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Exhibit 2 - I-Cubed Preliminary Economic Development Proposal for The Wa...
athena Health Commonwealth of Massachusetts Infrastructure Investment Incentive Program Preliminary Economic Development Proposal for The Watertown Arsenal Op t I,1 Olk y� A A Transforming a Historic Treasure into a Vibrant Campus, Health IT Epicenter and Community Space Submitted by athena Health Confidential athenahealth Table of Contents Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 I-Cubed Program Economic Development Proposal A. Developer's Information and Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 B. Government Official References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 C. Ownership of the Economic Development Project . . . . . . . . . . . . . . . . . . . . . . . . . . 5 D. Boundaries of the Economic Development District . . . . . . . . . . . . . . . . . . . . . . . . . 6 E. Description of the Economic Development Project . . . . . . . . . . . . . . . . . . . . . . . . . 11 F. Itemization of Projected Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 G. Project Timeline for Approval and Completion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 H. Necessity of I-Cubed Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 I. Employment and Revenue Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 J. Estimate of the Appropriate Displacement Factors . . . . . . . . . . . . . . . . . . . . . . . . . 34 K. Estimate of New State Tax Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 L. Projected Debt Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 M. Tenant Commitments and Relocation of Jobs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 N. Proposed Transfer of Property Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 O. Statement of Interest from the Municipal Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 P. Certification of the Developer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Q. Description of Economic Development District . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 R. Conformance to the Municipality's General Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 S. Debt Service Allocation Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 T. Developer's Agreement for Shortfall Reimbursement . . . . . . . . . . . . . . . . . . . . . . . 42 U. Application of Sustainable Development Principles . . . . . . . . . . . . . . . . . . . . . . . . . 42 V. Location of the Economic Development Project. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 W. Competitive Process for Contractor Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 X. Developer's Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Y. Securing of Obligations of Selected Contractors . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Z. Convention Center District . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Confidential i athenahealth Exhibits 1. Biographical Information for Lawrence Beals and Todd Morey 2. Record Plan of the Arsenal and Commander's Mansion 3. Arsenal Parcel Legal Description 4. Schematic of Arsenal Street Improvements 5. Schematic of North Beacon Street and Squibnocket Park Improvements 6. athenahealth 2013 Form 10-K Annual Report 7. Public Infrastructure Improvement Cost Details 8. "athenahealth to add 600 employees with Georgia Expansion," Boston Business Journal (Sept. 22, 2014) 9. "How employee freedom delivers better business," CNN.com (Sept. 21, 2011) 10. "Millennial Motivations and the Impact on the Organizational Culture," Nova Journal of Humanities and Social Sciences, Vol. 2(4), 2014:1-4 11. "Cloud Computing: US Businesses Will Spend $13B on It," Forbes (Jan. 29, 2014) 12. "Looking for a Lesson in Google's Perks," New York Times (Mar. 15, 2013) 13. "Maximizing Millennials in the Workplace," UNC Business School Executive Development (2012) 14. "athenathealth Announces Expansion in Atlanta and San Francisco," athenahealth press release (Sept. 22, 2014) 15. Texas Economic Development Agreement (Jan. 31, 2014) 16. Georgia Department of Economic Development Job Tax Credits Offer Letter (Jan. 23, 2013) 17. Georgia Department of Community Affairs Job Tax Credits Program Guidance 18. "athenahealth's MDP Accelerator Open for Business; Welcomes Applications for Promising Startups Poised to Disrupt Health Care," athenahealth press release (Sept. 24, 2014) 19. Watertown Statement of Interest 20. Watertown 2013 Comprehensive Plan (draft rev. Jun. 24, 2014) 21. Watertown Comprehensive Plan Presentation (Jun. 18, 2014) 22. Massachusetts Department of Conservation and Recreation Charles River Master Plan (2002) excerpts Confidential ii athenahealth Executive Summary Catalyzed by the growth and investment of athenahealth, Inc., the Arsenal on the Charles (the "Arsenal") in Watertown can become New England's marquee tech campus that will attract and cultivate the best minds in the industry while serving as a vital neighborhood center. Headquartered at the Arsenal for almost a decade, athenahealth has been growing exponentially thanks to the success of its cloud-based Health IT services. Crucial to athenahealth's expansion and continued success is hiring and retaining the best young tech talent—millennials. Millennials do not just want a job; they want a stimulating work environment with energy, collaboration, and community. Organizations that can create such appealing workplaces have an edge in attracting and retaining the best millennial tech talent. The Arsenal provides a perfect space to +�� +: create this type of environment. For almost two centuries, it served our country by storing munitions, building r weaponry, and developing advanced 'r - materials. It was decommissioned in - n 1995 and converted into an office park that preserved the historic architecture. Under this proposal, athenahealth, which " bought the Arsenal in 2013, will remake the Arsenal into a campus that attracts 4• and retains the best knowledge workers. t u Plans include renovations of existing office space into modern open layouts, A construction of new office space, an expanded Arsenal Center for the Arts, more green space, new walking and bicycle paths, outdoor meeting spaces, a farmers market, a beer garden, and new restaurants. These improvements are intended to cultivate a community that attracts and retains the best talent and encourages the kind of serendipitous interaction that generates innovation. A critical part of this vision is that the Arsenal must connect athenahealth to the outside world, not isolate it. Connecting and collaborating with others in and around the Arsenal is crucial to creating a dynamic atmosphere. The vision for the Arsenal campus is to open up the Arsenal as a public resource and integrate it into the fabric of Watertown. Given its strategic location, the Arsenal can reconnect Watertown with its Charles River waterfront while serving as an inviting new center for restaurants, cafes, and retail. With its civic focus, the Arsenal will be New England's answer to California tech campuses such as the Googleplex or Facebook campus. Confidential 1 athena iealth On its own, athenahealth's planned construction and renovations can improve the Arsenal parcel itself, but this will not create the ��" �� dynamic and collaborative atmosphere athenahealth needs because the Arsenal will still be isolated. To bring the community in to the Arsenal, public infrastructure improvements to the surrounding streetscapes and parklands are required to connect the campus with its surroundings. .�, Under this proposal, athenahealth's investment in and growth at the Arsenal as an owner-occupant drive new tax revenue to support the funding of the needed infrastructure improvements. Revenue from 1,900 new jobs and $237.8 million of capital investment from athenahealth can easily support the requested $24.8 million of infrastructure improvements. Enhanced retail activity and a Health IT startup incubator, the More Disruption Please (MDP) Accelerator, further enhance the financial benefit to the Commonwealth from the redevelopment of the Arsenal. Streetscape improvements and parkland enhancements comprise the envisioned infrastructure improvements. Arsenal Street, North Beacon Street, and Greenough Boulevard will become pedestrian- and bicycle-friendly "complete streets." The Watertown- owned Arsenal Commander's Mansion will be renovated to its former glory. And Squibnocket Park, an underused park along the Charles River, will become a gem of the Charles featuring a boardwalk and a new canoe and kayak center. These infrastructure improvements to the adjoining streetscapes and parklands are necessary and critical to the redevelopment of the Arsenal. They will connect the Arsenal with its neighborhood so that it can welcome community members, recruits, customers, business partners, and employees alike. People will be able to easily walk or bicycle to the Arsenal, whether for work, recreation, or both. And once at the Arsenal, a walk or meeting at an improved Charles River waterfront and other adjoining parklands will be only minutes away. Thus, with partnership and collaboration among the Commonwealth, Watertown, and athenahealth, this vision of a tech campus embracing its neighborhood can be realized at the Arsenal. If the proposed public infrastructure improvements are not built, on the other hand, then the right collaborative and community-oriented atmosphere cannot be created at the Arsenal because of a lack of connectivity with its neighborhood. athenahealth's alternative is to create the new jobs in locations that do have the right environment to attract and keep the best talent: its new offices in Atlanta, Austin, and San Francisco. Indeed, incentives offered by state and local governments in some of these locations would reward athenahealth for doing so. Confidential 2 athena iealth A. Legal name, contact information, personnel, description, and relevant experience of the Developer athenahealth is the sole developer. Founded in 1997, athenahealth is a leading cloud- based provider of billing and practice management, electronic health records (EHR), patient communications, care coordination, and related client support services. Publicly traded and currently headquartered at the Arsenal, 311 Arsenal Street Watertown, MA, 02472, athenahealth also has operations in seven other states and one other country. Today, athenahealth serves a client base of almost 59,000 healthcare professionals nationwide and is continually expanding its service offerings. athenahealth's experience with the Arsenal began in 2005, when it relocated from Waltham, at the time employing only 300 in Massachusetts. Its cloud-based model allowed rapid growth, scaling up to approximately 1,000 employees by the time it purchased the Arsenal from Harvard University in 2013. Thus, unlike most developers, athenahealth is an owner- occupant with a long-term commitment to a presence in the Arsenal and an interest in seeing the Arsenal reach its full potential. The principal contact at athenahealth is Dan Haley, Vice President of Government and Regulatory Affairs, dhaley@athenahealth.com, 617-402-1000. Additional contacts include Mark Blair, Director, Facilities Infrastructure, mblair@athenahealth.com, 207-323-7204; Bridger McGaw, Director, athenaEnvironment, bmcgaw@athenahealth.com, 617-402-6523; and Jacob Scott, Senior Corporate Counsel, jscott@athenahealth.com, 617-402-1873. In redeveloping the Arsenal, athenahealth / is working with Beals Associates, Inc., an established Massachusetts real estate planning and consulting firm. The Beals Associates team is providing critical expertise in planning and coordinating the construction and renovations needed to make a transformed Arsenal a reality. Leading the team are the company's founder, Larry Beals, and Vice President Todd Morey. Their biographical information is attached as Exhibit 1. Beals Associates has extensive experience with Massachusetts real estate projects, including the following: Confidential 3 athenahealth • Boston Landing, in the Brighton neighborhood of Boston, is a y multi-use transformation of a former industrial neighborhood into a Health and Wellness District that is a result of the ' vision of New Balance and their development partners. The — �-- project will include up to 1,500,000 square feet of .,. ; commercial, office and sports z complex uses, anchored by the New Balance world headquarters and the new practice facility for the Boston Bruins NHL franchise. Other key components include a 175-room hotel, 650,000 square feet of Class-A office space, and a multi-function sporting facility featuring a hydraulically operated track. Extensive pedestrian and bicycle accommodations are integrated into the project design which will allow the new development to feature a variety of transportation options. Beals Associates provided land planning, civil engineering and local and state permitting management services throughout the duration of this project from conceptualization through construction. • The Beauport Gloucester Hotel is located in the Fort Square section of Gloucester. The property was once home to the industrial building where Clarence Birdseye developed the flash freeze process. In transforming this historic IVA�property into a modern boutiqueVo-.1 hotel, the developers have wn I _+ � t included references to the f original marine industrial building, including a tower and historic photos and objects that will remind guests of the historic property. In addition to being the civil/site design, land planning and permitting project manager for the overall project, Beals Associates also served as the primary design coordinator between the project team and the City's Public Works Department for proposed infrastructure improvements to the entire Fort Square/Commercial Street neighborhood. As for athenahealth itself, the Arsenal is the principal property it owns (other than a retreat and a customer service center in Maine). Its other major offices are leased, often with athenahealth as the anchor tenant. Much like its vision for the Arsenal, athenahealth is committed to the rehabilitation and repurposing of other historic structures. Two recent examples are the Ponce City Market in Atlanta, Georgia, and the Seaholm Power Plant in Austin, Texas. Confidential 4 athena iealth • The Ponce City Market is the - --� redevelopment of an 88-year-old Sears Roebuck & Co. distribution center into a mixed-use development including residential units, restaurants and retail in addition to office space. athenahealth is the development's first major office tenant and has y worked closely with the developer, ..-L Jamestown L.P., in the build-out of athenahealth's space. • athenahealth is also collaborating with the Atlanta Beltline and Invest Atlanta in the improvement of the infrastructure connecting Ponce City Market to the adjoining Atlanta Beltline as part of a state Regional Economic Business Assistance (REBA) infrastructure grant. • The Seaholm Power Plant is a future urban oasis on the southwestern edge of downtown Austin. Built in the 1950s, the long- dormant power plant is in the midst of a $130 million re-development including office space, high-rise condos, retail shops, restaurants, and meeting spaces; all f'J surrounding a dramatic and '' z., L• ... accessible plaza. athenahealth isft the lead office tenant and is collaborating with the developer on the fit-out of its space. B. References and the contact information of other government officials, if any, with whom the Developer has dealt in connection with similar development projects athenahealth has been working with the Secretary of Housing and Economic Development, Gregory Bialecki, in its planned redevelopment of the Arsenal. Beyond Massachusetts, references at economic development agencies in other states and localities are available upon request; however, please bear in mind that these individuals represent jurisdictions in direct competition with the Commonwealth for new jobs. C. If the Economic Development Proposal is expected to be owned or carried out by more than one Developer, items 1 and 2 above for each Developer and an explanation of their relationship, their respective ownership interests and their respective roles in carrying out the Economic Development Proposal athenahealth is the sole Developer. Confidential 5 athena iealth D. Boundaries of the proposed Economic Development District (1) A textual description of the boundaries and a map showing boundaries The economic development district consists of much of the historic footprint of the Watertown Arsenal, with boundaries of Arsenal Street, Talcott Avenue, the northern and eastern boundaries of the Arsenal Park, Greenough Boulevard, Arsenal Street, the Charles River, the eastern border of the Watertown Yacht Club, North Beacon Street, and the western border of the Arsenal parcel: 'W. ; rff 4'�"-• � _ ;��,',,.ter. -'�,V.�h ►` :. T y � a , WE (2) Identification of the existing parcels of real property located within the proposed district Four parcels make up the economic development district. a. First, the Arsenal parcel, 311 Arsenal Street, Watertown Parcel ID 1301_1_1, consists of 29.4 acres of land containing historic buildings making up the Arsenal complex. Many of the buildings date to the nineteenth century, and most are currently used as office space. A copy of the record plan showing the Arsenal parcel and the Commander's Mansion parcel is attached as Exhibit 2; a legal description of the Arsenal parcel is attached as Exhibit 3. The buildings are listed in Table 1: Confidential 6 athena iealth Table 1: Arsenal Buildings Building Address Size (SF)' 37 200 Talcott Avenue 44,997 39 300 North Beacon Street 120,967 43 343 Arsenal Street 36,322 60 1 Kingsbury Avenue 11,265 97 400 North Beacon Street 20,417 117 3 Kingsbury Avenue 1,680 118 2 Kingsbury Avenue 5,760 131 400 Talcott Avenue 60,939 311 311 Arsenal Street 356,400 312 321 Arsenal Street 29,136 313 100 Talcott Avenue 65,750 b. Second, the historic Commander's Mansion, where the Commander of the Arsenal used to reside, is a separate parcel, located at 440 Talcott Avenue, Watertown Parcel ID 1301 1 2. This parcel consists of 7.2 acres of land surrounding the Commander's Mansion, which dates to 1865. ;Y ' R ' Note: Buildings' square footage(SF) is this document is generally based on leasable areas. Confidential 7 athena iealth c. Arsenal Park, Watertown Parcel ID 1301_2A_0, is a 13.2-acre park with recreational amenities including athletic fields, tennis courts, a playground, and a picnic area. It is located across Talcott Avenue, to the east of the Commander's Mansion and the Arsenal parcels, and north of Greenough Boulevard. 5 x a d. Fourth, the Charles River Reservation, including Squibnocket Park, is located across North Beacon Street and Greenough Boulevard from the other parcels. The land had historically been used by the U.S. Army as the Arsenal's waterfront. Part of it— Squibnocket Park—has since been converted into a park. The proposed economic development district will encompass the Charles River Reservation from the eastern edge of the Watertown Yacht Club to the Arsenal Street Bridge. h V t{, y Rr� (3) Identification of the current Owner of each parcel, and, to the extent any of the parcels are not currently owned by the Developer, evidence that the Developer has a reasonable expectation of acquiring the parcels not currently owned by the Developer and the expected cost of acquiring these parcels Ownership of the parcels is as follows: Confidential 8 athena iealth a. The Arsenal parcel is owned by Athena Arsenal LLC, a single-member limited liability company owned and controlled by athenahealth. b. The Commander's Mansion and Arsenal Park parcels are owned by the Town of Watertown. c. The Charles River Reservation, including Squibnocket Park, is owned by the Massachusetts Department of Conservation and Recreation. (4) Identification of the proposed Assessment Parcels upon which the different Project Components will be developed The only Assessment Parcel will be the Arsenal parcel. (5) Identification of the proposed Public Infrastructure Improvements The following proposed infrastructure improvements to Arsenal Street, North Beacon Street, Greenough Boulevard, Squibnocket Park, and the Commander's Mansion will open the Arsenal to the surrounding community and create a more dynamic and inviting campus environment. Arsenal Street is currently an automobile-focused corridor that is unwelcoming to pedestrians. The proposed streetscape improvements will take a "complete streets" approach to create an environment conducive to all transportation options. Improvements include adding landscaping and benches for beautification; relocation of utility equipment that is currently too close to the road; incorporation of a pervious paver divider with new street trees to ensure separation between vehicular traffic and pedestrians; bus stop curb work and shelters to improve bus rider safety and reduce traffic congestion; and building and improvement of sidewalks to improve pedestrian walking and safety. A schematic showing these improvements is attached as Exhibit 4. North Beacon Street requires improvements both to make the streetscape more accessible and to connect the Arsenal with Squibnocket Park across the street. Improvements include landscaping; construction and improvement of sidewalks, stairs and ramps to enhance pedestrian walking and safety; relocation of bike lanes from the roadway to an elevated surface; roadway improvements; drainage and storm water management infrastructure improvements; traffic and street lighting improvements to provide increased safety; and traffic control enhancements to improve traffic flow and pedestrian traffic. A schematic showing the improvements to North Beacon Street and Squibnocket Park is attached as Exhibit 5. Greenough Boulevard requires improved pedestrian and bicycle infrastructure. The intersections at both the Arsenal Street end and the North Beacon Street end also will receive improvements to enhance safety and improve traffic circulation. Squibnocket Park and Charles River Reservation improvements include landscaping improvements to beautify the area; construction of a canoe and kayak storage facility to enhance public access to the river and park; construction of Confidential 9 athena iealth dedicated parking spaces to enhance park access; construction of a wooden boardwalk or similar concept along the Charles River shoreline; construction of a canoe and kayak launch; and repair and restoration of the Arsenal seawall along the river between the North Beacon Street and Arsenal Street bridges. The Commander's Mansion, a historic structure, requires significant infrastructure improvements including landscaping improvements to beautify the parcel; building improvements to restore the Mansion to its former glory; and conversion of the old bunkers into a museum or similar space that tells the history of the Arsenal as part of Watertown. Arsenal Park, a Watertown park to the east of the Arsenal, needs improvements to connect it to the Arsenal and to enhance its recreational amenities, and particularly its athletic fields. New bike paths will also provide a connection from the Greenway Bike Path to the Charles River Reservation and the new bike paths along North Beacon Street. The Watertown Greenway, a rail-trail running along the former Watertown Branch Railroad right-of-way to the north of the Arsenal, will be connected with the Beacon Street and Charles River paths to enhance connectivity for cyclists and pedestrians. These infrastructure improvements will integrate the Arsenal with its neighborhood, boosting connectivity and encouraging smart growth in the surrounding areas. The following map shows the enhanced connectivity—particularly for cyclists and pedestrians—resulting from the project and its infrastructure improvements: :'J yi" f♦ II ?" t, ,jl11 •------------------------ - ,s,L. N '0I r I�' WIT ..}L - ,♦( .,'y J f -ANIMEI STOPS .4t WALKING R111i �XIXFPATH �#y"��.t `. r F T• yHr,�r N � ,F��.ISMPV S EMPLOYEE SHUTTLE 57DP a... -ENHANCED SIREETSLAPE• 'F STREET TREES.AMENITIES k B09T STREEIACTIYATIONUSE HB. � •SMALL SCALE RETAILANC EATERIES V.-I CULTURALIONE �N (�ARSENAL CENTER FOR ME ARTS rTyf OPEN GREEN SPACES fT '� Q ouIDD PERFORMAMCESPACE WINTER FARMER'S MARKET SUMMERFARNER'SMARKL7 Confidential 10 athena iealth E. Description of the Proposed Economic Development Project The project will transform the Arsenal and its surroundings into an integrated campus environment that attracts, engages and delights visitors (including potential employee recruits as well as prospective customers), employees, and community residents. Most of the existing buildings will be renovated, several new buildings will be constructed, and extensive landscaping and community features will be undertaken to create a harmonious environment. �111101 as +`�z 'Od. SAL #' s The following renderings provide a sense of athenahealth's vision. Each of the renderings is numbered and ties to the point of view from one of the numbered locations on the map below. Confidential 11 athena iealth •,K. .'ei9'�' ills '!E. '� � a.E INo E • 4 —. � � i !C Ell rMM �• 1_ �b 71 � - o Confidential 12 v � E11 I! ' - - +f' ,T�. •�,� �' Aix.: ,r 1. The view coming from the garage into the west side of the campus: 2. A campus green unfolds as you walk further into the complex: AR ELI LW: Confidential 13 3. The area outside of Building 311 is transformed from a vehicle zone into a safe and engaging 4. What was an k S� p 1 7" empty lay becomes vibrant outdoor work S • • • Confidential 14 athena iealth 5. Turn the corner to the historic smokestack and encounter a streetscape that engages employees and invites the community: fi , r �A ' H 6. Approaching the Charles River, restaurants flank the pathway: Confidential 15 athenahealth 7. Several walking paths follow the bluff's edge overlooking the Charles River: l� V.0- 8. A history garden welcomes visitors and guests, with artifacts from the industrial age of the original Arsenal: F - " i f si —r Confidential 16 athena iealth 9. The landmark South Gate that sat for years in disrepair becomes an active link to the Charles River: The proposed campus layout and building locations follow. Please note that buildings 4, 8, and 9 are envisioned as a later phase in the project and are being identified for illustrative purposes only; they are not included in the projected costs or the projected new tax revenues. 1 V�• ...`! 11` i •iEKRSGFWATEAT[IYiN `��• --" '- �. STAEFFAI r., �t �ss�. „�.._]1e._� �C� ,T�'�" ��•-r . F/ vj 311 'f 4 f I ........ ...... ".-' 3 y� kip . HR IMG 1 I— 1 f MiY�tr 0 `«4lstRlPT �tiw. GPEX GRffX SPIlLf - L��•ti. 39`!�' f 312 STN FFTGG1 PE ENHANCEMENT 9� 0 PARKING S� 37 r MF s BMPHITHEAIFA ,d• .�'. .� .___ -7 ...-_q A• - _ FLAGPOLES � m ���—� Z _i.�� ,_ • {� - I " d apo-o.L 60 131 -. �v 41 STAEEISLAPEENXA fL' B l FRcoN rgF(, ,:. �A�Eapd� Sta E5 f_ ------- t5'sE1BM1CN 0 NEWRONRIX i wNICOIARACCESS PROPOSED CAMPUS PLAN PR OPFETT LINE © EXIS71HORUILDINN � POIEN7IAL FONRE TRAFFIC MITIGATION Confidential 17 athena iealth (1) Each building, facility or other improvement to be constructed on each Project Component (2) The square footage of each building to be used as a commercial facility, and the expected allocation of the square footage among different types of commercial activity, and descriptions of the expected specific commercial uses of this square footage The following Tables 2, 3 and 4 list buildings planned for new construction, renovation, and no planned renovations, respectively. Table 2: New Construction Square Building Footage Completion Description 1 24,000 2017 Office space to be used by athenahealth; also contains multi-purpose support for a new amphitheater. 2 150,000 2020 Office space to be used by athenahealth. 3 4,500 2015 Destination-type restaurant building (designed in part by an established local operator) to be constructed along the southerly edge of the campus overlooking the Charles River. 4 TBD TBD Mixed-use space to be leased to various future tenants. 5 15,000 2015 Retail corridor building along the edge of the existing parking garage. Will be constructed to house various retail opportunities for local vendors and is intended to provide a public marketplace feel to the Kingsbury Avenue corridor. 8 TBD TBD Office building to be occupied by either athenahealth or other tenants. 9 TBD TBD Office building to be used by athenahealth. Parking 2017 Parking garage to be constructed on the western Garage end of the campus, thus allowing many of the existing surface parking lots to be converted to green space. 2 Approximate fiscal year of project completion Confidential 18 athenahealth Table 3: Renovation of Existing Buildings Square Building Footage Completion2 Description 39 113,000 2016 Currently comprised of 98,000 SF of office space plus vacant storage areas. Anticipated that athenahealth will occupy the total 113,000 SF of office space after renovations and fit-out are complete. 43 35,000 2014 Located along the frontage of Arsenal Street, the current location of La Casa de Pedro, a restaurant that occupies approximately 6,500 SF of space. Remainder of the building is undergoing renovations and fit-out construction to allow athenahealth to occupy the space. 60 15,900 2013 Office building where extensive renovations and fit-out construction have occurred allowing athenahealth to locate their marketing department in this former power plant. 118 5,028 2015 Currently consists of office space for several small commercial companies. Upon their departure, the office space will be renovated. This building will be occupied by athenahealth and the MDP Accelerator. 131 75,000 2016 Originally occupied by a variety of companies at the time of the purchase of the Arsenal by athenahealth. Currently two companies use approximately 25,500 square feet of office space. Remainder of the building will be renovated as office space for use by athenahealth. 311 377,000 2020 The most prominent building on the campus, dominating the frontage along Arsenal Street. athenahealth will renovate and fit out the vacated office space, eventually occupying 100% of this office space. 312 37,339 2017 The current and future home of the Arsenal Center for the Arts. Also contains a Panera Bread restaurant, Bright Horizons offices, and a vacant space formerly occupied by Watertown Savings Bank. Vacant bank space is being renovated for a future restaurant. 313 37,339 2020 Building consisted of a mix of vacant space and commercial office tenants. athenahealth will backfill vacated spaces upon completion of renovation and fit-out construction projects. Confidential 19 athena iealth Table 4: E isting Buildings — No Further Renovations Planned Square Building Footage Description 37 42,950 Currently houses Bright Horizons corporate offices; anticipated that this occupancy will continue. 97 20,417 Office building, completely occupied by athenahealth, currently houses athenahealth's executive offices, as well as other support staff. 117 1,680 Small building consists of office space occupied by the campus property manager, Related Beal Companies. It is anticipated that this occupancy will continue. (3) The number of condominium or apartment residential units to be included in any proposed residential facility, and the number of such units to be restricted as affordable to individuals and families with incomes at or below 80 percent of area-wide median income levels None. (4) Public Infrastructure Improvements The infrastructure improvements are described in Part D (5) above. (5) Any zoning amendments or relief that will be required to carry out the Proposed Economic Development Project and the status thereof athenahealth is seeking amendments to the Arsenal Overlay Development District (AODD) of the Watertown Zoning Ordinance. The requested amendments allow the implementation of a master plan to create a vibrant campus for athenahealth as well as the residents of Watertown. The amendments would modify the retail categories to allow small-scale retail uses through special permit, would increase height for new construction, and would clarify the permit process for the AODD. The amendments would also incorporate revisions made by the Watertown Arsenal Development Corporation at the time the site was first redeveloped and make ministerial changes. Once the AODD amendments are approved, athenahealth will seek a Campus Plan Special Permit for the project. After the Campus Plan Special Permit is approved, specific site plans consistent with the Campus Plan Special Permit are eligible for expedited permitting. A flow- chart showing the zoning and permitting process is as follows: Confidential 20 athena iealth AODD TEXT AMENDMENT CAMPUS PLAN SPECIAL PERMIT SITE PLAN REVIEW Submit Zoning Language I Apply for Campus Plan Special Prepare Site Plan Review I Permit Application 1 1 n Meet with Planin Staff and Staff Review of Plan and Design g Guidelines Staff Review to Determine if Director of Community Plan is Consistent with Development and Planning I HD Approved Campus Plan Detail:Location,Mass Yes I Elevation of All Proposed Buildings;Identify All Uses; Town Council First Reading Identify All Vehicle and Bicycle Planning Board Public Hearing Parking Areas;Prepare Design for Individual Projects Guidelines Planning Board Public Hearing NO Revise j rvo Approved? Revise Approved Planning Board Public Hearing NO Revise Approved yes Town Council Public Hearing NO Revise Prepare Site Plan for Individual Apply for Building Permit Projects Approved ---F I Prepare Campus Plan ; Yes Required to Amend Campus I Nu Construct Project Plan? F The AODD Amendments are currently in the Town Council Public Hearing stage of the zoning amendment process. It is anticipated that resolution on all matters related to the AODD Amendments will be reached soon. Regardless of the resolution of the matters currently under discussion, the economic viability of the project will remain unaffected because the renovations and almost all of the new construction are authorized under the existing zoning. The chief question at issue with respect to the AODD amendments is the height of the parking structure. (6) Any known environmental or other permitting that will be required to carry out the Project and the status thereof In order to complete the contemplated improvements, several layers of permitting will be required for the various elements. The following project permits are anticipated. Table 5: Town of Watertown Permitting Department Description Permit Status Town Council Arsenal Overlay Development District Zoning Under review Text Amendment Planning Board Campus Special Permit Not yet submitted Site Plan Review (several required) Not yet submitted Conservation Order of Conditions (several required) Not yet submitted Commission Public Works Utility Connection Permit (several required) Not yet submitted Health Food Service Permit (two required) Not yet submitted Confidential 21 athenahealth Table 5: Town of Watertown Permitting Department Description Permit Status Licensing Board Special Event Permits (several required) Not yet submitted Building Full suite of building permits/inspections Not yet submitted Liquor License Transfers (two required) Not yet submitted Table 6: Commonwealth of Massachusetts Permitting Department Description Permit Status Environmental Chapter 91 License Not yet submitted Protection Activity Use Limitation Review Not yet submitted Activity Use Limitation Amendment for Under review Recreational Use Conservation and Construction and Vehicular Access Permits Not yet submitted Recreation (several required) Site Plan Review for work within DCR Lands Not yet submitted Environmental Notice of Project Change Not yet submitted Policy Act Environmental Notification Form Not yet submitted Environmental Impact Report Not yet submitted Transportation Highway Access Permit Not yet submitted Historic Project Notification Form (One for each Ongoing Commission building impacted or proposed) Table 7: Federal Permitting Department Description Permit Status Army Corps of General Permit— Category 2 Not yet submitted Engineers Individual Discharge Permit Not yet submitted Individual Dredge Permit Not yet submitted Environmental Grant of Environmental Restriction Annual Ongoing Protection Agency Inspection NPDES Construction General Permit for Not yet submitted individual Projects Remediation General Permit for individual Not yet submitted Projects F. A detailed itemization of (1) The projected cost of each Project Component and the expected sources of financing available to fund such costs As explained above, there is a single project component, the Arsenal. At a high level, Table 8a outlines the projected costs in renovating the Arsenal (in thousands of dollars). In essence, construction costs total $206.6 million, and the costs of additional fixtures, equipment, furniture, etc. bring the total to $237.8 million. Confidential 22 athenahealth Table 8a: Project Costs By Year Total Machinery Furniture Technical / Construction & & Infrastructure Year (incl. Labor) Labor [1] Equipment Fixtures Upgrades Total 2014 $13,050 $4,568 $953 $1,452 $353 $15,808 2015 $14,000 $4,900 $975 $1,486 $361 $16,822 2016 $15,750 $5,512 $812 $1,238 $301 $18,101 2017 $56,200 $19,670 $1,471 $2,244 $545 $60,460 2018 $38,200 $13,370 $1,555 $2,371 $576 $42,702 2019 $23,800 $8,330 $1,543 $2,353 $571 $28,267 2020 $45,600 $15,960 $1,624 $2,477 $601 $50,302 2021 $0 $0 $1,056 $1,610 $391 $3,057 2022 $0 $0 $315 $481 $117 $913 � 2023 $0 $0 $466 $710 $172 $1,348 Total $206,600 $72,310 $10,770 $16,422 $3,988 $237,780 [1] Factored as 35% of Construction cost (wages only) Construction costs by building are listed in Table 8b: Table 8b: Project Costs by Building Building Projected Cost 1 $2,580,000 2 $45,000,000 3 $1,500,000 5 $2,500,000 Parking Garage $75,400,000 39 $21,411,000 43 $5,430,000 60 $2,470,000 118 $955,000 131 $4,579,000 311 $32,732,500 313 $12,040,500 Total $206,598,000 athenahealth anticipates financing this Economic Development Project from its own revenues. As a publicly-traded corporation, financial statements filed with the SEC are readily available. For reference, athenahealth's most recent annual financial report is attached as Exhibit 6. (2) the projected costs of each Public Infrastructure Improvement and the expected sources of financing available to fund such costs, including any funding being requested under St. 2006, c. 293 §§ 5 through 12, as amended. The itemization shall include financial statements or written financing commitments demonstrating that expected sources of financing are available for the project, or Confidential 23 athena iealth include a detailed explanation of the reasons any such financing sources have not yet been secured and the basis for believing they will be secured prior to the Secretary's approval of the Economic Development Proposal. The infrastructure improvements will be funded from the proceeds of I-Cubed bonds. Projected costs for the improvement project are listed in Table 9. Table 9: Public Infrastructure Improvements Cost Summary Area Total Arsenal Street $6,250,000 North Beacon Street $7,000,000 Greenough Boulevard $1,500,000 Squibnocket Park / Charles River Reservation $4,850,000 Arsenal Park $2,500,000 Commander's Mansion $2,250,000 Watertown Greenway $500,000 Total $24,850,000 A more detailed breakdown of the components and costs is attached as Exhibit 7. G. A detailed timeline for approval and completion of the Economic Development Project (1) The expected date of municipal approval (2) The expected date of final approval by the Secretary and the Agency athenahealth proposes an aggressive approval timeline so as to begin implementation of the project as quickly as possible, with Preliminary Application approval by November 21, 2014, municipal approval on December 9, 2014, and final approval by January 30, 2015. (3) The expected dates of commencement of construction and completion of each Project Component and the fiscal year Project Cost cash flows for each Project Component Renovation of the Arsenal is already underway. Project components, dates and cash flows for construction and renovation of the Arsenal buildings are presented in the following Table 10: Confidential 24 athena iealth Table 10: Projected Construction / Renovation Schedule Construction / Renovation Target Dates Fiscal Years Building Start Completion Cash Flow 1 (new) 2016 2017 $2,580,000 2 (new) 2019 2020 $45,000,000 3 (new) 2015 2015 $1,500,000 5 (new) 2014 2015 $2,500,000 Parking Garage (new) 2016 2017 $75,400,000 39 (300 N. Beacon Street) 2015 2016 $21,411,000 43 (343 Arsenal Street) 2013 2014 $5,430,000 60 0 Kingsbury Avenue) 2013 2013 $2,470,000 118 (2 Kingsbury Avenue) 2014 2015 $955,000 131 (400 Talcott Avenue) 2014 2015 $4,579,000 311 (311 Arsenal Street) 2014 2020 $32,732,500 313 (100 Talcott Avenue) 2014 2020 $12,040,500 Total $206,598,000 (4) The expected dates of commencement of construction and completion of each Public Infrastructure Improvement and the fiscal year Project Cost cash flows for each Public Infrastructure Improvement Table 11: Projected Construction / Renovation Schedule Construction / Renovation Target Dates Fiscal Years Area / Building Start Completion Cash Flow Arsenal Street 2014 2015 $6,250,000 North Beacon Street 2014 2016 $7,000,000 Greenough Boulevard 2015 2016 $1,500,000 Squibnocket Park / Charles River 2015 2016 $4,850,000 Reservation Arsenal Park 2016 2017 $2,500,000 Commander's Mansion 2015 2016 $2,250,000 Watertown Greenway 2015 2015 $500,000 Total 1 $24,850,000 (5) The expected dates of commencement and completion of any other construction-related activity to be undertaken in connection with the Economic Development Project. If the Developer is seeking approval of the Economic Development Project as a Phased Project, the detailed timeline must also clearly identify the different proposed phases of the Economic Development Project, including the Project Components and Public Infrastructure Improvements to be Confidential 25 athena completed in each phase, and the expected dates of commencement and completion of each phase There are approximately $15 million in additional projects over the next 6 to 8 years that will be included in the overall campus plan, ranging from landscaping upgrades, to campus utility enhancements, to glass-enclosed "winter gardens." These improvements have not been included in the revenue modeling for this proposal. H. Written evidence that the Economic Development Project would not happen or would not achieve the level of development, jobs or other economic activity contemplated by the Preliminary Economic Development Proposal without the Public Infrastructure Improvements and without the financing of all or a portion of the Cost of such Public Infrastructure Improvements under St. 2006, c. 293 §§ 5 through 12, as amended athenahealth competes with the world's leading technology companies for the best talent. As recently explained to the Boston Business Journal by CFO and CAO Kristi Matus, "[o]ur people are our most precious resource.... Selecting strategic sites in key urban markets across the country opens up possibilities and helps us attract exciting new talent and resources, as well as affords us opportunities to host more prospects and clients."3 To attract the best employees to the Arsenal, athenahealth must make a compelling case as to why it is better to work in Watertown than other desirable locations like San Francisco or Austin. To attract the best talent to the Arsenal, athenahealth needs to create an ideal work environment. Millennials want trust in leadership and each other, pride in their work, enjoyment of the people they work with, and fairness and transparency.4 They thrive in open environments where work is transparent and collaborative.5 Millennial culture values collaborative work and a free exchange of ideas in office settings that encourage face-to- face interaction. They want a welcoming and flexible work environment with a sense of fun. As a company with Massachusetts roots, athenahealth desires this type of campus environment at its historic Arsenal headquarters. It needs a public partnership to achieve its vision of an open campus that welcomes in the surrounding community and its attendant energy and new ideas. A renewed Arsenal campus does not make sense if it will be isolated. The proposed infrastructure improvements will integrate the Arsenal into the surrounding neighborhood fabric so that the vision of an exciting campus at the heart of a Health IT business cluster and neighborhood center can become a reality. I-Cubed funding is necessary for this public infrastructure to support and enhance athenahealth's growth at its 3 See Exhibit 8, "Athenahealth to add 600 employees with Georgia expansion," Boston Business Journal (Sept. 22, 2014). 4 See Exhibit 9, "How employee freedom delivers better business,"CNN.com (Sept. 21, 2011). 5 See Exhibit 10, "Millennial Motivations and the Impact on the Organizational Culture," Nova Journal of Humanities and Social Sciences,Vol. 2(4), 2014:1-4. Confidential 26 athena Arsenal headquarters; Watertown is not in a position to provide the necessary improvements. If the necessary public infrastructure improvements are unavailing, athenahealth's alternative is to attract the best and brightest to its other offices in more compelling locations, many of which already have agreed to provide economic development incentives for new jobs. Thus, without I-Cubed support for the necessary infrastructure improvements, the Arsenal transformation will not happen and will not achieve the level of development, jobs and other economic development activity athenahealth envisions and Watertown and Massachusetts desire. (a) The Redeveloped Arsenal Will Compete for Talent and Can Be the Foundation for a Health IT Business Cluster in Watertown The future is moving from suburban office parks and sealed-off corporate headquarters towards settings more conducive to innovation. athenahealth needs to create an ideal campus to be able to attract the best talent to Watertown. This renewed Arsenal campus will be the heart of a Health IT business cluster and entrepreneurial ecosystem in Watertown that will be a fertile environment for creating and implementing new ideas. athenahealth is expanding quickly and must hire the best talent in order to sustain its growth. A leading cloud-based Health IT service provider, athenahealth is perfectly positioned to reap the benefits of the shift from installed software to cloud-based platforms. In the words of a recent Forbes report, "Instead of a slow-moving fluffy white cloud image, the cloud computing industry should use a tornado—that might be a better way to visualize how fast cloud computing is growing today.,6 Key to attracting the best talent is providing the right kind of work environment that encourages interaction and collaboration. As an MIT PhD explained to the New York Times, "[p]hysical space is the biggest lever to encourage collaboration. And the data are clear that the biggest driver of performance in complex industries like software is serendipitous interaction."' A work environment conducive to innovation thus benefits both the employees and the company, by establishing an environment that appeals to millennials' desire for work-life integration, while also causing the type of serendipitous interaction that generates new ideas. In that same article, a Google executive explained that "success depends on innovation and collaboration. Everything we did was geared toward making it easy to talk," and adding that they sought to "remove[] psychological barriers to interacting...." The physical environment is thus critical to maintaining this type of flexible, innovative, and fun work environment that millennials desire.$ Millennials are flocking to out-of-state campuses that offer this kind of environment for creativity and productivity. Graduates from Massachusetts schools often leave the state for the California or Washington campuses of the nation's leading tech companies. Other 6 See Exhibit 11, "Cloud Computing: US Businesses will Spend $13B On It," Forbes(Jan. 29, 2014). See Exhibit 12, "Looking for a Lesson in Google's Perks," New York Times(Mar. 15, 2013). 8 For additional information about what millennials want and expect, see generally Exhibit 13,the University of North Carolina Business School Executive Development publication "Maximizing Millennials in the Workplace" (2012). Confidential 27 athena companies, like athenahealth's competitor Epic in Verona, Wisconsin (images below), have also adopted and implemented a similar campus strategy to compete in attracting, developing, and retaining key talent. Similar to these campuses, if completed as envisioned, the Arsenal will be attractive to millennials, offering options to cycle to the office, relieve stress through a midday activity, work in whatever environment is most productive, and socialize after work. The Arsenal will do these campuses one better, because it will integrate the campus into the fabric of the broader Watertown community thus imbuing the Arsenal campus with an urban vibrancy. athenahealth employees will interact not only with each other, but also with the employees of other businesses at the Arsenal and with the broader Watertown community. This potential for serendipitous interaction outside of the company is critical to athenahealth's strategy for the Arsenal. In the long-term, as a leader in cloud-based Health IT services, athenahealth's anticipated growth will bring more Health IT-related businesses to Watertown--indeed, its MDP Accelerator startup incubator has begun doing so already. athenahealth wants the Arsenal to become a magnet to other current and future Health IT and related businesses, whether established or startup. The key to this strategy is a virtuous cycle in which a deep market of skilled Health IT talent concentrates in Watertown, encouraging more IT/tech businesses to locate there, thus causing even more IT/technical professionals to concentrate in Watertown in a feedback loop of creativity and innovation. Creating the right environment to encourage tech talent and Health IT businesses to locate in and around the Arsenal is crucial to igniting the growth of the envisioned cluster. Confidential 28 athena (b) The Project Needs I-Cubed Support for Infrastructure Linking the Arsenal to Its Surrounding Community The transformation of the Arsenal is only possible with the public infrastructure improvements from I-Cubed. athenahealth is committed to the Arsenal and in any event will plan to keep its corporate headquarters there. However, its planned expansion adding 1,900 new jobs requires a compelling campus environment to compete in attracting and retaining the best talent. The Arsenal must be integrated with its surrounding community to facilitate the type of serendipitous interaction needed for a world-class tech campus. The infrastructure improvements will connect the Arsenal with its surroundings to draw Watertown into the Arsenal. Better streetscapes and bicycle paths will encourage the community (and athenahealth employees) to walk or bike to the Arsenal. Adjoining parkland improvements will make the Arsenal a more welcoming destination and will provide accessible outdoor space for employees and visitors. athenahealth's basic commitment to a presence at the Arsenal is clear based on its purchase of the facility and approximately $5 million of renovations thus far. But to transform the Arsenal into a campus that can compete for the best talent and serve as the center of a Health IT business cluster will require athenahealth to invest $237.8 million in the Arsenal and its offices therein. This investment does not make sense if the Arsenal will be an isolated compound. The public infrastructure improvements are needed to connect the Arsenal to its neighborhood. I-Cubed is the only way to achieve the required infrastructure. On its own, Watertown is not in a position to provide the public infrastructure investment. Without the infrastructure improvements, athenahealth will be handicapped in creating the right environment to attract the best talent to the Arsenal and develop a Health IT cluster. Instead, athenahealth will direct its job growth to other attractive locations as described below, and the transformation of the Arsenal and its attendant growth and development will not be realized. (c) Massachusetts is Competing with California, Georgia, and Texas for athenahealth Job Creation and Retention If the I-Cubed funding is unavailing and it thus no longer makes sense to go through with the extensive construction and renovations, athenahealth has ready alternatives to create jobs in desirable, dynamic urban locations in other states. In particular, athenahealth just opened or is about to open exciting new offices in Austin, Atlanta, and San Francisco that can readily accommodate the job growth and retention envisioned for the Arsenal. A recent press release summarizing the California and Georgia openings is attached as Exhibit 14. • The Seaholm Power Plant office will open in late 2014 or early 2015 in downtown Austin, Texas, alongside Lady Bird Lake. Austin is one of the most popular lifestyle cities for millennials, and athenahealth is the anchor office tenant in this mixed-use development that features office, residential, and retail spaces. Under a Texas Economic Development Agreement (copy attached as Exhibit 15), athenahealth receives a total of $5,000,000 in grant incentives upon completion of employment milestones. Redirecting job growth to Austin will accelerate payment of this Texas Enterprise Fund grant award. Confidential 29 athena • The Ponce City Market office is located in an up-and-coming location on the Beltline in Atlanta, Georgia, a city that is increasingly attracting talent to its urban lifestyle and relatively inexpensive costs of living. Furthermore, under the Georgia job tax credit program athenahealth receives $17,500 in refundable job tax credits for each job that it creates—having promised 500 new jobs, that means an award of $8,750,000. These Georgia job tax credits are not capped, and so athenahealth has every incentive to drive as much job growth to Georgia as possible; if it creates twice as many jobs it gets twice as many credits. A copy of the letter from the Department of Economic Development offering the job tax credits is attached as Exhibit 16. The credits are governed by Georgia Code Annotated section 48-7-40.1, and an explanation of the incentive from the Department of Community Affairs is attached as Exhibit 17. • The new San Francisco office at 50 Hawthorne Street in the up-and-coming South of Market area puts athenahealth at the heart of perhaps the hottest city in in the world for tech talent — a city that inherently provides the lifestyle amenities needed to attract and retain the best talent. In the near future athenahealth anticipates requesting California Competes tax incentives that will make this location even more attractive. (d) Conclusion: Improvements to the Infrastructure Surrounding the Arsenal Are Needed to Create the Right Environment to Attract and Retain Top-Tier Talent Without the additional infrastructure improvements provided by I-Cubed, the economic transformation of the Arsenal and its surroundings will not happen. athenahealth is willing to do its part to transform the Arsenal into a model tech campus, but only if the Arsenal can be a vibrant and welcoming center to the community. It needs governmental support for the public infrastructure improvements to make the total project viable by connecting the Arsenal with its surroundings. If such support is unavailable, then athenahealth will attract and retain talent at its other, more dynamic locations. While athenahealth would forgo its Economic Development Incentive Program (EDIP) credit award if it does so, the necessity of the right environment to attract talent is critical, and the benefits of the other locations would make up for the loss—particularly given other states' generous incentive packages. I. For each Project Component, the total number of jobs expected to be supported in each industry expected to be located at the Project Component and the expected average wage for each job in each such industry, the total retail sales activity by dollar volume and the total hotel rooms, projected room rates and projected daily occupancy levels, and the total number of construction jobs expected to be supported at each Project Component and for the Public Infrastructure Improvements, the expected average wage for each construction job and the amount expected to be spent for the purchase of construction materials in the Commonwealth for each Project Component and the Public Infrastructure Improvements, all with reference to recent government or industry sources used as the basis for the projections or to the actual experience, estimate or commitment of expected tenants or Owner of the Project Component athenahealth itself plans to create a total of 1,900 new jobs at the Arsenal over the next ten years. By FY-2023, athenahealth would employ almost 3,000 people at the Arsenal. Job Confidential 30 athenahealth creation will range between 120 and 180 jobs per year over the first five years, as occupied building space (assuming 10% vacancy) increases to over 521,600 SF. The annual range in employment growth increases to between 190 and 280 jobs in the following five years, due in part to the availability of a new office building, completed and operational in 2021. Projected athenahealth job creation, associated wages and building occupancy are listed in Table 12: Table 12: New Jobs Projection Level Basic Skilled Professional Management Annual Total Occupied Wage $38,000 to $52,000 to $71,000 to $139,000 to Total Jobs Bldg SF SF/Job Range $58,000 $78,000 $106,000 $208,000 1,047 1,047 200,912 192 2014 0 (5) 118 8 121 1,168 225,873 193 2015 (10) 5 157 0 152 1,320 275,131 208 2016 (30) 5 202 0 177 1,497 371,907 248 2017 0 6 166 0 172 1,669 433,453 260 2018 0 2 175 1 178 1,847 521,610 282 2019 0 6 181 0 187 2,034 521,610 256 2020 0 8 177 1 186 2,220 521,610 235 2021 0 8 198 1 207 2,427 666,006 274 2022 0 9 230 1 240 2,667 666,006 250 2023 0 11 269 0 280 2,947 666,006 226 Total 1 (40)1 551 1,8731 121 1,9001 2,9471 Occupied SF/Job assumes a 90% occupancy factor Using the low end of the wage range for jobs created or transferred from each employment level, and using a conservative factor of 1.5% to reflect annual wage inflation, an estimate of annual gross wages from the new jobs (cumulative) at athenahealth is set forth in the next table. The average annual wage starts at about $78,000 and increases to over $83,000 by 2023, due in part to inflation. By way of comparison, the average wage in Watertown in 2013 was nearly $67,550 or about 13.4% less than indicated for athenahealth. Based upon effective income tax rates for different pay levels, and including an inflation factor, approximately $6.8 million in gross income taxes would be generated in 2023 from the 1,900 new jobs created at athenahealth. Cumulatively, an estimated $32.5 million in gross income taxes would be collected over this 10-year period. Table 13 depicts the Arsenal gross wages by year from the projected job growth for athenahealth new employees for years 2014 through 2023: 9 The average annual wage in Massachusetts increased by 1.5% between 2012 and 2013 according to data from the Massachusetts Executive Office of Labor and Workforce Development or from $60,892 to$61,776. This factor is used as a proxy for inflation in this analysis. Confidential 31 athenahealth Table 13: Projected Wage Growth Inflation Adjusted Average Wage [1] Annual Gross Cumula- Basic Skilled Professional IManagement Wages Gross Income F Y tive Jobs $38,000 $52,000 $71,000 $139,000 (Cumulative) Avg Wage Taxes[2] 2014 121 $38,570 $52,780 $72,065 $141,085 $9,368,450 $77,425 $405,365 1 2015 273 $39,149 $53,572 $73,146 $143,201 $20,869,268 $76,444 $901,627 1 2016 450 $39,736 $54,375 $74,243 $145,349 $35,259,229 $78,354 $1,526,148 1 2017 622 $40,332 $55,191 $75,357 $147,530 $48,628,494 $78,181 $2,100,845 1 2018 800 $40,937 $56,019 $76,487 $149,742 $63,004,955 $78,756 $2,719,368 1 2019 987 $41,551 $56,859 $77,634 $151,989 $78,343,023 $79,375 $3,378,716 1 2020 1,173 $42,174 $57,712 $78,799 $154,268 $94,081,553 $80,206 $4,055,469 1 2021 1,380 $42,807 $58,578 $79,981 $156,582 $111,954,213 $81,126 $4,823,987 1 2022 1,620 $43,449 $59,456 $81,181 $158,931 $132,999,122 $82,098 $5,728,850 1 2023 1,900 $44,101 $60,348 $82,398 $161,315 $157,823,107 $83,065 $6,795,766 [1]Annual nflation fac or of 1.5% [2] Factor on an effective tax rates by pay level: 3.8% ($38,000);4.2% ($52,000); 4.3% ($71,000)and 4.5% ($139,000) Furthermore, ancillary retail and restaurant jobs will be created, as Table 14 presents. A projected 75 jobs would be created from the expanded retail and restaurant spaces at the Arsenal proposed to be completed by 2016. These jobs would generate an estimated $1.96 million in gross wages as shown in the following table. The gross income taxes would be nearly $66,100 annually. Table 14: New Ancillary Jobs Projection Effective Average Gross Income Use Gross SF SF [1] Jobs/SF Jobs Wage [2] Gross Wages Taxes[3] Retail 15,000 13,500 450 30 $35,250 $1,057,500 $39,128 Restaurant 7,358 6,622 150 45 $20,000 $900,000 $27,000 Tota I 1 22,3581 20,122 75 $1,957,500 $66,128 [1] Effective area based on a 90% occupancy factor [2] Average 2013 wage in Watertown for Retail and Acc/Food Sry inflated for 2 years (1.5%) [3] Based on effective tax rate by wage: 3.7% ($35,250) and 3.0% ($20,000) The next table, Table 15, presents projected retail and restaurant sales taxes. The retail and restaurant portion would have a variety of different specialty and niche vendors, as well as a proposed beer garden/restaurant and wine bar. Utilizing a conservative factor of $350/SF based on the effective size, gross sales are estimated at $7.0 million, and taxable sales at $3.0 million, as shown in the next table. Net sales tax is projected at $160,200 per year at build-out, when accounting for the 40% set-aside on retail sales tax. Confidential 32 athenahealth Table 15: Projected Retail and Restaurant Sales Taxes I Use I Retail I Restaurant I Total 1i Gross SF 15,000 7,358 22,358 Effective SF [1] 13,500 6,622 20,122 Sales/SF $350 $350 $350 Gross Sales $4,725,000 $2,317,770 $7,042,770 % Non-Taxable 75% 20% Taxable Sales $1,181,250 $1,854,216 $3,035,466 Gross Sales Tax $73,828 $115,889 $189,717 Less Set Aside ($29,531) $0 ($29,531) Net Sales Tax $44,297 $115,889 $160,185 [1] Effective area based on a 90% occupancy factor athenahealth plans to invest over $206.6 million over a seven-year period to renovate existing space, build a new parking garage and office building, as well as make numerous other improvements. This investment would create nearly 1,100 construction jobs over this 7-year period, which in turn would provide the Commonwealth with over $3 million in income taxes (cumulative). A total of $51.6 million of the construction cost is estimated for taxable materials, and it would generate over $1.9 million in net sales tax, excluding the $1.29 million in set-aside. The projected economic impact of these construction-related activities is presented in Table 16: Table 16: Projected Economic Impact-Construction Total Taxable Construction Cost for Labor #of Jobs Taxes from Building Gross Sales Less Set- Total from Year Costs [1] [2] Wages[3] Materials[4] Taxes Aside[5] Net Sales Tax Construction 2014 $13,050,000 $4,567,500 69 $191,835 $3,262,500 $203,906 ($81,563) $122,344 $314,179 2015 $14,000,000 $4,900,000 74 $205,800 $3,500,000 $218,750 ($87,500) $131,250 $337,050 2016 $15,750,000 $5,512,500 83 $231,525 $3,937,500 $246,094 ($98,438) $147,656 $379,181 2017 $56,200,000 $19,670,000 296 $826,140 $14,050,000 $878,125 ($351,250) $526,875 $1,353,015 2018 $38,200,000 $13,370,000 201 $561,540 $9,550,000 $596,875 ($238,750) $358,125 $919,665 2019 $23,800,000 $8,330,000 125 $349,860 $5,950,000 $371,875 ($148,750) $223,125 $572,985 2020 $45,600,000 $15,960,000 240 $670,320 $11,400,000 $712,500 ($285,000) $427,500 $1,097,820 2021 $0 $0 0 $0 $0 $0 $0 2022 $0 $0 0 $0 $0 $0 $0 2023 $0 $0 0 $0 $0 $0 $0 Total 1 $206,600,000 1 $72,310,000 I 1,089 I $3,037,020 $51,650,000 I $3,228,125 1 ($1,291,250)1 $1,936,875 1 $4,973,895 [1]Factored at 35%of construction cost for abor(wages,only) [2]Construction jobs factored on average wage of$66,400(MA 2013) [3]Based on an effective tax rate of 4.2%(2011) [4]25%of construction cost alloated for taxable materials [5]40%of Sales Taxes set is aside for MBTA(20%)and Education(20%) athenahealth estimates that a total of $31.2 million will be invested to upgrade machinery and equipment, furniture and fixtures, and the telecommunication infrastructure at the Arsenal over the next ten years, as shown in Table 17 below. Based on a series of assumptions as noted below, this investment would generate another $0.82 million in net sales tax over the 10-year period. Confidential 33 athena Table 17: Projected Economic Impact-Equipment Machinery& Funiture& Tech/Inf Total M&E, F Gross Sales Less Set Net Sales Year Equipment Fixtures Upgrades &F,and TIU Taxable [1] Tax Aside [2] Tax[2] 2014 $953,000 $1,452,000 $353,000 $2,758,000 $1,930,600 $120,663 ($48,265) $72,398 2015 $975,000 $1,486,000 $361,000 $2,822,000 $1,975,400 $123,463 ($49,385) $74,078 2016 $812,000 $1,238,000 $301,000 $2,351,000 $1,645,700 $102,856 ($41,143) $61,714 2017 $1,471,000 $2,244,000 $545,000 $4,260,000 $2,982,000 $186,375 ($74,550) $111,825 2018 $1,555,000 $2,371,000 $576,000 $4,502,000 $3,151,400 $196,963 ($78,785) $118,178 2019 $1,543,000 $2,353,000 $571,000 $4,467,000 $3,126,900 $195,431 ($78,173) $117,259 2020 $1,624,000 $2,477,000 $601,000 $4,702,000 $3,291,400 $205,713 ($82,285) $123,428 2021 $1,056,000 $1,610,000 $391,000 $3,057,000 $2,139,900 $133,744 ($53,498) $80,246 2022 $315,000 $481,000 $117,000 $913,000 $639,100 $39,944 ($15,978) $23,966 2023 $466,000 $710,000 $172,000 $1,348,000 $943,600 $58,975 ($23,590) $35,385 Total $10,770,000 $16,422,000 $3,988,000 \ $31,180,000 $21,826,000 $1,364,125 ($545,650) $818,475 [1]An estimated 70%of M, E, F, F&T investment are considered taxable [2]40%of Sales Taxes set is aside for MBTA(20%)and Education(20%) J. The Developer's estimate of the appropriate Displacement Factors for each Project Component, together with any data or explanation the Developer can offer to support such estimate athenahealth is an information technology business focused on providing business services to the medical industry by developing cloud-based software, networked knowledge, and back-office support. athenahealth wants to expand its corporate headquarters at the Arsenal, despite offers from or agreements with states incentivizing job growth in its other office locations. By staying and expanding in Massachusetts, athenahealth will create 1,900 high-tech jobs at the Arsenal over the next ten years and will create a vibrant, mixed-use campus with supporting amenities. This investment and expansion are necessary in order to attract highly educated and skilled employees who may otherwise work at athenahealth's other locations or similar high-profile tech businesses typically outside of Massachusetts. Also, given the nature of cloud-based business at athenahealth, approximately 90% of the sales revenue at athenahealth comes from outside of the Commonwealth, and the planned expansion will not materially change this. The legislation indicates that a displacement factor is not needed in those cases where a company would relocate its operation outside of Massachusetts if it was not for the project. This is the case for athenahealth's new jobs and the Arsenal redevelopment project, as explained in Part H above. However, for this analysis, a small displacement factor of 10% is used, which is supported by the export nature of the services provided by athenahealth. This factor would also account for potential displacement of any existing businesses at the Arsenal, should they not relocate elsewhere in Massachusetts when they leave the Arsenal as their leases expire. However, the likelihood of that appears remote based on evidence of former tenant relocation and expansion activity within the Commonwealth after leaving the Arsenal. For the retail/restaurant component, a 60% displacement factor is used, since these components will draw new sales revenue into the Commonwealth from new employees relocating from out-of-state to work at athenahealth, as well as the multiple out-of-state business vendors and customers calling on athenahealth. The redeveloped campus will also be more community-friendly allowing local residents to enjoy the new retail and Confidential 34 athenahealth restaurant offerings that were not available to them in the past, therefore creating a new market niche for these businesses to operate and capture increased spending potential. Additionally, any tenants that leave the Arsenal as athenahealth expands its space should not adversely affect the Commonwealth's revenues because such former tenants are extremely likely to relocate nearby, or at least within the Commonwealth. Table 18 identifies tenants that have left the Arsenal since athenahealth's acquisition in 2013; in all instances the tenants have remained in the Commonwealth. Indeed, in many instances the former tenants have expanded their offices at their new locations. Table 18: Former Arsenal Tenant Relocation Address Bldg Former Tenant Relocation I Address Comment 343 Arsenal St 43 Roundarch Isobar Boston 700 Atlantic Avenue, Suite 300 Expanded 2 Kingsbury Ave 118 Carlson Software Watertown 480 Pleasant St, Suite C100 Larger office 400 Talcott Ave 131 NetAge Solution Watertown 480 Pleasant St., Suite B200 Larger office 343 Arsenal St 43 EmAro Pharmaceuticals Watertown 480 Arsenal Street; Bldg 1 Renamed Forum (Apr 2014) 2 Kingsbury Ave 118 Optodot Corporation Woburn 100 TradeCenter, Suite G-700 Dec 2013 moved 100 Talcott Ave 313 Communispace Corporation Boston 290 Congress Street Expanded to 80,000 SF K. For each Project Component and based on 801 CMR 51.00, the DOR Guidance, the Commitments, and the Developer's estimate of the appropriate Displacement Factors for each Project Component, estimates of total state tax revenues, New Revenues and New State Tax Revenues to be generated from each Project Component of the Economic Development Project. For the purposes of these estimates, the Developer shall state the assumptions it is making with respect to the extent to which any portion of any Project Component for which the Developer does not yet have a Commitment will be leased or purchased by an entity that will or will not be relocating to the Economic Development District from elsewhere in the Commonwealth. Applying the displacement factors to the different components, the Arsenal project would generate over a projected $5.8 million in net new tax revenue at build-out as shown in Table 19: Table 19: Project Revenue Projection Summary athenahealth Retail Restaurant Total A\,erage Wage $78,000 $35,250 $20,000 Effective Tax Rate 4.3% 3.7% 3.0% Gross Income Taxes $3,354 $1,304 $600 $5,258 Displacment Factor -10% -60% -60% Displaced Taxes ($335) ($783) ($360) ($1,478) Net New Taxes $3,019 $522 $240 $3,780 #of Jobs 1,900 30 45 1,975 Subtotal $5,735,340 $15,651 $10,800 $5,761,791 Gross Sales Tax $73,828 $115,889 $189,717 Less Set-Aside ($29,531) $0 ($29,531) Net Sale Tax $44,297 $115,889 $160,185 Displacement Factor -60% -60% -60% Displaced Taxes ($26,578) ($69,533) ($96,111) Net New Taxes $17,719 $46,355 $64,074 Total $5,735,340 $33,370 $57,155 $5,825,865 Confidential 35 athena iealth L. Projected Debt Service schedule for financing of the Public Infrastructure Improvements, both in the aggregate and segregated by allocable Project Component, which is structured based on the following assumptions and parameters: (1) a total principal amount equal to the portion of the Cost of the Public Infrastructure Improvement requested to be funded under St. 2006, c. 293 §§ 5 through 12, as amended, and may include estimated costs of issuance of the Bonds up to three percent of said amount; (2) a minimum interest expense of five percent, payable semi-annually beginning in the fiscal year of the Commonwealth following the fiscal year in which the Bonds are issued; (3) issuance date or dates not more than three years prior to the expected completion of the related Public Infrastructure Improvements or portions thereof being financed with proceeds of the Bonds; (4) maximum term of 30 years from date of issuance; (5) principal amortization which results in annual Debt Service payments allocable to each Project Component after completion of the related Project Component that are not less than the annual Debt Service payable with respect to such Project Component in any subsequent year and (6) annual Debt Service payments allocable to each Project Component in any year prior to completion of the related Project Component that is at least equal to the total interest due and payable on the Bonds allocable to such Project Component. In estimating how the net new income and sales taxes generated from the Arsenal would support repayment of a $25 million bond, several financial assumptions for the bond and its repayment were made: • A $25 million bond issued by the end of Fiscal Year 2015; • Interest only (at 5%) payments for the first two years (FY-2016 and FY-2017); • Semi-annual amortized payments over the next 28 years (at a 5% fixed interest rate) including the reserve for the mandated 1.5 debt coverage ratio (DCR) (FY- 2018 through FY-2045); • All Arsenal economic development project benefits in the first two years (FY- 2014 and FY-2015) accrue to cover debt service in the later years; • Any cost associated with the issuance is NOT included; and • An annual inflation factor of 1.5% is used on wages and sales. The next table, Table 20, exhibits the annual net new revenue generated from the different components of the Arsenal project over a 32-year period from (1) athenahealth, (2) the retail/restaurant component, (3) the construction-related revenues, and (4) sales taxes from athenahealth equipment purchases, etc. In total, the Arsenal will generate over $198 million in net new tax revenue for the Commonwealth, and 95% of this revenue will be generated from the 1,900 new high-tech jobs athenahealth will create. Bond payments will total $72.6 million including the DCR reserve ($37.4 million). A surplus of$126 million would result after bond payments including the DCR reserve. As amortized bond payments with DCR ($2.50 million) start in 2018, the operations component ($2.54 million) is sufficient to exceed the payment plus DCR without relying on any construction-related revenue, or revenue from equipment purchases. In addition, over the first two years of interest-only payments, net revenue from operations are sufficient to cover payments without needing revenue from the construction, equipment components, or Confidential 36 athenahealth the accrued balance from the prior two years. At some point between 2022 and 2024, there would be sufficient surplus revenues to retire the bond. Table 20: Projected Debt Service Schedule Net New Revenue from ARSENAL EDP Total Net Surplus Surplus I-Cubed athena- Retail/Rest Material& New Bond Pymt (Loss)post Running Loan DCR Running I-C Yr F Y health Operations Construe-tion FIFE Revenue (+1.5 DCR) Payment Balance Balance Balance -1 2014 $364,828 - $314,179 $72,398 $751,404 - $751,404 $751,404 - - 1 0 2015 $811,464 $337,050 $74,078 $1,222,592 $1,222,592 $1,973,996 1 1 2016 $1,373,533 $379,181 $61,714 $1,814,428 $1,250,000 $564,428 $2,538,424 ($25,000,000) 2 2017 $1,890,760 $90,525 $1,353,015 $111,825 $3,446,126 $1,250,000 $2,196,126 $4,734,550 ($25,000,000) - 3 2018 $2,447,431 $91,883 $919,665 $118,178 $3,577,156 $2,502,932 $1,074,224 $5,808,774 ($24,576,146) $1,334,897 4 2019 $3,040,844 $93,261 $572,985 $117,259 $3,824,349 $2,502,932 $1,321,417 $7,130,191 ($24,130,834) $2,669,794 5 2020 $3,649,922 $94,660 $1,097,820 $123,428 $4,965,830 $2,502,932 $2,462,898 $9,593,089 ($23,662,979) $4,004,691 6 2021 $4,341,588 $96,080 $80,246 $4,517,915 $2,502,932 $2,014,983 $11,608,072 ($23,171,438) $5,339,588 7 2022 $5,155,965 $97,521 $23,966 $5,277,453 $2,502,932 $2,774,521 $14,382,593 ($22,655,013) $6,674,485 8 2023 $6,116,190 $98,984 $35,385 $6,250,559 $2,502,932 $3,747,627 $18,130,219 ($22,112,444' $8,009,382 9 2024 $6,207,932 $100,469 - $6,308,401 $2,502,932 $3,805,469 $21,935,689 ($21,542,407 $9,344,279 10 2025 $6,301,051 $101,976 $6,403,027 $2,502,932 $3,900,095 $25,835,784 ($20,943,513 $10,679,176 11 2026 $6,395,567 $103,506 $6,499,073 $2,502,932 $3,996,141 $29,831,925 ($20,314,299 $12,014,073 12 2027 $6,491,501 $105,058 $6,596,559 $2,502,932 $4,093,627 $33,925,552 ($19,653,231 $13,348,970 13 2028 $6,588,873 $106,634 - - $6,695,507 $2,502,932 $4,192,575 $38,118,127 ($18,958,697 $14,683,867 14 2029 $6,687,706 $108,234 $6,795,940 $2,502,932 $4,293,008 $42,411,135 ($18,229,002 $16,018,764 15 2030 $6,788,022 $109,857 $6,897,879 $2,502,932 $4,394,947 $46,806,081 ($17,462,366 $17,353,662 16 2031 $6,889,842 $111,505 - - $7,001,347 $2,502,932 $4,498,415 $51,304,497 ($16,656,919 $18,688,559 17 2032 $6,993,190 $113,177 $7,106,367 $2,502,932 $4,603,435 $55,907,932 ($15,810,697 $20,023,456 18 2033 $7,098,088 $114,875 $7,212,963 $2,502,932 $4,710,031 $60,617,963 ($14,921,634 $21,358,353 19 2034 $7,204,559 $116,598 - - $7,321,157 $2,502,932 $4,818,225 $65,436,188 ($13,987,563 $22,693,250 1 20 2035 $7,312,627 $118,347 $7,430,975 $2,502,932 $4,928,043 $70,364,230 ($13,006,204 $24,028,147 1 21 2036 $7,422,317 $120,122 - - $7,542,439 $2,502,932 $5,039,507 $75,403,738 ($11,975,164, $25,363,044 22 2037 $7,533,652 $121,924 $7,655,576 $2,502,932 $5,152,644 $80,556,381 ($10,891,928) $26,697,941 23 2038 $7,646,656 $123,753 $7,770,409 $2,502,932 $5,267,477 $85,823,859 ($9,753,853) $28,032,838 24 2039 $7,761,356 $125,609 - - $7,886,966 $2,502,932 $5,384,034 $91,207,893 ($8,558,162) $29,367,735 25 2040 $7,877,776 $127,494 $8,005,270 $2,502,932 $5,502,338 $96,710,231 ($7,301,940) $30,702,632 26 2041 $7,995,943 $129,406 $8,125,349 $2,502,932 $5,622,417 $102,332,648 ($5,982,122) $32,037,529 27 2042 $8,115,882 $131,347 - - $8,247,229 $2,502,932 $5,744,297 $108,076,945 ($4,595,488) $33,372,426 28 2043 $8,237,620 $133,317 $8,370,938 $2,502,932 $5,868,006 $113,944,951 ($3,138,655) $34,707,323 29 2044 $8,361,185 $135,317 $8,496,502 $2,502,932 $5,993,570 $119,938,521 ($1,608,070) $36,042,220 30 2045 $8,486,603 $137,347 $8,623,949 $2,502,932 $6,121,017 $126,059,538 $0 $37,377,117 Total $189,590,475 $3,258,788 $4,973,895 $818,475 $198,641,633 $72,582,095 $126,059,538 1 M. Any Commitments for any of the Project Components, together with a written statement as to whether any of the prospective tenants or purchasers making such Commitments are relocating jobs or commercial activity from elsewhere in the Commonwealth and whether any jobs being relocated from elsewhere within the Commonwealth to the Economic Development District would be relocated outside of the Commonwealth if the Economic Development Project were not carried out, including any compelling evidence supporting such an assertion that the Developer is able to provide. The Developer shall also produce a written description of the Developer's marketing efforts and the status of any active negotiations with potential tenants or purchasers. athenahealth is in a unique position as a rapidly-growing owner-occupier: unlike a traditional developer that must secure tenant commitments, athenahealth itself is in a position to commit to occupying more space and creating more jobs at the Arsenal. Furthermore, as explained in Part H above, the new jobs athenahealth envisions creating will otherwise be created outside of Massachusetts and do not constitute jobs relocated from elsewhere in Massachusetts. In addition to its own commitment, athenahealth has also started a new Health IT incubator, the MDP (More Disruption Please) Accelerator, which is bringing startups to the Arsenal on Confidential 37 athena iealth a short-term basis. A press release explaining the MDP Accelerator is attached as Exhibit 18. N. Written description of the proposed transfer of property interests in the Public Infrastructure Improvements after they have been completed. If the Public Infrastructure Improvements are expected to be conveyed to a governmental entity other than the Municipality, a vote of the legislative body or governing board of the governmental entity with the power to accept property on behalf of the governmental entity authorizing the acceptance of the Public Infrastructure Improvements and of responsibility for maintaining the same in the event that the Economic Development Proposal is approved by the Secretary. Most of the infrastructure improvements are being made on existing public land or streets and will transfer to the appropriate governmental unit upon completion. Improvements made on Arsenal Street, North Beacon Street, Greenough Boulevard, the Commander's Mansion, and Arsenal Park will transfer to Watertown upon completion. Public infrastructure improvements in Squibnocket Park and other parts of the Charles River Reservation will transfer to DCR upon completion. athenahealth is in the process of obtaining documentation from DCR acknowledging its willingness to accept the transfer of such infrastructure improvements. In a few isolated instances—principally the broadening of sidewalks and bike paths onto what had been fenced-off land—athenahealth will transfer the improvement to Watertown through an easement. O. Written statement of interest from the Municipal Officers confirming their preliminary support for the proposed Economic Development Project and their preliminary interest in pursuing the approval of the Economic Development Project by the Secretary, the Agency and the Municipality. A written Statement of Interest from Michael J. Driscoll, the Watertown Town Manager, is attached as Exhibit 19. P. Certification of the Developer confirming that: (1) The proposed Economic Development Project was not approved by the Municipality prior to September 7, 2006 This proposed Economic Development Project was not approved by Watertown before September 7, 2006. (2) The Developer has not received or applied for, and will not apply for, any public assistance for the project prohibited under St. 2006, c. 293 § 11(b), as amended The Developer has not received nor applied for any prohibited public assistance. It is true that athenahealth was awarded EDIP credits on June 26, 2013, which it has barely begun to utilize. These EDIP credits should not preclude I-Cubed funding, however, because the EDIP award preceded the application for I-Cubed funding. That is particularly the case here Confidential 38 athena iealth where the proposed project goes well beyond the economic activity that supported the EDIP award: Where the EDIP proposal had considered $89 million of investment, here athenahealth is proposing investing $237.8 million ($206.6 million of construction and $31.2 million of furniture, fixtures, and equipment), which is a net increase of$148 million. The I-Cubed statute is silent as to whether I-Cubed funding is available after EDIP tax credits have been awarded by the EACC. Moreover, the statute does not address the present scenario where the scope of the expansion project is materially increased from the time of the EDIP tax credit award. Consider the governing language: "[A] certified economic development project receiving financial assistance for public infrastructure improvements pursuant to this act shall not be eligible for ... the tax credit described in section 38N of chapter 63 of the General Laws...." Mass. Session Laws, Acts of 2006, ch. 293, § 11(b) ("Section 11(b)"). The law only explicitly denies eligibility for EDIP tax credits for a project that has received (- Cubed funding. It does not address whether I-Cubed funding is available after EDIP tax credits have been awarded, nor does it address whether different projects at the same location would be subject to the statutory limitation. Accordingly, athenahealth's 2013 EDIP award is not prohibited public assistance for the project. (3) Following the effective date of 801 CMR 51.00, the Developer has not applied and will not apply for any other public assistance funded by the Commonwealth for infrastructure improvements within the Economic Development District until any Bonds issued for Public Infrastructure Improvements therein are no longer outstanding, unless the Secretary approves of the Developer's applying for such other state infrastructure assistance athenahealth has not applied and will not apply for any other public assistance funded by the Commonwealth for infrastructure improvements within the economic development district until any bonds issued for public infrastructure improvements therein are no longer outstanding, unless the Secretary of the Executive Office of Administration and Finance approves of athenahealth's applying for such other state infrastructure assistance. Q. A description of each of the commercial establishments and residential facilities located within the proposed Economic Development District during the fiscal year prior to the application for funding under St. 2006, c. 293 §§ 5 through 12, as amended, and, if the Developer owns all or a portion of the property within the district, in the fiscal year prior to the Developer's acquisition of such property, whether any of such establishments or facilities are expected to remain within the district following the proposed Economic Development Project and the plans for relocating any of such establishments or the place of relocation of any of such establishments that have already been relocated, and the estimated amount of any state tax revenue generated from each of such commercial establishments in the prior fiscal year and in the fiscal year prior to the Developer's acquisition of such property, if applicable, together with the basis for such estimates. The Arsenal, owned by athenahealth, is a multi-building, historic complex situated on 29 acres on the eastern side of the Town of Watertown about 10 miles from downtown Boston. Confidential 39 athena There were and are no residential facilities. At the time of acquisition, athenahealth occupied nearly 30% (232,235 SF) of the rentable space (761,765 SF), and another two- thirds (508,821 SF) were subject to leases, and the remaining 4% was vacant. As shown in Table 21, twenty tenants currently occupy space totaling over 500,000 square feet. Table 21: Other Arsenal Tenants Bldg SF Building Tenant Occupied 39 HBSPC 112,688 43 La Casa de Pedro 6,466 43 Roundarch Isobar 28,579 117 Property Management Office 1,680 118 Watertown Eye Associates 1,104 118 Netwatch Systems 1,345 118 Carlson Software 2,579 131 Young President's Org 2,902 131 NetAge Solutions 4,200 131 Aliaswire 5,732 131 Scholastic Inc. 5,927 311 McGarr Services 2,500 311 Assoc. in Derm. 2,500 311 Mobile Messenger 19,786 311 Liason International 24,000 311 Bard, RAO + Athanas Cons 56,929 311 Boston Sports Club 57,926 312 Boston Bread (Panera) 4,500 313 1st Floor Center 2,933 313 Mobile Messenger 9,679 313 SEI Union (Local 509) 10,440 Mult Vacant 29,709 Mult Scholastic, Inc. 46,098 Mult Bright Horizons 98,325 Tota 1 538,527 Additionally, former tenants, all of which have relocated within the Commonwealth, were identified in Table 18 in Part J above. athenahealth employed approximately 1,050 jobs at its headquarters in 2013, or 5.5% of the Watertown employment base. Over the previous five years, employment levels at athenahealth doubled in size, helping to reduce the effects of the economic downturn in Watertown caused by the national recession. As athenahealth continues to grow as an owner-occupier, it may choose not to renew the leases of some tenants. Such displaced tenants are likely to relocate within the Commonwealth as explained in Part J above. R. Written evidence that the Economic Development Project shall conform to the general plan for the Municipality as a whole and any master plan for all or any portion of the Economic Development District, and an opinion of counsel to the Confidential 40 athena Developer confirming that the Economic Development Project shall conform with all applicable zoning, planning, land use, environmental and other laws and regulations of the Commonwealth and of the Municipality. athenahealth is committed to the new Watertown 2013 Comprehensive Plan'0 and sees the transformation