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2023-03-20-CEC-ATM-rpt
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2023-03-20-CEC-ATM-rpt
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3/20/2023 11:02:26 AM
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2023
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Town Clerk
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Capital Expenditures Committee Town Meeting Report for March 20, 2023
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CAPITAL EXPENDITURES COMMITTEE REPORT TO 2023 ATM <br /> The Lexington CPF receives the annual receipts from our local surcharge,the State supplement,and interest <br /> on the balance in our Town's CPF. Under the statute, 10% of the total received each year is allocated to <br /> each of the following categories: Community Housing,Historic Resources,and Open Space.The remaining <br /> 70%of this income may be spent for any of these categories or for Recreation. Funds may be accrued from <br /> year to year and are available for debt service on previously approved projects. <br /> A CPA-funded project can only be brought to Town Meeting for action through recommendation by the <br /> CPC whose membership, in our Town, is prescribed in the Code of Lexington as follows: <br /> § 29-23A. There is hereby established a Community Preservation Committee pursuant to Section <br /> 5 of Chapter 44B of the General Laws (the "Act") consisting of nine members. The Board of <br /> Selectmen shall appoint three members of the Community Preservation Committee and the <br /> following bodies shall each select one of its members for membership on the Community <br /> Preservation Committee: the Conservation Commission, the Planning Board, the Recreation <br /> Committee,the Historical Commission,the Housing Authority, and the Housing Partnership. <br /> Town Meeting can only approve,reduce the funding,or disapprove a project;it cannot change the purpose. <br /> Town Counsel has provided an opinion that Town Meeting can change the funding mechanism for a given <br /> project(cash or debt). This Committee gives our recommendation on each of the projects put before Town <br /> Meeting. <br /> See the report of the CPC for information on how Lexington has spent from the CPF since 2007. <br /> The projected available CPF cash is not a limitation on what the CPC can recommend to Town Meeting for <br /> spending approval. The CPA can—and often does—include debt financing, which is then paid over the <br /> term of the borrowing using the CPF. In fact, CPA has proposed funding the Monroe Center for the Arts <br /> renovation(2023 ATM Article 10(b)with a combination of existing CPA funds and $2 million debt. This <br /> Committee has always stated that cash funding should be the first preference. However, (1)Any such debt <br /> should be for as short a term as practical,with and payment front-end loaded,as practical,after considering <br /> the funding projected for the CPF (not including any State supplemental funds) over at least the next 10 <br /> years;and(2) Such debt should be approved only after consideration of potential future projects that might <br /> come before the CPC for consideration which would require funds beyond those allocated to the three, <br /> mandatory reserves for Open Space,Historic Resources, and Community(Affordable)Housing. <br /> The debt service is an obligation borne by the CPF throughout the term of those instruments—whether <br /> short-term financing(i.e.,notes,such as a Bond Anticipation Note [BAN])and/or long-term financing(i.e., <br /> a bond). It is the Town's practice that each year's debt service will be paid from any funds remaining in the <br /> reserve category under which that project was eligible—whether or not initially financed from that <br /> reserve—before use of other available funds. In subsequent years,the CPC recommends to Town Meeting <br /> those obligatory debt-service-payment appropriations. (See Article 10(q).) <br /> One approach that provides flexibility in deciding how much, if any, CPF cash should be applied up front <br /> for a large project is to defer that decision by initially issuing a BAN for a term of one year or less for the <br /> full amount of the project. (A BAN typically carries an interest rate that is below even the relatively low <br /> rates paid on the Town's bonds.)When a BAN matures, a decision can be made whether to use CPF cash <br /> to reduce the total for which a longer-term bond would then be issued. Doing so gives the Town a better <br /> idea of how much CPF cash should be held in anticipation of the next—and later—years' demands upon <br /> the CPF. This mechanism has been used in the past, and this Committee expects it to be proposed in the <br /> future for other large projects. <br /> The CPC carefully husbands available funds and has recommended taking on additional debt for the <br /> Monroe Center of the Arts renovation after considerable deliberation. The proposed addition at the Monroe <br /> Center will improve accessibility with the installation of an elevator and creating new, gender-neutral <br /> bathrooms. Without borrowing, CPF available fund balances would have dropped below the $2 million, <br /> which is the minimum the CPC customarily likes to keep on hand in event a large project needs funding in <br /> the near future. The impact of debt service from the Monroe Center project will be mitigated by the <br /> cessation of financing payments on Marrett Road and Cary Memorial Building Construction ending in <br /> FY2024 and FY2025,respectively. <br /> 8 <br />
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