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Capital Outlay

The Cellucci-Swift Administration remains committed to the fiscally responsible management of the Commonwealth's capital spending needs. This discipline is manifest in the five-year capital spending plan process coordinated through the Executive Office for Administration and Finance (EOAF) and the Administration's adherence to an overall bond-supported spending cap. The strong economy of recent years coupled with fiscal restraint in spending surplus operating revenues have helped generate funding for one-time capital improvements, thus alleviating pressure on the capital budget. It has also allowed the Commonwealth to quickly address a significant shortfall in the Central Artery/Ted Williams Tunnel (CA/T) project finance plan while at the same time reduce some of the Commonwealth's high-cost debt. The Administration will seek other debt defeasance opportunities in the future to ease the Commonwealth's debt burden, as well as innovative debt financing measures, such as the design-build-finance Route 3 North project, the Foxborough stadium project, and the renovation of the Saltonstall state office building through a public-private partnership.

Capital Plans and Cap

The five-year capital spending plan process was implemented in Fiscal Year 1992 in response to outstanding debt burdens that, from Fiscal Years 1987 to 1991, had increased an average of 20% each year. The plan sets forth the total amount of bond-funded capital spending that the Commonwealth can undertake in each of five successive years as determined by existing legislative authorization and projected debt-service requirements. The annual spending total is divided among oversight agencies and designated departments based on spending plans approved by the Secretary of Administration and Finance and monitored by the Fiscal Affairs Division. Spending under the plan is divided among seven program areas: transportation, infrastructure, the environment, information technology, housing, economic development and water treatment, and public safety. Although approximately $11.2 billion in bond-funded capital spending is authorized but unissued under current law, the capital plan limits spending of general and special obligation bond funds to $1 billion per year in Fiscal Years 2001 through 2005. Capping capital spending to an average of $1 billion per year over five years has constrained growth in the Commonwealth's outstanding debt to an average of 2.6% annually.

Strategic Review of Capital Financing

Beginning in Fiscal Year 2003, the level of capital spending for the CA/T project will diminish as this project nears completion. For purposes of projecting and planning capital spending over the next several years, this decrease in capital spending for the Central Artery/Tunnel project generates an increase in the level of unassigned cap available for other capital projects. So that the Commonwealth may be best positioned to maximize the effectiveness of its capital investments over the next several years, EOAF will undertake a comprehensive strategic review of the Commonwealth's capital planning practices. This review will examine how capital spending priorities are established and financed, as well as whether or not there are additional or alternative planning tools that might be useful for determining the prioritization of capital investments and the resulting cap allocation process. This review will also investigate whether the $1 billion capital spending cap is set at the appropriate level given such factors as historical patterns of capital spending and finance; the growth in the depth and breadth of the Massachusetts economy over the past decade; the need to invest in the infrastructure to assure a base for continued future growth; and preservation of the long-term viability of existing assets. EOAF will also review the Commonwealth's overall debt burden as it compares to a relevant peer group of states and whether or not there are alternative methodologies for establishing and defining the cap for its continued use as an effective tool for fiscal constraint.

In addition, the federal government recently approved a 50% increase in the private activity volume cap that will expand the bonding capacity for three large Commonwealth quasi-public authorities authorized to issue tax-exempt bonds: the Massachusetts Educational Financing Authority, which supports student loans at Massachusetts colleges; the Massachusetts Housing Finance Authority, which supports multi-family housing and first-time buyer programs; and the Massachusetts Development Finance Agency, which supports a variety of economic development projects. EOAF's review will also explore the impact of this increase in private activity cap on the Commonwealth's overall capital spending strategy, including how it may be most effectively allocated.

