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2014-03-20CITY OF BEVERLY PUBLIC MEETING MINUTES COMMITTEE OR COMMISSION: Community Preservation Committee SUBCOMMITTEE: DATE: March 20, 2014 LOCATION: Beverly City Hall, Third Floor Conference Room B MEMBERS PRESENT: Wendy Pearl — Chairperson, Darien Crimmin — Vice Chair, Robert Buchsbaum, Marilyn McCrory, John Thomson, Leland McDonough, Heather Richter, Lincoln Williams MEMBERS ABSENT: Henry Pizzo OTHERS PRESENT: Amy Maxner, Environmental Planner; Aaron Clausen, Director of Planning; Scott Houseman, Ward 4 City Councilor; Bryant Ayles, City Finance Director; Peter Johnson & Rosemary Maglio RECORDER: Craig Schuster The meeting was called to order at 7:02 P.M. The meeting opened with introduction of the Committee and members of the audience. Discussion, O &A Re: Bonding Pearl noted for this discussion that at the last CPC meeting the Committee was considering bonding for some projects since the number of pre - applications received exceeds the CPC budget. Ayles opened the discussion by handing out flow charts, which outlined how bonding works. He noted the following: • Bonding operates similar to a mortgage — you are borrowing money to finance something upfront. • There are options in the bond payback period which can be 5, 10, 15, or 20 years • There are restrictions to what can be bonded which is governed by Massachusetts General Law (MGL) • The way the bonding process works is first to identify a project for bonding. Next present before the City Council the proposed project for bonding since the Council has the authority to approve any loan order. Once approved the City would use their bond rating to borrow money on the CPC's behalf, then structure the bond with their bond council (a third party for funding the project). Once the bond structure is in place the City would debit the CPC's account every year to pay for the bond. • Before bonding would take place, the City would provide an annual debt service estimate to the CPC for planning purposes. • He said estimate because you want to be strategic about when you actually go to bond depending on rates. So municipalities have the ability to borrow short term until projects are done and then go to a permanent bond after the actual project costs are determined and you lock into an interest rate at that point. So once City Council approves the loan order and the Community Preservation Committee 03 -20 -14 Meeting Minutes Page I of 8 City talks to their bond council, which is a third party vendor that coordinates all the legal materials that are required, they structure the loan and finally a check is cut. • Since the City would be bonding on the CPC's behalf the City would be responsible for the debt on the bond if the CPC was ever dissolved. Ayles handed out to Committee members a section of MGL that outlines what are acceptable borrowings for what type of projects and the terms. Ayles summarized the MGL handout by stating that the City is not allowed to borrow money for anything that the City would not own because that is the collateral that is backing the bond debt. He noted for example that those CPC projects that are for enhancements or repairs of facilities that the City does not own could not be bonded but the CPC land acquisition project for the Girl Scout Camp could be bonded. He further noted that the Morraine Farm land acquisition CPC project may or may not be eligible for bonding because the City would have to demonstrate some value to the City since the City does not own the property. Pearl asked Ayles if he meant fee simple ownership, for Moraine Farm, as opposed to conservation restrictions or other interests. Ayles said yes that is what he means but would have to explore further once the CPC decided to make this project a consideration. Crimmin asked Ayles if the Moraine Farm project could be bonded based on the value it would add to the City even if the City would not own the land. Ayles replied he thinks so and felt that an argument could be made that they would certainly consider. Ayles mentioned as an example the MBTA garage being built in Beverly. The MBTA will own the garage but the City is bonding for their part of the MBTA garage costs. Ayles further noted that in this case the City could not bond independently but had to go through a finance oversight authority for them to allow the City to bond where the City does not own the asset. Ayles stated in his opinion he believes that the Moraine Farm could possibly qualify and that would be something to look into for the same type of process as the MBTA garage project. Pearl noted that as an example for a possibility for qualifying may be buying development rights that would protect an aquifer which protects the City's water supply, which is an asset to the City, or some other variation of this kind. Ayles said yes this may be an option but would have to be decided on a case -by -case basis. Thomson asked Ayles if there are general revenue bonds that are not based on the assets but on the guaranteed annual income of the CPC. Ayles responded that is a good question and he does not have the answer but noted that there would be some uncertainty to an investor since the revenue will be there one year but possibly not the next if the CPC was dissolved. Maxner noted her interpretation of the statute is that if the CPA were revoked, the annual surcharge collection would continue in order to pay off the outstanding bond. Johnson further added, per the CPA law, that the CPA cannot be revoked until at least five years, and if it is dissolved the dissolution cannot happen until all debts are paid off, also Section 11 of the Act makes reference to general obligation bonds and the City cannot approve a project unless there is an ownership of some right like public access or a conservation easement. There was some concern among the Committee members that the proposed CPC projects might