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HomeMy WebLinkAbout2011-02-23-AC-minFebruary 23, 2011 Minutes Town of Lexington Appropriation Committee February 23, 2011 Place and time: Town Office Building, Room G-15,7:30 p.m. Members Present: Glenn Parker, Chair; John Bartenstein, Vice Chair and Secretary; Robert Cohen; Alan Levine; Susan McLeish; Eric Michelson; Rob Addelson (non- voting, ex officio) The meeting was called to order at 7:50 p.m. 1. Liaison and Staff Reports. Board of Selectmen (Rob Addelson and Susan McLeish). Two topics of interest discussed at the most recent meeting of the Board of Selectmen were a recent $4.7m bond issue by the Town and final approval of the recommended FY2012 budget. o Bond Issue. Mr. Addelson reviewed the highlights of the bond issue for the Committee. The process began with a ratings conference call with Moody's that resulted in reaffirmation of the Town's Aaa rating. (The Moody's report will be posted on the Town web site.) The bond issue was then put out to bid. A total of 9 bids ranged from a "true interest" cost of 2.05% to 2.19 %. "True interest" is a measure used to compare on an "apples to apples" basis multiple bids that contain different coupon rates, bond premiums and other terms and conditions. The actual interest rate in any given year may be different from the true interest, which is the average annual interest cost to the Town over the life of the bond. The successful bidder was Roosevelt and Cross with a true interest bid of 2.05 %, which includes a premium of $169,000. The coupon rate is front - end- loaded, as high as 4% or so in earlier years but lower in later years. The bonds were sold on February 16 and have maturities ranging from five to ten years. Bonds issued at this time last year were sold at a true interest cost of about 1.5 %. Interest rates are starting to trend upward due to unease in the markets about municipal finances generally, but with its Aaa rating, Lexington will do much better than most other communities. The Town also issued a bond anticipation note (BAN) in the amount of $1,297,400 for the purpose of making a progress payment on the acquisition of the Cotton Farm Property. There were 5 bids, the lowest of which was from Century Bank for .7 %, with the note due 7/1/11. There will be a request at the upcoming Annual Town Meeting to appropriate -1- February 23, 2011 $1,300,604 from the Community Preservation Fund to retire the note when it comes due in July. This amount should ultimately be offset by the $500k LAND grant as and when that grant is received, for a net cost to the CPF of approximately $800,000. o FY2012 Budget. Mr. Addelson summarized the status of discussions about hiring a new Assistant Fire Chief and reinforcement of the fire station floor. There was a recommendation for $108,000 in total for this new hire, to include $15,000 for benefits, but the BOS is still reviewing the need for this position. The selectmen voted to move approximately half of this appropriation to the expense budget to fund a needs evaluation. If the need is confirmed, the remaining half would be available to fund the position beginning January 1, 2012. The expense budget also includes $3,500 for uniforms. The selectmen also adjusted the fire department's original request for $750k for capital projects, which included $450k for the floor reinforcement and $250k for an office trailer. The $250k has been removed from the request as it needs further justification. Mr. Levine inquired whether the benefits calculations used in projections of the cost of an additional hire includes a component for future pension and retiree health benefit (OPEB) costs. Mr. Addelson said that it did not. There was general discussion of how pension and retirement costs are funded, and Mr. Cohen noted that newly hired employees are now required to contribute from their salaries much higher pension contributions than prevailed before the 1980s (11% versus 5 %), and that this reform should result in a gradual reduction of required contributions by the Town to the pension fund overtime. Mr. Addelson explained that employees make a contribution to their current health benefits but are not assessed for retirement health benefits. Mr. Addelson advised that the Brown Book will be available electronically Monday, February 28, 2011, and will be printed next week for later hard - copy distribution. Mr. Addelson noted that preliminary MWRA assessments have been posted and will be reflected in the Brown Book. In the White Book, they were level- funded from last year's amounts. Preliminary water rates are up 5.6% from FY11 and sewer rates are up 7.2% for a combined increase of 6.5 %. Mr. Bartenstein pointed out that there will not necessarily be rate increases of the same magnitude because MWRA costs represent only about half of the water and sewer enterprise fund budgets, and the remaining components