Summary of Five-Year Capital Spending Plan and Plan of Finance

(in millions)

USES:

2001

2002

2003

2004

2005

Total

Category

Information Technology

$ 53

$ 49

$ 49

$ 49

$ 49

$ 249

Infrastructure

185

201.5

201.5

202

202

992

Environment

104

104

104

104

105

521

Housing

74.5

72

72

71

71

360.5

Transportation

  Central Artery/Tunnel Project

1,744

1,371

940

658

240

4,953

  All Other

718

662

631

487

813

3,311

Transportation Subtotal

2,462

2,033

1,571

1,145

1,053

8,264

Public Safety

19

9

9

9

9

55

Economic Development (1)

295

275

182

61

44

857

Reserve (2)

4

4

95

135

135

373

Total Uses

$ 3,197

$ 2,747

$ 2,284

$ 1,776

$ 1,668

$ 11,672

SOURCES:

Category

Commonwealth Long-Term Debt

$ 1,000

$ 1,000

$ 1,000

$ 1,000

$ 1,000

$ 5,000

Commonwealth Special Obligation Debt

248

227

138

16

0

629

Third Party-Supported Expenditures

117

38

11

37

181

384

Federal Grant Anticipation Notes

386

0

0

0

0

386

Federal Aid

781

599

452

387

387

2,606

Transportation Infrastructure Fund (3)

666

883

684

336

100

2,669

Total Sources

$ 3,197

$ 2,747

$ 2,284

$ 1,776

$ 1,668

$ 11,672

______________

(1) Includes approximately $629 million for convention centers in Boston, Worcester and Springfield that are expected to be funded by special obligation bonds.
(2) Reserve for unanticipated capital spending needs within a given fiscal year, to be allocated as needed among the listed categories.
(3)Includes $100 million annually for the statewide road and bridge program.
 

Fiscal Year 2000 Surplus Revenue for Capital Projects

The final Fiscal Year 2000 supplemental appropriations bill transferred $66.8 million of surplus operating revenues to the Capital Improvement and Investment Trust Fund for one-time capital expenditures through Fiscal Year 2003. This funding included $40 million for park and other recreation-related expenditures at the Executive Office of Environmental Affairs, $12 million for grants to cities and towns for public library improvement projects, and $5 million for historic preservation grants. The final Fiscal Year 2000 supplemental appropriations act also transferred $66.6 million of surplus operating revenues to a new MBTA Infrastructure Renovation Fund to support several station improvement projects through Fiscal Year 2005 that are not included in the Authority's own capital spending plan.

Central Artery Finance Plan and Statewide Road and Bridge Investments

This past May, in the face of a potential $1.4 billion cost overrun at the CA/T project, the Administration and Legislature acted quickly to enact a finance plan to address the projected shortfall and avert a potential federal funding freeze. On May 17, 2000 the Governor signed into law Chapter 87, "An Act Providing Additional Funding for the Central Artery/Ted Williams Tunnel Project and the Statewide Road and Bridge Program," thus providing $1.52 billion in additional capital authorization for these critical transportation initiatives. The legislation creates the Central Artery and Statewide Road and Bridge Infrastructure Fund, the funding source for the projected additional costs of the CA/T project as well as an additional $100 million annually for Fiscal Years 2001 through 2005 for the Statewide Road and Bridge program. Chapter 87 also reinstates license and vehicle registration renewal fees through the Registry of Motor Vehicles (RMV), which are expected to generate $100 million annually to offset debt service costs associated with the new bond authorization as well as direct funding for the project. In addition, the legislation authorizes up to $650 million to be deposited in the Debt Defeasance Trust Fund (up to $500 million from Fiscal Year 2000 surplus operating revenues and up to $150 million from prior years' surpluses deposited in the Capital Projects Fund). The legislation directs the Comptroller to transfer debt defeasance savings, accrued by retiring high-cost debt, from the debt service appropriation to the Central Artery and Statewide Road and Bridge Infrastructure Fund.

Projected costs for the CA/T project were refined this past summer and early fall culminating in an October finance plan that showed estimated costs, including a contingency, had risen $2.408 billion from the pre-February 2000 benchmark of $11.667 billion. The current estimated total project cost is $14.075 billion, which includes $258 million in budgeted contingency. Despite the cost increases, the finance mechanisms set in place this past year will still cover these additional costs. The Massachusetts Turnpike Authority will directly contribute $238 million through the sale of real estate assets and other resources, with the remaining $2.169 billion to be provided by the Central Artery and Statewide Road and Bridge Infrastructure Fund: $1.35 billion from Commonwealth bond proceeds; $231 million of RMV fees not used for debt service; $664 million through debt defeasance; an additional $200 million from the Massachusetts Turnpike Authority; $65 million from the Massachusetts Port Authority; $159 million in Fund interest earnings; less the $500 million to be spent on the Statewide Road and Bridge Program.