of the Arsenal and its surroundings as part of the fulfilment of the Vision for 2025. Extensive time and effort have been expended to ensure that this project and proposal are aligned with the new Comprehensive Plan, including: • Planning, designing, constructing and managing construction and renovations to minimize adverse environmental impacts; Incorporating "green" building practices to encourage energy efficiency; • Incorporating future land use to emphasize commercial office and retail development; Enhancing public access and use of the area; • Providing more bicycle and walking paths; • Enhancing or improving existing streetscapes, crosswalks and traffic infrastructure, with an emphasis on "complete streets" principles; • Moving parking from surface lots to garages so that the surface space is transformed into "green" space; • Working with developers to create or enhance multi-use connections to increase physical and visual access to the Charles River and the Arsenal mall; Celebrating unique neighborhoods, historic and cultural heritage and diversity; and • Promoting active, healthy lifestyles. S. A description of the methodology for the allocation of Debt Service to each Assessment Parcel and for the calculation of any infrastructure assessments to be levied by the Municipality upon each Assessment Parcel in the Economic Development Project, or the manner of determining such methodology. The methodology may include allocation by length of frontage, or type of Project Component, including classification of Assessment Parcels among residential, commercial, industrial and open space uses, or by square footage of an Assessment Parcel or an Economic Development Project, or according to the value of the Assessment Parcel as determined by the assessor or assessors, or by such other method as the assessor or assessors of the Municipality determine will fairly allocate the Costs of the Public Infrastructure Improvements financed by the Bonds to the real estate in the Economic Development District, which may also include allocating Debt Service and assessing in proportion to the New State Tax Revenue projected to be generated from the Assessment Parcel. Prior to the Secretary's issuance of a Preliminary Letter of Approval, the Secretary must also receive written evidence of the Municipal Officers' and the Municipality's assessor's or assessors' approval of the proposed methodology for the '0 A copy of the most recent and nearly final draft of the plan (dated April 2014, and revised as of June 24, 2014)is attached as Exhibit 20. While technically not finalized, this document best reflects Watertown's current planning. In addition, a recent comprehensive plan presentation (June 18, 2014)is attached as Exhibit 21 to provide a summary of Watertown's new plan. Confidential 41 athena iealth allocation of Debt Service to each Assessment Parcel and, if necessary, of the aforesaid determination of the assessor or assessors of the Municipality. In the event that the methodology proposed requires the aforesaid determination of the assessor or assessors of the Municipality, the Secretary shall not issue a Preliminary Approval Letter until receiving written evidence of such determination by the assessor or assessors. As there is only one Project Component and one Assessment Parcel, the allocation is straightforward: the entirety of the debt service will be allocated to the Arsenal parcel. T. A statement as to whether the Developer will agree to have Assessment Parcels assessed to reimburse the Municipality for all or any portion of any Local Development Infrastructure Assistance payments the Municipality is required to make to the Commonwealth with respect to any Shortfall between Debt Service and New State Tax Revenues after the related Project Component has become an Occupied Project Component, or a description of any agreements made between the Developer and Municipality for the same purpose. athenahealth agrees to have the Assessment Parcel on the Arsenal assessed to reimburse Watertown in the event of a shortfall. U. A written description of the extent to which the Economic Development Proposal is consistent with the Sustainable Development Principles. The project embraces sustainable development principles by redeveloping and repurposing a historic industrial/office complex into an active mixed use campus. Application of the specific principles is as follows: (1) Concentrate Development and Mix Uses The project will concentrate development at the Arsenal, a historic complex near the center of Watertown that only 20 years ago faced significant environmental issues. In addition to office space, the renovated campus will include restaurants, retailing, a fine arts center, and numerous opportunities for recreation for public enjoyment, as well as that of athenahealth employees. By building walking and bicycle paths, the project will boost connectivity in the area, facilitating active transportation to nearby amenities. (2) Advance Equity The Arsenal is located within an Economic Target Area (ETA) designated by the Commonwealth. Additionally, the conversion of the Arsenal and its surrounds from a suburban-style office park to a dynamic campus center will enhance the neighborhood's access to recreational amenities and employment opportunities. (3) Make Efficient Decisions The project is designed to conform to the Watertown master plan and to the DCR's plan for the Charles River Reservation. Under the proposed amendments to Arsenal Overlay Development District pending before the Watertown council, permitting and approvals will Confidential 42 athena iealth be streamlined and will allow efficient transitions from concept through design and construction. (4) Protect Land and Ecosystems Open spaces will be enhanced and preserved as part of the project. Of particular note is the restoration and enhancement of Squibnocket Park and the rest of the Charles River shoreline that will be improved by this project, significantly increasing the quality and accessibility of recreational opportunities along the Charles River. (5) Use Natural Resources Wisely The project renovates and conserves all existing buildings and structures, thus avoiding - IL ;► unnecessary impacts to historic natural resources. Additionally, �► improvements drainage and s reductions in impervious * '' surfaces will reduce waste and improve water quality. Building materials recycling practices ; "+ also will be employed. The Charles River will realize water , quality benefits from the overall greening of the campus through the reduction of impervious surfaces and untreated storm water runoff. The Charles River and the surrounding landscapes - -�- will become a focal point for the Campus and the area moving forward. (6) Expand Housing Opportunities While the project does not itself include a residential component, the infrastructure improvements will enhance active transportation options thus making nearby housing opportunities more viable. athenahealth see this as an opportunity for employees to seek housing options within walking and cycling distance of the campus as a means to create a balanced work-life-play environment. (7) Provide Transportation Choice Much of the planned infrastructure improvements are concerned with providing transportation choice, such as construction or improvement of bicycle lanes and walking paths. It is anticipated that persons working at the Arsenal will increasingly choose active transportation options. (8) Increase Job and Business Opportunities Confidential 43 athenahealth The project will tremendously increase job and business opportunities, attracting and retaining high-pay, high-skill jobs to the state as the nucleus for an eventual Health IT business cluster. Additionally, the construction and retailing activities envisioned will provide jobs for those not as skilled. (9) Promote Clean Energy The project seeks to maximize energy efficiency. The new buildings incorporate LEED and "green roof" designs, and multi-building lighting and heating distribution techniques will be used with new construction. Renovations to the historic buildings will increase their energy efficiency as well. (10) Plan Regionally In redeveloping the Arsenal as a Health IT cluster, the project is a logical westward extension of the Cambridge/Somerville tech hub. Employees and community members will have ready access into Cambridge via the Mount Auburn bus or by bicycle (including the extension of the Hubway bicycle rental program along Arsenal Street). V. A statement as to whether the proposed Economic Development Project is located in an Economically Distressed Municipality or a Growth District, and, if it is, any supporting information or evidence thereof. The project is not in an Economically Distressed Municipality or a Growth District. W. A written description of the Developer's proposed competitive process for selecting a contractor or contractors for the construction of the Public Infrastructure Improvements to ensure timely and quality construction and cost effectiveness. Contractors will be selected through a competitive Request for Qualifications / Request for Proposal structured process. Contractors are pre-qualified for different types of projects (building construction, site work, landscaping, etc.). Once a project is partly through design development, contractors are brought into the project to assist with pricing, value engineering and pre-construction management services. This improves the efficiency of moving a project from design development through permitting and into construction phases and helps to eliminate cost overruns. X. A written statement, together with supporting information or evidence, as to whether: (1) The Developer is committed to make each Project Component at least LEED certifiable athenahealth is committed to designing and constructing all buildings to LEED certifiable standards. For renovations of existing buildings, athenahealth will seek LEED certifiable design and construction standards where commercially reasonable, but in some instances, these standards may be infeasible because of the age and historic nature of the buildings. Confidential 44 athena iealth (2) Any of the Public Infrastructure Improvements have been previously contemplated and designed by the Commonwealth or any of its agencies The DCR's 2002 plan for the Charles River Reservation (excerpt attached as Exhibit 22) includes the following objectives, all of which will be achieved by this project. • Improve the North Beacon Street corridor to make it more cyclist- and pedestrian- friendly and to provide sufficient parking; • Connect Squibnocket Park with the Arsenal with improved crosswalks; • Provide a landing for canoes and kayaks; and • Restore the Arsenal seawall along the riverfront adjacent to Greenough Boulevard. (3) Any of the Public Infrastructure Improvements are reasonably likely to make other sites available for economic development projects The Arsenal renovation is part of the general redevelopment of the Arsenal Street Corridor. The redevelopment of the Arsenal into a pedestrian- and community-friendly space will enhance efforts to redevelop nearby parcels. Y. A written description of the Developer's plan to secure the obligations of its selected contractor or contractors to complete each of the Project Components and the Public Infrastructure Improvements with payment, performance and lien bonds which, in the case of the Public Infrastructure Improvements being funded in whole or in part from the proceeds of the Bonds, provide for the Developer and the Agency to be co-obligees under such bonds, and to secure its own obligation to complete the portion of the Public Infrastructure Improvements not funded by Bonds under St. 2006, c. 293 §§ 5 through 12, as amended, or to provide other security satisfactory to the Secretary. athenahealth will contract with qualified contractor(s) for the construction and renovation of the Arsenal and for the construction of the public infrastructure improvements. The terms of athenahealth's contract with a contractor will secure that contractor's obligations to complete the specified scope of work. Standard performance and payment bonds will be required of all contractors to ensure completion of work to specified quality. Where the improvements are within the public rights of way and/or property under the control of a public agency, it will be the intent to name those public entities on the performance and payment bonds in addition to athenahealth to protect the interests of the public properties. Z. If all or any portion of the proposed Economic Development Project is located in a Convention Center District, a written statement of preliminary support for the proposed Economic Development Project from the Executive Director of the Massachusetts Convention Center Authority and confirmation of his or her preliminary support for transferring the New State Tax Revenues deposited in the Convention Center Fund to the General Fund in accordance with St. 1997, c. 152 § 10(c) (vi). The project is not located in a Convention Center District. Confidential 45 athena iealth DM US 54026680-48.066925.0026 Confidential 46 athena iealth Commonwealth of Massachusetts Infrastructure Investment Incentive Program Preliminary Economic Development Proposal Exhibits 14 ram. l # Ot$ _ Transforming a Historic Treasure into a Vibrant Campus, Health IT Epicenter and Community Space Submitted by athena malth Confidential A 2'khenahealth Exhibit 1 Confidential BEALS - ASSOCIATES INC. 2 THIRTEENTH STREET CHARLESTOWN,MA 02129 PHONE:617-242-1120 FAx:617-242-1190 LAWRENCE M. BEALS Mr. Beals has had more than 30 years of professional experience, including over 20 years of principal- level planning and engineering consulting, seven years of multi-disciplinary project management experience, and three years of regulatory experience. During that time, he has been involved in all technical aspects of projects including master planning, land evaluations, subsurface explorations, wetland mapping, soil mapping, septic system designs, hydrogeological analyses, environmental impact assessments, industrial and office park design, site plans, zoning changes, residential design, land surveys, construction inspections, hazardous material investigations, environmental permitting, cost/benefit analyses of design alternatives, and development management. PROFESSIONAL EXPERIENCE Beals Associates, Offices is Boston, Massachusetts and Stratham, New Hampshire 1990 to Present President and Founder of Land Planning and Engineering Consulting Firm Specializing in Land Planning, Civil Engineering, Land Surveying and Landscape Architecture. • Principal-in-Charge of a consulting firm with offices in Boston, Massachusetts and Stratham, New Hampshire. • Management responsibilities for overall quality control and project strategies for projects in both offices located in all New England states. • Advisor to corporations, institutions, governments, non-profit organizations, and individuals on land use alternatives, design alternative, development strategies, permit processes, construction administration, and real estate acquisition and disposition. • Direct personal involvement in the evaluation, design, permitting, and construction of literally thousands of commercial, industrial, residential, and retail development projects. • Advisor to municipalities and the Commonwealth of Massachusetts regarding the review of projects proposed by others and on land use matters regarding property owned by cities, towns, and the state. • Principal-in-Charge of large and complex multi-disciplinary design projects. Successfully designed, permitted, and constructed a 100 unit open space housing development on 400 acres of land. The site included over 35,000 linear feet of bordering vegetated wetlands, rare and endangered species, and thirteen vernal pools. The project was reviewed and approved by the Groton Planning Board, the Groton Conservation Commission, the Groton Board of Health, the Nashoba Associated Boards of Health, the Massachusetts Environmental Policy Act unit, the Massachusetts Natural Heritage, and the Massachusetts Department of Environmental Protection. • Advisor to a private land owner (seller) and a non-profit conservation organization (buyer) to determine the fair market value of a 300+ acre tract of land based on its development potential. This transaction exceeded $15 million and the analysis need to comply with IRS standards and be accepted by all parties involved in the transaction. Beals and Thomas, Inc., Westborough, Massachusetts 1984 to 1990 Principal and Co-Founder of Planning and Engineering Consulting Firm • Principal-in-Charge of a variety of projects including the firm's largest and most complex projects. • Management responsibilities for the firm which grew in five years to include 75 employees, 300 clients, 1,500 projects, and annual design fees in excess of$6.5 million. • Principal-level strategic and operational planning responsibility for overall quality control, project management coordination, financial management, and personnel management. LAND PLANNING CIVIL ENGINEERING - LANDSCAPE ARCHITECTURE. - SURVEYING Resume ofLawrence M. Beals Page 2 • Principal-level responsibility for coordination between major projects during a period of rapid growth in the real estate market with evolving and changing environmental regulations. • Public presentations to a numerous regulatory entities and testimony in court as an expert witness. • Master planning, design, and permitting of a 400-acre industrial subdivision with an ultimate build-out of three million square feet; over one million square feet have been successfully completed. • Telecommunication network planning, design, and permitting nationwide. • Design and strategic permit planning for numerous multi-family residential developments throughout New England. • Evaluation and master planning of under-utilized corporate assets including economic analyses and assistance during marketing and transactions. • Preparation of value engineering estimates and pro forma economic analyses of design alternatives to achieve the greatest return on investment. • Participated in high-level strategic planning with corporations and developers. • Developed design strategies to insure maximum return on investment with the security of buildable development programs. BSC Engineering, Inc., Boston, Massachusetts 1977 to 1984 Project Manager and Department Supervisor • Specifically assigned to the firm's most significant accounts involving complicated and short time frame projects. • Designed and permitted projects in support of rapidly growing high-tech firms and clientele. • Provided support on projects including feasibility studies, subsurface explorations, and hydrogeological studies. • Primary responsibilities included the assessment of undeveloped land, including wetlands and soils, determining realistic development alternatives, and preparing plans and information necessary to obtain the permits necessary to construct the development projects. Cobbossee Watershed District, Winthrop, Maine 1974 to 1977 • Sponsored by the Massachusetts Audubon Society's Environmental Intern Program to assist with a quasi-municipal watershed agency to assess land use impacts on water quality within a discrete watershed. • Upon completion of the internship, continued to work with the District on implementation of land use management strategies to protect and improve water quality. • Directly responsible for formulating and implementing a number of programs funded by the US EPA including sanitary surveys, agricultural practices surveys, water quality studies, and soil studies, and land use impact assessments. Expert Witness Experience • Provide expert testimony on a weekly basis with local agencies throughout New England including Conservation Commissions, Planning Boards, Boards of Health, and Zoning Boards of Appeals. Testimony has been provided at more than 1200 public hearings. • Provide expert testimony to the Department of Environmental Protection to support Superseding Orders of Conditions for appeals under the Wetlands Protection Act. • Represented the Groton/Dunstable School Board (Middlesex Superior Court) in an eminent domain land taking case as necessary to determine the development potential and value of a large parcel of land taken for construction of a regional high school • Represented the Town of Clinton (MA Land Court) in an appeal of a Planning Board decision denying a subdivision plan that was determined not to comply with the Town's regulations • Represented Central Steel versus the City of Somerville in an eminent domain case. • Represented a seller (Essex Superior Court) in a dispute with a buyer regarding the development potential of a property based on soils and wetland issues • • INC. Resume ofLawrence M. Beals Page 3 • Represented W. R. Grace in settlement discussions with the Town of Acton concerning development alternatives for land owned by W. R. Grace • Represented a land owner in Andover, MA in an appeal to DEP concerning the denial of a permit to complete a development based on wetland issues. • Represented ADESA, owners of the former General Motors plant in Framingham, in negotiating a resolution to a compliant filed by the MA DEP Strike Force regarding potential wetland impacts. • Provided written expert testimony in support of litigation (Norfolk Superior Court) by a land owner who had been denied a building permit based on soil related issues. Based on the written testimony, the case was settled without going to trial. • Provided written expert testimony to support litigation (Middlesex Superior Court) concerning the development potential and value of a parcel of land in Carlisle, MA based on soil and wetland conditions. • Provided written expert testimony to support an appeal (Middlesex Superior Court) of a variance granted by the Malden Zoning Board of Appeals by a landowner who was negatively impacted by the ZBA's decision. • Provided written expert testimony to support litigation (Essex Superior Court) involving the impact of a vernal pool on a property's development potential and its value. • Provided expert testimony in support of mediation to settle litigation between the Ipswich Savings Bank and the Town of Rowley concerning development alternatives for a large parcel of land involving primarily wetland, soil, and land planning issues. • Provided expert testimony (Middlesex Superior Court) in support of litigation by a land owner of a large development parcel against a buyer regarding prudent and reasonable development alternatives. • Provided expert testimony(Essex, SS. Land Court Department of the Trial Court) regarding the denial by the Town of Danvers of permits related to a proposed Highway Business development. • Provide expert testimony (Norfolk Superior Court) in two cases involving land takings by the MBTA as necessary for the re-construction of the Greenbush Line through the Towns of Cohasset and Hingham • Provide expert testimony (Plymouth Superior Court) in a case involving a land taking by the MBTA as necessary to construct compensatory wetlands as part of the mitigation for the construction of the Greenbush Line through the Town of Hingham LECTURES Harvard University Graduate School of Design Instructor- Professional Development Course: Site Evaluation, Planning, and Development This course has been taught nine times. Massachusetts Bar Association Site Engineering and Permitting: "What Every Lawyer Should Know". Salem State University Site Planning and The Wetlands Protection Act Executive Office of Communities and Development Building on the Margin - Improved Transportation Access and Subsequent Changing Land Uses Landlaw Land Use Conference Package Sewage Treatment Plants • • INC. Resume ofLawrence M. Beals Page 4 New England Appraisers Expo—Commercial Program Real Estate Development and Land Use Crystal Lake Conservancy Annual Meeting The Principles of Limnology and The Practice of Watershed Management EDUCATION St. Lawrence University Bachelor of Science, Biology University of New Hampshire Master of Science, Soil Science Harvard Law School - Continuing Education Program of Instruction for Lawyers - Negotiation Workshop Institute for Wetland & Environmental Education & Research, Inc. Plant Identification: Wetlands &Their Borders University of New Hampshire Stormwater Center Stormwater Porous Pavement Demonstration Workshop REGISTRATIONS Registered Sanitarian - State of Massachusetts Licensed Site Evaluator- State of Maine ARCPACS, Certified Professional Soil Scientist PROFESSIONAL SOCIETY MEMBERSHIPS Urban Land Institute National Association of Industrial and Office Parks American Registry of Certified Professionals in Agronomy, Crops, and Soils Community Involvement Town of Winchester-Zoning Board of Appeal Winchester Boat Club—Commodore, Director, and Chair of Long Term Planning Committee Updated: September,2012 BEALS - AsSOCIATESINC. INC. 2 THIRTEENTH STREET CHARLESTOWN,MA 02129 PHONE:617-242-1120 FAx:617-242-1190 TODD P. MOREY, P.E. PROFESSIONAL EXPERIENCE Beals Associates, Inc., Boston, MA 2011- Present Vice President - Engineering • Provide project oversight including design and permitting efforts for projects ranging in cost from less than $500,000 to over$500,000,000. • Develop and coordinate scope of service and fee proposals including budget analysis and workload tracking. • Present project objectives and design features to public agencies during permitting negotiations. • Provide client-regulatory interface during project planning and design. • Develop and maintain relationships with overall project team members across wide spectrum of professional disciplines. • Key projects include Boston Landing, Beauport Gloucester Hotel, athenahealth Master Plan Landtech Consultants, Inc., Westford, MA 2010—2011 Director of Engineering • Oversee and direct the design, permitting and construction observation of a variety of Civil Engineering Projects. • Act as primary client liaison for all services contracted through firm. • Identify and coordinate outside consultants for projects needs that cannot be handled in-house. • Coordinate engineering needs with in-house survey staff. • Develop project budgets and schedules and integrate these into project proposals for presentation to prospective clients. • Present projects to local, state and federal agencies for public input and permit approval hearings. Lowe's Home Centers, Inc., Sandown, NH 2004-2009 Senior Site Development Manager, Northeast Region • Developed project teams of engineering and legal consultants to provide efficient and timely services allowing projects to remain within budgetary and scheduling constraints. The results of this effort culminated in numerous successful new store developments in Maine, New Hampshire and Massachusetts. • Developed and maintained project budgets ranging from $12 Million to $30 Million. • Developed overall project scheduling requirements. • Successfully presented company goals and project plans to municipal, state and federal agencies with overwhelmingly positive unsolicited feedback. • Directed due diligence efforts on over 45 locations throughout New England region to determine suitability of locations for development. • Coordinated with private developers to ensure company goals for budget and schedule were maintained in shopping center developments. • Communicated permitting, development and construction issues to operations and construction groups within the company. LAND PLANNING • CIVIL ENGINEERING • LANDSCAPE ARCHITECTURE • SURVEYING Todd P. Morey Resume Page 2 of 2 Deluca Hoffman Associates, Inc., South Portland, ME 1994-2004 Senior Project Manager(2000—2004) • Created and presented scope and fee proposals to prospective clients for engineering projects throughout New England and New York. • Directed all aspects of in-house design work with attention to detail, budget, and manpower allocations. • Contracted with outside consultants for services not available in-house. • Responsible for all final design and permit applications for assigned projects. • Project management for civil engineering projects involving onsite and offsite work including civil/site work, storm water management, natural resource protection, utility upgrades and extensions, roadway design and construction, and environmental remediation. Project Engineer(1996 -2000) • Responsible for preparation of final design, permitting and construction plans for projects throughout New England and New York. • Prepared permit applications for local, state and federal levels. • Prepared construction contracts and specifications for pre-bidding services. • Presented project plans to municipal agencies. Design Engineer(1994- 1996) • Prepared preliminary design and permitting plans for variety of civil engineering projects. • Designed construction details for non-standard detail projects. • Compiled construction specifications. • Ran computer modeling software to support overall project designs. EDUCATION Continuing Education—2005 to Present— 150 Additional PDH Units Earned Bachelor of Science, Civil Engineering, University of Massachusetts, Amherst, MA Associate of Science, Engineering Technology, Greenfield Community College, Greenfield, MA PROFESSIONAL CERTIFICATIONS Professional Engineer- Massachusetts, New Hampshire, Maine Member, American Society of Civil Engineers National Council of Examiners for Engineering and Surveying — Current Record COMMUNITY ACTIVITIES Member—Waterboro Zoning Board of Appeals 1996— 1998 Member—Waterboro Planning Board 1998—2002 Coach —Sandown Baseball 2009 - present BEALS - ASSOCIATES INC. athenahealth Exhibit 2 Confidential yutxr.Ngroy d OVA. Ufh MllNtl��b YL�Gl�f� '• ra•rYr9llCs�iq 1.� Ow- , ;*- - — 1 Corr- �.,t r r _fr .rr, l nv....�v.r•. — f wm 7 Rwa,wo ,�,, • ! d we rtanr.W OCtM '. a 7�b aY-lrwfwsC Awhkj r,I,lt S! • �� ln+rr wafsl R +r.■oYr m1 mama woQ R_. I �Irl s� lap1a 1. i :au5l '�.� • ].rm _- ,'�3,..1 A4!L%ogw•MrA: WrL6�W 0441150�1 TE1110rL MwO.NYnL pIIII �.. +��5 ? -�:� I�s,yiv `b. y fpa w■K* rw,/J1�1 LOTDM. ! oD I I,: jw i!K MM7 S CHARLES D A FJ.SFCUS MAP 4rA-X4X1,sr Punm�n �* sore ryptJp i. lrn+aurri mmKoo rn Ie/F t5vn.•.woC �� m R Jowl awi' Auer s� ROAD RpAU - W DATE IVER Dean• McKenzie) Inc. _�n�=r r pole —Kr: __-h ` _ ,., ru,l s une r�ICIVklJr4 rwEWourcrri iVn +, l J rat[ a ra�Jm tir ry.�x Jw of--d �� ,{ IRrN[?If OWk GO�R'nrG a0.IIC. Bi Y RPY1WN AG{S.Si1C►/ yu51CkIV5ETR ! i a140�... 9Q668 Confidential athenahealth Exhibit 3 Confidential EXHIIBIT A LEGAL DESCRIPTION A certain parcel of land with the buildings thcrcun situated on the Southerly side of Arsenal Street and the northerly side of North Beacon Street in Watertown, Middlesex County, Massachusetts shown as"Lot 1" on a plats titled"Plan of Land in Watertown, Massachusetts"prepared by Dunn McKenzie, Inc., Norfolk, Massachusetts, dated June 19. 1997 prepared for the town of Watertown", recorded with the Middlesex South District Registry of[seeds (the "Rcrzistrv") on August 5, 1998 as Plan No. 832 in Book 28930. Page 478,bounded and described as follows: Beginning on the southerly sideline of Arsenal Street at the Northwesterly corner of Arsenal Associates Land being the Northeasterly corner of Lot 1 on the easterly sideline of Talcoct Street (a private road); thence SOUTH 130 53'-39"WEST a distance of 737.70 feet by Arsenal Associates and Town of Watertown land to an angle in said property;thence SOUTH 110 42'-25"EAST a distance of 2.67 feet to a corner of Lot 2;thence NORTHH 760 03'-07"WF,ST a distance of 438.% feet through a granite bound to a Hex-rod (set)for a corner,thence SOUTH 1911 17'-48"WEST a distance of 125.38 feet to an Iron Rod(set)for a corner;thence SOUTH 500 21'-36"WEST a distance of 163.25 feet to an Iron Rod (set) at North Beacon Street on curve for a comer,thence NORTHWESTERLY on a curve to the right having a radius of 586.00 feet, an arc distance of I60.79 feet to the point of tangency;thence NORTH 200 36'-23"WEST a distance of 292.07 Feet to the point of curvature;thence NORTHWESTERLY on a curve to the left having a radius of 627.44 feet, an arc distance of 465.40 foci to the point of tangency;thence NORTH 6311 06'-20"WEST a distance of 707.76 feet to a slight angle break;thence NORTH 630 43'50"WEST a distance of 101.12 feet to a corner of land of Burnham Manning Post #1105-Veterans of Foreign Wars of U.S.A., Inc. the last five courses being by North Beacon Street;thence NORTH 250 59'-00" EAST a distance of 435.94 feet to a comer of Arsenal Stint;thence SOUTH 690 39'-19"EAST a distance of 1455.13 feet to a Stone Round at a slight angic break;thence SOUT11680 05'-21'-EAST a distance of 451.60 fed to a comer at the point and place of beginning,the last two courses being by Arsenal Street. Lot I contains 1,281.841 square feet(29.42 Acres)of land,more or less,according to said plan. Confidential Said parcel is conveyed together with easement rights located on Lot 2 that benefit Lot I as set forth in an Access, Parking and Utilities Cross-Easement Agreement by and b lween Charles River Business Center Associates, LLC.and the"Town of Watertown,dated December 1, 1999 and recorded with the Registry at Book 29502,Pagc 125,as affected by Relocation of Access, parking and Utilities Easement dated March 27, 2000 and recorded with the Registry at Ho*k 31422, Page 247, as further affected by Firth Amendment to Access. Parking and Utilities Cross-Easement Agreement made as of September 24,2002 recorded with the Registry in Book 36947,Page 3,as the same may have been amended from time to time. 6 Confidential athenahealth Exhibit 4 Confidential - - � LEXUS Ar5a,a1 on Ih@ Chertw DEALERSHIP' STR E ETS CA P E MIKE PATH BY DTHEMRS PROPOSAL BY OTHERS .t _ LIMIT OF WORK V DESIGN DEVELOPMENT I s PROVIDE PEDESTA WY AMENITIES AT NEW GARAGEFAfUDE y REMOVE EXISTING SIDEWALK AND INSTALL 1 NEW SO'BUS PULLOUT � — i INSTALL 12'X& J _ BUS STDP SMELTER - PROPOSED PARKING ARSENALSTREET STRUCTURE SCAPE �r� 1 of 4 Confidential Arm"on CIe Charles LEXUS DEALERSHIP �.,>o,t.. •M . hu&wo.8% LIC STREETSCAPE PROPOSAL I nara. ww#n BY OTHERS • �� -- BIKE PATH INSTALL 4'P *LS PAVFRS, 1 ---- —_ _L 10 CONCREW Pw S-I", Wrtf.���_ 3 i KW 4'AY.ANp r� r��— — � Nwr � � LATrOBC�WE } 0 on. + + LIMIT OF wGRK DESIGN DEVELOPMENT IS THE FACE rl OF BUILDING INSTALL 4'CONCRETE WALKWAY ADJACENT TO ! BUILDING WITH DRAINAGE INSTALL PARK REMOVE AND RESET/REPAIR INSTAU STREET ACCOMMODATICNS BENCHES ITYP.1 OR REPLACE IRON PERIMETER TREES(n'P.I FENCE ALONG ENTIRE SITE PERIMETER IRSTALL STREET I BUILD NG 311 LIGHTING ALONG STREET AT WON CLNTLR LIMIT OF WORK ARSENAL STREET 15 DIE FACE SCAPE 1 _ OF BUILDING I ,� - -- 2 OF 4 Confidential m _ (AWKIR . Arsenal on the ChaRee atlr[w.An�rL uc =A,C"" [.Pla>m ix .I WJdrw 3 icy rr - INSTAWYEW I _R � _ .� ST(pR►jEE��E��T IWTING r + AL �Lptm STALL I TREES O '.. LIMIT OF WORD{ y{ p. ,., DESIGN G�' ~ ONO DEVELOPMENT INSTALL PARK - RENCkES OWj 1 , 1 EMIR❑ING TRANSFORMERS + TRANSFORMERS - LIMIT OF WORK INSTALL (TYP.OF:3) 6 THE FACE TIIERMOPLASTIC ORR REPLACE IRON PERIMETER RAND RESET/REPAIR OF INJ DING CROSSWALKFENCE ALO - — •� BUILDING 311 PERIMfETERNG ENTIRE SITE = i ARSENALSTREET SCAPE 3 OF 4 Confidential Arsenal On She Charles - ,r Dv," An—$I I A9[nr 21 awb�hmwm ,•� AL &AMUL r R(5by1 l-[.7aG 47 1 ;j}U55TQF'SIfF,1.TER �. I�,$TALL+lEVa STREET LIGMTING — WALL SIRE ALONG STREET TREES fiYP,I f M Ok CENTLR OF WojRjj r� ARM DESIGN DEVELOPMENT LIMIT Of WORN REMOVEA.VORESETIREPAIR • t " IS THE FACE OR REPLACE IRON PERIMETER BUILD BUILDING G 43 Of BUILDING FENCE ALONG ENTIRE SITE PROPOSED PERIMETER SHEDS BUILDING 3 13 ARSENAL STREET 1k ` SCAPE 4 OF 4 Confidential athenahealth Exhibit 5 Confidential V` � `� nKrlPN rp1•_�� fin'jw <pL�aq �trrWN—Ma�r r BUILDING 117 -- pRp�pNG i OhA Of WORK t wwi��4. �•n�4wr•r ���'�.q� w�N ��O•�it VrYI�rP �' • • - • • • • • • • • . a • • • • • • i • a • -- • .� o a DESIGN _ - DEVELOPMENT 4 1 J - �4� � 1w�wr�+• I� T wl+R .. • r NORTH BEACON STREET SCAPE c-1 00 Confidential Arsartal on the Charles - ,rr�� 00 r ONNt* �`NG� �1]IL�IN�39 o Q��Qp5E� 0a� {(W BUllpl��'39 0MI'[ 41 'sue. DESIGN • �.r B1 DEVELOPMENT ,,- - pr _.. NORTH BEACON LU STREET SCAPE f-. C-200 Confidential f Arsenal on M9 Charkm 7DWA's WOW—IA- s ` iwrro�aupt.rJ i DOG S9 ti \ '` d SAD URE SUNVOG 39 _ r 0 Mai il v!i,a.� �[, - 7,�� , DESIGN } ,.'o� �' ` "'•' yf I DEVELOPMENT low ,, `•{ , ram" 4 .. ....- t x' ,t • ago s' 1 • i r ' # IL• NORTH BEACON r 40 STREET SCAPE - c-300 Confidential A 2'khenahealth Exhibit 6 Confidential Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington,D.C.20549 Form 10-K (Mark One) 0 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31,2013 or ❑ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-33689 athenahealth, Inc. (Exact name of registrant as specified in its charter) Delaware 04-3387530 (State or other jurisdiction of (I.R.S.Employer incorporation or organization) Identification No.) 311 Arsenal Street, Watertown,Massachusetts 02472 (Address of principal executive offices) (Zip Code) 617-402-1000 Registrant's telephone number,including area code Securities registered pursuant to Section 12(b)of the Act: Title of each class Name of each exchange on which registered Common Stock,$0.01 par value The NASDAQ Stock Market LLC Securities registered pursuant to Section 12(g)of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act. Yes 0 No ❑ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)of the Act. Yes ❑ No 0 Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days. Yes 0 No ❑ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,if any,every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(§232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit and post such files). Yes 0 No ❑ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K(§229.405 of this chapter)is not contained herein,and will not be contained,to the best of registrant's knowledge,in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ❑ Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,or a smaller reporting company.See the definitions of"large accelerated filer,""accelerated filer"and"smaller reporting company"in Rule 12b-2 of the Exchange Act. Large accelerated filer 0 Accelerated filer❑ Non-accelerated filer❑ (Do not check if a smaller reporting company) Smaller reporting company❑ Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Act). Yes ❑ No 0 The aggregate market value of the common stock held by non-affiliates of the registrant was approximately$3,086,579,443 based on the closing price on the NASDAQ Global Select Market on June 28,2013. At February 5,2014,the registrant had 37,381,347 shares of common stock,par value$0.01 per share,outstanding. DOCUMENTS INCORPORATED BY REFERENCE Part III of this Form 10-K incorporates information by reference from the registrant's definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended December 31,2013. Table of Contents INDEX PART Item 1. Business I Item 1A. Risk Factors 14 Item 1B. Unresolved Staff Comments 35 Item 2. Properties 35 Item 3. Leeal Proceedines 35 Item 4. Mine Safetv Disclosures 36 PART 11 Item 5. Market for Reeistrant's Common Eauity.Related Stockholder Matters and Issuer Purchases of Eauitv Securities 37 Item 6. Selected Financial Data 40 Item 7. Manaeement's Discussion and Analvsis of Financial Condition and Results of Onerations 42 Item 7A. Ouantitative and Oualitative Disclosures About Market Risk 57 Item 8. Financial Statements and Sunnlementary Data 58 Item 9. Chances in and Disa¢reements With Accountants on Accountin¢and Financial Disclosure 58 Item 9A. Controls and Procedures 58 Item 9B. Other Information 61 PART III Item 10. Directors.Executive Officers and Coroorate Governance 62 Item 11. Executive Compensation 62 Item 12. Security Ownershiu of Certain Beneficial Owners and Manaeement and Related Stockholder Matters 62 Item 13. Certain Relationships and Related Transactions.and Director Indeoendence 62 Item 14. Princinal Accountne Fees and Services 62 PART IV Item 15. Exhibits.Financial Statement Schedules 63 SIGNATURES 64 i Table of Contents PART SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA This Annual Report on Form 10-K contains forward-looking statements.All st atements other than statements of historical fact contained in this Annual Report on Form 10-K are forward-looking statements,including the combination or integration of newly acquired services;expanded sales and marketing efforts;changes in expenses related to operations,selling,marketing,research and development,general and administrative matters,and depreciation and amortization;liquidity issues;additional fundraising;and the expected performance period and estimated term of our client relationships,as well as more general statements regarding our expectations for future financial or operational performance,product and service offerings,regulatory environment,and market trends.In some cases,you can identify forward-looking statements b y terminology such as"may,""will,""should,""expects,""plans," "anticipates,""believes,""estimates,""predicts,""potential,"or"continue";the negative of these terms;or other comparable terminology. Forward-looking statements are only current predictions and are subject to known and unknown risks,uncertainties,and other factors that may cause our or our industry's actual results,levels of activity,performance,or achievements to be materially different from those anticipated by such statements. These factors include,among other things,those listed under"Risk Factors"and elsewhere in this Annual Report on Form 10-K. Although we believe that the expectations reflected in the forward-looking statements contained in this Annual Report on Form 10-K are reasonable,we cannot guarantee future results,levels of activity,performance,or achievements.Except as required by law,we are under no duty to update or revise any of such forward-looking statements,whether as a result of new information,future events,or otherwise,after the date of this Annual Report on Form 10-K. Unless otherwise indicated,information contained in this Annual Report on Form 10-K concerning our industry and the markets in which we operate, including our general expectations and market position,market opportunity,and market share,is based on information from independent industry analysts and third-party sources(including industry publications,surveys,and forecasts),our internal research,and management estimates.Management estimates are derived from publicly available information released by independent industry analysts and third-party sources,as well as data from our internal research, and are based on assumptions made by us based on such data and our knowledge of such industry and markets,which we believe to be reasonable.None of the sources cited in this Annual Report on Form 10-K has consented to the inclusion of any data from its reports,and we have not sought the consent of any source.Our internal research has not been verified by any independent source,and we have not independently verified any third-parry information.While we believe the market position,market opportunity,and market share information included in this Annual Report on Form 10-K is generally reliable,such information is inherently imprecise.In addition,projections,assumptions,and estimates of our future performance and the future performance of the industries in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors,including those described in"Risk Factors"in Item lA of Part I of this Annual Report on Form 10-K and elsewhere in this Annual Report on Form 10-K.These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us. Item 1. Business. In this Annual Report on Form 10-K,the terms"athenahealth,""we,""us,"and"our"refer to athenahealth,Inc.and its subsidiaries,Athena Arsenal, LLC;Athena Point Lookout,LLC;athenahealth MA,Inc.;athenahealth Security Corporation;athenahealth Technology Private Limited;Epocrates,Inc. ("Epocrates");Healthcare Data Services LLC;Modality,Inc.;and Proxsys LLC,and any subsidiary that may be acquired or formed in the future.We were incorporated in Delaware on August 21,1997,as Athena Healthcare Incorporated.We changed our name to athenahealth.com,Inc.on March 31,2000,and to athenahealth,Inc.on November 17,2000.Our corporate headquarters are located at 311 Arsenal Street,Watertown,Massachusetts 02472,and our telephone number is(617)402-1000. Overview athenahealth provides cloud-based business services that help medical caregivers collect more revenue and greatly reduce their administrative work burden.By combining three distinct but interconnected components—cloud-based software("Software"),networked knowledge("Knowledge"),and back- office work("Work")—athenahealth empowers its clients to achieve and sustain financial health while staying focused on quality patient care. Our services are designed to minimize the hassles that caregivers and their staff face from complex billing rules,quality measurement and reporting, clinical documentation and data exchange,patient communication and referrals,and many related tasks that can take attention away from delivering care.We differentiate our offerings by continuously updating and improving our services via our cloud-based network,athenaNet.Regular updates to athenaNet are free and automatic for everyone on the 1 Table of Contents network.As a web-based platform,athenaNet can be quickly implemented by our staff,with low upfront costs to clients.We do not charge licensing or hosting fees. We offer a suite of four,seamlessly integrated services:athenaCollector for revenue cycle and practice management;athenaClinicals for electronic health records("EHR");athenaCommunicator for automated,live,and online patient communications;and athenaCoordinator for care coordination.We also offer subscription-based and sponsored clinical information and decision support services under the Epocrates brand. Cloud-based Software Via the athenaNet platform,we provide a single instance of cloud-based software to clients;every health care provider across the network always access the same continuously updated services.Our software is the primary conduit through which we exchange information among clients,insurance payers,and our staff of experts. Networked Knowledge The athenaNet platform enables every client to benefit from the collective knowledge of all other clients.These learnings are culled and implemented through our patented billing rules engine("Rules Engine")and clinical quality management engine,collectively called"athenaRules."As we work with clients, insurance payers,and other partners,more expert knowledge is infused into each service,making the network"smarter"and more powerful for all clients. The network's shared knowledge and transparency also allows clients to monitor and benchmark their performance against those of other practices across the network. Back-office Work Our clients benefit from back-office administrative work that we perform on their behalf.These services range from receiving,scanning,and delivering incoming faxes to tracking claims with insurance payers.We automate these processes whenever possible;when automation is not an option,we perform the work ourselves. This unique combination of Software,Knowledge,and Work is the core of our aligned success model:we charge clients a percentage of collections,in most cases,connecting our financial results directly to that of our clients and our ability to drive revenue for them.This framework of shared financial interest demands and inspires a continual cycle of improvement and efficiency. Chronology We first released athenaCollector in 2000,followed by athenaClinicals in 2006.We then introduced athenaCommunicator in 2010,the result of our first acquisition,Crest Line Technologies,LLC(d.b.a.MedicalMessaging.net).Expansion continued with the following acquisitions:in October 2009,Anodyne Health Partners,Inc.("Anodyne"),developer of business intelligence tools;in August 2011,Proxsys LLC("Proxsys"),a leading provider of cloud-based care coordination services;in October 2012,Healthcare Data Services LLC,which offers patient population health management services;and in March 2013, Epocrates.Epocrates is recognized for developing a leading medical application among U.S.physicians for clinical content,practice tools,and health industry engagement at the point of care. In 2013,we generated revenue of$595.0 million from the sale of our services,compared to $422.3 million in 2012 and$324.1 million in 2011.As of December 31,2013,there were 50,212 medical providers,including 35,858 physicians,using our athenaCollector service across 49 states and the District of Columbia and across 92 medical specialties. Market Opportunity The health care industry is complex and fragmented,and is largely served by legacy software systems that cannot support the current needs for collaboration,flexibility,and interoperability.A disproportionate amount of communication still takes place on paper instead of via automated communications.This combination of outdated,inflexible systems and paper workflows creates significant costs for health care organizations,which suffer sizable administrative work,duplicated efforts,and errors.By addressing these problems,medical caregivers can focus on the practice of medicine and free their staff to spend time on higher-value tasks. Practice-based activities required to ensure appropriate payment for services rendered have increased in number and complexity for the following reasons: • Legislative reform efforts. Legislative reform,including the Patient Protection and Affordable Care Act("ACA"),is expected to drive many fundamental shifts in the health care reimbursement landscape.Millions of additional patients could be required to purchase health insurance coverage. • Health benefit plan design. Health insurers have introduced a wide range of benefit structures,many of which are customized to the unique goals of particular employer groups.Such insurers also continually update their reimbursement rules based on ongoing monitoring of consumption patterns,in response to new medical products and 2 Table of Contents procedures,and to address changing employer demands.This has resulted in an increase in the rules regarding who is eligible for health care services,what health care services are eligible for reimbursement,and who is responsible to pay for health care services delivered.It has also resulted in more plans that require a larger proportion of patient contribution for services delivered;these increase the burden on practices to manage and pursue receivables directly with the patient.Practices need to be continually aware of the diversity and dynamic nature of health benefit plan design. • New payment models. While the fee-for-service framework can be complicated enough,rapidly emerging outcome-based payment models are even more complex,requiring caregivers to capture and provide appropriate data to obtain payments.Accountable care programs also require a much greater focus on care coordination and cost efficiency across multiple caregivers.To complicate reimbursement even further,some models,such as Pay-For-Performance,demand that caregivers first identify programs for which they are eligible,and then enroll,identify eligible patients,and record relevant billing and clinical data for each eligible encounter.These newer models continue to evolve and grow in both number and complexity. • Financial incentives for the use of EHRs. The federal government enacted a financial incentive program through the 2009 Health Information Technology for Economic and Clinical Health Act(the"HITECH Act")for caregivers who demonstrate"Meaningful Use"of a certified EHR technology.While payments under the program do not represent a sustained market opportunity,they have shifted buying patterns since they were instituted,with many caregivers accelerating their purchase of EHRs and making revenue cycle decisions tied to an EHR selection. In addition to administering typical business functions,caregivers must dedicate significant time and resources to physician orders,including referrals to specialists,imaging centers,laboratories,pharmacies,and inpatient admissions.This requires a series of communications that ensure the care is appropriate and eligible for reimbursement.To process these communications,medical practices often interact with multiple software systems;manage communications via fax,and are challenged with having to contact patients,payers,and other trading partners to effectively exchange the right information to accompany the order. Our Strategy Our mission is to be caregivers'most trusted service,helping them do well doing the right thing.In almost all cases,we price our services as a percentage of practice collections,a strategy that incentivizes us to improve organization performance and reduce cost through more efficient operations.As practices face rising costs and complexity,they need solutions for a diverse set of problems,including the ever increasing administrative work driven by that increased complexity,including new,more complicated reimbursement models;partners'demand for electronic data exchange;pressure to adopt expensive EHRs; continued changes to federally mandated transaction standards;new insurance payer rules;and the challenges of collecting payments from uninsured, underinsured,and high deductible health plan patients. We believe the traditional software model fails to address these needs.As a system of limited connectivity and flexibility,conventional software does not allow for rapid,intelligent evolution of system functionality and client needs.Additionally,locally installed software favors larger organizations that can afford a sizable up-front investment in hardware and software,plus the staff to manage and maintain these systems. In contrast,cloud-based software can solve a greater set of problems because it can quickly be updated and delivered to all clients—as a single,shared instance of software—without expensive installations or upgrades.But there are challenges that require cloud-based software to have corresponding service components,such as processing and sorting a practice's incoming paper documents;identifying and managing payer rules;and having a live operator take patient phone calls after a practice closes for the day.Bringing these services,and many more,to our cloud-based software,is the crux of our cloud-based services model.As our software delivers the right knowledge to the right person at the right time,our back-office services execute work,at scale,that would otherwise fall upon the practice. The connectivity and system infrastructure we provide would normally be out of reach for small independent practices,which make up a large portion of the caregiver market.However,because we automate processes and scale work across our entire provider network,we can efficiently deliver our services to medical practices of every size.By giving small practices the same technical and service infrastructure available to large clients,we provide significant benefits not only to those practices,but also to their clinical exchange and trading partners with whom they share vital information.As practices continue to be acquired or divested by other entities,this strategic flexibility enhances our ability to compete,regardless of whether a practice is independent or owned by a large enterprise. Key elements of our strategy include: • Remaining intensely focused on our clients'success. We believe that aligning our financial goals with those of our clients provides us an ongoing incentive to improve our services and client performance;helps us to maintain client 3 Table of Contents loyalty(proven through high and sustained client satisfaction and retention);and enhances our reputation in the marketplace. • Integrating services. As newer payment models continue to integrate cost efficiency and outcomes into reimbursement formulas,new activities will become more important in driving performance.Only practices that can fully integrate these activities with their revenue cycle will have visibility into their true financial health.These can include coordinating care smoothly with other caregivers,directly tying lab results back to the right patient records,and delivering patient adherence reminders.We proactively demonstrate that when our integrated services are fully adopted and optimized, we help medical caregivers manage and monitor performance comprehensively. • Maintaining and growing athenaRules. We actively seek out new payer rules and new revenue opportunities for practices,and use our Rules Engine to deliver relevant information to the right person at the right time.Our Rules Engine identifies problems before claims are submitted.This increases the percentage of transactions that are successfully executed on the first attempt and reduces the time it takes to fully resolve claims or other transactions.The rules embedded in athenaClinicals are becoming increasingly tied to reimbursement as Pay-for-Reporting,Pay-for-Performance, shared savings,and other bonus payments require specific action at the point of care.Without the type of automation found in our quality management engine,these payment programs would plague physicians with an administrative burden,significantly impairing their ability to practice. • Increasing awareness and attracting new clients. We believe that our cloud-based business services provide significant value for medical practices and health systems of any size,and we continue to expand sales and marketing efforts to address our market opportunity and aggressively seek new clients.Our athenaCollector client base currently represents approximately five percent of the addressable U.S.market,comprised of an estimated 684,000 physicians practicing in the ambulatory segment.Our marketing efforts focus not only on small and group practices,but also on hospitals,health systems,and health services companies,with programs and services that can help them manage their affiliated and employed physician strategies.According to an independent third-party study,physician awareness of athenahealth increased from 31%in 2012 to 39%in 2013,a 26%increase.We believe that raising our awareness is critical to our growth strategy. • Uncovering and delivering new sources of revenue to clients. We work closely with payers and other healthcare trading partners to demonstrate the efficiencies and reduction in administrative work that our services provide.We believe that,as these partners gain greater understanding of these advantages and system-wide benefits,they will continue to reward these efficiencies in a manner that accrues direct benefits for our clients. • Maintaining high levels of user adoption and improving through network transparency. One of the biggest challenges for traditional EHR software vendors has been a lack of physician adoption.While adoption rates are improving,many physicians still fear that EHRs will slow them down.Because of our large services operation,we can:support many alternate documentation styles that are not available with software-only solutions;integrate multiple activities into our complete suite of services;and work to continually improve our services'ease of use for providers. Our clients can realize significant benefits by using our EHR,which drives our high adoption rate.We convert EHR usage data into key indicators of top practice performance,individual clinician performance,and the associated drivers of each,and can then share this intelligence across our entire network of clients to help optimize performance. • Expanding our client base and service offerings through the acquisition of Epocrates. We acquired Epocrates for the assembled workforce, expected synergies,accelerated awareness of our services across the health care market,and opportunity to deliver additional high-value information to the clinical community.Our loyal network of more than one million health care professionals using our Epocrates services,including approximately 50 percent of U.S.physicians,routinely access these intuitive solutions to help streamline workflow and improve patient care.These services are referenced multiple times per day and help health care professionals make more informed prescribing decisions,improve workflow,and enhance patient safety.We anticipate that our continuing integration of these services with those we offer through athenaNet will improve the quality of information available at the point of care,leading to better outcomes and an increase in the overall desirability of our services. Our Solutions Our proprietary cloud-based services are designed to help our clients increase collections,receive payments faster,significantly reduce administrative work,cut down on redundancies and error rates,lower operating costs,improve operational workflow and the coordination of care,and manage clinical and billing information more efficiently. athenaCollector athenaCollector,our revenue cycle and practice management service,automates and manages billing-related functions for medical practices.It assists our clients with the proper handling of claims and billing processes to help them manage reimbursement quickly and efficiently. 4 Table of Contents Software athenaCollector utilizes the Internet to connect medical practices to our Rules Engine and service operations team.It is a complete practice management system that includes scheduling and payment processing,and is used by our clients and service operations team to track the status of claims.Because athenaCollector is web-based,it provides our clients with the benefits of athenaRules and enables them to interact with our service operations team to efficiently monitor workflows.athenaCollector also includes a full set of reporting tools so that users can track their ongoing performance and benchmark against other practices. Knowledge Medical practices route their day-to-day electronic and paper-based payer communications to us,which we then process using our patented Rules Engine and service operations to avoid reimbursement delays and improve practice performance.Our proprietary database of payer knowledge contains information amassed over years of experience in handling the physician workflow for thousands of medical practices,with medical claims from tens of thousands of health benefit packages.The core focus of the database is on the payer rules,which are the key drivers of claim payment and denials.By understanding denials,we can add rules to the database that help the entire client base avoid future denials,resulting in increased automation of our workflow processes. athenaRules interact seamlessly within the medical office workflow and with our service operations. Work athenahcalth service operations consist of both knowledgeable staff and technological infrastructure used to execute the key steps associated with proper handling of physician claims and clinical data management.The service operations team interacts with physicians,providers,and clinicians at all key steps in the revenue cycle,including: • coordinating with payers to ensure that providers are properly set up for billing; • checking the eligibility of scheduled patients electronically; • submitting claims to payers directly or through intermediaries; • obtaining confirmation of claim receipt from payers; • receiving and processing checks and remittance information from payers and documenting the result of payers'responses; • evaluating denied claims and determining the best approach to appealing or resubmitting claims to obtain payment; • billing patients for balances that are due; • compiling and delivering management reporting about the performance of clients at both the account level and the provider level; • transmitting key clinical data to the revenue cycle workflow to eliminate the need for code re-entry and to permit assembly of all key data elements required to achieve maximum appropriate reimbursement;and • providing proactive and responsive client support to manage issues,address questions,identify training needs,and communicate trends. athenaClinicals athenaClinicals is our EHR service,designed to improve clinical administrative workflow for practices by automating and managing functions related to medical record-management.It assists medical groups with the proper handling of physician documentation,orders,and related inbound and outbound communications,to ensure that orders are carried out quickly and accurately. Software Through athenaNet,athenaClinicals displays key clinical measures related to the drivers of high-quality,efficient care delivery,lab results requiring review,patient referral requests,prescription requests,and family history of previous exams.athenaClinicals is ONC 2014 Edition-compliant and has been certified by the Certification Commission for Health Information Technology(CCHIT 8),an ONC-ACB,in accordance with the applicable certification criteria adopted by the Secretary of Health and Human Services.athenaNet provides comprehensive reporting on a range of clinical results.This includes distribution of different procedure codes(leveling),incidence of different diagnoses,timeliness of turnaround by lab companies and other intermediaries,and other key performance indicators. Knowledge As reporting and quality programs have collectively become a greater portion of physician revenue,clinical data must be captured according to the requirements and incentives of different payers and plans.This can be very difficult to manage on paper or in a static software system.athenaRules are designed to:identify the specific clinical activities required to meet Pay- 5 Table of Contents for-Performance and outcome-based programs,including Medicare incentive payments under the HITECH Act;access medication formularies;and identify potential medication errors(such as drug-to-drug interactions or allergy reactions). Work Medical practices that use an EHR can still receive a substantial number of clinical documents from third parties,creating a significant administrative burden.Our service operations capture inbound paper documents,convert them to electronic format,attach them to the appropriate patient chart,classify them according to type,and associate results with the original order where applicable.Additionally,even if the physician creates an order in the EHR,the intended recipient may not accept orders electronically;in that case,our service operations team converts the electronically generated order to paper for delivery on the practice's behalf.We also perform many of the Pay-for-Performance program identification and enrollment tasks on behalf of practices so they can participate without significant up-front research and effort. athenaCommunicator athenaCommunicator is a series of patient communication services,including automated patient messaging,live operator services,and an online patient portal.By encouraging patient engagement and maintaining a connection between patients and providers beyond the practice,athenaCommunicator services help reduce patient no-show rates and improve overall schedule density,increasing the number of revenue-generating appointments for our clients.The ability to increase patient outreach helps provide clinical education and adherence reminders to patients,which improves the quality of care and outcomes without increasing practice demand to monitor and contact patients.The automated services can be used to remind patients of appointments as well as self-pay balances,helping practices drive patient collections.Together,these services provide a personalized,high-quality experience for patients while driving practice performance. Software athenaCommunicator enables practices to manage many patient communication tasks electronically,including:delivering automated reminders with customizable criteria and opt-out functionality;creation of a self-service patient portal for patients to request appointments,pay bills,and exchange secure messages with the practice;and automatic generation of a-mails to patients.Automated phone calls are multi-purpose and may include appointment reminders, outbound population health campaigns,and follow-up on outstanding balances,while prompting patients to make payments by mail,telephone,or online. Knowledge athenaCommunicator enables practices to build a highly flexible set of communication rules with their patients.They can set patient or group-specific communication preferences that will automatically tailor communications to the preferred timing and mode of delivery,including phone call,e-mail,or patient portal.These communication rules allow each patient to receive a personalized experience,including delivery of messages with branding and using the Caller ID of the practice,if desired. Work Practices spend a great deal of time fielding phone calls from patients,on topics ranging from scheduling requests and clinical cases to driving directions. As part of the athenaCommunicator service,we provide live operators who field calls on behalf of practices,especially beneficial during peak phone call periods or after hours.The live operator service includes redirecting automated calls for appointment scheduling,patient payments,and message-taking. Additionally,we print and mail paper statements to patients on behalf of the practice to assist with patient payment collection.Collectively,these activities expand the availability of the office to patients and help alleviate practice phone burden,freeing staff to focus on more critical tasks. athenaCoordinator athenaCoordinator is a referral cycle management tool that helps streamline the disorganized system of patient care coordination.The connections between practices and points of patient referral are rife with inefficiencies due to patient data redundancies,manual inputs,and errors,resulting in additional practice workload and patient dissatisfaction.With athenaCoordinator,caregivers can efficiently deliver a clean referral order to a physician,hospital,or other supply- chain partner.This much-needed improvement in today's health care reduces unnecessary phone calls and faxes,eliminates redundancies,and greatly reduces both the error rate and patient frustration. Beginning in 2014,athenaCoordinator includes our financial and operations management and our population health management services.These services are the result of the integration of the Anodyne Health Partners,Inc.(financial and operations management)and Healthcare Data Services LLC(population health management)acquisitions.The union of these services provides visibility into the financial and clinical health of the health care network,helping health care organizations manage both networks of caregivers and populations of patients.By harmonizing data across practice management systems,EHRs,and claims systems,athenaCoordinator provides health care organizations with a single source of truth.athenaCoordinator turns insight into action,guiding data- driven decision-making at the point of care.This enables clients to 6 Table of Contents participate more effectively in new payment models that aim to create a reimbursement system that links care reimbursement to the quality of care delivered and,ultimately,to reduce overall health care expenses for patient populations.In the future,we plan to expand our offerings to visually present other data sets, such as clinical and patient cycle metrics. Software athenaCoordinator allows providers,via an easy-to-use online portal,to electronically prepare and send a"clean order"for a referral-meaning all the pertinent information needed to streamline care coordination is complete-and a patient can arrive at his or her appointment with another physician,or at a hospital or lab,with information already entered and verified.This type of efficient information transfer delivers benefits to both the referring and receiving providers.For the initial caregiver,athenaCoordinator reduces time spent managing outbound orders and can provide greater visibility to patient status after the referring visit.For the receiving caregiver,athenaCoordinator reduces denials,the time spent processing referrals,and the risk of acting on erroneous information.Referring providers who use athenaClinicals can also receive a detailed care summary of the referral,effectively closing the loop of patient care. athenaCoordinator utilizes a software-enabled service platform for the financial and operation management and population health management services that organizes and analyzes billing and claims-based data across medical practices,allowing decision makers to quickly and easily present that data visually through a wide array of business performance metrics.Our population health management service also allows clients to gather claims,health plan administrative,and clinical data from client health care organizations and combine those data into a single data asset that can be used by the client to coordinate care,reduce health care utilization,and address gaps in care across its patient population. Knowledge As part of a streamlined path of coordinated care information,our Rules Engine automatically determines a patient's insurance eligibility after a referring provider enters an order via the web-based portal.This cuts down on the need for practice staff to manually contact an insurer and allows a patient to arrive at a receiving provider with his or her coverage eligibility already confirmed.Both the patient and the receiving hospital or lab staff can then focus on care and not get bogged down with insurance eligibility research at the point of care. Work Preparing referral orders can often require office staff to spend time managing administrative duties—and they will often not receive follow-up information after a patient has visited a referred lab,physician,or hospital.As part of athenaCoordinator,our staff takes over this work,benefiting both the referring and receiving providers.Our back-office operations will verify insurance and benefits with payers,secure pre-certification,handle patient registration,collect self- pay from the patient,and electronically deliver the order to the receiving provider in advance of the patient visit. We use our broad and deep understanding of health care revenue cycle management and managed care to help our clients maximize the insight and value they can derive from using our financial and operations management and population health management services.We provide analytical support for deep-dives into data and assist in determining which benchmarks and targets to track. Epocrates Services Our Epocrates services center around a variety of clinical information and decision support offerings available through caregivers'mobile devices.The majority of health care professionals using our clinical information services access the free versions of our applications;premium subscriptions for some of these services are available,and some services are sponsored by clients in the health care industry(e.g.,pharmaceutical companies,managed care companies, and market research firms)that seek opportunities to engage with our network of members.These services include,but are not limited to: • DocAlert clinical messaging. DocAlerts are short messages authored by our staff that deliver clinical news and alerts to members,including product approvals,clinical study results,practice management information,industry guidelines,and formulary status changes.The majority of these messages are not sponsored,and we mark those that are. • Virtual representative services. Through our EssentialPoints offering,our clients can communicate short overviews on relevant topics to physicians'mobile devices.Our clients can also leverage the App Network,a service that provides them with development,distribution,or sponsorship of applications offered to targeted groups of physicians. • Market research. We recruit health care professionals based on a variety of criteria to participate in market research activities,such as online surveys,Q&A sessions,and one-on-one interviews. • Formulary hosting. We provide formulary hosting services,allowing health care professionals to access health plan covered drug lists,including co-pay levels,quantity limits,and prior authorization requirements,while displaying lower-cost and generic alternatives to offer the alternative of a less expensive treatment. Our clients are located almost entirely within the U.S. 7 Table of Contents Research and Development In response to changes in the market,and to better serve medical practices and health systems,our research and development efforts focus on enhancing our service offerings.All of our clients use the same version of athenaNet,with some athenaRules designed to take effect locally for particular clients.We continually update our software and rules,and execute bimonthly releases of new software functionality for our clients.Our software development life cycle methodology ensures that each software release is properly designed,built,tested,and rolled out.Our software development technologists are primarily located in the United States;we complement this team's work with software development services from third-party technology development providers,as well as our own employees at our development center operated through our subsidiary in Chennai,India.In addition to our core software development activities,we dedicate full-time staff to our ongoing development and maintenance of the athenaRules database.We also employ program management and product management personnel,who work continually on improvements to our service operations processes and our service design,respectively. Operations Our operations team assists clients at each critical step in the revenue,clinical,patient communication,and care coordination workflow,and provides services that include insurance benefits packaging,insurance eligibility confirmation,claims submission,claims tracking,remittance posting,denials management,payment processing,formatting of lab requisitions,submission of lab requisitions,and monitoring and classification of all inbound faxes. Additionally,we use third parties for data entry,data matching,data characterization,and outbound and inbound telephone services.These services are generally commercially available at comparable rates from other service providers. We depend on satisfied clients to succeed,and have aligned our financial goals with that of our client practices and health systems.Our client contracts require minimum commitments by us on a range of tasks,including claims submission,payment posting,claims tracking,and claims denial management. We also commit to our clients that athenaNet is accessible 99.7%of the time,excluding scheduled maintenance windows.Each quarter,our management conducts a survey of clients to identify client concerns and track progress against client satisfaction objectives.In our most recent survey,87.7%of the respondents reported that they would recommend athenahealth to a trusted friend or colleague. In addition to the services described above,we also provide client support services,many taking place on a regular basis,including: • client support by our client services center,designed to address client questions and concerns rapidly,whether those questions and concerns are registered via a phone call or via an online support case through our customized use of customer relationship management technology; • account performance monitoring by the account management organization,to address open issues and focus clients on the financial results of the co- sourcing relationship;these activities are intended to aid in client performance and retention,determine appropriate adjustments to service pricing at renewal dates,inform clients of the full suite of our services,and provide incremental services when appropriate; • relationship management by regional leaders of the client services organization to ensure that decision-makers at client practices are satisfied,and that regional performance is managed proactively with regard to client satisfaction,client margins,client retention,renewal pricing,and added services;and • active,real-time performance monitoring for clients with complex and highly scaled operations. Sales and Marketing We have developed sales and marketing capabilities aimed at expanding our network of physicians,medical groups,and health systems.We expect to expand our network by selling our complete suite of services to new clients,and cross-selling additional services into our client base.We have a direct sales force,which we augment through our channel partners and marketing initiatives. Direct Sales We sell our services primarily through our direct sales force,which is divided into three groups:the enterprise team,which is dedicated to serving the very largest managed care organizations,as well as those with high growth potential;the group team,which is dedicated to medical practices with seven to 150 physicians;and the small group team,which is dedicated to practices with one to six physicians.Our sales force is supported by personnel in our marketing organization,who provide specialized support for promotional and selling efforts.Due to our ongoing service relationship with clients,we conduct a consultative sales process,which includes understanding the needs of prospective clients,developing service proposals,and negotiating contracts to enable the commencement of services. 8 Table of Contents Channel Partners In addition to our direct sales force,we maintain business relationships with third parties that promote or support our sales or services within specific industries or geographic regions.We refer to these third parties as"channels"and the individuals and organizations involved as our"channel partners."In most cases,these relationships are agreements that compensate channel partners for providing us sales lead information that result in sales.These channel partners typically do not make direct sales.Other channel relationships permit third parties to act as an independent sales representative,a purchasing agent (as in the case of group purchasing organizations),or a joint marketer of combined service offerings that we jointly develop with that third party.In some instances,the channel relationship involves endorsement or promotion of our services by these third parties.Our channel relationships include state medical societies,health care information technology product companies,health care product distribution companies,consulting firms,group purchasing organizations,health systems,regional extension centers,and payers. Marketing Initiatives Since our service model is new to most physicians,our marketing and sales objectives are designed to increase awareness of our company,establish the benefits of our service model,and build credibility with prospective clients so they will view our company as a trustworthy long-term service provider.To execute on this strategy,we have designed and implemented specific activities and programs aimed at converting leads to new clients. Our marketing initiatives are generally targeted toward specific segments of the medical practice market.These marketing programs include: • traditional print advertising; • sponsored pay-per-click search advertising and other Internet-focused awareness-building efforts(such as social media,online videos,webinars,and destination websites covering compliance and other issues of interest to medical practices); • public relations activities aimed at generating media coverage; • participation in industry-focused trade shows; • targeted mail,e-mail,and phone calls to medical practices; • informational meetings(such as strategic retreats with targeted potential clients);and • dinner seminar series. Competition We have experienced,and expect to continue to experience,intense competition in the marketplace.Our primary competition uses locally installed software to manage the various clinical and financial workflow needs within the physician's office.Other nationwide competitors offer services they refer to as"on- demand"or"software-as-a-service"models,under which software is centrally hosted and services are provided from central locations.Companies that sell practice management,EHR,and care coordination software and services include:Allscripts-Misys Healthcare Solutions,Inc.;CareCloud Corporation;Cemer Corporation;eClinicalWorks,LLC;Epic Systems Corporation;Greenway Medical Technologies,Inc.;McKesson Corp.;NextGen Healthcare Information Systems,LLC;OptumInsight,Inc.;Practice Fusion,Inc.;SCI Solutions,Inc.;and Vitera Healthcare Solutions,LLC,which operates under the Greenway brand. The principal competitive factors in our industry include: • ability to quickly adapt to increasing complexity of the health care reimbursement system; • size and scope of payer rules knowledge; • ability to introduce only relevant rules into the workflow at the point of care; • ease of use and rates of user adoption; • product functionality and scope of services; • scope of network connections to support electronic data interactions; • performance,security,scalability,and reliability of service; • sale and marketing capabilities of the vendor;and • financial stability of the vendor. We believe that we compete favorably with our competitors on the basis of these factors.However,some of our competitors and potential competitors have significantly greater financial,technological,and other resources and name recognition,as well as more established distribution networks and relationships with health care providers.As a result,these companies may respond more quickly to new or emerging technologies and standards and changes in customer requirements. 9 Table of Contents These companies may be able to invest more resources than we can in research and development,strategic acquisitions,sales and marketing,and patent prosecution and litigation and to finance capital equipment acquisitions for their customers. Our Epocrates services compete for users of the types of clinical reference tools that we offer and for budget dollars from pharmaceutical,managed care, and market research clients.Competitors providing clinical content include Medscape,a division of WebMD,LLC,and UpToDate,Inc.,a division of Wolters Kluwer Health.The primary competition for pharmaceutical promotional spend comes from companies,such as WebMD,that offer other marketing channels to health care professionals.Our market research business competes with companies that recruit physicians for surveys and the recruitment arms of market research companies that have their own survey panels of health care professionals.We compete primarily on our ability to reach and communicate with health care professionals under the Epocrates brand,which is recognized and endorsed among health care professionals as a trusted and accurate source of drug and clinical information;the breadth and loyalty of this large and active network is not easily replicated,and it enhances our ability to market our sponsored services. Government Regulation Although we generally do not contract with U.S.state or local government entities,the services we provide are subject to a complex array of federal and state laws,including regulation by the Centers for Medicare and Medicaid Services,or CMS,of the U.S.Department of Health and Human Services,as well as additional regulation. Government Regulation of Health Information HIPAA Privacy and Security Rules. The Health Insurance Portability and Accountability Act of 1996,as amended,and the regulations that have been issued under it(collectively,"HIPAA")contain substantial restrictions and requirements with respect to the use and disclosure of individuals'protected health information.These are embodied in the Privacy Rule and Security Rule portions of HIPAA.The HIPAA Privacy Rule prohibits a covered entity from using or disclosing an individual's protected health information unless the use or disclosure is authorized by the individual or is specifically required or permitted under the Privacy Rule.Under the HIPAA Security Rule,covered entities must establish administrative,physical,and technical safeguards to protect the confidentiality,integrity,and availability of electronic protected health information maintained or transmitted by them or by others on their behalf. The HIPAA Privacy and Security Rules apply directly to covered entities,such as health care providers who engage in HIPAA-defined standard electronic transactions,health plans,and health care clearinghouses.Because we translate electronic transactions to and from the HIPAA-prescribed electronic forms and other forms,we are a clearinghouse and therefore a covered entity.In order to serve as a business associate for our clients and provide them with services that involve the use or disclosure of protected health information,HIPAA requires the execution of business associate agreements.Such agreements obligate us to provide adequate written assurances that we will properly safeguard the privacy and security of protected health information exchanged pursuant to each agreement.We also must enter into business associate agreements with entities who act as business associates for us. HIPAA Transaction Requirements. HIPAA also requires that certain electronic transactions related to health care billing be conducted using prescribed electronic formats.As a covered entity subject to HIPAA,we must meet these requirements,and,moreover,we must structure and provide our services in a way that supports our clients'HIPAA compliance obligations. HITECHAct and HIPAA Omnibus Rule. The HITECH Act,the regulations issued under it,and the corresponding amendments to the HIPAA regulations in the recently promulgated HIPAA Omnibus Rule have altered and enhanced our obligations with respect to protected health information.While we are in compliance with currently applicable requirements,we will need to implement additional measures to address provisions with future effective dates. State Laws. In addition to HIPAA and the HITECH Act,most states have enacted laws related to the security of confidential medical information.Such state laws,if more stringent than HIPAA and the HITECH Act,are not preempted by the federal requirements,and we must comply with them. Government Regulation of Reimbursement Our clients are subject to regulation by a number of governmental agencies,including those that administer the Medicare and Medicaid programs.Given the breadth of these laws,they are potentially applicable to our business activities,including the transactions that we undertake on behalf of our clients and the financial arrangements through which we market,sell,and distribute our services.Accordingly,we are sensitive to legislative and regulatory changes in,and limitations on,the government health care programs and changes in reimbursement policies,processes,and payment rates.During recent years,there have been numerous legislative and administrative actions that have affected government programs.It is possible that the federal or state governments will implement future reductions,increases,or changes in reimbursement under government programs that adversely affect our business,our client base,or our cost of providing our services. 