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HomeMy WebLinkAbout2006-02-06-CEC-min Meeting with BoS, 2/6/06, SMR, 8:30pm TE, SS, CWL Comments to BoS by CWL Madame Chair, members of the Board, Thank you for the opportunity for the Capital Expenditures Committee to meet with you this evening. Over the past several months, our committee has spent extensive time reviewing FY07 department requests, touring related facilities, speaking with the town manager, and most recently deliberating over the projects' impact, suitability, and priority. I would like to make some overall comments on the Cash Capital picture as it relates to the standing cash capital policy. These comments are restricted discussion to the non-excluded tax levy and do not include enterprise fund requests. The Town Manager has presented you with a requested capital budget of 5.6 million dollars for both municipal and schools. This is broken down into 1.04 million dollars in cash and 4.6 million dollars of debt. The 5% cash capital policy indicates that 5.2 million dollars should be used for capital projects. Subtracting out the FY07 interest and BAN payments yields 3.674 million dollars available for new capital projects. To determine the appropriate split between cash and debt, we subtract out 2.195 million dollars of principal paydown and arrive at a target of 1.479 million funded in cash. The proposed budget funds 540 thousand dollars of projects with cash, excluding 500 thousand dollars of roads set-aside money from the 2000 override. We can look at these numbers in a couple of different ways. The first is to consider the level of new debt relative to the principal being paid down. With proposed debt at 4.6 million and the principal paydown being 2.195 million we're borrowing 2.4 million dollars more than we're paying down, thereby moving us away from a cash-based capital policy. In other words, we're increasing debt, rather than decreasing it. I have spoken with the Town Manager about this and I understand and respect his motivations for using this level of debt. One of his motivations is that he places a strong emphasis on taxpayer equity. For example, the taxpayers of today shouldn't be asked to make a lump sum payment today for a fire truck that we buy that has a useful life of, say, 15 years. Rather by borrowing, we can distribute the cost of the firetruck over all of the taxpayers who use the service of that truck for the next 15 years. I would instead argue that the fire department provides a relatively constant level of service and the capital costs involved in providing that service have peaks and valleys depending on when a particular piece of equipment needs to be replaced. In spite of those year-to-year differences in capital costs, the level of service is the same and does not justify increased borrowing in the name of equity. The second way to look at these numbers is by focussing on the level of cash being used to pay for capital. By spending only 540 thousand dollars on cash capital, even though the target under the cash capital policy is 1.479 million dollars, we are effectively using 940 thousand dollars to balance the operating budget. I reluctantly remind you that this is something we practiced last year when the operating budget was balanced by using 989 thousand dollars of cash capital. The Capital Expenditures Committee, while sympathetic to the difficulties of cutting the operating budget and of the need to reduce the projected FY07 operating override as much as possible to ensure passage, has come to the conclusion that by borrowing above the FY07 principal paydown, 2.195 million dollars, we are making the problem worse in future years and thereby ensuring higher operating overrides. On the positive side, we generally feel that the proposed budget is in the right ballpark in terms of capital spending. We will propose some changes later in the meeting. Indeed, most of the capital requests in this proposed budget are necessary and timely. In our discussion this evening, I will be more succinct in my comments on the individual items. Presently, I want to call attention to two of the items totalling just over one million dollars: the Lincoln Fields Corretion project, and the Police Dispatch Center renovation. These are unique in that they are presumably one-time requests. The committee acknowledges that it may be appropriate to borrow in excess of the target debt amounts for these projects since they are not recurring. Comments on Individual Items: Replace E-1. We are in favor of this expenditure, but are concerned that the two pumpers are being purchased only two years apart. Nevertheless, the current E-1 is a potential danger to our personnel and should be replaced. Dispatch Center and communications equipment. We are in favor of replacing the communications equipment. There are inter-service communications issues and regulatory mandates to be met. With regards to the dispatch center, we toured the current center with the two chiefs. We are concerned about two issues. The first is that the new dispatch center will not be large enough to last more than 10 years. The second is that we anticipate following this renovation with a 1.8 million dollar renovation of the entire police station a few years down the road and are concerned that this later renovation may "re-do" some of the work done in the dispatch center renovation. We have assurances from the chiefs that this is not the case, but nevertheless we remain concerned. Nevertheless, the committee unanimously supports this appropriation with those concerns noted. Center Playground Reconstruction. Our discussion focussed on two aspects of this request. The first is that this playground was not originally constructed with public money and therefore by implication should possibly not be rebuilt with public money. The second aspect is that this is a good candidate for CPA money. We ask that the board receive a definitive opinion on whether CPA funds could be used for this purpose. We believe that other towns have used CPA money for playgrounds. We are supportive of playground reconstruction, but are hesitant to support such a large appropriation without first