the allocation of this State aid
increase to the school operating budget so as to decrease the amount that will be at risk in the June
override referendum.
The Town and School Administrations continue to work on revising the structure of the annual budgets.
The use of revolving funds is increasing and will hopefully lead to greater transparency in a number of
areas. Some of the details on the revolving funds may be found in our discussion of Article 25 in our first
report, and further details will be provided in our upcoming report on the school operating budget.
If the anticipated operating override for the school operating budget in June does not succeed, there will
be layoffs of about 40 school employees. Since a laid -off employee is entitled to receive unemployment
compensation from the Town while she /he is looking for a new job, the Town needs to be prepared to
bear the potential costs of unemployment compensation. The maximum cost in FY2008, which would be
borne in the highly unlikely case that none of the laid -off employees is reemployed, is close to $700K.
The unemployment compensation line (line 2140) has been increased to about $375K from a much lower
amount to cover the reasonably likely costs in the event that the override fails.
This Committee has, in collaboration with Town staff, worked on making projections in order to gain
some insight on future fiscal years (see Appendix B). The projections quantify, according to a set of
assumptions, the anticipated growth of expenses relative to revenues. We believe that we have made
reasonable assumptions, and therefore are obligated to consider seriously the implications of the
projections. They indicate that it is reasonably likely that maintenance of the FY2008 level of services in
Page 7 of 24
APPROPRIATION COMMITTEE 2 " REPORT, April 21, 2007, TO 2007 ATM
FY2009 and beyond will require drawing heavily on reserves, having another override referendum, or
cutting services. These conclusions are consistent with those of last year and other recent years.
Some of the fine details of the budget and the proposed override questions and amounts are still being
worked out. Our final recommendations on these matters will be given orally at Town Meeting.
FY 2009 and Beyond
As we noted last year, it seems highly likely that health insurance, energy, and special- education services
will continue to be significant cost drivers in future years. The Town is taking steps to address all of these
areas, but has at most a limited degree of control in each of them. Progress is therefore likely to be
incremental in nature and dependent upon external conditions. Nonetheless, incremental changes made
over a long period can be of great import. Wages and salaries will also continue to be cost drivers as even
increases of a few percent can have major effects. The annual increases in the number of students
attending our public schools continue to moderate, although some short-term increases can be expected as
the Avalon at Lexington Hills development (at the former Metropolitan State Hospital site) is completed
and occupied in FY2008 and FY2009. Long -term forecasts suggest that the school population will slowly
decline over the next ten years, but these forecasts become more uncertain at more distant times.
Last year, we noted that the Town's liabilities for future pension payments are projected to be fully
funded in 2015. This continues to be our understanding. In compliance with new requirements of the
Govermnent Accounting Standards Board, the Town recently obtained an actuarial report on its future
liability for other post retirement benefit costs (primarily retiree health insurance). Based upon a number
of assumptions, the report estimates the Town's liability for those future benefits to be in the $100 million
range. Over the next year, this Committee will be studying the report and its implications for future
funding needs. While there is not yet any legal requirement to fund these liabilities, the Town Manager
has suggested that the Town should make a modest start on such funding at the 2008 Annual Town
Meeting by appropriating funds anticipated to be received from Medicare reimbursements. When the
pension liabilities become fully funded in or about 2015, there will be a natural opportunity to make
larger contributions to fund the retiree health -care liabilities.
In early 2006, the Ad Hoc Financial Policy Committee recommended that the Town's physical assets be
evaluated in order to put discussions of long -term maintenance needs on a sounder footing. The
evaluation has not yet been initiated, but its potential usefulness has not diminished. Major capital
projects beyond the DPW facility that are needed include the reconstruction of the "White House" (the
present home of the School Administration) for use as a senior center or some other purpose, the
provision of a larger and more functional senior center in another location if not in a reconstructed White
House, and the reconstruction or major renovation of three or four elementary schools. It may also be
necessary to put aside new funds for use in street and road reconstruction. Voter approval through a
Proposition 2 /z debt - exclusion referendum will likely be required for each of these major projects.
The Town should continue to press the State for further substantial increases in aid. It is still low in
absolute and relative terms. Potential ways to increase local sources of revenue should also be
investigated. The possibility of expanding revenue by growing our commercial tax base will be examined
in a study that the Lexington 2020 Vision Economic Development Task Force hopes to fund under
Article 42 at this Town Meeting.
Page 8 of 24
APPROPRIATION COMMITTEE 2 " REPORT, April 21, 2007, TO 2007 ATM
Updated Committee Positions or Information Since 1S Report
The following provides changes in this Committee's positions and information since our I" Report to the
2007 Annual Town Meeting, which was released April 4, 2007.
Article 18: Accept MGL Chapter 32B, Section 18 (Medicare Extension Plans)
When the sponsor moved to Indefinitely Postpone this Article, this Committee unanimously (9 -0)
supported that action. (This Committee had previously unanimously supported the Article.)
Article 23: Petition General Court to Increase Income Limits for Property Tax Deferrals (Citizens'
Petition)
As a substitute motion was presented which was consistent with the policy change we would want to see
implemented, this Committee unanimously (7 -0) supported it. (This Committee previously had its
position as Pending)
Article 25: Continue and Approve Departmental Revolving Funds
For the DPW Compost Operations, the FY2008 Authorization was $230,000 (an increase from $210,034).
(There was no change in this Committee's unanimous support.)
Article 26: Appropriate the FY2008 Community Preservation Committee Operating Budget and
for CPA Projects
The total funds requested were increased by $25,000 (to $1,491,199) as of a result of increasing the
request under element (m) by that amount. This Committee's Recommendation was revised to
$1,289,599— reflecting support of the additional $25,000 and our decision not to support the $90,000
requested for element (e) that was previously listed as Pending.
(e) Comprehensive Cultural Resources Survey ($90,000 requested): A majority (5 -3) of this Committee
opposed this request as the proposed effort would expand the Cultural Resources Inventory without
having first addressed concerns regarding the process in the Demolition Delay Bylaw whose scope is
linked to property in the Inventory. (This Committee previously had its position as Pending)
(j) Douglas House ($300,000 requested): Following clarification of the circumstance under which the
units no longer being "affordable" would trigger repayment to the Town of these funds, a revised majority
(6-2) of this Committee supported the request. (This Committee previously had its position as supporting
by an 8 -1 majority.)
(m) Administration ($50,000 requested): This Committee unanimously (9 -0) supported the increased
amount. (This Committee previously had unanimously supported the original $25,000 request.)