10 Table of Contents Fraud and Abuse A number of federal and state laws,loosely referred to as"fraud and abuse laws,"prohibit a variety of activities that could result in excessive expenditure of funds on health care,such as the payment of kickbacks,fraudulent billing,and referrals for health care services where a conflict of interest exists.These laws include,but are not limited to: Anti-Kickback Laws. The federal Anti-Kickback Law prohibits any person or entity from offering,paying,soliciting,or receiving anything of value, directly or indirectly,for the referral of patients or the leasing,purchasing,ordering,or arranging for or recommending the lease,purchase,or order of any item,good,facility,or service covered by a federal healthcare program,including Medicare or Medicaid.Courts have construed the federal Anti-Kickback Law broadly to mean that a financial arrangement may violate this law if any one of the purposes of one of the arrangements is to encourage patient referrals or other federal health care program business,regardless of whether there are other legitimate purposes for the arrangement.There are several limited and narrow statutory exceptions and regulatory safe harbors that may protect some arrangements from enforcement penalties. False or Fraudulent Claim Laws. There are numerous federal and state criminal and civil laws that forbid,among other things,the submission of false information,or the failure to disclose information,in connection with the submission and payment of claims for reimbursement.In some cases,these laws also forbid abuse in connection with such submission and payment,for example,by systematic over treatment or duplicate billing for the same services to collect increased or duplicate payments.How these concepts apply to services such as ours that rely substantially on automated processes has not been well defined in the regulations or relevant case law.As a result,our errors with respect to the formatting,preparation,or transmission of such claims and any mishandling by us of claims information that is supplied by our clients or other third parties may be determined to be,or may be alleged to be,false claims under a false claims law. ACA. In addition to the provisions relating to healthcare access,financing,and delivery,the ACA made changes to healthcare fraud and abuse laws. The ACA expands false claim laws,amends key provisions of other anti-fraud and abuse statutes,provides the government with new enforcement tools and funding for enforcement,and enhances both criminal and administrative penalties for noncompliance.The ACA may result in increased anti-fraud enforcement activities. Stark Law. The Ethics in Patient Referrals Act,known as the Stark Law,prohibits certain types of referral arrangements between physicians and health care entities.Physicians are prohibited from referring patients for certain designated health services reimbursed under certain federal healthcare programs to entities with which they or their immediate family members have a financial relationship or an ownership interest,unless such referrals fall within a specific exception.Reimbursement claims that we submit for care rendered under forbidden referrals could be deemed false or fraudulent,resulting in liability under other fraud and abuse laws. Analogous State Laws. Many states have similar fraud and abuse laws,some of which may be broader in scope and may not be limited to items or services for which payment is made by a government health care program. Corporate Practice of Medicine Laws,Fee-Splitting Laws,and Anti Assignment Laws In many states,there are laws that prohibit non-licensed persons from practicing medicine,prevent corporations from employing licensed practitioners, and prohibit licensed medical practitioners from practicing medicine in collaboration with non-physicians,including business corporations.Some states also prohibit physicians from splitting their professional fees with non-physicians.In some cases,these laws have been interpreted to prevent business service providers from charging their physician clients on the basis of a percentage of the physician clients'collections or charges. There are also federal and state laws that forbid or limit assignment of claims for reimbursement from government-funded programs.Some of these laws limit the manner in which business service companies may handle payments for such claims and prevent such companies from charging their physician clients on the basis of a percentage of collections or charges.In particular,the Medicare program specifically requires that billing agents who receive Medicare payments on behalf of healthcare providers must meet certain requirements,and the agent's compensation may not be related in any way to the amount billed or collected or the actual collection of payment.Medicaid regulations similarly provide that Medicaid payments may be received by billing agents in the name of their clients without violating anti-assignment requirements if payment to the agent is related to the cost of the billing service,not related on a percentage basis to the amount billed or collected,and not dependent on collection of payment. Electronic Prescribing Laws States have differing prescription format and signature requirements.Due in part to recent industry initiatives,federal law and the laws of all 50 states now permit the electronic transmission of prescription orders.In addition,effective on January 1,2006,the Department of Health and Human Services promulgated its final E-Prescribing and the Prescription Drug Program regulations.These regulations,issued pursuant to the Medicare Prescription Drug Improvement and Modernization Act of 2003("MMA"),consist of detailed standards and requirements,in addition to the HIPAA standards discussed previously,for 11 Table of Contents prescription and other information transmitted electronically in connection with a drug benefit covered by the MMA's Prescription Drug Benefit.These standards cover not only transactions between prescribers and dispensers for prescriptions but also electronic eligibility and benefits inquiries and drug formulary and benefit coverage information.Aspects of our services are affected by such regulation,as our clients need to comply with these requirements. Anti-Tampering Laws For certain prescriptions that cannot or may not be transmitted electronically from physician to pharmacy,both federal and state laws require that the written forms used exhibit anti-tampering features.For example,the U.S.Troop Readiness,Veterans'Care,Katrina Recovery,and Iraq Accountability Appropriations Act of 2007 requires that most prescriptions covered by Medicaid must demonstrate security features that prevent copying,erasing,or counterfeiting of the written form.Because our clients will,on occasion,need to use printed forms,we must take these laws into consideration for purposes of the prescription functions of our athenaClinicals service. Electronic Health Records Certification Requirements The HITECH Act directs the Office of the National Coordinator for Health Information Technology,or ONCHIT,to support and promote meaningful use of certified EHR technology nationwide through the adoption of standards,implementation specifications,and certification criteria programs.In January 2011, HHS issued a final rule to establish a permanent certification program for EHR technology.Our athenaClinicals service has been certified as a 2014 Edition Complete EHR in accordance with the applicable certification criteria. United States Food and Drug Administration The U.S.Food and Drug Administration("FDA")has promulgated a draft policy for the regulation of computer software products as medical devices and a proposed rule for reclassification of medical device data systems under the Federal Food,Drug and Cosmetic Act,as amended,or FDCA.The FDA has stated that health information technology software is a medical device under the FDCA,and we expect that the FDA is likely to become increasingly active in regulating computer software intended for use in health care settings regardless of whether the draft policy or proposed rule is finalized or changed.We anticipate additional guidance on this subject by mid-2014,in the form of a report to be issued by the FDA,ONCHIT,and the Federal Communications Commission.This report would propose a regulatory framework for health information technology that promotes innovation,protects patient safety,and avoids regulatory duplication. If our computer software functionality is considered a medical device under the FDCA,we could be subject to additional regulatory requirements.FDA regulations govern,among other things,product development,testing,manufacture,packaging,labeling,storage,clearance or approval,advertising and promotion,sales and distribution,and import and export.FDA requirements with respect to devices that are determined to pose lesser risk to the public include: • establishment registration and device listing with the FDA; • the Quality System Regulation,or QSR,which requires manufacturers,including third-party or contract manufacturers,to follow stringent design, testing,control,documentation,and other quality assurance procedures during all aspects of manufacturing; • labeling regulations and FDA prohibitions against the advertising and promotion of products for uncleared,unapproved off-label uses and other requirements related to advertising and promotional activities; • medical device reporting regulations,which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur; • corrections and removal reporting regulations,which require that manufacturers report to the FDA any field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health;and • post-market surveillance regulations,which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device. Non-compliance with applicable FDA requirements can result in,among other things,public warning letters,fines,injunctions,civil penalties,recall or seizure of products,total or partial suspension of production,failure of the FDA to grant marketing approvals,withdrawal of marketing approvals,and criminal prosecutions. Foreign Regulations Our subsidiary in Chennai,India,is subject to additional regulations by the Government of India,as well as its regional subdivisions.These regulations include Indian federal and local corporation requirements,restrictions on exchange of funds,employment-related laws,and qualification for tax status and tax incentives. 12 Table of Contents Intellectual Property We rely on a combination of intellectual property laws,as well as confidentiality procedures and contractual provisions,to protect our proprietary technology,databases,and our brand.We have filed U.S.and international patent applications covering certain of our proprietary technology.As of December 31,2013,we held eleven U.S.patents,two foreign patents,with twenty U.S.patent applications pending and seven foreign patent applications pending.Our issued U.S.patents are expected to expire between 2020 and 2031.We also rely on a combination of registered and unregistered trademarks and service marks to protect our brand.We will continue to file and prosecute applications for patents and trademarks when and where appropriate to protect our rights in proprietary technologies and our brand. While our patents,trademarks,copyrights,and trade secrets provide some advantage and protection,we believe the following factors are more essential to establishing and maintaining a competitive advantage: • the statistical and technological skills of our service operations and research and development teams; • the health care domain expertise and payer rules knowledge of our service operations and research and development teams; • the real-time connectivity of our service offerings; • the continued expansion of our proprietary Rules Engine;and • a continued focus on the improved financial results of our clients. We have a policy of requiring employees and consultants to execute confidentiality agreements upon the commencement of an employment or consulting relationship with us.Our employee agreements also require relevant employees to assign to us all rights to any inventions made or conceived during their employment with us.In addition,we have a policy of requiring individuals and entities with which we discuss potential business relationships to sign non- disclosure agreements.Our agreements with clients include confidentiality and non-disclosure provisions. Seasonality There is moderate seasonality in the activity level of medical practices and our clients in the pharmaceutical industry.Typically,discretionary use of physician services declines in the late summer and during the holiday season,which leads to a decline in collections by our physician clients about 30 to 50 days later.Our pharmaceutical clients'budgeting process impacts the timing of revenue related to sales of sponsored clinical information and decision support services,which has historically been highest in the fourth quarter.In addition,as further explained in"Risk Factors"in Item lA of Part I of this Annual Report on Form 10-K,our revenues and operating results may fluctuate from quarter to quarter depending on a host of factors including,but not limited to,the severity,length,and timing of seasonal and pandemic illnesses. Employees As of December 31,2013,we had 2,966 full-time employees,with 1,533 in service operations,473 in sales and marketing,676 in research and development,and 284 in general and administrative functions.Of these full-time employees,2,667 were located in the U.S.and 299 were located in Chennai, India.We believe that we have good relationships with our employees.None of our employees are subject to collective bargaining agreements or are represented by a union. Financial Information The financial information required under this Item I is incorporated herein by reference to Item 8 of this Annual Report on Form 10-K. Where You Can Find More Information Our Annual Reports on Form 10-K,Quarterly Reports on Form 10-Q,Current Reports on Form 8-K,including exhibits,proxy and information statements and amendments to those reports filed or furnished pursuant to Section 13(a),14,and 15(d)of the Securities Exchange Act of 1934,as amended, are available through the"Investors"portion of our website(www.athenahealth.com)free of charge as soon as reasonably practicable after we electronically file such material with,or furnish it to,the Securities and Exchange Commission("SEC").Information on our website is not part of this Annual Report on Form 10-K or any of our other securities filings unless specifically incorporated herein by reference.The public may read and copy these materials at the SEC's Public Reference Room at 100 F Street,NE,Washington,DC 20549.The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.In addition,our filings with the SEC may be accessed through the SEC's Interactive Data Electronic Applications ("IDEA")system at http://www.sec.gov.All statements made in any of our securities filings,including all forward-looking statements or information,are made as of the date of the document in which the statement is included,and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law. 13 Table of Contents Item IA. Risk Factors. Our operating results and financial condition have varied in the past and may in the future vary significantly depending on a number of factors. Except for the historical information in this report,the matters contained in this report include forward-looking statements that involve risks and uncertainties. The following factors,among others,could cause actual results to differ materially from those contained in forward-looking statements made in this report and presented elsewhere by management from time to time.Such factors,among others,may have a material adverse effect upon our business,results of operations,and financial condition. RISKS RELATED TO OUR BUSINESS—GENERAL We operate in a highly competitive industry,and if we are not able to compete effectively,our business and operating results will be harmed. The provision by third parties of revenue cycle services to medical practices has historically been dominated by small service providers who offer highly individualized services and a high degree of specialized knowledge applicable in many cases to a limited medical specialty,a limited set of payers,or a limited geographical area.We anticipate that the software,statistical,and database tools that are available to such service providers will continue to become more sophisticated and effective and that demand for our services could be adversely affected. Revenue cycle and clinical cycle software for medical practices has historically been dominated by large,well-financed,and technologically sophisticated entities that have focused on software solutions.Some of these entities are now offering"on-demand"services or a"software-as-a-service"model under which software is centrally administered,and these vendors may also provide administrative services.The size,financial strength,and breadth of offerings of the larger entities is increasing as a result of continued consolidation in both the information technology and health care industries.We expect large integrated technology companies to continue to become more active in our markets,both through acquisition and internal investment.As costs fall and technology improves,increased market saturation may change the competitive landscape in favor of competitors with greater scale than we possess.In addition,a few smaller companies have started providing single-instance,Internet-based software using a model similar to ours;the offerings of these smaller companies may reduce the perceived competitive advantage of our services and impact our market share.Further,while the market for patient communication and referral management services is growing and is not as yet dominated by a small group of vendors with significant resources,our patient and referral cycle services face competition from a wide variety of market participants.For example,certain health systems have developed their own patient portals or referral management systems.If we fail to distinguish our patient and referral cycle offerings from the other options available to health care providers,the demand for and market share of those offerings may decrease. In regard to our Epocrates services,we compete with other companies for users of the types of drug and clinical reference tools that we offer and for budget dollars from our pharmaceutical,managed care,and market research clients.We compete within a broad industry of health care content providers for the attention of health care professionals who can choose to use mobile,online or print media to reference clinical information.Companies providing clinical content include Medscape,a division of WebMD,LLC,and UpToDate,Inc.,a division of Wolters Kluwer Health.Competition from each of these sources of clinical reference content may lead to a loss of our existing network members and a reduction in the rate at which we attract new members for our clinical information.Our primary competition for the promotional spend available from our pharmaceutical clients in the area of interactive services is from companies,including WebMD,that help such companies market their products,programs,and services to health care professionals.Our market research business competes with numerous companies that recruit physicians to participate in surveys in a variety of formats,as well as the recruitment arms of market research companies that have assembled their own survey panels of health care professionals.To the extent competing channels are available to access health care professionals,including physicians,the value of our interactive services to our clients is reduced. Some of our current large competitors,such as Allscripts-Misys Healthcare Solutions,Inc.;Epic Systems Corporation;GE Healthcare;McKesson Corp.;Quality Systems,Inc.;Sage Software Healthcare,Inc.;and Siemens Medical Solutions USA,Inc.,have greater name recognition,longer operating histories,and significantly greater resources than we do.As a result,our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities,technologies,standards,or client requirements.In addition,current and potential competitors have established,and may in the future establish,cooperative relationships with vendors of complementary products,technologies,or services to increase the availability of their products to the marketplace.Current or future competitors may consolidate to improve the breadth of their products,directly competing with our integrated offerings. Accordingly,new competitors or alliances may emerge that have greater market share,larger client bases,more widely adopted proprietary technologies, broader offerings,greater marketing 14 Table of Contents expertise,greater financial resources,and larger sales forces than we have,which could put us at a competitive disadvantage.Further,in light of these advantages,even if our services are more effective than the product or service offerings of our competitors,current or potential clients might accept competitive products and services in lieu of purchasing our services.Increased competition is likely to result in pricing pressures,which could negatively impact our sales,profitability,or market share.In addition to new niche vendors,who offer stand-alone products and services,we face competition from existing enterprise vendors,including those currently focused on software solutions,which have information systems in place with clients in our target markets.These existing enterprise vendors may now,or in the future,offer or promise products or services with less functionality than our services,but that offer ease of integration with existing systems and that leverage existing vendor relationships. If we are unable to retain existing members of our Epocrates network and attract new members,especially physician members with desired characteristics for our interactive services who actively participate in those services,our revenue will decline,the anticipated benefits of our Epocrates acquisition may not be realized,and our business will suffer. Most of the members of our Epocrates network use only our free drug reference product and may stop using the products at any time without loss. Members who subscribe to our premium drug and clinical reference products usually do so for a term of one year and have no obligation to renew their subscriptions when such subscriptions expire.Under certain circumstances,our members may cancel their subscriptions prior to expiration.Factors that may affect the retention rate of our existing members and the rate at which we attract new members for our drug and clinical reference tools include: • Service Relevance. Unless we are able to provide current,relevant,and reliable health care content,drug and clinical reference tools,formulary hosting,and other services that meet and continue to meet the needs of health care professionals,including physicians,the value of those services to new and existing members will decrease.Our provision of such services depends on our ability to hire and retain qualified physician and pharmacist editors and authors,license accurate and relevant content from third parties,contract with health plans and insurers to host formulary information, monitor and respond to changes in member interest in specific topics,and develop new or enhanced services.If we cannot meet our staffing needs or develop or acquire needed content at a reasonable cost,if there are errors or omissions in such content,if our competitors obtain exclusive access to or develop content that health care professionals consider superior to ours,or if we cannot meet the needs of our members,the value of our content and services would diminish. • Brand Reputation. The reputation of our Epocrates brand is dependent in large part on the medical community's continued perception of us as independent from our health care industry clients,particularly pharmaceutical companies.If health care professionals believe that we are too closely associated with such clients as a result of the revenue we receive from their purchase or sponsorship of our interactive services,the credibility of our brand will diminish.Although we take precautions to remain independent from our health care industry clients,including separating the development of our application content from our commercial dealings with such clients and clearly labeling the source and responsibility of sponsored messages, programs,and activities,we cannot assure you that the medical community will view our content as sufficiently unbiased.If the reputation of our brand is damaged,it will be difficult,expensive and time-consuming to restore the quality of our brand with health care professionals and our business could suffer. • Competitive Landscape. If the developers of mobile operating systems and mobile devices with which our products and services are compatible fail to remain competitive in the marketplace and to be adopted into medical practice and practice workflow,members will be less inclined to use our services.The availability,price,performance,and functionality of competing products and services,including mobile,Web-based,and traditional products and services offered by competitors or through online resources and searches may affect our retention rate and the rate at which we attract new members for our drug and clinical reference tools.The availability of download sites such as the Apple App Store sM that offer numerous free or low-priced competing products at one location has also reduced the demand for our paid subscription products.We expect the use of such sites to expand,reducing the number of paying members for our drug and clinical reference tools as a percentage of total members. In addition to the loss of subscription revenue,our inability to attract or retain members,especially physician members with desired characteristics,such as specialty and prescribing habits,who update their mobile devices through our servers with sufficient frequency,may cause an even more significant decline in revenue from our interactive services.Our market research,payer,and pharmaceutical clients are attracted to our large,engaged member network for the delivery of their clinical messages,formularies,and other sponsored content,and,without sufficient active members who meet desired criteria,those clients may reduce their subscription for our interactive services,and our revenue may decline. Even if the number of our members is not materially reduced,their participation in our services may decrease,which could impact our revenues.We have established limits on the number and the mix of sponsored and non-sponsored messages delivered to members in order to promote the quality of members' experience with our services.If an insufficient number of 15 Table of Contents members update during a given service period,or the demand for promotional clinical messaging sponsorship exceeds the available supply,our health care clients could become dissatisfied with our service.As a result,we may be unable to grow our interactive services revenue beyond the bounds we have set,as changes to such limits could cause our members to be dissatisfied with our services and the response to our interactive services to decrease.Furthermore,if our members generally become less responsive to participating in our services,the value of these interactive services will likely decline.This could cause our revenue to remain flat or to decline. Finally,if there is a reduction in the number of network members or their participation in our services,certain anticipated benefits of our acquisition of Epocrates,such as increased name recognition and reputation,cross-sell potential,and the market acceptance of joint services may not be fully realized,if at all. The market for Internet-based medical business services may not develop substantially further or develop more slowly than we expect, harming the growth of our business. While Internet-based medical business services have become more accepted,the market for these services remains narrowly based,and it is uncertain whether these services will achieve and sustain the high levels of demand and market acceptance we anticipate.Our success will depend to a substantial extent on the willingness of enterprises,large and small,to increase their use of on-demand business services in general,and for their revenue,clinical,and patient cycles in particular.Many enterprises have invested substantial personnel and financial resources to integrate established enterprise software into their businesses and therefore may be reluctant or unwilling to switch to an on-demand application service.Furthermore,some enterprises may be reluctant or unwilling to use on-demand application services,because they have concerns regarding the risks associated with the security and reliability,among other things,of the technology delivery model associated with these services.If enterprises do not perceive the benefits of our services,then the market for these services may not expand as much or develop as quickly as we expect,either of which would significantly adversely affect our business,financial condition, or operating results. Changes in the health care industry could affect the demand for our services,cause our existing contracts to terminate,and negatively impact the process of negotiating future contracts. As the health care industry evolves,changes in our member,client,and vendor bases may reduce the demand for our services,result in the termination of existing contracts,and make it more difficult to negotiate new contracts on terms that are acceptable to us.For example,the current trend toward consolidation of health care providers within hospital systems may cause our existing practice client contracts to terminate as independent practices are merged into hospital systems.Such larger health care organizations may also have their own practice management services and health IT systems,reducing demand for our services.Similarly,client and vendor consolidation results in fewer,larger entities with increased bargaining power and the ability to demand terms that are unfavorable to us.If these trends continue,we cannot assure you that we will be able to continue to maintain or expand our client base,negotiate contracts with acceptable terms,or maintain our current pricing structure,and our revenues may decrease. General reductions in expenditures by health care companies,or reductions in such expenditures within market segments that we serve,could have similar impacts with regard to our interactive services.Such reductions may result from,among other things,reduced governmental funding for health care;a decrease in the number of,or the market exclusivity available to,new drugs coming to market;government regulation or private initiatives that affect the manner in which health care providers interact with patients,pharmaceutical companies,payers,or other health care industry participants( e.g.,limitations on advertising to physicians or required disclosure of payments made to them);or adverse changes in business or economic conditions affecting health care payers or providers,the pharmaceutical industry,or other health care companies that subscribe for our interactive services(e.g.,changes in the design of health plans).Any of these changes could reduce the purchase of our services by such interactive services clients,reducing our revenue and possibly requiring us to materially revise our offerings.In addition,our interactive services clients'expectations regarding pending or potential industry developments may also affect their budgeting processes and spending plans with respect to services of the types we provide. If we do not continue to innovate and provide services that are useful to clients and users,we may not remain competitive,and our revenues and operating results could suffer. Our success depends on our ability to keep pace with technological developments,satisfy increasingly sophisticated client and user requirements,and sustain market acceptance.Our competitors are constantly developing products and services that may become more efficient or appealing to our clients or users.As a result,we must continue to invest significant resources in research and development in order to enhance our existing services and introduce new high-quality services that clients and users will want,while offering these services at competitive prices.For example,our mobile clinical information services are not compatible with all mobile platforms.If a mobile platform that is incompatible with our services achieves widespread use 16 Table of Contents and acceptance in the medical community,or if Internet resources or other non-mobile device resources become more attractive than what is offered for mobile platforms,we may be unable to retain or attract members to our products or services. If we are unable to predict user preferences or industry changes,or if we are unable to modify our services on a timely or cost-effective basis,we may lose clients and users.Our operating results would also suffer if our innovations are not responsive to the needs of our clients and users,are not appropriately timed with market opportunity,or are not effectively brought to market.As technology continues to develop,our competitors may be able to offer results that are,or that are perceived to be,substantially similar to or better than those generated by our services.This may force us to compete on additional service attributes and to expend significant resources in order to remain competitive. Failure to manage our rapid growth effectively could increase our expenses,decrease our revenue,and prevent us from implementing our business strategy. We have been experiencing a period of rapid growth.To manage our anticipated future growth effectively,we must continue to maintain,and may need to enhance,our information technology infrastructure and financial and accounting systems and controls,as well as manage expanded operations in geographically distributed locations.We also must attract,train,and retain a significant number of qualified sales and marketing personnel,professional services personnel,software engineers,technical personnel,and management personnel.Failure to manage our rapid growth effectively could lead us to over- invest or under-invest in technology and operations;result in weaknesses in our infrastructure,systems,or controls;give rise to operational mistakes,losses, or loss of productivity or business opportunities;reduce client or user satisfaction;limit our ability to respond to competitive pressures;and result in loss of employees and reduced productivity of remaining employees.Our growth could require significant capital expenditures and may divert financial resources and management attention from other projects,such as the development of new or enhanced services or the acquisition of suitable businesses or technologies.If our management is unable to effectively manage our growth,our expenses may increase more than expected,our revenue could decline or may grow more slowly than expected,and we may be unable to implement our business strategy. We may be unable to adequately protect,and we may incur significant costs in enforcing,our intellectual property and other proprietary rights. Our success depends in part on our ability to enforce our intellectual property and other proprietary rights.We rely upon a combination of copyright, patent,trademark,trade secret,and unfair competition laws,as well as license and access agreements and other contractual provisions,to protect these rights. Our attempts to protect our intellectual property through copyright,patent,and trademark registration may be challenged by others or invalidated through administrative process or litigation.While we have eleven issued U.S.patents(seven applicable to our Epocrates services),two issued foreign patents(both applicable to our Epocrates services),and a number of U.S.and foreign patent applications pending as of December 31,2013,the scope of issued patents may be insufficient to prevent competitors from providing products and services similar to ours,our patents may be successfully challenged,and we may not be able to obtain additional meaningful patent protection in the future. Our agreements with clients and users and with certain vendors and strategic partners limit their use of,and retain our rights in,our intellectual property and proprietary information and grant us ownership of intellectual property created in the performance of those agreements to the extent that it relates to the provision of our services.In addition,we require certain of our employees and consultants to enter into confidentiality,non-competition,and assignment of inventions agreements and certain of our vendors and strategic partners to agree to contract provisions regarding confidentiality and non-competition.However, these agreements may be breached,and we may not have adequate remedies for any such breach.Further,no assurance can be given that these agreements will be effective in preventing the unauthorized access to,or use of,our proprietary information or the reverse engineering of our technology.In any event,these agreements do not prevent our competitors from independently developing technology or authoring clinical information that is substantially equivalent or superior to our technology or the information we distribute.Agreement terms that address non-competition are difficult to enforce in many jurisdictions and may not be enforceable in any particular case. In addition,our platforms incorporate"open source"software components that are licensed to us under various public domain licenses.While we believe that we have complied with our obligations under the various applicable licenses for open source software that we use,open source license terms are often ambiguous,and there is little or no legal precedent governing the interpretation of many of the terms of certain of these licenses.Therefore,the potential impact of such terms on our business is somewhat unknown.For example,some open source licenses require that those using the associated code disclose modifications made to that code and that such modifications be licensed to third parties at no cost.We monitor our use of open source software in an effort to avoid uses in a manner that would require us to disclose or grant licenses under our proprietary source code.However,there can be no assurance that such efforts will be successful,and such use could inadvertently occur. 17 Table of Contents To the extent that our intellectual property and other proprietary rights are not adequately protected,third parties might gain access to our proprietary information,develop and market products or services similar to ours,or use trademarks similar to ours,each of which could materially harm our business. Existing U.S.federal and state intellectual property laws offer only limited protection.Moreover,the laws of other countries in which we now or may in the future conduct operations or contract for services may afford little or no effective protection of our intellectual property.If we resort to legal proceedings to enforce our intellectual property rights or to determine the validity and scope of the intellectual property or other proprietary rights of others,the proceedings could be burdensome and expensive,even if we were to prevail.Any litigation that may be necessary in the future could result in substantial costs and diversion of resources and could have a material adverse effect on our business,operating results,or financial condition. We may be sued by third parties for alleged infringement of their proprietary rights. The software and Internet industries are characterized by the existence of a large number of patents,trademarks,and copyrights and by frequent litigation based on allegations of infringement or other violations of intellectual property rights.Moreover,our business involves the systematic gathering and analysis of data about the requirements and behaviors of payers and other third parties,some or all of which may be claimed to be confidential or proprietary.We have received in the past,and may receive in the future,communications from third parties claiming that we have infringed on the intellectual property rights of others.Our technologies may not be able to withstand such third-party claims of rights against their use,and we could lose the right to use third-party technologies that are the subject of such claims.Any intellectual property claims,with or without merit,could be time-consuming and expensive to resolve, divert management attention from executing our business plan,and require us to pay monetary damages or enter into royalty or licensing agreements.In addition,many of our contracts contain warranties with respect to intellectual property rights,and some require us to indemnify our clients and third-party service providers for third-parry intellectual property infringement claims,which would increase the cost to us of an adverse ruling on such a claim.Although many of our third-party service providers are obligated to indemnify us if their products infringe the rights of others,such indemnification may not be effective or adequate to protect us or the indemnifying party may be unable to uphold its contractual obligations. Moreover,any settlement or adverse judgment resulting from such a claim could require us to pay substantial amounts of money or obtain a license to continue to use the technology or information that is the subject of the claim,or otherwise restrict or prohibit our use of the technology or information.There can be no assurance that we would be able to obtain a license on commercially reasonable terms,if at all,from third parties asserting an infringement claim; that we would be able to develop alternative technology on a timely basis,if at all;that we would be able to obtain a license to use a suitable alternative technology or information to permit us to continue offering,and our clients to continue using,our affected services;or that we would not need to change our product and design plans,which could require us to redesign affected products or services or delay new offerings.Accordingly,an adverse determination could prevent us from offering our services to others. Current and future litigation against us could be costly and time-consuming to defend and could result in additional liabilities. We may from time to time be subject to legal proceedings and claims that arise in the ordinary course of business,such as claims brought by our clients in connection with commercial disputes and employment claims made by our current or former employees.Claims may also be asserted by or on behalf of a variety of other parties,including government agencies,patients of our physician clients,or stockholders.For example,in May 2013 we purchased the property on which our corporate headquarters are located.This property is a former Superfund site,and our ownership of it,or any of our other properties, could expose us to liability under applicable environmental laws,as well as to liability as a landlord or as owner of property that may be used by members of the public.Any litigation involving us may result in substantial costs and may divert management's attention and resources,which may seriously harm our business,overall financial condition,and operating results.Insurance may not cover existing or future claims,be sufficient to fully compensate us for one or more of such claims,or continue to be available on terms acceptable to us.A claim brought against us that is uninsured or underinsured could result in unanticipated costs,thereby reducing our operating results and leading analysts or potential investors to reduce their expectations of our performance resulting in a reduction in the trading price of our stock. RISKS RELATED TO OUR BUSINESS—OPERATIONS We depend upon third party service providers for important processing functions.If these third party providers do not fulfill their contractual obligations or choose to discontinue their services,our business and operations could be disrupted and our operating results would be harmed We have entered into service agreements with International Business Machines Corporation(which relationship is currently being wound down);Vision Business Process Solutions Inc.,a subsidiary of Dell,Inc.(formerly Perot Systems Corporation);and Access Healthcare Services USA,LLC to provide data entry and other services from facilities located in India and the Philip 18 Table of Contents pines to support our client service operations.Among other things,these providers process critical claims data and clinical documents.If such services fail or are of poor quality,our business,reputation,and operating results could be harmed.Failure of these service providers to perform satisfactorily could result in client dissatisfaction,disrupt our operations,and adversely affect operating results.With respect to these service providers,we have significantly less control over the systems and processes involved than if we maintained and operated them ourselves,which increases our risk.In some cases,functions necessary to our business are performed on proprietary systems and software to which we have no access.If we need to find an alternative source for performing these functions,we may have to expend significant money,resources,and time to develop the alternative,and if this development is not accomplished in a timely manner and without significant disruption to our business,we may be unable to fulfill our responsibilities to clients or the expectations of clients,with the attendant potential for liability claims and a loss of business reputation,loss of ability to attract or maintain clients,and reduction of our revenue or operating margin. Various risks could affect our worldwide operations,exposing us to significant costs. We conduct operations in the United States,India,and the Philippines,either directly or through our service providers.Such worldwide operations expose us to potential operational disruptions and costs as a result of a wide variety of events,including local inflation or economic downturn,currency exchange fluctuations,political turmoil,terrorism,labor issues,natural disasters,unfavorable intellectual property protection,and pandemics.Any such disruptions or costs could have a negative effect on our ability to provide our services or meet our contractual obligations,the cost of our services,practice client and user satisfaction,our ability to attract or maintain practice clients,and,ultimately,our profits. In addition,although the substantial majority of the members of our Epocrates network are located in the United States,we currently have members in numerous other countries,and we could expand our international offerings in the future.Having members who are foreign residents could subject us to additional risks of conducting business,including failure to comply with local consumer protection laws or regulations,the impact of a country's or region's political or economic conditions on purchasing decisions,exposure to competitors who are more familiar with local markets,and restrictions on repatriation of earnings.Furthermore,we have limited experience in marketing,selling,and supporting our services abroad.For example,while Symbian is the most widely used mobile operating system in Europe,our clinical information and interactive services are not compatible with Symbian-based devices.If we invest substantial time and resources to expand our international operations and are unable to do so successfully and in a timely manner,our business and operating results will suffer. Because competition for our target employees is intense,we may not be able to attract and retain the highly skilled employees we need to support our planned growth. To continue to execute on our growth plan,we must attract and retain highly qualified personnel.Competition for these personnel is intense,especially for senior sales executives and engineers with high levels of experience in designing and developing software and Internet-related services.We may not be successful in attracting and retaining qualified personnel.We have from time to time in the past experienced,and we expect to continue to experience in the future,difficulty in hiring and retaining highly skilled employees with appropriate qualifications.For example,Epocrates has experienced high turnover in recent years,and we cannot assure you that we will be able to fill all open positions on a timely basis,or at all,on acceptable terms or that the limited exposure to Epocrates'business of those hired will not hinder our ability to manage and grow that business effectively,regardless of the extent of their past professional experience.In addition,our search for replacements for departed employees may cause uncertainty regarding the future of our business,impact employee hiring and retention,and adversely impact our revenue,operating results,and financial condition. Many of the companies with which we compete for experienced personnel have greater resources than we have.In addition,in making employment decisions,particularly in the Internet and high-technology industries,job candidates often consider the value of the equity awards they are to receive in connection with their employment.Volatility in the price of our stock or failure to obtain stockholder approval for increases in the number of shares available for grant under our equity plans may,therefore,adversely affect our ability to attract or retain key employees.Furthermore,the requirements to expense equity awards may discourage us from granting the size or type of equity awards that job candidates require to join our company.If we fail to attract new personnel or fail to retain and motivate our current personnel,our business and future growth prospects could be severely harmed. If we acquire companies or technologies,they could prove difficult to integrate,disrupt our business,dilute stockholder value,and adversely affect our operating results and the value of our common stock. As part of our business strategy,we may acquire,enter into joint ventures with,or make investments in complementary companies,services,and technologies in the future.Acquisitions and investments involve numerous risks,including: • difficulties in identifying and acquiring products,technologies,or businesses that will help our business; 19 Table of Contents • difficulties in integrating operations,technologies,services,and personnel; • the loss of key personnel; • failure to achieve anticipated operational efficiencies; • inconsistencies in standards,controls,procedures,or policies that give rise to additional costs; • diversion of financial and managerial resources from existing operations and other potential acquisitions and investments; • the risk of entering new markets in which we have little to no experience; • risks related to the assumption of known and unknown liabilities; • the risk of write-offs and the amortization of expenses related to purchased intangible assets;and • delays in client purchases due to uncertainty and the inability to maintain relationships with clients of the acquired businesses. As a result,if we fail to properly evaluate acquisitions or investments,we may not achieve the anticipated benefits of any such acquisitions,we may incur costs in excess of what we anticipate,and management resources and attention may be diverted from other necessary or valuable activities. RISKS RELATED TO OUR BUSINESS—FINANCIALS Our operating results have in the past fluctuated and may continue to fluctuate significantly,and if we fail to meet the expectations of analysts or investors,our stock price and the value of an investment in our common stock could decline substantially. Our operating results are likely to fluctuate,and if we fail to meet or exceed the expectations of securities analysts or investors,the trading price of our common stock could decline.Moreover,our stock price may be based on expectations of our future performance that may be unrealistic or that may not be met.Some of the important factors that could cause our revenues and operating results to fluctuate from quarter to quarter include: • the extent to which our services achieve or maintain market acceptance; • our ability to introduce new services and enhancements to our existing services on a timely basis; • new competitors and the introduction of enhanced products and services from new or existing competitors; • the length of our contracting and implementation cycles and our fulfillment periods for our services to pharmaceutical companies; • changes in Client Days in Accounts Receivable; • the severity,length,and timing of seasonal and pandemic illnesses; • seasonal declines in the use of physician services,generally in the late summer and during the holiday season,which lead to a decline in collections by our physician clients about 30 to 50 days later; • the financial condition of our current and future clients; • changes in client budgets and procurement policies; • changes in pharmaceutical company demand as a result of delays or changes in product approvals and changes in regulations or marketing strategies; • the amount and timing of our investment in research and development activities; • the amount and timing of our investment in sales and marketing activities; • technical difficulties or interruptions in our services; • our ability to hire and retain qualified personnel and maintain an adequate rate of expansion of our sales force; • changes in the regulatory environment related to health care; • regulatory compliance costs; • the timing,size,and integration success of potential future acquisitions;and • unforeseen legal expenses,including litigation and settlement costs. Many of these factors are not within our control,and the occurrence of one or more of them might cause our operating results to vary widely.As such,we believe that quarter-to-quarter comparisons of our revenues and operating results may not be meaningful and should not be relied upon as an indication of future performance. A significant portion of our operating expense is relatively fixed in nature,and planned expenditures are based in part on expectations regarding future revenue and profitability.Accordingly,unexpected revenue shortfalls,lower-than-expected 20 Table of Contents revenue increases as a result of planned expenditures,and longer-than-expected impact on profitability and margins as a result of planned expenditures may decrease our gross margins and profitability and could cause significant changes in our operating results from quarter to quarter.In addition,our future quarterly operating results may fluctuate and may not meet the expectations of securities analysts or investors.If this occurs,the trading price of our common stock could fall substantially,either suddenly or over time. If the revenue of our practice clients decreases,or if our clients cancel or elect not to renew their contracts,our revenue will decrease. Under most of our practice client contracts,we base our charges on a percentage of the revenue that the client realizes while using our services.Many factors may lead to decreases in client revenue,including: • interruption of client access to our system for any reason; • our failure to provide services in a timely or high-quality manner; • failure of our clients to adopt or maintain effective business practices; • actions by third-party payers of medical claims to reduce reimbursement; • government regulations and government or other payer actions or inaction reducing or delaying reimbursement;and • reduction of client revenue resulting from increased competition or other changes in the marketplace for physician services. The current economic situation may give rise to several of these factors.For example,patients who have lost health insurance coverage due to unemployment or who face increased deductibles imposed by financially struggling employers or insurers could reduce the number of visits those patients make to our practice clients.Patients without health insurance or with reduced coverage may also default on their payment obligations at a higher rate than patients with coverage.Added financial stress on our clients could lead to their acquisition or bankruptcy,which could cause the termination of some of our service relationships.Further,despite the cost benefits that we believe our services provide,prospective clients may wish to delay contract decisions due to implementation costs or be reluctant to make any material changes in their established business methods in the current economic climate.With a reduction in tax revenue,state and federal government health care programs,including reimbursement programs such as Medicaid or initiatives under the Affordable Care Act,may be reduced or eliminated,which could negatively impact the payments that our practice clients receive. Also,although we currently estimate our expected customer life for practice clients to be twelve years,this is only an estimate,and there can be no assurance that our clients will elect to renew their contracts for this period of time.Our practice clients typically purchase one-year contracts that,in most cases,may be terminated on 90 days'notice without cause.The majority of our clinical information subscriptions have terms of one year,and our contracts with our market research,payer,and pharmaceutical clients for our interactive services typically range from one to three years.We cannot assure you that members of our Epocrates network and other Epocrates clients will continue to participate in our existing programs beyond the terms of their existing contracts or that they will enter into any additional contracts for new programs that we offer.If our practice clients'revenue decreases for any of the above or other reasons,or if our clients cancel or elect not to renew their contracts,our revenue will decrease. If we are required to collect sales and use taxes on the services we sell in additional jurisdictions,we may be subject to liability for past sales and incur additional related costs and expenses,and our future sales may decrease. We may lose sales or incur significant expenses should states be successful in imposing state sales and use taxes on our services.A successful assertion by one or more states that we should collect sales or other taxes on the sale of our services could result in substantial tax liabilities for past sales,decrease our ability to compete with software vendors subject to sales and use taxes,and otherwise harm our business.Each state has different rules and regulations governing sales and use taxes,and these rules and regulations are subject to varying interpretations that may change over time.We review these rules and regulations periodically and,when we believe that our services are subject to sales and use taxes in a particular state,we voluntarily approach state tax authorities in order to determine how to comply with their rules and regulations.We cannot assure you that we will not be subject to sales and use taxes or related penalties for past sales in states where we believe no compliance is necessary. Vendors of services,like us,are typically held responsible by taxing authorities for the collection and payment of any applicable sales and similar taxes. If one or more taxing authorities determines that taxes should have,but have not,been paid with respect to our services,we may be liable for past taxes in addition to taxes going forward.Liability for past taxes may also include very substantial interest and penalty charges.Our client contracts provide that our clients must pay all applicable sales and similar taxes.Nevertheless,clients may be reluctant to pay back taxes and may refuse responsibility for interest or penalties associated with those taxes.If we are required to collect and pay back taxes and the associated interest and penalties,and if our 21 Table of Contents clients fail or refuse to reimburse us for all or a portion of these amounts,we will have incurred unplanned expenses that may be substantial.Moreover, imposition of such taxes on our services going forward will effectively increase the cost of such services to our clients and may adversely affect our ability to retain existing clients or to gain new clients in the states in which such taxes are imposed. We may also become subject to tax audits or similar procedures in states where we already pay sales and use taxes.The incurrence of additional accounting and legal costs and related expenses in connection with,and the assessment of,taxes,interest,and penalties as a result of audits,litigation,or otherwise could be materially adverse to our current and future results of operations and financial condition. As a result of our variable sales and implementation cycles for our athenahealth services,and the uncertainty as to the timing of the fulfillment of our Epocrates services,we may be unable to recognize revenue to offset expenditures,which could result in fluctuations in our quarterly results of operations or otherwise harm our future operating results. The sales cycle for our athenahealth services can be variable,typically ranging from three to five months from initial contact to contract execution, although this period can be substantially longer.During the sales cycle,we expend time and resources,and we do not recognize any revenue to offset such expenditures.Our implementation cycle is also variable,typically ranging from three to five months from contract execution to completion of implementation, although some of our new-client set-up projects—especially those for larger practice clients—are complex and require a lengthy delay and significant implementation work.Each client's situation is different,and unanticipated difficulties and delays may arise as a result of failure by us or by the client to meet our respective implementation responsibilities.During the implementation cycle,we expend substantial time,effort,and financial resources implementing our services,but accounting principles do not allow us to recognize the resulting revenue until the service has been implemented,at which time we begin recognition of implementation revenue over an expected attribution period of the longer of the estimated expected customer life,currently twelve years,or the contract term. Even if implementation has begun,there can be no assurance that we will recognize revenue on a timely basis or at all from our efforts.Implementation for a given practice client may be canceled,as our contracts typically provide that they can be terminated for any reason or no reason on 90 days'notice.Despite the fact that we typically require a deposit in advance of implementation,some clients have canceled before our services have been started.In addition, implementation may be delayed,or the target dates for completion may be extended into the future,for a variety of reasons,including the needs and requirements of the client,delays with payer processing,and the volume and complexity of the implementations awaiting our work.If implementation periods are extended,our provision of the revenue cycle,clinical cycle,or patient cycle services upon which we realize most of our revenues will be delayed,and our financial condition may be adversely affected.In addition,cancellation of any implementation after it has begun may involve loss to us of time,effort,and expenses invested in the canceled implementation process and lost opportunity for implementing paying clients in that same period of time. In regard to our Epocrates services,the time between the date of the signing of the contract with a pharmaceutical client for a program,the actual fulfillment of the services under such contract and the revenue recognition associated with such revenues may be lengthy,especially for larger contracts with multiple deliverables,and may be subject to delays over which we have little or no control,including those that result from that client's need for internal approvals. These factors may contribute to substantial fluctuations in our quarterly operating results,particularly in the near term and during any period in which our sales volume is relatively low.As a result,in future quarters our operating results could fall below the expectations of securities analysts or investors,in which event our stock price would likely decrease. Because we recognize revenue from our drug and clinical reference tool subscriptions and certain of our interactive services over the term or at the end of the service period,a significant downturn in our business may not be reflected immediately in our operating results,which may make it more difficult to evaluate our prospects. We recognize revenue from our Epocrates subscription agreements monthly over the terms of these agreements,which are typically one year.In most cases,we recognize revenue from our interactive services over the terms of these agreements or upon delivery of each service element.As a result,a significant portion of the revenue we report in each quarter is generated from subscription and service agreements entered into during prior periods.Consequently,a decline in new or renewed subscriptions or service agreements in any one quarter may not materially affect our financial performance in that quarter but will negatively affect our revenue in future quarters.In addition,we may be unable to adjust our costs,many of which are fixed,in response to reduced revenue. Accordingly,the effect of significant declines in sales and market acceptance of our services may not be reflected in our short-term results of operations,which would make our reported results less indicative of our future prospects. 22 Table of Contents If we fail to meet our current credit agreement's financial covenants,our business and financial condition could be adversely affected We currently have a credit agreement which contains financial covenants,including maintaining a consolidated fixed charge coverage ratio,a consolidated leverage ratio,and a consolidated senior leverage ratio.As of December 31,2013,we borrowed $223.8 million under the agreement and were in compliance with its financial covenants.There is no assurance that we will continue to be in compliance with all of the covenants under the agreement,and,if at any point we fail to comply with the financial covenants,the lenders can demand immediate repayment of our outstanding balance and deny future borrowings under the agreement.This could have a negative impact on our liquidity,thereby reducing the availability of cash flow for other purposes and adversely affecting our business. RISKS RELATED TO OUR SERVICE OFFERINGS Our proprietary software or our services may not operate properly,which could damage our reputation,give rise to claims against us,or divert application of our resources from other purposes,any of which could harm our business and operating results. Proprietary software development is time-consuming,expensive,and complex.Unforeseen difficulties can arise.We may encounter technical obstacles, and it is possible that we discover additional problems that prevent our applications from operating properly.If our systems do not function reliably or fail to achieve user or client expectations in terms of performance,clients could assert liability claims against us or attempt to cancel their contracts with us,and members could choose to terminate their use of our services.This could damage our reputation and impair our ability to attract or maintain clients and members. Information services as complex as those we offer have in the past contained,and may in the future develop or contain,undetected defects or errors.We cannot assure you that material performance problems or defects in our services will not arise in the future.Errors may result from sources beyond our control,including the receipt,entry,or interpretation of patient information;interface of our services with legacy systems that we did not develop;or errors in data provided by third parties.It is challenging for us to test our software for all potential problems because it is difficult to simulate the wide variety of computing environments or treatment methodologies that our practice clients or members may deploy or rely upon.Therefore,despite testing,defects or errors may arise in our existing or new software or service processes following introduction to the market.For example,changes in payer requirements and practices are frequent and sometimes difficult to determine except through trial and error,so we are continuously discovering defects and errors in our software and service processes compared against these requirements and practices. Because practice clients rely on our services to collect,manage,and report clinical,business,and administrative data-including information to assist care providers in tracking and treating ill patients-and members rely on our services to provide timely and accurate information regarding medical conditions and medicines,they may have a greater sensitivity to service errors and security vulnerabilities than clients of software products in general.Any operational delay in or failure of our technology or service processes may result in the disruption of patient care and could cause harm to patients and thereby give rise to a product liability claim or errors or omissions claim.Such claims could subject us to significant legal defense costs and adverse publicity,regardless of the merits or eventual outcome of those claims.While our subscription and services agreements typically contain limitations of liability and disclaimers that purport to limit our liability for damages related to defects in our software or content,such limitations and disclaimers may not be enforced by a court or other tribunal or otherwise effectively protect us from related claims.We maintain liability insurance coverage,including coverage for errors and omissions. However,it is possible that claims could exceed the amount of our applicable insurance coverage,if any,or that this coverage may not continue to be available on acceptable terms or in sufficient amounts. In light of this,defects and errors and any failure by us to identify and address them could result in loss of revenue or market share;liability to clients, members,their patients,or others;failure to achieve market acceptance or expansion;diversion of development and management resources;delays in the introduction of new services;injury to our reputation;and increased service and maintenance costs.Defects or errors in our software and service processes might discourage existing or potential clients or members from purchasing services from us.Correction of defects or errors could prove to be impossible or impracticable.The costs incurred in correcting any defects or errors or in responding to resulting claims or liability may be substantial and could adversely affect our operating results. 23 Table of Contents If our security measures are breached or fail,and unauthorized access is obtained to a client's or member's data,our services may be perceived as not being secure,clients and members may curtail or stop using our services,and we may incur significant liabilities. Our services involve the web-based storage and transmission of clients'and members'proprietary information and protected health information of patients.Because of the sensitivity of this information,security features of our software are very important.From time to time we may detect vulnerabilities in our systems,which,even if they do not result in a security breach,may reduce customer confidence and require substantial resources to address.If our security measures are breached or fail as a result of third-party action,employee error,malfeasance,insufficiency,defective design,or otherwise,someone may be able to obtain unauthorized access to client,member,or patient data.As a result,our reputation could be damaged,our business may suffer,and we could face damages for contract breach,penalties for violation of applicable laws or regulations,and significant costs for remediation and efforts to prevent future occurrences.We rely upon users of our systems for key activities to promote security of those systems and the data within them,such as administration of client-side access credentialing and control of client-side display of data.On occasion,our users have failed to perform these activities. Failure of users to perform these activities may result in claims against us that this reliance was misplaced,which could expose us to significant expense and harm to our reputation.Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target,we may be unable to anticipate these techniques or to implement adequate preventive measures.If an actual or perceived breach of our security occurs,the market perception of the effectiveness of our security measures could be harmed and we could lose sales,clients,and members.In addition,our practice clients may authorize or enable third parties to access their data or the data of their patients on our systems.Because we do not control such access,we cannot ensure the complete propriety of that access or integrity or security of such data in our systems. Failure by our clients to obtain proper permissions and waivers may result in claims against us or may limit or prevent our use of data,which could harm our business. We require our clients to provide necessary notices and to obtain necessary permissions and waivers for use and disclosure of the information that we receive,and we require contractual assurances from them that they have done so and will do so.If they do not obtain necessary permissions and waivers,then our use and disclosure of information that we receive from them or on their behalf may be limited or prohibited by state or federal privacy laws or other laws. This could impair our functions,processes,and databases that reflect,contain,or are based upon such data and may prevent use of such data.In addition, this could interfere with or prevent creation or use of rules,and analyses or limit other data-driven activities that benefit us.Moreover,we may be subject to claims or liability for use or disclosure of information by reason of lack of valid notice,permission,or waiver.These claims or liabilities could subject us to unexpected costs and adversely affect our operating results. Various events could interrupt users'access to our systems,exposing us to significant costs. The ability to access our systems is critical to our practice clients'administration of care,cash flow,and business viability.Our operations and facilities are vulnerable to interruption or damage from a number of sources,many of which are beyond our control,including,without limitation:(i)power loss and telecommunications failures;(ii)earthquake,fire,flood,hurricane,and other natural disasters;(iii)terrorism and acts of war;(iv)software and hardware errors,failures,or crashes in our systems or those of others;and(v)computer viruses,hacking,and similar disruptive problems in our systems or those of others.We attempt to mitigate these risks through various means,including redundant infrastructure,disaster recovery plans,business continuity plans, separate test systems,and change control and system security measures,but our precautions will not protect against all potential problems.If users'access is interrupted because of problems in the operation of our facilities,we could be exposed to significant claims by practice clients or their patients,particularly if the access interruption is associated with problems in the timely delivery of funds due to those clients or medical information relevant to patient care.Our plans for disaster recovery and business continuity rely in part upon third-party providers of related services,and if those vendors fail us at a time that our systems are not operating correctly,we could incur a loss of revenue and liability for failure to fulfill our obligations.Although we carry business interruption insurance,it only covers some,but not all,of these potential events,and even for those events that are covered,it may not be sufficient to compensate us fully for losses or damages that may occur as a result of such events,including,for example,loss of market share and diminution of our brand,reputation,and member and client loyalty. In addition,retention and availability of patient care and physician reimbursement data are subject to federal and state laws governing record retention, accuracy,and access.Some laws impose obligations on our practice clients and on us to produce information to third parties and to amend or expunge data at their direction.Our failure to meet these obligations may result in liability that could increase our costs and reduce our operating results. 24 Table of Contents We rely on Internet infrastructure,bandwidth providers,data center providers,other third parties,and our own systems for providing services to our users,and any failure or interruption in the services provided by these third parties or our own systems could expose us to litigation and negatively impact our relationships with users or clients,adversely affecting our brand and our business. In addition to the services we provide from our offices,we currently serve our practice clients from three third-parry data-hosting facilities located in the greater Boston,Massachusetts,and Dallas-Fort Worth,Texas,areas.These facilities are operated by Colospace Inc.and two subsidiaries of Digital Realty Trust,Inc.In addition,in December 2009 we signed a contract with a major provider of disaster recovery services,SunGard Availability Services,LP,to store our disaster recovery plans and provide disaster recovery testing services.In the case of a significant event at any of these data centers,we could move operations from that data center to our other data centers within a reasonable timeframe.For our Epocrates services,in addition to our operations at our facility in San Mateo,California,we use a co-location service administered by AT&T,Inc.in Redwood City,California. However,these facilities are vulnerable to damage or interruption from earthquakes,floods,fires,power loss,telecommunications failures,and similar events.They are also subject to break-ins,sabotage,intentional acts of vandalism,and similar misconduct.Despite precautions taken at these facilities,the occurrence of a natural disaster or an act of terrorism,a decision to close the facilities without adequate notice,or other unanticipated problems at two or more of the facilities could result in lengthy interruptions in our service.For example,the proximity of our San Mateo and Redwood City,California,operations, which are the sole facilities used to provide our Epocrates services,could result in both facilities being impacted by a regional event,such as an earthquake. Even with our disaster recovery arrangements,our services could be interrupted. Our ability to deliver our Internet-and telecommunications-based services is dependent on the development and maintenance of the infrastructure of the Internet and other telecommunications services by third parties.This includes maintenance of a reliable network backbone with the necessary speed,data capacity,and security for providing reliable Internet access and services and reliable mobile device,telephone,facsimile,and pager systems.Our services are designed to operate without interruption in accordance with our service level commitments and meet user expectations.However,we have experienced and expect that we will experience interruptions and delays in services and availability from time to time.We rely on internal systems as well as third-parry vendors,including data center,bandwidth,and telecommunications equipment or service providers,to provide our services.We do not maintain redundant systems or facilities for some of these services.In the event of a catastrophic event with respect to one or more of these systems or facilities,we may experience an extended period of system unavailability,which could negatively impact our relationship with users or clients.To operate without interruption,both we and our service providers must guard against: • damage from fire,power loss,and other natural disasters; • communications failures; • software and hardware errors,failures,and crashes; • security breaches,computer viruses,and similar disruptive problems;and • other potential interruptions. Any disruption in the network access,telecommunications,or co-location services provided by these third-party providers or any failure of or by these third-party providers or our own systems to handle current or higher volume of use could significantly harm our business.We exercise limited control over these third-parry vendors,which increases our vulnerability to problems with services they provide. Any errors,failures,interruptions,or delays experienced in connection with these third-party technologies and information services or our own systems could negatively impact our relationships with users and clients,adversely affect our brands and business,and expose us to third-party liabilities.Although we maintain insurance for our business,the coverage under our policies may not be adequate to compensate us for all losses that may occur.In addition,we cannot provide assurance that we will continue to be able to obtain adequate insurance coverage at an acceptable cost. The reliability and performance of the Internet may be harmed by increased usage or by denial-of-service attacks.The Internet has experienced a variety of outages and other delays as a result of damages to portions of its infrastructure,and it could face outages and delays in the future.These outages and delays could reduce the level of Internet usage as well as the availability of the Internet to us for delivery of our Internet-based services. 25 Table of Contents We rely on third party computer hardware and software that may be difficult to replace or that could cause errors or failures of our services, which could damage our reputation,harm our ability to attract and maintain clients and members,and decrease our revenue. We rely on computer hardware purchased or leased and software licensed from third parties in order to offer our services,including database software from Oracle Corporation and storage devices from International Business Machines Corporation and EMC Corporation.These licenses are generally commercially available on varying terms;however,it is possible that this hardware and software may not continue to be available on commercially reasonable terms,or at all.Any loss of the right to use any of this hardware or software could result in delays in the provisioning of our services until equivalent technology is either developed by us,or,if available,is identified,obtained,and integrated,which could harm our business.Any errors or defects in third- party hardware or software could result in errors or a failure of our services,which could damage our reputation,harm our ability to attract and maintain clients and members,and decrease our revenue. We are subject to the effect of payer and provider conduct that we cannot control and that could damage our reputation with clients and result in liability claims that increase our expenses. We offer certain electronic claims submission services for which we rely on content from clients,payers,and others.While we have implemented certain features and safeguards designed to maximize the accuracy and completeness of claims content,these features and safeguards may not be sufficient to prevent inaccurate claims data from being submitted to payers.Should inaccurate claims data be submitted to payers,we may experience poor operational results and may be subject to liability claims,which could damage our reputation with clients and result in liability claims that increase our expenses. If our services fail to provide accurate and timely information,or if our content or any other element of any of our services is associated with faulty clinical decisions or treatment,we could have liability to clients,members,clinicians,or patients,which could adversely affect our results of operations. Our software,content,and services are used to assist clinical decision-making and provide information about patient medical histories,treatment plans, medical conditions,and the use of particular medications.If our software,content,or services fail to provide accurate and timely information or are associated with faulty clinical decisions or treatment,then clients,members,clinicians,or their patients could assert claims against us that could result in substantial costs to us,harm our reputation in the industry,and cause demand for our services to decline. Our athenaClinicals service is utilized in clinical decision-making,provides access to patient medical histories,and assists in creating patient treatment plans,including the issuance of prescription drugs.Therefore,if these data are incorrect or incomplete or if we make mistakes in the capture or input of these data,adverse consequences,including death,may occur and give rise to product liability and other claims against us by practice clients,clinicians,patients, or others.Although the data stored and displayed in athenaClinicals is generally provided by our practice clients or third parties,and we often have little control over their accuracy,a court or government agency may take the position that our storage and display of health information exposes us to personal injury liability or other liability for wrongful delivery or handling of health care services or erroneous health information. Our Epocrates clinical reference tools and interactive services provide health care professionals with access to clinical information,including information regarding particular medical conditions and the use of particular medications.If our content,or content we obtain from third parties,contains inaccuracies,or we introduce inaccuracies in the process of implementing third-party content,it is possible that patients,physicians,consumers,the providers of the third- party content,or others may sue us if they are harmed as a result of such inaccuracies.We have editorial procedures in place to provide quality control of the information that we publish or provide.However,we cannot assure you that our editorial and other quality control procedures will be sufficient to ensure that there are no errors or omissions in particular content,and we have had content errors in the past. The assertion of such claims and ensuing litigation,regardless of its outcome,could result in substantial cost to us,divert management's attention from operations,damage our reputation,and decrease market acceptance of our services.We attempt to limit by contract our liability for damages;have our members assume responsibility for medical oversight and dosing decisions;and require that our practice clients assume responsibility for medical care and approve key system rules,protocols,and data.Despite these precautions,the allocations of responsibility and limitations of liability set forth in our contracts may not be enforceable,be binding upon patients,or otherwise protect us from liability for damages.Furthermore,while we maintain general liability and errors and omissions insurance coverage,this coverage may not continue to be available on acceptable terms or may not be available in sufficient amounts to cover one or more large claims against us.In addition,the insurer might disclaim coverage as to any future claim.One or more large claims could exceed our available insurance coverage. If any of these risks occur,they could materially adversely affect our business,financial condition,or results of operations. 