Innovative Debt Financing

Route 3 North: As authorized by Chapter 53 of the Acts of 1999, this past August the Executive Office for Transportation and Construction (EOTC) entered into a design-build-finance agreement with a private developer for the much-needed reconstruction and widening of the entire 21-mile corridor of Route 3 North between Burlington and the New Hampshire border. This innovative agreement requires the developer to add a third travel lane in each direction, improve 13 interchanges, replace 30 bridges, reconstruct the Drum Hill Rotary, construct two park and ride lots, and make numerous other improvements within 42 months and at a fixed price of $385 million. Unlike other Commonwealth construction projects, for the Route 3 North project, the developer bears full risk for completion on time and on budget.

The Route 3 North Transportation Improvements Association on August 17, 2000 secured financing for this project. Bonds issued by the Association received rates comparable to bonds issued by the Commonwealth, but are not obligations of the Commonwealth. Upon completion of the project, the Commonwealth will make lease payments to the developer for a period of 30 years.

The agreement between the Commonwealth and the developer also allows for ancillary development along Route 3 North. Under the agreement, the Commonwealth will receive at least 50% of net revenues from ancillary development. The developer has guaranteed payment of at least $110,000 per year to the Commonwealth in revenues from fiber optic cable installation along the corridor. Roadside service plazas and office space could yield additional revenue to the state.

Foxboro Stadium: As authorized by Chapter 16 of the Acts of 1999, the Town of Foxborough issued bonds to finance $70 million in infrastructure improvements relating to the renovation of Foxboro Stadium. The Commonwealth has entered into a contract for financial assistance to the Town and will provide approximately $5.2 million per year for debt service. As partial reimbursement, the Commonwealth will receive approximately $1.4 million per year in parking and administrative fees.

The Saltonstall State Office Building Renovation: On July 19, 2000, in response to proposals received from various development teams to redevelop the Saltonstall State Office Building, the Administration filed legislation that would authorize the quasi-public Massachusetts Development Finance Agency (MDFA) to redevelop state office space and build housing, while supporting the project with revenues from renting private office space. The provisions of this bill were added to the Division of Capital Asset Management and Maintenance (DCAMM) bond bill (see "Infrastructure" below) approved August 10, 2000. Under the provisions relating to the Saltonstall Building, the building is to be leased to the MDFA for a lease term of up to 50 years, with extension terms permitted for an aggregate of 30 more years. MDFA will renovate the building and lease half of it back to the Commonwealth for office space for state agencies and related parking for a comparable lease term. The remainder of the building will be redeveloped as private office space, with private housing units and retail establishments built around the lower floors. In opening up this state office building to multiple uses, the Commonwealth is creating a finance mechanism for renovating the building as well as enhancing the overall work and living environment.

Convention Centers: Pursuant to Chapter 152 of the Acts of 1997, the Massachusetts Convention Center Authority (MCCA) and the Boston Redevelopment Authority (BRA) are jointly developing the Boston Convention and Exhibition Center in South Boston. The 1.7 million square-foot facility will include approximately 600,000 square feet of contiguous meeting space on one level, 200,000 square feet of additional meeting space, and a 50,000 square-foot ballroom, as well as banquet and lecture halls and indoor parking. The BRA has acquired the site, construction commenced in the spring of 2000, and completion is anticipated for the fall of 2003.

This project is being jointly financed by the City of Boston and the Commonwealth. The Convention Center Act authorizes the Commonwealth to issue up to $676.9 million of special obligation bonds for the purposes of the Boston Convention and Exhibition Center ($609.4 million), the Springfield Civic Center ($48.5 million), and the Worcester Convention Center ($19 million). Debt issued to finance the convention center projects will not be a general obligation of the Commonwealth. Debt service on the bonds is to be paid from receipts of convention center fees on hotel rooms in the cities of Boston, Cambridge, Springfield, and Worcester, car rentals in the city of Boston, parking at the convention center facilities, site-seeing tours in the city of Boston, and sales and meals taxes within a finance district near the Boston Convention and Exhibition Center.

