SECTION VII

Capital planning and budgeting is a critical undertaking for any government and is "central to economic development, transportation, communication, delivery of other essential services, and environmental management and quality of life", as stated in ICMA’s Capital Budgeting: A Guide for Local Governments. In fact, without a sound plan for long-term investment in infrastructure, facilities, and equipment, a local government's ability to accomplish its goals is greatly hindered. Developing a financing plan for capital investments that fits within the overall financial framework of a community is of equal importance, as poor decisions regarding the use of debt can negatively impact a community's financial condition for many years.

In Massachusetts, the preparation of the annual Capital Improvements Program (CIP) is mandated by State statute. Massachusetts General Law Chapter 41 provides that the Planning Board shall annually prepare and submit a CIP. In Brookline’s case, Chapter 270 of the Acts of 1985, special legislation known as the "Town Administrator Act", directs the Town Administrator to prepare and recommend an annual financial plan that includes a CIP. The Deputy Town Administrator and the Director of Planning and Community Development co-chair a working group of department heads that reviews and evaluates all project requests. A number of these requests arise from public input received by boards and commissions. A more detailed description of the CIP process can be found below.

The Town has a set of formal CIP policies that define what a capital improvement project is, how projects are evaluated and prioritized, and how the CIP is financed. The complete text of these policies can be found in the Appendix of this Financial Plan. The table on the following page presents the indicators that are to be monitored per the Debt Management Policies portion of the CIP Financing Polices, along with other standard debt measurement variables.

INTRODUCTION

The financial underpinning of the Town's CIP is the policy that states an amount equivalent to 6% of the prior year's net revenue shall be dedicated to the CIP. This key policy places both a floor and a ceiling on the amount of debt supported by the tax levy that can be authorized, thereby limiting the impact on the Operating Budget. The goal is to have the 6% consist of both a debt-financed component and a revenue (or “pay-as-you-go”) component, with 4.5% for debt-financed CIP and 1.5% for pay-as-you-go CIP.

In addition to the 6% policy, there is a Free Cash Policy, also included in the Appendix of this Financial Plan, that dedicates an amount of this revenue source to the CIP so that total CIP funding reaches 7.5% of prior year net revenue. In summary, the policy prioritizes the use of Free Cash so that (1) an annual Operating Budget Reserve is supported, (2) overall Fund Balance levels are maintained, (3) the Catastrophe and Liability Fund is maintained at recommended funding levels, and (4) the CIP reaches the 7.5% level*. This important funding source allows for the expansion of the pay-as-you-go component of the CIP. Without Free Cash, the Town would be unable to fund many of the projects being recommended. Lastly, from time to time, one-time revenues will be used to augment the CIP, such as the re-appropriation of surpluses from prior year CIP appropriations.

* The Free Cash policy also calls for a.) supporting the Affordable Housing Trust Fund under certain circumstances and b.) supporting other trust funds related to fringe benefits and unfunded liabilities related to employee benefits, if available.

The preparation of the annual CIP is mandated by statute: MGL Chapter 41 provides that the Planning Board shall prepare and submit a CIP. In Brookline’s case, Chapter 270 of the Acts of 1985, special legislation known as the “Town Administrator Act”, directs the Town Administrator to prepare and recommend an annual financial plan that includes a CIP. The annual process for Brookline begins with the submission of project requests by departments, which in many cases are the result of various board/commission (Park and Recreation Commission, Library Trustees, etc.) public hearings.

The requests are then reviewed by a working group that is co-chaired by the Deputy Town Administrator and the Director of the Department of Planning and Community Development and is comprised of all department heads that have requested projects. After reviewing all project requests, a Preliminary CIP is recommended to the Town Administrator, who then presents it to the Select Board as part of a public hearing on the Town's Operating and Capital budgets, normally held in December. The Town Administrator's Preliminary CIP is then reviewed by the Capital Sub-Committee of the Advisory Committee. Any changes to the first year of the CIP are factored into the budget that is presented to Town Meeting by the Advisory Committee.

