Governor Deval Patrick's Budget Recommendation - House 1 Fiscal Year 2014

Capital Investment Plan


The Commonwealth’s five-year capital investment plan is updated annually after the operating budget has been released.  Under Governor Patrick’s leadership, the Executive Office for Administration and Finance now develops a five-year Capital Investment Plan in conjunction with an annual debt affordability analysis to help ensure Massachusetts continues to borrow responsibly. 

The current FY 2013-2017 plan implements the vision and priorities established in each of the Patrick-Murray Administration’s first five plans.  In large part, the investments included in FY 2013-2017 plan continue projects launched in prior years or commence projects anticipated by the prior five-year plans.  Over 80 percent of the bond-funded FY13 capital investment plan is needed to fund previously-made commitments, including ongoing construction contracts, investments needed to leverage federal funds, legal commitments and personnel needed to carry out capital programs. 

As with the prior capital plans, the Administration engaged in a diligent, fiscally responsible, and comprehensive process for developing this five-year capital investment proposal.  One common challenge each year is that demand for capital improvements far exceeds affordable funding capacity.  The inevitable consequence is that many worthy projects will not receive funding.

In order to establish the total amount of the bond-funded capital program within an affordable level, the Administration conducts a rigorous review of the Commonwealth’s debt capacity within its debt affordability policy.  The debt affordability analysis underlying the FY 2013-2017 capital investment plan can be found at http://www.mass.gov/bb/cap/fy2013/exec/hdebtaffordability.htm.  In part due to the Patrick-Murray Administration’s diligence in following the debt affordability analysis, the state presently has ratings of Aa1 from Moody’s and AA+ from Fitch and Standard & Poor’s.  Taken together, these ratings give Massachusetts its highest credit standing in history. 

Highlights of the FY 2013 Capital Investment Plan

The Patrick-Murray Administration’s capital investment plan is designed to reverse decades of underinvestment, create jobs and set the stage for a better economic future. This is accomplished by investing in public higher education, supporting innovation industries and strengthening infrastructure. 

The FY 2013 Capital Investment Plan continues the Administration’s efforts to create an affordable, accessible public higher education system, by committing $1.16 billion in programmed projects and over $100 million reserved for future projects or deferred maintenance over five years. In FY 2013, the Administration strengthened its commitment to community colleges by announcing five new community college projects which will provide students with strong educational foundations and relevant workforce training opportunities that will prepare them for success in the local job market and/or further academic study.  Additionally, projects are currently underway or completed at 26 of the 29 public university campuses, including laboratory facilities at the University of Massachusetts (UMass) Boston, UMass Lowell, UMass Amherst, Bridgewater State, Fitchburg State, Framingham State and Mass College of Liberal Arts; libraries at UMass Dartmouth, Salem State and Mass Maritime Academy; and classrooms at UMass Amherst and UMass Boston. 

The Patrick-Murray Administration’s commitment to innovation industries continues with $500 million of capital investment over ten years to support the life sciences.  This investment includes the completion of the Sherman Center at the University of Massachusetts Medical School in Worcester, University of Massachusetts Dartmouth’s Biomanufacturing facility, and the Dana-Farber Cancer Institute.

Through capital investment the Patrick-Murray Administration has strengthened infrastructure by repairing or replacing aging state facilities, roads and bridges and providing broadband communication to the 123 cities and towns in Massachusetts that previously did not have high-speed internet. 

The Accelerated Bridge Program has reduced the number structurally-deficient bridges by almost 20%, and created 17,000 jobs throughout the state. In the FY 2013-2017 Capital Investment Plan, the Administration applies the same approach to energy efficiency at state facilities.  The new Accelerated Energy Program is a three-year initiative to “green” 700 sites in 700 working days encompassing over 4,000 state buildings throughout the Commonwealth. This program will create thousands of clean energy job opportunities across the Commonwealth and save over $40 million annually through the conservation of energy and water.

Please note that the FY 2013-2017 Capital Investment Plan was published in October of 2012 and has not been updated to reflect the Administration’s proposal to increase the transportation capital investment by $13 B over the next ten years to create a state-of-the-art transportation network that is able to provide fast and reliable service while attracting and supporting sustainable economic growth in the future. The program budget includes FY 2014 capital spending as projected by the FY 2013-2017 Capital Investment Plan, and similarly does not include the proposed transportation investment.