Transportation

New capital authorization: This past August, Governor Cellucci signed into law Chapter 235 of the Acts of 2000, "An Act Providing for an Accelerated Transportation Development and Improvement Program for the Commonwealth." This legislation provides $3.014 billion of transportation-related capital authorization, with approximately $1.616 billion to be funded by Commonwealth general obligation bonds and approximately $1.397 billion to be funded by federal reimbursements. The legislation also authorizes an additional $150 million in spending for the CA/T project to be funded by federal grant anticipation notes, completing the legislative authorization for the $1.5 billion federal grant anticipation note program contemplated by the project finance plan. This legislation provides critical authorization for the Statewide Road and Bridge program and local aid road programs, including: $1.4 billion to fund the Statewide Road and Bridge program; $50 million in new authorizations for the Chapter 90 program; $30 million for the Public Works Economic Development grant program; and $35 million to continue the clean-up of hazardous materials from Massachusetts Highway Department (MassHighway) sites. This legislation also provides authorization for additional transportation initiatives, including $42 million for the Massachusetts Aeronautics Commission for improvements to local airfields, $10 million for Regional Tourist Centers, and $5 million for the Mobility Assistance Program.

Fiscal Year 2001- Fiscal Year 2005 capital plan highlights: The CA/T project's peak construction period extends through Fiscal Year 2002 in preparation for the initial openings of Interstate 90 and Interstate 93 for traffic in Fiscal Year 2003. A major milestone building up to traffic flow will be the completion of the Leonard P. Zakim/Bunker Hill Bridge by the end of April 2001. Independent of the CA/T project, the capital investment plan focuses on safety, traffic, and environmental issues, as well as economic development throughout the Commonwealth. The aim of the plan is to continue the five-year trend of leading the nation with the lowest fatality crash rate. This is partially the result of upgrading 28% of bridges with significant deterioration and identifying and addressing 56 of the top 100 hazardous locations in the last nine years.

This Administration is committed to continuing this trend by reducing the numbers of deteriorating and hazardous road and bridge locations by investing over $700 million annually to improve the statewide transportation infrastructure, of which at least $400 million will be dedicated solely to the Statewide Road and Bridge program. The result of these investments will be a safer and better-maintained interconnected bridge and road infrastructure Commonwealth-wide. MassHighway has worked to establish a capital plan to meet these needs. Some of the ongoing projects include: a twin-tower cable stayed bridge in Fitchburg; a traffic light and sidewalk reconstruction project on Route 109 in the Medway/Millis area; the widening and reconstruction of Route 9 in the Hadley/Northampton area; and the Ashuwillticook Rail-Trail bike path from Pittsfield to Cheshire. MassHighway is also working with the Massachusetts Bay Transportation Authority and the Massachusetts Port Authority to construct an intermodal transportation center in Woburn. In the design stage is a project to widen Route 128 between Wellesley and Canton. Planned improvements to the Union Station Intermodal Center in Springfield are also in the works.

Infrastructure

New capital authorization: This past August, Governor Cellucci signed into law Chapter 237 of the Acts of 2000, "An Act Relative to Compliance with Life Safety Codes, Remediation of Environmental Hazards and the Preservation and Management of the Commonwealth's Real Property Assets." This legislation provides the Division of Capital Asset Management and Maintenance (DCAMM) with $117 million in new capital authorization needed for general state facility repairs in the areas of deferred maintenance, sprinkler installation, and environmental remediation.

Fiscal Year 2001- Fiscal Year 2005 capital plan highlights:

New authorization needed: In the Spring, the Administration plans to file a limited infrastructure bond authorization for Human Services agencies, targeted needs at Higher Education campuses, critical repairs and deferred maintenance, and administrative accounts.

Environment

New capital authorization: This past August, Governor Cellucci signed into law Chapter 238 of the Acts of 2000, "An Act Providing for the Emergency Maintenance of Environmental Assets of the Commonwealth." This law provided $145.1 million in new capital authorization, including $44.2 million for facility improvements at Executive Office of Environmental Affairs (EOEA) agencies, $28 million for eminent domain payments relating to land takings, $24.8 million for open space protection, $19 million for matching capitalization grants for the state revolving fund program, $14.4 million for flood control, dam and seawall repair, $7.7 million for environmental remediation, and $6.5 million for resource protection. This law also deauthorized $106.7 million of authorized but unissued general obligation bonds.