Article 31(a): Lincoln Field Methane Mitigation
While we previously gave our unanimous support to a requested appropriaton of $460,000 requested
level, we now understand that a State - approved solution may cost up to $475,800 —the Consulting
Engineer's cost estimate for Alternative #2 (Passive Ventilation with Horizontal Collector Pipe and
Membrane Wall). Pending at the time this report went to press is a proposal to do the work in two phases
(first just the ventilation at a lower depth; then the wall using a different material). The objective would
be to see whether the ventilation alone is sufficient to reduce the methane -gas level to meet the
standards— thereby eliminating the need to construct the barrier wall. While a revised cost estimate is not
yet available to us, we expect the total cost, even if phased, to be lower than $475,800 —with this Town
Meeting being asked to appropriate only for funding the first phase. As much as we would hope the final
implementation can be achieved at a cost less than even whatever is the first -phase cost, we see no
practical alternative to the Town meeting its legal obligation by resolving the gas - migration issue. This
Committee, therefore, consistent with our earlier statement of necessity, unanimously (7 -0) supports the
requested amount (anticipated not to be more than $475,800).
Page 9 of 24
APPROPRIATION COMMITTEE 2 " REPORT, April 21, 2007, TO 2007 ATM
Warrant Article Analysis and Recommendations
Article 21:
Appropriate
FY2008 Operating
Funds Requested
Funding
Source
Committee
Recommendation
(Lexington Public
Multiple
To be addressed in a
Budget
Schools)
High School
subsequent report
$56,331,435
Multiple
$56,331,435 ($794,544
(Minuteman
contingent on an
Regional High
override (7 -0)
School, Shared
Expenses, &
Municipal)
($794,544
contingent on an
override
Project Description
Amount
Requested
Funding
Source
Committee Recommends
(a) Lexington Public
$1,200,438
Multiple
I
To be addressed in a subsequent
I
Schools
High School
report
Project Description
Amount
Re
Funding
Source
Committee Recommends
(b) Minuteman Regional
$1,200,438
GF
$1,200,438 (7 -0)
High School
Enrollment figures for the FY2008 school year (2007 -2008) are measured as of October 1, 2006, and at
that time there were 693 full -time students, a decrease of 50 students (- 6.8 %). The school served a total of
882 full -time equivalent (FTE) full and part-time students, down from 931 FTE ( -5 %). The school
population is roughly 64% from in- district towns, and 36% out -of- district towns. There are no "Choice"
students attending. In- district enrolhnent decreased by 59 students (41.6 %). Out -of- district enrollment
levels increased by 8 students (3.3 %). SPED students are 51% of the FTE enrollment.
The Minuteman Regional High School (MRHS) Committee has accepted an operating budget for FY2008
of $16,745,769 (a $606,271 [3.8 %] budget increase over current year). Last year's increase was 2.8 %.
Salaries, which are 63% of the budget, increased $496,172 (4.9 %). The factors that make up this large
percentage increase are 1) an FY2007 one -year contract settlement which was higher than budgeted
(actual 2.5 %, budgeted at 2 %), and 2) a budgeted increase for the still unsettled contract for FY2008. Due
to reduced enrollment the school has reduced academic staff 4.5 FTEs, yet in response to higher demands
of SPED, academic competency reporting, and mandated student occupational certification, it has had to
maintain support and administrative staffing levels. The higher cost of energy continues to affect heating,
power, and student transportation. The school continues its commitment to infrastructure renewal with an
annual capital budget of $250,000.
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APPROPRIATION COMMITTEE 2 " REPORT, April 21, 2007, TO 2007 ATM
Member towns' assessments are used to fund the portion of the budget that is not funded by the
combination of: 1) all other projected revenues and 2) member towns' State Required Minimum (SRM)
per - student payments. Member towns are assessed for the upcoming year based on their student
enrolhnent in the current year.
This year's assessments are based on a MRHS budget funded with a projected $2,258,053 of Chapter 70
money and $983,837 in transportation aid. This is a slightly increased level of funding of Chapter 70 aid
and a significantly increased level ( +29.4 %) of funding of transportation aid from FY2007. Out -of- district
enrolhnent and its associated tuition revenue are anticipated to continue to decline over the long term and,
although the FY2008 enrolhnent increased slightly, it remains 23 students below its October 2004 level of
270. This is mainly due to the State's current Chapter 74 rules which restrict the number of non - resident
students eligible to enroll. Although the State caps the non - resident student tuition rate, that rate is now
set using the actual in- district average cost as a factor. The non - resident tuition rate for FY2007 was set at
$15,547 per student. Minuteman officials have lobbied both the Legislature and the State's Commissioner
of Education on this issue for years and FY2007 rates were increased 7 %. The FY2008 non - resident rates
have yet to be set by the State, but they are anticipated to increase 3 %-5 %. Minuteman's budget assumes
level per -pupil funding with a decreased out -of- district enrolhnent.
This year, as last year, MRHS has made clear that its assessments to its member towns are just an
estimate. MRHS cannot produce final assessments until Chapter 70 State aid has been set by the State
Legislature, and as of press time that has yet to occur. The preliminary assessments are based on the aid in
the Governor's proposed budget, known as House -1, which should serve as a minimum figure.
The preliminary assessment for Lexington for FY2008 is $175,621 ( +17.1 %) higher than the FY2007
actual assessment. The main portion is based on Lexington's FY2007 Base Enrolhnent (as of October 1,
2006) of 51.7 full -time regular students in grades 9 -12, 1.6 ( -3 %) less than last year. However, while
Lexington's enrollment has slightly dropped, the overall MRHS in- district enrollment has significantly
declined, raising our Town's share of in- district enrolhnent by 17.5 %. This has increased our total full -
time student operating -share assessment $103,197 ( +63.4 %) to $265,869, a per -pupil increase of 68.5 %.
In addition, Lexington's total SRM payment increased $54,438 ( +9 %) with our per- student SRM payment
increasing 7 %, the fifth highest per -pupil percentage increase among the in- district towns. The escalation
of our SRM payment is due to growth in two of the three community factors used to calculate it: total
value of assessed property increasing 11 %, total value of household income increasing 13 %, and the
municipal revenue growth factor decreasing 6 %.