PROPOSED FY2024 – FY2029 CIP

The recommended FY2024 – FY2029 CIP calls for an investment of $367 million, for an average of approximately $61 million per year, and follows the Town’s CIP and Free Cash policies for projects inside the levy limit. This continues the Town's commitment to prevent the decline of its infrastructure, upgrade its facilities, improve its physical appearance, and invest in opportunities that positively impact the Operating Budget. Over the last 10 years (FY14 - FY23), the Town has authorized expenditures of $739 million, for an average of $74 million per year. These efforts, which have been supported by the Select Board, the Advisory Committee, Town Meeting, and, ultimately, the taxpayers of Brookline, have helped address a backlog of capital projects. This has allowed for the creation of additional classroom spaces necessitated by the surge in enrollment, dramatically improved the Town's physical assets, and have helped yield savings in the Operating Budget through investments in technology and energy efficiency.

The Town was fortunate to have a strong Free Cash certification that can be used to support the CIP this year. After discussions with the Select Board at their budget retreat this year investments in the CIP focused on current infrastructure and deferred maintenance obligations. The Town is able to add $2M in funding for roadway maintenance above the original base level of roadway funding in FY24. Critical requests for Traffic Calming and Bike Access Improvements we also able to be met in FY24. An additional $1M is also provided for School Repair and Maintenance. The Override Plan calls for additional investments to allow for continued support in the out-years of the plan.

This CIP reflects the continuation of the Town’s plan to deal with classroom challenges by continuing to fund the lease agreements under the Classroom Capacity item and planning for the renovation and expansion of the Pierce School. This year, a debt exclusion is anticipated for the Pierce School project. The final project budget of $209,915,958 assumes a $37,128,511 grant from the Massachusetts School Building Authority (MSBA).

There is also funding allocated in FY2024 for one Traffic Calming/Safety Improvement project. The Transportation Board and the Transportation Division of Public Works committed to improving pedestrian safety along the portion of Washington Street from the townline with Boston and Salisbury Road as a result of a fatal pedestrian crash at the intersection of Washington Street and Downing Road in November of 2021. This area of Washington Street is outside the project limits for the transportation mitigation improvements as part of the Driscoll School construction project and the planned TIP project from Beacon Street to Station Street. The section of roadway was the site of safety improvements over 15 years ago that included the construction of curb extensions on Washington Street at intersections with residential streets that flow into the arterial roadway. The initial staff plan is to expand on these measures and to further increase pedestrian safety along the corridor, by increasing pedestrian sightlines, pedestrian accessibility, and reduce vehicle speeds of those turning onto and off of Washington Street through the installation of raised crosswalks along the side street crossings on Salisbury Road, Bartlett Street, Evans Road, and Downing Road and a pedestrian actuated rectangular rapid flashing beacon (RRFB) at the unsignalized crosswalk across Washington Street at Bartlett Street. These are safety improvement techniques used both regionally and nationally to create safer pedestrian accommodations along main arterial roadways like Washington Street. With the support of the Transportation Board and the Zoning Board of Appeals, staff was able to secure a commitment by the developer for 45 Bartlett Crescent to design and construct the raised crosswalk for Bartlett Crescent.

In FY2018, the CIP funded a feasibility study, including a structural evaluation, of the Davis Path Footbridge that spans the MBTA D-Branch on the Green Line adjacent to Boylston Street Playground. In April 2020, during the course of the feasibility study, the existing span was deemed structurally unsound. An emergency demolition was required to remove the span and restore safety to the site.

Both the Select Board’s commitment to become carbon neutral by 2050 and Town Meeting’s December 2019 Healthy & Sustainable Transportation resolution to achieve a mode split of 75% of trips by walking, biking, electric micro-mobility, and public transit (among others) require creating new and maintaining existing pedestrian infrastructure throughout the Town. The Davis Path Footbridge provides an important connection in the Town’s pedestrian network as a safe north-south connection over the D-Branch to the civic center of the Town including: Town Hall, the Main Library, the Court House and Police Station, Emerson Garden, Brookline Village and neighborhoods west thereof, and Boylston Street.

The Washington Street Project involves the rehabilitation of 1.3 miles of Washington Street and associated intersections from Station Street (Brookline Village) northerly up to and including its intersection with Beacon Street (Washington Square). This critical arterial roadway is in poor condition, serves as an important connection between Route 9/Boylston Street and Beacon Street which is utilized by high volumes of drivers, pedestrians, and bicyclists alike and provides access to 3 commercial districts, public safety facilities, County Court House, and other Town government services including the Library and Town Hall. ). It is anticipated that the Town would be eligible for Federal and/or State funding for the project, currently estimated at $31 million for construction. The Town funding share is currently estimated at $5 million spread over several years to include preliminary design, public participation, right of way approvals, engineering bid documents, construction oversight, project management, funding assistance, implementation and Town preferred betterments.

