Public Meeting Notice  November 14, 2025 Capital Debt Affordability Committee Meeting

Teleconference line: 1-305-224-1968

Meeting ID: 898 5469 4201

Passcode: 622506

The meeting was called to order at 1:03 pm

Board members comprising a quorum: 

Kaitlyn Connors, Chair, Executive Office for Administration & Finance

Martin Benison, Appointee of the Treasurer

Sue Perez, Office of the Treasurer and Receiver-General

Michelle Scott, Massachusetts Department of Transportation

Catherine Walsh, Appointee of the Governor

Others in attendance:

Representative Michael Finn, Chair of Bonding, Capital Expenditures, and State Assets Joint Committee Senator Paul Mark, Vice Chair of Bonding, Capital Expenditures, and State Assets Joint Committee

Representative Norman Orrall, Ranking Minority, Capital Expenditures, and State Assets Joint Committee

Aidan Bettencourt, Office of State Representative Michael Finn

Michael LaFlamme, Office of State Representative Michael Finn

Joshua Tavares, Office of Senator Ryan Fattman

Thomas Skehill, Office of Senator Patrick O’Connor

Gita Swamy, Office of Senator Paul Mark

Peter DeGrandis, Committee Counsel, Joint Committee on Bonding, Capital Expenditures and State Assets

Cory Bannon, Office of the Treasurer and Receiver-General

Daniel Aldridge, Office of the Treasurer and Receiver-General

Timur Kaya Yontar, Executive Office for Administration and Finance

Minutes:

Ms. Connors called the meeting to order and conducted the roll to establish quorum.  She immediately moved into the agenda and called the first item of business which was approval of the minutes from the October 24, 2025, committee meeting. Upon a motion made by Ms. Perez, and duly seconded by Ms. Scott, the minutes were approved unanimously.

Ms. Connors then moved on to the next item on the agenda, where Mr. Timur Yontar, Capital Budget Director at the Executive Office for Administration and Finance provided an overview of the model the Committee uses to project impacts of future debt under various scenarios. Mr. Yontar explained that the DAC uses an excel based model developed in-house by A&F staff, with DAC input to project debt service payments under various scenarios to inform its annual recommendation. He noted that the model was revised last year with the help of financial consultants and the Treasurer’s office. 

Mr. Yontar then summarized the main inputs in the model noting which inputs were held constant across modeling scenarios and which ones were adjusted. The constant inputs include debt service on existing debt, contract assistance payments, issuance maturity terms, debt structuring assumptions and  issuance timing.  He noted that debt service on existing debt and contract assistance payments were based on current debt service schedules associated with the state’s current outstanding debt.  He then explained that issuance maturity, structing, and issuance timing assumptions were based on typical Commonwealth maturities.

He then explained that the inputs that are adjusted across modeling scenarios include revenue growth, interest rates, premium assumptions, projected bond cap growth and the FY27 projected bond cap.

For revenue growth, Mr. Yontar noted the Committee typically uses the CAGR approach, which looks at the 10- and 20-year compound annual growth rate (CAGR) history and conservatively takes the lowest levels. Using this approach, revenue growth assumptions used in the model for the conservative and stress test scenarios would be 3.2% (20-yr low) and 1.6% (10-yr low), respectively.  The average annual year-over-year growth is 7.1%, which could be used as a moderate tax revenue scenario.

Ms. Connors noted that the CAGR approach is generally accepted as an accurate way to compare growth rates over different timelines and that Dr. Kazim Ozyurt from the Department of Revenue (DOR) confirmed that this was the right approach when he presented to the Committee at the last meeting.

Mr. Yontar moved on to the next input: interest rate assumptions.  He explained for modeling, the Committee typically relies on Moody’s forecasts for future interest rates. Moody’s projections for 20 year Aa muni is typically used as the baseline, which represents a conservative approach given actual interest rates for Commonwealth GO bond transactions typically fall between Aaa and Aa.

Mr. Yontar then reviewed key interest rate trends and highlights, noting rates are projected to increase slightly in 2026 and hold steady over the next 10 years. He also pointed out that Moody’s 2024 projections for 2025 were ~36 bps higher than 2025 actuals (e.g. for Aa: 4.41% projection vs. 4.05% actual) and that Moody’s Aa 20 yr rates 2005–2025 average was 3.70%, with a high of 4.60% (2008) and a low of 1.97% (2020).

Mr. Benison asked what rates the Commonwealth typically sees. Ms. Perez responded that it varies, and confirmed that Commonwealth rates fall between the AA and AAA curve.  However she noted that rates tend to be closer to the AAA curve. 

Ms. Perez reminded the Committee that the updated model factors in premium and when factoring in premium, interest rates are based on the coupon. Ms. Perez also pointed out that the premium input was most related to the direct debt limit which is the more constraining affordability factor.  Ms. Connors concurred and mentioned that premium had been the focus of Committee discussions last year for that reason.

Ms. Perez stated the Commonwealth typically issues bonds with a 5% coupon, but coupon is driven by demand. She has seen some issuers using 5.25% coupon for longer maturities, which would yield a higher premium. However, she noted that there is a trade-off: while a higher coupon yields higher premiums you end up with a higher interest rate, so that trade off needs to be balanced.

Mr. Yontar finished the interest rate presentation with a recap of where current muni bond rates are today although he noted these would not be relevant when factoring in premium.

The Committee discussion then shifted to modeling input assumptions where they focused on surtax revenue and whether it should be included in revenue projections. Ms. Connors asked whether the rating agencies were including it in their calculations. Ms. Perez said she could look into that.

Ms. Connors stated the question of surtax inclusion should be discussed, but stated that surtax, while restricted in its uses, does afford the Commonwealth some fiscal nimbleness and flexibility that should be considered.

Ms. Connors then asked if the Committee was comfortable using the other assumptions for the “constant inputs” that were used last year. Ms. Perez agreed that the assumptions still made sense, although premiums have been less this year than in prior years and recommended using 10% as the optimistic version rather than 11%.

Ms. Scott asked about construction escalation and how the related bond cap adjustment in FY25 was incorporated. Ms. Perez responded that it was included in FY25 and that future bond cap increases were layered on top of that base, but that no construction escalation adjustments are factored in.

Mr. Bennison stated that the Committee’s responsibility was to recommend the amount of debt that could be prudently afforded and expressed concern over straying too far from that charge.

There were no more questions from Committee members.

On a motion made by Mr. Benison and duly seconded by Ms. Perez, the meeting was adjourned at approximately 1:50 pm.  

1. Administrative Matters
   • Introductions
   • Adoption of meeting minutes from November 7, 2025 (Vote)
2. Debt Affordability Model Review and Preliminary Analysis Discussion
3. Adjournment