Page 11 of 24
APPROPRIATION COMMITTEE 2 " REPORT, April 21, 2007, TO 2007 ATM
A breakdown of the full assessment is:
Minuteman's Projected Assessment (based on the unapproved House -1 budget)
PROGRAM
FTE BASIS AVE PER -PUPIL ASSESSMENT
Grades 9 -12:
Regular Day Students -Operating -Share Assessment
Special Education Assessment
State Required Minimum
Totals, grades 9 -12 (including SPED)
Special Programs:
"Reduced Charge" Pupils
"Afternoon" Pupils
Totals, Special Programs
TOTAL OPERATING
Capital Assessment (based on enrolled 9 -12)
TOTAL ASSESSMENT
ENROLLMENT*
($)
($)
FY2007
FY2008
FY2007
FY2008
FY2007
FY2008
53.30
31
53.30
51.70
30
51.70
3,052
4,250
12,297
5,143
4,250
13,730,
162,672
131,750
655,405
265,869
127,500
709,843
53.30
51.70
17,820
21,339
949,827
1,103,212
6.00
7.88
9.00
4.86
4,697
2,587
5,174
4,457
28,180
20387
48 567
998,394
46,570
21663
68 233
1,171,445
13.88
13.86
3,499
4,923
67.18
65.56
14,861
17,868
496
561
26,423
28,993
15,255
18,311
1,024,817
1,200,438
Percentage increase over prior year 42.79%4 20.03% 15.45% 17.14%
' - prior year's enrollment as of October 1
# - large increase due to elimination of middle school program
This Committee unanimously (7 -0) supports this request.
Project Description
Amount
Requested
Funding
Source
Committee Recommends
$28,916,441
($794,544
$28,916,441 ($794,544 is
(c) Shared Expenses
contingent
GF
contingent on an override) (7 -0)
on an
override)
[Brown Book, Section IV: Program 2000: Shared Expenses]
Shared Expenses encompass three basic categories: (1) Line 2100, Employee Benefits; (2) Line 2200,
Debt Service; and (3) Line 2300, Reserve Fund.
Employee Benefits
This portion of Shared Expenses includes the costs for current and future pensions for retired employees;
health (self - insured) and dental (insured through a group policy) insurance for current and retired
employees; premiums for property and liability insurance policies; and potential unemployment and
workers compensation liabilities. It does not include any suns for the funding of health benefits for future
retirees. There is as yet no obligation for Lexington to fund that liability although, pursuant to changes in
the Government Accounting Standards Board (GASH) requirements, the Town must begin reporting the
unfunded liability in its financial statements. (See the discussion of Article 37 in this report.)
Health benefits for both municipal and school employees are included in this section of the budget, an
approach that began with the FY2007 budget. The estimated expense for health benefits (including
medical & dental) to be paid by the Town totals $19,869,487, by far the largest portion of this section.
This figure represents a 9.4% increase over FY2007 and continues a trend of escalating health costs
which has confronted the Town since 2000. This increase results from higher health costs, higher
premiums, and the increasing enrollment of employees and their families in the various health care plans
Page 12 of 24
APPROPRIATION COMMITTEE 2 " REPORT, April 21, 2007, TO 2007 ATM
offered by the Town. For a further explanation of the multiple reasons underlying this continuing
increase, see page ii of the Town Manager's Report in the Brown Book.
For the first time, the FY2008 budget identifies what portion and percentage of the projected health
benefit costs are attributable to municipal, school and retired employees. (See page IV -4 of the Brown
Book.) The projected percentage increase of health costs for municipal and school employees is the same,
10.4 %; the percentage increase attributable to retired employees (which includes spouses) is
approximately 1.2% less. This is because most retirees have only individual, as opposed to family, plans.
Individual plans for retirees are less expensive than individual plans for active employees. The total dollar
amounts of the FY2008 estimates for municipal ($3,256,000) and school employees ($9,595,000) differ
because a significantly greater number of individuals are employed on the School side.
During budget development, the estimate for health costs in Line 2130 was premised on the same number
of active employees as existed on both Municipal and Schools sides in FY2007, and did not take into
account either new employees who have been added to the Schools' protected, not -at -risk, list for
FY2008, or new school employees who will be added if any of the projected school override questions
are approved by the voters. The health benefits for those new employees were included in the Schools
budget numbers. However, for purposes of actual appropriation, all health benefits will be carried in
Line 2130 and the Schools budget, Line 1100, will be adjusted accordingly. This will be the case whether
the override succeeds or fails.
A number of current School employee positions are placed at risk in the upcoming School override
questions. Should those questions be rejected by the voters, and those employees' positions consequently
eliminated, the projected health benefits for those employees will not be incurred. Accordingly, there will
be a decrease in total, projected, health expenditures for FY2008. However, the Town will face a statutory
liability for unemployment compensation payments for those employees who are laid off, an amount
which will approximate the savings in health benefit costs. The current budget, in Line 2140, carries a
higher number for unemployment benefits than in past years to address, in some degree, those benefits in
case of a failed override. At the time of the printing of this Report, it cannot be determined whether that
amount will, by itself, be sufficient to cover unemployment compensation costs imposed on the Town
should the override fail.
The second largest figure in this section of Shared Expenses is Line 2110, $3,449,284. It represents the
amount to be paid by the Town to the Lexington Retirement Trust Fund, managed and overseen by the
Lexington Retirement Board, pursuant to an ongoing program to fund the Town's liabilities for current
and future pension payments to retirees. The State requires that municipalities fully fund all such
liabilities by 2028. Based on the annual payments the Town has made, and is projected to continue to
make, the Trust Fund should be fully funded by 2015.
Debt Service
Debt service includes interest and principal payments for within -levy long -term debt (bonds) and for
temporary borrowing. The budgeted debt payment recommended for FY2008 is $3,779,937, which is
$59,876, or 1.61 %, higher than in FY2007. The total amount is broken down as follows: temporary -
borrowing interest payments of $242,125; long -term debt interest payments of $703,832; and long -term
debt principal payments of $2,833,980. The long -term debt interest payment is 11% higher than in
FY2007, offsetting percentage decreases in long -term debt principal and temporary - borrowing payments.
It is anticipated that this section of the budget will appreciably increase in FY2009, when substantial
long -teen within -levy debt is issued.
Reserve Fund
The amount recommended to be put into the Reserve Fund, from which this Committee approves
transfers and payments for extraordinary and unforeseen expenses, is $450,000. This is $50,000 more
than was appropriated for FY2007, continuing a process in which the amount appropriated to this Fund
has been increased over the past several years. An appropriation of $150,000 for FY2005 was approved
by the 2004 Annual Town Meeting, but then was increased to $300,000 by means of a supplemental
Page 13 of 24
APPROPRIATION COMMITTEE 2 " REPORT, April 21, 2007, TO 2007 ATM
appropriation at the 2005 Annual Town Meeting. The 2005 Annual Town Meeting also appropriated
$150,000 for FY2006. The 2006 Annual Town Meeting increased the FY2007 appropriation to $400,000.