overlap with City departments who might be bonding for the same projects. Ayles stated that he is unaware of any other City departments, which have budgeted for these projects and thought that Community Preservation Committee 03 -20 -14 Meeting Minutes Page 2 of 8 CPC projects are CPC's to do or not to do. However, he added there might be future opportunities to leverage with other City departments for projects. Pearl asked Ayles if he could provide information, for use by the CPC, on the bonding for the MBTA garage project. Ayles responded that the project has not been bonded yet by the bonding company but has been approved by the City Council. Ayles noted that the City is responsible for $500,000 of the project cost and will probably bond for a 20 -year term. Ayles noted that the City's current bond rating at AA and since money is cheap to borrow at this time the difference between AA and AAA bond rating is maybe 1/8 of a percentage point, i.e. not much of a difference. Ayles stated that he uses a rate of 4% when calculating the debt service payback; he also noted other analysts have used 3 %. Ayles provided further information on how bonding structure works noted that the rate is not fixed over the life of the bond. He said bonding companies would bid on your bond and offer different types of bonding structures. What bonding companies do is they will come in with a low interest rate and then about the ten year mark the bonding companies will raise their rates because after 10 years you can refinance the bond. Then after 10 years the bonding companies bring the rates back down in order to entice you to refinance with them. The rate structure is fixed by year but will fluctuate so there is not one rate over the life of the bond. Thomson asked if there are any other ancillary fees that are part of the bonding process. Ayles commented that is variable depending on the bond packages. Ayles said the City never sees the fee directly since it is included in the bond offering, therefore, has no idea what it would be. He did say that since the City is a tax exempt organization that the rate offers are lower so people who invest in the City debt gets a tax exemption so the City can offer bonds for cheaper. Ayles offered the Committee to get more information on this if they feel it would be beneficial. Ayles added that the costs for CPC projects would not go right out to bond because the upfront bond costs would be better used under a larger debt offering. Ayles said the next big bond offering would be for the new middle school project, so he would carry any CPC bonding in short term vehicles so when the City goes to full bond roll these short term vehicles into the larger bond so that way the CPC would not be absorbing all the costs — they would only be paying for a small portion of the fees. Crimmin asked what is the city's recent past bonding deals and what is the midterm plan to finance other projects. Ayles said that they present to city council a 10 -year capital expenditure plan. Right now there are a number of projects that have been authorized to bond and about 80% of them are ready to be bonded. The city currently has a number of projects bonded with a total cost of approximately 15 million. McCrory asked if there are any City issues with CPC's dedicated fund and how will the City handle the CPC's fund with the City's budget. Ayles replied the way he will handle the accounting is to set up four separate funds because the CPC is obligated to have three funds at 10% each and one general fund. So when the City gets the gross revenue they will put them into these various funds and will have a running balance for each of these funds so if the CPC needed to use funds say for low income housing then the City would take that debt service right out of that fund balance. Pearl clarified that the CPC is in charge of putting the money into the funds and not the City and it is not Community Preservation Committee 03 -20 -14 Meeting Minutes Page 3 of 8 automatic. Pearl noted that the CPC is required to vote an annual budget putting in at least 10% into the funds and then submit to City Council for approval. Pearl asked if there were any administrative costs from the City's standpoint in managing the bonds for the CPC. Ayles said there is but is not sure if there will be an indirect costs charged back to the CPC right now. This is because the City is currently undertaking a review of their indirect costs and whether that will translate into direct charges to those funds being supported by the City and it will be based on usage and probably would be minimal to the CPC because the CPC budget is only 600k as compared to other City budgets. Crimmin noted a concern that the bond rates could change /rise while the loan is sitting in a short- term vehicle and if the CPC budgeted say 80k per year to pay back the bond it could actually go up if rates increase. Ayles noted that it is impossible to predict how the market will go. McDonough added that the CPC would be funding such a small amount that he would expect the money to sit in the short term vehicle for only maybe one or two years. He also noted that the market is very competitive and he expects the underwriting costs will probably be less than 1 %. Pearl asked if Ayles was cautioning the CPC about bonds that the CPC should not enter into them lightly since the City bonds really big projects. Ayles said from his official capacity he needs to let the CPC know all the parameters to consider. Ayles stated that the CPC has some real opportunities and should consider bonding. Houseman noted that the City Council is aware of the opportunities before the CPC to do projects that the city otherwise could not do and the Council and the Mayor are looking forward to working with the CPC. Johnson noted that Community Preservation Coalition has information on bonding. Houseman noted that he is interested in the CPC's