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HomeMy WebLinkAbout2022-06-15 Financial Summit/DPF 20-Year Capital Plan (Part Two)-min Financial Summit Select Board, School Committee, Appropriation Committee and Capital Expenditures Committee June 15, 2022 A remote participation Financial Summit was called to order at 7:00 p.m. on Wednesday, June 15, 2022 via Zoom remote meeting services. Present for the Select Board (SB): Ms. Hai, Chair; Mr. Lucente; Vice Chair, Mr. Pato, Ms. Barry, and Mr. Sandeen were present, as well as Mr. Malloy, Town Manager; Ms. Axtell, Deputy Town Manager; Ms. Katzenback, Executive Clerk. Present for the Appropriation Committee (AC): Glen Parker, Chair; John Bartenstein; Alan Levine; Eric Michelson; Meg Muckenhoupt; Sanjay Padaki; Lily Yan and Anil Ajuha. Present for the School Committee (SC): Kathleen Lenihan; Eileen Jay; Scott Bokun; Deepika Sawhney, Vice Chair; Dr. Julie Hackett, Superintendent of Schools and David Coelho, Assistant Superintendent for Finance. Present for the Capital Expenditures Committee (CEC): Charles Lamb, Chair; Sandhya Beebee; Mike Boudett; David Kanter, Vice Chair; and Franklin Smith. Also Present: Ms. Kosnoff, Assistant Town Manager for Finance; Mr. Cronin – Director of Public Facilities; Ms. Hai stated that the meeting was being conducted via Zoom as posted, with the agenda on the Town’s website. She noted that; at the last Financial Summit, the groups requested adjustments to the modeling proposed by Mr. Cronin. That will be reviewed this evening. The groups are being asked for directional guidance on this plan. ITEMS FOR INDIVIDUAL CONSIDERATION 1. Department of Public Facilities 20-Year Capital Plan (Part 2) Mr. Cronin explained that the Town contracted about a year and a half ago with VFA. VFA toured all of the Department of Public Facilities (DPF) buildings, reviewed the equipment, and logged it into a system. A lifecycle expectancy was assigned to each piece of equipment. The VFA database shows when systems/equipment are at end-of-useful life and also shows budget estimates for direct in-kind replacement. The replacement cost was determined for a direct in-kind replacement for systems over the next 20 years. Along with RSMeans, DPF used actual cost estimates for recent projects to verify and/or adjust the database budget estimates. The Facilities Condition Index (FCI) for a 5-year window beginning in FY2022 shows $196M worth of activity that needs to take place. This results in a 0.26 FCI, or a C/fair rating. Six Town buildings not listed in the FCI, are the Police Station, the Lexington High School, Lexington Public Schools (LPS) Central Administration, 173 Bedford Street, East Lexington Fire Station, and the Town Office Building. The Police Station and Lexington High School will likely have work done on them in the near future, which will impact the FCI, and total amount of funding needed for future activity. Mr. Cronin explained that there are approximately $90M worth of requirements due for replacement/renewal at the Lexington High School over the next five years. This includes requirements that were previously due for replacement and were deferred. He explained that Article 16(g) was proposed last year for $500,000 to be allocated for emergency use at that school if systems start to fail. If the Police Station and Lexington High School are removed, the Town’s FCI drops to 0.225. Certain amounts of funding will be necessary each year in order to maintain that FCI level for the next 20 years. There will need to be thought put into how to build new buildings while maintaining old buildings and trying to keep a consistent FCI. Mr. Cronin explained that, from FY2017 to FY2023, the Town has spent an annual average of approximately $2M on facilities capital programs. The five year need for projects in the Town, when removing the Police Station and High School, is approximately $101.6M. There are four buildings in Town which currently have D (Poor, Major Renovation) and F (Very Poor, Replace with New) ratings which need additional investments. These equate to approximately $25M of the five-year capital request. In reviewing all of the items on the request list, it was determined that approximately $22M of the $101M can likely be deferred at this time for possibly another five years. Removing these two items from the calculation leaves the Town with an average of $11M of capital needs each year for the next five years. However, there are some standout items within that list. Capital planning should be examined using three lenses: major building renovation/replacement; single, one-off major projects; and annual Capital Improvement Program (CIP) projects. Mr. Cronin stated that the Town needs to increase its annual program funding levels in order to keep existing buildings at their target FCI level. It will be important to evaluate how to increase funding over the next few months. The Capital Improvement Programs categories could also be reorganized for additional flexibility. He suggested that the plan for the Lexington High School should be to not invest major capital funds at this time and continue to go down the Massachusetts School Building Authority (MSBA) path for renovation/new construction. He also suggested deferring the $90M required system replacements in the school at this time. The Emergency Use funds can be utilized in the event of major system failure. He explained that the Town will need to have deeper discussions regarding the other four buildings that are, collectively, in need of $25M financial investment. The Town will also need to discuss what an ideal FCI rating is and/or what a target FCI should be. Mr. Cronin explained that the new CIP would include MEP (mechanical/electrical/plumbing), building envelope & roofing, interior finishes, site improvements, bid documents, and stand-alone large projects. Ms. Kosnoff explained that these new categories combine the Town and schools together into one bucket. The DPF feels that this better reflects how these projects are managed. The municipal building envelope, funded using the tax levy, is proposed to be kept and the amount increased over time as well. Mr. Malloy noted that there is a suggestion to either modify the Capital Plan that is submitted every year as part of the budget or include an appendix that shows the projects that have been identified for the next 10 years, and what