The purpose of this Reserve Fund is to provide contingency funds in the budget to deal with unexpected
and substantial cost overruns without impairing permanent reserves, such as the Stabilization Fund and
Free Cash. Among such potential expenses are snow removal, overtime expenses for police and fire
personnel, and special education (SPED) costs. Additionally, increasing the Reserve Fund relieves
individual municipal and school departments from the need to include reserves in their respective
individual budgets.
This Committee unanimously (7 -0) supports this request.
Project Description
Amount
Re
Funding
Source
Committee Recommends
(d) Municipal
$26,214,556
Multiple
$26,214,556 (7 -0)
The municipal budget request is a 5.3% increase over FY2007. The health insurance costs (carried in the
Shared Expenses Budget) attributable to current municipal employees are estimated by the Town
Manager to be $3,256,000 for FY2008. A comparison of FY2007 and FY2008 municipal budgets with
the corresponding health benefits for municipal employees follows:
The Brown Book contains a wealth of information about each municipal department's recommended
budget, including projected FY2008 and historical staffing levels (going back to FY2004), departmental
initiatives, and programs and items requested, but not recommended, for funding in FY2008.
This budget includes an estimate of the funds needed for FY2008 salaries as those contracts are still under
negotiation at press time.
This Committee unanimously (7 -0) supports this request.
Article 37:
FY2007
FY2008
% Increase
Municipal Budget
$24,895,327
$26,214,556
5.30%
Health Insurance
$ 2,950,000
$ 3,256,000
10.37%
Total
$27,845,327
$29,470,556
5.84%
The Brown Book contains a wealth of information about each municipal department's recommended
budget, including projected FY2008 and historical staffing levels (going back to FY2004), departmental
initiatives, and programs and items requested, but not recommended, for funding in FY2008.
This budget includes an estimate of the funds needed for FY2008 salaries as those contracts are still under
negotiation at press time.
This Committee unanimously (7 -0) supports this request.
Article 37:
Funds Requested
Funding
Committee
Appropriate for
Source
Recommendation
Post Employment
GF
Indefinitely Postpone
Benefits
( -0 )
Retired Lexington employees receive two types of post - employment benefits: a pension and health
insurance. Annual appropriations to the pension fund and to the health -care trust fund (under the Shared
Expenses portion of the municipal Operating Budget Article) cover the costs of current retirees' benefits
(with the exception of teachers, who receive their pension from the State pension fund; their health
benefits, however, are provided by the Town). In the case of both types of benefits, there is a future
liability (for current and past employees who have not yet reached retirement age) that is being incurred.
The annual appropriation for the pension fund includes an amount for the funding of the future pension
liability, but no similar provision is currently being made for the future health benefit liability.
As reported last year, the new Government Accounting Standards Board (GASH) Statement 45 (GASH-
45) dictates that municipalities begin reporting the unfunded liability for retiree health benefits with
deadlines based on their annual revenues. For Lexington, that means reporting beginning with FY2008.
Page 14 of 24
APPROPRIATION COMMITTEE 2 " REPORT, April 21, 2007, TO 2007 ATM
This is not a requirement to begin funding the liability, but simply to determine the amount of the liability
and record it as part of the annual audit. The Town engaged an actuary to measure the liability in order to
be in compliance with GASB -45. The actuarial analysis has been completed and the results of the report,
dated March 9, 2007, were presented to the Board of Selectmen at its meeting, April 18, 2007.
As introduced last year, this Article is a placeholder for the eventual funding of this liability and no funds
are requested at this time. It is anticipated that at the next Annual Town Meeting, the Town Manager will
recommend an appropriation to begin funding future retiree health -care liabilities. The expected source
will be funds the Town is now receiving from the Federal government to partially offset the prescription -
drug benefit we provide to retirees in place of the Medicare Part D prescription benefit. During the current
fiscal year (FY2007), the Town has received approximately $300K in Medicare Part D rebate, but these
monies cannot be appropriated until they become part of the next certified Free Cash balance. It is
expected that this will be an annual payment to the Town as long as we continue to offer a prescription
drug benefit to retirees.
This Committee unanimously (7 -0) supports Indefinite Postponement.
Article 38: Rescind
Funds Requested
Funding
Committee
Prior Borrowing
Source
Recommendation
Authorizations
($3,000,000)
Debt
No Position (7 -1)
Indefinitely
Postpone
The 1999 Annual Town Meeting approved (for FY2000) an appropriation of $3,000,000 "for acquiring
land for open space and conservation purposes, including outdoor recreation, as provided by G.L.c.40,
§8C, as amended ". The vote further provided "that to meet this appropriation the Treasurer with the
approval of the Board of Selectmen is authorized to borrow $3,000,000 under G.L.c.44, §7(3); provided,
however, that this appropriation and the expenditure of funds pursuant thereto shall be limited to the
acquisition of such land and/or interest in land as may be approved by a two - thirds vote of an annual or
special town meeting" [1999 Annual Town Meeting, Article 34 (Land Acquisition Bond), Motion dated
March 22, 1999]
While there were no specific acquisitions identified as ready for funding at that time, it is our
understanding that the action was taken to demonstrate formally the Town's continuing commitment to
open space, conservation, and outdoor recreation.
Since then, first Town Meeting (by its approval at the 2005 Annual Town Meeting) and then the
Lexington citizens (by voting to pass a referendum question in March 2006) have formally renewed that
commitment with the adoption of the Community Preservation Act (CPA) —which was done at the
maximum, 3 %, surcharge on their real- estate taxes. Those local funds, along with the matching (to some
degree, but starting at 100 %) State funds, are for Affordable Housing, Open Space, Historic Preservation,
Recreation, and for operating expenses of the Community Preservation Committee (CPC).
With the implementation of the CPA in Lexington, there is now a more- robust, in -use program to achieve
the same purpose(s) as the never -used bonding authority from 1999. While outstanding bonding
authority —which remains part of Lexington's authorized borrowing authority and, thus, diminishes our
total borrowing capacity —could have some very -minor adverse ef'f'ect as bond - rating agencies judge
Lexington, that is not our reasoning for believing it is prudent to rescind this unused authority. Even
without an ef'f'ect on the Town's bond rating and even having been told there is no legal impediment to
having two concurrent, alternate, funding procedures, we still would urge rescission as we cannot support
having two, parallel, funding paths for the purchase of open space. We see a purchase that would fall
under the 1999 authority as falling within the scope of the CPA, and believe any such CPA - eligible
project should be presented to the CPC so it can compete along with other CPA - eligible projects. Further,
Page 15 of 24
APPROPRIATION COMMITTEE 2 " REPORT, April 21, 2007, TO 2007 ATM
any no- longer- needed authority should be rescinded so the Town's financial records and reports are not
cluttered with outdated authorizations.