Even with the pressure placed on the CIP by the School overcrowding issue; this Preliminary CIP continues the Town’s commitment to upgrading its parks, playgrounds, and other open spaces. There is $40.1M of specific park projects included, as shown in the table below:

By following these policies, $4,604,206 of Free Cash is used to get from 6% of prior year net revenue to 7.5%. Then an additional $8,575,832 is allocated to the CIP to help balance it. In total, $13,180,038 of Free Cash goes toward the CIP, as recommended.

MAJOR PROJECTS

• Pierce School- Partnership with MSBA Construction budget $210M (estimated Town share of $173M)• Davis Path Footbridge $13M (FY27)• Larz Anderson - $12.6M (FY24-29, Future Years)• Classroom Capacity - $6.4M (FY24-FY29)• Hammond/Woodland Traffic Signal / Road Diet - $1.7M (FY25)• Washington St. Rehab and Complete Streets - $33.4M (FY24-27)• Schick Playground - $2M (FY24)• Body Worn and In-Car Camera Equipment $200K (FY24)

CONTINUED MAJOR INVESTMENT

• Parks & Open Space - $3.7M (non-project specific investment)• Street & Sidewalk Rehab - $23.6M• Town/School Masonry/Fenestration - $5.25M• Town/School Roofs - $7.3M • Water & Sewer Infrastructure - $29.3M -- enterprise fund• Fire Apparatus - $1.2M • Tree Replacement - $1.9M• Town/School Bldg Security / Life Safety Sys - $3.2M

Prior Financial Plans spoke to the “tightness” of the CIP, resulting primarily from the costs associated with addressing the increasing school enrollment and the debt service for the Coolidge Corner School and High School projects. The lease for 2 Clark Road also limits cash funded projects. The graphs below show the split between revenue-financed and debt-financed CIP based on the plan outlined above.

As the graphs show, the split between cash and debt is tight for FY24, especially due to the assumption that the entirety of the $11M Alston settlement will be funded with resources that would otherwise go towards the CIP. The CIP returns to the targeted balance of 4.5% debt and 1.5% cash projects in FY29. A strong free cash certification helped the FY24 CIP tremendously.

This portion of Section VII is dedicated to the role debt plays in the CIP and its relationship to the Operating Budget. For all entities, both public and private, debt financing is a primary method of financing large capital projects, as it enables projects to be undertaken now with the costs spread out over a period of years. However, if used in an imprudent and / or poorly constructed manner, debt can have a disastrous impact on the Operating Budget and negatively impact the level and quality of services a municipality can deliver. This is why the Town's CIP Financing Policies are a vital component of the Town's overall Financial Planning guidelines. A well planned and properly devised debt management plan is critical to maintaining the Town's positive financial condition and to maintaining the Town's much-valued Aaa bond rating.

The bond authorization process is laid out in Massachusetts General Laws (MGL), specifically Chapter 44, Sections 7 and 8. General Obligation (GO) Bonds are secured by a pledge of revenues through property taxes and are authorized by Town Meeting via a 2/3's vote. Bond Anticipation Notes (BANs) can be utilized prior to the permanent issuance of bonds and are included as part of the Town's 6% funding policy. The Town's credit was most recently reviewed on March 5, 2020 by Moody's and the Town maintained its Aaa rating. Among the reasons stated by Moody's for the Aaa rating were “the history of balanced operations, maintenance of adequate reserve levels, and commitment to addressing capital needs and long-term liabilities.”

Chapter 44, Section 10 limits the authorized indebtedness to 5% of the Town's equalized valuation (EQV). The Town's most recent EQV, approved by the State as of 1/1/2020, is $28.148 billion. Therefore, the Town's debt limit is $1.407 billion. Obviously, the Town has no plans to come near this limit.