knowing if CPA money is available. DPW Equipment. Our committee is supportive of this request, with the caveat that there are some minor tweaks still being made to the equipment list. Building Envelope: We would reduce this request by a total of 265 thousand dollars, broken out as follows: $30K for Munroe Cemetery and Parks Department buildings, which at $15K each are not capital items, $75K for TOB Ramp since we would prefer to see the Cary Hall Bird Room finished with the existing 18a/04 appropriation, $100K for the visitor center electric since we simply can not understand how that much money can be spent on rewiring a building that could possibly be rebuilt completely for the same amount, and $60K for the fire station which the Chief has indicated is not money he needs this year. We have not taken a firm position on the remaining two items, the Westview Cemetery heating system at $40K and the LFD floor, because we are awaiting a second consultant's report on the latter. On the heating system, we're having a hard time understanding how a heating system on such a small building can cost $40K. Town Clerk Vault HVAC: We have not taken a position on this yet. Our concerns are present that we want to investigate whether there is an overall records management plan. We will investigate this further. COA Feasibility: We have not taken a position yet. We would like to know if the current situation in the Munroe building, relative to contracts, will permit locating the senior center there. Nstar Parking Lot: We have not taken a position yet because we have not seen a plan, including number of spaces, ROI, the lease/buy arrangement, what the ongoing operational costs are, whether there's an EMF problem, and whether there's a long term parking plan in the center, like a parking garage. Roads: Motherhood and apple pie. Lincoln Fields Corrective: While our sentiment is positive on this request, we have asked the town manager to investigate whether this could be included as a supplemental appropriation to the 2002 Debt exclusion. Sidewalks: Our sentiment is that an appropriate amount might be $150K. We would like guidance from the Board on what breakdown they might use between center sidewalks and non-center sidewalks with this amount. Street Drain Improvements: strong support for this. We ask that this request broken down into the mapping and construction components. All Enterprise Requests (Recreation and W&S): In favor. Schools: We'll take it up with the superintendent and school committee. Generally in favor. EUAC Study: While we note that Town Meeting has voted in favor of moving in this direction on two occasions, it has never had to actually appropriate money under such a vote. Before we would be willing to support such an appropriation, we would want to see strong voter support through a non-binding ballot question. The upcoming override ballot could be used for such a question and if sentiment were strong, then a request at the 2007 ATM could be made. Comments by CEC to Board of Selectmen, 2/6/06 Madame Chair, members of the Board, Thank you for the opportunity for the Capital Expenditures Committee to meet with you this evening. Over the past several months, our committee has spent extensive time reviewing FY07 department requests, touring related facilities, speaking with the town manager, and most recently deliberating over the projects' impact, suitability, and priority. I would like to make some overall comments on the Cash Capital picture as it relates to the standing cash capital policy. These comments are restricted to the non-excluded tax levy and does not include enterprise fund requests. The Town Manager has presented you with a requested capital budget of 5.6 million dollars of for both municipal and schools. This is broken down into 1.04 million dollars in cash and 4.6 million dollars of debt. The 5% cash capital policy indicates that 5.2 million dollars should be used for capital projects in FY07. Subtracting out the projected FY07 interest and BAN payments yields 3.674 million dollars available for new capital projects. To determine the appropriate split between cash and debt, we subtract out 2.195 million dollars of FY07 principal paydown and arrive at a target of 1.479 million funded in cash. The proposed budget funds 540 thousand dollars of new projects with cash, excluding 500 thousand dollars of roads set-aside money from the 2000 override. We can look at these numbers in a couple of different ways. The first is to consider the level of new debt relative to the principal being paid down. With proposed debt at 4.6 million and the principal paydown being 2.195 million we're borrowing 2.4 million dollars more than we're paying down, thereby moving us away from a cash-based capital policy. In other words, we're increasing debt, rather than decreasing it. This will put strain on out-year operating budgets. This might be appropriate if we thought that the level of capital spending would decrease. I have spoken with the Town Manager about this and I understand and respect his motivations for using so much debt. One of his motivations is that he places a strong emphasis on taxpayer equity. For example, the taxpayers of today shouldn't be asked to make a lump sum payment today for a fire truck that we buy that has a useful life of, say, 15 years. Rather by borrowing, we distribute the cost of the firetruck over all of the taxpayers who use the service of that truck for the next 15 years. I would instead argue that the fire department provides a relatively constant level of service and the capital costs involved in providing that service have peaks and valleys depending on when a particular piece of equipment needs to be replaced. In spite of those year-to-year differences in capital costs, the level of service is the same and does not justify increased borrowing in the name of equity. The second way to look at these numbers is by focussing on the level of cash being used to pay for capital. By spending only 540 thousand dollars on cash capital, even though the target under the cash capital policy is 1.479 million dollars, we are effectively using 940 thousand dollars to balance the operating