However, the Town Manager advises that the Lexington Conservation Cormnission —which was a
proponent of the 1999 action and is the steward of much of the Town's open space—in the absence of
knowing whether CPA funding will be made available for conservation -land purchases, prefers to retain
the option of funding outside of the CPA and has requested Indefinite Postponement of this Article.
The majority of this Committee (7 -1) takes no position with regard to Indefinite Postponement of this
Article, but unanimously (8 -0) looks forward to readdressing the rescission of the 1999 authorization at
the next Town Meeting (special or annual).
Article 39: Establish
Funds Requested
Funding
Committee
and Appropriate to
Source
Recommendation
Specified
See details below
GF
Approve (7 -0)
Stabilization Funds
regarding Four new
Stabilization Funds
This Article seeks to establish four different, specified, stabilization funds. Appropriations for these
stabilization funds would come from existing and future special revenue accounts. Historically, funds in
these special revenue accounts were spent without specific appropriation, but because of recently issued
Massachusetts Department of Revenue guidelines, as well as a goal of making those transactions more
transparent, the Town now seeks to establish specified stabilization funds instead. The proposed funds are
as follows:
1. Transportation Demand Manaeement (TDM) /Public Transportation Stabilization Fund. The fund
would support the operations of the LEXPRESS bus service. It is proposed that $58,000 be appropriated
from the LEXPRESS TDM special revenue account to this fund. That TDM account has been funded by
payments from multiple developers over time. The $58,000 would then be appropriated from this newly
created stabilization fund under Article 21 to support the LEXPRESS operation, which is a component of
the DPW operating budget in FY2008.
2. Traffic Mitigation Stabilization Fund This fund would finance traffic mitigation projects pursuant to
conditions of special permits issued by the Town. It is proposed that $220,035.99 —which are all the
unencumbered funds—be appropriated from the TDM Avalon Bay special revenue account to this fund.
There is no proposed Article 21 appropriation of these funds for FY2008.
3. School Bus Transportation Stabilization Fund This fund would support the transportation of students
to and from school on a daily basis. It is proposed that $200,000 be appropriated from the School
Transportation Avalon Bay special revenue account to this fund. Out of this amount, it is proposed that
$65,000 be appropriated under Article 21 from the newly created stabilization fund to support school -bus
transportation costs in the FY2008 school budget.
4. Section 135 Zoning BY -Law Stabilization Fund This fund would be used
improvements pursuant to Section 135 of the Code of the Town of Lexington. The
establish this fund at this time, with no proposed appropriation into or out of t
anticipates that future payments from developers could be appropriated into this fund.
This Committee unanimously (7 -0) approves this request.
to finance public
Town seeks only to
he fund. The Town
Page 16 of 24
APPROPRIATION COMMITTEE 2 " REPORT, April 21, 2007, TO 2007 ATM
Article 40:
Funds Requested
Funding
Committee
Appropriate to
Source
Recommendation
Stabilization Fund
$1,000,000
GF
$1,000,000 (7 -0)
This Article seeks to transfer $1,000,000 from Free Cash into the unrestricted Stabilization Fund. The
Town anticipates finishing FY2007 with a balance of $4,440,947 in this Stabilization Fund before this
transfer. With this $1,000,000 addition, the Town projects a balance in this Stabilization Fund at July 1,
2007, of $5,441,000 (rounded). This additional appropriation from Free Cash is consistent with a policy
recommendation supported by both the Town Manager and the Selectmen's Ad Hoc Fiscal Policy
Committee to keep a minimum balance in Free Cash and to accumulate reserves in one or more
stabilization funds. And as this action represents a major portion of the funds last received by the Town
from the closeout of the NESWC Stabilization Fund, a one -time source of revenue, it is prudent to
appropriate it to the Stabilization Fund rather than to use it to pay for recurring expenses. Further, this
approach has the advantage of providing better segregation and protection of reserves and sets a higher
bar for the use of such funds. Town Meeting must approve appropriations into and out of stabilization
funds by a two - thirds vote.
This Committee unanimously (7 -0) supports this request.
Article 41:
Funds Requested
Funding
Committee
Appropriate for
Source
Recommendation
Prior Years'
$50,531
GF
$50,531 (7 -0)
Unpaid Bills
The School Committee is requesting this appropriation to pay for FY2006 unpaid bills. The amount of
those bills represents less than 0.08% of the FY2006 School Budget. These bills were not paid during
FY2006 because either they were not properly processed internally or they arrived from the vendor late or
with errors.
The new Assistant Superintendent for Finance and Business has implemented procedures and controls to
make sure bills in the future are properly identified, coded, and paid. The administrative support staff has
attended training sessions to review the proper procedures for ordering items and services, and tracking
their delivery and payment. Starting May 1, 2007, all open FY2007 purchase orders will be closed giving
the business office enough time to track all outstanding orders and invoices, and make payments before
the close of the fiscal year. Going forward, 0.1% of the budget will be encumbered to cover the small
errors and omissions that often occur in year -end bills.
This Committee unanimously (7 -0) supports this request.
Page 17 of 24
APPROPRIATION COMMITTEE 2 " REPORT, April 21, 2007, TO 2007 ATM
Article 43:
Funds Requested
Funding
Committee
Appropriate for
$15,000
Source
Recommendation
Vault Shelving to Cary Vault
Transfer
Town
Authorized Capital
$15,000 + TBD
$15,000 CPA
$15,000 (7 -0)
Improvements
Transfer + TBD
+
Additional
TBD (Pending)
Excluded Debt
Project Description
Amount
Requested
Funding
Source
Committee Recommends
(a) Transfer Funds from Cary
$15,000
CPA (2006
Vault Shelving to Cary Vault
Transfer
Town
$15,000 Transfer (7 -0)
Climate Control
Meetings)
"CARY VAULT SHELVING - Article 4, subsection (d) of the November 29, 2006 Special Town
Meeting (Community Preservation Fund) appropriated $60,000 from the general unreserved fund
balance of the Community Preservation Act for shelving for the main vault of the Cary Memorial
Building, in furtherance of its rehabilitation for its intended use.
"Donnegan Systems, Inc. has been contracted with for the installation of a new Kardex Shelving
System in the Cary Memorial Building vault. Final design of the system to be installed has
resulted in a reduced cost, projected not to exceed $45,000. The Kardex Shelving system is
expected to be ready for installation in the Spring 2007.