26 Table of Contents RISKS RELATED TO REGULATION Government regulation of health care creates risks and challenges with respect to our compliance efforts and our business strategies. The health care industry is highly regulated and is subject to changing political,legislative,regulatory,and other influences.Existing and new laws and regulations affecting the health care industry could create unexpected liabilities for us,cause us to incur additional costs,and restrict our operations.Many health care laws are complex,and their application to specific services and relationships may not be clear.In particular,many existing health care laws and regulations,when enacted,did not anticipate the health care information and interactive services that we provide,and these laws and regulations may be applied to our services in ways that we do not anticipate,particularly as we develop and release new and more sophisticated products and services.Our failure to accurately anticipate the application of these laws and regulations,or our other failure to comply with them,could create liability for us,result in adverse publicity,and negatively affect our business.Some of the risks we face from health care regulation are described below: False or Fraudulent Claim Laws. There are numerous federal and state laws that forbid submission of false information,or the failure to disclose information,in connection with submission and payment of physician claims for reimbursement.In some cases,these laws also forbid abuse in connection with such submission and payment.Any failure of our services to comply with these laws and regulations could result in substantial liability(including,but not limited to,criminal liability),adversely affect demand for our services,and force us to expend significant capital,research and development,and other resources to address the failure.Errors by us or our systems with respect to entry,formatting,preparation,or transmission of claim information may be determined or alleged to be in violation of these laws and regulations.Any determination by a court or regulatory agency that our services violate these laws could subject us to civil or criminal penalties,invalidate all or portions of some of our practice client contracts,require us to change or terminate some portions of our business,require us to refund portions of our services fees,cause us to be disqualified from serving practice clients doing business with government payers,and have an adverse effect on our business. In most cases where we are permitted to do so,we calculate charges for our services based on a percentage of the collections that our practice clients receive as a result of our services.To the extent that violations or liability for violations of these laws and regulations require intent,it may be alleged that this percentage calculation provides us or our employees with incentive to commit or overlook fraud or abuse in connection with submission and payment of reimbursement claims.The U.S.Centers for Medicare and Medicaid Services has stated that it is concerned that percentage-based billing services may encourage billing companies to engage in or overlook fraudulent or abusive practices. In addition,we may contract with third parties that offer software relating to the selection or verification of codes used to identify and classify the services for which reimbursement is sought.Submission of codes that do not accurately reflect the services provided or the location or method of their provision may constitute a violation of false or fraudulent claims laws.Our ability to comply with these laws depends on the coding decisions made by our practice clients and the accuracy of our vendors'software and services in suggesting possible codes to those clients and verifying that proper codes have been selected. HIPAA and other Health Privacy Regulations. There are numerous federal and state laws related to patient privacy.In particular,the Health Insurance Portability and Accountability Act of 1996,or HIPAA,includes privacy standards that protect individual privacy by limiting the uses and disclosures of individually identifiable health information and implementing data security standards that require covered entities to implement administrative,physical,and technological safeguards to ensure the confidentiality,integrity,availability,and security of individually identifiable health information in electronic form. HIPAA also specifies formats that must be used in certain electronic transactions,such as claims,payment advice,and eligibility inquiries.Because we translate electronic transactions to and from HIPAA-prescribed electronic formats and other forms,we are considered a clearinghouse and,as such,a covered entity subject to HIPAA.In addition,our practice clients are also covered entities and are mandated by HIPAA to enter into written agreements with us—known as business associate agreements—that require us to safeguard individually identifiable health information.Business associate agreements typically include: • a description of our permitted uses of individually identifiable health information; • a covenant not to disclose that information except as permitted under the agreement and to make our subcontractors,if any,subject to the same restrictions; • assurances that appropriate administrative,physical,and technical safeguards are in place to prevent misuse of that information; • an obligation to report to our client any use or disclosure of that information other than as provided for in the agreement; 27 Table of Contents • a prohibition against our use or disclosure of that information if a similar use or disclosure by our client would violate the HIPAA standards; • the ability of our clients to terminate the underlying support agreement if we breach a material term of the business associate agreement and are unable to cure the breach; • the requirement to return or destroy all individually identifiable health information at the end of our support agreement;and • access by the Department of Health and Human Services to our internal practices,books,and records to validate that we are safeguarding individually identifiable health information. We may not be able to adequately address the business risks created by HIPAA implementation.Furthermore,we are unable to predict what changes to HIPAA or other laws or regulations might be made in the future or how those changes could affect our business or the costs of compliance.For example,the provisions of the HITECH Act and the regulations issued under it(including the omnibus rule promulgated in January 2013)have provided clarification of certain aspects of both the Privacy and Security Rules,expansion of the disclosure requirements for a breach of the Security Rule,and strengthening of the civil and criminal penalties for failure to comply with HIPAA.In addition,ONCHIT is coordinating the ongoing development of standards to enable interoperable health information technology infrastructure nationwide based on the widespread adoption of electronic health records in the health care sector.We are unable to predict what,if any,impact the changes in such standards will have on our compliance costs or our services. In addition,some payers and clearinghouses with which we conduct business interpret HIPAA transaction requirements differently than we do.Where clearinghouses or payers require conformity with their interpretations as a condition of effecting transactions,and their interpretations are no less stringent than ours,we seek to comply with their interpretations. The HIPAA transaction standards include proper use of procedure and diagnosis codes.Since these codes are selected or approved by our practice clients, and since we do not verify their propriety,some of our capability to comply with the transaction standards is dependent on the proper conduct of those clients. Among our services,we provide telephone reminder services to patients,Internet-and telephone-based access to medical test results,pager and email notification to practices of patient calls,and patient call answering services.We believe that reasonable efforts to prevent disclosure of individually identifiable health information have been and are being taken in connection with these services,including the use of multiple-password security.However,any failure of our practice clients to provide accurate contact information for their patients or physicians or any breach of our telecommunications systems could result in a disclosure of individually identifiable health information. In addition to the HIPAA Privacy and Security Rules and the HITECH Act requirements,most states have enacted patient confidentiality laws that protect against the disclosure of confidential medical and other personally identifiable information,and many states have adopted or are considering further legislation in this area,including privacy safeguards,security standards,and data security breach notification requirements.Such state laws,if more stringent than HIPAA and HITECH Act requirements,are not preempted by the federal requirements,and we are required to comply with them. Failure by us to comply with any of the federal and state standards regarding patient privacy may subject us to penalties,including civil monetary penalties and,in some circumstances,criminal penalties.In addition,such failure may injure our reputation and adversely affect our ability to retain clients and attract new clients. In addition to false claims and HIPAA requirements,we are subject to a variety of other regulatory schemes,including: • Anti-Kickback and Anti-Bribery Laws. There are federal and state laws that govern patient referrals,physician financial relationships,and inducements to health care providers and patients.For example,the federal health care programs'anti-kickback law prohibits any person or entity from offering,paying,soliciting,or receiving anything of value,directly or indirectly,for the referral of patients covered by Medicare,Medicaid, and other federal health care programs or the leasing,purchasing,ordering,or arranging for or recommending the lease,purchase,or order of any item,good,facility,or service covered by these programs.Many states also have similar anti-kickback laws that are not necessarily limited to items or services for which payment is made by a federal health care program.Moreover,both federal and state laws forbid bribery and similar behavior. Any determination by a state or federal regulatory agency that any of our activities or those of our clients,vendors,or channel partners violate any of these laws could subject us to civil or criminal penalties,require us to change or terminate some portions of our business,require us to refund a portion of our service fees,disqualify us from providing services to clients doing business with government programs,and have an adverse effect on our business.For example,one aspect of our athenaCoordinator service is the preparation and submission of electronic orders from providers to other participants in the health care system(e.g.,hospitals,labs,and specialists).As the recipients of those orders will in certain instances pay us for the submission of 28 Table of Contents accurate,complete,and readable orders instead of the handwritten and often incomplete orders traditionally submitted,our service could potentially be seen as providing referrals to the order recipients in exchange for payment.Although the Office of Inspector General issued an Advisory Opinion in November 2011 stating that our receipt of payments in such instances would not violate federal anti-kickback laws,we cannot predict whether changes in the law or our services might lead to a challenge of the legality of those services by government regulators.Even an unsuccessful challenge by regulatory authorities of our activities could result in adverse publicity and could require a costly response from us. • Legislation relating to payments to physicians. Legislation enacted or pending in several states and enacted at the federal level as part of the Patient Protection and Affordable Care Act and the Healthcare and Education Reconciliation Act of 2010 mandates public disclosure of,or otherwise regulates or limits the providing of,certain gifts and payments by pharmaceutical companies to physicians.These laws may be interpreted to cover honorarium payments made to physicians for participation in market research activities sponsored by pharmaceutical companies.Because we currently provide market research services involving participants from our member network,the increased adoption and enforcement of these laws and the application of any public disclosure requirements or other limitations may have a negative impact on the ability of pharmaceutical companies to sponsor these activities or the willingness of physicians to participate in the market research.To date,we have not experienced a significant reduction in our market research services business as a result of these laws in the few jurisdictions in which they have been enacted and become effective.However,we cannot predict how pharmaceutical companies or physicians will respond when such legislation becomes more widespread or becomes effective at the federal level.A significant decline in the sponsorship of our market research services by pharmaceutical companies or the agencies that represent such companies,or a significant decline in physicians'willingness to participate in such studies could negatively impact our operating results. • Anti-Referral Laws. There are federal and state laws that forbid payment for patient referrals,patient brokering,remuneration of patients,or billing based on referrals between individuals or entities that have various financial,ownership,or other business relationships with health care providers.In many cases,billing for care arising from such actions is illegal.These vary widely from state to state,and one of the federal laws —called the Stark Law—is very complex in its application.Any determination by a state or federal regulatory agency that any of our practice clients violate or have violated any of these laws may result in allegations that claims that we have processed or forwarded are improper.This could subject us to civil or criminal penalties,require us to change or terminate some portions of our business,require us to refund portions of our services fees, and have an adverse effect on our business.Even an unsuccessful challenge by regulatory authorities of our activities could result in adverse publicity and could require a costly response from us. • Corporate Practice of Medicine Laws and Fee-Splitting Laws. Many states have laws forbidding physicians from practicing medicine in partnership with non-physicians,such as business corporations.In some states,including New York,these take the form of laws or regulations forbidding splitting of physician fees with non-physicians or others.In some cases,these laws have been interpreted to prevent business service providers from charging their physician clients on the basis of a percentage of collections or charges.We have varied our charge structure in some states to comply with these laws,which may make our services less desirable to potential clients.Any determination by a state court or regulatory agency that our service contracts with our practice clients violate these laws could subject us to civil or criminal penalties,invalidate all or portions of some of those contracts,require us to change or terminate some portions of our business,require us to refund portions of our services fees,and have an adverse effect on our business.Even an unsuccessful challenge by regulatory authorities of our activities could result in adverse publicity and could require a costly response from us. • Anti-Assignment Laws. There are federal and state laws that prohibit or limit assignment of claims for reimbursement from government-funded programs.In some cases,these laws have been interpreted in regulations or policy statements to limit the manner in which business service companies may handle checks or other payments for such claims and to limit or prevent such companies from charging their physician clients on the basis of a percentage of collections or charges.Any determination by a state court or regulatory agency that our service contracts with our practice clients violate these laws could subject us to civil or criminal penalties,invalidate all or portions of some of those contracts,require us to change or terminate some portions of our business,require us to refund portions of our service fees,and have an adverse effect on our business.Even an unsuccessful challenge by regulatory authorities of our activities could result in adverse publicity and could require a costly response from us. • Prescribing Laws. The use of our software by physicians to perform a variety of functions relating to prescriptions,including electronic prescribing,electronic routing of prescriptions to pharmacies,and dispensing of medication,is governed by state and federal law,including fraud and abuse laws,drug control regulations,and state department of health regulations.States have differing prescription format requirements,and, due in part to recent industry initiatives,federal law and the laws of all 50 states now provide a regulatory framework for the electronic transmission 29 Table of Contents of prescription orders.Regulatory authorities such as the U.S.Department of Health and Human Services'Centers for Medicare and Medicaid Services may impose functionality standards with regard to electronic prescribing and ERR technologies.Any determination that we or our practice clients have violated prescribing laws may expose us to liability,loss of reputation,and loss of business.These laws and requirements may also increase the cost and time necessary to market new services and could affect us in other respects not presently foreseeable. • Electronic Health Records Laws. A number of federal and state laws govern the use and content of electronic health record systems,including fraud and abuse laws that may affect how such technology is provided.As a company that provides EHR functionality,our systems and services must be designed in a manner that facilitates our practice clients'compliance with these laws.Because this is a topic of increasing state and federal regulation,we expect additional and continuing modification of the current legal and regulatory environment.We cannot predict the content or effect of possible future regulation on our business activities.The software component of our athenaClinicals service was certified as a 2014 Edition compliant Complete EHR by CCHIT,an ONC-ATCB,in accordance with the applicable certification criteria adopted by the Secretary of the U.S. Department of Health and Human Services(HHS).However,such certification does not represent an endorsement of our athenaClinicals service by HHS or guarantee the receipt of incentive payments.While we believe that our system is well designed in terms of function and interoperability,we cannot be certain that it will meet future requirements. • Claims Transmission Laws. Our services include the manual and electronic transmission of medical practice claims for reimbursement from payers.Federal and various state laws provide for civil and criminal penalties for any person who submits,or causes to be submitted,a claim to any payer(including,without limitation,Medicare,Medicaid,and any private health plans and managed care plans)that is false or that overbills or bills for items that have not been provided to the patient.Although we do not determine what is billed to a payer,to the extent that such laws apply to a service that merely transmits claims on behalf of others,we could be subject to the same civil and criminal penalties as our practice clients. • Prompt Pay Laws. Laws in many states govern prompt payment obligations for health care services.These laws generally define claims payment processes and set specific time frames for submission,payment,and appeal steps.They frequently also define and require clean claims.Failure to meet these requirements and time frames may result in rejection or delay of claims.Failure of our services to comply may adversely affect our business results and give rise to liability claims by practice clients. • Medical professional regulation. The practice of most healthcare professions requires licensing under applicable state law.In addition,the laws in some states prohibit business entities from practicing medicine.We do not believe that we engage in the practice of medicine and have attempted to structure our services,strategic relationships,and other operations to avoid violating these state licensing and professional practice laws.We employ and contract with physicians who provide only medical information to our users,some of whom may be consumers,and we do not intend to provide medical care or advice.Any determination that we are a health care provider and acted improperly as a health care provider may result in liability to US. • Regulation of drug and medical device advertising and promotion. We provide services involving promotion of prescription and over-the- counter drugs and medical devices.Any increase in regulation of these areas by the U.S.Food and Drug Administration,or FDA;the Federal Trade Commission,or FTC;or other governmental bodies at the federal,state,or local level,could make it more difficult for us to contract for certain of our interactive services.Physician groups and others have criticized the FDA's current policies and have called for restrictions on advertising of prescription drugs and for increased FDA enforcement.In response,the FDA has conducted hearings and sought public comment regarding its regulation of information concerning drugs on the Internet and the relationships between pharmaceutical companies and those disseminating information on drugs.We cannot predict what actions the FDA or industry participants may take in response to these criticisms.It is also possible that new laws would be enacted that impose restrictions on such marketing and advertising.Our interactive services revenues could be materially reduced by additional restrictions on the marketing or advertising of prescription drugs and medical devices,whether imposed by law or regulation or by policies adopted by industry members.If the FDA,the FTC,or another governmental body finds that any information available on our website or distributed by us violates FDA,FTC,or other laws or regulations,they may take regulatory or judicial action against us or the advertiser or sponsor of that information.State attorneys general may also take similar action based on their state's consumer protection statutes or other new or existing laws. • Medical Device Laws. The U.S.Food and Drug Administration(FDA)has promulgated a draft policy for the regulation of computer software products as medical devices under the 1976 Medical Device Amendments to the Federal Food,Drug and Cosmetic Act.In addition,in February 2011 the FDA issued a final rule regarding regulation of Medical Device Data Systems(MDDSs),which are systems that are intended to transfer, store,convert,or display medical device data.While EHRs are expressly exempted from the final rule,it is possible that future changes in our services could involve the transfer,storage,conversion,or display of medical device data.In addition,a report,which 30 Table of Contents we anticipate by mid-2014 from the FDA,ONCHIT,and the Federal Communications Commission,is expected to propose a regulatory framework for health information technology for the purpose of promoting innovation,protecting patient safety,and avoiding regulatory duplication.To the extent that our software is considered a medical device under the policy or an MDDS under the final rule,or is the subject of additional regulation promulgated as a result of the report,we,as a provider of application functionality,could be required,depending on the functionality,to: register and list our products with the FDA; notify the FDA and demonstrate substantial equivalence to other products on the market before marketing our functionality;or obtain FDA approval by demonstrating safety and effectiveness before marketing our functionality. The FDA can impose extensive requirements governing pre-and post-market conditions,such as service investigation and others relating to approval, labeling,and manufacturing.In addition,the FDA can impose extensive requirements governing development controls and quality assurance processes. Potential health care reform and new regulatory requirements placed on our software,services,and content could impose increased costs on us,delay or prevent our introduction of new service types,and impair the function or value of our existing service types. Our services may be significantly impacted by health care reform initiatives and will be subject to increasing regulatory requirements,either of which could affect our business in a multitude of ways.If substantive health care reform or applicable regulatory requirements are adopted,we may have to change or adapt our services and software to comply.Reform or changing regulatory requirements may also render our services obsolete or may block us from accomplishing our work or from developing new services.This may in turn impose additional costs upon us to adapt to the new operating environment or to further develop services or software.For example,the conversion to the ICD-10 standard in October 2014 for coding medical diagnoses will likely cause significant disruption to our industry and consume a large amount of resources on our part.Such reforms may also make introduction of new service types more costly or more time-consuming than we currently anticipate.Such changes may even prevent introduction by us of new services or make the continuation of our existing services unprofitable or impossible. Potential additional regulation of the disclosure of health information outside the United States may adversely affect our operations and may increase our costs. Federal or state governmental authorities may impose additional data security standards or additional privacy or other restrictions on the collection,use, transmission,and other disclosures of health information.Legislation has been proposed at various times at both the federal and the state level that would limit,forbid,or regulate the use or transmission of medical information outside of the United States.Such legislation,if adopted,may render our use of our off-shore partners,such as our data-entry and customer service providers,for work related to such data impracticable or substantially more expensive. Alternative processing of such information within the United States may involve substantial delay in implementation and increased cost. Due to the particular nature of certain services we provide or the manner in which we provide them,we may be subject to government regulation unrelated to health care. While our services are primarily subject to government regulations pertaining to health care,certain aspects of those services may require us to comply with regulatory schemes from other areas.Examples of such regulatory schema include: Anti-spam Laws. We may be required to comply with current or future anti-spam legislation by limiting or modifying some of our interactive services, such as our clinical messaging,which may result in a reduction in our revenue.One such law,the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003,or CAN-SPAM,became effective in the United States on January 1,2004.CAN-SPAM imposes complex and often burdensome requirements in connection with the sending of commercial e-mail.CAN-SPAM or similar laws may impose burdens on our member communication practices and on certain of our services,which in turn could harm our ability to attract new payer and pharmaceutical clients and increase revenues. Antitrust Laws. Our national cloud-based network allows us access to cost and pricing data for a large number of providers inmost regional markets, as well as to the contracted rates for third-party payers.To the extent that our services enable providers to compare their cost and pricing data with those of their competitors,those providers could collude to increase the pricing for their services,to reduce the compensation they pay their employees,or to collectively negotiate agreements with third parties.Similarly,if payers are able to compare their contracted rates of payment to providers,those payers may seek to reduce the amounts they might otherwise pay.Such actions may be deemed to be anti-competitive and a 31 Table of Contents violation of federal antitrust laws.To the extent that we are deemed to have enabled such activities,we could be subject to fines and penalties imposed by the U.S.Department of Justice or the Federal Trade Commission and be required to curtail or terminate the services that permitted such collusion. Debt Collection Laws. As a billing service that offers patient communication and registration services,our employees or those of our service providers may from time to time come into contact with patients who owe our practice clients outstanding amounts.Communications with patients that relate to amounts owed may be deemed to subject us or our service providers to federal or state debt collection laws and regulations.Such laws and regulations,if deemed to apply to us,could require registration with government agencies and compliance with significant administrative obligations( e.g.,to maintain an in-state office with local employees),which could result in increased expenses and subject us to fines and penalties for violation.Following the disclosure in 2012 of the methods used by debt collector Accretive Health to obtain payment of amounts owed by patients to one of its hospital clients,heightened focus on debt collection practices may lead to additional regulation and greater scrutiny of existing debt collection practices. Privacy Regulation. The FTC and many state attorneys general are applying federal and state consumer protection laws to require that the online collection,use,and dissemination of data,and the presentation of website or other electronic content,comply with certain standards for notice,choice, security,and access.Courts may also adopt these developing standards.A number of states,including California,have enacted laws or are considering the enactment of laws governing the release of credit card or other personal information received from consumers. In addition,several foreign governments have regulations dealing with the collection and use of personal information obtained from their citizens.For example,the European Union,or EU,adopted the Data Protection Directive,or DPD,imposing strict regulations and establishing a series of requirements regarding the collection and use of personally identifiable information online.The DPD provides for specific regulations requiring all non-EU countries doing business with EU member states to provide adequate data privacy protection when receiving personal data from any of the EU member states.Similarly, Canada's Personal Information and Protection of Electronic Documents Act provides Canadian residents with privacy protections in regard to transactions with businesses and organizations in the private sector and sets out ground rules for how private sector organizations may collect,use,and disclose personal information in the course of commercial activities.Foreign governments may attempt to apply such laws extraterritorially or through treaties or other arrangements with U.S.governmental entities,and our practice management services for practices along the Canadian border and our market research services could each involve the personal information of foreign residents.Furthermore,in the conduct of our market research activities outside of the United States,we rely upon a third party to identify and recruit respondents for the market research and to comply with the applicable privacy laws in each jurisdiction in which it operates.We cannot assure you that this third party will successfully comply with such laws or that we would not be responsible for any failure of this third party to comply. While we have privacy policies posted with our services that we believe comply with applicable laws requiring notice to our users and practice clients about our information collection,use,and disclosure practices,we cannot assure you that the privacy policies and other statements regarding our practices will be found sufficient to protect us from liability or adverse publicity relating to the privacy and security of personal information.Whether and how existing local and international privacy and consumer protection laws in various jurisdictions apply to the Internet and other online technologies is still uncertain and may take years to resolve.Privacy laws and regulations,if drafted or interpreted broadly,could be deemed to apply to the technology we use and could restrict our information collection methods or decrease the amount and utility of the information that we would be permitted to collect.The costs of compliance with, and the other burdens imposed by,these and other laws or regulatory actions may prevent us from selling our products or services,or increase the costs of doing so,and may affect our ability to invest in or jointly develop products.In addition,a determination by a court or government agency that any of our practices,or those of our agents,do not meet these standards could result in liability,result in adverse publicity,and adversely affect our business. Errors or illegal activity on the part of our clients may result in claims against us. We require our clients to provide us with accurate and appropriate data and directives for our actions.We also rely upon our clients as users of our system to perform key activities in order to produce proper claims for reimbursement.Failure of our clients to provide these data and directives or to perform these activities may result in claims against us alleging that our reliance was misplaced or unreasonable or that we have facilitated or otherwise participated in submission of false claims. If participants in our channel marketing and sales lead programs do not maintain appropriate relationships with current and potential clients,our sales accomplished with their help or data may be unwound and our payments to them may be deemed improper. We maintain a series of relationships with third parties that we term"channel relationships."These relationships take different forms under different contractual language.Some relationships help us identify sales leads.Other relationships permit 32 Table of Contents third parties to act as value-added resellers or as independent sales representatives for our services.In some cases,for example in the case of some membership organizations,these relationships involve endorsement of our services as well as other marketing activities.In each of these cases,we require contractually that the third party disclose information to and limit their relationships with potential purchasers of our services for regulatory compliance reasons.If these third parties do not comply with these regulatory requirements or if our requirements are deemed insufficient,sales accomplished with the data or help that they have provided,as well as the channel relationships themselves,may not be enforceable,may be unwound,and may be deemed to violate relevant laws or regulations.Third parties that,despite our requirements,exercise undue influence over decisions by current and prospective clients,occupy positions with obligations of fidelity or fiduciary obligations to current and prospective clients,or who offer bribes or kickbacks to current and prospective clients or their employees may be committing illegal acts that could render any resulting contract between us and the client unenforceable or in violation of relevant laws or regulations.Any misconduct by these third parties with respect to current or prospective clients,any failure to follow contractual requirements,or any insufficiency of those contractual requirements may result in allegations that we have encouraged or participated in illegal behavior and that payments to such third parties under our channel contracts are improper.This misconduct could subject us to civil or criminal claims and liabilities,require us to change or terminate some portions of our business,require us to refund portions of our services fees,and adversely affect our revenue and operating margin.Even an unsuccessful challenge of our activities could result in adverse publicity,require costly response from us,impair our ability to attract and maintain clients, and lead analysts or investors to reduce their expectations of our performance,resulting in reduction in the market price of our stock. Our services present the potential for embezzlement,identity theft,or other similar illegal behavior by our employees or subcontractors with respect to third parties. Among other things,our services involve handling mail from payers and from patients for many of our clients,and this mail frequently includes original checks and credit card information and occasionally includes currency.Even in those cases in which we do not handle original documents or mail,our services also involve the use and disclosure of personal and business information that could be used to impersonate third parties or otherwise gain access to their data or funds.If any of our employees or subcontractors takes,converts,or misuses such funds,documents,or data,we could be liable for damages, and our business reputation could be damaged or destroyed.In addition,we could be perceived to have facilitated or participated in illegal misappropriation of funds,documents,or data and therefore be subject to civil or criminal liability. Subsidy of services similar to ours may reduce client demand if we do not participate in such programs. In the past few years,various entities and federal programs have provided subsidies for services similar to ours,including EHR initiatives.While we have qualified for and participated in many of such subsidy programs,we cannot guarantee that we will be able to do so in the future.To the extent that we do not participate in such programs,demand for our services may be reduced,which may decrease our revenues. RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK The price of our common stock may continue to be volatile. The trading price of our common stock has been and is likely to remain highly volatile and could be subject to wide fluctuations in response to various factors,some of which are beyond our control or unrelated to our operating performance.In addition to the factors discussed in this"Risk Factors"section and elsewhere in this Annual Report on Form 10-K,these factors include: • the operating performance of similar companies; • the overall performance of the equity markets; • announcements by us or our competitors of acquisitions,business plans,or commercial relationships; • threatened or actual litigation; • changes in laws or regulations relating to the provision of health care or the sale of health insurance; • any major change in our board of directors or management; • publication of research reports or news stories about us,our competitors,or our industry or positive or negative recommendations or withdrawal of research coverage by securities analysts; • large volumes of sales of our shares of common stock by existing stockholders;and • general political and economic conditions. In addition,the stock market in general,and the market for Internet-related companies in particular,has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those 33 Table of Contents companies.Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company's securities.This litigation,if instituted against us,could result in very substantial costs;divert our management's attention and resources;and harm our business,operating results,and financial condition. If a substantial number of shares become available for sale and are sold in a short period of time,the market price of our common stock could decline. If our existing stockholders sell a large number of shares of our common stock or the public market perceives that these sales may occur,the market price of our common stock could decline.As of December 31,2013,we had approximately 37.3 million shares of common stock outstanding,with a large percentage held by a few institutional shareholders.Moreover,certain holders of shares of our common stock have rights,subject to some conditions,to require us to file registration statements covering the shares they currently hold,or to include these shares in registration statements that we may file for ourselves or other stockholders. We have also registered all common stock that we may issue under our 1997 Stock Plan,2000 Stock Plan,2007 Stock Option and Incentive Plan,and 2007 Employee Stock Purchase Plan,and we have assumed the 1999 Stock Option Plan,2008 Equity Incentive Plan,and 2010 Equity Incentive Plan of Epocrates,under which all issuable common stock has been registered.As of December 31,2013,we had outstanding options to purchase approximately 2.2 million shares of common stock(approximately 1.4 million of which were exercisable at December 31,2013)that,if exercised,would result in those shares becoming available for sale in the public market.As of December 31,2013,we had outstanding restricted stock units totaling approximately 1.2 million that,if vested,would result in those shares becoming available for sale in the public market.If a large number of these shares are sold in the public market,the sales could reduce the trading price of our common stock. Actual or potential sales of our stock by our employees,including members of our senior management team,pursuant to pre-arranged stock trading plans could cause our stock price to fall or prevent it from increasing for numerous reasons,and actual or potential sales by such persons could be viewed negatively by other investors. In accordance with the guidelines specified under Rule l Ob5-1 of the Securities and Exchange Act of 1934 and our policies regarding stock transactions,a number of our directors and employees,including members of our senior management team,have adopted and will continue to adopt pre-arranged stock trading plans to sell shares of our common stock that they hold or will hold as the result of exercise or vesting of equity grants.Generally,stock sales under such plans by members of our senior management team and directors require public filings.Actual or potential sales of our stock by such persons could cause our stock price to fall or prevent it from increasing for numerous reasons.For example,actual or potential sales by such persons could be viewed negatively by other investors. Provisions in our certificate of incorporation and by-laws or Delaware law might discourage,delay,or prevent a change of control of our company or changes in our management and,therefore,depress the trading price of our common stock. Provisions of our certificate of incorporation and by-laws and Delaware law may discourage,delay,or prevent a merger,acquisition,or other change in control that stockholders may consider favorable,including transactions in which they might otherwise receive a premium for their shares of our common stock.These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management.These provisions include: • limitations on the removal of directors; • advance notice requirements for stockholder proposals and nominations; • the inability of stockholders to act by written consent or to call special meetings;and • the ability of our board of directors to make,alter,or repeal our by-laws. The affirmative vote of the holders of at least 75%of our shares of capital stock entitled to vote is necessary to amend or repeal the above provisions of our certificate of incorporation.As our board of directors has the ability to designate the terns of and issue new series of prefered stock without stockholder approval,the effective number of votes required to make such changes could increase.Also,absent approval of our board of directors,our by-laws may only be amended or repealed by the affirmative vote of the holders of at least 75%of our shares of capital stock entitled to vote. In addition,Section 203 of the Delaware General Corporation Law prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder(generally an entity that,together with its affiliates,owns,or within the last three years has owned,15%or more of our voting stock)for a period of three years after the date of the transaction in which the entity became an interested stockholder,unless the business combination is approved in a prescribed manner. 34 Table of Contents The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock.They could also deter potential acquirers of our company,thereby reducing the likelihood that stockholders could receive a premium for their common stock in an acquisition. We do not currently intend to pay dividends on our common stock,and,consequently,stockholders'ability to achieve a return on their investment will depend on appreciation in the price of our common stock. We have never declared or paid any cash dividends on our common stock and do not currently intend to do so for the foreseeable future.We currently intend to invest our future earnings,if any,to fund our growth.Therefore,investors are not likely to receive any dividends on their common stock for the foreseeable future,and the success of an investment in shares of our common stock will depend upon any future appreciation in its value.There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares. Item 113. Unresolved Staff Comments. None. Item 2. Properties. Our primary location is 311 Arsenal Street in Watertown,Massachusetts.As of December 31,2013,we owned the building housing our headquarters as part of our purchase of the real estate commonly known as the Arsenal on the Charles,located in Watertown,Massachusetts in May 2013.The Arsenal on the Charles is an expansive 29-acre,multi-building,commercial property which includes approximately 762,000 square feet of office space,where we were leasing space for our headquarters and related operating activities prior to the transaction.We currently occupy 261,000 square feet of these facilities and lease the remaining portion.Additionally,we own a complex of buildings,including approximately 133,000 square feet of office space,on approximately 53 acres of land in Belfast,Maine,as well as a conference and training facility on approximately 396 acres of land in Northport,Maine. We lease the remainder of our facilities.We lease 75,000 square feet in Atlanta,Georgia,which is under lease until June 16,2025;37,506 square feet in Chennai,India,through our Indian subsidiary,athenahealth Technology Private Limited,until October 31,2014;and space in various locations throughout the United States.Additionally,we operate data centers nationwide,including at our headquarters and our Belfast,Maine offices and in Bedford, Massachusetts and Dallas,Texas. Item 3. Legal Proceedings. On July 18,2011,we filed a complaint against ADP AdvancedMD,Inc.in the United States District Court for the District of Massachusetts.The complaint alleges that ADP AdvancedMD,Inc.has infringed two of our U.S.Patents:No.7,617,116,which was issued on November 10,2009,for "Practice Management and Billing Automation System"and No.7,720,701,which was issued on May 18,2010,for"Automated Configuration of Medical Practice Management Systems."On May 16,2012,the Court entered the parties'joint stipulation of dismissal without prejudice of claims and counterclaims related to U.S.Patent No.7,720,701.A Markman Hearing was held on September 14,2012,and a ruling was issued on November 26,2013.We are seeking permanent injunctive relief,damages,pre-and post judgment costs and interest,and attorneys'fees. On July 28,2011,a complaint was filed by PPS Data,LLC naming us in a patent infringement case(PPS Data,LLC v.athenahealth,Inc.,Civil Action No.3:11-cv-00746,United States District Court for the Middle District of Florida).The complaint alleges that we have infringed U.S.Patent No.6,343,271 with a listed issue date of January 29,2002,entitled"Electronic Creation,Submission,Adjudication,and Payment of Health Insurance Claims"(the"`271 Patent").The complaint seeks an injunction enjoining infringement,damages,pre-and post judgment costs and interest,and attorneys'fees.On September 8, 2011,we filed a motion to dismiss,or,in the alternative,a motion for summary judgment.On October 18,2011,the plaintiff filed a motion for leave to amend its complaint to allege that we have infringed on U.S.Patent No.6,341,265 with a listed issue date of January 22,2002,entitled"Provider claim editing and settlement system,"and U.S.Patent No.7,194,416 with a listed issue date of March 20,2007,entitled"Interactive creation and adjudication of health care insurance claims."The Court granted the plaintiff s motion for leave to amend its complaint on December 21,2011,and on December 23,2011, the plaintiff filed its amended complaint.On December 27,2011,we filed a motion to dismiss,or,in the alternative,a motion for summary judgment of non- infringement with respect to the`271 Patent.On December 29,2011,the United States Patent and Trademark Office granted our request for reexamination of the`271 Patent.On January 9,2012,we filed a motion to stay the case pending completion of the patent reexamination,and on March 1,2012,the Court granted our motion to stay the case.We believe that we have meritorious defenses to the amended complaint and will continue to contest the claims vigorously. 35 Table of Contents On January 11,2013,a complaint captioned Bushansky v.Epocrates,Inc.,et al.,Case No.519078,was filed in San Mateo County Superior Court (the"Court")on behalf of a putative class of Epocrates'shareholders against Epocrates and each member of the Epocrates board of directors.This complaint challenged the proposed merger between Epocrates and one of our wholly owned subsidiaries.On January 25,2013,a similar complaint was filed in the Court captioned DeJoice v.Epocrates,et al.,Case No.519461.This second complaint made similar allegations against Epocrates and each member of the Epocrates board of directors and included a claim against us for aiding and abetting a breach of fiduciary duty.On January 31,2013,the Bushansky complaint was amended to include additional allegations.Plaintiffs allege,among other things,that the Epocrates directors breached their fiduciary duties by allegedly agreeing to sell Epocrates at an unfair and inadequate price,failing to take steps to maximize the sale price of Epocrates,and making material omissions to the preliminary proxy statement dated January 25,2013.The complaints sought to enjoin the merger,other equitable relief,and monetary damages.On March 5, 2013,Epocrates and the plaintiffs signed a memorandum of understanding in which the parties agreed to enter into a stipulation of settlement whereby the plaintiffs and all class members would release all claims related to the merger in exchange for Epocrates filing a supplement to its definitive proxy statement regarding the merger with the SEC,which would include additional disclosures regarding the merger agreement,and an agreement to negotiate in good faith regarding the amount of attorneys'fees and expenses for which plaintiffs may seek approval from the Court.On October 4,2013,the court granted final settlement approval including a grant of fees and expenses in the amount of$335,000 to plaintiffs'counsel.The settlement has no material impact on the Company's consolidated financial statements. On March 1,2013,a complaint was filed in the United States District Court for the Northern District of California captioned Police and Fire Retirement System of the City of Detroit v.Epocrates,Inc.et al.,Case No.5:13cv0945,on behalf of a putative class of Epocrates'stockholders against Epocrates and certain of its former officers and directors.The complaint asserts claims under sections 11, 12,and 15 of the Securities Act of 1933 on behalf of all stockholders that purchased Epocrates stock in its Initial Public Offering and claims under sections 10(b)and 20 of the Securities Exchange Act of 1934 on behalf of all stockholders that purchased shares between the February 2,2011,IPO and August 9,2011.The complaint alleges that Epocrates made false or misleading statements with respect to the fact that Epocrates'pharmaceutical clients were awaiting guidance from the Food and Drug Administration on the use of advertising and social media,which caused the clients to delay spending on marketing and negatively impacted Epocrates'sales and revenue growth.The complaint seeks certification as a class action,compensatory damages in an unspecified amount,plaintiffs costs,attorneys'fees,and such other and further relief as the Court may deem just and proper.On December 9,2013,we filed a motion to dismiss the complaint.We believe that we have meritorious defenses to the complaint and will continue to contest the claims vigorously. In addition,from time to time we may be subject to other legal proceedings,claims,and litigation arising in the ordinary course of business.We do not, however,currently expect that the ultimate costs to resolve any pending matter will have a material effect on our consolidated financial position,results of operations,or cash flows. Item 4. Mine Safety Disclosures. None. 36 Table of Contents PART II Item 5. Market for Registrant's Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is listed on the NASDAQ Global Select Market under the trading symbol"ATHN."The following table sets forth,for each of the periods indicated,the high and low sales prices per share of our common stock as reported by the NASDAQ Global Select Market. High Low Fiscal Year Ended December 31,2013 First Quarter $ 99.79 $ 74.45 Second Quarter $ 98.42 $ 82.01 Third Quarter $ 117.72 $ 83.57 Fourth Quarter $ 144.42 $ 104.66 Fiscal Year Ended December 31,2012 First Quarter $ 78.24 $ 48.75 Second Quarter $ 87.16 $ 69.34 Third Quarter $ 97.37 $ 78.67 Fourth Quarter $ 92.56 $ 56.33 Holders The last reported sale price of our common stock on the NASDAQ Global Select Market on February 5,2014,was$141.51 per share.As of February 5,2014,we had 90 holders of record of our common stock.Because many shares of common stock are held by brokers and other institutions on behalf of stockholders,we are unable to estimate the total number of stockholders represented by these record holders. Dividends We have never declared or paid any dividends on our capital stock.We currently intend to retain any future earnings and do not intend to declare or pay cash dividends on our common stock in the foreseeable future.Any future determination to pay dividends will be,subject to applicable law,at the discretion of our board of directors and will depend upon,among other factors,our results of operations,financial condition,contractual restrictions,and capital requirements. 37 Table of Contents Performance Graph The following performance graph and related information shall not be deemed "soliciting material"or to be "filed"with the Securities and Exchange Commission,nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934,each as amended,except to the extent that we specifically incorporate it by reference into such filing. Set forth below is a graph comparing the cumulative total stockholder return on our common stock with the NASDAQ Composite-Total Returns Index and the NASDAQ Computer and Data Processing Index for each of the last five fiscal years ended December 31,2013,assuming an investment of$100 at the beginning of such period and the reinvestment of any dividends. Comparison of 5 Year Cumulative Total Return Among athenahealth, Inc., the NASDAQ Composite, and the NASDAQ Computer and Data Processing Index. $400 S350 S300 S250 S200 S150 slog S50 so 12/08 12I09 12/10 11"11 12112 12/13 tathenaheal&Inc —*-- 1.,�i._-,,� l):nposite-TotalRetums —0—NASDAQ Computer and Data Processing Index 12/08 12/09 12/10 12/11 12/12 12/13 athenahealth,Inc. $ 100 $ 120 $ 109 $ 131 $ 195 $ 358 NASDAQ Composite-Total Returns Index $ 100 $ 145 $ 172 $ 170 $ 201 $ 281 NASDAQ Computer and Data Processing Index $ 100 $ 163 $ 186 $ 180 $ 205 $ 295 Recent Sales of Unregistered Securities None. 38 Table of Contents Issuer Purchases of Equity Securities During the quarter ended December 31,2013,there were no purchases made by us,on our behalf,or by any"affiliated purchasers"of shares of our common stock. 39 Table of Contents Item 6. Selected Financial Data. The following tables summarize our consolidated financial data for the periods presented.You should read the following financial information together with the information under"Management's Discussion and Analysis of Financial Condition and Results of Operations"and our consolidated financial statements and the related notes to these consolidated financial statements appearing elsewhere in this Form 10-K.Historical results are not necessarily indicative of the results to be expected in future periods. Years Ended December 31, 2013 2012 2011 2010 2009 (in thousands,except per share data) Revenue: Business services $ 563,237 $ 408,496 $ 312,768 $ 237,145 $ 183,230 Implementation and other 31,766 13,775 11,299 8,393 5,297 Total revenue 595,003 422,271 324,067 245,538 188,527 Expenses(1): Direct operating 238,672 166,886 122,795 96,582 79,017 Selling and marketing 149,488 104,300 79,775 52,675 34,072 Research and development 57,639 33,792 23,343 18,448 14,348 General and administrative 99,776 57,025 48,711 43,119 36,111 Depreciation and amortization 43,575 25,641 16,710 11,117 7,767 Total expenses 589,150 387,644 291,334 221,941 171,315 Operating income 5,853 34,627 32,733 23,597 17,212 Other(expense)income: Interest expense (3,905) (407) (314) (753) (968) Other income 283 658 461 256 1,861 Total other(expense)income (3,622) 251 147 (497) 893 Income before income tax benefit(provision) 2,231 34,878 32,880 23,100 18,105 Income tax benefit(provision) 363 (16,146) (13,834) (10,396) (8,829) Net income $ 2,594 $ 18,732 $ 19,046 $ 12,704 $ 9,276 Net income per share-Basic $ 0.07 $ 0.52 $ 0.54 $ 0.37 $ 0.28 Net income per share-Diluted $ 0.07 $ 0.50 $ 0.53 $ 0.36 $ 0.27 Weighted average shares used in computing net income per share-basic 36,856 35,956 35,046 34,181 33,584 Weighted average shares used in computing net income per share-diluted 38,257 37,133 36,050 35,204 34,917 As of December 31, 2013 2012 2011 2010 2009 (in thousands) Balance Sheet Data: Cash,cash equivalents and short-term investments $ 65,002 $ 193,080 $ 119,865 $ 116,175 $ 82,849 Current assets 178,657 274,184 183,136 163,650 126,379 Total assets 796,396 428,452 348,786 261,170 211,077 Current liabilities 149,756 66,817 59,573 40,592 37,489 Total non-current liabilities 255,332 49,987 52,742 49,825 46,270 Total liabilities 405,088 116,804 112,315 90,417 83,759 Total indebtedness including current portion 223,750 9,216 12,388 Total stockholders'equity 391,308 311,648 236,471 170,753 127,318 40 Table of Contents Years Ended December 31, 2013 2012 2011 2010 2009 (In thousands) (1)Amounts include stock-based compensation as follows: Direct operating costs $ 7,778 $ 5,619 3,173 2,298 1,589 Selling and marketing 12,057 7,717 5,645 3,509 2,126 Research and development 4,238 3,213 2,311 2,014 1,015 General and administrative 18,575 10,687 7,772 6,656 3,584 Total stock-based compensation expense $ 42,648 $ 27,236 $ 18,901 $ 14,477 $ 8,314 Amortization of capitalized stock-based compensation related to software development(2) 1,027 257 Total $ 43,675 $ 27,493 $ 18,901 $ 14,477 $ 8,314 (2) In addition,for the years ended December 31,2013 and 2012, $2.2 million and$0.8 million of stock-based compensation was capitalized in the software development costs line in the Consolidated Balance Sheets for which $1.0 million and$0.3 million was included in the depreciation and amortization expense line in the Consolidated Statements of Income.The amount of stock-based compensation related to capitalized software development costs in prior periods was not significant. 41 Table of Contents Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis should be read in conjunction with our consolidated financial statements, the accompanying notes to these financial statements,and the other financial information that appear elsewhere in this Annual Report on Form 10-K. This discussion contains predictions,estimates,and other forward-looking statements that involve a number of risks and uncertainties.In some cases,you can identify forward- looking statements by terminology such as "may," "will," "should," "expects," `plans," "anticipates," "believes," "estimates," `predicts," `potential,"or "continue";the negative of these terms;or other comparable terminology.Actual results may differ materially from those discussed in these forward-looking statements due to a number offactors,including those set forth in the section entitled"Risk Factors"and elsewhere in this Annual Report on Form 10-K. Although we believe that the expectations reflected in the forward-looking statements are reasonable,we cannot guarantee future results,levels of activity,performance,or achievements.Except as required by law,we are under no duty to update or revise any of the forward-looking statements, whether as a result of new information,future events,or otherwise,after the date of this Annual Report on Form 10-K. Overview athenahealth provides cloud-based business services that help medical caregivers achieve and sustain financial health by collecting more revenue and greatly reducing their administrative work burden.These services are designed to minimize the hassles that caregivers and their staff face from complex billing rules,quality measurement and reporting,clinical documentation and data exchange,patient communication and referrals,and many related tasks that can take attention away from delivering care.Our services are delivered and consumed through a single instance of our cloud-based platform,athenaNet.We differentiate our services by continuously updating and improving our services via athenaNet.Regular updates to athenaNet are free and automatic for everyone on the network.As a web-based platform,athenaNet can be quickly implemented by our staff,with low upfront costs to clients. The services provided through our single-instance cloud are offered as a suite of four seamlessly integrated services:athenaCollector for revenue cycle and practice management,athenaClinicals for electronic health record management,athenaCommunicator for automated,live and online patient communications, and athenaCoordinator for referral cycle management.Beginning in 2014,athenaCoordinator includes our financial and operations management and our population health management services.These services are the result of the integration of Anodyne Health Partners,Inc.(business intelligence tools)and Healthcare Data Services LLC(patient population health management)acquisitions. Each service we provide is supported by a model comprised of three distinct but interconnected components:cloud-based software("Software"), networked knowledge("Knowledge"),and back-office work("Work").The cloud-based software is provided at no extra charge to users but is the primary conduit through which we exchange information between clients,insurance payers,and our staff of experts.Knowledge is infused into each of our services via our Rules Engine as we work with clients,insurance payers,and other partners to codify rules associated with reimbursement,clinical quality measures,and other factors related to our clients'performance,making the network"smarter"and more powerful for all clients.The network's shared knowledge and transparency also allows clients to monitor and benchmark their performance against those of other practices across the network.The third component to each of our services is the Work that we perform on behalf of our clients.Wherever possible,we replace manual processes with automation,but where automation is not possible,we perform the work on our clients'behalf.These services range from receiving,scanning,and delivering incoming faxes to tracking claims with insurance payers.This unique service model of Software,Knowledge,and Work is the core of our aligned success model.We charge clients a percentage of collections,in most cases,connecting our financial results directly to that of our clients and our ability to drive revenue to medical practices. We also provide clients in the health care industry(e.g.,pharmaceutical companies,managed care companies,and market research firms)the opportunity to sponsor clinical information and decision support services in order to engage with Epocrates'member network,and offer the sale of subscriptions to Epocrates'premium drug and clinical reference tools to health care professionals. For the year ended December 31,2013,we generated revenue of$595.0 million from the sale of our services compared to $422.3 million for the year ended December 31,2012,and$324.1 million for the year ended December 31,2011.Given the scope of our market opportunity,we have increased our spending each year on growth,innovation,and infrastructure. Our revenue is predominately derived from core athenahealth business services that we provide on an ongoing basis.Revenue from business services associated with our four integrated services is generally determined as a percentage of payments collected by us on behalf of our clients,so the key drivers of such revenue include growth in the number of physicians and other medical providers working within our client accounts,the collections of these physicians, and the number 42 Table of Contents of services purchased.To provide these services,we incur expenses in several categories,including direct operating,selling and marketing,research and development,general and administrative,and depreciation and amortization expense.In general,our direct operating expense increases as our volume of work increases,whereas our selling and marketing expense increases in proportion to our intended growth rate of adding new accounts to our network of physician clients.Our other expense categories are less directly related to growth of revenues and relate more to our planning for the future,our overall business management activities,and our infrastructure.We manage our cash and our use of credit facilities to ensure adequate liquidity and to ensure adherence to related financial covenants. Critical Accounting Policies Our discussion and analysis of our results of operations and liquidity and capital resources are based on our consolidated financial statements,which have been prepared in accordance with generally accepted accounting principles in the United States("GAAP").In connection with the preparation of our consolidated financial statements,we are required to make assumptions and estimates about future events,and apply judgments that affect the reported amounts of assets,liabilities,revenue,expenses,and the related disclosures.We base our assumptions,estimates and judgments on historical experience, current trends and other factors we believe to be relevant at the time we prepared our consolidated financial statements.On a regular basis,we review the accounting policies,assumptions,estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with GAAP.However,because future events and their effects cannot be determined with certainty,actual results could differ from our assumptions and estimates, and such differences could be material. The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions.These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the financial statements,and the reported amounts of revenues and expenses during the reporting periods.Significant estimates and assumptions are used for,but are not limited to:(1)revenue recognition;including our estimated expected customer life;(2)asset impairments;(3)depreciable lives of assets;(4)fair value of stock options;(5)allocation of direct and indirect expenses;(6)fair value of acquired intangible assets and long-lived tangible assets in a business combination;(7) fair value of reporting units for goodwill impairment test;and(8)litigation reserves.Future events and their effects cannot be predicted with certainty,and accordingly,our accounting estimates require the exercise of judgment.Please refer to the tables below for those estimates and assumptions which we deem to be the most critical.The accounting estimates used in the preparation of our consolidated financial statements will change as new events occur,as more experience is acquired,as additional information is obtained,and as our operating environment changes.We evaluate and update our assumptions and estimates on an ongoing basis and may employ outside experts to assist in our evaluations.Actual results could differ from the estimates we have used. Our significant accounting policies are discussed in Note 1—Nature of Operations and Summary of Significant Accounting Policies,to our accompanying consolidated financial statements.We believe the following accounting policies are the most critical to aid in fully understanding and evaluating our reported financial results,as they require management to make difficult,subjective or complex judgments,and to make estimates about the effect of matters that are inherently uncertain.We have reviewed these critical accounting policies and related disclosures with the audit committee of our board of directors. 43 Effect if Actual Results Differ from Description Judgment and Uncertainties Assumptions Revenue Recognition All revenue,other than implementation revenue, Determining whether and when some of our Although we believe that our approach to estimates is recognized when the service is performed.We revenue recognition criteria have been satisfied and judgments as described herein is reasonable, recognize revenue when there is evidence of an often involves judgments that can have a actual results could differ and we may be exposed arrangement,the service has been provided to significant impact on the timing and amount to increases or decreases in revenue that could be the client,the collection of the fees is reasonably of revenue we report.For example,our material. assured,and the amount of fees to be paid by assessment of the likelihood of collection is a the client is fixed or determinable.We derive our critical element in determining the timing of Our calculation of BESP may prove to be revenue from business services associated with revenue recognition.If we do not believe that inaccurate,in which case we may have our four integrated services and from collection is reasonably assured,revenue is understated or overstated the revenue recognized in subscriptions to and sponsored clinical deferred. an accounting period.For example,if our BESP is information and decision support services for too high or too low for an individual or group of our point of care medical application. Multiple element arrangements require deliverables,the amount of revenue recognized judgments as to how to allocate the within each reporting period would be inaccurate. Our clients typically purchase one-year service arrangement consideration to each deliverable. The amount of deferred revenue related to contracts related to our integrated services that We maintain a standard price list by service; separable deliverables with BESP is$22.4 million renew automatically upon completion.In most however,certain incentives,such as as of December 31,2013. cases,our clients may terminate their discounts,may be offered to clients when they agreements with 90 days notice without cause. purchase multiple services.Such discounting Our estimate of expected performance period may We typically retain the right to terminate client is subject to various levels of management prove to be inaccurate,in which case we may have agreements in a similar timeframe.Our clients approval and any discount offered is based on understated or overstated the revenue recognized in are billed monthly,in arrears,based either upon the total contract value.Due to the specific an accounting period.For example,if,in the a percentage of collections posted to our cloud- nature of these agreements and the variability future,we need to increase our estimated expected based network,athenaNet;minimum fees;flat in the amount of discount offered for performance period to a period longer than 12 fees;or per-claim fees where applicable. individual services across multiple contracts, years,the amount we would recognize in each Invoices are generated within the first two weeks we have not been able to conclude that a accounting period would decrease.On the other of the subsequent month and delivered to clients consistent number of standalone sales of a hand,if,in the future,we need to decrease our primarily by e-mail.For most of our clients, deliverable have been priced within a estimated expected performance period to a period amounts due are then deducted from a pre- reasonably narrow range in order to assert that shorter than 12 years,the amount we would defined bank account one week after invoice we have established VSOE. recognize in each accounting period would receipt via an auto-debit transaction.Unbilled increase.The amount of deferred revenue related to amounts that have been earned are accrued and When we cannot establish VSOE of fair non-refundable up-front fees is$41.3 million as of recorded as revenue or deferred revenue,as value,we then determine if we can establish December 31,2013. appropriate,and are included in our accounts TPE of fair value.TPE is determined based receivable balances. on competitor prices for similar deliverables when sold separately.Our services differ Subscriptions for the Epocrates point of care significantly from that of our peers and our medical application are entered into by a offerings contain a significant level of member via an internal or third-party digital customization and differentiation such that the distribution platform or through a redeemable comparable pricing of products with similar license code which expires within six to 12 functionality cannot be obtained.Furthermore, months of issuance.Basic subscriptions are we are unable to reliably determine what free and do not expire.Premium subscription similar competitor products'selling prices are fees are assessed on the length of the on a stand-alone basis.Therefore,we are subscription period,typically one year,and typically unable to determine TPE. payment occurs at the time of order,which is in advance of the services being performed,and If both VSOE and TPE do not exist,we use are recorded as deferred revenue.Premium BESP to establish fair value and to allocate subscriptions are recognized ratably over the total consideration to each element in the arrangement. 44 Effect if Actual Results Differ from Description Judgment and Uncertainties Assumptions contracted term of delivery,typically a year.If a Any discount or premium inherent in the license code expires before it is redeemed, arrangement is allocated to each element in the revenue is recognized upon expiration. arrangement based on the relative fair value of each element. Clients in the health care industry typically enter into sponsored clinical information and The objective of BESP is to determine the decision support service arrangements that price at which we would transact a sale if the contain various combinations of services that product or service were sold on a stand-alone are generally fulfilled within one year.The basis.We determine BESP for a product or clients are charged a fee for the entire group of service by considering multiple factors services to be provided and are typically billed including an analysis of recent stand-alone a portion of the contracted fee upon signing of sales of that product,market conditions, the agreement with the balance billed upon one competitive landscape,internal costs,gross or more future milestones.Because billings margin objectives,and pricing practices. typically occur in advance of services being performed,these amounts are recorded as Multiple element arrangements require deferred revenue when billed.Each service judgment as to whether deliverables meet the deliverable within these multiple element criteria to be separated into separate units of arrangements is accounted for as a separate unit accounting.We consider a deliverable it have and consideration is allocated using our best standalone value if we sell this item separately estimate of selling price("BESP")if we do not or if the item is sold by another vendor or have vendor specific objective evidence of could be resold by the client.We believe that selling price("VSOE")of fair value or third- our implementation service related to our party evidence("TPE")of fair value. integrated services is not separable from the ongoing business services,as the implementation services do not have value to the customer on a standalone basis. The determination of the amount of revenue we can recognize each accounting period requires management to make estimates and judgments on the estimated expected customer life.We determined the estimated customer life considering the following key factors: Renewal rate considerations Economic life of the product or service -Industry data The estimated customer life,or expected performance period,for the years presented is 12 years. 45 Effect if Actual Results Differ from Description Judgment and Uncertainties Assumptions Purchased Intangible Assets and Goodwill Business Combinations,including purchased Fair value accounting as it relates to business Future business and economic conditions,as well intangible assets are accounted for at fair value. combinations and impairment testing requires as differences actually related to any of the Acquisition costs are expensed as incurred and us to make significant estimates and assumptions,could materially impact the recorded in general and administrative expenses. assumptions. financial statements through impairment of Measurement period adjustments relate to goodwill,intangible assets,and acceleration of the adjustments to the fair value of assets acquired Critical estimates in valuing certain intangible amortization period of the purchased intangible and liabilities assumed based on information assets and the fair value of reporting units assets,which are finite-lived assets. that we should have known at the time of during goodwill impairment tests include,but acquisition.All changes to purchase accounting are not limited to,identifying reporting units, As of December 31,2013,the carrying amounts of that do not qualify as measurement period historical and projected customer retention goodwill and purchased intangibles were$198.0 adjustments are included in current period rates,anticipated growth in revenue from the million and$168.4 million,respectively. earnings. acquired customers,expected future cash The fair value amount assigned to intangible outflows,the allocation of those cash flows to assets is based on an exit price from a market identifiable intangible assets,estimated useful participant's viewpoint,and utilizes data such lives of these intangible assets and a as discounted cash flow analysis and probability-weighted income approach based replacement cost models.We review acquired on scenarios in estimating achievement of intangible assets for impairment whenever operating results. events or changes in circumstances indicate that the carrying amount of such assets may not be Significant judgment in testing goodwill for recoverable. impairment also includes assigning assets and liabilities to those reporting units and Goodwill is recorded as the difference,if any, determining the fair value of each reporting between the aggregate consideration paid for an unit based on management's best estimates acquisition and the fair value of the identifiable and assumptions,as well as other information net tangible and intangible assets acquired. compiled by management,including Goodwill is not amortized but is evaluated for valuations that utilize customary valuation impairment annually on November 30th or procedures and techniques. more frequently if indicators of impairment are present or changes in circumstances suggest Management's best estimates and that impairment may exist.The first step of the assumptions are employed in determining the goodwill impairment test compares the fair appropriateness of these assumptions as of the value of the reporting unit with its carrying acquisition date and for each subsequent amount,including goodwill.If the fair value of period. our reporting unit exceeds its carrying amount, the goodwill of the reporting unit is considered not impaired.If the carrying amount of our reporting unit exceeds its fair value,the second step of the goodwill impairment test is performed to measure the amount of impairment loss,if any.The second step of the goodwill impairment test,used to measure the amount of impairment loss,compares the implied fair value of the affected reporting unit's goodwill with the carrying value of that goodwill. 