budget. I reluctantly remind you that this is something we practiced last year when the operating budget was balanced by using 989 thousand dollars of cash capital. The Capital Expenditures Committee, while sympathetic to the difficulties of cutting the operating budget and of the need to reduce the projected FY07 operating override as much as possible to ensure passage, has come to the conclusion that by borrowing above the FY07 principal paydown, 2.195 million dollars, we are making the problem worse in future years and thereby ensuring higher operating overrides. On the positive side, we generally feel that the proposed budget is in the right ballpark in terms of capital spending. We will propose some changes later in the meeting. Indeed, most of the capital requests in this proposed budget are necessary and timely in light of our record of asset neglect. In our discussion this evening, I will be more succinct in my comments on the individual items. Presently, I want to call attention to two of the items totalling just over one million dollars: the Lincoln Fields Correction project, and the Police Dispatch Center renovation. These are unique in that they are presumably one-time requests. The committee acknowledges that it may be appropriate to borrow in excess of the target debt amounts for these projects since they are not recurring, understanding, of course, that this may put a strain on our out year capital budgets. Comments on Individual Items: Replace E-1. We are in favor of this expenditure, but are concerned that the two pumpers are being purchased only two years apart. Nevertheless, the current E-1 is a potential danger to our personnel and should be replaced. Dispatch Center and communications equipment. We are in favor of replacing the communications equipment. There are inter-service communications issues and regulatory mandates to be met. With regards to the dispatch center, we toured the current center with the two chiefs. We are concerned about two issues. The first is that the new dispatch center will not be large enough to last more than 10 years. The second is that we anticipate following this renovation with a 1.8 million dollar renovation of the entire police station a few years down the road and are concerned that this later renovation may "re-do" some of the work done in the dispatch center renovation. We have assurances from the chiefs that this is not the case, but nevertheless we remain concerned. Nevertheless, the committee unanimously supports this appropriation with those concerns noted. Center Playground Reconstruction. Our discussion focussed on two aspects of this request. The first is that this playground was not originally constructed with public money and therefore by implication should possibly not be rebuilt with public money. The second aspect is that this is a good candidate for CPA money, assuming that CPA is approved by the voters. We ask that the board receive a definitive opinion on whether CPA funds could be used for this purpose. We believe that other towns have used CPA money for playgrounds. We are supportive of playground reconstruction, but are hesitant to support such a large appropriation without first knowing if CPA money is available. DPW Equipment. Our committee is supportive of this request, with the caveat that there are some minor tweaks still being made to the equipment list. Building Envelope: We would reduce this request by a total of 265 thousand dollars, broken out as follows: $30K for Munroe Cemetery and Parks Department buildings, which at $15K each are not capital items, $75K for TOB Ramp since we would prefer to see the Cary Hall Bird Room finished with the existing 18a/04 appropriation, $100K for the visitor center electric since we simply can not understand how that much money can be spent on rewiring a building that could possibly be rebuilt completely for the same amount, and $60K for the fire station which the Chief has indicated is not money he needs this year. We have not taken a firm position on the remaining two items, the Westview Cemetery heating system at $40K and the LFD floor, because we are awaiting a second consultant's report on the latter. On the heating system, we're having a hard time understanding how a heating system on such a small building can cost $40K. Town Clerk Vault HVAC: We have not taken a position on this yet. Our present concerns is that we want to investigate whether there is an overall records management plan. We will investigate this further. COA Feasibility: We have not taken a position yet. We would like to know if the current situation in the Munroe building, relative to contracts, will permit locating the senior center there. Nstar Parking Lot: We have not taken a position yet because we have not seen a plan, including number of spaces, ROI, the lease/buy arrangement, what the ongoing operational costs are, whether there's an EMF problem, and whether there's a long term parking plan in the center, like a parking garage. Roads: Motherhood and apple pie. Lincoln Fields Corrective: While our sentiment is positive on this request, we have asked the town manager to investigate whether this could be included as a supplemental appropriation to the 2002 Debt exclusion. Sidewalks: Our sentiment is that an appropriate amount might be $150K. We would like guidance from the Board on what breakdown they might use between center sidewalks and non-center sidewalks with this amount. Street Drain Improvements: strong support for this. We ask that this request be broken down into the mapping and construction components. All Enterprise Requests (Recreation and W&S): In favor. Schools: We'll take it up with the superintendent and school committee. Generally in favor. EUAC Study: While we note that Town Meeting has voted in favor of moving in this direction on two occasions, it has never had to actually appropriate money under such a vote. Before we would be willing to support such an appropriation, we would want to see strong voter support through a non-binding ballot question. The upcoming override ballot could be used for such a question and if sentiment were strong, then a request at the 2007 ATM could be made.