"CARY VAULT CLIMATE CONTROL - Article 28, subsection (i) of the 2006 Annual Town
Meeting (Appropriate for Municipal Capital Projects) Building Renovations authorized $60,000 for
the rehabilitation and restoration of the records vault in the Cary Memorial Hall, to be raised from the
Community Preservation Fund, for historic resource purposes under the Community Preservation Act.
"Initial discussion with a professional engineering design and consulting firm, and review of the
Cary Memorial Building plans of 1927, preliminarily estimates the total project will exceed the
$60,000 appropriated, to a projected amount of approximately $80,000. Any firmer number is
premature at this time. Upon finalization of the necessary specifications and documents for the
design and bidding of a climate control and fire suppression system for the vault in the Cary
Memorial Building a more definitive amount will be available.
"Due to the initial estimate that the total project would likely exceed the $60,000 appropriated,
the project will be bid to provide for completion of as much of the project as possible with
available funds.
"Authorization for the transfer of $15,000 of surplus funds appropriated under Article 4, subsection (d) of
the November 29, 2006 Special Town Meeting (Community Preservation Fund) to CARY VAULT
CLIMATE CONTROL - Article 28, subsection (i) of the 2006 Annual Town Meeting (Appropriate for
Municipal Capital Projects) Building Renovations is requested as part of ARTICLE 43, 2007 Annual
Town Meeting."
[Town Clerk Motion, March 26, 2007]
This Committee unanimously (7 -0) supports the requested transfer.
Page 18 of 24
APPROPRIATION COMMITTEE 2 " REPORT, April 21, 2007, TO 2007 ATM
Project Description
Amount
Funding
Committee Recommends
Funds to Reduce
Requested
Source
Recommendation
(b) Closeout of
GF
Previously
the Tax Rate
Fiske /Harrington Elementary
TBD
Authorized
Pending
Schools Projects
Excluded Debt
It is contemplated that some additional funding will be needed to close out the Town's financial
obligations for construction of the new Fiske and Harrington Elementary Schools project. The exact
amount was not known at the time this report went to press. When that amount is determined, Town
Meeting will be asked to appropriate it as a further addition to the excluded debt of $32.150M that was
originally authorized by appropriation at a 2002 Special Town Meeting, under its Article 5, subject to the
passage of a debt - exclusion override for those projects. That override, as is the case for all debt - exclusion
overrides in this State, was for the projects' scope and not for a specific dollar amount. This addition,
together with the $1.575M addition approved at the 2005 Annual Town Meeting, under its Article 29(d),
for which no excluded debt has yet been issued, are believed to be within the one -time adjustment
allowed by the Massachusetts Department of Revenue.
This Committee's position is pending receipt of further information on the amount being requested.
Article 44: Use of
Funds Requested
Funding
Committee
Funds to Reduce
Source
Recommendation
GF
Indefinitely Postpone
the Tax Rate
( -0 )
In prior years, this Article has been the vehicle for appropriating any Free Cash necessary to balance the
operating budget. This year, as last year, all appropriations of Free Cash have occurred under the relevant
budget articles. At press time the article motions were not yet available, but the likely relevant articles
are: 21, 39, 40, 41, and 42. Accordingly, no funds are requested under this Article.
This Committee unanimously (7 -0) supports indefinite postponement.
Page 19 of 24
APPROPRIATION COMMITTEE 2 " REPORT, April 21, 2007, TO 2007 ATM
Appendix A: Estimated Impact of a Possible Override and
Other Factors on Single- Family -Home Taxes for FY2008
FY2007
Assessed Value
FY2007 Total
Property Tax
Est. FY2008
Total
Increase w/o
Override
Estimated
Increase for
a $3.98M
Override'
Est. FY2008
Total
Property Tax
with Override
$200,000
$2,299
$57
$87
$2,443
$300,000
$3,466
$86
$130
$3,682
$400,000
$4,632
$116
$173
$4,920
$500,000
$5,798
$145
$216
$6,159
$600,000
$6,964
$174
$260
$7,398
$700,000
$8,131
$203
$303
$8,636
$800,000
$9,297
$232
$346
$9,875
$900,000
$10,463
$261
$389
$11,113
$1,000,000
$11,630
$290
$433
$12,352
$1,200,000
$13,962
$348
$519
$14,829
$1,500,000
$17,461
$435
$649
$18,545
$2,000,000
$23,292
$580
$865
$24,738
Percent
increase
7.95'%
over FY2006
2.49%
3.75%
6.22%
Proposition 2' /z allows for a 2.5% increase in town -wide total property -tax revenue, exclusive of property
taxes to fund debt service for Proposition 2' /z excluded debt, plus the increase in property -tax revenue for
new growth. In this table we restrict ourselves to single - family homes with no new growth, so that only
the 2.5% and excluded debt come into play. In past years other types of residential property saw different
tax increases than single - family houses, however this year there are no material differences in tax
increases among the different types of residential property, for example condos and multi - family houses,
so the FY2008 increases are good approximations for other types of residential property.
In recent years, taxes on single - family homes, even absent the approval of Proposition 2 /z operating or
debt - exclusion overrides, have risen faster than 2.5% because the increase in home values relative to
commercial values has shifted ever more of the property tax burden onto residential property, especially
single - family homes. Last year we estimated this shift would lead to an additional tax increase of 2.29%
from FY2006 to FY2007, in addition to the usual 2.5% increase allowed under Proposition 2 However,
the shift moderated and turned out to be about 1.45 %. The latest data suggest that the FY2007 to FY2008
shift will be essentially nil. The values here assume there will be no shift of the tax burden between
residential and commercial property categories.
An increase in exempt -debt service from one year to the next causes a tax increase in addition to the
Proposition 2 2.5% allowed increases (as will happen in FY2009 and /or FY2010 if a debt - exclusion
override to fund a new DPW facility is passed), while a decrease in exempt debt as debt is paid down has
the opposite effect. This year the change in exempt debt is essentially zero. If a debt - exclusion override
for a new DPW facility is passed this June, exempt debt service will rise as shown in appendix C.
Note 1: All "total" tax amounts include CPA surcharges.
Note 2: If a $3.98M operating override is approved in June 2007. The increase is 0.94% per million dollars of
override, or $76 per million dollars of override for a home assessed at $700,000, approximately the Town -wide
median assessment.
