2017-04-24-CEC-ATM-STM1-rpt (incl Updates Errata)

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CAPITAL EXPENDITURES COMMITTEE REPORT TO 2017 ATM&STM 2017-1 (with Updates&Errata) So while the supplement level had fallen substantially since our first year—but with the last three years having a rebound when there was additional funding into the CPATF from the State's surplus—our Town will continue to receive significant help from the State toward the cost of our CPA-funded projects. The proceeds under the CPA may be used for various capital projects proposed by Town and non-Town (see ATM 10(a & b)) entities within the categories of Community Housing, Historic Resources, Open Space, and Recreational Use that fall within the provisions set forth in the enabling Act. Projects are put forth to Town Meeting for action by a Community Preservation Committee (CPC) whose membership,in our Town, is prescribed in the Code of Lexington as follows: § 29-23A. There is hereby established a Community Preservation Committee pursuant to Section 5 of Chapter 44B of the General Laws (the "Act") consisting of nine members. The Board of Selectmen shall appoint three members of the Community Preservation Committee and the following bodies shall each select one of its members for membership on the Community Preservation Committee: the Conservation Commission, the Planning Board, the Recreation Committee, the Historical Commission, the Housing Authority and the Housing Partnership. Town Meeting can only approve, reduce the funding, or disapprove a project; it cannot change the purpose. Town Counsel has provided an opinion that Town Meeting can change the funding mechanism (cash or debt). As with any capital project, this Committee will give our recommendation on each of the projects put before the Town Meeting. (See Article 10) The CPA provides an alternative funding mechanism for capital projects. The CPA creates a separate pool of money that can be used for a limited set of projects. It can help accomplish some of the Town's traditional capital needs,but only those that fall within the limited purposes of the Act. See the report of the CPC for information on how Lexington has spent the funds received from its taxpayers and the State under the Act. It is important to note that the projected available CPF cash is not a limitation on what the CPC can recommend to Town Meeting for approval. The method of paying for what the CPC recommends can— and now often does—include, in part or in total, issuing debt instruments. It remains the recommendation of this Committee that any such debt be for as short a term as practical after considering the funding projected for the CPF (not including any State matching fund) 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, Reserves for use on Open Space, Historic Resources, and Community (Affordable) Housing. 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., notes, such as 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. (See Article 10(o)) 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 FY2018 and in the future for other very-large projects. See the CPA Summary in the Brown Book (Appendix C, Page C-7) for a summary of the CPF status including what projects have been funded from the CPF since its inception in Lexington and what is being requested in FY2018. Also see the CPC's report to these Town Meetings for its projection of what the 8