work and has been working with Maxner and Ayles in drafting a memorandum outlining how the CPC finances work so the other City Councilors can understand the workings of the CPC. He further stated that the answers provided tonight will be very useful to incorporate into the memo. There was a Committee discussion about who recommends the bond, does the CPC or the City? Houseman said the CPC decides the projects to recommend which would include any proposed bonding. However, he noted that the Council has the final authority to say yes or no. Thomson wondered if the City Council could "cherry" pick certain projects that the CPC recommends. For example say the CPC recommends 10 projects but the council only likes the first five can the Council recommend those five. Houseman replied that the Council can always say no to a project or can redirect the choice back to the CPC based on funding, for example say the council likes 5 out of the 10 proposed projects but knows only 5 can be funded at this time so the Council would say to the CPC out of the 10 projects you CPC have to decide which 5 to fund. Houseman further added the Council's role is really to rule on the recommended projects and not to add new projects. Houseman noted that he expects that the Council would give deference to the recommendations that the CPC makes especially if it is lump sum distribution versus bonding — Council would look closely at the bonding. Houseman noted the City can only bond based on the property taxes collected and not what the state gives in grants. Community Preservation Committee 03 -20 -14 Meeting Minutes Page 4 of 8 The Committee members thank Ayles for attending the meeting and for sharing his expertise. Emergency /Special Circumstances Project Situations Pearl noted Maxner created a draft process and criteria addressing special circumstances (based on the Concord model) in which a project could be considered for review outside the normal CPC process and with a limited window for review and approval. There was a discussion among Committee members about the draft Special Application Purposes. The following was noted: • Under "Purpose" it should be added that the applicant has to demonstrate eligibility under the CPC pre - application process. • Strengthen the wording in the paragraphs under "Purpose" to express the urgency needed for submitting the project. • "Process & Criteria" title should be broken up into two separate headings. The "Process" heading should be placed after the #6 criteria to cover the last two paragraphs. • Criteria #3 should be removed since it may be difficult for an applicant to get any City board approvals before coming to the CPC. • Second paragraph last sentence change "emergency" to "urgent" • Introductory paragraph under "Process & Criteria" strike out "adherence /consistency" leave "demonstrates compliance" • Move Criteria #4 up to #2 • Revise Criteria #5 to read "Appropriation of CPA funding is critical to the success of the project ", in order to stress the urgency of the project. • Revise Criteria #6 to state the project "aligns with" or "is consistent" with the goals of various plans. • Under "Purpose" heading, second paragraph, first sentence, change "within" to "for ". • Under "Purpose" heading replace the word "principle" with the word "situation" Pearl clarified that it is her understanding that if an urgent application is submitted that the whole Committee would review it and not be reviewed first by the Chair and Vice Chair and have them decide if a meeting is required. The Committee agreed with Pearl's understanding. Pearl asked the Committee then what should the process be if an applicant contacts Maxner with a project, when should the Committee convene. Pearl asked if there should be a timetable such as within 10 or 20 days within receipt of the application to determine that the project warrants special consideration. Pearl noted that it is important to have a quick turnaround on these types of projects. Pearl noted that the Special Application Process should say specifically that the CPC would meet to determine whether special circumstances exist and then at that meeting a timeline should be established for the submission of the application. Crimmin commented that there should be an option to deliberate on these applications. What if we get an application that is obviously not eligible under CPA? Or what happens if the CPC receives a number of applications? The Committee discussed this issue and decided that Maxner would receive the information and then disburse the information to the Chair and Vice Chair of the CPC Community Preservation Committee 03 -20 -14 Meeting Minutes Page 5 of 8 for their determination of reasonableness of the request. If it is determined to be reasonable then the Chair will call a meeting of the full Committee. Williams commented that establishing an exact timeline for review of the project does not allow for those special circumstances where the Committee could not meet. He suggested keeping the timeline vague. Richter commented that the urgency of the letter was not direct enough at the beginning and that the last two paragraphs seemed to meet that need. It was discussed and decided by the Committee to eliminate the last paragraph since the actual process will be outlined and to keep the second to the last paragraph as the ending of the letter. Pearl asked the Committee if this should be part of the application or separate. The Committee agreed to keep it separate. The Committee asked Maxner to present a final version of this at the next CPC meeting. CPA Project Signage Pearl notes for the discussion among the committee the concept of requiring a project sign to be posted at locations where CPA funds are being spent in order to promote the work of the CPC. She further added for discussion the consideration on the way to acquire and install the sign. The ways to be considered are - CPC funds