2015-03-AC-STM-rpt - Laserfiche WebLink

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AC–M2015STM#1&STM#2 PPROPRIATIONOMMITTEEARCH A call for short- or long-term reduction of the CPA surcharge to offset the impact on tax payers of the costs of these projects. Any change to the CPA surcharge would require the approval of Town Meeting and the voters in a referendum, and would be required to satisfy existing debt obligations on CPA funds. Issuance of bonds with terms longer than 20 years, exceeding the maximum term for which bonds have traditionally been issued by the Town. Competition for limited resources when planning major capital projects during the coming decade and beyond, including renovation or replacement of Lexington High School. Financial Aspects of the Present Request In our view, funding this request is a necessary first step, but there is no guarantee that these projects will proceed to completion as proposed. Significant future funding will require appropriation by Town Meet- ing. As noted above, several projects will also require voter approval in a debt exclusion referendum. Per advice from Bond Counsel, the term of bond financing is limited to 5 years for expenses on projects that do not proceed to construction, and those expenses will not qualify under a debt exemption. Expenses on projects that ultimately proceed to construction can be financed by bonds with terms of 20+ years. This means the expenses for feasibility studies and design development must be carefully tracked to make prudent and qualified use of bond financing. One or more Bond Anticipation Notes (BANs) will be issued to cover the appropriation, giving the Town a short-term interest-only loan that will be serviced within the tax levy. For projects that are eventually approved in debt exclusion referenda, the BANs will be converted into bonds with a terms of 20 or more years. Borrowing for projects that do not result in construction is limited to 5 years and will continue to be managed as within-levy debt. The lurking risk is that, if the Town spends a significant portion of this $4.08 million on projects that do not proceed to construction, the Town will then have to finance that portion within a 5-year period. There- fore, it behooves us to start from a well-considered list of projects in the first place, and to limit spending on those that are not expected to proceed to construction. Committee Position At a joint meeting held on February 25, 2015, this Committee, along with the School Committee, Board of Selectmen, and Capital Expenditures Committee, endorsed a consensus statement of support for the request presented by the Board of Selectmen. This request will allow the Town to research key issues prior to making decisions about which projects to pursue, when they should be initiated, and how they should be financed. These issues include basic feasi- bility, cost estimates, timing, and scheduling factors for each phase of the proposed projects. This infor- mation is necessary for the Town to proceed promptly and confidently with the school capital projects. The Committee recommends approval of this request (9-0). 6