2018-03-26-CEC-ATM-rpt - Laserfiche WebLink

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CAPITAL EXPENDITURES COMMITTEE REPORT TO 2018 ATM favorably out of committee in May, 2017. If the bill should pass in the current Legislative session and be signed by the Governor,that enhanced funding would first be experienced in FY2020. Each year, the following reserves each receive 10% of the total funds received into our Town's CPF: Community Housing, Historic Resources, and Open Space. The remaining 70% may be spent for any of these categories or for Recreation. Funds may be accrued from year to year and are available for debt service on previously approved projects. The proceeds from the CPA may be used for various capital projects proposed by Town and non-Town entities (See Article 10.) 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 brought to Town Meeting for action upon the recommendation of 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). This Committee will give our recommendation on each of the projects put before the Town Meeting. 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 scope of the Act. See the report of the CPC for information on how Lexington has spent the funds received from its taxpayers, interest earned on the CPF, and the State supplement 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 often does—include, in part or in total, issuing debt instruments which are then paid over the term of the borrowing using the CPF. It remains the recommendation of this Committee that: (1) Any such debt be for as short a tei ii and payment front-end loaded, as practical, after considering the funding projected for the CPF (not including any State supplemental funds) over at least the next 10 years; and (2) Such debt should be approved only after consideration of future 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. The debt service on such debt instruments is an obligation borne by the CPF throughout the teen of those instruments—whether short-term financing (i.e., notes, such as a Bond Anticipation Note [BAN]) and/or long-term financing (i.e., a Bond). In future years, it is incumbent on the CPC to recommend to Town Meeting, and for Town Meeting to approve, those obligatory debt-service-payment appropriations. (See Article 10(k).) One approach that provides flexibility in deciding how much, if any, CPF cash should be applied up front for a large project is to defer that decision by initially issuing a BAN for a term of 1 year or less for the full amount of the project. (A BAN typically carries an interest rate substantially below even the relatively low rates paid on the Town's bonds.) When a BAN matures, a decision can be made whether to use CPF cash to reduce the total for which a longer-term bond would then be issued. Doing so gives the Town a better idea of how much CPF cash should be held in anticipation of the next—and later—years' demands upon the CPF. This mechanism has been used in the past and this Committee expects it to be proposed in the future for other large projects. 8