46 Financial Operations Overview Revenue. We derive our revenue from two sources:from business services associated with our revenue cycle and practice management service,electronic health record management service,patient communication management service,care coordination management service,financial and population analytics offerings,and from subscriptions to and sponsored clinical information and decision support services for our point of care clinical application;and from implementation and other services.Implementation and other services revenue consists primarily of professional services fees related to assisting clients with the initial implementation of our services,for ongoing training and related support services,and for third-party tenant revenue.Business services accounted for approximately 95%and 97%of our total revenues for the years ended December 31,2013 and 2012,respectively.Business services revenue is typically 2%to 8%of a practice's total collections depending upon the services purchased,the size,complexity,and other characteristics of the practice,plus a per- statement charge for billing statements that are generated for patients.Accordingly,business services revenue is largely driven by:the number of physician practices and other service providers we serve,the number of physicians and other medical providers working in those physician practices,the volume of activity and related collections of those physicians,the mix of our services used by those physician practices and other medical providers,and our contracted rates.There is moderate seasonality in the activity level of physician practices.Typically,discretionary use of physician services declines in the late summer and during the holiday season,which leads to a decline in collections by our physician clients about 30 to 50 days later.Additionally,the volume of activity and related collections vary from year to year based in large part on the severity,length and timing of the onset of the flu season.While we believe that the severity,length and timing of the onset of the cold and flu season will continue to impact collections by our physician clients,there can be no assurance that our future sales of these services will necessarily follow historical patterns.Implementation and other services revenue is largely driven by the increase in the volume of our new business.As a result,we expect implementation and other services revenue to increase in absolute terns for the foreseeable future but to remain relatively consistent as a percentage of total revenue.None of our clients accounted for more than 10%of our total revenues for the years ended December 31,2013,2012,and 2011. Direct Operating Expense. Direct operating expense consists primarily of salaries,benefits,claim processing costs,stock-based compensation related to personnel who provide services to clients,including staff who implement new clients,and other direct expenses.We expense implementation costs as incurred. We include in direct operating expense all service costs incurred to fulfill our revenue contracts.We expect to increase our overall level of automation as we become a larger operation,with higher volumes of work in particular functions,geographies,and medical specialties.Although we expect that direct operating expense will increase in absolute terms for the foreseeable future,the direct operating expense is expected to decline as a percentage of revenue as we increase automation.Direct operating expense includes costs associated with third-party tenant revenue for the Arsenal on the Charles.Direct operating expense does not include allocated amounts for rent expense,depreciation,and amortization,except for a portion of amortization related to certain purchased intangible assets. Selling and Marketing Expense. Selling and marketing expense consists primarily of marketing programs(including trade shows,brand messaging, and on-line initiatives)and personnel-related expense for sales and marketing employees(including salaries,benefits,commissions,stock-based compensation,non-billable travel,lodging,and other out-of-pocket employee-related expenses).Although we recognize substantially all of our revenue when services have been delivered,we recognize a large portion of our sales commission expense at the time of contract signature and at the time our services commence.Accordingly,we incur a portion of our sales and marketing expense prior to the recognition of the corresponding revenue.We have increased our sales and marketing expenses from year to year and we expect to continue to increase our investment in sales and marketing by hiring additional direct sales personnel and support personnel to add new clients and increase sales to our existing clients and to expand awareness through paid search and other similar initiatives.We also plan to expand our marketing activities,such as attending trade shows,expanding user groups,and creating new printed materials.As a result,we expect that,in the near-term,sales and marketing expense will increase in line with revenue growth.Sales and marketing expense does not include allocated amounts for rent,occupancy and other indirect costs(including building maintenance and utilities),depreciation,and amortization,except for a portion of amortization related to certain purchased intangible assets. Research and Development Expense. Research and development expense consists primarily of personnel-related expenses for research and development employees(including salaries,benefits,stock-based compensation,non-billable travel,lodging,and other out-of-pocket employee-related expenses)and consulting fees for third-party developers.We expect that,in the near-tern,research and development expenditures will increase in absolute terms and will likely increase as a percent of revenue as we develop and enhance new and existing services;however,the amount of expenditures that should be capitalized as software development costs versus expensed as research and development could vary based on the specific projects we undertake. General and Administrative Expense. General and administrative expense consists primarily of personnel-related expense for administrative employees (including salaries,benefits,stock-based compensation,non-billable travel,lodging,and other 47 Table of Contents out-of-pocket employee-related expense),occupancy and other indirect costs(including building maintenance and utilities for space occupied by the Company),and insurance premiums;and,outside professional fees for accountants,lawyers,external costs associated with acquisitions,change in the fair value of contingent consideration,and consultants.We expect that general and administrative expense will increase in absolute terns as we invest in infrastructure to support our growth.Though expenses are expected to continue to rise in absolute terms,we expect general and administrative expense to decline as a percentage of total revenue over time. Depreciation and Amortization Expense. Depreciation and amortization expense consists primarily of depreciation of fixed assets and amortization of capitalized software development and acquisition costs,which we amortize over a two to three-year period from the time of release of related software code.As we grow,we will continue to make capital investments in the infrastructure of the business and we will continue to develop software that we capitalize.In the near term we expect depreciation and amortization expense to increase as a percentage of total revenue. Other Income(Expense).Other income(expense)is primarily comprised of interest expense.Interest expense consists primarily of interest costs related to our term and revolving loans under our credit facility and the amortization of deferred financing fees. Income Tax(Provision)Benefit.Income tax(provision)benefit consists of federal and state income taxes in the United States and India.The difference between our effective tax rate and our statutory rate is mainly related to transaction costs associated with stock acquisitions,any changes in the fair value of contingent consideration related to non-tax deductible goodwill,the treatment of Incentive Stock Options("ISOs"),and the impact of certain tax deduction limits related to certain of our highly compensated officers.Transaction costs related to stock acquisitions are primarily non-tax deductible.The changes in the fair value of contingent consideration related to non-tax deductible goodwill and the treatment of disqualifying dispositions related to ISOs are also treated as discrete items,which means that they are recorded in the quarter in which they occur and could cause significant differences between the quarterly and annual effective tax rate.We substantially ceased issuing ISOs in 2009,but we expect continued volatility related to these options since we cannot anticipate when disqualifying dispositions related to these stock options will occur. Results of Operations Consolidated Results of Operations The following table sets forth our consolidated results of operations as a percentage of total revenue for the years ended December 31,2013,2012,and 2011. Year Ended December 31, 2013 2012 2011 Revenue: Business services 94.7% 96.7% 96.5% Implementation and other 5.3 3.3 3.5 Total revenue 100.0 100.0 100.0 Expense: Direct operating 40.1 39.5 37.9 Selling and marketing 25.1 24.7 24.6 Research and development 9.7 8.0 7.2 General and administrative 16.8 13.5 15.0 Depreciation and amortization 7.3 6.1 5.2 Total expense 99.0 91.8 89.9 Operating income 1.0 8.2 10.1 Other(expense)income: Interest expense (0.7) (0.1) (0.1) Other income 0.1 0.2 0.2 Total other(expense)income (0.6) 0.1 0.1 Income before income taxes 0.4 8.3 10.2 Income tax provision (3.9) (4.3) Net income 0.4% 4.4% 5.9% 48 Table of Contents Percentages for each line item may not sum to the totals or subtotals for each fiscal year due to rounding. Comparison of the Years Ended December 31,2013 and 2012 Year Ended December 31, Change 2013 2012 Amount Percent (in thousands) Business services $ 563,237 $ 408,496 $ 154,741 38% Implementation and other 31,766 13,775 17,991 131% Total $ 595,003 $ 422,271 $ 172,732 41% Revenue.Total revenue for the year ended December 31,2013 increased by 41%due to an increase in business services revenue. Business Services Revenue. The increase in business services revenue is primarily driven by the growth in the number of physicians and providers using our services,and additionally due to revenue from sponsored clinical information and decision support services and subscriptions.The increases in the number of physicians and providers using our revenue cycle and practice management service,athenaCollector;electronic health record management service, athenaClinicals;and patient communication management service,athenaCommunicator;are as follows: As of December 31, 2013 2012 Change Amount Amount Amount Percent athenaCollector Physicians 35,858 28,011 7,847 28% Providers 50,212 39,752 10,460 26% Physicians 12,388 7,949 4,439 56% athenaClinicals Providers 16,805 10,926 5,879 54% athenaCommunicator Physicians 21,516 10,153 11,363 112% Providers 28,360 14,065 14,295 102% Also contributing to this increase was the growth in related collections on behalf of these physicians and providers.The amount of collections processed are as follows: Year Ended December 31, Change 2013 2012 Amount Percent (in millions) Collections processed $11,663.5 $9,183.6 $ 2,479.9 27% The year ended December 31,2013 includes$52.4 million of total revenue attributable to sponsored clinical information and decision support services and subscriptions. Implementation and Other Revenue. The increase in revenue from implementation and other revenue was primarily driven by third-party tenant revenue of$9.7 million associated with the Arsenal on the Charles property from the date of acquisition in May through December 31,2013.Implementation and other revenue was also increased by new client implementations and increased professional services for our larger client base. Year Ended December 31, Change 2013 2012 Amount Percent (in thousands) Direct operating $238,672 $166,886 $ 71,786 43% 49 Table of Contents Direct Operating Expense. The number of claims that we processed on behalf of our clients increased during the year ended December 31,2013.The increase in direct operating expense is primarily due to the expense of providing these services,including transactions expense and employee-related costs.The total claims submitted on behalf of clients are as follows: Year Ended December 31, Change 2013 2012 Amount Percent (in millions) Total claims submitted 90.8 73.1 17.7 24% Direct operating employee-related costs,including stock-based compensation,increased$28.5 million from the year ended December 31,2012,to the year ended December 31,2013,primarily due to a 12%increase in headcount since December 31,2012,and an increase in fair value of our recently issued stock-based compensation expense.We increased headcount to meet the current and anticipated demand for our services as our customer base continues to expand and includes larger medical groups.Headcount at December 31,2013 includes 57 employees from our acquisition of Epocrates in March 2013. Also contributing to the increase in direct operating expense was amortization related to purchased intangible assets,which increased$8.0 million from the year ended December 31,2012,to the year ended December 31,2013,due to our acquisitions of Epocrates during the three months ended March 31,2013, and the Arsenal on the Charles during the three months ended June 30,2013.Direct operating expense from the Arsenal on the Charles acquisition date of May 10,2013,through the period ended December 31,2013,includes$4.7 million of costs associated with third-party tenant revenue.No cost associated with third-party tenant revenue was included in direct operating expense during the year ended December 31,2012. Year Ended December 31, Change 2013 2012 Amount Percent (in thousands) Selling and marketing $ 149,488 $ 104,300 $ 45,188 43% Research and development 57,639 33,792 23,847 71% General and administrative 99,776 57,025 42,751 75% Depreciation and amortization 43,575 25,641 17,934 70% Total $ 350,478 $ 220,758 $ 129,720 5 9% Selling and Marketing Expense. The increase in selling and marketing expense was primarily due to compensation costs,including stock-based compensation expense,internal sales commissions and external channel partner commission,which increased approximately$26.6 million,or 40%,from $65.8 million for the year ended December 31,2012,to$92.4 million for the year ended December 31,2013.The cost of compensation is primarily driven by headcount.Our sales and marketing headcount increased 34%since December 31,2012,as we hired additional sales personnel to focus on adding new customers and increasing penetration within our existing markets.Headcount at December 31,2013 also includes 59 employees from our acquisition of Epocrates in March 2013.Also contributing to the increase in selling and marketing expense was a$9.0 million increase in other general marketing-related costs.Finally,amortization related to purchased intangible assets allocated to selling and marketing expense increased$7.3 million for the year ended December 31,2013,compared to the year ended December 31,2012,primarily due to our acquisition of Epocrates during the three months ended March 31, 2013. Research and Development Expense. The increase in research and development expense was due to higher employee-related costs,including stock-based compensation expense,which increased approximately $23.8 million,or 70%,from$33.8 million for the year ended December 31,2012,to$57.6 million for the year ended December 31,2013.This increase is primarily due to a 68%increase in headcount from December 31,2012.The additional research and development personnel were necessary in order to upgrade and extend our service offerings and develop new technologies.Headcount at December 31,2013 also includes 97 employees from our acquisition of Epocrates in March 2013.We anticipate that research and development expense will continue to increase in the foreseeable future. General and Administrative Expense. General and administrative expense increased primarily due to higher employee-related costs,including stock- based compensation expense.Employee-related compensation increased$21.1 million,largely due to a 28%increase in headcount from December 31,2012. We increased our general and administrative personnel to support our growth.General and administrative headcount at December 31,2013 also includes 29 employees from our acquisition of Epocrates in March 2013.Included in the employee-related compensation is an increase in stock-based compensation expense of$7.9 million.The stock-based compensation increase for the year ended December 31,2013 is primarily related to acceleration of vesting for certain Epocrates employees upon termination and an increase in the fair value of recently issued stock-based awards due to an increase in the stock price. 50 Table of Contents The increase we experienced in headcount drove an increased investment in our infrastructure of$8.3 million for the year ended December 31,2013. Additionally,transaction costs associated with the Epocrates and the Arsenal on the Charles acquisitions increased general and administrative expenses by $5.1 million for the year ended December 31,2013.These costs were partially offset by a$2.5 million net gain in the year ended December 31,2013,due to the early termination of our lease and the realization of the remaining balance in deferred rent upon acquisition of the Arsenal on the Charles property where our corporate headquarters are located in Watertown,Massachusetts.Comparatively,in the year ended December 31,2012,there was a net fair value adjustment of a$5.1 million credit related to contingent consideration compared to a less than$0.1 million charge in the year ended December 31,2013. Depreciation and Amortization Expense. Depreciation and amortization expense for the year ended December 31,2013,was$43.6 million,an increase of approximately$17.9 million,or 70%,from depreciation and amortization of$25.6 million for the year ended December 31,2012.This increase was primarily due to higher depreciation from fixed asset expenditures in 2013 and 2012,the acquisition of the Arsenal on the Charles,and higher amortization related to an increase in our software development costs of$8.9 million,$2.1 million and$6.9 million,respectively. Interest Expense. Interest expense increased for the year ended December 31,2013,primarily due to the increase in the amount of debt outstanding compared to the prior year. Year Ended December 31, Change 2013 2012 Amount Percent (in thousands) Income tax(benefit)provision $ (363) $ 16,146 $ (16,509) (102)% Effective tax rate (16)% 46% Income Tax(Benefit)Provision.The change from an income tax provision to an income tax benefit is primarily due to lower pre-tax income and an increase in research and development tax credits,offset by larger permanent items for the year ended December 31,2013.Research and development tax credits increased$5.0 million in the year ended December 31,2013 compared to December 31,2012.This increase is primarily attributable to completion of a multi- year research and development tax study.Additionally,on January 2,2013,the American Taxpayer Relief Act of 2012 was signed into law reinstating the federal research and development credit for the 2012 and 2013 years.Under the accounting guidance on this topic,the effects are recognized as a component of income tax expense or benefit from continuing operations in the financial statements for the period that includes the enactment date.The benefit related to the 2012 federal research and development credit of$0.9 million was recorded in the year ended December 31,2013.The offsetting higher permanent items for the year ended December 31,2013 were primarily due to non-deductible transaction costs related to the acquisition of Epocrates of$2.2 million. Comparison of the Years Ended December 31,2012 and 2011 Year Ended December 31, Change 2012 2011 Amount Percent (in thousands) Business services $ 408,496 $ 312,768 $ 95,728 31% Implementation and other 13,775 11,299 2,476 22% Total $ 422,271 $ 324,067 $ 98,204 30% Revenue.Total revenue for the year ended December 31,2012 increased almost entirely due to an increase in business services revenue. 51 Table of Contents Business Services Revenue. The increase in business services revenue is primarily driven by the growth in the number of physicians and providers using our services.The summary of changes in the physicians and providers using our revenue cycle management service,athenaCollector,electronic health record management service,athenaClinicals,and patient communication management service,athenaCommunicator are as follows: As of December 31, 2012 2011 Change Amount Amount Amount Percent athenaCollector Physicians 28,011 23,210 4,801 21% Providers 39,752 32,740 7,012 21% Physicians 7,949 4,662 3,287 71% athenaClinicals Providers 10,926 6,525 4,401 67% Physicians 10,153 4,098 6,055 148% athenaCommunicator providers 14,065 5,830 8,235 141% Also contributing to this increase was the growth in related collections on behalf of these physicians and providers.The amount of collections processed are as follows: Year Ended December 31, Change 2012 2011 Amount Percent (in millions) Collections processed $ 9,183.6 $ 7,276.6 $ 1,907.0 26% Implementation and Other Revenue. The increase in revenue from implementation and other revenue was driven by new client implementations and increased professional services for our larger client base.The increase in implementation and other revenue is the result of the increase in the volume of oar new business. Year Ended December 31, Change 2012 2011 Amount Percent (in thousands) Direct operating $ 166,886 $ 122,795 $ 44,091 36% Direct Operating Costs. The increase in direct operating expense is primarily due to an increase in the number of claims that we processed on behalf of our clients and the related expense of providing services,including transactions expense and employee-related costs.The total claims submitted on behalf of clients are as follows: Year Ended December 31, Change 2012 2011 Amount Percent (in millions) Total claims submitted 73.1 59.3 13.8 23% Also contributing to this increase was the direct operating employee-related costs,including stock-based compensation,which increased$28.2 million from the year ended December 31,2011,to the year ended December 31,2012,primarily due to the 28%increase in headcount since December 31,2011,and an increase in the fair value of our recently issued stock-based compensation expense.We increased headcount to meet the current and anticipated demand for our services as our customer base has expanded and includes larger medical groups.Amortization related to purchased intangible assets increased$1.1 million from the year ended December 31,2011,to the year ended December 31,2012. Year Ended December 31, Change 2012 2011 Amount Percent (in thousands) Selling and marketing $ 104,300 $ 79,775 $ 24,525 31% Research and development 33,792 23,343 10,449 45% General and administrative 57,025 48,711 8,314 17% Depreciation and amortization 25,641 16,710 8,931 53% Total $ 220,758 $ 168,539 $ 52,219 31% 52 Table of Contents Selling and Marketing Expense. The increase in selling and marketing expense was primarily due to employee-related costs,including stock-based compensation expense,internal sales commissions and external partner channel commissions of$15.7 million,or 31%,from$50.0 million for the year ended December 31,2011,to$65.7 million for the year ended December 31,2012.Our sales and marketing headcount increased by 28%since December 31,2011, as we hired additional sales personnel to focus on adding new customers and increasing penetration within our existing markets.The increase was also due to a$3.4 million increase in travel-related expenses and consulting and a$5.4 million increase in online marketing,offline marketing and other marketing events for the year. Research and Development Expense. Research and development expense increased due to higher employee-related costs,including stock-based compensation expense of$8.5 million,or 42%,from$20.5 million for the year ended December 31,2011,to$29.0 million for the year ended December 31, 2012.This increase is due in part to a 45%increase in headcount from December 31,2011,as we hired additional research and development personnel in order to upgrade and extend our service offerings and develop new technologies.The increase was also due to a$1.9 million increase in travel-related expenses, infrastructure and consulting. General and Administrative Expense. General and administrative expense increased partially due to higher employee-related costs,including stock-based compensation expense,of$6.2 million,due to an increase in headcount and in the fair value of our recently issued stock-based compensation expense.Our general and administrative headcount increased by 26%since December 31,2011,as we added personnel to support our growth.The increase in headcount drove an increase in our expenditures related to infrastructure by$3.4 million.General and administrative expense for the year ended December 31,2012 included an increase of$2.3 million in legal,audit,tax,consulting,and external costs associated with acquisitions and insurance expenses along with an increase of$2.6 million in travel expenses,recruiting and corporate events. These increases are offset by a decrease in the provision for uncollectible accounts of$1.0 million due to less accounts requiring higher reserve percentages due to increased collection activity and a decrease in the fair value of the contingent consideration of$5.1 million.The fair value considerations related to each of the contingent considerations are fully disclosed in Note 4 to the Consolidated Financial Statements.The impact of those described changes in the fair value of the contingent considerations on General and Administrative Expense in the Consolidated Statements of Income are as follows: Year Ended December 31, 2012 2011 (in thousands) First Anodyne contingent consideration $ — $ — Second Anodyne contingent consideration 1,310 40 First Proxsys contingent consideration (2,420) — Second Proxsys contingent consideration (4,008) — Total $ (5,118) $ 40 Depreciation and Amortization Expense. Depreciation and amortization expense for the year ended December 31,2012 was$25.6 million,an increase of$8.9 million,or 53%,from depreciation and amortization of$16.7 million for the year ended December 31,2011.This increase was primarily due to higher depreciation from fixed asset expenditures in 2012 and 2011 and higher amortization related to an increase in our software development costs. Year Ended December 31, Change 2012 2011 Amount Percent (in thousands) Income tax provision 16,146 13,834 $ 2,312 17% Effective tax rate 46% 42% 4% Income Tax Provision.The effective tax rate is higher due to larger permanent items for the year ended December 31,2012,primarily related to compensation in excess of tax deduction limits which had a 1.5%unfavorable impact,the change in the Anodyne contingent consideration which is treated as additional non-taxable goodwill which had a 1.5%unfavorable impact and the transaction costs related to the pending acquisition of Epocrates which had a 0.5%unfavorable impact.The rate was also impacted by ISO disqualifying events which impacted the rate favorably by 2%for the year ended December 31, 2012.Comparatively,the effective tax rate for the year ended December 31,2011 was not impacted by compensation in excess of tax deduction limits,changes related to the Anodyne contingent consideration or non-deductible transaction costs but did have a favorable impact of 2.5%due to ISO disqualifications. 53 Table of Contents On January 2,2013,the American Taxpayer Relief Act of 2012 was signed into law reinstating the federal research and development credit for the 2012 and 2013 years.Under the accounting guidance on this topic,the effects are recognized as a component of income tax expense or benefit from continuing operations in the financial statements for the interim or annual period that includes the enactment date.The benefit related to the 2012 federal research and development credit of$0.9 million was recorded in the year ended December 31,2013. Liquidity and Capital Resources Sources of Liquidity As of December 31,2013,our principal sources of liquidity consisted of cash and cash equivalents of $65.0 million.As of December 31,2013,we have outstanding indebtedness of$223.8 million.On October 20,2011,we entered into a credit agreement which provides for a five-year$100 million revolving credit facility("Revolving Credit Agreement").The Revolving Credit Agreement contains certain covenants,including consolidated leverage and minimum fixed charge coverage ratios.The interest rates applicable to revolving loans under the Revolving Credit Agreement are at either(i)the British Bankers Association London Interbank Offered Rate("LIBOR")plus an interest margin based on our consolidated leverage ratio,or(ii)the base rate(which is the highest of(a)the bank's prime rate,(b)the Federal Funds rate plus 0.50%,and(c)one month LIBOR plus 1.00%)plus an interest margin based on our consolidated leverage ratio.We paid a commitment fee during the term of the Revolving Credit Agreement which varied between 0.20%and 0.30%depending on our consolidated leverage ratio.There was no balance outstanding on the revolving credit facility as of December 31,2012.In connection with the planned acquisition of Epocrates,on January 3,2013,we borrowed$100 million from our revolving credit facility and,on January 9,2013,we repaid the borrowed amount in full.The Revolving Credit Agreement was increased by $55 million on January 7,2013.On March 11,2013,we borrowed $155.0 million from the revolving credit facility to fund the Epocrates acquisition.The entire amount borrowed under this facility was repaid as of May 10,2013. On May 10,2013,we entered into a five-year$325 million senior credit facility consisting of a$200 million unsecured term loan facility and a$125 million unsecured revolving credit facility("Senior Credit Facility").The Senior Credit Facility replaced the Revolving Credit Agreement.The Senior Credit Facility contains terms and conditions that are customary to facilities of this nature,and may be used to refinance existing indebtedness,to finance the acquisition of the real estate known as the Arsenal on the Charles,and for working capital and other general corporate purposes.We may increase the Senior Credit Facility up to an additional $100 million subject to certain terms,including obtaining lender commitments.As of December 31,2013,we had$188.8 million outstanding on the unsecured term loan facility and $35.0 million outstanding on the unsecured revolving credit facility.As of December 31,2013,we had$90.0 million available on the unsecured revolving credit facility.As of December 31,2013,we were in compliance with our covenants under the Senior Credit Facility. We believe our current sources of liquidity will be sufficient to sustain operations,to finance our strategic initiatives,to make payments on our contractual obligations,and to purchase property and equipment in the foreseeable future.Our analysis is supported by the growth in our new customer base and a high rate of renewal with our existing customers and the corresponding increase in billings and collections.There can be no assurance that we will continue to generate cash flows at or above current levels or that we will be able to maintain our ability to borrow under these credit facilities or obtain additional financing. Commitments We enter into various purchase commitments with vendors in the normal course of business.We believe that our existing sources of liquidity will be adequate to fund these purchases during the 2014 fiscal year.In the normal course of business,we make representations and warranties that guarantee the performance of services under service arrangements with clients.Historically,there have been no material losses related to such guarantees. Comparison of the Years Ended December 31,2013 and 2012 Operating Cash Flow Activities Year Ended December 31, 2013 2012 Change Net income $ 2,594 $ 18,732 $ (16,138) Non-cash adjustments 91,347 37,438 53,909 Net income after non-cash adjustments are added back 93,941 56,170 37,771 Cash(used in)provided by changes in operating assets and liabilities (633) 14,043 (14,676) Net cash provided by operating activities $ 93,308 $ 70,213 $ 23,095 54 Table of Contents The increase in net cash provided by operating activities for the year ended December 31,2013,compared to the year ended December 31,2012,is primarily due to a$37.8 million increase in net income after non-cash adjustments are added back.The increase in non-cash adjustments reflects an increase in depreciation and amortization expense of$32.7 million,primarily the result of the acquisitions of Epocrates and the Arsenal on the Charles,and an increase in stock-based compensation of$15.4 million.The increase in stock-based compensation is the result of an increase in the fair value of recently issued stock- based awards due to an increase in the stock price,as well as the accelerated vesting of stock awards related to the termination of certain employees associated with the integration of Epocrates. The change in cash(used in)provided by operating assets and liabilities for the year ended December 31,2013,compared to the year ended December 31, 2012,is mainly driven by a$8.6 million decrease on the cash used related to accounts receivable,a$6.1 million change on the cash provided/used related to deferred revenue,and a$3.9 million related to the cash used for accrued expenses,all offset by the$8.8 million decrease in the cash provided by the prepaid and other assets.The changes in cash used in the accounts receivable is a result of the Epocrates transaction,as typically a portion of each Epocrates clinical information services contract is billed upfront,with the balance paid upon one or more future milestones.The change on the cash provided/used related to deferred revenue is due to a decrease in the amount of implementation fees collected upfront,as small group practices are only doing remote implementations and therefore there is no charge for implementation.In addition,Epocrates deferred revenue is normally billed,collected and recognized over a period of one year which has decreased the rate in which deferred revenue contributes to our cash inflows from working capital.The changes related to accrued expenses are primarily due to timing of invoices.The changes in prepaid and other assets is due to the fact we are currently in an income taxes receivable position and we continue to offset a portion of our income tax assessments with net operating losses from prior years and tax benefits from current year as shown by the excess tax benefit amounts.The amount of excess tax benefit utilized was lower in the current year due to a lower pre-tax net income in the year ended December 31, 2013. Investing Cash Flow Activities Net cash used in investing activities increased $424.8 million to$424.9 million for the year ended December 31,2013,as compared to the year ended December 31,2012.Cash flows used in investing activities consist primarily of cash paid for the acquisitions of Epocrates of$242.8 million,net of cash acquired,and the Arsenal on the Charles of$167.3 million. The increase in net cash used in investing activities is also attributable to increases in purchases of property and equipment of $14.4 million and increases in capitalized software development costs of$13.5 million.We make investments in property and equipment and in software development on an ongoing basis.Our increased investment in property for the period ended December 31,2013,consists of our expansion to support our growth,including the build-out of our Corporate headquarters.Our increased investment in equipment for the period ended December 31,2013 consists primarily of purchases of technology infrastructure to provide service stability and additional capacity to support our expanding client base.Our investment in software development consists of company-managed design,development,and testing of new application functionality.The increase in capitalized software development costs for the period ended December 31,2013,compared to the period ended December 31,2012,is primarily related to the new automation activities related to the new athenaCoordinator service offering as well as our athenaClinicals offering.We expect these investments to increase in the foreseeable future to support our continued growth and new service offerings,as well as to support expansion in four of our locations during 2014,including our Corporate headquarters and new office space. These increases in net cash used in investing activities for the year ended December 31,2013,are partially offset by a$12.8 million decrease in net proceeds and purchases of investments. The net change in proceeds and purchases of our available-for-sale investments is based upon the changes in maturity of our investments in securities,and additionally,we decreased the amount of available-for-sale investments in 2013 due to the the acquisitions of Epocrates and the Arsenal on the Charles property. Financing Cash Flow Activities Net cash provided by financing activities increased $214.6 million to$241.7 million for the year ended December 31,2013,compared to cash provided by financing activities of$27.1 million for the year ended December 31,2012.Cash provided by financing activities for the year ended December 31,2013, is primarily attributable to the$200.0 million in proceeds from our term loan which we utilized in our acquisitions of Epocrates and the Arsenal on the Charles,and$35.0 million received in net proceeds from our line of credit. 55 Table of Contents Comparison of the Years Ended December 31,2012 and 2011 Operating Cash Flow Activities Year Ended December 31, 2012 2011 Change Net income $ 18,732 $ 19,046 $ (314) Non-cash adjustments 37,438 23,575 13,863 Net income after non-cash adjustments are added back 56,170 42,621 13,549 Cash used in changes in operating assets and liabilities 14,043 18,143 (4,100) Net cash provided by operating activities $ 70,213 $ 60,764 $ 9,449 The increase in cash flow from operations for the year ended December 31,2012,compared to the year ended December 31,2011,is mainly attributable to the actual and proportionate increase in the amount of non-cash adjustments compared to the net income for those periods.The non-cash adjustments include an increase of stock-based compensation of$8.3 million and depreciation and amortization of$10.1 million offset by a decrease in the change in fair value of the contingent consideration of$5.1 million when comparing these periods.The increase in stock-based compensation is a result of an increase in the fair value of recently issued stock-based awards due to an increase in the stock price.We continue to offset our portion of our income tax assessments with net operating losses from stock based compensation from prior years and tax benefits from current year exercises as shown by the excess tax benefit amounts.We no longer have significant net operating losses from prior years and expect the amount of taxes paid will increase in future years. The year over year decrease in cash used in operating assets and liabilities is mainly driven by the change in deferred revenue.The increase in the deferred revenue balance of$3.0 million in the year ended December 31,2012,compared to$10.0 million in the year ended December 31,2011,is primarily due to the fact that we began waiving implementation fees for remote implementations and for some sales offerings. Investing Cash Flow Activities The cash used by investing activities decreased$53 million for the year ended December 31,2012,as compared to the year ended December 31,2011. Cash flows used in investing activities consist primarily of purchases of property and equipment,capitalized software development costs,and our investment activities.We make investments in property and equipment and in software development on an ongoing basis.Our investment in equipment consists primarily of purchases of technology infrastructure to provide service stability and additional capacity to support our expanding client base.Our increase of $7.2 million in equipment is primarily related to several new servers for our new data center located in Dallas,Texas and existing data centers located in Bedford,Massachusetts,and Belfast,Maine,as well as build out of new leasehold and building improvements to accommodate our headcount growth.Our investment in software development consists of company managed-design,development,and testing of new application functionality.Our capitalized software development costs increased by$7.9 million for the year ended December 31,2012,compared to the year ended December 31,2011,primarily related to the new automation activities related to the new athenaCoordinator service offering as well as our athenaClinicals service offering.The change of restricted cash is due to the timing of the payments made for contingent consideration relating to the Anodyne acquisition completed in 2009.In the year ended December 31, 2012,we acquired Healthcare Data Services,LLC for$5.8 million.In the year ended December 31,2011,we acquired a conference center located in Maine for$7.0 million and Proxsys for$27.9 million. The net change in proceeds and purchases of our available for sale investments is based upon the changes in maturity of our investments in securities.We decreased the amount of available for sale investments at December 31,2012,in anticipation of the proposed acquisition of Epocrates and the Arsenal on the Charles property that we anticipate will both close in the first half of 2013. Financing Cash Flow Activities The cash provided by financing activities was$27.1 million for the year ended December 31,2012,compared to cash provided by financing activities of $14.4 million for the year ended December 31,2011.The change is primarily attributable to the$9.7 million payment related to our debt and interest rate swap in 2011.We elected to repay all of our outstanding debt balances under our equipment line of credit and term loan,as well as terminate our related interest rate derivative in May 2011.The increase of$4.6 million in cash received from the exercise of stock options during the year ended December 31, 2012,compared to the year ended December 31,2011,is primarily due to the overall increase in the strike price of the options exercised along with an increase in the number of options exercised during the comparable time periods.This increase was offset by an increase of$4.2 million related to the cash paid to settle tax obligations through the net settlement method that our employees can elect when restricted stock units vest in the year ended December 31,2012.We began issuing restricted stock 56 Table of Contents units in 2010 and have since experienced an increase in the proportionate number of restricted stock units granted compared to options granted.We expect that the cash paid to settle tax obligations will increase in the near future as these issued restricted stock units begin to vest.The payment of contingent consideration relates to the portion of the Anodyne contingent consideration that was accrued at acquisition date. We expect that our cash flows from financing activities will increase in the near future as we anticipate that we will need to borrow to fund the pending transactions discussed in the"Recent Developments"section. Contractual Obligations The following table summarizes our long-term contractual obligations and commitments as of December 31,2013: Payments Due by Period Less than 1 More than 5 (in thousands) Total Year 1-3 Years 3-5 Years Years Other Long-tern debt(1) $ 188,750 15,000 30,000 30,000 113,750 — Operatingleaseobligations 87,928 5,658 15,629 16,388 50,253 — Other 4,851 4,851 Total $ 281,529 $ 20,658 $ 45,629 $ 46,388 $ 164,003 $ 4,851 (1)We have cash interest requirements due on the Senior Credit Facility payable at variable rates which are not included in the above table. The commitments under our operating leases shown above consist primarily of lease payments for our offices in Atlanta,Georgia;Alpharetta,Georgia; Birmingham,Alabama;Austin,Texas;San Francisco,California;San Mateo,California;Ewing,New Jersey;Princeton,New Jersey;Durham,North Carolina;and Chennai,India. "Other"consists of uncertain tax benefits.We have not utilized these uncertain tax benefits,nor do we have an expectation of when these uncertain tax benefits would be challenged.As of December 31,2013,we cannot reasonably estimate when any future cash outlays would occur related to these uncertain tax positions. Off-Balance Sheet Arrangements As of December 31,2013 and 2012,we did not have any relationships with unconsolidated entities or financial partnerships,such as entities often referred to as"structured finance"or"special purpose"entities,which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.Other than our operating leases for office space,we do not engage in off-balance sheet financing arrangements. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Foreign Currency Exchange Risk. Our results of operations and cash flows are subject to fluctuations due to changes in the Indian rupee.None of our consolidated revenues are generated outside the United States.None of our vendor relationships,including our contracts with our offshore service providers for work performed in India and the Philippines,is denominated in any currency other than the U.S.dollar.For the years ended December 31,2013 and 2012, less than 1%of our expenses occurred in our direct subsidiary in Chennai,India,and was incurred in Indian rupees.We therefore believe that the risk of a significant impact on our operating income from foreign currency fluctuations is not likely. Interest Rate Risk.We had$223.8 million of outstanding borrowings under our Senior Credit Facility at December 31,2013.The Senior Credit Facility bears interest at LIBOR plus an applicable margin.Accordingly,we are exposed to fluctuations in interest rates on borrowings under the Senior Credit Facility. During the year ended December 31,2013,we utilized an interest rate swap to manage exposure to interest rates on the variable rate of our indebtedness. Our interest rate swap is with a major financial institution and is not used for speculative or trading purposes.We have designated our interest rate swap as a cash flow hedge and changes in the fair value of the interest rate swap are recognized in other comprehensive income.Hedge ineffectiveness,if any,associated with the interest rate swap will be reported by us in interest expense.We did not utilize an interest rate swap during the year ended December 31,2012. We recorded the interest rate swap at fair value,which amounted to a liability of$0.4 million at December 31,2013.A one hundred basis point change in the interest rate on our borrowings outstanding as of December 31,2013,would result in a change in interest expense of approximately$2.2 million annually. 57 Table of Contents Item 8. Financial Statements and Supplementary Data. The financial statements required by this Item are located beginning on page F-1 of this report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities and Exchange Act of 1934 are(1)recorded,processed,summarized,and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and(2)accumulated and communicated to our management,including our Chief Executive Officer and Chief Financial Officer,to allow timely decisions regarding required disclosure.As of December 31,2013(the"Evaluation Date"),our management,with the participation of our Chief Executive Officer and Chief Financial Officer,evaluated the effectiveness of our disclosure controls and procedures(as defined in Rules 13a-15(e)and 15d-15(e)under the Securities and Exchange Act of 1934).Our management recognizes that any controls and procedures,no matter how well designed and operated,can provide only reasonable assurance of achieving their objectives,and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.Our Chief Executive Officer and Chief Financial Officer have concluded based upon the evaluation described above that,as of the Evaluation Date,our disclosure controls and procedures were effective at the reasonable assurance level. Management's Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting for our company.Internal control over financial reporting is defined in Rules 13a-15(f)and 15(d)-15(f)promulgated under the Securities Exchange Act of 1934,as amended,as a process designed by,or under the supervision of,our Chief Executive and Chief Financial Officers and effected by our board of directors,management,and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: • pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of our assets; • provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles; • provide reasonable assurance that our receipts and expenditures are being made only in accordance with authorization of our management and directors;and • provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,use,or disposition of our assets that could have a material effect on the financial statements. Because of inherent limitations,internal controls over financial reporting may not prevent or detect misstatements.Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. Our management evaluated the effectiveness of athenahealth's internal control over financial reporting as of December 31,2013,excluding an assessment of internal control over Epocrates,Inc.,which was acquired on March 12,2013. As of December 31,2013,the revenue transactions of Epocrates are being processed by Epocrates legacy systems and under the internal controls over financial reporting existing at the acquisition date. All other transactions of Epocrates are maintained on the Company's systems. Epocrates revenue transactions included in the consolidated financial statements aggregate 9%of our consolidated financial statement amounts for the year ended December 31,2013. Our management,including our Chief Executive Officer and Chief Financial Officer,has conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31,2013.In conducting this evaluation,we used 58 Table of Contents the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission("COSO"),in Internal Control-Integrated Framework. Based upon this evaluation and those criteria,management believes that,as of December 31,2013,our internal controls over financial reporting were effective. Deloitte and Touche LLP,our independent registered public accounting firm,has audited our consolidated financial statements and the effectiveness of our internal control over financial reporting as of December 31,2013. Changes in Internal Control We are in the process of evaluating and integrating Epocrates revenue internal control processes and controls with ours. Other than the change noted above,there have been no changes in our internal control over financial reporting for the year ended December 31,2013,that have materially affected,or are reasonably likely to materially affect,our internal control over financial reporting. 59 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of athenahealth,Inc. Watertown,Massachusetts We have audited the internal control over financial reporting of athenahealth,Inc.and subsidiaries(the"Company")as of December 31,2013,based on criteria established in Internal Control-Integrated Framework(1992)issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in Management's Report on Internal Control over Financial Reporting,management excluded from its assessment the internal control over the revenue cycle of Epocrates,Inc.,which was acquired on March 12,2013 and constitutes 9%of revenues of the consolidated financial statement amounts for the year ended December 31,2013. Accordingly,our audit did not include the internal control over financial reporting over the revenue cycle at Epocrates,Inc. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting,included in the accompanying Management's Report on Internal Control over Financial Reporting.Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board(United States).Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.Our audit included obtaining an understanding of internal control over financial reporting,assessing the risk that a material weakness exists,testing and evaluating the design and operating effectiveness of internal control based on the assessed risk,and performing such other procedures as we considered necessary in the circumstances.We believe that our audit provides a reasonable basis for our opinion. A company's internal control over financial reporting is a process designed by,or under the supervision of,the company's principal executive and principal financial officers,or persons performing similar functions,and effected by the company's board of directors,management,and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.A company's internal control over financial reporting includes those policies and procedures that(1)pertain to the maintenance of records that,in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company;(2)provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;and(3)provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,use,or disposition of the company's assets that could have a material effect on the financial statements. Because of the inherent limitations of internal control over financial reporting,including the possibility of collusion or improper management override of controls,material misstatements due to error or fraud may not be prevented or detected on a timely basis.Also,projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions,or that the degree of compliance with the policies or procedures may deteriorate. In our opinion,the Company maintained,in all material respects,effective internal control over financial reporting as of December 31,2013,based on the criteria established in Internal Control-Integrated Framework(1992)issued by the Committee of Sponsoring Organizations of the Treadway Commission. We have also audited,in accordance with the standards of the Public Company Accounting Oversight Board(United States),the consolidated financial statements as of and for the year ended December 31,2013 of the Company and our report dated February 7,2014 expressed an unqualified opinion on those financial statements. /s/Deloitte&Touche LLP Boston,Massachusetts February 7,2014 60 Table of Contents Item 9B. Other Information. None. 61 Table of Contents PART III Certain information required by Part III of Form 10-K is omitted from this report because we expect to file a definitive proxy statement for our 2014 Annual Meeting of Stockholders("2014 Proxy Statement')within 120 days after the end of our fiscal year pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934,as amended,and the information included in our 2014 Proxy Statement is incorporated herein by reference to the extent provided below. Item 10. Directors,Executive Officers and Corporate Governance. The information required by this Item is incorporated by reference to the information to be contained in our 2014 Proxy Statement. We have adopted a code of ethics that applies to all of our directors,officers,and employees.This code is publicly available on our website at www.athenahealth.com.Amendments to the code of ethics or any grant of a waiver from a provision of the code requiring disclosure under applicable SEC and NASDAQ Global Select Market rules will be disclosed on our website or,if so required,disclosed in a Current Report on Form 8-K. Item 11. Executive Compensation. The information required by this Item is incorporated by reference to the information to be contained in our 2014 Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by this Item is incorporated by reference to the information to be contained in our 2014 Proxy Statement. Item 13. Certain Relationships and Related Transactions,and Director Independence. The information required by this Item is incorporated by reference to the information to be contained in our 2014 Proxy Statement. Item 14. Principal Accounting Fees and Services. The information required by this Item is incorporated by reference to the information to be contained in our 2014 Proxy Statement. 62 Table of Contents PART IV Item 15. Exhibits,Financial Statement Schedules. (a) Documents filed as part of this report. (1) The following consolidated financial statements are filed herewith in Item 8 of Part II above. (i) Renort of Independent Reeistered Public Accountine Firm (ii) Consolidated Balance Sheets (iii) Consolidated Statements of Income (iv) Consolidated Statements of Comurehensive Income (v) Consolidated Statements of Stockholders'Eauitv (v) Consolidated Statements of Cash Flows (vi) Notes to Consolidated Financial Statements (2) Financial Statement Schedules All other supplemental schedules are omitted because of the absence of conditions under which they are required or because the required information is given in the financial statements or notes thereto. (3) Exhibits See the Exhibit Index immediately following the signature page of this Annual Report on Form 10-K. 63 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d)of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized. ATHENAHEALTH,INC. By: /s/ Jonathan Bush Jonathan Bush Chief Executive Officer,President,and Chairman By: /s/ Timothy M.Adams Timothy M.Adams Chief Financial Officer and Senior Vice President Date:February 7,2014 Pursuant to the requirements of the Securities Exchange Act of 1934,this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date Chief Executive Officer,President,and February 7,2014 /s/ Jonathan Bush Chairman(Principal Executive Officer) (Jonathan Bush) Chief Financial Officer and Senior Vice President February 7,2014 /s/ Timothy M.Adams (Principal Financial Officer&Principal Accounting Officer) (Timothy M.Adams) /s/ Amy Abernethy Director February 7,2014 (Amy Abernethy) /s/ Brandon H.Hull Lead Director February 7,2014 (Brandon H.Hull) /s/ Dev Ittycheria Director February 7,2014 (Dev Ittycheria) /s/ John A.Kane Director February 7,2014 (John A.Kane) /s/ Jacqueline B.Kosecoff Director February 7,2014 (Jacqueline B.Kosecoff) /s/ James L.Mann Director February 7,2014 (James L.Mann) /s/ David E.Robinson Director February 7,2014 (David E.Robinson) 64 Table of Contents Exhibit Filed No. Exhibit Description Incorporated by Reference herewith Form File No. Filing Date 2.1 Agreement and Plan of Merger by and among the Registrant,Aries Acquisition 8-K 001-33689 October 5,2009 Corporation,Anodyne Health Partners,Inc.,and the Securityholders'Representatives named therein,dated October 5,2009 2.2 Agreement and Plan of Merger by and among the Registrant,Prometheus Acquisition 8-K 001-33689 July 21,2011 LLC,Proxsys LLC,and the Securityholders'Representative named therein,dated July 21,2011 2.3 Agreement and Plan of Merger by and among the Registrant,Echo Merger Sub,Inc., 8-K 001-33689 January 7,2013 and Epocrates,Inc.,dated January 7,2013 3.1 Amended and Restated Certificate of Incorporation of the Registrant S-1 333-143998 September 11,2007 3.2 Amended and Restated Bylaws of the Registrant S-1 333-143998 September 11,2007 4.1 Specimen Certificate evidencing shares of common stock S-1 333-143998 August 3,2007 10.1 Form of Indemnification Agreement,to be entered into between the Registrant and each S-1 333-143998 September 6,2007 of its directors and officers t 10.2 athenahealth,Inc. 1997 Stock Plan and form of agreements S-1 333-143998 July 13,2007 t10.3 athenahealth,Inc.2000 Stock Option and Incentive Plan,as amended,and form of S-1 333-143998 July 13,2007 agreements t10.4 athenahealth,Inc.2007 Stock Option and Incentive Plan,as amended,and form of 10-Q 001-33689 October 18,2013 agreements t10.5 athenahealth,Inc.2007 Employee Stock Purchase Plan,as amended 10-Q 001-33689 October 19,2012 t10.6 Epocrates,Inc. 1999 Stock Option Plan,as amended S-8 333-187224 March 13,2013 t10.7 Epocrates,Inc.2008 Equity Incentive Plan,as amended S-8 333-187224 March 13,2013 t10.8 Epocrates,Inc.2010 Equity Incentive Plan,as amended S-8 333-187224 March 13,2013 t 10.9 Employment Agreement by and between the Registrant and Timothy M.Adams,dated 10-Q 001-33689 May 3,2010 January 11,2010 t10.10 Employment Agreement by and between the Registrant and Jonathan Bush,dated S-1 333-143998 July 13,2007 November 1, 1999,as amended t10.11 Employment Agreement by and between the Registrant and Robert L.Cosinuke,dated 10-Q 001-33689 May 6,2008 December 3,2007 t 10.12 Employment Agreement by and between the Registrant and Stephen Kahane,dated 10-Q 001-33689 April 29,2011 February 18,2011 t10.13 Employment Agreement by and between the Registrant and Daniel H.Orenstein,dated 10-Q 001-33689 October 22,2010 July 1,2010 10.14 Employment Agreement by and between the Registrant and Ed Park,dated July 1, 10-Q 001-33689 October 22,2010 2010 t 10.15 athenahealth,Inc.Executive Incentive Plan,adopted March 29,2013 8-K 001-33689 April 4,2013 65 Table of Contents Exhibit Filed No. Exhibit Description Incorporated by Reference herewith Form File No. Filing Date #10.16 Lease between President and Fellows of Harvard College and the Registrant,dated S-1 333-143998 July 13,2007 November 8,2004,for space at the premises located at 300 North Beacon Street, Watertown,MA 02472 and 311 Arsenal Street,Watertown,MA 02472 10.17 First Amendment to Lease by and between the Registrant and President and Fellows of 10-Q 001-33689 July 22,2011 Harvard College,dated May 16,2011 10.18 Second Amendment to Lease by and between the Registrant and President and Fellows 10-K 001-33689 February 16,2012 of Harvard College,dated November 7,2011 10.19 Third Amendment to Lease by and between the Registrant and President and Fellows of 10-Q 001-33689 October 19,2012 Harvard College,dated August 29,2012 10.20 Lease Deed by and between MIS.Faery Estates Private Limited and athenahealth 10-K 001-33689 February 16,2012 Technology Private Limited,dated October 24,2011,for space at the premises located at Unit No.3 and 4,91h Floor,MGR Salai(Veeranam Road),Kandanchavadi, Perungudi,Chennai,600096. #10.21 Agreement of Lease by and between Sentinel Properties--Bedford,LLC and the S-1 333-143998 July 13,2007 Registrant,dated May 8,2007 10.22 Office Lease Agreement by and between the Registrant and JAMESTOWN Ponce City 10-Q 001-33689 July 19,2013 Market,L.P.,dated June 24,2013 10.23 Purchase and Sale Agreement by and between the Registrant and the President and 10-K 001-33689 February 11,2013 Fellows of Harvard College,dated December 5,2012 10.24 First Amendment to Purchase and Sale Agreement by and between athenahealth,Inc. 8-K 001-33689 March 18,2013 and President and Fellows of Harvard College,dated March 12,2013 10.25 Credit Agreement among the Registrant,Bank of America,N.A.,as Administrative 10-Q 001-33689 October 21,2011 Agent,Swing Line Lender,and L/C Issuer,and the other lenders from time to time parry thereto,dated October 20,2011,and exhibits and schedules thereunder. 10.26 Credit Agreement among the Registrant,Bank of America,N.A.,as Administrative 10-Q 001-33689 July 19,2013 Agent,Swing Line Lender,and Letter of Credit Issuer,the other lenders party thereto, and Merrill Lynch,Pierce,Fenner&Smith Incorporated and TD Securities(USA) LLC as Joint Lead Arrangers and Joint Book Managers,dated May 10,2013,and exhibits and schedules thereunder 10.27 Amended and Restated Master Agreement by and between the Registrant and Dell 10-Q 001-33689 July 19,2013 Marketing L.P.,dated February 1,2013 t 10.28 Director Compensation Plan of the Registrant,effective as of January 1,2014 X 21.1 Subsidiaries of the Registrant X 23.1 Consent of Independent Registered Public Accounting Firm X 31.1 Rule 13a-14(a)or 15d-14 Certification of Chief Executive Officer X 31.2 Rule 13a-14(a)or 15d-14 Certification of Chief Financial Officer X 66 Table of Contents Exhibit Filed No. Exhibit Description Incorporated by Reference herewith Form File No. Filing Date 32.1* Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Exchange Act rules 13a-14(b)or 15d-14(b)and 18 U.S.C.Section 1350 101 XBRL(eXtensible Business Reporting Language).The following materials from X athenahealth,Inc.'s Annual Report on Form 10-K for the year ended December 31, 2013,formatted in XBRL:(i)the Consolidated Balance Sheets,(ii)the Consolidated Statements of Income,(iii)the Consolidated Statements of Comprehensive Income,(iv) the Consolidated Statements of Stockholders'Equity,(v)the Consolidated Statements of Cash Flows,and(vi)notes to consolidated financial statements. t Indicates a management contract or any compensatory plan,contract,or arrangement. * Furnished herewith. # Application has been made to the Securities and Exchange Commission for confidential treatment of certain provisions.Omitted material for which confidential treatment has been requested has been filed separately with the Securities and Exchange Commission. 67 Table of Contents Financial Statements and Supplementary Data athenahealth,Inc. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Contents Report of Independent Reeistered Public Accountine Firm F-2 FINANCIAL STATEMENTS Consolidated Balance Sheets F-3 Consolidated Statements of Income F-4 Consolidated Statements of Comnrehensive Income F-5 Consolidated Statements of Stockholders'Eauitv F-6 Consolidated Statements of Cash Flows F-7 Notes to Consolidated Financial Statements F-9 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of athenahealth,Inc. Watertown,Massachusetts We have audited the accompanying consolidated balance sheets of athenahealth,Inc.and subsidiaries(the"Company")as of December 31,2013 and 2012,and the related consolidated statements of income,comprehensive income,stockholders'equity,and cash flows for each of the three years in the period ended December 31,2013.These financial statements are the responsibility of the Company's management.Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board(United States).Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.An audit includes examining,on a test basis,evidence supporting the amounts and disclosures in the financial statements.An audit also includes assessing the accounting principles used and significant estimates made by management,as well as evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for our opinion. In our opinion,such consolidated financial statements present fairly,in all material respects,the financial position of athenahealth,Inc.and subsidiaries as of December 31,2013 and 2012,and the results of their operations and their cash flows for each of the three years in the period ended December 31,2013,in conformity with accounting principles generally accepted in the United States of America. We have also audited,in accordance with the standards of the Public Company Accounting Oversight Board(United States),the Company's internal control over financial reporting as of December 31,2012,based on the criteria established in Internal Control—Integrated Framework(1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 7,2014,expressed an unqualified opinion on the Company's internal control over financial reporting. /s/Deloitte&Touche LLP Boston,Massachusetts February 7,2014 F-2 Table of Contents athenahealth,Inc. CONSOLIDATED BALANCE SHEETS (Amounts in thousands,except per-share amounts) December 31, December 31, 2013 2012 Assets Current assets: Cash and cash equivalents $ 65,002 $ 154,988 Short-term investments - 38,092 Accounts receivable-net 87,343 61,916 Current portion of restricted cash 3,000 1,357 Deferred tax assets 6,118 6,907 Prepaid expenses and other current assets 17,194 10,924 Total current assets 178,657 274,184 Property and equipment-net 213,018 54,035 Capitalized software costs-net 29,987 16,050 Purchased intangible assets-net 168,364 21,561 Goodwill 198,049 48,090 Deferred tax assets - 11,759 Investments and other assets 8,321 2,773 Total assets $ 796,396 $ 428,452 Liabilities&Stockholders'Equity Current liabilities: Accounts payable $ 3,930 $ 1,733 Accrued compensation 44,444 36,393 Accrued expenses 24,297 19,683 Line of credit 35,000 - Current portion of long-term debt 15,000 - Current portion of deferred revenue 27,002 8,209 Current portion of deferred rent 83 799 Total current liabilities 149,756 66,817 Deferred rent,net of current portion 1,478 2,854 Long-tern debt,net of current portion 173,750 - Deferred revenue,net of current portion 53,172 45,515 Long-term deferred tax liability-net 21,421 Other long-term liabilities 5,511 1,618 Total liabilities 405,088 116,804 Commitments and contingencies(note 14) Stockholders'equity: Preferred stock,$0.01 par value:5,000 shares authorized;no shares issued and outstanding at December 31,2013 and December 31,2012,respectively Common stock,$0.01 par value: 125,000 shares authorized;38,600 shares issued and 37,322 shares outstanding at December 31,2013;37,572 shares issued and 36,294 shares outstanding at December 31,2012 387 376 Additional paid-in capital 380,967 303,547 Treasury stock,at cost, 1,278 shares (1,200) (1,200) Accumulated other comprehensive loss (446) (81) Retained earnings 11,600 9,006 Total stockholders'equity 391,308 311,648 Total liabilities and stockholders'equity $ 796,396 $ 428,452 The accompanying notes are an integral part of these consolidated financial statements. F-3 Table of Contents athenahealth,Inc. CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands,except per-share amounts) Year Ended December 31, 2013 2012 2011 Revenue: Business services $ 563,237 $ 408,496 $ 312,768 Implementation and other 31,766 13,775 11,299 Total revenue 595,003 422,271 324,067 Expense: Direct operating 238,672 166,886 122,795 Selling and marketing 149,488 104,300 79,775 Research and development 57,639 33,792 23,343 General and administrative 99,776 57,025 48,711 Depreciation and amortization 43,575 25,641 16,710 Total expense 589,150 387,644 291,334 Operating income 5,853 34,627 32,733 Other(expense)income: Interest expense (3,905) (407) (314) Other income 283 658 461 Total other(expense)income (3,622) 251 147 Income before income tax benefit(provision) 2,231 34,878 32,880 Income tax benefit(provision) 363 (16,146) (13,834) Net income $ 2,594 $ 18,732 $ 19,046 Net income per share-Basic $ 0.07 $ 0.52 $ 0.54 Net income per share-Diluted $ 0.07 $ 0.50 $ 0.53 Weighted average shares used in computing net income per share: Basic 36,856 35,956 35,046 Diluted 38,257 37,133 36,050 The accompanying notes are an integral part of these consolidated financial statements. F-4 Table of Contents athenahealth,Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Amounts in thousands) Year Ended December 31, 2013 2012 2011 Net income $ 2,594 $ 18,732 $ 19,046 Other comprehensive income(loss) Unrealized gain(loss)on securities,net of tax of$5,$3,and$1 for the years ended December 31,2013,2012,and 2011,respectively. 13 32 (6) Unrealized loss on interest rate derivative,net of tax of$101,$0,and$0 for the years ended December 31,2013,2012,and 2011,respectively. (253) Foreign currency translation adjustment (125) (12) (123) Total other comprehensive(loss)income (365) 20 (129) Comprehensive income $ 2,229 $ 18,752 $ 18,917 The accompanying notes are an integral part of these consolidated financial statements. F-5 Table of Contents athenahealth,Inc. CONSOLIDATED STATEMENTS OF STOCKHOLDERS'EQUITY (Amounts in thousands) Common Stock Treasury Stock Accumulated Retained Additional Other Earnings Total Paid-In Comprehensive (Accumulated Stockholders Shares Amount Capital Shares Amount (Loss)Income Deficit) Equity BALANCE-January 1,2011 35,808 $ 358 $ 200,339 (1,278) $ (1,200) $ 28 $ (28,772) $ 170,753 Stock compensation expense 18,901 18,901 Stock options exercised and restricted stock units vested 816 8 12,320 12,328 Common stock issued under employee stock purchase plan 54 1 1,768 1,769 Tax benefit realized from stock- based awards 13,803 13,803 Net income 19,046 19,046 Other comprehensive loss (129) (129) BALANCE-December 31,2011 36,678 $ 367 $ 247,131 (1,278) $ (1,200) $ (101) $ (9,726) $ 236,471 Stock compensation expense 28,082 28,082 Stock options and warrants exercised and restricted stock units vested,net 849 9 11,758 11,767 Common stock issued under employee stock purchase plan 45 2,426 2,426 Tax benefit realized from stock- based awards 14,150 14,150 Net income 18,732 18,732 Other comprehensive income 20 20 BALANCE-December 31,2012 37,572 $ 376 $ 303,547 (1,278) $ (1,200) $ (81) $ 9,006 $ 311,648 Stock compensation expense 44,842 44,842 Stock options exercised and restricted stock units vested,net 983 11 15,805 15,816 Common stock issued under employee stock purchase plan 45 - 3,500 3,500 Tax benefit realized from stock- based awards 6,051 6,051 Fair value of vested stock options and restricted stock units assumed 13,028 13,028 Net settlement of acquired company's board of directors equity shares (5,806) (5,806) Net income 2,594 2,594 Other comprehensive loss (365) (365) BALANCE-December 31,2013 38,600 $ 387 $ 380,967 (1,278) $ (1,200) $ (446) $ 11,600 $ 391,308 The accompanying notes are an integral part of the consolidated financial statements. F-6 Table of Contents athenahealth,Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) Year Ended December 31, 2013 2012 2011 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,594 $ 18,732 $ 19,046 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 61,853 29,144 19,030 Amortization of premium on investments 84 1,270 1,579 Provision for uncollectible accounts 791 153 1,122 Excess tax benefit from stock-based awards (6,910) (14,179) (14,208) Deferred income tax (7,044) (890) (2,962) Change in fair value of contingent considerations 76 (5,118) 40 Stock-based compensation expense 42,648 27,236 18,901 Other reconciling adjustments (151) (178) 73 Changes in operating assets and liabilities: Accounts receivable (4,190) (12,764) (12,130) Prepaid expenses and other current assets 3,283 12,096 11,787 Other long-term assets (66) ill 489 Accounts payable (233) 13 688 Accrued expenses (21) 3,898 2,832 Accrued compensation 5,775 7,959 8,055 Deferred revenue (3,090) 2,969 9,987 Deferred rent (2,091) (239) (3,565) Net cash provided by operating activities 93,308 70,213 60,764 CASH FLOWS FROM INVESTING ACTIVITIES: Capitalized software development costs (29,123) (15,657) (7,779) Purchases of property and equipment (38,260) (23,904) (16,696) Proceeds from sales and disposals of property and equipment - 172 - Proceeds from sales and maturities of investments 56,245 160,340 168,083 Purchases of investments (2,000) (118,919) (165,657) Payments on acquisitions,net of cash acquired (410,161) (5,798) (34,882) Change in restricted cash (1,643) 3,650 3,684 Net cash used in investing activities (424,942) (116) (53,247) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock under stock plans and warrants 31,133 18,699 14,097 Taxes paid related to net share settlement of restricted stock awards (12,075) (4,248) - Excess tax benefit from stock-based awards 6,910 14,179 14,208 Proceeds from long-term debt 200,000 Proceeds from line of credit 155,000 Payments on line of credit (120,000) Payments on long-term debt and capital lease obligations (11,250) - (9,216) Net settlement of acquired company's board of directors equity shares (5,806) Debt issuance costs (1,699) - (741) Payment of contingent consideration accrued at acquisition date (525) (1,550) (3,355) Payment to terminate interest rate derivative contract (563) Net cash provided by financing activities 241,688 27,080 14,430 Effects of exchange rate changes on cash and cash equivalents (40) 30 (110) Net(decrease)increase in cash and cash equivalents (89,986) 97,207 21,837 Cash and cash equivalents at beginning of period 154,988 57,781 35,944 Cash and cash equivalents at end of period $ 65,002 $ 154,988 $ 57,781 Non-cash transactions Property,equipment and purchased software recorded in accounts payable and accrued expenses $ 1,667 $ 4,217 $ 8,066 Taxes to be paid related to net share settlement of restricted stock units in accrued expenses $ - $ 258 $ - Fair value of equity awards assumed $ 13,028 $ - $ - F-7 Table of Contents 'Grant from government program to be used to reduce non-income taxes recorded in investments and other assets and other long-term liabilities 936 Fair value of contingent consideration at acquisition date 6,836 Tax benefit recorded in prepaid expenses and other current assets $ 5,649 $ 14,150 $ 13,803 Additional disclosures Cash received for interest $ 451 $ 1,960 $ 1,900 Cash paid for interest $ 3,328 $ — $ 183 Cash paid for taxes $ 1,348 $ 3,932 $ 2,708 The accompanying notes are an integral part of these consolidated financial statements. F-8 Table of Contents athenahealth,Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands,except per-share amounts) 1.NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General—athenahealth,Inc.(the"Company","we","us",or"our")is a business services company that provides ongoing billing,clinical-related,and other related services to its customers.The Company provides these services with the use of a single instance of athenaNet,a proprietary Internet-based practice management application.The Company's customers consist of medical group practices ranging in size throughout the United States of America.In March 2013,the Company acquired Epocrates,Inc.Epocrates is recognized for developing a leading medical application among U.S.physicians for clinical content,practice tools,and health industry engagement at the point of care.The features available through the Epocrates services are used by health care professionals to make more informed prescribing decisions,improve workflow,and enhance patient safety. Principles of Consolidation—The accompanying consolidated financial statements include the results of operations of the Company and its wholly- owned subsidiaries.All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements,as well as the reported amounts of revenues and expenses during the reporting period.Significant estimates and assumptions are used for,but are not limited to:(1)revenue recognition;including the estimated expected customer life;(2)asset impairments;(3)depreciable lives of assets;(4)fair value of stock-based compensation;(5)allocation of direct and indirect cost of sales;(6)fair value of identifiable purchased tangible and intangible assets in a business combination;(7)fair value of reporting units for goodwill impairment test and(8)litigation reserves.Actual results could significantly differ from those estimates. Revenue Recognition—The Company recognizes revenue when there is evidence of an arrangement,the service has been provided to the customer,the collection of the fees is reasonably assured,and the amount of fees to be paid by the customer are fixed or determinable. The Company derives its revenue from business services associated with our four integrated services and from subscriptions to and sponsored clinical information and decision support services for our point of care medical application.Our four integrated services consist of athenaCollector for revenue cycle and practice management;athenaClinicals for electronic health records("EHR");athenaCommunicator for automated,live and online patient communications; and athenaCoordinator for care coordination. athenahealth's clients typically purchase one-year service contracts related to our integrated services that renew automatically upon completion.In most cases,the Company's clients may terminate their agreements with 90 days notice without cause.The Company typically retains the right to terminate client agreements in a similar timeframe.The Company's clients are billed monthly,in arrears,based either upon a percentage of collections posted to athenaNet, minimum fees,flat fees,or per-claim fees where applicable.The Company does not recognize revenue for business services fees until these collections are made,as the services fees are not fixed and determinable until such time. Subscriptions to the Epocrates point of care medical application are entered into by a member via an internal or third-parry digital distribution platform or through a redeemable license code which expires within six to 12 months of issuance.Basic subscriptions are free and do not expire.Premium subscription fees are assessed on the length of the subscription period,typically one year,and payment occurs at the time of order,which is in advance of the services being performed,and is recorded as deferred revenue.Premium subscriptions are recognized ratably over the contracted term of delivery,typically one year.If a license code expires before it is redeemed,revenue is recognized upon expiration. Clients in the health care industry typically enter into sponsored clinical information and decision support service arrangements that contain various combinations of services that are generally fulfilled within one year.The clients are charged a fee for the entire group of services to be provided and are typically billed a portion of the contracted fee upon signing of the agreement with the balance billed upon one or more future milestones.Because billings typically occur in advance of services being performed,these amounts are recorded as deferred revenue when billed.Each deliverable within a multiple- deliverable revenue arrangement is accounted for as a separate unit if both of the following criteria are met:(1)the delivered item or items have value to the customer on a standalone basis and(2)for an arrangement that includes a general right of return relative to the delivered item(s),delivery or performance of the undelivered item(s)is considered probable and substantially in our control.Further,the Company's revenue arrangements do not include a general right of return,as we deliver services and not products. F-9 Table of Contents athenahealth,Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands,except per-share amounts) The Company considers a deliverable to have standalone value if it sells this item separately or if the item is sold by another vendor or could be resold by the customer.Each service deliverable within these multiple element arrangements is then accounted for as a separate unit;deliverables not meeting the criteria for being a separate unit of accounting are combined with a deliverable that does meet that criterion,and the Company allocates arrangement consideration to each deliverable using its best estimate of selling price("BESP")if it does not have vendor specific objective evidence of selling price("VSOE")of fair value or third-party evidence("TPE")of fair value.Any discount or premium inherent in the arrangement is allocated to each element in the arrangement based on the relative fair value of each element. Multiple element arrangements require judgments as to how to allocate the arrangement consideration to each deliverable.We maintain a standard price list by service;however,certain incentives,such as discounts,may be offered to clients when they purchase multiple services.Such discounting is subject to various levels of management approval and any discount offered is based on the total contract value.Due to the specific nature of these agreements and the variability in the amount of discount offered for individual services across multiple contracts,we have not been able to conclude that a consistent number of standalone sales of a deliverable have been priced within a reasonably narrow range in order to assert that we have established VSOE. When we cannot establish VSOE of fair value,we then determine if we can establish TPE of fair value.TPE is determined based on competitor prices for similar deliverables when sold separately.Our services differ significantly from that of our peers and our offerings contain a significant level of customization and differentiation such that the comparable pricing of products with similar functionality cannot be obtained.Furthermore,we are unable to reliably determine what similar competitor products'selling prices are on a stand-alone basis.Therefore,we are typically unable to determine TPE. If both VSOE and TPE do not exist,we use BESP to establish fair value and to allocate total consideration to each element in the arrangement.The objective of BESP is to determine the price at which we would transact a sale if the product or service were sold on a stand-alone basis.We determine BESP for a product or service by considering multiple factors including an analysis of recent stand-alone sales of that product,market conditions,competitive landscape,internal costs,gross margin objectives,and pricing practices. Implementation revenue consists primarily of professional services fees related to assisting customers with the implementation of the Company's services and are generally billed upfront and recorded as deferred revenue until the implementation is complete and then,as the service does not have stand-alone value, it is recognized ratably over the longer of the life of the agreement or the estimated expected customer life,which is currently estimated to be 12 years.The Company evaluates the length of the amortization period of the implementation fees based on its experience with customer contract renewals and consideration of the period over which those customers will receive benefits from the Company's current portfolio of services.Certain expenses related to the implementation of a customer,such as out-of-pocket travel,are typically reimbursed by the customer.This is accounted for as both revenue and expense in the period the cost is incurred.Other services consist primarily of tenant revenue which is straight-lined over the term of the lease. Direct Operating Expenses—Direct operating expenses consist primarily of salaries,benefits,claims processing costs,stock-based compensation related to personnel who provide services to clients,including staff who implement new clients,and other direct expenses.Costs associated with the implementation of new clients are expensed as incurred.Direct operating expenses include all service costs incurred to fulfill our revenue contracts.Direct operating expenses also include costs associated with third-party tenant revenue for the Arsenal on the Charles.The reported amounts of direct operating expenses do not include allocated amounts for rent expense,depreciation,and amortization,except for a portion of amortization related to certain purchased intangible assets. Research and Development Expenses—Research and development expenses consist primarily of personnel-related costs and consulting fees for third- parry developers.All such costs are expensed as incurred,except for certain internal use software development costs,which may be capitalized. Advertising Expenses—Advertising expenses are expensed as incurred and are included in selling and marketing expense in the Consolidated Statements of Income.Advertising expense totaled$14.2 million, $12.3 million and$9.8 million for the years ended December 31,2013,2012 and 2011,respectively. Cash and Cash Equivalents—The Company considers all highly liquid investments with an original or remaining maturity from the Company's date of purchase of 90 days or less to be cash equivalents. Investments—Management determines the appropriate classification of investments at the time of purchase based upon management's intent with regard to such investments.All investments,except for certain long-term investments in privately- F-10 Table of Contents athenahealth,Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands,except per-share amounts) held companies which are accounted for at cost,are held as available-for-sale investments.Scheduled maturity dates of U.S.government-backed securities, corporate bonds and commercial paper purchased that are within one year are classified as short-tern.Scheduled maturity dates of U.S.government-backed securities,corporate bonds and commercial paper that are in excess of one year are classified as long-tern.All investments are recorded at fair value with unrealized holding gains and losses included in accumulated other comprehensive(loss)income.There were no material realized gains and losses on sales of these investments for the periods presented.The Company determines realized gains and losses based on the specific identification method. Accounts Receivable—Accounts receivable represents amounts due from customers for business services.Accounts receivable are stated net of an allowance for uncollectible accounts,which is determined by establishing reserves for specific accounts and consideration of historical and estimated probable losses. Activity in the allowance for doubtful accounts is as follows: Years Ended December 31, 2013 2012 2011 Beginning balance $ 1,771 $ 2,348 $ 1,945 Provision 791 153 1,122 Write-offs and adjustments (871) (730) (719) Ending balance $ 1,691 $ 1,771 $ 2,348 Financial Instruments—Certain financial instruments are required to be recorded at fair value.The other financial instruments approximate their fair value,primarily because of their short-term nature.All highly-liquid debt instruments purchased with a maturity of three months or less at the date of acquisition are included in cash and cash equivalents. Derivative financial instruments are used to manage certain of the Company's interest rate exposures.The Company does not enter into derivatives for trading or speculative purposes.Derivatives are carried at fair value,as determined using standard valuation models,and adjusted when necessary for credit risk.Refer to Note 9—Debt for additional information. Property and Equipment—Property and equipment are stated at cost.Equipment,furniture,and fixtures are depreciated using the straight-line method over their estimated useful lives,generally ranging from three to five years.Leasehold improvements are depreciated using the straight-line method over the lesser of the useful life of the improvements or the applicable lease terms,excluding renewal periods.Buildings are depreciated using the straight-line method over 30 to 40 years.Building improvements are depreciated using the straight-line method over 10 years.Costs associated with maintenance and repairs are expensed as incurred.The airplane and land improvements are depreciated using the straight-line method over 20 years and 10 years,respectively. Long-Lived Assets—Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.Determination of recoverability of long-lived assets is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition,as compared with the asset carrying value.Measurement of an impairment loss for long-lived assets that management expects to hold and use is based on the fair value of the asset.Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value,less costs to sell.No impairment losses have been recognized in the years ended December 31,2013,2012,and 2011. Capitalized Interest Cost—Interest costs related to major capital projects,specifically the Company's corporate headquarters campus project and capitalized internal-use software development costs,are capitalized until the underlying asset is placed into service.Capitalized interest is calculated by multiplying the effective interest rate of the outstanding debt by the qualifying costs.As the qualifying asset is placed into service,the qualifying asset and the related capitalized interest are amortized over the useful life of the related asset. Restricted Cash—As of December 31,2013 and 2012,restricted cash balances totaled$3.0 million and$1.4 million,respectively.The December 31, 2013 balance of$3.0 million consists of escrowed funds held as a deposit associated with a possible pending lease.The amount was returned to Company when the lease was signed in January 2014.The December 31,2012 balance consists of$0.9 million of escrowed funds held under a letter of credit as a condition of the Company's previous operating lease for its corporate headquarters and $0.5 million consists of a deposit made relating to the purchase of the Company's corporate headquarters. F-11 Table of Contents athenahealth,Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands,except per-share amounts) Capitalized Software Costs—The Company capitalizes costs related to its athenaNet services and certain other projects for internal use incurred during the application development stage,including stock-based compensation expense for employees working on these projects.Costs related to the preliminary project stage and post implementation activities are expensed as incurred.Internal-use software is amortized on a straight-line basis over its estimated useful life.The estimated useful life of the software is two to three years.Amortization expense was $18.0 million, $9.0 million,and$4.4 million for the years ended December 31,2013,2012,and 2011,respectively.Future amortization expense for all software development costs capitalized as of December 31,2013 is estimated to be$18.8 million, $9.2 million and$0.6 million for the years ending December 31,2014,2015,and 2016,respectively.In addition to the future amortization expenses,the Company has a $1.4 million balance in a capitalization in progress account related to software development costs. Goodwill—Goodwill is recorded as the difference,if any,between the aggregate consideration paid for an acquisition and the fair value of the identifiable net tangible and intangible assets acquired.Goodwill is not amortized but is evaluated for impairment annually or more frequently if indicators of impairment are present or changes in circumstances suggest that impairment may exist.The Company evaluates the carrying value of its goodwill annually on November 30.The first step of the goodwill impairment test compares the fair value of the reporting unit with its carrying amount,including goodwill.If the fair value of the Company's reporting unit exceeds its carrying amount,the goodwill of the reporting unit is considered not impaired.If the carrying amount of the Company's reporting unit exceeds its fair value,the second step of the goodwill impairment test is performed to measure the amount of impairment loss,if any.The second step of the goodwill impairment test,used to measure the amount of impairment loss,compares the implied fair value of the affected reporting unit's goodwill with the carrying value of that goodwill. No impairment losses have been recognized in the years ended December 31,2013,2012,and 2011. Purchased Intangible Assets—Purchased intangible assets consist of technology,a physician network,content,a trade name,customer backlog,non- compete agreements and customer relationships acquired in connection with business acquisitions and are amortized over their estimated useful lives based on the pattern of economic benefit expected from each asset.The Company concluded for certain purchased intangible assets that the pattern of economic benefit approximated straight-line method therefore the use of the straight-line method was appropriate as the majority of the cash flows will be recognized ratably over the estimated useful lives and there is no degradation of the cash flows over time. Accrued expenses and accrued compensation—Accrued expenses consist of the following: As of December 31, 2013 2012 Accrued bonus $ 25,013 $ 17,192 Accrued vacation 5,107 4,109 Accrued payroll 8,611 9,980 Accrued commissions 5,713 5,112 Accrued compensation expenses $ 44,444 $ 36,393 Accrued expenses $ 23,692 $ 15,214 Accrued property and equipment additions 605 4,021 Current portion of accrued contingent consideration — 448 Accrued expenses $ 24,297 $ 19,683 Deferred Rent—Deferred rent consists of rent escalation payment terms,tenant improvement allowances and other incentives received from landlords related to the Company's operating leases for its facilities.Rent escalation represents the difference between actual operating lease payments due and straight- line rent expense,which is recorded by the Company over the term of the lease,including any construction period.The excess is recorded as a deferred credit in the early periods of the lease,when cash payments are generally lower than straight-line rent expense,and is reduced in the later periods of the lease when payments begin to exceed the straight-line expense.Tenant allowances from landlords for tenant improvements are generally comprised of cash received from the landlord as part of the negotiated terms of the lease or reimbursements of moving costs.These cash payments are recorded as deferred rent from landlords and are amortized as a reduction of periodic rent expense,over the term of the applicable lease. Deferred Revenue—Deferred revenue primarily consists of billings or payments received in advance of the revenue recognition criteria being met. Deferred revenue includes certain deferred revenue associated with multiple element F-12 Table of Contents athenahealth,Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands,except per-share amounts) arrangements associated with sponsored clinical information and decision support services which is recognized based upon contractual deliverables,and implementation services fees which are recognized as revenue ratably over the longer of the life of the agreement or the estimated expected customer life,which is currently estimated to be twelve years.Deferred revenue that will be recognized during the succeeding 12-month period is recorded as current deferred revenue and the remaining portion is recorded as noncurrent. Business Combinations—The Company applies business combination accounting when they have acquired control over one or more businesses. Business Combinations are accounted for at fair value.The associated acquisition costs are generally expensed as incurred and recorded in general and administrative expenses;non-controlling interests,if any,are reflected at fair value at the acquisition date;in-process research and development("IPR&D"),if any,is recorded at fair value as an intangible asset at the acquisition date;restructuring costs associated with a business combination,if any,are generally expensed rather than capitalized;contingent consideration is measured at fair value at the acquisition date,with changes in the fair value after the acquisition date affecting earnings;changes in deferred tax asset valuation allowances and income tax uncertainties after the measurement period will affect income tax expense;and goodwill is determined as the excess of the fair value of the consideration conveyed in the acquisition over the fair value of the net assets acquired. The accounting for business combinations requires estimates and judgments as to expectations for future cash flows of the acquired business,and the allocation of those cash flows to identifiable intangible assets,in determining the estimated fair value for assets and liabilities acquired.The fair values assigned to tangible and intangible assets acquired and liabilities assumed,including contingent consideration,are based on management's estimates and assumptions,as well as other information compiled by management,including valuations that utilize customary valuation procedures and techniques.If the actual results differ from the estimates and judgments used in these estimates,the amounts recorded in the financial statements could result in a possible impairment of the intangible assets and goodwill,or require acceleration of the amortization expense of finite-lived intangible assets.The results of the newly acquired businesses'operations are included in the Consolidated Statements of Income of the combined entity beginning on the date of acquisition.We have applied this acquisition method to the transactions described in Note 2. Related Party Transaction—During the year ended December 31,2013,we made a long-term investment in a vendor.The total expense for the year ended December 31,2013 was$1.5 million and the total amount payable at December 31,2013 was$0.4 million. Concentrations of Credit Risk—Financial instruments that potentially subject the Company to concentrations of credit risk are cash equivalents, investments,derivatives,and accounts receivable.The Company attempts to limit its credit risk associated with cash equivalents and investments by investing in highly-rated corporate and financial institutions,and engaging with highly-rated financial institutions as counterparties to its derivative transactions.With respect to customer accounts receivable,the Company manages its credit risk by performing ongoing credit evaluations of its customers. No customers accounted for more than 10%of revenues for the years ended December 31,2013,December 31,2012 and December 31,2011.No customer accounted for more than 10%of accounts receivable as of December 31,2013.One customer accounted for 11%of accounts receivable as of the year ended December 31,2012 due to the timing of receipt of payments. Income Taxes—Deferred tax assets and liabilities relate to temporary differences between the financial reporting and income tax bases of assets and liabilities and are measured using enacted tax rates and laws expected to be in effect at the time of their reversal.A valuation allowance is established to reduce net deferred tax assets if,based on the available positive and negative evidence,it is more likely than not that some or all of the deferred tax assets will not be realized.In making such determination,the Company considers all available positive and negative evidence,including future reversals of existing taxable temporary differences,projected future taxable income,tax planning strategies,and recent financial results. The Company recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes,based on the technical merits.Our income tax positions must meet a more-likely-than-not recognition threshold at the balance sheet date to be recognized in the related period.The Company's policy is to record interest and penalties related to unrecognized tax benefits in income tax expense. From time to time,the Company receives incentives from various government agencies and programs.The Company accounts for the portion of the credits that are expected to be used to reduce non-income taxes as a grant.Credits which are expected to be used to reduce non-income taxes are recognized when the requirements to earn the credits have been met. Sales and Use Taxes—The Company's services are subject to sales and use taxes in certain jurisdictions.The Company's contractual agreements with its customers provide that payment of any sales or use tax assessments are the responsibility of the customer.In certain jurisdictions sales taxes are collected from the customer and remitted to the respective agencies.These taxes are recorded on a net basis and excluded from revenue and expense in our financial statements as presented. F-13 Table of Contents athenahealth,Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands,except per-share amounts) Segment Reporting—Operating segments are identified as components of an enterprise about which separate discrete financial information is evaluated by the chief operating decision-maker("CODM"),or decision-making group,in making decisions regarding resource allocation and assessing performance. The Company,which uses consolidated financial information in determining how to allocate resources and assess performance,has determined that it operates in one segment and the CODM uses non-GAAP operating income(defined as Operating Income as shown in the Consolidated Statements of Income less total stock-based compensation,amortization expense related to purchased intangible assets,integration costs,transaction costs,and gain on early termination of lease for the period)as the measure of the Company's profit on a regular basis.During the year ended December 31,2013,the Company acquired and integrated two significant businesses and re-evaluated its operating segments.As of December 31,2013,the Company's CODM determined that the newly- acquired businesses are so closely integrated,that he will continue to review and assess the business as one operating segment. Stock-Based Compensation—The Company accounts for share-based awards,including shares issued under employee stock purchase plans,stock options,and share-based awards with compensation cost measured using the fair value of the awards issued.The Company uses the Black-Scholes option pricing model to value share-based awards and determine the related compensation expense.The assumptions used in calculating the fair value of share-based awards represent management's best estimates.The Company generally issues previously unissued shares for the exercise of stock options;however,the Company may reissue previously acquired treasury shares to satisfy these issuances in the future. Certain employees have received grants for which the ultimate number of shares that will be subject to vesting is dependent upon the achievement of certain financial targets for the year.Such determination is not made until the grant's vesting determination date,which is the date the Company's fiscal year financial statements are available.The grant is initially recorded at the maximum attainable number of shares that is most likely to be subject to vesting based on available financial forecasts as of the date of grant.This amount is adjusted on a quarterly basis as new financial forecasts become available.Stock -based compensation expense for these grants is recorded over the requisite service period,generally four years.Such options generally vest ratably over four years from the vesting determination date. Foreign Currency Translation—The financial position and results of operations of the Company's foreign subsidiary are measured using local currency as the functional currency.Assets and liabilities are translated at the rate of exchange in effect at the end of each reporting period.Revenues and expenses are translated at the average exchange rate for the period.Foreign currency translation gains and losses are recorded within other comprehensive(loss) income. 2.ACQUISITIONS Watertown,MA Corporate Headquarters-Arsenal on the Charles On May 10,2013,athenahealth,through its wholly-owned subsidiary Athena Arsenal,LLC,completed the acquisition of the real estate commonly known as the Arsenal on the Charles,located in Watertown,Massachusetts.The Arsenal on the Charles is an expansive 2 9-acre,multi-building,commercial property where the Company was leasing space for its headquarters and related operating activities prior to the transaction.The purpose of this acquisition is to allow for future expansion of the corporate headquarters to accommodate anticipated headcount growth.The purchase price was $168.5 million,subject to working capital adjustments.The fair value of the consideration paid was $167.3 million,all of which was paid in cash. The following table summarizes the estimated fair values of assets acquired and liabilities assumed as of the date of acquisition: Prepaid expenses and other current assets $ 685 Property,equipment and buildings 144,071 Purchased intangible assets 25,545 Accrued expenses (271) Deferred revenue (789) Other long-term liabilities (1,916) Total identifiable net assets $ 167,325 The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed are based on management's estimates and assumptions and are based on the information that was available as of the date of the acquisition.The Company believes that the information provides a reasonable basis for estimating the fair values of assets acquired and F-14 Table of Contents athenahealth,Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands,except per-share amounts) liabilities assumed,but certain items such as the working capital adjustments to the purchase price may be subject to change as additional information is received about facts and circumstances that existed at the date of acquisition.Thus,the provisional measurements of fair value set forth above are subject to change.We expect to finalize the valuation as soon as practicable,but not later than one year from the acquisition date. The following table sets forth the fair value of the preliminary components of the identifiable intangible assets acquired by asset class: Above market leases $ 3,298 In-place leases 22,247 Total intangible assets subject to amortization $ 25,545 The value of any in-place lease is estimated to be equal to the property owners'avoidance of costs necessary to re-lease the property for a lease term equal to the remaining primary in-place lease term and the value of investment grade tenancy.The cost avoidance to the property owners of vacancy/leasing costs necessary to lease the property for a lease term equal to the remaining in-place lease term is derived first by determining the in-place lease term on the subject lease.Then,based on the Company's review of the market,the cost to be borne by a property owner to replicate a market lease to the remaining in-place term was estimated.These costs consist of:(i)rent lost during downtime(e.g.,assumed periods of vacancy),(ii)estimated expenses that would be incurred by the property owner during periods of vacancy,(iii)rent concessions(e.g.,free rent),(iv)leasing commissions,and(v)tenant improvement allowances.The Company determine these values using its own estimates along with third-party appraisals.We amortize the capitalized value of in-place lease intangible assets to expense over the remaining initial term of each lease.We amortize the capitalized value of above market leases to expense over the initial and expected renewal terms of the leases.No amortization period for intangible assets will exceed the remaining depreciable life of the building. The amounts of third-party tenant revenue(included in the line item"Implementation and other")and net loss from the Arsenal on the Charles included in our Consolidated Statements of Income from the acquisition date of May 10,2013,through the period ended December 31,2013,are$9.7 million and$4.8 million,respectively.Direct operating expense from the acquisition date of May 10,2013,through the period ended December 31,2013,includes$9.1 million of costs associated with third-party tenant revenue for the Arsenal on the Charles. We incurred transaction costs in connection with the acquisition of$2.4 million during the year ended December 31,2013,respectively,and$3.1 million in total.These costs are included in general and administrative expenses. Epocrates,Inc. On March 12,2013,we acquired Epocrates,a leading provider of essential clinical content,practice tools,and health industry engagement via mobile devices at the point of care.We acquired Epocrates for the assembled workforce,expected synergies,and accelerated awareness of athenahealth's services across the physician market and to deliver high-value information to the clinical community.The acquisition date fair value of the consideration transferred for Epocrates,less cash and short-term investments acquired,was approximately $237.6 million,which consisted of the following: Cash payments $ 294,632 Fair value of vested stock options and restricted stock units assumed 13,028 Fair value of total consideration 307,660 Less cash acquired (51,796) Less short-term investments acquired (18,250) Total $ 237,614 The value of the share consideration for Epocrates'common stock was based on the average closing sales prices per share of athenahealth common stock for the ten trading days ending on the second trading day prior to the closing of the acquisition.The fair value of the stock options and restricted stock units assumed by us was determined using the Black-Scholes option pricing model.The share conversion ratio of 0.1239 was applied to convert Epocrates stock options and restricted stock units to athenahealth stock options and restricted stock units. F-15 Table of Contents athenahealth,Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands,except per-share amounts) We assumed stock options and restricted stock units with a fair value of$22.6 million.Of the total consideration, $13.0 million was allocated to the purchase consideration and$9.6 million was allocated to future services and will be expensed on a straight-line basis over the remaining service periods.In the year ended December 31,2013,stock-based compensation expense recognized for stock options and restricted stock units assumed was $7.4 million. The following table summarizes the preliminary and final fair values of assets acquired and liabilities assumed as of the date of acquisition,March 12, 2013,and upon completion of the valuation at December 31,2013: March 12,2013 Adjustments December 31,2013 Accounts receivable $ 23,144 $ (1,116) $ 22,028 Other current and long-term assets 3,833 650 4,483 Property,equipment and capitalized software costs 4,168 20 4,188 Purchased intangible assets 139,900 (500) 139,400 Current liabilities (11,054) (282) (11,336) Deferred tax liabilities,net (39,811) (1,340) (41,151) Deferred revenue (29,400) 648 (28,752) Other long-term liabilities (1,259) 53 (1,206) Total identifiable net assets 89,521 (1,867) 87,654 Goodwill 148,093 1,867 149,960 $ 237,614 $ — $ 237,614 The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill.The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed were based on management's estimates and assumptions based on the information that was available as of the date of the acquisition.The fair values of certain items,such as accounts receivable,purchased intangible assets,current and non-current income taxes payable,deferred taxes,deferred revenue and uncertain tax benefits,were subject to change as additional information was received about facts and circumstances that existed at the date of acquisition and as certain tax returns were finalized.The fair values were finalized during the quarter ended December 31,2013. The following table sets forth the components of the identifiable intangible assets acquired by asset class and their estimated useful lives as of the date of acquisition: Fair Value Useful Life Physician network 104,000 14 years Drug information content 10,000 5 years Trade name 11,500 10 years Customer backlog 2,900 1.5 years Developed technology 6,500 3 years Epocrates non-compete agreement 4,500 1.5 years Total intangible assets subject to amortization $ 139,400 The physician network represents the fair values of the underlying relationships and agreements with Epocrates customers and the fair values of the savings associated with future marketing spend for the athenahealth services to the acquired physician network.Drug information content represents the fair value of the cost to replace the drug information and interaction content used by the physician network.The trade name represents the fair value of the brand and name recognition associated with the marketing of Epocrates'service offerings.Customer backlog represents the estimated fair value of existing contractual backlog orders as of the acquisition date.Epocrates non-compete agreement represents the estimated fair value of the contract between athenahealth and a former member of Epocrates management.Developed technology represents the estimated fair value of Epocrates'mobile device platform.All of the purchased intangible assets related to the Epocrates transaction have finite lives.For those purchased intangible assets where an income approach was used, we considered the projected undiscounted cash flows as the best indication of the pattern of economic benefit expected from each asset. F-16 Table of Contents athenahealth,Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands,except per-share amounts) The goodwill balance is primarily attributed to the assembled workforce and expanded market opportunities when integrating Epocrates'mobile device platform with the athenahealth service offerings.The goodwill balance is not deductible for U.S.income tax purposes. The amounts of revenue and net loss of Epocrates included in our Consolidated Statements of Income from the acquisition date of March 12,2013, through the period ended December 31,2013,are$52.4 million and$14.4 million,respectively.The net loss includes$7.9 million in stock-based compensation expense primarily related to the acceleration of certain individuals'stock awards upon termination. We incurred transaction costs in connection with the acquisition of$2.7 million during the year ended December 31,2013,and$3.2 million in total. These costs are included in general and administrative expenses. As part of the integration of Epocrates,we communicated to certain employees severance and retention bonuses which total $4.2 million and were expensed through the end of 2013.If the employee did not fulfill the required employment period for the retention bonus,the amount was not paid and the expense was reversed.The following table summarizes these amounts on the Consolidated Statements of Income for the year ended December 31,2013: Rollforward of integration costs Beginning balance,January 1,2013 $ — Addition to provision 3,909 Cash payments (3,574) Ending balance,December 31,2013 $ 335 Pro Forma Presentation The following pro forma financial information summarizes the combined results of operations for athenahealth as though the acquisitions of Epocrates and the Arsenal on the Charles occurred on January 1,2012.The unaudited pro forma financial information is as follows: Year Ended December 31, 2013 2012 Revenue $ 614,775 $ 538,030 Net income(loss) $ (1,808) $ (4,700) Net income(loss)per share—Basic $ (0.05) $ (0.13) Net income(loss)per share—Diluted $ (0.05) $ (0.13) The pro forma financial information for all periods presented has been calculated after adjusting the results of Epocrates and the Arsenal on the Charles to reflect the business combination accounting effects resulting from these acquisitions including the amortization expenses from acquired intangible assets,the deprecation expenses from acquired tangible assets,the stock-based compensation expense for unvested stock options and restricted stock units assumed and the related tax effects as though the acquisition occurred as of January 1,2012.The pro forma financial information is for infonnational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of our 2012 fiscal year. Healthcare Data Services On October 10,2012,the Company acquired Healthcare Data Services LLC("HDS")for a purchase price of $6.0 million,which was adjusted for certain working capital adjustments to arrive at a total cash consideration of $5.8 million net of cash acquired.The valuation of the intangible assets was finalized during the quarter ended December 31,2012.The identifiable assets acquired and liabilities assumed included $0.3 million in accounts receivable, prepaid and other current assets, $4.8 million of intangible assets and$0.1 million in accrued expenses and deferred revenue.The goodwill recorded as a result of this transaction was $0.8 million and is deductible for tax purposes.The Company incurred legal and professional fees in connection with the acquisition of$0.2 million,which are included in general and administrative expenses. F-17 Table of Contents athenahealth,Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands,except per-share amounts) The fair values of the purchased intangible assets acquired as part of the purchase of Healthcare Data Services are allocated as development technology of $3.2 million,customer relationships of$0.4 million and non-compete agreement of$1.2 million.The intangible assets are being amortized between 3 and 5 years,with customer lists being amortized over 5 years.The goodwill resulting from the acquisition arises largely from the synergies expected from combining the operations of the acquisition with our existing service operations,as well as from the benefits derived from the assembled workforce of the acquisition.The goodwill recognized is deductible for tax purposes. 3.NET INCOME PER SHARE Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period.Diluted net income per share is computed by dividing net income by the weighted average number of common shares outstanding and potentially dilutive securities outstanding during the period under the treasury stock method.Potentially dilutive securities include stock options,restricted stock units,and shares to be purchased under the employee stock purchase plan.Under the treasury stock method,dilutive securities are assumed to be exercised at the beginning of the periods and as if funds obtained thereby were used to purchase common stock at the average market price during the period.Securities are excluded from the computations of diluted net income per share if their effect would be anti-dilutive to earnings per share. The following table reconciles the weighted average shares outstanding for basic and diluted net income per share for the periods indicated: Years Ended December 31, 2013 2012 2011 Net income $ 2,594 $ 18,732 $ 19,046 Weighted average shares used in computing basic net income per share 36,856 35,956 35,046 Net income per share—basic $ 0.07 $ 0.52 $ 0.54 Net income $ 2,594 $ 18,732 $ 19,046 Weighted average shares used in computing basic net income per share 36,856 35,956 35,046 Effect of dilutive securities 1,401 1,177 1,004 Weighted average shares used in computing diluted net income per share 38,257 37,133 36,050 Net income per share—diluted $ 0.07 $ 0.50 $ 0.53 The computation of diluted net income per share does not include 0.4 million, 0.4 million,and 0.8 million of stock options and restricted stock units for the years ended December 31,2013,2012,and 2011,respectively,because their inclusion would have an anti-dilutive effect on net income per share. 4.FAIR VALUE OF FINANCIAL INSTRUMENTS As of December 31,2013 and 2012,the carrying amounts of cash and cash equivalents,restricted cash,receivables,accounts payable and accrued expenses approximated their estimated fair values because of their short term nature of these financial instruments.Included in cash and cash equivalents as of December 31,2013 and 2012,are money market fund investments of$0.0 million and$59.4 million,respectively,which are reported at fair value.As of December 31,2013,the Company had$188.8 million outstanding on its term loan facility and $35.0 million outstanding on its revolving credit facility(see Note 9—Debt),which approximate their fair values due to their variable rate nature at current market rates.As of December 31,2012,the Company had no outstanding debt. F-18 Table of Contents athenahealth,Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands,except per-share amounts) The following table presents information about the Company's financial assets and liabilities that are measured at fair value on a recurring basis as of December 31,2013 and December 31,2012,and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.In general,fair values determined by Level 1 inputs utilize quoted prices(unadjusted)in active markets for identical assets or liabilities and fair values determined by Level 2 inputs utilize quoted prices(unadjusted)in inactive markets for identical assets or liabilities obtained from readily available pricing sources for similar instruments.The fair values determined by Level inputs are unobservable values which are supported by little or no market activity. Fair Value Measurements At December 31,2013,Using Level Level Level Total Cash and cash equivalents: Money market $ 26 $ $ $ 26 Total assets $ 26 $ — $ — $ 26 Interest rate swap liability $ — $ (354) $ — $ (354) Total liabilities $ — $ (354) $ — $ (354) Fair Value Measurements as of December 31,2012,Using Level Level Level Total Cash and cash equivalents: Money market $ 89,480 $ — $ — $ 89,480 Available-for-sale investments: — Commercial paper — 11,748 — 11,748 Corporate bonds — 20,334 — 20,334 Certificate of deposit — 6,010 — 6,010 Total assets $ 89,480 $ 38,092 $ — $ 127,572 Accrued contingent consideration $ — $ $ (448) $ (448) Total liabilities $ — $ — $ (448) $ (448) Money markets,certificates of deposit,U.S.government-backed securities,corporate bonds and commercial paper are valued using a market approach based upon the quoted market prices of identical instruments when available or other observable inputs such as trading prices of identical instruments in inactive markets or similar securities.It is the Company's policy to recognize transfers between levels of the fair value hierarchy,if any,at the end of the reporting period;however,there have been no such transfers during any periods presented. The estimated fair value of our interest rate swap agreement with a certain financial institution at December 31,2013,was$0.4 million,based on inputs other than quoted prices that are observable for the interest rate swap(Level 2).Inputs include preset value of fixed and projected floating rate cash flows over term of the swap contract.There was no interest rate swap agreement at December 31,2012.Refer to Note 9—Debt for further information. Contingent consideration is recorded at fair value as an element of consideration paid with subsequent adjustments recognized in the Consolidated Statements of Income.At the acquisition date and reporting date,the fair value of the accrued contingent consideration was determined using a probability- weighted income approach based on upside,downside and base case scenarios.This approach is based on significant inputs that are not observable in the market,which are referred to as Level 3 inputs.As of December 31,2012,the Company had accrued a liability $0.4 million for the estimated fair value of contingent considerations estimated to be payable upon the acquired companies reaching specific performance metrics over a specified period of operations or time after acquisition.There was no contingent consideration as of December 31,2013. Anodyne The first potential contingent consideration related to our acquisition of Anodyne Health Partners,Inc.("Anodyne")in 2009 ranged from zero to$4.8 million and was payable in one installment based upon operational performance for the year ended December 31,2010.Based on the actual operational performance for the year ended December 31,2010,the Company paid $2.4 million relating to the first potential contingent consideration in March of 2011. F-19 Table of Contents athenahealth,Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands,except per-share amounts) The second potential contingent consideration related to our acquisition of Anodyne in 2009 ranged from zero to$2.9 million and was payable in quarterly installments based upon the cross selling of the Company's services for the years ended December 31,2010 and 2011,and the six-month period ended June 30,2012.Any amounts not earned in the first potential contingent consideration could be earned under the second potential contingent consideration in excess of the initial$2.9 million bringing the total second potential contingent consideration to $5.3 million.On December 31,2011,the Company estimated the fair value of the second contingent consideration at $1.4 million based on key assumptions including a probability adjusted level of 50%for the base case scenario and 25%for the upside and downside scenarios.The significant judgment related to the estimated earn-out payments by scenario was primarily based on the Company's i)past experience of our cross selling,ii)past experience of the timeline for converting pipeline opportunities into customers and iii)the remaining time period of this contingent consideration.At December 31,2011,a large cross sell customer opportunity was included in the upside scenario which had a 25%probability.On March 31,2012,the Company estimated the fair value of the second contingent consideration at $3.4 million based on key assumptions including a 20%for the base case scenario, 70%for the upside scenario and 10%for the downside scenario.At March 31,2012,this large cross sell opportunity was in final contract negotiations with the Company and therefore a higher probability was assigned to the upside scenario.The time period through which the contingent consideration could be earned elapsed on June 30,2012.The Company accrued $1.8 million as of June 30,2012,for the final payment based on the final cross selling results which was paid during the three months ended September 30,2012.The change in fair value of $1.3 million for the year ended December 31,2012,was an increase in the general and administrative line item in the Consolidated Statements of Income.The Company paid$2.6 million during the year ended December 31,2012,and$3.9 million over the entire term of the second contingent consideration. Proxsys The first potential contingent consideration related to our acquisition of Proxsys LLC("Proxsys")in 2011 ranges from zero to$3.0 million and is payable in one installment in the first quarter of 2013 based upon revenue and new sales performance for the fiscal year ended December 31,2012.In order to qualify for the earnout payment,the acquired subsidiary must have achieved a minimum revenue threshold which was derived from both recurring revenue and revenue generated from new customers brought onto the service after the acquisition.Once that minimum revenue threshold is met,the amount of the payment is then determined by new sales of the Company's athenaCoordinator service offering since date of acquisition.At acquisition date and on December 31,2011, the Company estimated the fair value of the first potential contingent consideration at $2.4 million,the key assumptions relating to this potential contingent consideration included the athenaCoordinator revenue budget for the 2012 fiscal year,which included recurring revenue and estimates related to new revenue generated from new customers based upon the existing sales pipeline and historical implementation timeline and a probability adjusted level of 60%for the base case and 25%and 15%for the upside and downside scenarios,respectively.The athenaCoordinator revenue budget for the 2012 fiscal year exceeded the minimum revenue threshold.The downside scenarios included a worse case scenario where the acquired subsidiary did not achieve the minimum revenue target.Certain contracts that were in an advanced negotiation stage at December 31,2011,and estimated to close in the first quarter of 2012,did not close during the three months ended March 31,2012;therefore as of March 31,2012,the Company determined that it is more likely than not that the minimum revenue threshold for athenaCoordinator will not be achieved by a margin of 5-10%.On March 31,2012,the Company determined that based on the reforecasted amounts and the pass fail structure of this contingent payment,the probability percentages have been adjusted to 90%for the worse case scenario and 10%for the upside scenario.On March 31,2012,the Company estimated the fair value of the first potential contingent consideration at $0.3 million.On June 30,2012,the Company estimated the fair value of the first potential contingent consideration to have no value.For the year ended December 31,2012,the Company did not meet the minimum revenue threshold and therefore zero consideration was earned related to the first contingent consideration.The change in fair value of$2.4 million is a decrease in the general and administrative expense line item in the Consolidated Statements of Income for the year ended December 31,2012. The second potential contingent consideration related to our acquisition of Proxsys in 2011 ranges from zero to$5.0 million and is payable in quarterly installments based upon the cross selling of the Company's athenaCollector services into Proxsys'new and acquired customer and physician sender base, from acquisition to the second year anniversary of the acquisition in the third quarter of 2013.On December 31,2011,and through June 30,2012,the key assumptions relating to this potential contingent consideration included scenarios primarily based on the Company's(i)past experience of our cross selling related to the Anodyne acquisition,(ii)past experience of the timeline for converting pipeline opportunities into customers and(iii)the remaining time period of this contingent consideration and a probability adjusted level of 65%for the base case and 25%and 10%for the upside and downside scenarios,respectively. As of September 30,2012,over one year after the acquisition,the Company determined that it now had sufficient information into the actual cross sell opportunity base to adjust the scenarios.The Company lowered its expectations of achievable cross sells within the earn out period for all scenarios and has a probability adjusted level of 60%for the base case and 20%for the upside and downside scenarios.The Company estimated the fair value of the contingent consideration at December 31,2012,to be$0.4 million,primarily related to the F-20 Table of Contents athenahealth,Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands,except per-share amounts) amount of time left to earn the additional consideration.The change in fair value of $4.0 million is a decrease in the general and administrative expense line item in the Consolidated Statements of Income for the year ended December 31,2012.Minimal cross-sells were earned and minimal payments were made as of December 31,2012.The second contingent consideration related to the Proxsys acquisition ended on August 31,2013 and a final payment of $0.5 million was made during the period ending December 31,2013.The total expense for the period ended December 31,2013 was$0.1 million. The reconciliations for the fair values of financial instruments determined by Level 3 for the periods presented,are as follows: Year Ended December 31, Year Ended December 31, 2013 2012 Balance beginning of period $ 448 $ 8,176 Payments (524) (2,610) Additions Change in fair value(included in G&A expenses) 76 (5,118) Balance end of period $ — $ 448 F-21 Table of Contents athenahealth,Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands,except per-share amounts) 5.INVESTMENTS As of December 31,2013,the Company has no available-for-sale securities.The summary of available-for-sale securities at December 31,2012,is as follows: Gross Unrealized Amortized Cost Gains Fair Value Commercial paper $ 11,740 $ 8 $ 11,748 Corporate bonds 20,331 3 20,334 Certificate of deposit 6,008 2 6,010 Total $ 38,079 $ 13 $ 38,092 6.PROPERTY AND EQUIPMENT The Company has no capital leases for the years ended December 31,2013 and December 31,2012. The fair values of the property and equipment acquired as part of the purchase of the Arsenal on the Charles are allocated to buildings,land,and land improvements in the amounts of$121.3 million, $21.0 million,and$1.8 million,respectively. Property and equipment consist of the following: Years Ended December 31, 2013 2012 Equipment $ 78,616 $ 56,078 Furniture and fixtures 8,822 5,297 Leasehold improvements 3,104 15,518 Airplane 3,156 3,156 Building 136,368 14,644 Building improvements 24,441 3,500 Land 23,059 2,035 Land improvements 2,980 915 Total property and equipment,at cost 280,546 101,143 Accumulated depreciation and amortization (72,777) (49,902) Construction in progress 5,249 2,794 Property and equipment,net $ 213,018 $ 54,035 Depreciation expense on property and equipment was $25.5 million, $16.6 million,and$12.2 million for the years ended December 31,2013,2012, and 2011,respectively. F-22 Table of Contents athenahealth,Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands,except per-share amounts) 7.GOODWILL AND PURCHASED INTANGIBLE ASSETS Goodwill The following table summarizes the activity related to the carrying value of the Company's goodwill during the years ended December 31,2013 and 2012: Gross balance as of January 1,2012 $ 47,307 Goodwill recorded in connection with the acquisition of Healthcare Data Services LLC 783 Gross balance as of December 31,2012 $ 48,090 Goodwill recorded in connection with the acquisition of Epocrates,Inc. 149,959 Gross balance as of December 31,2013 $ 198,049 Purchased Intangible Assets Intangible assets acquired as of December 31,2013 and 2012,are as follows: December 31,2013 Accumulated Weighted Average Remaining Gross Amortization Net Useful Life(years) Developed technology $ 11,721 $ (4,737) $ 6,984 2.0 Customer relationships 21,434 (7,365) 14,069 6.6 Doctor network 104,000 (682) 103,318 13.2 Drug information content 10,000 (1,608) 8,392 4.2 Trade name 11,500 (924) 10,576 9.2 Customer backlog 2,900 (1,554) 1,346 0.7 Non-compete agreement 6,178 (3,280) 2,898 1.0 Above market leases 3,123 (357) 2,766 5.9 Leases in place 21,578 (3,563) 18,015 5.3 Total $ 192,434 $ (24,070) $ 168,364 December 31,2012 Accumulated Weighted Average Remaining Gross Amortization Net Useful Life(years) Developed technology $ 6,612 $ (2,678) $ 3,934 2.5 Customer relationships 21,434 (5,175) 16,259 7.6 Non-compete agreement 1,678 (310) 1,368 2.6 Total $ 29,724 $ (8,163) $ 21,561 Amortization expense for the years ended December 31,2013,2012,and 2011,was$17.9 million, $3.4 million,and$2.2 million,respectively,and is included in direct operating expenses.Estimated amortization expense,based upon the Company's intangible assets at December 31,2013,is as follows: Year ending December 31, Amount 2014$ 27,670 2015 22,528 2016 18,560 2017 17,803 2018 15,441 Thereafter 66,362 Total $ 168,364 F-23 Table of Contents athenahealth,Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands,except per-share amounts) S.OPERATING LEASES AND OTHER COMMITMENTS The Company maintains operating leases for facilities and certain office equipment.The facility leases contain renewal options and require payments of certain utilities,taxes,and shared operating costs of each leased facility.The rental agreements expire at various dates from 2014 to 2029. The Company entered into a lease agreement with a landlord in connection with the relocation of its corporate offices in June 2005 to the Arsenal on the Charles.Under the terms of such lease agreement,the landlord provided approximately $11.5 million in allowances to the Company for the leasehold improvements for the office space,reimbursement of moving costs and all payments under the Company's lease agreement relating to its previous office space. Prior to May 2011,the incentive payments received from the new landlord were being recognized over the lease term and accounted for as a component of deferred rent on the Company's Consolidated Balance Sheets.In May 2011,the Company paid $2.1 million to settle the remaining amounts of these rental incentive loans.In May 2013,this lease was effectively terminated when the Company purchased the Arsenal on the Charles from the landlord(see Note 2). During the year ended December 31,2013,the Company recognized a$2.5 million net gain due to the early termination of our lease and the realization of the remaining balance in deferred rent at the time of acquisition.This gain was recorded in general and administrative expense during the three months ended June 30,2013. Rent expense for the Company totaled$5.5 million, $4.9 million,and$3.5 million for the years ended December 31,2013,2012,and 2011, respectively. Future minimum lease payments under non-cancelable operating leases as of December 31,2013,are as follows: Future Rent Year ending December 31, Payments 2014 $ 5,658 2015 7,645 2016 7,984 2017 8,093 2018 8,295 Thereafter 50,253 Total minimum lease payments $ 87,928 9.DEBT 2011 Line of Credit—On October 20,2011,the Company entered into a five-year,$100.0 million revolving credit agreement("Revolving Credit Agreement").The Revolving Credit Agreement contained certain covenants,including consolidated leverage and minimum fixed charge coverage ratios.The interest rates applicable to revolving loans under the Revolving Credit Agreement were at either(i)the British Bankers Association London Interbank Offered Rate("LIBOR")plus an interest margin based on our consolidated leverage ratio,or(ii)the base rate(which is the highest of(a)the bank's prime rate,(b)the Federal Funds rate plus 0.50%,and(c)one month LIBOR plus 1.00%)plus an interest margin based on our consolidated leverage ratio. There was no balance outstanding on the revolving credit facility as of December 31,2012.In connection with the planned acquisition of Epocrates,on January 3,2013,the Company borrowed $100.0 million from the revolving credit facility and,on January 9,2013,repaid the borrowed amount in full. 2013 Commitment Letter—On January 7,2013,the Company entered into a commitment letter,pursuant to which Bank of America,N.A.committed to increase its commitment to provide revolving loans under the Revolving Credit Agreement by an amount up to $55.0 million as a source of funding for the Epocrates transaction(see Note 2—Acquisitions).The Company was required to pay financing fees of $0.3 million for this commitment. On March 11,2013,the Company borrowed$155.0 million under the Revolving Credit Agreement as a source of funding for the Epocrates transaction, and repaid$50.0 million of the$155.0 million as of March 31,2013.All amounts outstanding under the Revolving Credit Agreement were repaid on May 10, 2013. F-24 Table of Contents athenahealth,Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands,except per-share amounts) 2013 Credit Agreement—On May 10,2013,the Company entered into a $325.0 million senior credit facility consisting of a$200.0 million unsecured term loan facility and a$125.0 million unsecured revolving credit facility(the"Senior Credit Facility").The Senior Credit Facility replaced the Revolving Credit Agreement.The Senior Credit Facility contains terms and conditions that are customary to facilities of this nature and certain covenants,including consolidated leverage ratio and capital expenditures limitations.The Senior Credit Facility may be used to refinance existing indebtedness,to finance the acquisition of the real estate known as the Arsenal on the Charles,and for working capital and other general corporate purposes.The Company may increase the Senior Credit Facility up to an additional $100.0 million,subject to certain terms,including obtaining lender commitments.The Senior Credit Facility expires on May 10,2018,although the Company may prepay the Senior Credit Facility in whole or in part at any time without premium or penalty,and the unutilized portion of the commitments may be irrevocably reduced or terminated by athenahealth in whole or in part without penalty or premium. On May 10,2013,the Company borrowed $200.0 million under the unsecured term loan facility and $50.0 million under the unsecured revolving credit facility of the Senior Credit Facility to refinance existing indebtedness described above,to finance the Arsenal on the Charles acquisition as described in Note 2 —Acquisitions,and for working capital and other general corporate purposes.The unsecured term loan facility was payable quarterly starting in June 30, 2013,in the amount of$3.8 million each quarter.As of December 31,2013, $188.8 million was outstanding on the unsecured term loan facility and $35.0 million was outstanding on the unsecured revolving credit facility.As of December 31,2013,there was$90.0 million available on the unsecured revolving credit facility. Any loan under the Senior Credit Facility bears interest at the same rates as in the Revolving Credit Agreement.The interest rate for the Senior Credit Facility as of December 31,2013 was 1.67%. The Company was required to pay financing fees of$1.4 million for the Senior Credit Facility,which are being amortized as interest expense in the Consolidated Statements of Income over the five-year term of the agreement. Future principal payments of the unsecured term loan facility at December 31,2013 are as follows: Amount 2014 $ 15,000 2015 15,000 2016 15,000 2017 15,000 Thereafter 128,750 Total $ 188,750 Less current portion 15,000 Long-tern portion $ 173,750 During the quarter ended September 30,2013,the Company entered into an interest rate swap agreement designed to fix the variable interest rate payable on$120.0 million of its outstanding borrowings under the Senior Credit Facility at 0.8396%exclusive of the credit spread under the Senior Credit Facility. The interest rate swap agreement was designed to manage exposure to interest rates on the Company's variable rate indebtedness.The Company recognizes all derivatives on the Consolidated Balance Sheet at fair value.The Company has designated the interest rate swap agreement as a cash flow hedge.Changes in the fair value of the interest rate swap are recognized in other comprehensive income(loss)("OCI")until the hedged items are recognized in earnings.Hedge ineffectiveness,if any,associated with the interest rate swap will be reported in interest expense.There was no ineffectiveness associated with the interest rate swap during the quarter ended December 31,2013,nor was any amount excluded from ineffectiveness testing.The Company is exposed to credit loss in the event of non-performance by the swap counter party. The fair value of the interest rate swap recognized in other long-term liabilities and in OCI was as follows: Fair Value Notional Effective Date Amount Fixed Rate Maturity December 31,2013 December 31,2012 August 31,2013 120,000 0.8396% August 31,2016 $ (354) $ — Refer to Note 4—Fair Value of Financial Instruments for further information. F-25 Table of Contents athenahealth,Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands,except per-share amounts) 10.STOCKHOLDERS'EQUITY Preferred Stock—The Company's Board of Directors has the authority,without further action by stockholders,to issue up to 5,000 shares of preferred stock in one or more series.The Company's Board of Directors may designate the rights,preferences,privileges,and restrictions of the preferred stock, including dividend rights,conversion rights,voting rights,terms of redemption,liquidation preference,and number of shares constituting any series or the designation of any series.The issuance of preferred stock could have the effect of restricting dividends on the Company's common stock,diluting the voting power of its common stock,impairing the liquidation rights of its common stock,or delaying or preventing a change in control.The ability to issue preferred stock could delay or impede a change in control.As of December 31,2013 and 2012, no shares of preferred stock were outstanding. Common Stock—Common stockholders are entitled to one vote per share and dividends when declared by the Board of Directors,subject to any preferential rights of preferred stockholders. Warrants—In connection with equipment financing with a finance company and a bank in May 2001,the Company issued warrants to purchase shares of the Company's stock at an exercise price of$3.08 per share.As of December 31,2011, 32 warrants remained outstanding.The 32 warrants were exercised during the year ended December 31,2012.As of December 31,2013 and 2012,no warrants remain outstanding. 11.STOCK-BASED COMPENSATION Total stock-based compensation expense for the years ended December 31,2013,2012,and 2011,is as follows: Year Ended December 31, 2013 2012 2011 Stock-based compensation charged to: Direct operating $ 7,778 $ 5,619 $ 3,173 Selling and marketing 12,057 7,717 5,645 Research and development 4,238 3,213 2,311 General and administrative 18,575 10,687 7,772 Total $ 42,648 $ 27,236 $ 18,901 Amortization of capitalized stock-based compensation related to software development 1,027 257 — Total $ 43,675 $ 27,493 $ 18,901 In addition,for the years ended December 31,2013 and 2012, $2.2 million and$0.8 million of stock-based compensation was capitalized in the line item Software Development Costs in the Consolidated Balance Sheets for which $1.0 million and$0.3 million was included in the line item Depreciation and Amortization Expense in the Consolidated Statements of Income.The amount of stock-based compensation related to capitalized software development costs in prior periods was not significant. In 2007,the board of directors and the Company's stockholders approved the Company's 2007 Stock Option and Incentive Plan.The 2007 Stock Option and Incentive Plan was amended and restated in 2011 to:(i)remove an evergreen provision;(ii)increase the number of shares reserved for issuance by 1.3 million shares;(iii)set a multiplier for full value awards of 1.3 shares of stock for each share of stock subject to that award;(iv)set minimum restriction periods for stock awards;(v)set maximum awards payable for performance-based awards;(vi)add performance criteria;and(vii)make other administrative changes;and in 2012 to:(i)increase the number of shares reserved for issuance by 1.85 million shares;(ii)set a multiplier for full value awards of 1.66 shares of stock for each share of stock subject to that award;(iii)set a new minimum period for a performance cycle for cash-based awards;(iv)add performance criteria;(v)revise the share counting provision so that shares underlying awards other than stock options and stock appreciation rights may be withheld to satisfy tax withholding obligations;and(vi)extend its term through April 23,2022(as amended and restated,the"2007 Plan");and in 2013 to:(i) increase the number of shares reserved for issuance by 1.66 million shares.As part of the Epocrates acquisition,we assumed 0.4 million shares available for issuance under the Epocrates stock plan.As of December 31,2013 and 2012,there were approximately 4,609 and 3,303 shares,respectively,available for grant under the Company's stock award plans. F-26 Table of Contents athenahealth,Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands,except per-share amounts) Stock Options Options granted under the 2007 Plan may be incentive stock options or non-qualified stock options under the applicable provisions of the Internal Revenue Code.Incentive stock options are granted with exercise prices at or above the fair value of the Company's common stock at the grant date as determined by the Board of Directors.Incentive stock options granted to employees who own more than 10%of the voting power of all classes of stock are granted with exercise prices at 110%of the fair value of the Company's common stock at the date of the grant.Non-qualified stock options may be granted with exercise prices up to the fair value of the Company's common stock on the date of the grant,as determined by the Board of Directors.All options granted vest over a range of one to four years and have contractual terms of between five and ten years.Options granted typically vest 25%per year over a total of four years at each anniversary,with the exception of options granted to members of the board of directors,which vest on a quarterly basis. The following table presents the stock option activity for the year ended December 31,2013: Weighted- Weighted- Average Average Remaining Aggregate Exercise Contractual Term Intrinsic Shares Price (in years) Value Outstanding—January 1,2013 2,503 $ 37.93 Granted 241 96.09 Options assumed 251 83.91 Exercised (749) 36.86 Forfeited (79) 75.22 Outstanding—as of December 31,2013 2,167 $ 48.69 6.3 $ 186,093 Exercisable—as of December 31,2013 1,354 $ 37.11 5.3 $ 131,950 Vested and expected to vest as of December 31,2013 2,040 $ 47.03 6.2 $ 178,634 Weighted-average fair value of options granted for the year ended December 31,2013 $ 38.09 The Company assumed stock options related to the acquisition of Epocrates based on a conversion ratio of 0.1239.The Company recorded compensation expense in relation to stock options of$14.0 million, $9.8 million,and$10.6 million,for the years ended December 31,2013,2012,and 2011,respectively. The following table illustrates the weighted average assumptions used to compute stock-based compensation expense for awards granted: Year Ended December 31, 2013 2012 2011 Risk-free interest rate .35%-.75% 1% 1%-2.2% Expected dividend yield —% —% —% Expected option term(years) 3.0-5.0 3.0-5.0 5.0 Expected stock volatility 41%-45% 43%-52% 51%-54% The risk-free interest rate estimate was based on the U.S.Treasury rates for U.S.Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued.The expected dividend yield was based on the Company's expectation of not paying dividends in the foreseeable future. Since the Company completed its initial public offering in September 2007,it did not have sufficient history as a publicly-traded company to evaluate its volatility factor for grants prior to 2011.As such,the Company analyzed the volatilities of a group of peer companies,including company-specific historical information to date,to support the assumptions used in its calculations.The Company averaged the volatilities of the peer companies with in-the-money options,sufficient trading history and similar vesting terms to generate the assumptions.In 2012,the Company began using only company-specific historical and implied volatility information to generate the volatility assumptions. F-27 Table of Contents athenahealth,Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands,except per-share amounts) As of December 31,2013 and 2012,there was$17.4 million and$19.2 million,respectively,of unrecognized stock-based compensation expense related to unvested stock option share-based compensation arrangements granted under the Company's stock award plans.This expense is expected to be recognized over a weighted-average period of approximately 1.4 years.The weighted average fair value of stock options granted during fiscal 2013,2012,and 2011,was $38.09, $31.71,and$21.01,respectively.The intrinsic value of options exercised during fiscal 2013,2012,and 2011,was$53.2 million, $36.1 million, and$26.1 million,respectively.The intrinsic value is calculated as the difference between the market value on the date of purchase and the exercise price of the options. Restricted Stock Units The 2007 Plan also allows for granting of restricted stock unit awards under the terms of the plan.The majority of the restricted units vest in four equal, annual installments on the anniversaries of the vesting start date or in four equal,quarterly installments on anniversaries of the vesting date.The Company estimated the fair value of the restricted stock units using the market price of its common stock on the date of the grant.The fair value of restricted stock units is amortized on a straight-line basis over the vesting period.The following table presents the restricted stock unit activity for the year ended December 31, 2013. Weighted- Average Grant Date Shares Fair Value Outstanding—January 1,2013 1,084 $ 58.07 Granted 504 98.34 RSUs assumed 29 71.22 Vested (365) 56.28 Forfeited (59) 70.78 Outstanding—as of December 31,2013 1,193 $ 75.20 The Company assumed restricted stock units related to the acquisition of Epocrates based on a conversion ratio of 0.1239.As of December 31,2013, $68.7 million of total unrecognized compensation costs related to restricted stock units is expected to be recognized over a weighted average period of 2.0 years. Stock-based compensation expense of$27.4 million, $17.3 million,and$7.3 million was recorded for restricted stock units during the years ended December 31,2013,2012,and 2011,respectively.The weighted average fair value of restricted stock units granted during the years ended December 31, 2013, 2012,and 2011,was$98.34, $71.15,and$47.02,respectively.The intrinsic value of vested restricted stock units during the years ended December 31,2013,2012,and 2011,was$35.2 million, $15.1 million,and$3.8 million,respectively. Employee Stock Purchase Plan The Company's 2007 Employee Stock Purchase Plan("2007 ESPP")allows employees of the Company and its subsidiaries as designated by the Company's board of directors to purchase shares of the Company's common stock.The purchase price is equal to 85%of the lower of the closing price of the Company's common stock on(1)the first day of the purchase period or(2)the last day of the purchase period.The expense for the years ended December 31, 2013,2012,and 2011,was$1.2 million, $1.0 million,and$1.0 million,respectively. F-28 Table of Contents athenahealth,Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands,except per-share amounts) 12.INCOME TAXES The components of the Company's income tax(benefit)provision for the years ended December 31,2013,2012,and 2011 are as follows: 2013 2012 2011 Current Provision: Federal $ 4,225 $ 13,089 $ 12,264 State 1,495 3,575 4,397 Foreign 961 372 135 6,681 17,036 16,796 Deferred(Benefit)Provision: Federal (5,291) 26 (1,804) Foreign — (114) — State (1,753) (802) (1,158) (7,044) (890) (2,962) Total income tax(benefit)provision $ (363) $ 16,146 $ 13,834 The components of the Company's deferred income taxes as of December 31,2013 and 2012 are as follows: 2013 2012 Deferred tax assets: Federal net operating loss carryforward $ 187 $ State net operating loss carryforward 1,476 25 Research and development tax credits 3,244 — Allowances for accounts receivable 2,773 1,005 Deferred rent obligation 328 1,593 Stock compensation 18,270 13,800 Other accrued liabilities 2,171 1,743 Deferred revenue 17,754 16,594 Other 3,101 2,251 Total gross deferred tax assets 49,304 37,011 Valuation allowance (2,627) (25) Total deferred tax assets 46,677 36,986 Deferred tax liabilities: Intangible assets (49,555) (6,605) Capitalized software development (8,641) (5,420) Property and equipment (3,784) (6,290) Investments (5) Total deferred tax liabilities (61,980) (18,320) Net deferred tax(liabilities)assets $ (15,303) $ 18,666 The Company classifies its deferred tax assets and liabilities as current or noncurrent based on the classification of the related asset or liability for financial reporting giving rise to the temporary difference.A deferred tax asset that is not related to an asset or liability for financial reporting,including deferred tax assets related to net operating loss("NOL")carryforwards,is classified according to the expected reversal date.The Company recorded a valuation allowance against certain deferred tax assets related to state NOL carryforwards and research and development tax credits.The Company evaluated the ability to utilize the losses and credits and determined they could not meet the more likely than not standard. As of December 31,2013,the Company had federal and state NOL carryforwards of approximately $28.0 million(which includes$27.5 million of NOL carryforwards from stock-based compensation)and $26.0 million(which includes$1.6 million of NOL carryforwards from stock-based compensation),respectively,to offset future federal and state taxable income.The state NOL carryforwards begin to expire in 2018 and the federal NOL carryforwards expire at various times from 2025 through F-29 Table of Contents athenahealth,Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands,except per-share amounts) 2033.As of December 31,2012,the Company had federal and state NOL carryforwards of approximately $6.1 million(which includes$6.1 million of NOL carryforwards from stock-based compensation)and $2.2 million(which includes$0.4 million of NOL carryforwards from stock-based compensation), respectively,to offset future federal and state taxable income. The Company has generated NOL carryforwards from stock-based compensation deductions in excess of expenses recognized for financial reporting purposes("excess tax benefits").Excess tax benefits are realized when they reduce taxes payable,as determined using a"with and without"method,and are credited to additional paid-in capital rather than as a reduction of income tax provision.During the years ended December 31,2013,2012,and 2011,the Company realized excess tax benefits from federal and state tax deductions of $6.9 million, $14.1 million and$14.2 million,respectively,which was credited to additional paid-in capital.As of December 31,2013,the amount of unrecognized federal and state excess tax benefits is $9.6 million and$0.1 million, respectively,which will be credited to additional paid-in capital when realized. During the year ended December 31,2013,the Company utilized tax federal and state NOL carryforwards to reduce the current tax provision by $7.0 million and zero,respectively.During the year ended December 31,2012,the Company utilized federal NOL carryforwards to reduce the current tax provision by$2.8 million.During the year ended December 31,2011,the Company utilized federal NOL carryforwards to reduce the current tax provision by $0.3 million. The Company's federal research and development tax credits carryforward is available to offset future federal and state taxes and the credits expire at various times through 2033.The Company has federal and state R&D credits of$7.6 million(which includes$5.2 million from the utilization of credits under the without method of accounting related to stock-based compensation)and $3.0 million(which includes$1.7 million from the utilization of credits under the without method of accounting related to stock-based compensation),respectively.These benefits,when utilized to reduce taxes payable,will be credited to additional paid-in capital. A reconciliation of the federal statutory income tax rate to the Company's effective income tax rate is as follows for the years ended December 31,2013, 2012,and 2011: 2013 2012 2011 Income tax computed at federal statutory tax rate 35% 35% 35% State taxes,net of federal benefit (6)% 5% 6% Research and development credits (98)% —% (1)% Permanent differences 20% 6% 2% Valuation allowance 33% —% —% Total (16)% 46% 42% A reconciliation of the beginning and ending amount of uncertain tax benefits is as follows: 2013 2012 2011 Beginning uncertain tax benefits $ 1,761 $ 1,685 $ 1,610 Prior year—decreases (537) (140) (23) Prior year—increases 501 177 22 Acquired balances 2,339 Current year—increases 787 39 76 Ending uncertain tax benefits $ 4,851 $ 1,761 $ 1,685 Included in the balance of unrecognized tax benefits at December 31,2013,are$4.3 million of tax benefits that,if recognized,would affect the effective tax rate.The Company anticipates that no material amounts of unrecognized tax benefits will either expire or be settled in the next 12 months of the reporting date. On January 2,2013,the American Taxpayer Relief Act of 2012 was signed into law reinstating the federal research and development credit for the 2012 and 2013 years.Under the accounting guidance on this topic,the effects are recognized as a component of income tax expense or benefit from continuing operations in the financial statements for the interim or annual period that includes the enactment date.The deferred benefit recorded in 2013 related to the 2012 federal research and development credit was $0.9 million. The Company is subject to taxation in the United States,various states and India.As of December 31,2013,tax years 1997 through 2012—except for 2006 through 2008 for federal purposes—remain open to examination by major taxing jurisdictions F-30 Table of Contents athenahealth,Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands,except per-share amounts) to which the Company is subject,which years primarily resulted in carryforward attributes that may still be adjusted upon examination by the Internal Revenue Service or other tax authorities if they have been used or will be used in a future period. 13.EMPLOYEE BENEFIT PLAN The Company sponsors a 401(k)retirement savings plan(the"401(k)Plan"),under which eligible employees may contribute,on a pre-tax basis, specified percentages of their compensation,subject to maximum aggregate annual contributions imposed by the Internal Revenue Code of 1986.All employee contributions are allocated to the employee's individual account and are invested in various investment options as directed by the employee.Employees'cash contributions are fully vested and non-forfeitable.The Company may make a discretionary contribution in any year,subject to authorization by the Company's Board of Directors.During the years ended December 31,2013,2012,and 2011,the Company's contributions to the 401(k)Plan were $3.2 million, $2.4 million,and$1.7 million,respectively. 14.COMMITMENTS AND CONTINGENCIES On January 11,2013,a complaint captioned Bushansky v.Epocrates,Inc.,et al.,Case No.519078,was filed in San Mateo County Superior Court (the"Court")on behalf of a putative class of Epocrates'shareholders against Epocrates and each member of the Epocrates board of directors.This complaint challenged the proposed merger between Epocrates and one of our wholly owned subsidiaries.On January 25,2013,a similar complaint was filed in the Court captioned DeJoice v.Epocrates,et al.,Case No.519461.This second complaint made similar allegations against Epocrates and each member of the Epocrates board of directors and included a claim against us for aiding and abetting a breach of fiduciary duty.On January 31,2013,the Bushansky complaint was amended to include additional allegations.Plaintiffs allege,among other things,that the Epocrates directors breached their fiduciary duties by allegedly agreeing to sell Epocrates at an unfair and inadequate price,failing to take steps to maximize the sale price of Epocrates,and making material omissions to the preliminary proxy statement dated January 25,2013.The complaints sought to enjoin the merger,other equitable relief,and monetary damages.On March 5,2013,Epocrates and the plaintiffs signed a memorandum of understanding in which the parties agreed to enter into a stipulation of settlement whereby the plaintiffs and all class members would release all claims related to the merger in exchange for Epocrates filing a supplement to its definitive proxy statement regarding the merger with the SEC,which would include additional disclosures regarding the merger agreement,and an agreement to negotiate in good faith regarding the amount of attorneys'fees and expenses for which plaintiffs may seek approval from the Court.On October 4,2013,the Court granted final settlement approval including a grant of fees and expenses in the amount of $0.3 million to plaintiffs'counsel.The settlement has no material impact on our consolidated financial statements. In addition,we are engaged from time to time in certain legal disputes arising in the ordinary course of business,including employment discrimination claims and challenges to our intellectual property.We believe that we have adequate legal defenses and that the likelihood of a loss contingency relating to the ultimate dispositions of any of these disputes is remote.When the likelihood of a loss contingency becomes at least reasonably possible with respect to any of these disputes,or,as applicable in the future,if there is at least a reasonable possibility that a loss exceeding amounts already recognized may have been incurred,we will revise our disclosures in accordance with the relevant authoritative guidance. Additionally,we will accrue liability for loss contingencies when we believe that it is both probable that a liability has been incurred and that we can reasonably estimate the amount of the loss.We will review these accruals and adjust them to reflect ongoing negotiations,settlements,rulings,advice of legal counsel,and other relevant information.To the extent new information is obtained,and our views on the probable outcomes of claims,suits,assessments, investigations,or legal proceedings change,changes in our accrued liabilities would be recorded in the period in which such determination is made. F-31 Table of Contents athenahealth,Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands,except per-share amounts) 15.QUARTERLY FINANCIAL INFORMATION(UNAUDITED) Selected quarterly financial information follows for the year ended December 31,2013: First Second Third Fourth Quarter Quarter Quarter Quarter Year Revenue: Business services $ 121,463 $ 137,919 $ 141,326 $ 162,529 $ 563,237 Implementation and other 4,133 8,382 10,201 9,050 31,766 Total revenue 125,596 146,301 151,527 171,579 595,003 Expenses: Direct operating 53,185 59,390 63,245 62,852 238,672 Selling and marketing 32,922 41,035 37,584 37,947 149,488 Research and development 11,944 14,269 15,104 16,322 57,639 General and administrative 31,077 24,670 21,690 22,339 99,776 Depreciation and amortization 8,341 11,107 11,263 12,864 43,575 Total expenses 137,469 150,471 148,886 152,324 589,150 Operating(loss)income (11,873) (4,170) 2,641 19,255 5,853 Other(expense)income: Interest expense (164) (1,001) (1,421) (1,319) (3,905) Other(expense)income 54 63 30 136 283 Total other expense (110) (938) (1,391) (1,183) (3,622) (Loss)income before income tax benefit(provision) (11,983) (5,108) 1,250 18,072 2,231 Income tax benefit(provision) 12,683 (7,313) (80) (4,927) 363 Net income(loss) $ 700 $ (12,421) $ 1,170 $ 13,145 $ 2,594 Net income(loss)per share-Basic $ 0.02 $ (0.34) $ 0.03 $ 0.35 $ 0.07 Net income(loss)per share-Diluted $ 0.02 $ (0.34) $ 0.03 $ 0.34 $ 0.07 Weighted average shares used in computing net income (loss)per share: Basic 36,409 36,760 36,970 37,262 36,856 Diluted 37,744 36,760 38,343 38,645 38,257 F-32 Table of Contents athenahealth,Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands,except per-share amounts) Selected quarterly financial information follows for the year ended December 31,2012: First Second Third Fourth Quarter Quarter Quarter Quarter Year Revenue: Business services $ 93,549 $ 100,110 $ 102,256 $ 112,581 $ 408,496 Implementation and other 3,017 3,405 3,630 3,723 13,775 Total revenue 96,566 103,515 105,886 116,304 422,271 Expenses: Direct operating 38,798 41,014 41,866 45,208 166,886 Selling and marketing 23,728 27,389 25,603 27,580 104,300 Research and development 7,168 8,615 8,746 9,263 33,792 General and administrative 16,199 13,961 11,913 14,952 57,025 Depreciation and amortization 5,486 5,795 6,683 7,677 25,641 Total expenses 91,379 96,774 94,811 104,680 387,644 Operating income 5,187 6,741 11,075 11,624 34,627 Other income 134 12 88 17 251 Income before income tax provision 5,321 6,753 11,163 11,641 34,878 Income tax provision (2,893) (2,599) (4,953) (5,701) (16,146) Net income $ 2,428 4,154 6,210 5,940 $ 18,732 Net income per share-Basic $ 0.07 $ 0.12 $ 0.17 $ 0.16 $ 0.52 Net income per share-Diluted $ 0.07 $ 0.11 $ 0.17 $ 0.16 $ 0.50 Weighted average shares used in computing net income per share: Basic 35,535 35,685 35,832 36,264 35,956 Diluted 36,996 36,906 37,212 37,420 37,133 Net income(loss)per share for the four quarters of each fiscal year may not sum to the total for the fiscal year due to the different number of shares outstanding during each period. F-33 EXHIBIT 10.28 ATHENAHEALTH,INC. DIRECTOR COMPENSATION PLAN as amended (Effective January 1,2014) The Director Compensation Plan(the"Plan")of athenahealth,Inc.(the"Company")applies to non-employee directors,who shall receive the following compensation for service on the Board of Directors: Cash Compensation Meeting Fees* Meeting Fee In Person-Board Meeting $ 3,000 In Person-Committee Meeting $ 3,000 By Phone-Board Meeting and Board Calls $ 1,000 By Phone-Committee Meeting $ 1,000 Annual Retainers* Retainer Annual $ 20,000 Lead Director $ 10,000 Audit Committee Chair $ 20,000 Compensation Committee Chair $ 10,000 Nominating and Corporate Governance Committee Chair $ 10,000 *Meeting Fees and Retainers are payable quarterly in arrears,and Retainers are pro-rated for any partial period. Board Meeting Fees will only be paid once per scheduled meeting even if a meeting occurs over one or more days.Committee Meeting Fees will only be paid once per day even if more than one Committee Meeting is attended on such day. Equity Compensation Annual Grant Annual equity grants shall be equivalent in value to$225,000 per year. The equity amount will be determined by dividing$225,000 by the average stock price of the Company during the last 20 trading sessions preceding and including February 1 to arrive at a restricted stock unit equivalent. Restricted stock units and/or stock options(or any combination of stock options and restricted stock units,which are awarded at a 2:1 ratio to option shares)shall be granted the first business day of March and will vest fully on June 1 of the following year. Grants for new directors will be pro-rated for partial year service and granted on the first business day of the month following the later of the initial date of service or the date on which such grant is approved. The number of stock option shares and restricted stock units will be reviewed annually by the Nominating and Corporate Governance Committee and are subject to change. In addition to the cash and equity compensation described above,the Company reimburses each member of the Board of Directors for reasonable travel and other expenses in connection with attending meetings of the Board of Directors or committees thereof. This Plan is prospective from its effective date and will not affect any compensation paid or granted before that date. This Plan may be amended from time to time by vote of the Board of Directors. This Plan does not affect the obligations of the Company to indemnify directors as set forth in relevant sections of the Company's certificate of incorporation,by-laws,or indemnification agreements.Questions or issues concerning the application and administration of this Plan will be addressed by the Nominating and Corporate Governance Committee. EXHIBIT 21.1 Subsidiaries of Registrant Name Jurisdiction of Organization Athena Arsenal,LLC Massachusetts Athena Point Lookout,LLC Maine athenahealth MA,Inc. Massachusetts athenahealth Security Corporation Massachusetts athenahealth Technology Private Limited India Epocrates,Inc. Delaware Healthcare Data Services LLC Massachusetts Modality,Inc. North Carolina Proxsys LLC Alabama EXHIBIT 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in Registration Statement Nos.333-146340,333-172619,333-183053 and 333-187244 on Form S-8 of our reports dated February 7,2014,relating to the financial statements of athenahealth,Inc.and subsidiaries,and the effectiveness of athenahealth,Inc.'s internal control over financial reporting appearing in this Annual Report on Form 10-K of athenahealth,Inc.for the year ended December 31,2013. /s/Deloitte&Touche LLP Boston,Massachusetts February 7,2014 EXHIBIT 31.1 Certification I,Jonathan Bush,certify that: 1.I have reviewed this Annual Report on Form 10-K of athenahealth,Inc; 2.Based on my knowledge,this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,in light of the circumstances under which such statements were made,not misleading with respect to the period covered by this report; 3.Based on my knowledge,the financial statements,and other financial information included in this report,fairly present in all material respects the financial condition,results of operations,and cash flows of the registrant as of,and for,the periods presented in this report; 4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-15(e)and 15d-15(e))and internal control over financial reporting(as defined in Exchange Act Rules 13a-15(f)and 15d-15(f))for the registrant and have: (a)designed such disclosure controls and procedures,or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant,including its consolidated subsidiaries,is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b)designed such internal controls over financial reporting,or caused such internal controls over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c)evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures,as of the end of the period covered by this report based on such evaluation;and (d)disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter(the registrant's fourth fiscal quarter in the case of an annual report)that has materially affected,or is reasonably likely to materially affect, the registrant's internal control over financial reporting;and 5.The registrant's other certifying officer and I have disclosed,based on our most recent evaluation of internal control over financial reporting,to the registrant's auditors and the audit committee of the registrant's Board of Directors(or persons performing the equivalent functions): (a)all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record,process,summarize,and report financial information;and (b)any fraud,whether or not material,that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 7,2014 /s/Jonathan Bush Chief Executive Officer EXHIBIT 31.2 Certification I,Timothy M.Adams,certify that: 1.I have reviewed this Annual Report on Form 10-K of athenahealth,Inc; 2.Based on my knowledge,this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,in light of the circumstances under which such statements were made,not misleading with respect to the period covered by this report; 3.Based on my knowledge,the financial statements,and other financial information included in this report,fairly present in all material respects the financial condition,results of operations,and cash flows of the registrant as of,and for,the periods presented in this report; 4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-15(e)and 15d-15(e))and internal control over financial reporting(as defined in Exchange Act Rules 13a-15(f)and 15d-15(f))for the registrant and have: (a)designed such disclosure controls and procedures,or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant,including its consolidated subsidiaries,is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b)designed such internal controls over financial reporting,or caused such internal controls over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c)evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures,as of the end of the period covered by this report based on such evaluation;and (d)disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter(the registrant's fourth fiscal quarter in the case of an annual report)that has materially affected,or is reasonably likely to materially affect, the registrant's internal control over financial reporting;and 5.The registrant's other certifying officer and 1 have disclosed,based on our most recent evaluation of internal control over financial reporting,to the registrant's auditors and the audit committee of the registrant's Board of Directors(or persons performing the equivalent functions): (a)all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record,process,summarize,and report financial information;and (b)any fraud,whether or not material,that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 7,2014 /s/Timothy M.Adams Chief Financial Officer EXHIBIT 32.1 The following certification is being made to the Securities and Exchange Commission solely for purposes of Section 906 of the Sarbanes-Oxley Act of 2002(18 U.S.C.1350).This certification is not to be deemed a part of the Report,nor is it deemed to be"filed"for any purpose whatsoever. In accordance with the requirements of Section 906 of the Sarbanes-Oxley Act of 2002(18 USC 1350),each of the undersigned hereby certifies,to our knowledge,that: (i)this Annual Report on Form 10-K for the year ended December 31,2013,which this statement accompanies,fully complies with the requirements of section 13(a)or 15(d)of the Securities Exchange Act of 1934(15 U.S.C.78m or 78o(d));and (ii)the information contained in this Annual Report on Form 10-K for the year ended December 31,2013,fairly presents,in all material respects,the financial condition and results of operations of athenahealth,Inc. Dated as of this 7th day of February 2014. /s/Jonathan Bush /s/Timothy M.Adams Jonathan Bush Timothy M.Adams Chief Executive Officer Chief Financial Officer athenahealth Exhibit 7 Confidential athena Project Component Budget Total Install New Streetscape $2,800,000 Repair/Restore/Relocate Fence $800,000 Construct Bus Shelters and Bus Stops $350,000 Install Hubway Stations along Arsenal Street Corridor Arsenal Street extending system from Boston and Cambridge to Watertown Square $1,000,000 Upgrade the Arsenal Street/Greenough Boulevard intersection-alter roadway geometry,install landscaping,pedestrian and bicycle features $1 300 000 $6,250,000 Repair/Restore/Relocate Fence $600,000 Construct New Bike Lanes $500,000 Reconstruct Roadway and On-Street Parking $1,700,000 North Beacon Street Enhance Pedestrian Environment $600,000 Install New Streetscape $1,700,000 Upgrade Greenough Blvd. Intersection $1,500,000 Install Drainage Improvements $400,000 $7,000,000 Upgrade/Improve pedestrian and bicycle facilities Greenough Boulevard along"Little"Greenough Boulevard;create history walk $1,500,000 $1,500,000 Extend Riverwalkto Squibnocket Park $200,000 Improve Squibnocket Park Grounds $400,000 Squibnocket Park/ Construct Squibnocket Park Boardwalk $3,000,000 Charles River Reservation Construct Squibnocket Park Canoe/Kayak Center $750,000 Restore/Reconfigure open space around Arsenal Seawall; Restore Arsenal Seawall $500,000 $4,850,000 Arsenal Park Construct/Upgrade athletic fields at Arsenal Park $2,500,000 $2,500,000 Upgrade Commander's Mansion-renovate and Commander's Mansion restore exterior,interior and grounds;upgrade communications services for conferencing abilities and functions $2,250,000 $2,250,000 Install Bike Path connection from existing Greenway Watertown Greenway to North Beacon Street Charles River / $500,000 $500,000 Total 1 $24,850,000 Confidential A 2'khenahealth Exhibit 8 Confidential 10/8/2014 Athenahealth to add 600 employees with Georgia expansion-Boston Business Journal From the Boston Business Journal :http://www.bizjournals.com/boston/blog/health-care/2014/09/athenahealth-to- add-600-employees-with-georgia.html Athenahealth to add 600 employees with Georgia expansion Sep 22, 2014, 2:11pm EDT l� Jessica Bartlett Reporter- Boston Business Journal Email I Twitter As part of a plan to add 1,000 employees by 2017, athenahealth announced that it will be expanding into Atlanta. The Watertown-based company, which provides electronic medical records software to medical groups and health systems throughout the country, already had offices in Georgia. Employees will move from existing spaces to the new Atlanta campus as employees are brought on board. The news comes months after the company announced expansion plans into Austin, Texas, an initiative that will add 800 jobs over the next 10 years. The Georgia expansion will add 600 employees over the next three years. "As we work to connect care and drive meaningful and measurable results for our growing network of clients, we are expanding our national foothold to meet their needs," said Kristi Matus, chief financial and administrative officer of athenahealth, in a release. To accommodate expansion and relocation plans, athenahealth redeveloped a 75,000 square- foot space in Ponce City Market in Atlanta. Formerly the Sears, Roebuck and Co. building, the renovation is part of a downtown revitalization, which is also adding shops, residential apartments and a food hall by 2015. Employees are also on the move in San Francisco. Though not an expansion, a spokeswoman said employees are moving from offices in San Mateo to 56,000 square-foot building in downtown San Francisco's South of Market district within the next month. "Our people are our most precious resource," Matus said. 