The FY 2013-2017 plan continues strategic investments in the future by creating thousands of new jobs and improving the environment for economic growth.  Examples of projects included in the FY 2013-2017 plan:

  • $5.4 million in FY 2013 for the Springfield Union Station Parking Garage which will be constructed in conjunction with the proposed development of the Union Station Regional Intermodal Transportation Center, a $45 million project with multiple funding sources; and
  • $227 million in FY 2013 for statewide road and bridge projects, including a state match to $415 million in federal funds; and
  • Funding for the relocation of inmates at the Middlesex Sheriff facility located in the Edward J. Sullivan Courthouse in Cambridge, which will allow for the closure and redevelopment of this property; and
  • Funding awards for MassWorks public infrastructure projects which currently includes:
    • Construction of the new MBTA station at Assembly Square;
    • Reconstruction of Acushnet Avenue in New Bedford; and
    • Roadway infrastructure to support the redevelopment of the Ludlow Mills,
    • Roadway and utility improvements to strengthen security for the entry way of the US Army Natick Soldier SystemsCenter (NSSC), and many others.
  • I-Cubed projects at Assembly Square in Somerville and Fan Pier in Boston which are expected to leverage $1 billion in private investment and create over 1,000 construction and 2,000 permanent jobs; and
  • $29 million in FY 2013 for the development of the New Bedford Marine Commerce Terminal, a unique seaport facility which will provide a staging ground for the development of offshore wind and spur hundreds of jobs on the South Coast of the Commonwealth; and
  • $51 million for the Green Line extension project in FY 2013;
  • A $3 million increase in FY 2013 in the Commonwealth’s investment in Public Housing Energy and Water Savings Initiatives which will produce energy, water and/or maintenance cost savings that allow Local Housing Authorities to reduce operating subsidy or reallocate operating dollars to needed preventive maintenance; and
  • $14.6 million in FY 2013 for IT projects to implement health care cost containment and child welfare information initiatives including converting to the federally mandated ICD-10 diagnostic coding system, implementing a new eligibility determination system, completing the federally mandated analysis for the Medicaid Information Architecture and replacing the existing FamilyNet child welfare system

The full five-year Capital Investment Plan can be found at www.mass.gov/capital.  The charts below show the plan’s investments by major investment categories for each of the five fiscal years covered by the plan funded only from state bond proceeds or “bond cap” and funded from all anticipated sources of capital funding.  Note that FY 13 includes $93 million in unused capacity from the prior fiscal year. The Administration has conservatively constrained the bond cap in FY 16 and FY 17 at the FY 15 level. Future debt affordability analysis may show sufficient revenue growth to allow increased bond cap in future plans.

FY 2013-2017 Capital Investment Plan Total Bond Cap (in $thousands)
  FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 5-Year Total % of 5-Year Total
Community Investments 291,743 285,456 277,117 273,286 273,212 1,400,813 14%
Corrections 37,384 55,350 56,500 63,500 76,500 289,234 3%
Courts 20,170 75,874 127,674 147,674 114,168 485,558 5%
Economic Development 138,240 128,920 138,500 150,000 148,000 703,659 7%
Energy and Environment 167,141 159,329 114,179 86,346 87,346 614,340 6%
Health and Human Services 27,582 37,615 69,575 75,400 102,000 312,172 3%
Higher Education 177,420 259,928 293,172 287,700 281,900 1,300,211 13%
Housing 179,500 169,500 169,500 169,500 169,500 857,500 8%
Information Technology 174,380 101,973 118,822 120,897 119,614 635,685 6%
Public Safety 28,083 37,530 66,780 66,930 51,180 250,503 2%
State Office Buildings 73,553 64,103 72,835 58,951 68,056 337,497 3%
Transportation 652,959 624,423 620,348 624,817 633,525 3,156,072 34%
Total Bond Cap 1,968,155 2,000,000 2,125,000 2,125,000 2,125,000 10,343,155  



FY 2013-2017 Capital Investment Plan All Sources of Funding (in $thousands)
  FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 5-Year Total % of 5-Year Total
Community Investments 322,719 314,847 304,517 300,286 300,612 1,542,980 9%
Corrections 37,384 55,350 56,500 63,500 76,500 289,234 2%
Courts 20,170 75,874 132,674 162,674 119,168 510,558 3%
Economic Development 188,153 153,920 163,500 175,000 173,000 853,573 5%
Energy and Environment 266,791 287,279 221,296 143,296 132,546 1,051,040 6%
Health and Human Services 30,982 40,000 88,600 103,600 106,000 369,182 2%
Higher Education 247,720 326,071 309,872 290,700 285,400 1,459,763 9%
Housing 179,500 169,500 169,500 169,500 169,500 857,500 5%
Information Technology 236,744 210,945 177,923 177,040 139,811 942,462 6%
Public Safety 39,923 51,730 72,577 66,930 51,180 282,340 2%
State Office Buildings 73,553 64,103 72,835 58,951 68,056 337,497 2%
Transportation 1,630,874 1,776,138 1,686,300 1,647,732 1,430,563 8,171,607 49%
Total All Sources 3,274,513 3,525,755 3,445,925 3,359,209 3,052,335 16,667,737  

Many of the projects funded in FY 2013 are multi-year projects with costs that will be incurred in subsequent fiscal years; these projected future costs have been taken into account in making investment category reservations for future years.  Projects will evolve and change, and the Executive Office for Administration and Finance (ANF) intends to adjust the capital plan during the fiscal year as circumstances dictate.  ANF will also undertake a formal reassessment of capital investment needs to develop an annual update to the five-year capital plan.  The Administration plans to update and publish a new five-year capital investment plan with specific projects identified in FY 2014 after the new fiscal year.