of the budget are not inflating as rapidly; also, final MWRA assessments made in July are often lower than the preliminary assessments. Mr. Addelson added that the rate increases could be further mitigated by appropriations from retained earnings. -2- February 23, 2011 • School Committee (Alan Levine). Ms. Garberg and Mr. Levine had a meeting with Mary Ellen Dunn last week to discuss school capital projects. There have been changes to food service operations to eliminate cash transactions, which makes accounting smoother. Mr. Cohen commented that there may be too much flexibility for the children as there is no cap on purchases. There was discussion regarding capital purchase of new equipment with $30k of the $50k that would be paid from the food service fund. • CPC (Glenn Parker and Susan McLeish). Mr. Parker and Ms. McLeish attended the most recent CPC meeting where there was discussion of two items that may be taken up under Article 8: o Article 8(d), LexHAB Set - Aside. The CPC voted in favor of the LexHAB proposal for a set -aside fund from which potential future purchases of housing units could be made, subject to a set of non - binding guidelines. The request was for $450k to be allocated in advance in order to avoid a double closure process when a desirable property is found. CPC, CEC and BOS would have to approve a purchase prior to finalization. o Article 8(h), Muzzey Window Replacement. The Muzzey Condo window replacement project was also discussed. The Muzzey High Condo Association is seeking financial assistance for up to approximately 35 unit owners who have not yet performed required window replacements because conditions imposed by the Historic District Commission (HDC) significantly increase the cost of the replacements. An earlier proposal for interest -free loans from the Community Preservation Fund was supported by the CPC but may be withdrawn. Several unit owners present at the meeting suggested that they would be willing to forego any financial assistance if they were allowed to add the cost of the replacement windows to the cap on the sale price of their units. Ms. McLeish noted that such an arrangement would not assist those in financial need in funding the current costs. She also commented that the criteria for purchase of condo units at Muzzey allows for a fairly high income level but the original proposal did not include any needs test. Mr. Addelson said he believed the funding had been sought as an historic preservation, not an affordable housing, project. • Miscellaneous. Mr. Addelson alerted the Committee that the recent trend of rising energy costs could result in the need to draw on the Reserve Fund in FY2012. He reminded the Committee of the recommendation a few years ago to raise the AC Reserve Fund by $100k for rising energy costs as there was concern with the short -term direction of the market. This is in regards to gasoline, diesel and heating oil, not natural gas and electricity where there are separate contracts for the next few years. Mr. Addelson advised that the amount to be requested for the senior service program has not yet been finalized, although $45,000 is still being carried in the budget. Charlotte Rogers is looking -3- February 23, 2011 at this program to increase participation. If the requested appropriation is reduced, the balance not used will become unallocated revenue 2. Article Assignments and Discussion. • Article 16. Ms. McLeish reported that this article would allow a supplemental annual allowance of $3k (from $6k to $9k) for widows of retired employees who sustained injuries while performing job duties. She will determine what fund this would be paid from, the source of the request and how many people could be on this program at one time so the Committee can understand the longer term liability. • Articles 37 and 38: Citizen Articles (Patrick Mehr). It was agreed to postpone discussion regarding the commercial and residential assessments until Mr. Neumeier is in attendance as he is doing the write up. • Article 17. Citizen Article (Alan Seferian). Reducing the CPA surcharge was discussed and invitations will be made to hear a presentation by Mr. Seferian and to include a representative of CPC in a future meeting. An op -ed piece in expected in the Minuteman next week. • Article 36: Citizen Article (Ephraim Weiss). There was a brief discussion of this article seeking a resolution urging the Committee to accelerate analysis of employee health benefit costs. It was agreed to postpone further discussion until Mr. Pato is present and there has been an opportunity to review last year's resolution. The next meeting is scheduled for Thursday, March 3, 2011. The meeting was adjourned at 10:00 p.m. No documents or other exhibits, other than preliminary drafts of article write -ups, were used at this meeting. Respectfully submitted, Andrea Yepez Recording Secretary Approved March 3, 2011