Fiscal Year 2001- Fiscal Year 2005 capital plan highlights: The Cellucci-Swift Administration will continue its support of the array of programs that, under the aegis of EOEA, preserve and protect the environmental assets of the Commonwealth. EOEA devotes nearly half of its $104 million cap allocation to open space protection, consistent with the Administration's goal of preserving 200,000 additional acres by 2008. EOEA has preserved 57,000 acres towards this goal to date, and will reach the halfway point by the end of calendar year 2001.

EOEA's non-land spending encompasses a wide variety of activities ranging from hazardous waste cleanup to infrastructure and facility maintenance to resource preservation and protection. EOEA allocates the next largest portion of its cap towards maintaining park and recreational facilities-parks, beaches, rinks, pools, fish hatcheries-as well as infrastructure-roadways, bridges, dams, seawalls-under the jurisdiction of the Department of Environmental Management (DEM), the Metropolitan District Commission (MDC), and the Department of Fisheries, Wildlife, and Environmental Law Enforcement (DFWELE). EOEA devotes additional cap toward resource protection and pollution prevention activities, as well as to address environmental hazards on EOEA property. EOEA also contributes $4 million of its yearly cap toward the Seaport initiative, which supports an array of economic development and harbor revitalization projects as approved by the Seaport Advisory Council.

New authorization needed: Despite last summer's approval of $145.1 million in new authorization, EOEA will likely require new authorization in certain areas, such as land acquisition, in order to implement their proposed Fiscal Year 2001-05 capital spending plan.

Information Technology

Fiscal Year 2001- Fiscal Year 2005 capital plan highlights: The Information Technology Division's (ITD) five-year capital spending plan reflects a number of key initiatives necessary to maintain smooth business operations within the Commonwealth as well as a number of innovative projects intended to improve and streamline business transactions for clients of state services.

Internal Operations: In an effort to maximize state government efficiencies through technology, ITD is planning for a new, electronic state accounting system; coordinating the consolidation of state government's disparate e-mail systems into a unified, MassMail system; enhancing the capability for exchanging real-time data among the public safety agencies; overseeing a comprehensive effort to automate business functions in the Commonwealth's trial courts; and developing an intranet/internet-based system that will allow human service providers to electronically enter service delivery information.

Electronic Government Initiative: In an effort to streamline interactions between businesses, citizens, and state government, ITD will sponsor a number of electronic government projects. The goal of the initiative is to present a single face of government through a task-based, enterprise portal that will maximize the functions and information that can be accessed on-line. Government services would be available 24 hours a day and seven days a week from the location most convenient to the customer. Thus, for example, a citizen interested in purchasing a house could go to the Commonwealth's web page, click on the icon of a house, and access the full list of programs available for first-time home buyers, rather than search through a directory for the agencies that run the state's many housing programs. Motorists will be able to perform all RMV transactions on-line, as well as insure their car or appeal a parking ticket, all by clicking on the icon of a car on the Commonwealth's enterprise portal.

New authorization needed: In order for ITD to pursue critical E-Government initiatives as well as core business functions of the Commonwealth, the Administration will soon be filing an information technology capital authorization bill.

 

Housing

Fiscal Year 2001- Fiscal Year 2005 capital plan highlights: The Department of Housing and Community Development (DHCD) typically devotes approximately 55% of its capital allocation to public housing modernization efforts, primarily to support local housing authority improvements to their state-aided programs. Another 35% of DHCD's capital budget supports efforts to expand private homeownership and rental opportunities, including the Housing Innovation Fund, which promotes alternative and special needs housing, and the Housing Stabilization Fund, which supports neighborhood redevelopment efforts to preserve and rehabilitate private housing stock. The final 10% supports community development and public infrastructure, targeted to areas unlikely to attract private investment, for example, repairs to sidewalks, water and sewer lines, and demolition projects.