Affordability and Fiscal Responsibility

The Commonwealth’s capital budget is separate and distinct from the annual operating budget.  The capital budget is funded mainly by borrowing through the issuance of bonds.  Other sources of funding for the capital budget include federal funds, primarily to reimburse transportation infrastructure improvements and other sources of funding available to finance certain capital investment projects. 

Because the capital program is funded primarily through bond proceeds, the total size of the capital program is determined primarily by the amount of debt the Commonwealth can afford to issue.  Annually, ANF has established what is known as the “bond cap” as an administrative guideline for annual bond issuance in support of the capital program.  For the sixth consecutive year, the Patrick-Murray Administration engaged in a rigorous analysis of the state’s outstanding debt to determine the affordable level of bond issuance.  A complete description of the Administration’s debt affordability analysis and policy can be found at http://www.mass.gov/bb/cap/fy2013/exec/hdebtaffordability.htm .

For purposes of its analysis of existing payment obligations, ANF takes into account both debt service on general obligation bonds and debt service on certain special obligations, contract assistance obligations and certain capital lease payments.  Although the Accelerated Bridge Program is being carried out in addition to the regular capital program in order to achieve savings from avoided cost inflation and deferred maintenance and to achieve the other objectives of the program, the debt service resulting from the program is also taken into account within the 8% limit under the debt affordability analysis. 

The Administration takes a conservative approach to projecting future budgeted revenues, basing its growth estimate on the lesser of 3% or the actual compound annual growth rate of the Commonwealth’s revenues over the last 10 years, which included both economic booms and downturns. ANF models future debt issuance using fiscally conservative assumptions about interest rates, maturities, dates of issuance and market conditions.

The Patrick-Murray Administration intends to limit the total amount of virtually all future bond-funded capital projects to the bond cap.  However, there are certain, limited circumstances in which the Administration plans to undertake borrowing outside the bond cap when there is a sound policy justification for doing so.  For example, if there are certain projects for which a dedicated stream of new, project-related revenues can be identified to support debt service costs related to those projects. 

The debt affordability analysis methodology is based on the Commonwealth’s current available financing resources and mechanisms.  Changes in financing structures and resources in the future may impact how the Administration examines the administrative bond cap and the state’s capacity for additional borrowing.  The Administration revisits the debt capacity and affordability analysis every year, revising its estimates for future years by taking into account fluctuations in interest rates, budgeted revenues and other changes impacting the Commonwealth’s debt capacity.  In addition, the Administration will annually assess the appropriateness of the methodology and constraints for establishing the bond cap described above.  The complete Debt Affordability Analysis can be found online at http://www.mass.gov/bb/cap/fy2013/exec/hdebtaffordability.htm

Impact of Capital Budget on the Operating Budget

Each year, as part of the annual development of the capital investment plan, the Executive Office for Administration and Finance evaluates the operating budget impacts for all requested projects.  This year the Administration has taken steps to better evaluate the impact of capital investments on the operating budget. Starting in FY 13, before investing in new IT projects, a private IT investment consultant will forecast the project’s return on investment and long term operating impact.

Every state government capital spending request must show the incremental on-going annual operating costs/savings that are expected to be incurred upon completion of the project.  Decisions on whether to fund the capital projects depend on A&F’s assessment of not only the programmatic need for the project, but also the affordability of the related operating costs. The following capital budget construction projects are expected to result in an FY13 operating budget impact that exceeds $500,000 per year:

  • Hampden Sheriff's Department - Western MA Women's Correctional Facility
  • New Middlesex Courthouse Project
  • Greenfield Trial Court Project
  • Worcester Recovery Center and Hospital
  • Worcester State University - Wellness Center
  • Framingham State University Hemenway Hall Science Center Modernization
  • Bridgewater State University - Conant Building Modernization
  • UMass Lowell - South Campus Academic Facilities
  • Fitchburg State University - Science Facility Modernization
  • UMass Amherst - New Academic Classroom Building
  • UMass Amherst - New Laboratory Science Building
  • UMass Boston - New Integrated Science Building

In addition, for construction projects that are starting study in FY 2013, those studies will project the operating cost impact and will be reported to A&F over the year.  When agencies are preparing their annual budget requests during A&F’s spending plan process they are asked that the additional operational costs associated with capital projects are reflected in their projected funding requirements.


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