'Selecting strategic sites in key urban markets across the country opens up possibilities and helps us attract exciting new talent and resources, as well as affords us opportunities to host more prospects and clients." http://www.bizjournals.com/boston/blog/health-care/2014/09/athenahealth-to-add-600-employees-with-georgia.html?s=print 1/2 10/8/2014 Athenahealth to add 600 employees with Georgia expansion-Boston Business Journal Athenahealth, which had a $12.7 million operating loss in the two quarters ending June 2014, currently has over 3,300 employees. Beyond offices in Watertown, Atlanta, San Francisco, and Austin, athenahealth has employees in Belfast, Maine; Princeton, N.J.; Durham, N.C.; and Chennai, India. http://www.bizjournals.com/boston/blog/health-care/2014/09/athenahealth-to-add-600-employees-with-georgia.html?s=print 2/2 A 2'khenahealth Exhibit 9 Confidential How employee freedom delivers better business - CNN.com Page 1 of 4 You've selected the International Edition.Would you like to make this your default edition? Yes I No close EDITION: INTERNATIONAAOI U.S. MtXICo I ARABIC Sign up I Login TV: CNNi I CNN en Espanol SEARCH Set edition preference E3 Home Video World I U.S. I Africa I Asia I Europe I Latin America I Middle East I Business I World Sport I Entertainment I Tech I Travel I iReport EINGTHEUN Jot IS HUMMLY POSSIBLE Ile& i r ..r Part of complete coverage on •X Route to the top How employee freedom delivers better SHARE THIS Print business Email By Susanne Gargiulo,special to CNN More sharing September 21,2011--Updated 1358 GMT(2158 HKT) Recommend 1583 � HARNE551NG TH E WINDS OF CHANGL ISHUWWLYPOSS13LE Go fill e k 'S, i� c 'ic Schmidt..Larry Page and Sergey Brin in aself-driving car on January 20,2011 �f'iry STORY HIGHLIGHTS (CNN)--They've got it all:Free food,fitness facilities,massage Google employees in Mountain rooms,hair dressers,laundry rooms and on-site doctors.Are they View get free food,fitness Hollywood celebrities? facilities and on-site doctors Such pay-offs show up in No,they're Google employees in Mountain View,south of San increased innovation and Francisco,and if you're an employee here you're encouraged to productivity , spend 20%of your time on a project of your choosing.It's no surprise Today's employees want more Google places fourth on the U.S.Fortune'100 Best Companies to than a paycheck Work For'list. If you give employees freedom, they will surprise you First place belongs to SAS,the world's largest privately held software company which offers free on-site medical care for employees and FC E5i1=`n°' their families,low-cost high quality child care,a fitness center,library, and summer camp for children of employees. Most Popular How could this possibly pay off?"it pays off spectacularly,"says Today's five most popular stories Milton Moskowitz,journalist and co-author of the Fortune'100 Best And the world's 50 best bars are... Companies to Work For list since its beginning in 1998."We keep track of stock market performances of companies on this list,and Starting a business?Here are the 10 best they are consistently outperforming other companies,"he adds. emerging cities to launch your startup This year's'Sexiest Woman Alive'is... http://edition.cnn.com/2011/09/19/business/gargiulo-google-workplace-empowerment/in... 10/14/2014 How employee freedom delivers better business - CNN.com Page 2 of 4 You don't need a The payoff shows up in increased innovation and Mysterious Air Force space plane to land soon productivity,low turnover,low sickness rates,and high lot Of money to employee satisfaction.In a world warring for increasingly North Korea says leader has reappeared do what Google sparse talent,a strong employer image is also not to be has done. If you underestimated."It means you can attract and attain some amazing people",says Laszlo Bock,senior vice give people president of people operations at Google."People who freedom, they will are exceptional and motivated,and who are driven More from CNN Video beyond a good job and a paycheck." amaze you. IMF:Global recovery is fragile. Laszlo Bock "Employees matter,and the thought that they just'turn off their lights'when they come to work is ridiculous",says Jennifer Mann,vice president of human resources for Learning about AIDS through SAS."You are not going to succeed unless you have a sports stable workforce.Our voluntary turnover is 4%or less in an average industry of 22%,and we estimate it is saving the company hundreds of millions in company turnover." Yumkella:We are failing against Ebola The approach is a far cry from the 1900s sweatshops of the U.S.So, what's changed?Perhaps not as much as you might like to think. Liberian health care workers demand help The companies on this list are"exceptional,"says Moskowitz."They are not the norm.We still have a lot of ground to cover,but 25 years ago it was such a hierarchical business structure and that's changed More from CNN a lot." Moneyball:How businesses are using data to outsmart their "The realization that there is a relationship between rivals employee welfare and productivity is actually not new," • says Daniel A.Wren,author of Evolution of Management Secret recipe turns culinary Thought."Henry Ford tried a workers'welfare program to trash to treasure ' deal with high turnover,even paying people$5 a day at a time when that was unheard of.Others have tried similar programs.But,we've come a long way since the Russia looks to China for business courtship backbreaking work of the 1920s.Workers today are • smarter,more skilled,more demanding.They want different things." From around the web Research by the Great Place to Work Institute,co-publisher of the Fortune annual list,shows us that today's employees really do want m `� Why Microsoft can't pay its different things-and it is not in their paychecks.Their work with more female employees in 'karma' (Promoted-The Daily Dot) than ten million employees worldwide reveals that what people want is:Trust in leadership and each other,pride in their work,enjoyment Looking for a CRM Solution? of the people they work with,and fairness and transparency;all rt Here Are 7 -Business News Daily)things that companies like Google and SAS seem to do well.The key ILA. (Promoted to making this approach successful,they say,is a sincere focus on employee wellbeing. Recommended by "A lot of companies think,they can fix just one thing,says Mann,who through SAS also works with companies globally to help them create BUSINESS— better work environments,"They think that if they add a healthcare L JUST CLfCK HER centre then that will do.But it's a much bigger picture." YOUR 1 E . 1 USINESS Bock agrees,"The important thing to note is that you don't need a lot of money to do what Google has done.If you give people freedom, they will amaze you." So,how can you begin to reap the benefits of a happy staff? Simple,says Moskowitz:"Sit down and talk with your employees. Ask them what they want." We recommend i - a • {I. .. r . http://edition.cnn.com/2011/09/19/business/gargiulo-google-workplace-empowerment/in... 10/14/2014 How employee freedom delivers better business - CNN.com Page 3 of 4 Can pets get or spread Decision nears on Miley Cyrus'trifecta of Don't hide your dark Fhnla? Amanda Bv_Des' had tact. side:Why emotional treatment;brain agility is key to he in a 'microchip'tweet is key better boss From around the web I� � � r• How To Figure Out What The Most(and Leasty Org Charts are ig Ways Big Data Is Job You Actually Want Effective Keywords in Important.So Why Are Changing the Business (Promoted-General Email Subject Lines They Usually so of Sports Assembly) IPromoted-Yesward) Shoddy? (Promoted-Clo.com) (Promoted-Khoms) Recommended by Sponsored links Special Stock Report Prostate Cancer Treatment Democracy Can Be Improved Buffett,Gates&Soros own nearly 1 Effective Surgery Alternative with a Want to end politcal deadlock? Billion in this Sectar.Read Now. High Documented Cure Rate! Discover a new proposal for reform www.undervaluedze no.com prostrCision.com issue-se led an info Comments for this thread are now closed. 5 Comments CNN i Login - Sort by Best- Share L Favorite* MLMitchFrance That's amazing and yet it really works!Companies all over the word should consider this issue... ;2- - • Snare MLblublu•i nears ago Good employer wi11 always get good employee and good returns.I'd work my socks off for companies offering me all those assortment of perks. Share 6L "...what they want." -no time clock entering BS,especially when a salary is paid and not by the hour. 3^ • Share RegVeg•3 years agri Sounds like the utopia portrayed in the StarTrek series.Personnel on the USS enterprise and other Federation places get free everything.All they have to do is their homework and the employer does the rest like sweet old parents. 3 • Share, WLhuxieia- vearsag, Now that the golden handcuffs are finally off and most of the employees have their stock fully vested,I bet they'll see turnover start to inch upward- 590 Hi London, d° 52° � London,n,United Kingdom Weather forecast wwruco w Gpaytic Home I Video I World I U.S.I Africa I Asia I Europe I Latin America I Middle East I Business I World Sport I Entertainment I Tech I Travel I iReport Tools&Widgets I RSS I Podcasts I Blogs I CNN Mobile I My Profile I E-mail Alerts I CNN Shop I Site map I CNN Partner Hotels http://edition.cnn.com/2011/09/19/business/gargiulo-google-workplace-empowerment/in... 10/14/2014 How employee freedom delivers better business - CNN.com Page 4 of 4 M©2014 Cable News Network.Turner Broadcasting System,Inc.All Rights Reserved. CNN an ESPANOL I CNN Chile I CNN Mexico I Q#o I TOrkge Terms of service I Privacy guidelines I AdChoices m I Advertise with us I License our content I About us I Contact us I Work for us I Help CNN TV I HLN I Transcripts http://edition.cnn.com/2011/09/19/business/gargiulo-google-workplace-empowerment/in... 10/14/2014 A 2'khenahealth Exhibit 10 Confidential Nova Explore Publications Nova Journal of Humanities and Social Sciences PII: S229279131400016-2 Vol.2(4),2014:1-4 www.novacxplore.com Research Article Millennial Motivations and the Impact on the Organizational Culture Arlouwe Sumer and Toni DiDona Carlos Albizu University Arlouwe Sumer',Toni DiDonal 'Department of Industrial-Organizational Psychology,Carlos Albizu University;Florida,United States of America. Corresponding Authors: Arlouwe Sumer(email: asumer505*sunmail.albizu.edu)and Toni DiDon(email: tdidona@albizu.edu).Department of Industrial-Organizational Psychology,Carlos Albizu University; Florida, United States of America Abstract The modern workforce today typically contains four distinct generations working within the same organization. One of the main concerns of employers include the hiring, associated costs, and retention of the latest generation to enter the workforce-Generation Y. In this article, the needs for continued motivation on the job are discussed, as well as how those needs may necessitate physical change in the workplace to remain competitive as a business overall. Such changes include the downsizing of physical office space and increasing mobility in both work schedule and physical location, the increasing of intra-office collaboration through open office plans, and the increasing presence of symbolic artifacts representing collective benefits such as performance management and corporate social philanthropy. Despite the preferences of millennials and their ongoing effect on the workplace, there may be continued resistance from other generational groups such as baby boomers,as well as cost issues related to the change. More research may be needed to develop a cost effective way to update offices as past generations begin to age out, and new generations with increasing technological needs begin to take their place. Keywords: Generation Y,Millennial,Work Environment,Job Motivation,Office Design Introduction The modern workforce today consists of at least four generations. Those generations are the"Silent"generation consisting of those born before 1945, the "Baby Boomers" who were born post-WWII to 1965, "Generation X" who began at 1966 up to approximately 1981, and"Generation Y", also popularly known as"Millennials"who were born around 1981 up until the mid to late nineties [1 p. 201].The advent of the internet and social networking has not only defined a new era in technology,but has also shaped this newest generation to enter the workforce. Millennials, who represent the first generation to be dependent on technology, will compose a majority of the workforce at a faster rate than previous generations by 2020 [2]. There have been many studies conducted in recent times regarding how to handle this incoming generation. Current empirical studies and relevant literature have explored their behaviors and work attitudes [1, 3-4, 6, 8, 11-16]. In brief, millennials prefer collaboration, feedback and praise,constant supervision, and flexibility in time to cope with multitasking [3]. They are the most adept generation thus far in using the internet and have fully integrated social media as part of their lives. They are born to "helicopter parents",which has been theorized as leading to avoidance of conflict and more on exploration and rationalization[4,5 pp.66]. Compton [4] sums the needs of millennials from the outsider's perspective, investigating the differences that divide them from other generations. Millennials, according to Compton, possess a very socially oriented background. Millennial students have stronger beliefs in engaging in a greater sense of purpose in changing their collective future. They also thrive when they feel secure, where risk is avoided, failure is minimized, and participation is encouraged. The economic recession of 2008, Compton notes, has played a major role in shaping a rather pessimistic outlook of building a career, and understandably so. In addition,this generation is Nova Journal of Humanities and Social Sciences Vol 2(4), 2014:1-4 z more collective in their work ethic where group work is the preferred norm. Millennials also thrive under conventions where structure is readily available through rules and standards and ambiguity is often reduced. Lastly,Millennials have shown to be one of the most educated generations thus far and are oriented in achieving greater success [2]. From these observations, it will be interesting to track the physical evolution of the workplace to meet the needs of millennials. Their proficiency and full integration with the internet and mobile technology brings the modern office space to a crossroad. Demand for flexible schedules, an increasing pattern of telework and virtual office, and the increasing social needs of millennials may indeed warrant changes to the traditional environment of an office. For example, many Silicon Valley companies are now adopting more open layouts [1], which coincidentally consist of a large number of Generation X and Y'ers [3]. Manager interaction with millennials has differed compared to previous generations, as millenials are more interested in the rationale behind management demands,and are sensitive to praise and blame from their supervisors[6]. Thus, how an organization copes with millennials' needs may ultimately affect motivation within the job. There is evidence of how the physical office environment affects productivity. Observations by Puybaraud et al. [3] explored how the physical arrangement of the office and the experience of interacting with the environment affects production and worker attention. For example, information exchange was more often seen using face-to-face contact with other employees rather than through the use of the telephone. In addition, office location for employees affects socialization with other employees and affects management interaction[3]. Casual observers of Generation Y may assume that their connectedness over the internet and social media may eventually lead to the decline of the physical office which it being replaced by the virtual office. While assumptions like this may be supported [5], Millennial culture values collaborative work and a free exchange of ideas in the office setting. Davis [7] and more recently Boutellier,Ullman, Schrieber, and Naef[8] observed that offices that have a greater open area with less restrictive partitions increase interaction, contribute to the overall generation of knowledge and ideas. Thus,physical interaction is still a valued part of the overall work experience, even by Millennials and Generation Y. This inclination is not just limited to the United States; Puybaraud et al. [3] reported that Generation Y workers from India, the United States, the United Kingdom, and China, most strongly attribute productivity and creativity to the people who immediately surround them, the technology available, and the general physical environment in which they work. Rasila and Rothe [9] also found that millennials' attitudes towards an open-plan office were favorable and supported the notion of intra-office interaction as a positive factor in the workplace. This leads to the innovation of the work space, as millennials are now redefining the office from being organized cubicles into more thoughtfully designed environments. Companies that include a large number of Generation Y employees such as Google now possess arcades, world-class restaurants, and even fitness rooms [10]. Ferri-Reed [6] also observed the use of more abstract designs to foster creativity; rooms with less congruency, more fluid shapes, along with a variety of unorthodox, interactive environments such as whiteboards and mentally-intriguing games helped foster the generation of unique and innovative ideas in the mind of millennials. Such areas,Ferri-Reed [6] posited,increase interaction and team collaboration, increasing overall productivity in quantity and in quality. Mobility has become the key word describing the role of technology in millennials' lives. More organizations are providing tablet computers and laptops, promoting flexible work spaces and schedules. Mooney, Wright, and Higgins [5] surmised that the technological adeptness of millennials is a unique advantage to businesses, and utilizing this knowledge effectively will lead to a greater long-term presence as technology continues to evolve at a rapid pace.Incorporated into the use of mobile technology is the rise of social networking. The growing connectedness of the millennial generation has implications for social patterns in the work environment. For example, Choi, Kwon, and Kim [I I] found that millennial-aged hospitality workers in the US experienced greater job satisfaction if they were allowed time to engage in fun activities in the workplace. Mooney et al. [5] have described the historical ban of social media in the workplace, such as Facebook or Linkedln, due to its potential as a distraction in the workplace. Communication devices that decrease social proximity,the extent to which one is able to easily communicate with someone else,have been linked with decreased productivity [12]. However, Mooney et al. [5] described the evolution of the role of social media, becoming a harbinger of productivity to becoming a useful knowledge base and a highly complex tool for work collaboration,targeted advertising, and strategic planning. Ferri-Reed [6] points out the potential in social media that millennials can exploit. Posts on popular social networking websites and research of trends in such networks helps facilitate new ideas to bring to their managers. Miller,Hodge,Brandt,and Schneider[2] have also discussed the collaborative and even advocating potential of social media in the workplace. The ability to congregate virtually has allowed for easier discussion of concerns such as pay,and social media plays a modern role in workers' ability to unionize.What is included is the adaptation of the already well-founded knowledge Generation Y Nova Journal of Humanities and Social Sciences Vol 2(4), 2014:1-4 3 has come to accumulate in using social and mobile media. This, according to Mooney et al., has implications for increased worker retention among Generation Y. In an intergenerational study of employee perception of workplace, Bell [13] and Puybaraud et al. [3] found that millennials had valued factors related to flexibility, collectiveness, and cognitive efficacy. Moreover, Ferri-Reed [6] brought forward the notion that millennials now include corporate philanthropy when considering employment. Social responsibility programs, both to the employees or to the community,are valuable work initiatives that will draw millennials into organizations,giving them a greater sense of purpose to their scope of responsibilities. Other factors,such as location of the work environment and corporate culture have similar impact on millennials' interest in a particular company. The physical location of the worksite is an example of a symbolic artifact that can be used for millennials' perception of corporate philanthropy.Puybaraud et al. [3] observed how travel to work has become an environmental concern,and many prefer their worksite to be easily accessible by walking or biking, rather than using their car. Subsequently, the accessibility of the physical worksite through alternative modes of transportation other than the automobile affects recruitment among Generation Y. Not only does this serve practical accessibility,but also ties in to Generation Y beliefs [14]. Miller, Hodge, Brandt, and Schneider [2] have also discussed the symbolic value of the dress code. Miller et al. [2] pointed out how office counter culture today is not necessarily related to recent generations,but an already present trend which dated back to the early 1960s. Business casual attire has come to symbolize not only a business generating strategy, but also as a concession to workers for strict grooming guidelines. A large proportion of millennials now possess non-traditional piercings or tattoos [2]. Despite the continued stigma surrounding such artifacts, Miller et al. [2] explored the possible benefits in worker retention by loosening restrictions towards grooming policy,and even a positive effect towards worker creativity and culture. In addition, Puybaraud et al. [3] discussed millennial preference for high quality on-site services such as full service restaurants, cafes, and gymnasiums. Such has been the growing norm among Silicon Valley companies. It also matches Generation Y's preference for flexibility in the office as work becomes increasingly secondary to the personal life of millennials [6].Puybaraud et al.'s [3] survey indicated that activities that are not directly related to work are highly desired by millennials because of its importance in reinvigorating them. The caveat to such services include longer hours spent at the office and higher productivity, a price that employees receiving those services are willing to accept [10]. Thus, on-site services have become an integral part of the millennial motivational model. Myers and Sadaghiani [15] identified the value of supervision, feedback, and open communication among millenials. They trend towards a greater presence of and stronger relationship with their manager, with consistent and immediate feedback, most especially in the initial stages of their career in an organization. A strong performance management system has become a preference of millennials. The presence of such a system will present a strong symbolic token which will contribute towards their needs today. In addition to performance management, Blain [16] also states that millennials are engaging in more creative solutions when given the appropriate oversight from supervisors. Because of the value millennials place on oversight and supervision, the physical office environment may benefit from having a presence of feedback cards, virtual coaching/training, and, as previously discussed, an open and accessible office plan. In addition, the preferred increased presence of managers by millennials may impact the ideal location of the manager/supervisor's office. Gone are the days of vertical structuring where superiors have larger and higher space of their own which leads to a decrease in interaction between lower level workers and managers [16, 7]. Increased manager presence may mean having the manager's office parallel to their personnel or simply having a workstation near or on the work floor. Overall, the modern office is experiencing major changes as technology use is increasing, along with the generational differences of the current workforce. Is this revolution of the workplace an unprecedented event? Twenge [1] noted that although Generation Y has stark physical and symbolic differences in the workplace compared to previous generations,they uphold more of the same underlying beliefs than differences from previous generations. Such beliefs include the value of hard work, societal change, and respect for superiors[1].However,according to Twenge [1],past generations continue to maintain biases aimed against Generation Y, further deepening the divide in the new workforce. This presents a barrier in the effective management of emerging talent, negating the needs of Millenials and potentially contributing to performance concerns. To conclude, the work environment continues to evolve rapidly to accommodate the technological proficiency of Millenials, in the form of newer equipment, greater mobility, and the addition of new and innovative human resource services. Also, millennial work behavior continues to change the culture of the office,involving managers to adopt new methods in overseeing workgroups,and Nova Journal of Humanities and Social Sciences Vol 2(4), 2014:1-4 4 communication patterns becoming more distinct with social tools most commonly associated with Millenials, such as Facebook, Twitter, etc. [6]. However, despite the apparent differences between generations, several common underlying values persist as organizations continue to understand the latest generation to enter the workforce. Thus, how an organization responds to Millenial preferences in their management structure and job design, adapts to Millenial needs in the physical work environment, and understands the work motivations of Millenials, could affect the potential for the organization to effectively and significantly attract the talent of this emerging workforce. References 1. Twenge J. A Review of the Empirical Evidence on Generational Differences in Work Attitudes. Journal of Business & Psychology [serial on the Internet]. 2010 Jun. [cited August 21, 2014]; 25(2): 201-210. Available from: Business Source Complete 2. Miller M, Hodge K, Brandt A, Schneider E. The Young and the Restless: Gen Y'ers in the Workplace! Are You Prepared?. FDCC Quarterly [serial on the Internet]. Spring 2013. [cited August 21, 2014]; 63(3): 226-250. Available from: Business Source Complete. 3. Puybaraud M, Russell S, McEwan AM, Leussink E, Beck L. Generation Y and the workplace [Internet]. Johnson Controls Inc.; 2010. [cited August 21, 2014]; Available from http://wwwjohnsoncontrols.com/content/dam/WWW/J*ci/be/global workplace_innovation/oxygenz/Oxygenz_Report- 2010.pdf 4. Compton J.Avoiding the Dangerfield Effect: Earning Respect as a Young Coach in a Millennial Environment.Forensic [serial on the Internet]. 2012, Summer 2012. [cited August 21, 2014]; 97(2): 15-23. Available from: Communication&Mass Media Complete. 5. Mooney J, Wright J, Higgins L. Gen Y's addiction to web 2.0: Problem or strategy?. Journal of Corporate Accounting & Finance (Wiley) [serial on the Internet]. 2010 Nov. [cited August 21, 2014]; 22(1): 63-73. Available from: Business Source Complete. 6. Ferri-Reed J. Millennializing the Workplace. Journal for Quality & Participation [serial on the Internet]. 2014 Jan. [cited August 21,2014];37(1): 13-14.Available from:Business Source Complete. 7. Davis T. The Influence of the Physical Environment in Offices. Academy Of Management Review [serial on the Internet]. 1984 Apr. [cited August 21,2014];9(2):271-283.Available from:Business Source Complete. 8. Boutellier R, Ullman F, Schreiber J, Naef R. Impact of office layout on communication in a science-driven business. R&D Management [serial on the Internet]. 2008 Sep. [cited August 21, 2014]; 38(4): 372-391. Available from: Business Source Complete. 9. Rasila H,Rothe P. A problem is a problem is a benefit?Generation Y perceptions of open-plan offices.Property Management [serial on the Internet].2012 Oct. [cited August 21,2014];30(4): 362-375.Available from:Business Source Complete 10. BBCWorldwide. Inside Facebook HQ -Mark Zuckerberg-Inside Facebook-BBC [Video File]. 2013 July 19. [cited August 21,2014];Available from http://www.youtube.com/watch?v--cGEb-g5JMU0 11. Choi Y,Kwon J,Kim W. Effects of attitudes vs experience of workplace fun on employee behaviors focused on Generation Y in the hospitality industry. International Journal of Contemporary Hospitality Management [serial on the Internet]. 2013 May. [cited August 21,2014];25(3):410.Available from:Publisher Provided Full Text Searching File. 12. Sundstrom E,Burt R, Kamp D. Privacy at Work: Architectural Correlates of Job Satisfaction and Job Performance.Academy Of Management Journal [serial on the Internet]. 1980 Mar. [cited August 21,2014];23(1): 101-117.Available from:Business Source Complete. 13. Bell E. Exploring employee perception of the work environment along generational lines. Performance Improvement [serial on the Internet]. 2008 Oct. [cited August 21,2014];47(9): 35-45.Available from:Business Source Complete. 14. Kwok H. The Generation Y's Working Encounter: A Comparative Study of Hong Kong and other Chinese Cities. Journal of Family and Economic Issues [serial on the Internet]. 2012. [Cited August 21, 2014]; (2): 231. Available from: Academic OneFile 15. Myers K, Sadaghiani K. Millennials in the Workplace: A Communication Perspective on Millennials' Organizational Relationships and Performance. Journal of Business&Psychology [serial on the Internet]. 2010 Jun. [cited August 21, 2014]; 25(2):225-238.Available from:Business Source Complete 16. Blain A. The Millenial Tidalwave: Five Elements That Will Change the Workplace of Tomorrow. Journal Of The Quality Assurance Institute [serial on the Internet].2008 Apr., [cited August 21,2014];22(2): 11-13.Available from:Business Source Complete. Nova Journal of Humanities and Social Sciences Vol 2(4), 2014:1-4 A 2'khenahealth Exhibit 11 Confidential BETTER THAN : DATA. Your business at yourfingertips. TJ McCue(http://www.forbes.com/sites/tjmccue/)Contributor t� I write about makers and inventors and creators. Opinions expressed by Forbes Contributors are their own. TECH(/TECHNOLOGY) 1/29/2014 @ 2:13PM 115,471 views Cloud Computing: United States Businesses Will Spend $13 Billion On It Comment Now Follow Comments Instead of a slow-moving fluffy white cloud image,the cloud computing (httD://www.forbes.com/cloud-computing/)industry should use a tornado— that might be a better way to visualize how fast cloud computing is growing today.Amazon is dominating,but is followed by the usual suspects: IBM t/companies/ibm IBM-0.38%(/companies/ibm/),ADple(/companies/aDDle/) AAPL-0.57%(/companies/ar)OP),,Cisco, GOOtsle(/companies/ 00 le GOOG-1.51%(/companies/moale/),Microsoft(/eompanies/mierosoft/) MSFT-0.39%(/companies/microsoftll, Salesforce, and Rackspace,to name a few. (Disclosure:I am on the paid blogger team for IBM Midsize Insider (http://bit.ly/1QWCYffl, which covers technology pertinent to midsize companies, including the cloud,among other topics.) "The cloud"is frequently in the news,but there is also a fair amount of confusion, outside of technology teams.What is cloud computing and why do businesses need to care?IBM published this handy infographic: r,Reasons Businesses Use The Cloud (http://www.flickr.com/photos/ibm media/1o4r,82820_qC;/).Among the reasons: Collaboration,better access to analytics,increasing productivity, reducing costs, and speeding up development cycles. • By 2015,end-user spending on cloud services could be more than$18o billion. It is predicted that the global market for cloud equipment will reach$79.1 billion by 2018 • If given the choice of only being able to move one application to the cloud,25%of respondents would choose storage • By 2014,businesses in the United States will spend more than$13 billion on cloud i computing and managed hosting services. BETTER BIGGER N 131. THAN ANALYTICS, BEYOND ! • • 5 Reasons It offers better insight It makes collaboration easy and vlSlhlllty trwg oiiv,.s xvx m a ttcesrea!ram a+ynnttc � &n'.kan die!sip crud xandegmwa0ad en mu6ak Can[cs,�iaY':ig[i�ft'uncamal Businesses :�aaM�csHreM Oi kaC ngdgK s1 w r'oa m rt g tt Httci nn irnA ng Use the Cloud 54% 9 4 C rl doyen nwmaare56% aauwaoaroameowar Every year.more and more businesses are o rWgw w�,aom rde adopting cloud"While traditionally thanght nom ag daze of as an IT decision,cloud is increasi ngiyAli being considered a business decision to enable company functions.Take a Inok at 59% eerciavman,""aoamiana five reasons why more businesses are adding 'niend m�uciwe en�.,e She cloud to!heir technology arsenals. maaaee ore data+a i�ruwti ,j� 0, It can support a variety of It allows for rapid development IN results are proven business needs of new products and services nom a w, e a ate„ Cam•[ss0'v%.1v1.:CMh"I r.w rhC C'a.0 OH-bLdi �wWabk capaN hies. bufiMaxnupng Gaudaieeealuig Eexli[s ra w,nx sow kW a1+6�m1ft ew nc—.nat ieames eapmmhmsaq'aerewe acruas lac aaniwnY. mxi s�pwd to oe aye. em w W. �'m 557 *nrr�rnr o5%� 55%� m���iman,e�� f o'.au,essedsa«a 15% a.a'lin:.+vmn �.,iea- it ca.: errs rncr•c 7r aK one taerre,aedaie..i 139'v ryiefvnee'mndn vcauc�s&arrvrcee 4B% � �ta I ■� ea..�mom•emenr m a� emoioyee mmniy Sw'rn CVM1 iN,MwC Hp�d ia,Nn ---- According to Jack Woods at Silicon Angle,there's some serious growth forecasted and he HAS 20 recent cloud computing statistics (httD://bit.ly/ik8kui1)you can use to make your case for why you need the cloud or to understand why you should consider it for your business.The above bullet points come from his post. At the simplest level, cloud computing lets you share files and resources via the web.If you run a small business,you read about cloud storage as a way to backup and protect your data. Companies, such as, Google Docs (now Drive), DropBox,Carbonite, Cubby, and a slew of others. If you need to choose an online backup provider,take a look at Tim Fisher's post: 4o Online BackuD. Services Reviewed(httD://abt.cm/1e7U4hD). Looking beyond online backup,to understanding where the cloud is going,I look to Louis Columbus who writes extensively about the cloud here on Forbes and elsewhere.After reading Louis'Big Data post a couple of weeks ago,2014: The Year Big Data Adoption Goes Mainstream In The Enterprise, (linked in left column)it made it clear that big data takes big crunching power and is part of why many midsized and large enterprises are not leveraging in- house servers —there is no leverage.You want to leverage a cloud provider like those listed above that can scale up and down with your computing needs. Well known tech guru, Om Malik, can help you wrap your head around cloud computing and its enormous,rapid growth in his interview with Amazon CTO Werner Vogels(httn://iziizaom.com/201-q/12/-qO/amazon-cto-werner-vogels- cloud-and-saas-are-going-global-fast/).Vogels spells out how the big impact of the cloud will take place overseas,outside the USA,especially for small and midsized businesses.You can read additional 2014 from GigaOm here (httn://research.gigaom.com/201'1/12/cloud-computing_-and-database-2014- the-trend-is-vour-friend/). Forbes contributor,Joe McKendrick,penned a useful post as I was writing this today: 9 `Worst Practices'To Avoid With Cloud Computing. It includes some great ideas to help you evaluate whether the cloud can help your business or not(listed to the left). From improved collaboration to productivity increases,the cloud has the potential to change your business.The cloud is rapidly growing,moving quickly—if you've been on the fence around investing in new infrastructure, you should look to the cloud.This post from Network Computing lists out a bunch of recent stats around big data and the cloud (httn://www.networkcomnutine.com/next-generation-data- center/servers/big-data-analvtics-and-why-datacenter-in/24016r,742). Final note:The Mvth Of Online Backup (httn://www.forbes.com/sites/tonvbradlev/201-/07/2-/the-mvth-of-online- backun/)by Tony Bradley here on Forbes is excellent and highlights how you need to read the fine print for any cloud service you use. He explains a not-so- extreme example of a photographer using Carbonite to back up her 2.5 Terabytes of important,wouldn't-want-to-lose customer data.Worthy read. Forrester: Top Technology Trends For 2014 And Beyond THE MANAGED CLOUD 0 2xpe/ience f dioital- exoerience- delivery- SEE FOR 1fOlJRSELF makes-or- breaks- s/ i. Digital Convergence Erodes Boundaries Physical and digital worlds are converging.As a result consumers expect uniform service whether they are in the • 4 comments,1 called-out Comment Now Follow Comments A 2'khenahealth Exhibit 12 Confidential At Google, a Place to Work and Play-NYTimes.com Page 1 of 5 O)r„New Rork 0me.5 March 15,2013 Looking for a Lesson in Google's Perks By JAMES B. STEWART After Yahoo's chief executive, Marissa Mayer, ordered employees working from home to show up at the office for work, there was speculation that she was emulating Google, her previous employer. Yahoo employees should be so lucky. Whatever else might be said about Yahoo's workplace, it's a long way from Google's, as I discovered this week when I dropped in at Google's East Coast headquarters, a vast former Port Authority shipping complex that occupies a full city block in the Chelsea neighborhood of Manhattan.Yahoo set off a nationwide debate about workplace flexibility, productivity and creativity last month after a memo with the directive surfaced on the Internet. "We need to be one Yahoo, and that starts with physically being together," read the memo from Jackie Reses,Yahoo's director of human resources, which went viral after Kara Swisher posted it on AllThingsD. The discussion may have been all the more heated since the ban was imposed by one of the relatively few female chief executives, one who had a nursery built near the executive suite after she gave birth last year. Google's various offices and campuses around the globe reflect the company's overarching philosophy, which is nothing less than "to create the happiest, most productive workplace in the world," according to a Google spokesman, Jordan Newman. But do its unorthodox workplaces and lavish perks yield the kind of creativity it prides itself on, and Yahoo obviously hopes to foster? Mr. Newman, 27, who joined Google straight from Yale, and Brian Welle, a"people analytics" manager who has a Ph.D. in industrial and organizational psychology from New York University, led me on a brisk and, at times, dizzying excursion through a labyrinth of play areas; cafes, coffee bars and open kitchens; sunny outdoor terraces with chaises; gourmet cafeterias that serve free breakfast, lunch and dinner; Broadway-theme conference rooms with velvet drapes; and conversation areas designed to look like vintage subway cars. http://www.nytimes.com/2013/03/16/business/at-google-a-place-to-work-and-play.html?... 10/14/2014 At Google, a Place to Work and Play-NYTimes.com Page 2 of 5 The library looks as if Miss Scarlet (from the board game Clue)has just stepped out, leaving her incriminating noose (in the form of a necktie) prominently draped on the back of an oversize wing chair.A bookcase swings open to reveal a secret room and even more private reading area. Next to the recently expanded Lego play station, employees can scurry up a ladder that connects the fourth and fifth floors, where a fiendishly challenging scavenger hunt was in progress. Dogs strolled the corridors alongside their masters, and a cocker spaniel was napping,leashed to a pet rail, outside one of the dining areas. Google lets many of its hundreds of software engineers, the core of its intellectual capital, design their own desks or work stations out of what resemble oversize Tinker Toys. Some have standing desks, a few even have attached treadmills so they can walk while working. Employees express themselves by scribbling on walls. The result looks a little chaotic,like some kind of high-tech refugee camp,but Google says that's how the engineers like it. "We're trying to push the boundaries of the workplace," Mr. Newman said, in what seemed an understatement. In keeping with a company built on information, this seeming spontaneity is anything but. Everything has been researched and is backed by data. In one of the open kitchen areas, Dr. Welle pointed to an array of free food, snacks, candy and beverages. "The healthy choices are front-loaded,"he said. "We're not trying to be mom and dad. Coercion doesn't work. The choices are there. But we care about our employees'health, and our research shows that if people cognitively engage with food, they make better choices." So the candy(M&Ms, plain and peanut; TCHO brand luxury chocolate bars, chewing gum, Life Savers) is in opaque ceramic jars that sport prominent nutritional labels. Healthier snacks (almonds, peanuts, dried kiwi and dried banana chips) are in transparent glass jars. In coolers, sodas are concealed behind translucent glass.A variety of waters and juices are immediately visible. "Our research shows that people consume 40 percent more water if that's the first thing they see," Dr. Welle said. (Note to Mayor Bloomberg: Perhaps New York City should hide supersize sodas rather than ban them.) Craig Nevill-Manning, a New Zealand native and Google's engineering director in Manhattan,was the impetus behind the company's decision to hire a cadre of engineers in New York, and he led an exodus to Chelsea from what was a small outpost near Times Square. "I lobbied for this building,"he told me. "I love the neighborhood.You can live across the street. There are bars and restaurants." He showed me a map of the city with dots indicating where each Google employee lives. They're heavily concentrated in Manhattan below 34th Street, Brooklyn and the Upper West http://www.nytimes.com/2013/03/16/business/at-google-a-place-to-work-and-play.html?... 10/14/2014 At Google, a Place to Work and Play-NYTimes.com Page 3 of 5 Side, most within walking distance of Chelsea or a short subway ride away. "We inherited the informal work environment — the casual dress, the flexible hours — from Silicon Valley,but we adapted it to the East Coast urban environment,"he said.After the dot-com collapse in 2000, Manhattan was largely written off as a technology center. Since Google's move, Chelsea is mentioned in the same breath as Silicon Valley. Google has turned over 22,000 square feet of its space, rent-free, to Cornell until its new technology campus can be built on Roosevelt Island. "The philosophy is very simple," Mr. Nevill-Manning said. "Google's success depends on innovation and collaboration. Everything we did was geared toward making it easy to talk. Being on one floor here removed psychological barriers to interacting, and we've tried to preserve that."Among innovations that sprang from seemingly chance office encounters are the Google Art Project,which is putting thousands of museum works online, and enhancements to the company's AdSense and AdWords advertising platforms. Razor scooters make it easy to get around the huge floors (each covers five acres), which offer every conceivable gathering space, from large open spaces to tiny nooks with whimsical furniture. It was Mr. Nevill-Manning's idea to install the ladder connecting floors, now that Google is too large to fit on one. He said he wouldn't go so far as to say cost is no object, but software engineers "are incredibly productive on a square foot basis,"he said. "Their value is enormous. It doesn't cost that much to make them happy." Allison Mooney, 32,joined Google two years ago from the advertising giant Omnicom Group, and the difference is "night and day," she said. "I came here from the New York agency model, where you work constantly, 24/7. You answer every e-mail, nights and weekends. Here,you don't have to show you're working, or act like you're working. The culture here is to shut down on weekends. People have a life." And the perks, she added, are "amazing." In the course of our brief conversation, she mentioned subsidized massages (with massage rooms on nearly every floor); free once-a- week eyebrow shaping; free yoga and Pilates classes; a course she took called "Unwind: the art and science of stress management"; a course in advanced negotiation taught by a Wharton professor; a health consultation and follow-up with a personal health counselor; an author series and an appearance by the novelist Toni Morrison; and a live interview of Justin Bieber by Jimmy Fallon in the Google office. This in addition to a full array of more traditional employee benefits. Curiously, there's some exercise equipment but no fitness center (Google's headquarters in Mountain View, Calif. has multiple state-of-the-art fitness centers)because Manhattan employees said they preferred joining health clubs to exercising with colleagues. (Google subsidizes the gym http://www.nytimes.com/2013/03/16/business/at-google-a-place-to-work-and-play.html?... 10/14/2014 At Google, a Place to Work and Play-NYTimes.com Page 4 of 5 memberships.)And there's no open bar, although alcohol is served at T.G.I.F. parties (now held on Thursdays), one of which featured a dating game. After my visit, I spoke to Teresa Amabile, a business administration professor at Harvard Business School and co-author of"The Progress Principle," about creativity at work, and told her I had just been to Google. "Isn't it fantastic?" she said. Some of her former students work there, and"they feel very,very fortunate to be there," she said.As to the broader relationship between the workplace and creativity, "there's some evidence that great physical space enhances creativity," she said. "The theory is that open spaces that are fun,where people want to be, facilitate idea exchange. I've watched people interact at Google and you see a cross-fertilization of ideas."That said, she added, "there isn't a lot of research to support this.And none of this matters unless people feel they have meaningful work and are making progress at it. In over 30 years of research, I've found that people do their most creative work when they're motivated by the work itself." Ben Waber, who has a Ph.D. from M.I.T. and is the author of"People Analytics,"is, at 29, the median age of Google employees. His company, Sociometric Solutions in Boston, uses data to assess workplace interactions. "Google has really been out front in this field,"he said. "They've looked at the data to see how people are collaborating. Physical space is the biggest lever to encourage collaboration.And the data are clear that the biggest driver of performance in complex industries like software is serendipitous interaction. For this to happen,you also need to shape a community. That means if you're stressed, there's someone to help, to take up the slack. If you're surrounded by friends,you're happier,you're more loyal,you're more productive. Google looks at this holistically. It's the antithesis of the old factory model,where people were just cogs in a machine." Both experts were critical of Yahoo's plan to force employees into the office. "If you're spying on them, monitoring them or coercing them, it will create a poisonous atmosphere," Dr. Waber said. Professor Amabile added: "Google doesn't have to force people. Marissa Mayers's mistake may have been not being more clear about the need to be together and to experience creative excitement. Taking a hard line is likely to have negative effects." A Yahoo spokeswoman responded: "We don't discuss internal matters. This isn't a broad industry view on working from home. This is about what is right for Yahoo, right now." It should probably be obvious at this juncture,but Google doesn't require employees to work from the office. It doesn't even keep track of who's there. The notion seems to have never occurred to anyone. "I don't think we've ever had a policy on that," Mr. Newman said,but http://www.nytimes.com/2013/03/16/business/at-google-a-place-to-work-and-play.html?... 10/14/2014 At Google, a Place to Work and Play-NYTimes.com Page 5 of 5 "we do expect employees to figure out a work schedule with their team and manager. It's not a free-for-all." For a company with Google's largess — and the profit margins that make it possible — it's hardly necessary to require employees to be at the office. "People want to come in," Ms. Mooney said. On average, she estimates she spends nine hours a day there, five days a week. She mentioned that she recently took a day off— and ended up at the office. "I live in a studio apartment," she explained. "And I don't have free food." http://www.nytimes.com/2013/03/16/business/at-google-a-place-to-work-and-play.html?... 10/14/2014 A 2'khenahealth Exhibit 13 Confidential Maximizing Millennials in the Workplace tJNC KENAN-FLAGLER BUSINESS SCHOOL By: Jessica Brack Program Director UNC Executive Development All Content @ UNC Executive Development 2012 Website:www.execdev.unc.edu I Phone:1.800.862.3932 1 Email:unc exec@unc.edu Maximizing Millennials in the Workplace UNC C KENlAN--FLAGLER BUSINESS SCHOOL. Introduction They are known as Millennials, Gen Y, Gen Next, Echo Boomers, the Baby-on- Board Generation, Screenagers, Facebookers and the MySpace Generation, to name just a few. Whatever you choose to call them, they are the nearly 80 million young adults born (according to the U.S. Bureau of Labor Statistics) between 1976 and 2001 who have already joined or are preparing to join the workforce. By 2014, 36 percent of the U.S. workforce will be comprised of this generation and by 2020, nearly half (46 percent) of all U.S. workers will be Millennials (Lynch, 2008). By comparison, the generation before them, Generation X (or Gen Xers), represent only 16 percent of today's workforce. The sheer volume of Millennials, combined with the relative lack of Gen Xers and the increasing retirement of Baby Boomers means that employers will be facing leadership gaps. And they will be looking to Millennials to fill those gaps. Millennials in the Millennials in the Workforce - 2014 Workforce - 2020 u Millennials -i Older Generations u Millennials i Older Generations 46 400 54% Source:Lvnch,2008 Source:Lvnch,2008 By all accounts, Millennials are unlike preceding generations. They view the world differently and have redefined the meaning of success, personally and professionally. In some cases, this has led to misunderstanding among the different generations co- existing in today's workplace. Increasingly, however, business leaders are realizing this generation's unique competencies and perspective, and employers are looking for ways to harness their strengths. (For additional insights on how to leverage the shared values of the different generations in your workforce, refer to the UNC Executive Development white paper: Rethinking Generation Gaps in the Worko/ace: Focus on Shared Values.) 1'he Power of All Content©UNC Executive Development 2012 2 1 P a g e Experience UNC txn.urivn VP d: pm l Maximizing Millennials in the Workplace UNC C KENlAN--FLAGLER BUSINESS SCHOOL. This white paper: Examines the positive characteristics Millennials bring to an organization. Explores what this generation feels is important in a job and what they expect from their employers. Offers HR and talent development professionals some practical tips on how to keep this generation engaged. Provides examples of what leading-edge organizations are doing to leverage this generation's strengths and to integrate them into a multi-generational workforce. The Cowboys The generations preceding the Millennials are sort of like cowboys, a rugged, individualistic lot. In general, these Baby Boomers and Gen Xers believe in a command-and-control management approach, value working individually, view managers as experts and look to their employers for career planning. They like clear boundaries and have a generally inward-looking perspective as compared to Millennials (Gartner Research in Lynch, 2008). These characteristics are understandable. Baby Boomers and Gen Xers grew up during a time when conducting research required a trip to the library and a stroll through the index card file. If they were early cell phone users, they toted around a two-pound, brick-sized phone with a whopping half-hour of talk time. Life for these generations was more linear. It took time to progress from point A to point B. The Collaborators In contrast, Millennials see life in more circular, optimistic terms. For them, life is more like London's Eye—the city's giant Ferris wheel—there are multiple opportunities to stop along the way, with great views they can instantly snap with their camera phones, post to Facebook, and add a status update, all before the next stop. They have grown up with technology. They have always been able to open multiple tabs in an Internet browser to conduct research and search for movies and music while simultaneously playing Angry Birds. They use social media applications like they 1'he Power of All Content©UNC Executive Development 2012 3 1 P a g e Experience UNC txn.urivn VP d: pm l Maximizing Millennials in the Workplace UNC C KENlAN--FLAGLER BUSINESS SCHOOL. were born to it—because they were. They are tech-savvy multi-taskers because that is all they have ever known. They don't view managers as content experts (like their predecessors) because they know where to find multiple versions of the information. Instead, they view managers more as coaches and mentors. They know of dozens of websites that can help them plan their own careers, and the constant launching of a newer or better app has made them continuous learners. Still, Millennials were raised under heavy supervision. This generation didn't grow up in a world where kids left the house on their bikes every summer morning and returned in the evening just in time for dinner. They were driven to soccer practices, music lessons and T-ball games, and most summer days were spent at a carefully selected camp. Their early (and constantly supervised) exposure to team sports has made them the best team players and collaborators in generations. In addition, they are the most Millennials are continuous learners, diverse generation to date team players, collaborators, diverse, and not just racially or optimistic, achievement-oriented, ethnically. This generation socially conscious and highly educated. has more individuals than ever who come from single- parent homes, blended families and same-sex parent families. Millennials are optimistic and achievement- oriented. They are also the most educated generation in history (Newman, 2010; Rikleen, n.d.). And thanks to technology,they are aware of their own vast numbers and their impact on the environment. This generation is socially conscious and expects their employers to act in socially conscious ways. The Clash of the Cowboys and the Collaborators in the Workplace Nof surprisingly, what makes Millennials unique—their tech-savvy, multi-tasking, collaborative approach to life—may cause some challenges in the workplace. Where the "cowboy generations" take an individualistic approach to life and work, Millennials crave collaboration, team-based work projects and an unstructured flow of information at all levels. They have an outward-looking perspective and interact with an extensive network of communities beyond their employer, which may be interpreted by other generations as a lack of dedication or loyalty (Gartner Research in Lynch, 2008). 1'he Power of All Content©UNC Executive Development 2012 4 1 P a g e Experience UNC txn.urivn VP d: pm l Maximizing Millennials in the Workplace KET � C KENlAN--FLAGLER BUSINESS SCHOOL. While Baby Boomers and Gen Xers want job security and structure, Millennials seek employability and flexibility. Millennials want to continually add to their skills in meaningful ways. For them, work isn't just about income. It's about personal enrichment and fulfillment, which means that having flexibility in their work schedules is highly regarded. In fact, a recent Mercer study (in Nekuda, 2011) found that the top three career priorities for Millennials were compensation (most Millennials graduate from college with an average of$20,000 in debt), flexible work schedules and the opportunity to make a difference. Not far behind the top three were having trust in their organization's leadership, receiving benefits and getting professional development opportunities. Cowboys also value these factors in their jobs but to a different extent. In a study by Levit and Licina (2011, in Rikleen, n.d.,) when asked how important meaningful work was, 12 percent of managers said it was important versus 30 percent of Millennials. Fifty percent of managers in the study said that high pay was important, versus 28 percent of Millennials. Only 12 percent of managers said a sense of accomplishment was important, as compared with 25 percent of Millennials. And while 12 percent of managers said responsibility was important, only 5 percent of Millennials thought so. Job Factors Valued as Important o Millennials U Managers 50% C 30% 28% 25% 12% Ll 12% Meaningful Work High Pay Sense of Responsibility Accomplishment Source:2011.in Rikleen.n.d. 1'he Power of All Content©UNC Executive Development 2012 5 1 P a g e Experience uNc txn.urivn V-d: p—1 Maximizing Millennials in the Workplace _KETC KENlAN--FLAGLER BUSINESS SCHOOL. Company Spotlight: Johnson & Johnson Johnson &Johnson formed its first-ever rmuvn+"wn generational affinity group, the Millennials, to help raise understanding of the generation and to encourage inclusion across all generations. The group serves as an educational resource and awareness advocate about Millennials' culture and characteristics, empowers and supports Millennials' professional growth and success, and works to establish relationships between Millennials and all other employees to encourage a deeper understanding of the Millennial population. The group is open for everyone—not just Millennials—to join. (Rickleen, n.d.) With such different work expectations among generations, it is no wonder that some conflict may arise. These different expectations can and must be managed, particularly now, as we slowly emerge from the Great Recession, which officially ended in 2009 and delayed the wave of Baby Boomer retirements. Cowboys vs. Millennials: Workplace Expectations Cowboys Command and control management style Active,involved leadership Individually focused work Collaborative, teamwork Managed flow of information Unstructured flow of information Job security Employability Work= income Work= income and personal enrichment Structure No structure, flexibility is highly valued Inward looking Outward looking Influence through organization, position Influence through networks, communities Source:Gartner Research in Lynch,2008 1'he Power of All Content©UNC Executive Development 2012 6 1 P a g e Experience UNC txn.urivn VP d: pm ' Maximizing Millennials in the Workplace UNC C KENlAN--FLAGLER BUSINESS SCHOOL. What Millennials Want from Their Employers Understanding how Millennials were raised and their collective world experiences can help employers better understand what they want from their jobs. Diane Speigel, CEO of The End Result, a corporate training and leadership development company, writes that Millennials want the following from their employers: 1. Coaching. Millennials were raised with constant coaching and feedback and expect it to continue in the workplace. Coaching will keep Millennials engaged in their work. Speigel notes that coaching does not need to be time consuming or overly formal. "Coaching," she states, "can be as simple as a quick e-mail response, a text or a two-minute conversation." 2. rnllahnratinr Millennials are natural collaborators, particularly when the group's purpose and goals are understood. Speigel recommends that employers be clear about deadlines and any business boundaries the group should be aware of. 3. Measures. Millennials were raised with a lot of structure and measuring systems and are accustomed to understanding how they will be judged and assessed. They expect these metrics to continue in the workplace, so employers should define clear and consistent job assessment criteria. 4. Motivatior Millennials want a work environment that is comfortable and which inspires them to contribute without fear of being criticized. Speigel suggests throwing a pizza lunch or giving time off for a job well done (Speigel, 2011). In addition to Speigel's observations, Cara Newman of Young Money adds a few more. The structure Millennials grew up with means that they are used to supervision. They prefer, however, to follow leaders who are honest, have integrity and who treat them with respect. Leaders should let Millennials know the big picture so they understand their roles. They want flexibility in their jobs and opportunities to learn and meaningfully contribute. Offer projects, then, with a learning component. It will challenge them and make them work harder (Newman, 2010). 1'he Power of All Content©UNC Executive Development 2012 7 1 P a g e Experience UNC txn.urivn VP d: pm l Maximizing Millennials in the Workplace UNC C KENlAN--FLAGLER BUSINESS SCHOOL. The Millennial Engagement Challenge The recent recession has taken its toll on everyone, but Millennials in particular were hard hit. Many younger adults, who were employed at the start of the recession, became victims of "the last one in, the first one out" syndrome. This soured their perceptions of the workplace; 37 percent of Millennials in a recent SBR Consulting survey said they didn't trust big business (Randall, 2011). A 2011 Pew study on young adults and work found that 41 percent of the public believed young adults (between the ages of 18 and 34) were having a tougher time in today's marketplace than middle-age and older adults when it came to finding long- term employment. Government statistics appear to back that impression. Since 2010, the share of young adults currently employed (54 percent) is the lowest since the U.S. government started collecting such data in 1948. In addition, the gap in employment between young adults and all working adults—about 15 percentage points—is the widest on record. Furthermore, younger adults employed full time have experienced a 6 percent drop in weekly earning—more than any other age group over the past four years (Taylor et al, 2012). The Pew survey also found that during the recent recession, 49 percent of the young adults surveyed said that had taken a job they didn't want just to pay the bills, and nearly a quarter said they had taken an unpaid job to gain some work experience. For employers, this means that many working Millennials are probably not engaged and, according to the SBR Consulting survey, 70 percent of them are planning to change jobs once the economy improves (Nekuda, 2011). (For additional insights on employee engagement, refer to the UNC Executive Development white paper: Focusina on Em,nlovee Enaaaement.•How to Measure and Improve It.) This potential exodus of Millennials from their current jobs combined with Baby Boomer retirements could put organizations at risk at a time when many are only now finally making it solidly back into the black. This turnover will mean knowledge and productivity loss, higher recruitment and training costs, not to mention the leadership gaps that will be created by exiting Baby Boomers. There are simply not enough Gen Xers in the workplace to fill the leadership gaps that will occur, and employers must prepare Millennials now to help fill those gaps. 1'he Power of All Content©UNC Executive Development 2012 8 1 P a g e Experience UNC txn.urivn VP d: pm l Maximizing Millennials in the Workplace _KETC Q� KENlAN--FLAGLER BUSINESS SCHOOL. HR's Role in Attracting, Developing, and Retaining Millennials Despite the setbacks Millennials experienced as a result of the Company Spotlight: General Electric recession, the bad times, according to the Pew study, did not trump this To help transition its generation's optimism. Among the Millennial workforce to / young adults surveyed, 88 percent GE's culture, HR leaders / said they either earned enough at GE formed a team of 21 money now or expected to in the Millennials from various GE future. Young adults are concerned businesses and functions with a goal to about their future employability, identify ways to attract, develop and retain however. Nearly half (46 percent) of Millennial talent. The team, named "Global young adults responding to the New Directions," returned from their three- survey said they lacked the education month assignment with the following or training necessary to get ahead in recommendations that were adopted by their jobs or careers, a number that senior leaders: could reflect Millennials' awareness of the fast-paced change inherent in a Use gaming technology to connect the knowledge economy. In addition, the world to GE in a fun and engaging way to survey reflected an increased level of educate prospective employees about vulnerability among young adults; the company's values. only 43 percent felt extremely or very confident that they could find another Create a personalized suite of benefits job if they lost or left their current that offers more flexibility and choice to one. better meet the needs of GE's global, Millennials then, are optimistic about diverse workforce. their future earnings but feel Enhance performance management vulnerable about their immediate systems with new tools to help employability. They are also deeply concerned whether they have the employees navigate their careers at GE, training and skills needed to compete to identify a wider range of job in the long run. opportunities throughout the company, and to offer more "just-in-time" feedback and coaching. (Peters, 2012) 1'he Power of All Content©UNC Executive Development 2012 9 1 P a g e Experience UNC txn.urivn VP d: pm l Maximizing Millennials in the Workplace UNC C KENlAN--FLAGLER BUSINESS SCHOOL. With this in mind and understanding what Millennials are looking for from their employers, here are a few steps HR and talent management professionals can take to attract, develop and retain this generation: Step 1: Attract them. When trying to attract Millennials to an organization, communicate to prospective employees what the organization does to engage workers. Let them know about the organization's culture, open communication policy, flexible work schedules, training- and-development opportunities, etc. Companies like Google and Deloitte are increasingly using technology to deliver this information through video streaming on recruiting websites. Employees are often featured in the videos, letting prospective employees "walk" with them through their day as they explain how the organizational culture fits with their job. Technology and e-learning opportunities can also be used in onboarding and cross-training programs. (For additional insights on how leading organizations use technology in their HR practices to attract and retain talent to their organizations, refer to the UNC Executive Development white paper: The Recruiting Revolution:How Technoloavis Transformina TalentAcauisition.) It may also be time to consider Millennials' compensation needs, particularly in light of the average $20,000 debt Millennials have in student loans after graduating from college. Compensation packages slightly above industry or regional averages can provide organizations a recruitment edge in attracting the best and brightest of this generation. Most Millennials also believe that they will never see a pension or Social Security check and that they will need to find their own financial independence in retirement, so offering immediate 401(k) eligibility can have appeal for Millennials (Lynch, 2008). 1'he Power of All Content©UNC Executive Development 2012 10 1 P a g e Experience UNC txn.urivn VP d: pm l Maximizing Millennials in the Workplace UNC C KENlAN--FLAGLER BUSINESS SCHOOL. Step 2: Develop them. In addition to the steps taken to attract Millennials, leadership expert Lauren Stiller Rikleen offers the following tips on how to develop Millennials into leadership roles: Develop initiatives that foster mutual support and understanding among the generations. Training on intergenerational dynamics will help build rapport and a stronger sense of community. For Millennials, offer soft-skills training like how to assimilate into a new workplace culture, how to work with team members assertively and diplomatically, how to process feedback, how to approach a supervisor for coaching and mentoring, and how to set long-term career goals. Offer collaborative discussions like roundtables that encourage innovative thinking across generations. Foster an appreciation of diversity within the organization. This will help all generations avoid the stereotyping that gets in the way of valuing the skills sets of each employee (Rikleen, n.d.) . These kinds of leadership development opportunities will not only help minimize the misperceptions that arise among generations, but will also help prepare the Millennial generation to assume leadership roles when Baby Boomers begin leaving the workplace. Step 3: Retain them. Creating an organizational culture that is flexible and relaxed, has open communication, encourages sharing and innovation and offers flexibility is a good step to keeping Millennials engaged. Millennials want fun and a less formal atmosphere may help foster it. Open and honest communication is highly valued by Millennials and they expect it from their leaders, so when focusing on creating a comfortable culture, consider not just the formal surroundings but also the nature and tone of organizational communication. Good communication will also help them understand their role in the organization, and may break down some of the distrust this generation has of big business. (For additional insights on how organizations have used open-book management practices to create an engaging corporate culture, refer to the UNC Executive Development white paper: Embracing Oaen-BookManaaement to Fuel Emplovee Engapementand Corporate Sustainabilitv.) 1'he Power of All Content©UNC Executive Development 2012 111 Page Experience UNC txn.urivn VP d: pm ' Maximizing Millennials in the Workplace UNC C KENlAN--FLAGLER BUSINESS SCHOOL. Training and development budgets were hard hit during the recession. Millennials place a high value on having those opportunities available through their employers and want to acquire new skills and abilities to remain competitive, so it is now more important than ever to reinstate those budgets. Training and development opportunities can include on-the-job training, coaching and mentoring. Some organizations have taken coaching and mentoring a step further by instituting reverse mentoring programs, which allow Millennials to share their technological knowledge to other generations in the workplace. (For additional insights on how organizations have used e-learning and technology to cost-effectively develop and retain their employees, refer to the UNC Executive Development white paper: Unlocking the Potential of On-Demand Learning in the Workplace.) Coaching and mentoring programs can help retain Millennials. A study of Sun Microsystems by Bellevue University's Human Capital Lab found that mentees had a 23 percent higher retention rate than non-participants, and mentors had a retention rate that was 20 percent higher than non-participants, resulting in estimated savings of $6.7 million (Nekuda, 2011). Company Spotlight: Northrop Grumman Northrop Grumman's Connecting AfORTMROP GRUMMAX program is run by employees, for employees and its aim is to retain recently hired and highly skilled engineers. The all-volunteer team organizes social networking, community outreach and professional development activities across 26 geographic regions. In the past three years, more than 15 percent of Northrop Grumman employees have participated in more than 1,000 events. The program also focuses on providing education about the business, industry trends and relevant career planning information. It also aims to provide frequent interaction with senior executives who provide guidance on career paths to new hires. (Rickleen, n.d.) 1'he Power of All Content©UNC Executive Development 2012 12 1 P a g e Experience UNC txn.urivn VP d: pm l Maximizing Millennials in the Workplace UNC C KENlAN--FLAGLER BUSINESS SCHOOL. Millennials are continuous learners and there is evidence that learning opportunities, such as tuition reimbursement programs, increase retention rates. A Bellevue University study of Mutual of Omaha found that employees who participated in the company's tuition reimbursement program were twice as likely to stay as non- participants (Nekuda, 2011). When considering training and development opportunities targeted to Millennials, leverage their love of technology with e-learning opportunities. E-learning opportunities can be on-demand, offering flexibility in terms of when and where Millennials participate (a feature Millennials highly value), and are extremely cost effective. Employers are increasingly using e-learning to teach introductory concepts like business basics or sales techniques. Millennials like to work collaboratively on teams, so now would be a good time to take a teamwork approach to work on a test run. Since other generations may balk at this approach, consider forming a team of Millennials to tackle a particular project—just be sure the project fits with the organizational mission, goals and objectives because Millennials will want to understand how the project fits into the big picture. Finally, keep the doors open for Millennials who leave the organization. Many organizations have developed virtual alumni networks that keep former employees up- to-date on what is happening in the organization. These networks can also be used to post job announcements specifically tailored to alumni who may be ready to return. Conclusion The nearly 80 million Millennials who are about to enter or who are already in the workforce will fundamentally change how business is conducted in the future. HR practices and policies designed to attract, develop and retain this vast cohort must change to reflect this generation's work—and life—expectations. 1'he Power of All Content©UNC Executive Development 2012 13 1 P a g e Experience UNC txn.urivn VP d: pm l Maximizing Millennials in the Workplace UNC C KENlAN--FLAGLER BUSINESS SCHOOL. About UNC Executive Development Our approach to program design and delivery draws upon the power of real-world, applicable experiences from our faculty and staff, integrated with the knowledge our client partners share about the challenges they face. We call this approach The Power of Experience. We combine traditional with experiential and unique learning. Through action learning and business simulation activities, we challenge participants to think, reflect and make decisions differently. Our Approach: The Partnership Our team customizes each leadership program through a highly collaborative process that involves our clients, program directors,faculty and program managers. This integrated approach consistently drives strong outcomes. Our Approach: The Results Our executive education programs are designed with results in mind. Below are a few examples of the results our client partners have achieved: Leadership refocused with new Products redefined strategy and cohesive vision New markets targeted Strategic plans created for the Cost-saving measures developed global marketplace Silos leveled Supply chains streamlined Teams aligned Participants leave empowered to bring in new ideas, present different ways to grow business and tackle challenges. The result is stronger individuals leading stronger teams and organizations. The UNC Business Essentials online business certificate program provides individuals without business backgrounds the business skills and knowledge necessary to help them pursue their career goals and make a positive impact in any organization. The program's flexible e-learning environment enables a positive and challenging learning experience for employees while minimizing costs such as travel, lodging and lost productivity. Contact Us Jessica Brack, UNC Executive Development, Program Director, iessica brack@unc.edu Website: www.execdev.unc.edu I Phone: 1.800.862.3932 1 Email: unc exec@unc.edu 1'he Power of All Content©UNC Executive Development 2012 14 1 P a g e Experience UNC txn.urivn VP d: pm l Maximizing Millennials in the Workplace KET � C KENlAN--FLAGLER BUSINESS SCHOOL. Sources Burgess,J.(2008).Managing the new workforce,generation Y(Millennials).Red Fusion.Retrieved from http://www.redfusion.com/arc managing generation Y millennials.htm Gorman,P.,Nelson,T.&Glassman,A.(2004).The Millennial generation:a strategic opportunity.Organizational Analysis,12,3,255- 270. Hardy,D.(2011,June).Mining the Millennials.DarrenHardy.Retrieved from http://darrenhardv.success.com/2011/06/mining-the- millennials/ Internships.com(n.d.)."Gen Y'interns:7 reasons why they are good hires.Internships.com.Retrieved from http://www.internships.com/emr)lover/resources/recruit/whvgen-v Lynch,A.(2008).R01 on generation Y employees.Bottom Line Conversations,LLC.Retrieved from http://www.knoxviIlechamber.com/pdf/workforce/ROIonGenYWhitePaper.[)df Mercer(2011,June).Inside employees minds:navigating the new rules of engagement.Mercer.New York:NY. Myers,K.&Sadaghiani,K.(2010,June).Millennials in the workplace:a communication perspective on Millennials'organizational relationships and performance.Journal of Business Psychology,25(2),225-238. Nekuda,J.(2011,August 11).What Millennials want.Human Capital Lab.Retrieved from http://www.hu mancapital la be.org/blog/?p=256 Newman,C.(2010,March 31).Managing Millennials in the workforce.Young Money.Retrieved from http://www.voungmonev.com/entrepreneur/managing-millennials-in-the-workforce/ Peters,S.(2012,February 8).How GE is attracting,developing,and retaining global talent.Harvard Business Review.Retrieved from http://blogs.hbr.org/cs/2012/02/how ge is attracting and devel.html Portillo,E.(2011,December 26).New poll shows many think Millennials aren't hard workers.Chicago Tribune.Retrieved from http://articles.chicagotribune.com/2011-12-26/business/ct-biz-1226-millennials-20111224-1-m illennials-new-poll-older-workers Randall,S.(2011).Millennial generation today.SBR Consulting.Charlotte:NC. Rikleen,L.(n.d.).Creating tomorrow's leaders:the expanding roles of Millennials in the workplace.Boston College Center for Work& Family.Chestnut Hill:MA. Schawbel,D.(2011,December 13).The expanding roles of Millennials in the workplace.Forbes.Retrieved from http://www.forbes.com/sites/da nschawbel/2011/12/13/the-expanding-roles-of-m i Ilenn ials-in-the-workplace/ Speigel,D.(2011,July 20).Why hiring Millennials is good for your business.Open Forum.Retrieved from http://www.oi)enforum.com/articles/whv-hiring-millennials-is-good-for-vour-business Sullivan,J.(2011,December 12).The business case for hiring college grads-32 reasons they can produce high ROL Ere.net. Retrieved from http://www.erenet.net/2011/12/12/the-business-case-for-hiring-college-grads-reasons-thev-can-i)roced-a-high-roi/ Taylor,P.,Parker,K.,Kochlar,R.et al(2012,February 9).Young,underemployed and optimistic.Coming of age,slowly,in a tough economy.Pew Social&Demographic Trends.Washington:DC. Ukeleja,M.(2011,November 15).How do you keep Millennials from moving on?LeadershipTraq.Retrieved from http://Ieadershi Dtraci.com/2011/11/15/how-do-vou-keep-mi II en nials-from-moving-on/ 1'he Power of All Content©UNC Executive Development 2012 15 1 P a g e Experience A 2'khenahealth Exhibit 14 Confidential athenahealth Announces Expansion in Atlanta and San Francisco Sep 22, 2014 Company Expects to Create More Than 1,000 Jobs in Core Health and Technology Geographies by 2017 WATERTOWN, Mass., Sept. 22, 2014 (GLOBE NEWSWIRE) -- athenahealth. Inc.(Nasdaq:ATHN), a leading provider of cloud-based services and mobile tools for medical groups and health systems, today announced new office openings in Atlanta, Georgia, and San Francisco, California. As part of athenahealth's national growth strategy, the company is increasing its foothold in major health care and technology markets to meet the diverse needs of its growing client base. athenahealth has more than 3,300 employees and is headquartered in Watertown, Massachusettswith additional offices in Belfast, Maine; Princeton,New Jersey; Durham,North Carolina; Austin, Texas; and Chennai, India. As part of the expansion, athenahealth has redeveloped and outfitted approximately 75,000- square-feet of office space in Ponce City Market, formerly the historic Sears, Roebuck and Co. building, inAtlanta's famous Old Fourth Ward. The loft office space is part of an adaptive reuse project that will revitalize the area. At the heart is a marketplace, expected to be completed in 2015, that will feature an artisan-inspired food hall and market, shops, as well as residential apartments. Over the next three years, athenahealth plans to draw on the city's strong talent pool to fill 600 positions in operations, sales, and client services. On the west coast, athenahealth will make its home at 50 Hawthorne, a 56,000-square-foot, three-floor modern building in downtown San Francisco's South of Market(SOMA) district. As one of the company's creative hubs, it will house user experience designers, developers, and project managers with a focus on mobile innovation. "Ponce City Market and 50 Hawthorne both embody all things athenahealth, and also reflect the feel and vibrancy of each city," said Kristi Matus, chief financial and administrative officer, athenahealth. "As we work to connect care and drive meaningful and measurable results for our growing network of clients, we are expanding our national foothold to meet their needs. Our people are our most precious resource. Selecting strategic sites in key urban markets across the country opens up possibilities and helps us attract exciting new talent and resources, as well as affords us opportunities to host more prospects and clients." In March of this year, athenahealth also announced its intentions to redevelop Austin's Seaholm Power Plant, which will serve as the company's flagship research and development(R&D)hub. By 2024, athenahealth plans to bring approximately 800 software development and R&D jobs to Austin, Texas. Renovation of the Seaholm Power Plant is scheduled to be completed this November. About athenahealth,Inc. athenahealth is a leading provider of cloud-based services for electronic health records EHR), revenue cycle management and medical billine,patient enenement, care coordination, and population health management, as well as Epocrates and other point-of-care mobile apps. We connect care and drive meaningful, measurable results for more than 55,000 health care providers in medical practices and health systems nationwide. For more information,please visitwww.athenahealth.com. This press release contains forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding anticipated hiring rates and construction project timelines. These statements are neither promises nor guarantees, and are subject to a variety of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those contemplated in these forward-looking statements. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. athenahealth undertakes no obligation to update or revise the information contained in this press release, whether as a result of new information,future events or circumstances, or otherwise. For additional disclosure regarding these and other risks faced by athenahealth,please see the disclosure contained in our public filings with the Securities and Exchange Commission, available on the Investors section of our website at http://Www.athenahealth.com and on the SEC's website athttp://Www.see.L-ov. CONTACT: Jillian Palash athenahealth, Inc. (Media) media(aathenahealth.com 617-402-6509 Dana Quattrochi athenahealth, Inc. (Investors) investorrelations(aathenahealth.com 617-402-1329 A 2'khenahealth Exhibit 15 Confidential ECONOMIC DEVELOPMENT AGREEMENT BETWEEN THE STATE OF TEXAS AND ATHENAHEALTH,INC. JANUARY 31,2014 THIS AGREEMENT ("Agreement") is by and between the State of Texas (the"State"), acting by and through the Office of Economic Development and Tourism,a division within the Office of the Governor("OOG"),and athenahealth, Inc.,a Delaware company, ("athenahealth"). The State and athenahealth are hereinafter referred to either individually as the "party," or collectively as the "parties." The Effective Date of this Agreement is January 31,2014. RECITALS WHEREAS,Texas'low taxes,budgetary discipline,reasonable regulations and educated workforce continue to make the state a top location for businesses looking to expand or relocate; and WHEREAS, athenahealth is known for providing cloud-based IT services for electronic health records,medical practice management and medical care coordination; and WHEREAS,athenahealth employs 2,853 people throughout the United States with annual revenues of approximately$422 million; WHEREAS, athenahealth has proposed leasing and operating a new facility in Austin, Travis County, Texas;and WHEREAS, the new facility will involve athenahealth investing approximately $13 million in Texas,and is expected to create at least 607 new full-time jobs for Texans,with an average annual payroll of approximately$66.2 million; and WHEREAS,Article 111, Section 52-a of the Texas Constitution expressly authorizes the State to use public funds for the public purposes of development and diversification of the economy of the State, the elimination of unemployment or underemployment in the State, or the development of commerce in the State; and WHEREAS,SB 1771 of the 78t"Texas Legislature established the Texas Enterprise Fund("TEF") to be used with the express written approval of the Governor, Lieutenant Governor,and Speaker of the House of Representatives for economic development, infrastructure development, community development, job training programs, and business incentives, and the 83"d Texas Legislature reauthorized the TEF for the 2014 and 2015 biennium; and WHEREAS,the State values athenahealth as a distinguished and important corporate citizen, and wishes to receive a commitment that athenahealth will expand its existing operations in Texas,and athenahealth wishes to provide such a commitment; and WHEREAS,the Governor, Lieutenant Governor,and Speaker have each approved a grant from the TEF to athenahealth, as evidenced in the letter attached as Exhibit A hereto; and WHEREAS, to ensure that the benefits the State provides under this Agreement are utilized in a manner consistent with Article III,Section 52-a of the Texas Constitution,and other laws,the State requires athenahealth to comply with conditions and deliver certain performance as set forth herein, including achieving measurable job creation and retention commitments,in exchange for receiving these benefits; and WHEREAS, the parties desire to have such proposals set forth in a valid, binding and enforceable agreement; and WHEREAS, the State believes it is in the best public interest to enter into this Agreement for the reasons set forth above; AGREEMENTS NOW,THEREFORE,in consideration of the mutual promises herein,the parties agree as follows: 1. STATE OF TEXAS COMMITMENT Grant of Funds from the Texas Enterprise Fund. The State agrees to pay cash from the Texas Enterprise Fund to athenahealth in the amount of Five Million Dollars ($5,000,000) (the"Funds") as follows: (i) First Grant Payment from the Texas Enterprise Fund. The State shall pay cash from the Texas Enterprise Fund to athenahealth in the amount of One Million Five Hundred Thousand Dollars ($1,500,000) (the"First Payment") within thirty days following the execution of this Agreement,provided that the following accounting documents required for disbursement have been provided in acceptable form to the State: Request for Taxpayer Identification Number and Certification; Texas Application for Payee Identification Number; and Vendor Direct Deposit Authorization. (ii) Second Grant Payment from the Texas Enterprise Fund. The State shall pay cash from the Texas Enterprise Fund to athenahealth in the amount of One Million Five Hundred Thousand Dollars ($1,500,000) (the "Second Payment") within thirty days following receipt from athenahealth of reasonable evidence of creating at least One Hundred(100)Employment Positions,as defined below. The format for this submittal will be in sufficient detail for the State to confirm the asserted job creation. (iii) Third Grant Payment from the Texas Enterprise Fund. The State shall pay cash from the Texas Enterprise Fund to athenahealth in the amount of One Million Dollars ($1,000,000) (the "Third Payment") within thirty days following receipt from athenahealth of reasonable evidence of creating at least Two Hundred 2 Seventy-Five(275)Employment Positions, as defined below. The format for this submittal will be in sufficient detail for the State to confirm the asserted job creation. (iv) Fourth Grant Payment from the Texas Enterprise Fund. The State shall pay cash from the Texas Enterprise Fund to athenahealth in the amount of One Million Dollars ($1,000,000) (the"Fourth Payment")within thirty days following receipt from athenahealth of reasonable evidence of creating at least Six Hundred Seven (607)Employment Positions, as defined below. The format for this submittal will be in sufficient detail for the State to confirm the asserted job creation. 