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| Fiscal Affairs Division |
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One of the Cellucci/Swift Administration's most important objectives is ensuring the fiscal stability of the Commonwealth through the aggressive management of capital spending.
The Commonwealth's five-year capital spending plan, first implemented in 1991, continues to be an effective tool for capital planning and budgeting. This plan sets forth the total amount of bond-funded capital spending that the Commonwealth can undertake each year for five years as determined by existing legislative authorization and the corresponding projected level of future debt service. The annual spending total or "cap" is divided amongst oversight agencies and designated departments based on spending plans identifying specific priorities as submitted to and approved by the Secretary of Administration and Finance and implemented by the Fiscal Affairs Division. The five-year capital spending plan has enabled the Administration to establish long-range priorities with increased accuracy and efficiency to ensure that capital spending does not exceed the Commonwealth's capacity to incur debt, and to identify areas for creative and alternative financing.
Although approximately $12.3 billion in bond-funded capital spending is authorized but unissued under current law, the five-year capital plan limits annual spending of general and special obligation bond funds to $1 billion per year in fiscal years 1999 through 2003. Limiting capital spending to an average of $1 billion per year over five years restrains growth in the Commonwealth's outstanding debt to an average of 2.7% annually. This aggressive long-range fiscal strategy provided the Commonwealth with the opportunity in Fiscal Year 1998 to retire its existing recovery bonds and reduce its level of annual debt service expenditures; thereby further decreasing the annual rate of growth in outstanding debt from 20% annually from Fiscal Years 1987 - 1991 to 4% between Fiscal Years 1991 - 1998. In addition, this process has enhanced the Commonwealth's ability to develop alternatives to traditional General Obligation bond-funded debt and employ more flexible responses to address outstanding capital concerns including the appropriation of one-time supplemental operating budget funds. The successful implementation of this capital planning and budgeting process is evidenced by the numerous bond-rating upgrades that the Commonwealth has received from the investment community since 1991.
The Cellucci/Swift Administration will support and work cooperatively with the Legislature to fund certain non-recurring capital expenses from the operating budget. Chapter 88 of the Acts of 1997 created the Capital Investment Trust Fund, a mechanism designed to relieve the future debt burden of taxpayers by using a percentage of surplus operating revenues to fund capital investments, instead of long-term borrowing. In Fiscal Years 1998 and 1999, approximately $230 million will be expended from the Capital Investment Trust Fund, supplementing the $2.1 billion in bond-funded spending for the same period. In 1998, a similar bill, Chapter 289 of the Acts of 1998, provided an additional $189.2 million from the operating budget to fund certain other non-recurring capital expenses in Fiscal Years 1999 and 2000. These funds will supplement the $2 billion in bond-funded spending projected for this same period.
The fiscal impact of new capital projects is carefully considered when the Administration determines which new projects to initiate. The Administration is committed to long-term investments that will improve and sustain the Commonwealth's infrastructure well into the next century. The primary areas of bond-funded capital spending are: transportation, infrastructure, the environment, information technology, housing, economic development, public safety, and water treatment. In 1998, the Commonwealth also began using debt financing to fund significant investments to expand available convention center space.
Transportation
The Commonwealth continues to maintain an aggressive capital spending program for transportation-related projects throughout the state. These projects include: construction and reconstruction of state highways and bridges; local aid funds for capital improvements to local roads and bridges; direct aid for MBTA capital improvement program repayments; improvements to municipal airports; aid to regional transit authorities; and the maintenance and construction of railways and bike paths.
Projects currently underway include: reconstruction of Granby Road in Chicopee; reconstruction of a section of Route 20 in Charlton; relocation and widening of Route 146 in the Worcester/Millbury area; reconstruction of a section of Route 9 in Williamsburg; and reconstruction of Merrill Road in Pittsfield.
The largest, most notable state transportation project is the Central Artery/Tunnel (CA/T) project which is scheduled to be completed in 2004 and will improve the mobility of the estimated 190,000 vehicles which use the Central Artery every day. The Project is forecasted to cost approximately $10.8 billion, of which about 67% will be paid by the Federal Government and 33% by the Commonwealth and its transportation authorities.
The Executive Office of Transportation and Construction's five-year capital plan reflects an increase in capital spending from Fiscal Year 1999 through Fiscal Year 2002. CA/T construction costs will peak over this period which represents the project's most challenging and costly phase of construction. Additional funding will be required during this period to provide sufficient cash to meet project costs. The Commonwealth anticipates the additional funding to be available in the form of interim financing vehicles known as Bond Anticipation Notes (BANs) and Grant Anticipation Notes (GANs). BANs and GANs are forms of "bridge financing" which enable the state to borrow funds against the future receipt of payments in amounts sufficient to repay the borrowing. BANs will be issued to fund project costs and will be repaid as the cash contributions from the Turnpike and Port Authorities are received. GANs are issued to fund federally eligible project costs and will be repaid as future federal grants are received from the Federal Highway Administration. The use of BANs and GANs will enable the project to proceed on schedule without costly delays. The Fiscal Year 2000 interest costs associated with existing and projected GANs borrowings are included in the Commonwealth's short-term debt service line item.
Infrastructure
The Division of Capital Asset Management and Maintenance (DCAMM) is responsible for the construction and the scheduled maintenance and repair needs of virtually all buildings owned by the Commonwealth. As the department responsible for vertical construction and infrastructure, DCAMM oversees important Administration capital initiatives relating to health and human services, public safety, higher education, the judiciary, environmental agencies, and state office buildings. Each of these initiatives and various other repair and construction projects under DCAMM's purview are reflected in the Commonwealth's current five-year capital plan. These include ongoing projects with existing funding authorizations, as well as planned projects that are already authorized as part of recently enacted bond bills, and projects authorized in legislation filed by the Administration, but not yet enacted.