would be used to purchase the sign and then given to the approved applicant for installation or add $500 to each approved applicant along with a sign specification and have the applicant construct and install the sign. There was a discussion among the Committee and it was agreed that providing a sign at a CPC funded project site is a good idea. The Committee also discussed and agreed that on certain CPC projects a permanent sign may be desired and on other CPC projects the sign would be temporary and last just for the duration of the project. It was noted by Williams that some CPC projects would not make sense to provide a sign. Pearl noted that the Committee needs to decide on a couple of sign options and language for acknowledgement. Pearl volunteered to research sign examples and report back to the Committee at next meeting. Pearl noted that the Committee also needs to look at Memorandum of Agreements (MOAs) sooner rather than later. Maxner volunteered to research examples of MOA's and report back to the Committee at next meeting. Upcoming CPC Tentative Schedule Pearl noted that the next meeting is April 17, 2014. Other Business Community Preservation Committee 03 -20 -14 Meeting Minutes Page 6 of 8 Pearl noted that all the letters went out to the applicants. Pearl asked Maxner if there have been any responses to the letter. Maxner replied nothing of note from the applicants, mostly just thanks. Maxner did mention that Ms. Madore was unclear why her pre - application was not approved and Maxner explained to her that it was the way the project description was written but noted that going forward if this project comes up to the level of the Open Space Committee's priorities then this project can be reconsidered by the CPC. McCrory asked Maxner if any of the applicants had any questions about the pre - application process itself. Maxner noted one late applicant for historic, 107 Hart Street, misunderstood the timeline for submission of the pre - application. Maxner explained to her the proper timeline. The applicant also stated it appears that she should not submit a pre - application since the CPC is looking for public type projects. Maxner stated to the applicant that this is not necessarily true and that the CPC, since it being the first time going through the process, is looking for projects that demonstrate a real public benefit. McCrory noted that not just this year projects would have to demonstrate a real public benefit but all years. Maxner explainsed to the applicant and stressed the requirement for a real public benefit no matter when a pre - application is submitted. Pearl noted she received a call from Kathy Roth the Coalition. Roth noted to Pearl that Jeanette Jones, from Beverly, contacted her expressing their concern about the proposed stadium, stating that a lot of money has been spent on this design and it will take up a lot of public land. Pearl noted she and Roth were confused about the comment and then they proceeded to go through each pre - application, and the CPC determinations of eligibility, to determine if the comments were directed to one of the pre - applications. Pearl noted that the only pre - application that possibly comes close is the pavilion at Obear Park, which is not a stadium. Both Roth and Pearl felt Jones was referring to the proposed hockey rink at Endicott College, which is not under consideration by the CPC. As a follow up from last meeting Pearl noted that she has not received any responses from the Committee members for participating in the BEVCAM interview. Pearl will follow up for next meeting. The draft February 20, 2014 minutes are reviewed. Members suggest various edits and clarifications. Pearl noted that there was supposed to be follow up with the Coalition if an ineligible building sits on eligible land is there an issue with purchasing the land. Maxner noted she contacted the Coalition and was told there were a myriad of concerns. Maxner further stated that during her conversation with the Coalition the topic of bonding came up as well. It was suggested by the Coalition to have a webinar possibly later this month or early April to discuss these topics. Buchsbaum moves to approve the minutes as amended. Seconded by Williams. Buchsbaum, Crimmin, McCrory, Thomson, McDonough, Richter, and Williams voted in favor. None opposed. The draft February 27, 2014 minutes are reviewed. Members suggest minor edits and clarifications. McDonough moves to approve the minutes as amended. Seconded by Williams. Buchsbaum, Crimmin, McCrory, Thomson, McDonough, Richter, and Williams voted in favor. None opposed. Community Preservation Committee 03 -20 -14 Meeting Minutes Page 7 of 8 Maxner notes that there are meeting minutes from previous CPC meetings that have not been completed. She requested to the Committee if they would let Schuster transcribed one of the previous meetings. The Committee agreed. Crimmin asked what is the guidance of a Committee member when talking to a CPC applicant outside of a CPC meeting. There was a discussion among the Committee members and it was generally agreed that since you are providing a public service to the City then it is fine to talk to an applicant, however, it was also noted an individual Committee member cannot speak on behalf of the CPC. Pearl added that Committee members, who do not already sit on other City committees, serve the City, and the Committee members always have to advocate for the benefit of the City when talking about CPC business outside of CPC meetings. It was also noted that the Committee members could always contact the Massachusetts Ethics Commission if there are any questions. Adjournment McDonough moved to adjourn the meeting. Thomson seconded. McDonough, Buschbaum, Crimmin, McCrory, Thomson, Richter, Pearl, and Williams in favor. None opposed. Meeting adjourned at 9:00 P.M. Community Preservation Committee 03 -20 -14 Meeting Minutes Page 8 of 8