Note 3: With the exception of the CPA taxes, the percentage increase is the same for all homes. This only has a
material impact on the tax increase percentages from FY2006 to FY2007. The increase from FY2006 to FY2007 is
5.32% plus CPA which varies with assessed value from a low of 1.50% @ $200,000 to a high of 2.85% @
$2,000,000. The value 7.95% is for a home assessed at $700,000, which is approximately the Town -wide median.
Page 20 of 24
APPROPRIATION COMMITTEE 2 " REPORT, April 21, 2007, TO 2007 ATM
Appendix B: Financial Forecasts for FY2009— FY2011
This appendix provides revenue and expense projections out to FY2011. While some level of detail is
provided in Table B -3, these projections are best thought of as a broad -brush look at how the Town
finances may play out over the coming few years as the fine details will undoubtedly unfold somewhat
differently. The big picture is that this year and next, revenues will not meet expected increases in
expenses for a "same service" budget, unless there are new efficiencies or additional revenues. In FY2010
and FY2011, revenues are not projected to meet increasing expenses; however the gaps between revenues
and expenses are projected to be somewhat smaller.
Accompanying tables include:
B -1: FY2009– FY2011 Budget Drivers
B -2: FY2009– FY2011 Summary of the projected budget totals, exclusive of exempt debt and projected
overrides needed to close the projected budget gaps.
B -3: FY2009– FY2011 Detailed Budget Projections.
A figure B -I showing the growth in the budget from FY2001– FY2011 is also provided.
Revenue growth, excluding any override amounts, in most years is largely limited to:
• Proposition 2' /z allowed growth: 2.5% of the tax base excluding exempt debt, projected to be
about $2.4M in FY2008.
• Tax growth from new /improved real estate and personal property— projected to be about $1.6M
in each of the next few years. Note that amount is lower than actually expected to account for the
snow and ice deficit that occurs in most years. As part of the tax -rate setting processes, an
estimate of the actual amount is used to compute the Proposition 2 /z- allowed increase for the next
year and it is assumed that the actual value will be $1.9M. This is slightly lower than in the past
few years to account for the downturn in the local housing market.
In addition there are other changes in revenue that can occur
• Any change in expected local receipts—projected to be a decrease of about $740,537 from
FY2007 to FY2008. This specific decrease is due to accounting changes in the school account
that move certain monies into revolving accounts which are matched by a decrease in school
expenses and does not reflect a true decrease in revenue.
• Changes in Free Cash from one year to the next. Free Cash represents revenue from previous
years that was not spent. This may come from receiving more revenue than expected, or year -end
close outs of line items with unspent appropriations.
These revenue increases, in FY2008, are offset by a decrease in available funds of about $513,000,
primarily due to a decrease in available free cash. Another decrease in available funds, due to a further
drop in available Free Cash is projected for FY2009, which will again pose a challenge to the Town.
Available Free Cash in FY2007 and FY2008 is higher than can normally be expected due to some one-
time sources of Free Cash. Revenue increases are projected to be significantly higher in FY2010 and
FY2011 than in FY2008 and FY2009.
Page 21 of 24
APPROPRIATION COMMITTEE 2 " REPORT, April 21, 2007, TO 2007 ATM
We continue to experience growth in a number of expense items which exceeds typical annual growth in
revenues. These include the following growth factors, as estimated by the Appropriation Committee:
School cost of living and step increases: 4.5% (less approximately $650K salary differential due
to higher -paid teacher retiring and being replace by less - expensive teachers)
School expenses: 6.5%
• Municipal: 3%
• Benefits and Insurance: 12%
• Note that possible further increases in SPED expenses have not been included
Together, these revenue and expense factors lead to an annual unbalance between available revenues and
expenses for level services. This imbalance is shown in line 4 as a voter "approved override /gap ". It
should be noted that while for the purposes of display we show these gaps closed by an override, these
gaps also may be closed by service reductions, suspending appropriations to stabilization, new
efficiencies, increases in revenues other than by an override, or some combination of these methods.
A summary of some revenue and expense growth items is given Table B -1. This table assumes overrides
to balance the budget as shown in line 4 of Table B -3. This is not a blanket endorsement of overrides. We
could instead show budget gaps at the bottom of the table, but have chosen to show what balanced
budgets may look like, given expected increases in revenues and expenses for a same service budget. A
summary of total revenues and expenses is given in Table B -2, along with projected override amounts
needed to balance the budgets if revenues are not otherwise increased, or expenses otherwise decreased.
Perhaps the most important fording is that we face a serious shortfall in revenues in FY2009 regardless of
passing or not passing an operating override in FY2008.
It should be noted that these are only projections. In many years, Free Cash comes in higher than initially
expected. This could happen again if, for example, we are able to profitably invest monies from a bond
sale for the new DPW facility while we are waiting to spend those monies on the new facility. Other
possible sources of additional revenue include new growth or local receipts coming in higher than
projected. On the other hand, SPED increases, unexpected past bills, or a harsh winter driving up energy
costs can drive the budget in the opposite direction.
Page 22 of 24
APPROPRIATION COMMITTEE 2 " REPORT, April 21, 2007, TO 2007 ATM
Table B -1: Budget Drivers
FY2008
FY2009
FY2010
FY2011
Revenue Growth
$143,498,841
$150,394,661
$157,010,281
$164,208,331
Proposition 2%
$2,400,263
$2,607,310
$2,825,586
$2,982,393
New Growth
$1,600,000
$1,600,000
$1,600,000
$1,600,000
State Aid
$689,454
$0
$0
$0
Local Receipts
- $740,537
$134,000
- $76,000
$0
Available Funds
- $447,653
- $1,965,607
$1,792
$0
Subtotal
$3,501,527
$2,375,703
$4,351,378
$4,582,393
Expense Growth
Lexington Public Schools
$4,876,483
$2,721,303
$2,863,130
$3,012,599
Municipal
$1,319,230
$799,116
$823,476
$848,578
Benefits & Insurance
$2,130,353
$2,861,481
$3,193,407
$3,563,837
In -levy Debt
$78,076
$452,122
- $532,140
- $527,195
Subtotal
$8,404,142
$6,834,021
$6,347,873
$6,897,820
Table B -2: Projection Summa
FY2008
FY2009
FY2010
FY2011
Total Expenses /Revenues
$143,498,841
$150,394,661
$157,010,281
$164,208,331
Override to balance
$3,981,589
$4,223,738
$1,846,725
$2,377,312
Annual budget exclusive of exempt debt
$180,000,000
$160,000,000
$140,000,000
$120,000,000
$100,000,000
$80,000,000
$60,000,000
$40,000,000
$20,000,000
$0
Average annual increase 5.1%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Fiscal Year
Figure B -1: Annual Budget Exclusive of Exempt Debt
This figure shows the past annual budget, exclusive of exempt debt, in small squares and projected "level
service' budgets in larger diamonds. Over the period of FY2001 through FY2011, the average annual
increase is about 5.1 %.