Debt can be broken into "exempt debt" and "non-exempt debt". Exempt debt is paid for outside of the property tax levy limit of Proposition 2 1/2. Stated another way, it is paid for with taxes raised outside of the property tax limit. In order to have exempt debt, a Debt Exclusion Override is required, and that can only be approved by the local electorate. Non-Exempt debt, or "within-levy debt", must be raised and paid for within the property tax levy. In Brookline, five projects are funded with exempt debt: a portion of the Florida Ruffin Ridley (formerly know as the Edward Devotion or Coolidge Corner School) ($49.6 million estimated pending final MSBA reimbursement) the 2018 High School expansion/renovation project ($168.2 million) the Driscoll School project, the aquisition of Newbury College and the Fire Station renovations project. In addition, the Pierce School Project ($210 million with an estimated $37 million MSBA reimbursement) is also assumed to be funded via a debt exclusion.

Debt is issued on behalf of the Water and Sewer Enterprise Fund and the Golf Course Enterprise Fund. The tax levy does not fund any enterprise fund debt. As previously mentioned, they are 100% cost recovery funds, so they pay for their debt service through their own revenue streams. The table below breaks out outstanding debt by fund, with exempt and non-exempt debt of the General Fund separated, for each of the past six years. Looking at FY22, this shows that the Town's total outstanding debt was $490.1 million, of which $12 million was owed by enterprise funds, leaving $478 million of outstanding debt. The increase in FY19 was due to the High School project. The increase in FY21 is due to the Driscoll School project.

Once debt is incurred, an amount must be set aside annually to fund the principal and interest payments, known as Debt Service. As previously noted, if debt is used in an imprudent and / or poorly constructed manner, it can have a negative impact on the Operating Budget. This is because of debt service: debt service takes away funding that would otherwise be available for other areas of the Operating Budget. If decision makers are not made aware of the impact debt service has on the Operating Budget (via long-range forecasting), then the authorization of debt is being made in a vacuum. Governmental bodies can cripple their finances if bonds are authorized and issued without a full understanding of the impact they have on the overall finances of the entity.

In Brookline, both the Long Range Financial Plan and the planning process for the CIP clearly show decision makers the impact debt service has on the Operating Budget. Since the Town's CIP Financing Policies set a limit on the overall amount of debt that can be issued -- basically the 6% policy plus the other debt management variables that are to be measured -- the impact on the Operating Budget is both known and within an expected range.

The "Debt and Debt Service" section discussed the impact of debt service on the Operating Budget. Another potential impact of a CIP on a community's Operating Budget is an increase or decrease in operating expenses. For example, adding another facility in the community will add costs for utilities and building operation / maintenance. Conversely, undertaking energy conservation projects will help reduce costs in the Operating Budget. The proposed CIP contains a number of projects that will impact the Operating Budget, both positively and negatively. They are listed below:

• Technology Applications — Projects undertaken by the Information Technology Department (ITD) are focused on improving efficiencies in numerous departments. While it is difficult to put a dollar figure on savings, past applications have proven to yield savings in the Operating Budget, including a reduction in headcount. On the other hand, new technologies often come with increased maintenance contracts.
• Wastewater System Improvements - these projects will help prevent costly system failures, lower MWRA wholesale costs by reducing extraneous flows, and make more efficient use of annual operating funds.
• Playground Projects — As playgrounds are renovated and new or improved water play features are included as part of the project, water/sewer costs will increase.
• Pierce project — This project is certain to increase the size of the facility, so additional utility costs are to be expected. However, increases will be minimized to the greatest extent possible by including energy efficient systems and “green” components.
• Town / School Energy Management Systems and Energy Conservation — These on-going items are meant to yield savings in the operating budget. With large increases in utility prices over the past few years, it is imperative that monies be invested to decrease energy consumption in buildings. Programs would include, but are not limited to, lighting retrofit and controls, energy efficient motors, insulation, and temperature equipment. This program would augment existing gas and electric utility conservation programs. Monies would also go toward more efficient heating and cooling equipment.
• Town / School Emergency Generator Replacement, Elevator Replacement, Roof Replacement, Masonry Repairs, and Fenestration - these items represent an approach to systematically replace various core facility needs that only become more expensive to maintain if not replaced in a timely manner. They also help eliminate the need for larger expenditures that might arise if allowed to deteriorate.
• Classroom Capacity — The School Department estimates $252,952 of additional operating expenses associated with the Clark Road lease. This includes building maintenance, landscape services and utility costs.