New authorization needed: In order to support DHCD's capital-spending program, the Administration anticipates filing legislation soon seeking new capital authorization for the Housing Innovations Fund, the Housing Stabilization Fund, housing authority renovation grants, and community development action grants.

Economic Development and Wastewater Treatment

New capital authorization: This past August, Governor Cellucci signed into law Chapter 208 of the Acts of 2000, "An Act Relative to the Construction and Financing of Infrastructure and Other Improvements in the City of Boston and around Fenway Park." The legislation authorizes $100 million of Commonwealth general obligation bonds for transportation-related infrastructure improvements near the site of a proposed new stadium. The legislation also provides that state sales tax receipts from establishments in and around the ballpark in excess of those received during Fiscal Year 2001 (but not more than $1.5 million per year) will be paid to the city of Boston.

Fiscal Year 2001- Fiscal Year 2005 capital plan highlights: Beginning with Fiscal Year 2001, the cap allocation for the Water Pollution Abatement Trust, which funds water and sewer improvement projects through the State Revolving Fund (SRF), has been consolidated with the Economic Development cap allocation. This combined $47.5 million cap is managed by the Executive Office for Administration and Finance. The Economic Development cap typically funds grants for off-street parking projects, such as those planned for Worcester at Union Station and Medical City, for Amherst, and for the regional transit authority in Lowell; library construction grants through the Board of Library Commissioners; Massachusetts Historical Commission grants through the Secretary of State; and Energy Conservation Improvement grants, administered by the Division of Energy Resources to promote energy savings in public schools. Other major economic development initiatives receiving funding include the so-called Telecom City project; the Devens Commerce Center, in partnership with the Massachusetts Development Finance Agency; construction of a new facility for the Basketball Hall of Fame in Springfield; major expansion of the Massachusetts Museum of Contemporary Art in North Adams; and major renovations to MacMillan Pier in Provincetown.

New authorization needed: The Administration will soon file legislation requesting new authorization necessary to continue the Massachusetts Historical Commission grant program.

Public Safety

New capital authorization: On August 8, 2000, the Governor signed Chapter 202, which authorizes $10 million for firefighter safety equipment for local fire departments across the Commonwealth, and $245,000 for repairs at three armories.

Fiscal Year 2001- Fiscal Year 2005 capital plan highlights: The Executive Office of Public Safety's (EOPS) five-year capital plan reflects a $55 million investment in public safety improvements, including a proposed $18 million for State Police Mobile Data Terminals (MDTs), for which new authorization will be required. The plan includes the following authorized expenditures: $10 million for the firefighter safety program, which includes $9.8 million in grants to fire departments for equipment and $200,000 for firefighter safety training provided by the Department of Fire Services; $8.7 million for three State Police helicopters; $5 million for State Police cruisers in Fiscal Year 2001; $3.1 million for maintenance and emergency repairs at state and county correctional facilities; and $1.6 million for improvements to the statewide 800 Mhz telecommunication system. In addition, EOPS plans to spend another $7.9 million in Fiscal Year 2001 outside of their capital plan cap allocation, including $5 million for bulletproof vest reimbursements, $1.5 million for the DNA Samples Database, and $1.4 million for equipment for the Hazardous Materials Response program. This funding comes from surplus operating funds in Fiscal Years 1999 and 2000 that were deposited into the Capital Improvement and Investment Trust Fund.

New authorization needed: EOPS requires new authorization in order to purchase and install MDTs in all State Police cruisers, as reflected on their capital spending plan. MDTs will provide both safety and productivity enhancements: the ability for officers to run driver and criminal records checks without a dispatcher, thereby increasing response times; the ability for officers to enter citations and accident reports into the centralized database remotely; and better information sharing between the State Police and other criminal justice and public safety agencies, including the Registry of Motor Vehicles, the Merit Rating Board, the Trial Courts, the District Attorneys, and the Attorney General. EOPS also requires new authorization for equipment, facility maintenance and repairs, building construction, and information technology at many of its agencies. The Administration will soon file legislation requesting this new authorization.

 
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Commonwealth of Massachusetts

Executive Office for Administration and Finance
Fiscal Affairs Division
State House, Room 272
Boston, MA 02133
(617) 727-2081


Last updated on January 17, 2001

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