Page 23 of 24
APPROPRIATION COMMITTEE 2 " REPORT, April 21, 2007, TO 2007 ATM
Table B -3: 3 -Year Budget Projections from the Appropriation Committee
Page 24 of 24
Revenue Summary
FY 2006
FY 2007
FY 2008
FY 2009
FY 2010
FY 2011
Actual
Recap
Bud et
Pro'ected
Pro'ected
Pro'ected
Bud et
Bud et
Bud et
I
Base tax Iev
$85,867,574
$89,868,589
$96,010,528
$104.292.380
$113.023.428
$119.295.739
2
Proposition 2%
$2,146,689
$2,246,715
$2,400,263
$2.607.310
$2.825.586
$2.982.393
3
New growth
$1,854,326
$2,036,789
$1,600,000
$1.600.000
$1.600.000
$1.600.000
4
Voter approved override/ gap
$1,858,435
$3,981,589
$4,223,738
$1,846,725
$2,377,312
5
Total Tax levy
$89,868,589
$96,010,528
$103,992,380
,AI 12,723,428
,AI 19,295,739
S126,255,444
6
State Aid
$8,603,524
$8,304,953
$8,994,407
$8.994.407
$8.994.407
$8.994.407
7
Local Receipts
$13,321,875
$10,448,000
$9,707,463
$9.841.463
$9.765.463
$9.765.463
8
Available Funds
$2,188,182
$4,923,000
$4,475,347
$2.509.740
$2.511.532
$2.511.532
9
Revenue Offsets
-$3,145,438
-$1,530,137
-$1,640,063
- $1.642.482
- $1.667.056
- $1.667.056
10
Enterprise Funds Indirect
$1,789,916
$1,772,313
$1,752,885
$1.691.336
$1.629.787
$1.629.787
11
Total General Fund
$112,626,648
$119,928,656
$127,282,419
$134.117.891
$140.529.871
$147 489.576
12
Other Revenues
13
Revolving Funds
$542,343
$793,431
$966,234
$857.234
$857.234
$857.234
14
Grants
$173,390
$173,390
$173,390
$173.390
$173.390
$173.390
15
Enterprise Funds Direct
$13,393,865
$14,235,935
$15,076,798
$15.246.145
$15.449.786
$15.688.131
16
Total Other Revenues
$14,109,599
$15,202,756
$16,216,422
$16.276.769
$16.480.410
$16.718.755
17
Total Revenues
$126,736,246
$135,131,413
$143,498,841
$150.394.661
$157.010.281
$164.208.331
Expense Summary
FY 2006
FY 2007
FY 2008
FY 2009
FY 2010
FY 2011
Actual
Adusted
Recommended
Pro'ected
Pro'ected
Pro'ected
Bud et
Bud et
Bud et
Education
18
Lexington Public Schools
$60,652,760
$63,419,500
$68,295,983
$71.017.286
$73.880.416
$76.893.015
19
Minuteman Reg. School
$830,234
$1,024,817
$1,200,438
$1.256889
$1.315.996
$1.377.881
20
1 sub -total Education
$61,482,994
$64,444,317
$69,496,421
$72.274.175
$75.196.412
$78.270.896
21
Municipal
$22,624,947
$24,895,327
$26,214,557
$27.013.673
$27.837.149
$28.685.727
Shared Expenses
22
Benefits & Insurance
$19,015,811
$22,537,951
$24,668,304
$27.529.785
$30.723.192
$34.287.029
23
Debt (within-levy)
$3,417,301
$3,720,061
$3,798,137
$4.250.259
$3.718.119
$3.190.924
24
Reserve Fund
$0
$400,000
$450,000
$450.000
$450.000
$450.000
25
sub -total Shared Exp enses
$22,433,112
$26,658,012
$28,916,441
$32.230.044
$34.891.311
$37.927.953
Capital
26
Cash Capital
$1,153,000
$1,195,000
$1,355,000
$1.355.000
$1.355.000
$1.355.000
27
1 sub-total Capital
$1,153,000
$1,195,000
$1,355,000
$1.355.000
$1.355.000
$1.355.000
Other
28
Stabilization Fund
$603,647
$2,650,000
$1,000,000
$1.000.000
$1.000.000
$1.000.000
29
Other
$0
$86,000
$40,000
$45.000
$50.000
$50.000
30
sub-total Other
$603,647
$2,736,000
$1,040,000
$1.045.000
$1.050.000
$1.050.000
Exempt Debt
31
Municipal
$771,013
$1,299,188
$1,351,294
$2.588.794
$3.798.794
$3.743.794
32
School
$4,172,300
$3,828,068
$3,745,975
$3.685.250
$3.599.638
$3.514.026
33
sub-total Exempt Debt
$4,943,313
$5,127,256
$5,097,269
,.46,274,044
,.47,398,432
,.47,257,820
34
1 2007 Operating Reserve
$0
$0
$260,000
$200.000
$200.000
$200.000
35
Total General Fund
$108,297,700
$119,928,656
$127,282,419
$134.117.891
$140.529.871
$147.489.576
36
Other Expenses
37
Revolving Funds
$542,343
$793,431
$966,234
$857.234
$857.234
$857.234
38
Grants
$173,390
$173,390
$173,390
$173.390
$173.390
$173.390
39
Enterprise Funds Direct
$0
$0
40
Water
$5,408,102
$5,728,822
$6,078,058
$6377.747
$6692.212
$7.022.183
41
Wastewater Sewer
$6,279,508
$6,705,609
$7,346,035
$7.101.982
$6866037
$6637.931
42
Recreation
$1,481,913
$1,726,504
$1,627,705
$1.749.091
$1.879.530
$2.019.697
43
Cash Capital
$80,000
$75,000
$25,000
$17.325
$12.006
$8.320
44
sub -total Enter Funds
$13,249,523
$14,235,935
$15,076,798
,.415,246,145
,.415,449,786
,.415,688,131
45
Total Other Expenses
$13,965,256
$15,202,756
$16,216,422
$16276769
$16.480.410
$16718.755
46
Total Expenses
$122,262,956
$135,131,412
$143,498,841
$150.394.661
$157.010.281
$164.208.331
47
Surplus/(Deficit)
$4,473,290
$0
$0
$0
$0
$0
Page 24 of 24