Massachusetts governor proposes $3.5 billion of funding for downtowns

Proceeds from sales of about $1.3 billion in bonds would benefit cities and towns across Massachusetts under legislation Gov. Charlie Baker filed on Thursday.

The bill, called the Future Opportunities for Resiliency, Workforce, and Revitalized Downtowns, or FORWARD, would authorize the use of $2.3 billion in funding from the federal American Rescue Plan Act and the issuance of over $1.256 billion in bonds for projects to strengthen the state’s infrastructure and create jobs.

“The Commonwealth has an opportunity to make significant investments now to help our communities and local economies emerge stronger in a post-pandemic world,” Baker announced at a press conference at Breakwater North Harbor in Lynn. “The FORWARD legislation will make investments in every municipality in Massachusetts, strengthening downtowns, improving the resiliency of infrastructure and giving workers the tools they need to succeed in today’s economy.

Highlights of the proposal include money for: climate resiliency and preservation efforts from the ARPA; revitalizing downtowns and communities, funded through ARPA and bond proceeds; COVID-19 response, funded through the ARPA; housing, funded with bonds; and education, funded through the ARPA.

Last year, the administration commissioned a report on the “Future of Work.” The results showed that many downtown areas will look very different after the COVID-19 pandemic subsides because many people have already changed how and where they work. The funding aims to help municipalities adapt to this new reality.

Massachusetts’ general obligation bonds are rated Aa1 by Moody’s Investors Service, AA by S&P Global Ratings and AA-plus by Fitch Ratings.

Since 2011, the state has sold almost $35 billion of bonds, with the most issuance occurring in 2016 when it offered $4.8 billion.

Like most other states, Massachusetts is figuring out how to use its large federal pandemic assistance windfall, Bryan Quevedo, a director at Fitch, told The Bond Buyer.

“They have an enormous amount of flexibility to identify priorities, capital and otherwise, and allocate resources to fund them,” Quevedo said. “Putting most of the proposal into capital, instead of starting ongoing initiatives, reduces the risk of a fiscal cliff once aid is spent down.”

The Massachusetts proposal is in line with what a lot of states are planning to do with their ARPA funds, Denise Rappmund, vice president and senior analyst at Moody’s, told The Bond Buyer.

“In terms of broad themes of what Massachusetts is planning to use the money for it seems very much in line with many of the broader themes across the sector, in terms of investment in these systemic, socially challenged areas with respect to workforce or housing,” she said.

She noted that much of the money would be invested in renewable energy and pushing the economy in that direction, which buttresses the investment priorities the Baker administration has previously implemented.

“It seems like they’re a bit ahead of the game, relative to other states,” she said.

“Because this is substantial one-time money that is trying to address a lot of systemic issues, we will have to see if there’s longer-term money that can be there to support some of these programs,” Rappmund said.

However, she noted that because revenues in Massachusetts were growing strongly, this may not pose a big issue in a couple of years.

The legislation proposes nearly $970 million to support revitalizing the commonwealth’s downtowns and communities, including $318 million in ARPA funding and $650 million in bond authorization.

This includes $550 million for the MassWorks infrastructure program, including $400 million in reauthorization and $147 million in ARPA funds to support 94 local projects. Nearly 250 municipalities will receive downtown recovery grants totaling $108 million.

MassWorks is a competitive grant program which provides a source of capital funds to municipalities and public entities for infrastructure projects that support housing, development and job creation.

ARPA funds must be committed to by the end of 2024 and spent by the end of 2026. The bill prioritizes using this for projects that can be completed by 2026

“This bill will support hundreds of local projects, whether through funding to improve green spaces or grants to support economic development,” said Lt. Gov. Karyn Polito. “Making these local investments will help cities and towns fortify their infrastructure and redevelop their downtowns.”

The proposal also includes $1.2 billion in ARPA funds for climate resiliency and preservation efforts.

This includes a $750 million investment in the clean energy industry, which will be used for a variety of areas within the sector. These uses include electric vehicle rapid charging stations at Logan International Airport and the expansion of the MassCEC Wind Technology Training Center in Charlestown. More than $70 million will go to the New Bedford Marine Terminal and there will be an investment in higher education and workforce training that can support the clean energy industry.

The bill also proposes to spend $413 million for state parks and trails, water and sewer, and environmental infrastructure grant programs.

Massachusetts has been trying to stay ahead of the curve when looking at post-pandemic work and other social and economic changes, Rappmund said.

“This is another area where Massachusetts is trying to get ahead of some of the trend or issues that really emerged from the pandemic, not just the change in work,” she said, noting big investments in child care.

She said that Massachusetts was a state that was already very strong with respect to workforce and investments in key social areas such as education.

“Assuming that these programs are administered well, I think it will just build on where Massachusetts is already ahead,” she said.

Breakwater North Harbor, where Baker announced the proposal, is a 331-unit apartment community in Lynn that broke ground in 2019. A $1.2 million MassWorks grant to fund roadway and water infrastructure improvements partly funded the development along with a $1 million Seaport Economic Council grant to ensure long-term integrity of the adjacent shoreline.

The new legislation would send an additional $27 million to Lynn that would go toward improvements to the Lynn Heritage State Park and the South Harbor waterfront redevelopment site as well as for local economic recovery.

“We look forward to working with the Legislature to take action on this bill quickly to ensure cities and towns receive much-needed recovery funding,” Baker said.

Baker, a Republican, must get his proposals through a legislature dominated by Democrats. He’s also a lame duck, having announced that he won’t seek a third term in November.