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APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 STM
<br />Funding the Purchase
<br />The purchase price of $10,950,000 will be partially funded with $7,390,000 of debt within the CPA
<br />budget. The remaining $3,560,000 will come from previously unallocated cash in the General Fund.
<br />An additional $262,500 from CPA FY2014 funds will cover: $15,000 for surveying and lot division;
<br />$120,000 for legal expenses, including filing the required statutory CPA restriction documentation;
<br />$12,500 for site assessment; and the cost of a Bond Anticipation Note (BAN) for the first year's debt ser-
<br />vice, estimated at $115,000.
<br />As part of the request for use of Community Preservation Funds, the Community Preservation Committee
<br />was required to obtain two professional appraisals for the property. By statute, these appraisals create a
<br />cap on the amount of CPA funds that can be used for the purchase. The appraisals estimated the land's
<br />value under a "by- right" development scenario. Based on the actual competing bids for the property, it
<br />seems neither appraisal captured its full market value.
<br />The $3,560,000 from General Fund cash will commit almost all of the previously unallocated funds in the
<br />Town's FY2014 proposed budget to this purchase. Those funds could have been used to address capital
<br />needs not eligible for CPA funding that the Town will likely be discussing at a fall Special Town Meet-
<br />ing, such as additional modular classrooms at Lexington High School. If this purchase is approved, some
<br />pending capital projects will require debt financing.
<br />Purchase Considerations
<br />The CPC's recommendation is that this entire property be acquired under the Historical Preservation cat-
<br />egory of the CPA statute. This would require the Town to establish a deed restriction on the property that
<br />would legally constrain future development of the land and buildings. The deed restriction would not con-
<br />strain the Town's use of the existing structures, only the preservation of those structures in their historic
<br />state. Details of this restriction would be worked out after the purchase, and at that time the Town could
<br />arrange specific exceptions for non - conforming uses. For example, the Town could request the right to
<br />add a gymnasium facility, or to construct a secondary access road. Once established, the constraints under
<br />this deed restriction would be permanent.
<br />Using CPA funding for this purchase provides exceptional financial leverage to the Town due to match-
<br />ing funds from the State. Currently the State contribution is projected at 27% of the Town CPA surcharge,
<br />and the State's annual contributions have been fairly consistent in the last few years. However, future
<br />State contributions will vary based on State revenue and participation in the CPA by other municipalities.
<br />CPA revenue for FY2014 is estimated to be about $4,600,000 and the existing balance is about
<br />$2,000,000. If this article is approved, the request for $526,000 in CPA funds for Phase III work on the
<br />Muzzey Senior Center would be withdrawn, and there would then be a total of about $2,300,000 of pro-
<br />jects for Town Meeting consideration under Article 8 of the 2013 Annual Town Meeting. Also, the ap-
<br />proximately $500,000 in CPA funds appropriated for Phase II work on the Muzzey Senior Center ap-
<br />proved by Town Meeting last year would not be spent. We further note that bonding the Wright Farm
<br />purchase of $2,950,000 was deferred while this purchase was being considered.
<br />A net expenditure of $7,752,500 from CPA funds would be the largest amount to date put towards a sin-
<br />gle purpose using Lexington's CPA fund. As noted above, it has been proposed that the debt for this pur-
<br />chase be issued as a 10 -year bond. Up until now, the Town has followed a policy limiting CPA borrowing
<br />to terms of 3 -5 years. The annual debt service, once the bond was issued, would be close to $1,000,000 in
<br />the first few years and would decline over the term of the bond to roughly $800,000 in the final year. This
<br />debt service, in combination with anticipated spending on other capital projects, would impact the Town's
<br />ability to maintain a $2,000,000 reserve for unanticipated future needs in the CPA Trust Fund, and it
<br />would limit the number of other large projects that the CPC could consider for the duration of the debt
<br />service.
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