2014-03-31-CEC-ATM-STM-rpt (Final- incorporates Updates and Errata 03-31-14)

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CAPITAL EXPENDITURES COMMITTEE REPORT TO 2014 ATM & 2014 STM (Mar 24th) recommendation of this Committee that any such debt be for as short a term as practical after considering the funding projected for the CPF over at least the next 10 years and consideration of projects that might come before the CPC for consideration which would require funds beyond those allocated to the three, mandatory, 10% of revenue, purpose -category Reserves. (Those are the first three Reserves cited in the above table.) If front-end loading of such debt were practical, that, too, remains a recommendation. The debt service on such debt instruments is an obligation borne by the CPF throughout the term of those instruments—whether short-term financing (e.g., a Bond Anticipation Note [BAN]) and/or long-term financing (i.e., a Bond). In the future years, it is incumbent on the CPC to recommend to Town Meeting, and for Town Meeting to appropriate in full, those obligatory debt -service payments. One approach that provides flexibility in making a decision about how much, if any, CPF cash should be applied, up front, for a very -large project is to defer that decision by initially issuing a BAN that has a term of 1 year or less for the full amount of the project. When that BAN matures (which typically carries an interest rate substantially below even the relatively low rates on the Town's bonds), at that time make the decision on whether to use CPF cash to reduce the total for which a bond would then be issued. Doing so permits the Town to have a better idea of how much CPF cash should be held in anticipation of the next—and later—years' demands upon the CPF. That mechanism has been used in the past and this Committee would expect it to be proposed for FY2015 and in the future for other very -large projects. As shown in the previous table our CPA -surcharge funding is eligible for supplemental State funding based on each town's prior -fiscal -year's property -tax surcharges, but the percentage is not guaranteed. When there are not sufficient funds for a 100% match, the State does a 2"d -round, and potentially 3ra_ round, calculation to determine the final supplemental funding for those communities that have adopted the maximum 3% surcharge, including Lexington. Since the passage of the CPA, the supplements have been funded from the State's CPA Trust Fund that gets its revenue from surcharges on the fees on property transactions at the Registries of Deeds. That process continues, but there has been a significant enhancement beyond those transactions. Initially based on State Legislature action and signature by the Governor on July 9, 2012, of the FY2013 State budget, to the extent the State ended FY2013 with a surplus, up to the first $25 million of that surplus also shall be added to that Trust Fundi The State Comptroller then certified the FY2013 consolidated net surplus in his report on November 5, 2013, at $106.8 million—thereby allowing the $25 million to be added to the Trust Fund. The result—as the next table shows—was nearly a doubling of the distribution in FY2014. Although that initial Legislative action only applied to any FY2013 surplus, there were indications from the Legislative leaders they intend to repeat that provision in each future fiscal year, and when the Governor signed the FY2014 State budget on July 12, 2013, it did contain a provision reaffirming the potential for a similar addition to the Trust Fund of the first $25 million from any FY2014 consolidated net surplus. If that potential should become a fact, then the distribution the Town receives in FY2015 should, again, be substantially more than it would be if it relied only on the surcharges at the Registries of Deeds. As both funding sources for that Trust Fund are highly variable and dependent upon future actions by the Legislature and the Governor, there will always be a significant degree of uncertainty about the level of future State -supplement funding. i The Acts of 2012, Chapter 139, Section 155 The Acts of 2013, Chapter 38, Section 145