has been accomplished each year. This would allow everyone to see that the Town is addressing the work that needs to be done most urgently. Mr. Cronin explained that non-in-kind replacement, such as electrification, would require changes to be made to these spreadsheets for future projects. There will be future questions around this topic, depending on what the groups decide. Mr. Kanter (CEC) stated that he supports removing the Police Station and High School from the FCI but believes that the Stone Building needs to be included on the list. He cautioned against using the plain term “maintenance”—rather than extraordinary maintenance—regarding capital projects, due to what should be funded under capital projects versus through the operating budget. He asked about if it makes sense to have some work—for example paving—still segregated between the Department of Public Works (DPW) and DPF as it may make better sense for contracting and managing them by DPW. Ms. Lenihan (SC) noted that the Bowman and Bridge schools will be close to 70 years old in 20 years. She stated that expanding the lifespan of these schools might need to be more closely considered. Mr. Pato (SB) stated that he believes the goal is how the buildings are being addressed, more so than a target FCI itself. He asked what the Town’s exposure is for the capital expenses in order to know what the appropriate amount of fiscal obligation is. He noted that he would also like to see all buildings, such as the Stone Building, included on the list. If there are buildings that are currently mothballed and the intention is to continue keeping them that way, the cost to do so also needs to be known. Mr. Boudett (CEC) stated that the FCI is basically a front-loading score to tell the Town what is on the near-term horizon for all the capital and maintenance needs. Most of these are unavoidable, even if a building is replaced. He agreed with Mr. Malloy’s suggestion to create a more accurate and fulsome 10- year projection of all the capital and maintenance needs. To compare that to the current budget and keep an ongoing checklist seems incredibly important and on point. Mr. Sandeen (SB)stated that he believes the value of this presentation is in bubbling up which buildings have the greatest needs in Town. Ms. Barry (SC) echoed the previous comments to include all buildings on the list, such as the Stone Buildings, mothballed buildings, and all of the recreational buildings. She explained that she believes three of the buildings, 173 Bedford Street, the Town Office building, and the Central Administration building, seem to be interrelated. The 173 Bedford Street building may potentially be used toward the Massachusetts Bay Transportation Authority (MBTA) Communities item which will soon need to be explored. There will need to be out-of-the box thinking in regard to these buildings. She is concerned regarding the East Lexington Fire Station and the safety of the buildings. Mr. Lucente (SB) explained that he believes the Town has previously treated buildings as if they have an expiration date. As that date gets closer, the care for the buildings goes down, and they are almost neglected to a point where there is no choice but to replace them. He hopes that the Town can start to look at its new buildings and consider how to keep them in good condition far into the future. Ms. Hai (SB) stated that she believes it is important to have a comprehensive picture of all capital assets that are going to require maintenance and/or renovation, including mothballed buildings. Focusing on building needs, instead of an abstract number such as the FCI, which can work for roads in Town will be important. She believes the Town needs to start planning more robustly for the category of major renovation/replacement. She also agreed that 173 Bedford Street is a prime opportunity to talk about affordable housing. Mr. Levine (AC) stated that he agrees that the FCI is not necessarily the target, so much as maintaining the building serviceability for their intended uses. He explained that not all building systems are created equal. Some are critical and some are not critical. He believes it will be important to categorize systems as critical versus non-critical, or degrees of criticality. He suggested that another summit be held within the next few months to discuss the four buildings with the greatest needs. He noted that electrification will affect the fossil fuel infrastructure of buildings. The Town may want to consider a large project to electrify many of its buildings through debt exclusion. Mr. Parker (AC) stated that he would like to discuss the impact of maintenance on operating expenses, and also as a maintenance multiplier. He finds it frustrating that the issues with the School Administration and Town Office buildings are known, but don’t seem to be moving forward. Mr. Michaelson (AC) stated that, regarding the appropriate levels of annual appropriation for the Capital Improvement Program categories, he would like to see a correlation between what the tool shows is needed, and an explanation from DPF of how many of the critical systems can be delayed, in order to get an idea of the actual percentage of total expenditures required. In response to a question from Mr. Padaki (AC), Ms. Kosnoff explained that the DPF would like to use the revised database to identify the most critical projects in the buildings that are not complete overhauls or complete reconstructions, and on a year-to-year basis be able to pick the most important ones without having to create a special appropriation for each one. This will allow for greater flexibility. It is certainly not the intention to bank money. Ms. Sawhney (SC) pointed out that the Lexington High School is one of the most used buildings with 2,000 students and 300-400 staff each day, plus visitors. There are 180 days of education going on in that building every year, equating to approximately 900 days of use over the five-year planning period. There may be a bit more than emergency TLC (tender loving care) for the building needed. DOCUMENTS: 20-YearCapitalPlanningLife-CycleReplacementPresentation-Part Two, June 15, 2022 ADJOURN Upon a motion duly made and seconded, by roll call, the Select Board voted 5-0 to adjourn the meeting at 8:38 p.m. The other committees followed suit. A true record; Attest: Kristan Patenaude Recording Secretary