The current DCAMM five-year capital spending plan reflects essential spending to enhance and maintain the Commonwealth's infrastructure including the acquisition, construction, renovation, and repair of courthouses; major repairs and renovations at Health and Human Services facilities; upgrades to campuses of the University of Massachusetts, and state and community colleges; expansions, repairs, and renovation to prisons, jails, and houses of correction; repairs at state office buildings; and the maintenance of environmental facilities.
Environment
The Executive Office of Environmental Affairs manages a combination of programs to preserve and protect the environmental assets of the Commonwealth. The five-year capital plan for environmental agencies includes land acquisitions, authorized primarily as part of the 1996 Open Space Bond Bill and the 1996 Rivers Protection Act; financing for projects to revitalize the Commonwealth's seaports; and financing to maintain state parks, dams, and watershed land.
Information Technology
The Information Technology Division (ITD) is responsible for information technology standards and shared mainframe, telecommunications, and applications development services for Commonwealth agencies. ITD coordinates and manages enhancements and additions to the Commonwealth's growing information technology infrastructure.
Among the current priorities in the area of information technology is implementation of the $314 million 1996 Information Technology Bond Bill which includes capital authorizations for investments in public safety technology, improved information systems at a wide variety of state agencies, and education technology initiatives. ITD is also working with the Commonwealth's Trial Courts to implement a $75 million bond authorization for the purpose of creating a comprehensive information system for the Commonwealth's Trial Courts.
Housing
The Department of Housing and Community Development (DHCD) coordinates capital spending for the construction, modernization, and repair of affordable housing through payments to local housing authorities. The Commonwealth's affordable housing stock benefits the elderly, low-income individuals and families, and individuals who are disabled or have specialized residential needs. DHCD also administers the Community Development Action Grant program to provide grants to cities and towns for infrastructure improvements, the Abandoned Building Demolition program, the Housing Innovations Fund, and the Housing Stabilization Fund.
Economic Development
The Executive Office for Administration and Finance coordinates an array of capital projects which are implemented and managed through a combination of state agencies and executive offices. These projects represent a significant potential for job creation and retention, and contribute to the economic stability of a community or region. Funding for these projects frequently involves a combination of federal, state, municipal, quasi-public, or private investment. Economic development projects currently included in the five-year capital spending plan include: construction of a new, expanded Basketball Hall of Fame in Springfield; an ongoing grant program to construct, renovate, and expand public libraries; matching grants for the construction of parking facilities to revitalize downtown business districts; and funding for the preservation of historic properties in cities and towns.
Public Safety
The Executive Office of Public Safety manages capital spending in support of the Commonwealth's law enforcement, fire fighting, and emergency response systems. Among the public safety capital investments included in the five-year plan are the purchase of bullet proof vests for law enforcement personnel and an improved telecommunications system for the State Police.
Water Treatment
The Massachusetts Water Pollution Abatement Trust (MWPAT) currently manages the state and federally funded state revolving fund (SRF) program for clean water, a revolving loan fund that helps finance wastewater treatment projects in cities, towns, and other public entities. The capital spending plan includes continued capitalization of the loan fund. Pursuant to legislation approved by the Governor this past April, MWPAT assists in the financing of projects to maintain safe drinking water in the Commonwealth.
Convention Centers
The enactment in 1997 of "An Act Relative to the Construction and Financing of Convention and Exhibition Centers in the Commonwealth" authorized the Commonwealth to spend up to $609 million for the design and construction of a new, state-of-the-art convention and exhibition facility in South Boston. The law also authorized $49.5 million in spending for expansion, renovation, and construction on the site of the Springfield Civic Center, and $19 million to reimburse the City of Worcester for construction of a new convention center. Revenue bonds to permanently finance the Boston, Springfield, and Worcester convention centers will be payable from a 2.75% additional hotel tax in Boston, Cambridge, Springfield, and Worcester; sales tax receipts from businesses near the new Boston facility that first opened on or after July 1, 1997; a surcharge on car rentals in Boston; a parking surcharge at all three facilities; the entire hotel tax collected at hotels near the new Boston facility; and all sales tax and hotel tax receipts at new hotels in Boston and Cambridge first opened on or after July 1, 1997.
In 1998, several major milestones with respect to the new Boston Convention Center were achieved: in October, a construction manager was selected to represent the Massachusetts Convention Center Authority (MCCA); in November, the Secretary of Administration and Finance and the Collector-Treasurer of Boston approved the marketability study submitted to them by the MCCA and the Boston Redevelopment Authority (BRA), as provided by statute; and in December, the Secretary of Environmental Affairs approved the Environmental Impact Report. As a result of these and other actions by the MCCA and the BRA, the project is on schedule for completion in 2003.
A $25 million portion of the General Obligation bonds authorized in the convention center legislation will be used to assist the city of Springfield in developing a new Basketball Hall of fame in conjunction with the NBA and the NCAA. The Executive Office for Administration and Finance has a completed study identifying other potential civic, convention, and exhibition halls which could be financed with the remaining $60 million of the general obligation bonds authorized in the convention center legislation, subject to financial participation by the regional cities and towns benefiting from the facilities, as well as the sectors of the regional private economy which will benefit from the facilities.
Conclusion
Continued investment in the Commonwealth's infrastructure and facilities is critical for Massachusetts to maintain its economic viability into the next century. This need for constant investment must be carefully balanced with fiscal responsibility and the Cellucci/Swift Administration's strong desire to limit future increases in the Commonwealth's outstanding debt.
