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CAPITAL EXPENDITURES COMMITTEE REPORT TO 2022 ATM& STMs 2022-1 & -2 Foreword We encourage you to read our report, in full or in part, and to use it as a resource to: Get details on a particular Capital or Community Preservation Act (CPA) Article. Use the Table of Contents or the Summary on the inside back cover to locate the Article in the second part of this report, and then read the description from the Town's Recommended Budget & Finance Plan (Brown Book)as well as any supplemental information we include to further explain the project'. Get context and historical perspective on a department or a Capital project. Locate the department or project in the front section of this report to read about it and see a five-year funding history. See what Capital spending might look like in the future. Refer to this Committee's Five–Year Capital Plan (5YCP) starting on Page 11. One of this Committee's statutory responsibilities is to compose a 5YCP which forecasts the capital projects and programs that we see on the horizon for the next 5 years. This plan usually starts with the Town Manager's proposed budget, a/k/a "The Brown Book" and annotates it with footnotes and changes based on our opinions.While there is always some uncertainty to trying to predict the future,this year the Town finds itself in an inflationary bidding environment, largely due to the pandemic. This is not just our Committee's point of view—it has been confirmed by statements by the Town Manager and staff. To wit, we have already seen project cost escalation prior to Town Meeting approval for the Department of Public Works (DPW) pump-station project, and the Lexington Police Station rebuild as well as the necessity for a supplemental appropriation for the Westview Cemetery project. We anticipate there will be other projects which suffer the same fate. From a capital planning perspective, this makes short- and long-term planning difficult. In short, these inflationary trends imply any of the following: increased project costs, the need for supplemental appropriations, and/or reduced project/program scope. At least two of those three outcomes will generally result in overall delays. This means that there is a larger than normal degree of uncertainty in our own report and its five-year projections. The largest project on anyone's radar is the Lexington High School rebuild/renovation. While staff has been carrying a $350M project cost, this is a number that has not been adjusted for normal or pandemic inflation for several years. The Committee has for a long time, and continues to do so, called this figure into question. Carrying a realistic figure is important because this number is used for stabilization fund (SF), debt service,and taxpayer impact projections. Adding to the uncertainty our five-year capital plan is the study conducted by the Department of Public Facilities (DPF) which takes a 20–year view of all of the Town's building assets. The results of this study still have not been incorporated into the Town's long-term capital planning.While this Committee has not actually seen the report,we know that many of the numbers are large and may cause significant impact to the Town's longer-term plans. We commend the town staff for continuing to move to a completely cash-capital based program budget. This is something we have long advocated. Two examples of this in the Fiscal Year(FY)2023 budget are the Fire Pumper Truck replacement and the School Technology program. While the Town Pool Water Heater Replacement project may seem small, it is important to maintain focus on the Town's sustainability goals as previously stated by you, Town Meeting. The current water heater is oil-fired. The replacement proposal presented to us in early November was specified to continue to use oil as the fuel source. This Committee (and others) called this into question, and the result is that the staff is now seeking design funds to explore electric alternatives with the expectation that construction 1 Throughout this report, "project" is generally used to characterize a Capital endeavor. Within the development of budgets and other financial actions, "program" is used for already on-going needs while "project" is used for what is considered to be a one-off endeavor during the five-year scope of financial planning. I