2. ATHENAHEALTH FUNDING CONDITIONS athenahealth must meet all of the following"Funding Conditions", or will be subject to liquidated damages and/or repayment in accordance with the Agreement. The Funding Conditions are as follows: a. Opening of the New athenahealth Location. athenahealth commits to leasing and operating a new facility in Austin, Travis County, Texas. (the "Facility"). The Facility shall be open and operational by December 31,2014. b. Job Target. athenahealth commits to meeting a job target of(i) creating a total of at least Six Hundred Seven(607) Employment Positions by December 31, 2023, at the Facility and of(ii)maintaining these Employment Positions through December 31, 2025 (collectively, the"Job Target"). athenahealth also commits to the following job creation schedule: (i) Thirty-Five(35)Employment Positions by December 31,2014; (ii) Twenty-Nine(29) additional Employment Positions (64 total) on December 31,2015; (iii) Thirty-Six (36) additional Employment Positions (100 total) on December 31,2016; (iv) Fifty-Five (55) additional Employment Positions (155 total) on December 31,2017; (v) Sixty-Two (62) additional Employment Positions (217 total) on December 31,2018; (vi) Fifty-Eight (58) additional Employment Positions (275 total) on December 31,2019; (vii) Sixty-Six (66) additional Employment Positions (341 total) on December 31,2020; (viii) Seventy-Seven (77) additional Employment Positions (418 total) on December 31, 2021; (ix) Eighty-Eight(88)additional Employment Positions(506 total)on December 31,2022; (x) One Hundred One (101) additional Employment Positions (607 total) on December 31, 2023; (xi) Zero (0) additional Employment Positions (607 total) on December 31,2024; (xii) Zero (0) additional Employment Positions (607 total) on December 31, 2025. 3 Jobs will only be counted as Employment Positions for purposes of this Agreement if they are above the total number of employment positions with athenahealth's operations in Texas at the time this Agreement is executed (the "Threshold"). The parties agree that for purposes of this Agreement,the Threshold shall be Fifty-Three(53). c. Employment Positions. For the purposes of this Agreement,"Employment Positions" shall be defined as jobs meeting all of the following criteria: (i) New full-time employment positions with athenahealth at the Facility, and (ii) With an average annual gross compensation(excluding benefits) each year of at least: (A) $109,000 for 2014; (B) $110,090 for 2015; (C) $111,191 for 2016; (D) $112,303 for 2017; (E) $113,426 for 2018; (F) $114,560 for 2019; (G) $115,706 for 2020; (H) $116,863 for 2021; (I) $118,031 for 2022; (J) $119,212 for 2023; (K) $120,404 for 2024; (L) $121,608 for 2025. (iii) Unless specifically provided by this Agreement, no jobs created by athenahealth subsidiaries,affiliates, contractors,or any other party not identified in this Agreement constitute Employment Positions. Additionally, no jobs transferred from other athenahealth operations in the State, including any athenahealth subsidiaries or affiliates, constitute Employment Positions. d. Annual Compliance Verification. Beginning in January 2015, and continuing every year thereafter through January 2026, each year by January 31 athenahealth must deliver to OOG a compliance verification signed by a duly authorized representative of athenahealth that shall certify the number of and generally describe the Employment Positions existing as of December 31 of the year preceding and provide the median wage for all Employment Positions(the"Annual Compliance Verification"). There will be a total of Twelve(12)Annual Compliance Verifications due, covering jobs created and maintained in years 2014 through 2025. All Annual Compliance Verifications shall provide appropriate back-up data to establish both the Employment Position numbers provided and maintenance of the required Threshold. All Annual Compliance Verifications shall be in a form reasonably satisfactory to OOG. In addition, athenahealth must submit each year a copy of the Annual Compliance Verification to the Office of the Lieutenant Governor and the Office of the Speaker of the House of Representatives at the addresses listed below. Lt. Governor of Texas Speaker of the House of Representatives of Texas P.O. Box 12068 P.O. Box 2910 Austin, Texas 78711 Austin, TX 78768 e. Certification of Good Standing/Delinquent Taxes. By execution of this Agreement, athenahealth certifies that it is in good standing under the laws of the State in which it was formed 4 or organized, and has provided the State sufficient evidence of such. In addition, athenahealth certifies that it owes no delinquent taxes to any taxing unit of this State at the time of execution of this Agreement. f. Certification relating to undocumented workers. By execution of this Agreement, athenahealth, including any branch, division, and department of athenahealth, certifies that it does not and will not knowingly employ an undocumented worker (as defined by Texas Government Code Section 2264.001(4)). If after any funds are disbursed, athenahealth, or a branch, division, or department of athenahealth, is convicted of a violation under 8 U.S.C. Section 1324a(f), athenahealth shall repay the amount of any funds disbursed plus interest at the rate of 3.1%. The repayment shall occur not later than the 120th day after the date the OOG notifies athenahealth of the violation. 3. LIQUIDATED DAMAGES a. Failure to Meet 2014 "Floor"Job Target. If athenahealth's first Annual Compliance Verification demonstrates that it has failed to create and maintain at least Eighteen (18) Employment Positions as of December 31, 2014, the State may terminate the Agreement and require athenahealth to repay the entirety of any amounts disbursed under this Agreement plus interest at the rate of 3.1% per year, compounded annually from the date of disbursement to the date of repayment. b. Job Target. As set forth in Section 2 above,annually during the term of this Agreement through 2026, athenahealth must deliver to OOG an Annual Compliance Verification demonstrating that it has met the Job Target for the year just ended. The consequences to athenahealth of satisfying, failing to satisfy, or exceeding the Job Target are as follows: (i) Compliance with Job Target. If athenahealth has met the Job Target for that year,as demonstrated in its Annual Compliance Verification, then athenahealth will be deemed to have met its obligations for such preceding year and no liquidated damages will be due. (ii) Failure to Meet Job Target. If athenahealth has not met the Job Target for that year, as demonstrated in its Annual Compliance Verification, then OOG may require athenahealth to pay liquidated damages in the amount of Two Thousand Two Hundred Fifty-Seven Dollars ($2,257)per job for every Employment Position by which it is short that year. (iii) Exceeding Job Target. If an Annual. Compliance Verification filed by athenahealth demonstrates that it has exceeded the job target for that year, then athenahealth will be deemed to have exceeded its obligations, and will receive a"Surplus Job Credit"for each extra Employment Position that it has maintained above the job target for that year. athenahealth may utilize any earned Surplus Job Credits in following years as follows: A. athenahealth may expend a Surplus Job Credit in lieu of paying liquidated damages in the amount of$2,257 per job(for example, if athenahealth owes liquidated damages in the amount of$225,700 for 100 Employment Positions lacking in a particular year, athenahealth may discharge completely or reduce this amount by expending up to 100 Surplus Job Credits it has earned in prior years); or B. athenahealth may apply any Surplus Job Credits toward meeting the remaining Job Target for future years, such that if athenahealth accumulates 5 enough Surplus Job Credits it will be deemed to have fulfilled all of its obligations under the Agreement,and will be released from the Agreement early(for example, if athenahealth has accumulated at least Six Hundred Seven (607) Surplus Job Credits by December 31,2024,then it may apply these Surplus Job Credits forward to fulfill its Job Target for 2025, and may thereby fulfill its obligations and be released from the Agreement one year early). 4. ATHENAHEALTH ADDITIONAL COMMITMENTS a. OOG Audit Rights. (i) Duty to Maintain Records. athenahealth shall maintain adequate records to support its charges, procedures and performances to OOG for all work related to this Agreement. athenahealth also shall maintain such records as are deemed necessary by the OOG and auditors of the State of Texas or United States, or such other persons or entities designated by the OOG,to ensure proper accounting for all costs and performances related to this Agreement. (ii) Records Retention. athenahealth shall maintain and retain for a period of four (4) years after the submission of the final Annual Compliance Verification, or until full and final resolution of all audit or litigation matters which arise after the expiration of the four(4)year period after the submission of the final Annual Compliance Verification, whichever time period is longer, such records as are necessary to fully disclose the extent of services provided under this Agreement, including but not limited to any daily activity reports and time distribution and attendance records, and other records which may show the basis for the calculation of full time positions. (iii) Audit Trails. Appropriate audit trails shall be maintained by athenahealth to provide accountability for updates and changes to automated personnel and financial systems. Audit trails maintained by athenahealth will,at a minimum, identify the changes made, the individual making the change and the date the change was made. An adequate history of transactions shall be maintained by athenahealth to permit an audit of the system by tracing the activities of individuals through the system. athenahealth's automated systems must provide the means whereby authorized personnel have the ability to audit and establish individual accountability for any action that can potentially cause access to, generation of, or modification of information related to the performances of this Agreement. athenahealth agrees that athenahealth's failure to maintain adequate audit trails and corresponding documentation shall create a rebuttable presumption that the performances were not performed. (iv) Access. athenahealth shall grant access to all paper and electronic records, books, documents, accounting procedures, practices or any other items relevant to the performance of this Agreement to OOG and auditors of the State of Texas, or such other persons or entities designated by OOG for the purposes of inspecting, auditing,or copying such books and records. All records, books, documents, accounting procedures, practices or any other items relevant to the performance of this Agreement shall be subject to examination or audit by the OOG and auditors of the State of Texas,or such other persons or entities designated by the OOG in accordance with all applicable state and federal laws, regulations or directives. athenahealth will direct any subcontractor with whom it has established a contractual relationship to discharge athenahealth's obligations to likewise 6 permit access to,inspection of, and reproduction of all books and records of athenahealth's subcontractor(s)which pertain to this Agreement. (v) Location. Any such audit shall be conducted during athenahealth's normal business hours at an athenahealth location chosen by OOG and at OOG's expense, provided all costs incurred by OOG in conducting any such audit shall be reimbursed by athenahealth in the event such audit reveals a material discrepancy in any athenahealth reporting of compliance as required by the Agreement. (vi) Reimbursement. If any audit or examination reveals that athenahealth's reports for the audited period are not accurate in the calculation of the Job Target for such period, athenahealth shall promptly reimburse the OOG for the liquidated damages amount(s) in accordance with section 3.b.ii. (vii) Corrective Action Plan. If any audit reveals any discrepancies or inadequacies which are necessary in order to maintain compliance with this Agreement, applicable laws, regulations, or athenahealth's obligations hereunder, athenahealth agrees within thirty(30)calendar days after athenahealth's receipt of the audit findings,to propose and submit to OOG a corrective action plan to correct such discrepancies or inadequacies subject to the approval of the OOG. athenahealth further agrees to complete the corrective action approved by OOG within thirty (30) calendar days after OOG approves athenahealth's corrective action plan, at the sole cost of athenahealth. (viii) Reports. athenahealth shall provide to OOG periodic status reports in accordance with OOG's audit procedures regarding athenahealth's resolution of any audit- related compliance activity for which athenahealth is responsible. b. Economic Impact Reports; Periodic Progress Briefings. In a manner consistent with the need to protect privacy and the intellectual property of athenahealth and third parties, athenahealth will provide periodic briefings as reasonably requested by OOG on the general activities, economic impact and progress of the new project development and business operations in Texas. c. Use and Retention of Texas Suppliers. athenahealth will use reasonable efforts to use qualified Texas-based suppliers to provide products and services under this Agreement, provided however,athenahealth may in its sole discretion select suppliers and contractors based on program needs, scientific criteria, and industry standards. d.Financial Information.athenahealth will furnish to OOG on an annual basis by January 31,of each year throughout the term of the Agreement, information regarding the general business status, market and general summary financial updates regarding athenahealth. Such financial information shall be in a form reasonably satisfactory to OOG. e. Indemnity and Hold Harmless. athenahealth agrees to indemnify and hold the State, the maker of this grant, and its agents, officers, and employees harmless for any and all losses, claims,suits,actions,and liability,including any litigation costs,that arise from any act or omission of athenahealth or any of its officers and employees, agents, contractors, assignees, and affiliates relating to the project for which this grant is made regardless of whether the act or omission is related to job creation or other stated purpose of the grant. 7 f. EXPRESS NEGLIGENCE. THE INDEMNITY SET FORTH IN THIS AGREEMENT IS INTENDED TO BE ENFORCEABLE AGAINST COMPANY AND ITS SUCCESSORS AND ASSIGNS IN ACCORDANCE WITH THE EXPRESS TERMS AND SCOPE HEREOF NOTWITHSTANDING TEXAS' EXPRESS NEGLIGENCE RULE OR ANY SIMILAR DIRECTIVE THAT WOULD PROHIBIT OR OTHERWISE LIMIT INDEMNITIES BECAUSE OF THE NEGLIGENCE (WHETHER SOLE, CONCURRENT, ACTIVE OR PASSIVE) OR OTHER FAULT OR STRICT LIABILITY OF THE OOG. 5. DEFAULTS AND REMEDIES Each of the following acts or omissions of athenahealth or occurrences shall constitute an act of default under this Agreement: a. Failure to Invest and Open the Facility. If athenahealth fails to invest and open the Facility by December 31, 2014, then the State may terminate the Agreement and require athenahealth to immediately repay the entirety of any amounts disbursed under this agreement plus interest at the rate of 3.1% per year, compounded annually from the date of disbursement to the date of repayment,reduced by any funds refunded to the State for failure to meet Job Targets. b. Failure to pay liquidated damages for job creation. After notice, athenahealth shall have thirty(30) days to pay outstanding damages for job creation. If athenahealth does not pay after this period, all amounts that could potentially be claimed for failure to meet job targets shall become due and payable immediately on demand of the State of Texas. c. Failure to provide verification. If after the end of a calendar year athenahealth fails to provide an Annual Compliance Verification by the deadline for that year, OOG may make a good faith estimate, based on information available to OOG, of the Employment Positions at athenahealth as of December 31 of that year and, if the estimated Employment Positions fall short of the Job Target, require corresponding liquidated damages in accordance with Section 3.b.ii. above. athenahealth will not be eligible to earn Surplus Job Credits for any such year for which it fails to provide an Annual Compliance Verification by the deadline for that year. d. Failure to comply with Section 2.E If after any funds are disbursed, athenahealth, or a branch,division,or department of athenahealth,is convicted of a violation under 8 U.S.C. Section 1324a(f), athenahealth shall repay the amount of any funds disbursed plus interest at the rate of 3.1%. The repayment shall occur not later than the 120th day after the date the OOG notifies athenahealth of the violation. 6. GENERAL PROVISIONS a. Authority. Each party represents that it has obtained all necessary authority to enter into this Agreement. b. Relationship of Parties and Disclaimer of Liability. The parties will perform their respective obligations under this Agreement as independent contractors and not as agents, employees,partners,joint venturers, or representatives of the other party. Neither party can make representations or commitments that bind the other party. athenahealth is not a "governmental body"by virtue of this Agreement or the use of TEF or other funding. 8 c. Limitation of Liability. In no event will either party be liable to the other party for any indirect, special, punitive, exemplary, incidental or consequential damages. This limitation will apply regardless of whether or not the other party has been advised of the possibility of such damages. athenahealth's total liability under this Agreement shall not exceed the amount of Funds actually received by athenahealth plus interest at a rate of 3.1%. d. Term. The term of this Agreement commences on the Effective Date of the Agreement and continues until January 31, 2026, unless terminated earlier pursuant to the terms of this Agreement. e. Termination for Cause. Either party may terminate this Agreement for Cause upon thirty(30) days prior written notice to the other party. "Cause"is any failure to perform a material obligation under this Agreement within the specified time,including a material breach of a Funding Condition. This Agreement may not be terminated if the alleged Cause is cured within the specified thirty-day period. The sole remedy for any termination for Cause (and for the"cause" giving rise to the termination) shall be that each party is relieved of its obligation to perform hereunder, however, following termination by the State,athenahealth will continue to be obligated to the State for liquidated damages and/or repayment of funds in accordance with applicable provisions of this Agreement. f. Repayment upon Early Termination. In the event of early termination of the Agreement for Cause or by mutual agreement of the parties, athenahealth shall repay the entirety of any amounts disbursed under this Agreement plus interest at the rate of 3.1% per year, compounded annually from the date of disbursement to the date of repayment. g. Dispute Resolution and Applicable Law. (i) Informal Meetings. The parties' representatives will meet as needed to implement the terms of this Agreement and will make a good faith attempt to informally resolve any disputes. (ii) Non-binding Mediation. Except to prevent irreparable harm for which there is no adequate remedy at law, neither party shall file suit to enforce this Agreement without first submitting the dispute to confidential, non-binding mediation before a mediator mutually agreed upon by the parties. (iii) Applicable Law and Venue. This Agreement is made and entered into in the state of Texas,and this Agreement and all disputes arising out of or relating thereto shall be governed by the laws of the state of Texas, without regard to any otherwise applicable conflict of law rules or requirements. athenahealth agrees that any action, suit, litigation or other proceeding (collectively "litigation") arising out of or in any way relating to this Agreement, or the matters referred to therein, shall be commenced exclusively in the Travis County District Court or the United States District Court for the Western District of Texas, Austin Division, and hereby irrevocably and unconditionally consents to the exclusive jurisdiction of those courts for the purpose of prosecuting and/or defending such litigation. athenahealth hereby waives and agrees not to assert by way of motion,as a defense,or otherwise,in any suit,action or proceeding,any claim that(a)athenahealth is not personally subject to the jurisdiction of the above-named courts, (b) the suit, action or proceeding is brought in an inconvenient forum or(c)the venue of the suit,action or proceeding is improper. 9 h. Publicity. Upon request by OOG, athenahealth agrees to cooperate fully with OOG to assist in the preparation of any press release or other public disclosure regarding this Agreement. athenahealth agrees to obtain OOG's approval prior to athenahealth's issuance of any press release or other public disclosure concerning this Agreement, unless otherwise required by law. i. No Waiver of Sovereign Immunity. Nothing in this Agreement may be construed to be a waiver of the sovereign immunity of the State to suit. 7. MISCELLANEOUS PROVISIONS a. Counterparts. This Agreement may be executed simultaneously in two or more counterparts,each of which shall be deemed an original,and it shall not be necessary in establishing proof of this Agreement to produce or account for more than one such counterpart. b. Merger. This document constitutes the final entire agreement between the parties and supersedes any and all prior oral or written communication,representation or agreement relating to the subject matter of this Agreement. c. Severability. Any term in this Agreement prohibited by, or unlawful or unenforceable under, any applicable law or jurisdiction is void without invalidating the remaining terms of this said Agreement. However, where the provisions of any such applicable law may be waived, they are hereby waived by either party, as the case may be, to the fullest extent permitted by the law, and the affected terms are enforceable in accordance with the parties' original intent. d. Survival of Promises. Notwithstanding any expiration, termination or cancellation of this Agreement, the rights and obligations pertaining to payment or repayment of funds and/or liquidated damages, confidentiality, disclaimers and limitation of liability, indemnification, and any other provision implying survivability will remain in effect after this Agreement ends. e. Binding Effect. This Agreement and all terms, provisions and obligations set forth herein shall be binding upon and shall inure to the benefit of the parties and their successors and assigns and shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns and all other state agencies and any other agencies, departments, divisions, governmental entities, public corporations and other entities which shall be successors to each of the parties or which shall succeed to or become obligated to perform or become bound by any of the covenants,agreements or obligations hereunder of each of the parties hereto. f. Successors and Assigns/Notice. athenahealth, or any legal successor thereto or prior assignee thereof,may assign its rights and obligations under this Agreement, including by merger or operation of law, to any legal successor or any person or entity that acquires all or substantially all of its business and operations. In addition, with the prior written consent of the State, which consent shall not be unreasonably withheld, or delayed, athenahealth, or any legal successor company thereto or prior assignee thereof, may assign its rights and obligations under this Agreement to any parent or wholly owned subsidiary that it currently has in place or later establishes,if it is constituted as a separate legally recognized business entity.Any such assignment will be made without additional consideration being payable to the State. This Agreement shall survive any sale, change of control or similar transaction involving athenahealth, any successor thereto or prior assignee thereof and no such transaction shall require the consent of the State. athenahealth shall provide the State written notice of any assignment, sale, change of control or 10 similar transaction pursuant to this section as soon as possible and in no event not later than thirty (30) calendar days following such event. g. Force Majeure. Neither party shall be required to perform any obligation under this Agreement or be liable or responsible for any loss or damage resulting from its failure to perform so long as performance is delayed by force majeure or acts of God, including but not limited to strikes, lockouts or labor shortages, embargo, riot, war, revolution, terrorism, rebellion, insurrection, flood,natural disaster, or interruption of utilities from external causes. h. Notice. All notices, requests, demands and other communications will be in writing and will be deemed given and received(i) on the date of delivery when delivered by hand, (ii) on the following business day when sent by confirmed simultaneous telecopy, (iii) on the following business day when sent by receipted overnight courier, or(iv)three(3)business days after deposit in the United States Mail when mailed by registered or certified mail,return receipt requested,first class postage prepaid, as follows: If to the State to: TEF Compliance Compliance and Oversight Division PO Box 12428 Austin, TX 78711 with a concurrent copy to: General Counsel Office of the Governor P.O. Box 12428 Austin, Texas 78711 Phone: 512-463-1788 Fax: 512-463-1932 If to athenahealth to: athenahealth, Inc. 311 Arsenal Street Watertown, MA 02472 Attn: General Counsel Phone: 617-402-1000 Fax: 617-402-1099 {Signature Page Follows} 11 The parties have caused this Economic Development Agreement to be executed by their duly authorized representatives to be effective as of the date first specified above. THE STATE OF TEXAS ATHENAHEALTH,INC. i KATHY*ALT DAN HALEY CHIEF OF STAFF VICE PRESIDENT,GOVERNMENT AND OFFICE OF THE GOVERNOR REGULATORY AFFAIRS ATHENAHEALTH,INC. 12 EXHIBIT A LETTER FROM GOVERNOR,LIEUTENANT GOVERNOR AND SPEAKER APPROVING GRANT TO ATHENAHEALTH FROM THE TEXAS ENTERPRISE FUND 13 OFFICE OF THE GOVERNOR RICK PERRY GOVERNOR December 12, 20 Mr. Dan Maley Vice President, Government and Regulatory Affairs athenahealth, Inc. 311 Arsenal Street Watertown, Massachusetts 02472 Dear Mr, Haley: The State of Texas is honored that athenahealth, Inc., is considering making investments and creating jobs in our state. We are confident that you will find Texas to bean ideal location,and we:are working with community leaders in Austin to promote your success, During the 78`" Legislative Session in 2003, the Texas Enterprise Fund was created as a tool to bring jobs to Texas. Allocations from the"Texas Enterprise Fund support the creation of quality jobs and leverage private investment for activities that will strengthen the economic future of the suite. We welcome your investment in our state and are prepared to allocate $5,000,000 to athenahealth, Inc., contingent upon execution of a formal Economic Development Agreement to be negotiated. This offer by the State of Texas may be rescinded if a finalized Economic Development Agreement is not executed by all applicable parties within six months of the date of this letter. The State of Texas is pleased to provide this incentive for economic development purposes. We look forward to working with you to help this project achieve its objectives. Sincerely, ky Rick Perry David Dewhurst Joe Strau, Governor Lieutenant Governor Speaker of the House cc: Ms. Charisse Bodisch, Vice President, Economic Development - Austin Chamber of Commerce Pose Oma, Box 12428 AUSTIN, TExAS 78711 (512)463-2000 (Voice)/DIAL 7-1-1 FOR RELAY SERVICES VISIT WWW.reXASONLINE.COM THE OFFICIAL WEB SITE OF THE STATE OP TEXAS A 2'khenahealth Exhibit 16 Confidential �r January 25, 2013 Dan Haley Vice President, Government and Regulatory Affairs athenahealth Inc. 311 Arsenal Street Watertown, MA 02472 Dear Mr. Haley: In today's global economy, we know there are many locations from which you could choose to establish your business. On behalf of the Governor and the State of Georgia, we want to express our sincerest appreciation for considering Georgia as the home for your next investment. It is our goal that you be successful and prosperous in Georgia. Georgia offers unique assets that set it apart globally and give your business the edge it needs to grow and compete. Georgia's outstanding logistics means that 80% of the U.S. market is within a 2-day truck haul, and its 5,000 miles of railroad comprise the largest network in the Southeast. The superb deep water port at Savannah provides easy access to international markets, and Atlanta's Hartsfield-Jackson Airport offers connectivity throughout the world with direct flights to 5 continents and over 150 domestic locations. We also know that every business relies on a well-trained, educated workforce. Not only does Georgia have a highly educated workforce, we also ensure that communities are ready for your business with the community "work-ready" certification program and Georgia's Quick Start workforce training program, ranked nationally as #1 by Expansion Management. Cable-network CNBC recently ranked Georgia as#4 for Best Workforce In The Nation in its annual grading of state business climates. With the current business environment, we also know that your company must remain focused on the fundamentals. That is why Georgia's low tax rates, sound fiscal policies, and pro-business climate have landed it on additional "Best Of' lists, including the Forbes' Best State for Business list (111") and CNBC's Best State To Do Business In list (41"). We remain committed to these core principles which make our state attractive to business. Our continued commitment to ensuring that companies locating and expanding in Georgia have a low cost of doing business is evident in measures recently passed to further provide savings. These measures include the following: a low corporate income tax rate; 100% single factor gross receipts apportionment formula, which substantially reduces state corporate income tax for companies that deliver a large portion of products to customers outside Georgia; and an expanded sales and use tax exemption for manufacturing machinery. Georgia Department of • • Development 75 Fifth Str- •4 Ailonta, Georgia 30308 04 !00 Georgia Our goal is that Georgia continue to have an outstanding business environment that supports your growth and success with a quality workforce, a cost of living that is below the national average, and a great quality life. It is our understanding that athenahealth Inc. plans to open a new office in Atlanta, GA with plans to hire 500 new employees over five years. The facility will require a $10.8 million investment in real estate improvements and equipment. The project completion deadline will be no more than 5 years from commencement of operations. The company is considering 3 building options in Atlanta: Ponce City Market, Centergy Building at 75 51h street in Midtown, and Capital City Plaza in Buckhead. Both Ponce City Market and 75 51h street are in Georgia Opportunity Zones. The Georgia offer of support is based on the following assumptions: New Jobs to be Created: 500 net new jobs (50%of the jobs estimated to be above 110%of county avg. wage) Private Investment to be Made: $10.8 million Average Wage for all employees: $68,500-$75,000 Timeframe for jobs and investment: 5 years Summary of • • . . Ponce 'Quality Job Tax Credits $0 2Job Tax Credits(Opportunity Zone) $8,750,000 3Project Development Grant $750,000 Savings and Cost Avoidancesit $9,500,000 Proposal.Summary of Georgia's 'Quality Job Tax Credits $3,125,000 2Job Tax Credits(Tier 3) $2,187,500 3Project Development Grant $750,000 Estimated Total Cost Savings and Cost Avoidances $6,062,500 Georgia Thank you for considering Georgia as the location for your company's investment. This past year, the State worked to locate over 400 companies in Georgia, bringing in more than $5.9 billion worth of new and expanding investment. We hope athenahealth will join our list of growing Georgia companies. We look forward to working with you and athenahealth as your project progresses. Best Re ards, Chris Cummiskey Commissioner door (9 Geoygia- 1. In order to qualify for Quality Job Tax Credits, the salaries for 50 or more of the new jobs created must be higher than 110 percent of the county average. The Quality Job Tax Credit program provides tax credits under Article 2 of Chapter 7 of Title 48 of the Official Code of Georgia Annotated. The qualifying new jobs must be created and retained for one year before any credit may be received. 2. In order to qualify for Job Tax Credits or Less Developed Census Tract Credits, the average wage of the new jobs created must be above the average wage of the county that has the lowest average wage of any county in the state as reported in the most recently available annual issue of the Georgia Employment and Wages Averages Report of the Department of Labor. According to the 2011 annual report, the lowest average wage (Echols County) is. $446/week(_ $11.15/hour or=$23,193/year). The Job Tax Credit program provides tax credits under Article 2 of Chapter 7 of Title 48 of the Official Code of Georgia Annotated. A minimum number of new full-time jobs must be created and retained for one year before any credit may be received. 3. This offer is good for 30 days from the date of the letter. A letter or e-mail to the Georgia Department of Economic Development from the company indicating its intention to accept the incentives listed above and locate its facility in Georgia will initiate the execution of incentive programs. A signed Memorandum of Understanding between the company, local community and the state of Georgia is necessary to initiate the state Project Development Grant. A signed Performance & Accountability Agreement will articulate the employment and investment performance terms of the state Project Development Grant and is a necessary component of the grant application process. A local government entity or authorized development authority will be the applicant and recipient of state Project Development grant funds. The Georgia Department of Community Affairs will review grant applications, conduct a financial risk analysis on the ultimate recipient(company) and disburse funds directly to the local government applicant based on receipts from eligible project activities. Georgia Department of • • Development 75 Fifth Stre- 11 Atlanta, Georgia 30308 I. 111 A 2'khenahealth Exhibit 17 Confidential 10/5/2014 DCA I Business Assistance Welcome to the ` Georgia Department of Community Affairs Opportunity Zones - Business Assistance for Job Tax Credits Program Description I Downloads&Related Links I Contact Information I Opportunity Zones I Community Assistance I Designations and Maps Program Description The benefit to a business locating within the boundaries of a designated Opportunity Zone,where the business creates eligible net new jobs to Georgia,is the Georgia Job Tax Credit. Eligible industries:Any lawful business may qualify for eligible net new jobs created at a business location within the boundaries of a designated Opportunity Zone. Threshold Job Creation:Minimum of two(2)eligible net new jobs within a single tax year,but if only two jobs are created the persons in those jobs cannot be married to each other. Net new jobs must meet three(3)criteria to be eligible for the Job Tax Credit: Must be permanent full-time jobs working a minimum of 35 hours per week; Must pay in excess of the lowest average wage of any county in the state;and Must be offered health insurance upon employment,although the employer is not required to pay for such insurance. If the business meets the eligibility criteria,then the allowable Job Tax Credit is$3,500 per eligible net new job. The job tax credit is first applied against any income tax liability on the Georgia Corporate Income Tax Return,with any excess job tax credit eligible to claim against Georgia payroll withholding taxes if the proper steps are taken with the Department of Revenue.The credit is available to be claimed for five(5)years,as long as the jobs are maintained.Therefore, a small business which creates two(2)eligible net new jobs and then maintains those jobs for five(5)full years should be able to claim a$7,000 tax credit each year($3,500 per job x 2 jobs)for five years,for a total tax credit of$35,000($7,000 tax credit x 5 years). The tax credit has a ten(10)year carry forward provision from the year in which the jobs are created.The carry forward period is the same for job tax credit claimed against either income taxes or payroll withholding taxes. There is no limit on the number of jobs that may be claimed under the Program,only that the jobs meet all eligibility requirements under Code and regulation.Click here to access the Job Tax Credit page for additional information and forms. An overview of the job tax credit in an Opportunity Zone,including the steps for filing for the job tax credit,can be found here. To determine if an area has an Opportunity Zone designation,you can access a listing of current designations and maps specific to the designations here. To determine if a location is within the boundaries of a designated Opportunity Zone,you can access a listing of local contacts for each area here.The local contact person can assist in verifying the address.If the address is within the designated Opportunity Zone boundary,then the local person will certify the location for purpose of the Opportunity Zone Certification form,which can be accessed in the Forms section below. To access additional detail on Opportunity Zones,including shapefiles and KML maps for DCA-approved Opportunity Zones,as well as poverty data for census block groups throughout the state,click here and scroll down to the Opportunity Zone Program Maps detail. Downloads&Related Links Opportunity Zone Brochure for Businesses(PDF) Opportunity Zone Brochure for Businesses-2009 Forward(PDF) Presentation on How to Utilize the Job Tax Credit in an Opportunity Zone(26.5MB PowerPoint) Forms for Filing: Opportunity Zone Certification (PDF) Link to Forms IT-CA and Form IT-WH on the Department of Revenue web site Contact Information To learn more about the Tax Credits available to businesses locating or expanding within a designated Opportunity Zone,contact Dawn Sturbaum at(404)679-1585. Georgia Department of Community Affairs 60 Executive Park South,N.E. Atlanta,Georgia 30329-2231 ©2014 Georgia Department of Community Affairs http://www.dca.state.ga.us/economic/DevelopmentTools/programs/businessAssistance.asp 1/1 A 2'khenahealth Exhibit 18 Confidential athenahealth's MDP Accelerator Open for Business; Welcomes Applications for Promising Startups Poised to Disrupt Health Care Sep 23, 2014 Company Pursues New Channel to Enliven Industry Innovation Through Entrepreneurship WATERTOWN, Mass., Sept. 23, 2014 (GLOBE NEWSWIRE) -- athenahealth, Inc. (Nasdaq:ATHN), a leading provider of cloud-based services and mobile tools for medical groups and health systems, today announced that its More Disruption Please (MDP)Accelerator is now accepting applications. Launched in June 2014 with the arrival of its first portfolio company, Smart Scheduling, the Accelerator is the company's newest initiative for driving connectivity and innovation across the continuum of care. The MDP Accelerator intends to drive disruption in health care by fostering the growth of high- potential, early-stage startups. athenahealth is offering its Accelerator portfolio companies seed funding, free office space at its Watertown headquarters, and ongoing mentorship from athenahealth experts, advisors-in-residence, and partners. Most notably, the MDP Accelerator provides its portfolio companies with exposure to athenahealth's network of more than 55,000 health care providers via seamless integration with athenahealth's athenaNet®platform. Companies interested in working with MDP can now access and test athenahealth's APIs through a reimagineddeveloper portal, designed to streamline global connectivity with athenaNet. Chris Moses, CEO, Smart Scheduling, said, "Smart Scheduling is thrilled to take advantage of athenahealth's commitment to open, interoperable, and disruptive technology as its first portfolio company. What's unique about the athenahealth Accelerator is its highly customized approach; we are working together to determine a mutual definition of success for our company. Access to athenahealth's APIs and cloud-based network has been, and will continue to be, critical to our scalability and success. We look forward to continuing to work with athenahealth's team to bring our unique service to more and more providers across the country." Since 2010, MDP has been committed to disrupting the status quo in health care by delivering access and connectivity to innovative solutions. The MDP Network,which began by bringing like-minded health care professionals together through conferences and hackathons, now boasts over 2,500 members. The athenahealth Marketplace, introduced in 2013, integrates best-in- breed technologies into athenahealth's cloud-based network to offer complementary services that enhance athenaNet. The Accelerator is the third pillar of the MDP program. Kyle Armbrester, vice president of business development, athenahealth, said, "After three successful years creating the MDP Network for innovation, More Disruption Please is taking the next step in its evolution, bringing entrepreneurialism to health care through a tailored program that offers portfolio companies customized resources and programming to meet their individual needs. With the Accelerator, athenahealth is deepening its commitment to creating a robust market for open health care technology—something doctors and patients demand to improve the quality of care." The Accelerator will accept applications to its program on a rolling basis, with an expected residency period of eight to 12 months for each portfolio company. For more information about the MDP Accelerator, including details on eligibility criteria and to submit an application, please visit: httu://www.athenahealth.com/mdu-accelerator. About athenahealth, Inc. athenahealth is a leading provider of cloud-based services for electronic health records EHR), revenue cycle management and medical billing,patient engagement, care coordination. and population health management, as well as Epocrates and other point-of-care mobile apps. We connect care and drive meaningful, measurable results for more than 55,000 health care providers in medical practices and health systems nationwide. For more information,please visitwww.athenahealth.com. CONTACT: Jillian Palash athenahealth, Inc. (Media) media(cathenahealth.com 617-402-6509 Dana Quattrochi athenahealth, Inc. (Investors) investorrelations(&,,athenahealth.com 617-402-1329 athenahealth Exhibit 19 Confidential TOWN OF WATERTOWN 1630 Office of the Town Manager i Administration Building i> 149 Main Street p y Watertown, MA 02472 Phone: 617.972.6465 Fax: 617-972-6404 www.watertown-ma.gov Michael J. Driscoll townmgr@watertown-ma.gov Town Manager October 23, 2014 Secretary Glen Shor Executive Office of Administration & Finance State House, Room 373 Boston, Massachusetts 02133 RE: Sunnort of I-Cubed Funding for Watertown' s Arsenal Dear Secretary Shor: I am pleased to write in support of the application by athenahealth, Inc. for approval of a Preliminary Economic Development Proposal for the designation of the Watertown Arsenal and its surroundings as an Economic Development District under the Commonwealth's Infrastructure Improvement Incentive Program ("I-Cubed") and for investment by the Commonwealth of $25 million through bond funding for public infrastructure improvements. Watertown is encouraged that the Arsenal's continued revitalization will produce a long-term relationship between the Watertown community and athenahealth. Indeed, athenahealth's proposal envisions the Arsenal as a neighborhood center with retail, restaurants, and activities open to the Watertown community. Moreover, the continued expansion and development of athenahealth's operations at the Arsenal has the potential to catalyze the establishment of a Health IT business cluster in Watertown that would be a powerful engine of future economic growth. Although the availability of I-Cubed funding for infrastructure improvements is an important component of the public/private partnership identified in athenahealth' s proposal, I note that Watertown' s participation in the I-Cubed program is dependent on athenahealth successfully navigating the regulatory approval process necessary to implement its master plan within the Arsenal Overlay Development District, preparation of a final I-Cubed Economic Development Proposal acceptable to Watertown municipal leadership, and formal approval of the Economic Development Proposal by the Watertown Town Council. We are hopeful these conditions can be resolved to Watertown' s satisfaction so as to realize the vision of a renewed Arsenal. Based on the foregoing, I urge your favorable consideration of this Preliminary Economic Development Proposal. C: incerely, Michael J . Driscoll Town Manager A 2'khenahealth Exhibit 20 Confidential TOWN Of i COMPREHENSIVE PLA Town of Watertown 2013 Comprehensive Plan DRAFT April 2014 Presented to: Town of Watertown, Massachusetts Presented by (a Vanasse Hangen Brustlln, Inc. ® Vanasse Ifangen Brustlin,Inc. Acknowledgement Insert Acknowledgement i Acknowledgement April2014 DRAFT Vanasse Hangen Brustim,Inc. Table of Contents ACKNOWLEDGEMENT....................................................................................................................................... TABLEOF CONTENTS........................................................................................................................................ II EXECUTIVESUMMARY......................................................................................................................................1 VISION STATEMENT..........................................................................................................................................2 WATERTOWN'S PEOPLE AND HISTORY..........................................................................................................................2 WATERTOWN'S SETTING............................................................................................................................................2 VISIONFOR 2025....................................................................................................................................................3 LANDUSE..........................................................................................................................................................4 INTRODUCTION........................................................................................................................................................4 BASELINE ASSESSMENT.............................................................................................................................................6 Purpose..........................................................................................................................................................6 Historical Land Use Patterns..........................................................................................................................7 ExistingLand Use...........................................................................................................................................9 Neighborhoods.............................................................................................................................................12 Watertown's Squares and Corridors............................................................................................................12 Zoning Regulations vs. Future Land Use......................................................................................................28 GOALS.................................................................................................................................................................35 RECOMMENDATIONS..............................................................................................................................................35 TRANSPORTATION,CIRCULATION,AND PARKING ..........................................................................................40 INTRODUCTION......................................................................................................................................................40 BASELINEASSESSMENT...........................................................................................................................................43 RegionalContext..........................................................................................................................................43 Background..................................................................................................................................................44 ExistingConditions.......................................................................................................................................47 FutureConditions.........................................................................................................................................60 ii Table of Contents April 2014 DRAFT aVanasse Hangen Brustlin,Inc. GOALS.................................................................................................................................................................62 RECOMMENDATIONS..............................................................................................................................................63 HOUSING........................................................................................................................................................70 INTRODUCTION......................................................................................................................................................70 BASELINEASSESSMENT...........................................................................................................................................71 Demographics..............................................................................................................................................71 HousingCharacteristics................................................................................................................................75 HousingMarket Conditions..........................................................................................................................77 HousingAffordability...................................................................................................................................79 Chapter40B Inventory.................................................................................................................................81 GOALS.................................................................................................................................................................81 RECOMMENDATIONS..............................................................................................................................................82 ECONOMIC DEVELOPMENT..........................................................................ERROR! BOOKMARK NOT DEFINED. INTRODUCTION..........................................................................................................ERROR!BOOKMARK NOT DEFINED. GOALS AND STRATEGIES FROM THE 2011 STRATEGIC FRAMEWORK....................................ERROR!BOOKMARK NOT DEFINED. BASELINE ASSESSMENT...............................................................................................ERROR!BOOKMARK NOT DEFINED. Labor Force Characteristics..............................................................................Error!Bookmark not defined. Institutions Supporting Local and Regional Economic Development..............Error!Bookmark not defined. Local Business in Watertown...........................................................................Error!Bookmark not defined. Targeted Industry Clusters Identified in the 2011 Strategic Framework.........Error!Bookmark not defined. Commercial Space in Watertown.....................................................................Error!Bookmark not defined. GOALS.....................................................................................................................ERROR!BOOKMARK NOT DEFINED. RECOMMENDATIONS..................................................................................................ERROR!BOOKMARK NOT DEFINED. OPEN SPACE AND RECREATION ....................................................................................................................105 INTRODUCTION....................................................................................................................................................105 EXISTING CONDITIONS..........................................................................................................................................105 Private Open Space Resources...................................................................................................................107 Watertown Park and Recreation Facilities and Programs.........................................................................108 CharlesRiver...............................................................................................................................................111 Watertown-Cambridge Greenway.............................................................................................................113 OPEN SPACE AND RECREATION NEEDS.....................................................................................................................114 GOALS...............................................................................................................................................................115 RECOMMENDATIONS AND STRATEGIES.....................................................................................................................116 NATURAL RESOURCES...................................................................................................................................120 INTRODUCTION....................................................................................................................................................120 iii Table of Contents April 2014 DRAFT aVanasse Hangen Brustlin,Inc. BASELINEASSESSMENT.........................................................................................................................................120 Geology,Soils and Topography..................................................................................................................120 LandscapeCharacter..................................................................................................................................122 WaterResources........................................................................................................................................123 Vegetation..................................................................................................................................................125 Fisheriesand Wildlife.................................................................................................................................127 Scenic Resources and Unique Environments..............................................................................................128 Environmental Challenges..........................................................................................................................128 GOALS...............................................................................................................................................................130 RECOMMENDATIONS............................................................................................................................................130 HISTORIC AND CULTURAL RESOURCES..........................................................................................................133 INTRODUCTION....................................................................................................................................................133 BASELINEASSESSMENT.........................................................................................................................................133 Purpose......................................................................................................................................................133 Significance of Watertown's Historic and Cultural Resources...................................................................134 Designated Historic Resources...................................................................................................................143 Inventoried Resources................................................................................................................................145 CulturalAssets............................................................................................................................................147 Preservation Programs...............................................................................................................................153 GOALS...............................................................................................................................................................162 RECOMMENDATIONS............................................................................................................................................162 PUBLIC SERVICES AND FACILITIES .................................................................................................................164 INTRODUCTION....................................................................................................................................................164 BASELINE ASSESSMENT.........................................................................................................................................167 TownServices.............................................................................................................................................167 CapitalImprovement Plan..........................................................................................................................168 Public Health and Land Use Connection.....................................................................................................179 GOALS...............................................................................................................................................................181 RECOMMENDATIONS............................................................................................................................................181 ENERGY.........................................................................................................................................................184 INTRODUCTION....................................................................................................................................................184 BASELINE ASSESSMENT.........................................................................................................................................185 Municipal Energy Projects and Programs..................................................................................................185 Community Energy Programs and Projects................................................................................................189 Energy Opportunities in Watertown..........................................................................................................192 iv Table of Contents April 2014 DRAFT aVanasse Hangen Brustim,Inc. GOALS...............................................................................................................................................................192 RECOMMENDATIONS............................................................................................................................................193 IMPLEMENTATION........................................................................................................................................195 INTRODUCTION ...................................................................................................................................................195 IMPLEMENTATIONMATRIX....................................................................................................................................198 v Table of Contents April 2014 DRAFT ® Vanasse Ifangen Brustlin,Inc. Executive Summary Insert Executive Summary 1 Executive Summary April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Vision Statement Mertom's people and history... Since Watertown's founding in 1630,the community has evolved from an original Puritan Settlement based on agriculture into a hub for trade and commerce,then becoming a key industrial center,and now transitioning into a post-industrial community with a mix of cultural,racial,educational,and economic diversity. Watertown is a place where residents appreciate and benefit from a strong sense of community,diverse urban neighborhoods, robust school system,rich culture,and a number of people that live and work in town.With a network of squares and multi-modal corridors,Watertown is a well-connected and attractive place to live and work. A variety of housing types throughout the community and innovative re-use of old industrial sites along the river and former rail corridor provides flexible options for a strong business and residential mix. W1c tei town's sett)ng... Located six miles west of Boston,Watertown has many local retail,cultural, and natural assets while enjoying the advantages of a diverse metropolitan area and regional economy. Along with the cultural and natural attractions, the community has a balance of residential neighborhoods and retail centers and a strong transportation network --all making Watertown a great place to live,work,and play. With just over 4 square miles of land and more than 4 miles of direct frontage along the Charles River,Watertown strongly identifies itself with the river,providing residents and visitors with a tremendous natural setting that include waterfront p arks,trails,and recreational opportunities. This system of parkland and open space has helped define development patterns. 2 Chapter 1 -Vision and Land Use April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Two primary retail centers,Watertown and Coolidge Squares,are local and regional landmarks that are warmly embraced by town residents and businesses as vibrant destinations where people can live,shop,and eat.A third regional retail center exists along Arsenal Street with two shopping malls and a number of large national retailers.Watertown's amenities include regional destinations such as the Charles River Greenway,the Arsenal Center for the Arts,and the historic Mount Auburn Cemetery. The Cemetery is a national historic landmark,botanical garden,museum,home to urban wildlife,and is a tremendous resource to residents and visitors.Watertown is connected to the region by mixed-use corridors —Galen,Mt.Auburn,Arsenal, and West Main —with easy access to the Massachusetts Turnpike,MBTA bus service,and multi-use trails. Vision for=5 Watertown envisions a vibrant and diverse future for its community that builds upon its rich foundation of neighborhoods,culture,commercial districts,town squares,diverse street corridors, civic assets,and proximity to the Charles River and Boston. With these great qualities and resources in place,the Watertown community envisions a future that: • has a stronger relationship w ith the Charles River Reservation, where residents and businesses benefit from enhanced connections to the river, more waterfront activities,preservation and respect of the ecology of the river and its natural habitat, making Watertown known to the region as a community that respects and appreciates its natural features. • is shaped by a built environment along each of its squares and corridors that reinforces Watertow n's character, achieving balance between design, preservation, and redevelopment efforts in ways that make Watertown known for being a destination and context sensitive design community. • is innovative and a leader in economic development, targeting growth of specific types of development and housing opportunities in ways that supports diverse,successful, and environmentally conscious employment centers in balance with neighborhood character and existing development, making Watertown known as a placefor innovation. • is proactive in maintaining and developing its infrastructure and public services, with continued support and improvements of the school system,park system, library network, and cultural assets. • is know n for celebrating its unique neighborhoods,historic and cultural heritage,and diversity, where visitors and residents alike will mingle in distinctive local shops and restaurants, arts venues, beautiful parks, and active 3 Chapter 1 -Vision and Land Use April 2014 DRAFT Vanasse Hangen Brusthn,Inc. plazas, making Watertown known for its eclectic mix of local venues and amenities. • incorporates welcoming,attractive streetscapes and gateways on well- designed pedestrian-oriented, bicycle friendly, tree-lined streets. • is progressive about sustainability, by investing in smart infrastructure and program choices, making Watertown known as a community that embraces state- of-the-art sustainable practices for the public and private sectors. • Is a community that promotes an active,healthy lifestyle where residents have access to social services, nutritious and affordable food, and places to be physically active. Land Use Irrt aftlion Founded in 1630,Watertown has been described as the "mother town"as it was one of America's earliest colonial settlements and served as an entry into the heartland of America for early settlers. The early town boundaries encompassed what is now Weston,Waltham,and large sections of what is now Lincoln,Belmont,Newton,and Cambridge. The existence of the Charles River was a critical factor in the settlement of the Town.Being a transit point into the early colonial frontier with a river,Watertown began to see manufacturing and milling industries soon after it was founded.Damming the Charles River became commonplace by the early 1800's,providing water power for various industries such as cotton weaving,sail making,and linen cleaners.Raw materials and finished products were shipped via water to the port at Boston Harbor and continued to their final destinations throughout the new nation and the rest of the world. In the late 18th century,Watertown's early industries helped to fuel the American industrial revolution. Spurred by the Civil War,Watertown evolved to become a significant national industrial center in the early 19th century.The new nation's need for munitions found Watertown to be ideally located for such manufacturing,resulting in the founding of the U.S.Army Arsenal in 1816,which at its height of operations before World War I covered 4 Chapter 1 -Vision and Land Use April 2014 DRAFT Vanasse Hangen Brusthn,Inc. over eighty acres of land with more than sixteen hundred employees,and continued in operation until its complete closure in 1995. With a burgeoning industrial base,Watertown attracted substantial worker populations.Housing in Watertown became a major concern in the early 20th century. Typical development patterns ensued in which industrial workers settled near the factories of East Watertown and the mills along Pleasant Street west of Watertown Square.The northern and northwestern areas of town were developed from large estates,orchards, and farms.One such estate is "The Oakley"whose remnants are now part of the Oakley Country Club, one of America's first golf courses. 1 Land use within a community is the pattern of residential, commercial, industrial and public development,interspersed with open space,such as parks and recreational areas. The evolution of land use within a community is the product of history, local economic conditions and community preferences;while growth, development and redevelopment is based on such factors as access to jobs, employment,and the availability of land for new housing or commercial development Community preferences,expressed as land use plans and regulations,dictate the use,form,location,and the pace of new development. � J Due to the changing political realities and new economic and technology trends,for several decades after the mid-20th century Watertown experienced a period of industrial decline with population decrease and infill development.Although most of the Town's industries have long since departed,Watertown's housing stock continues to reflect the earlier socio- economic landscape of the past centuries.Larger homes and lots in the northern and northwestern segments of the Town gives way to higher population density and more urban development as one moves from the northern border with Belmont to the southern and eastern edges that border on Cambridge and Newton where factories once operated. During the past 300 years,the Charles River has changed from a bountiful aquatic habitat to a polluted waterway,damaged by former use as an open sewer for industrial and human wastes.It was reborn as a "water parkway" in the late 1890's only to decline in the mid-20th century and then to be recently rediscovered as a regional recreational asset.In Watertown, industrial effluent began discharging into the Charles in the early 1800's with such industries as Lewando's Cleansing and Dying Company on Pleasant Street,Whitney Paper Mill on Morse Street,and the Aetna Mills on Bridge 5 Chapter 1 -Vision and Land Use April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Street.Today,with most of Watertown's industries gone,effluent into the Charles continues to a much lesser degree from smaller sources like surface runoff,isolated spills,and improper sewer ties from households and municipal storm sewers.The river has begun to rebound with aquatic life, improved water quality,preservation of shoreline,creation of parks,and a significant return of recreational activities such as the annual "Run of the Charles". Watertown provides a diverse mix of close-knit neighborhoods with prime access to regional economic,medical,and educational centers,as well as a rich 383 year history going back to America's earliest colonial heritage.While land use is shaped by various geographic,economic,and social factors,it is important to understand how land use patterns in Watertown have evolved over time in order to inform the land use strategies for the next 20 to 25 years that will guide desired developments,improve the natural environment,and enhance the social and economic vibrancy in the community. The following sections provide an overview of the historic and current land use patterns in Watertown. Basel i ne/4SS@SSmer t ■ Purpose Land use forms the basis for master planning and determines,to a large extent,a town's need to provide public facilities and infrastructure, transportation networks and services,and protection of environmental resources.As communities plan for their future,determining how and where growth and development should occur will provide the basis for planning where investments for municipal services will be needed,as well as determining what controls will be necessary to protect areas of the Town from unwanted development. Communities have the ability to control land use and development patterns through a variety of mechanisms,including zoning and subdivision regulations,provision of public utilities and infrastructure,and protection of open space lands through direct acquisition and the acquisition or acceptance of conservation restrictions/ easements. 6 Chapter 1 -Vision and Land Use April 2014 DRAFT Vanasse Hangen Brusthn,Inc. ■ Historical Land Use Patterns A review of Watertown's land use patterns shows how the Town's history shaped its character and the fabric of the Town itself. The context for the Town's growth and development can be traced through the changes in land use over time.According to the historical land use data of Watertown, accessible through MassGIS,in 1971 about half of the land in Watertown was used for residential purpose;605.6 acres or 23%was dedicated to institutional and recreational uses;industrial land comprised nearly 14%of the community and commercial land more than 7%;in addition, 18.5 acres or 0.7%of the land in Watertown was classified as open undeveloped land (see Figure 1-1). As shown in Table 1-1 below,agricultural land and natural land had remained unchanged between 1971 and 1999,accounting for respectively 1.1%and 1.2%of the total land in Town.Residential land increased slightly from 1,315 acres in 1971 to 1,327 acres in 1999,while land for urban institution/recreational decreased by 2.6%from 605.6 acres to 589.6 acres.The biggest percentage increase occurred in commercial land with more than a 36%increase from 191.9 acres in 1971 to 261.1 acres in 1999.Development over these years resulted in a further loss of open undeveloped land,which decreased by 72.4%from 18.5 acres to only 5.1 acres in 1999.Industrial land also experienced more than 14%decrease from 361.9 acres in 1971 to 310.1 acres in 1999. Overall,land use change in Watertown during the late 201h century was characterized by a steady transition from industrial and undeveloped open land into residential and primarily commercial land.While large industrial complexes such as Raytheon,the Arsenal and Hood Rubber generated truck traffic and employed a lot of people,many of them lived in nearby worker housing.The evolution over time to residential and commercial uses resulted in different traffic patterns that impact the Town and will shape many of the recommendations that come out of this Plan. 7 Chapter 1 -Vision and Land Use April 2014 DRAFT Figure 1-1 Historical Land Use in Mertown, 1971 PeJr.IF bIpmR LD\n25)DMG61Pmjecd d_m_I921 mnd � BELMONT / 1 WALTHAM / \� _— CAMBRIDGE 10 ._ate NEWTON J BOSTON n Historicalr Land Use Type Source:M—GIS May 2913 Crop Land Open Land Multi-Family Residential -Industrial ELWaste Disposal Comprehensive Plan _ Forest _ Participation Recreation Residential -Urban Open Water W.k t—,MA Non-Forested Wetland -Water-Based Recreation -Commercial —Transportation Note.Raad network reilecls 2013 contlil— 8 Vision and Land Use April2014 DRAFT aVanasse Hangen Brustlin,Inc. Table 1-1 Historic Land Use Pattems in Watertown, 1971, 1985, and 1999 1971 1985 1999 Percent Percent Acreage Percent Percent Change Acreage of Total of Total Acreage of Total 1971-1999 Agriculture 28.9 1.1% 28.9 1.1% 28.9 1.1% - Open Undeveloped Land 18.5 0.7% 5.1 0.2% 5.1 0.2% -72.4% Commercial 191.9 7.3% 257.1 9.8% 261.1 9.9% 36.1% Industrial/Transportatior-dMning 361.9 13.7% 310.1 11.8% 310.1 11.8% -14.3% Residential 1,315.0 49.9% 1,315.0 49.9% 1,327.0 50.3% 0.90/0 Urban Open) 605.6 23.0% 605.5 23.0% 589.6 22.4% -2.6% Institutional/Recreation Natural Land 31.9 1.2% 31.9 1.2% 31.9 1.2% - Water 82.8 3.1% 82.8 3.1% 82.8 3.1% - Total 2,636.6 - 2,636.6 - 2,636.6 - - Source:MassGIS land use data ■ Feasting Land Use More recent land use data from MassGIS shows that in 2005 the largest three categories of land in Watertown were residential(51.5%),urban open/ institutional/recreation (19.7%),and commercial(15.5%).Industrial land made up 6.6%of the total area of Watertown and agricultural land accounted for 0.8%(see Figure 1-2). Approximately 72 acres or 2.7%of Watertown was classified as natural land/ undisturbed vegetation,most of which were forested areas'.There was no open developable land left in 2005. Although 2005 land use data cannot be legitimately compared to data from previous years due to data limitations',the general land use trend indicates that commercial uses has been steadily growing while industrial land has been declining.Residential uses,with limited land available for new development,have been expanding through redevelopment of vacant and underutilized parcels and increased density along certain corridors,most notably Pleasant Street. According to MassGIS,2005 land use data is not strictly comparable to land use data from 1971,1985,and 1999 due to evolved image interpretation and data production methods,as well as changes in land use categories.Data discrepancy,such as increased natural/vegetated areas in 2005,exists when cross-comparing data from 2005 and previous years. 'See 1 9 Chapter 1 -Vision and Land Use April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Figure 1-2 Land Use in Watertown,2005 Industrial/ •, •. Transportation/ Institutional/ • Mining Recreation 15.5% 6.6% Water 3.2% Natural Land/ Undisturbed Residential Vegetation 2.7% Agriculture 6hL 0.8% Source:NasSGIs land use data,2005 Land use patterns today in Watertown form a tightly knit mosaic created by its historic development as a mill town and a streetcar suburb of Boston 3 The Existing Land Use Map (see Figure 1-3),visualized from the Town's 2012 assessor's database,vividly profiles the land use composition in the community at parcel level.As shown in the map,single-family residential areas are primarily concentrated in the west end mid-west part of the Town, and are also distributed in the southern part of the Town on both sides of the Charles River.The distribution of residential land reflects the history of housing development in close proximity to the streetcar lines along Mt. Auburn Street,Belmont Street, and Galen Street,and later expanding to the west side of the town. Commercial uses,on the other hand,have shaped distinctive nodes and corridors throughout the community. There are three major commercial nodes,each with unique characteristics.Watertown Square,located near the crossing of the Charles River and serving as a crossroad at the present time,is characterized by a mix of commercial and retail uses,as well as river views segregated by major roads. There is little residential development in Watertown Square.,with some two-and multi-family buildings mostly located on the periphery. Coolidge Square,located on the northeast side of town,has a stronger appearance as a village center populated by local neighborhood retail stores and specialty food establishments.Along Arsenal Street,the major commercial activity is dominated by the Arsenal Mall, Watertown Mall,and a number of office buildings.Anchored by these main commercial nodes,five major corridors expand to the east,west,and south of Watertown Square. s Strategic Framework for Economic Development,Town of Watertown,2011 10 Chapter 1 -Vision and Land Use April 2014 DRAFT Figure 1-3 Usting Land Use in Watertown,2013 Pash11vh61pm�WL�11225'l.00IGISPro�ecclLnd_use_eaisingnswd /N � BELMONT WALTHAM / �L__ CAMBRIDGE ►` A j IL 4. 00 1* Awe 41L it 1 1 / ` ����► 'r�� ��� ♦ ♦ ." r, �� `fir ,`F+®• �' I �+ 1 NEWTON ' ' 'f BOSTON 0• Watertown,Vanasse Hangen Brustlin,Inc. Existing Land Use in I Source:Watertown Assessor's Database Land Use Type •� May 2013 Single Family -office Ublity -Non-profit and Religious State-Other C..prehe 1,e P1a Two Family Indoor Recreational Facilities Public Service Properties - Cemeteries - Housing Authority Watertown.MA Other Residential _Outdoor Recreational Facilities Child Care Facilities Vacant Land-Developable Town-owned - Retail Trade - Manufacturing and Processing Transient Group Quarters -Vacant Land-Undevelopable Other -Automotive Sales and Services -Storage and Distribution Facilities - Private Schools -State-DCR 11 Chapter 1 -Vision and Land Use April2014 DRAFT Vanasse Hangen Brusthn,Inc. ■ Neighborhoods Watertown has over 50 percent of its land dedicated to residential uses. The diverse fabric of the community has created a mix of residential types that support single and two-family neighborhoods,higher density residential complexes,and mixed-use. Residential development is spread throughout town with many neighborhoods where there is little to no transition into more intense commercial and industrial areas. These areas create conflict points,as well as wonderful organic success stories(Iggy's Bakery and other small business successes in the industrial residential conflict zone),in Watertown's constant juggling act to deal with a complex urban form where over 30,000 people live and 20,000 people work,all in a little over four square miles. The planning process included an initial meeting with over two hundred residents and also included on-line discussions. The public discourse showed that Watertown is diverse,both in types of housing options and resident opinion,and that there are several critical issues and key steps that can help maintain Watertown's neighborhoods while supporting commercial nodes throughout the town.Among the issues raised during the planning process are the following: > Preservation of neighborhood character and historic fabric of the housing stock > Non-conforming houses > Large additions that are out of character with the existing neighborhood > Tear-downs and the resultant larger home that replaces the original one > Cut-through traffic on residential streets due to congestion along the Town's major roadways > Pedestrian safety and the need to provide safe routes for students to schools located in residential areas ■ fttertown's Squares and Corridors When thinking about Watertown's early development,it becomes clear that the Town's potential future development and growth can be defined by its commercial centers and roadways.These include Watertown Square and the Main Street corridor traveling west toward Waltham;the Galen Street corridor that connects Watertown Square and the Massachusetts Turnpike; 12 Chapter 1 -Vision and Land Use April 2014 DRAFT Vanasse Hangen Brusthn,Inc. the Arsenal Street corridor from Watertown Square to the Boston city line; Coolidge Square and the Mt.Auburn Street corridor that connects Watertown with Cambridge;and the Pleasant Street corridor. The following is a description of the key commercial squares and connecting corridors,the potential development opportunities,and how those opportunities can be accommodated in a manner that enhances Watertown as a place to live,work, and play. ....................................................................................................................................................................... Mertom Square and the Main Street Corridor Watertown Square is considered by many to be the "town center"of Watertown. Seven roads converge on the Square,it is the site of a major transportation hub at the MBTA bus yard,and it is adjacent to the Charles River.As summarized in the 2011 Strategic Framework for Economic Development,Watertown Square "contains a vital mix of business, government,and restaurant amenities for the entire area.Nowhere else in Town does such an active mix of uses touch the Charles River. 0 Currently,Watertown Square is characterized by a mix of mostly commercial uses including offices,banks,personal service retail such as a pharmacy, some restaurants and other smaller-scale retail. Civic uses in the Square include the Watertown Administration Building (Town Hall),the Watertown Free Public Library,and the Fire Station.Building heights vary but most of the buildings are three stories or less.Recent residential development includes a new five story condominium building and the five story Residence at Watertown Square project,which will feature 90 assisted living units,and is scheduled to open in the Fall of 2014.At the main intersection in the Square,there is a public plaza and a main entry to the Charles River Reservation including the historic Watertown Landing and dock. While most of the businesses in the Square front the street and rely on municipal parking,there are several buildings along the southern end of Mt. Auburn Street that have a more suburban feel with a number of curb cuts leading to parking along the sides or in front of the businesses. Most of the parking to service the business in the Square is centered in a public parking lot behind the storefronts on Main Street.The lack of parking is one of the more frequently mentioned problems in the area and is seen as a limiting factor in accommodating future growth and development in the Square. °Strategic Framework for Economic Development,August 2011,p.24 13 Chapter 1 -Vision and Land Use April 2014 DRAFT Vanasse Hangen Brusthn,Inc. With MBTA bus service running along the Main,Mt.Auburn and Arsenal Street corridors and the MBTA bus yard located across the river,the Square is a hub for transportation to Boston,Newton and Cambridge.It is also a major source of traffic congestion given the volume of traffic that flows through the Square every day and the configuration of the roadways that traverse the Square.As a result,it is a difficult area for pedestrians and cyclists to maneuver. The combination of traffic and the difficulties faced by other modes of transportation will need to be addressed when considering the future of Watertown Square. The potential for the Community Path to bring a multimodal opportunity to travel to and through the square also presents an opportunity that the community has broadly supported. The most commonly raised issues about Watertown Square include: > It is not a destination.Aside from a few restaurants,the mix of businesses does not draw people to visit the Square.New businesses,such as boutique retail and bistros with sidewalk dining,along with better pedestrian accommodations are needed. > There is a lack of parking. > Traffic congestion and the difficulties faced by pedestrians and bicyclists are concerns. > There should be ways to better capitalize on the proximity to the Charles River such as enhanced bicycle and pedestrian connections and recreational-oriented business located in the Square. The commercial corridor extending from Watertown Square along Main Street features the historic town center that offers a variety of dining, government services,banking,convenience retail and cultural attractions,as well as upgraded streetscape and sidewalk amenities. The configuration of parking behind the buildings that front the section of Main Street near Watertown Square reinforces an intimate pedestrian environment. Several ball fields and parks,including the Watertown Linear Park,interlace with commercial,residential,and public facilities in the east half of Main Street in Watertown. See Figure 1-4 that illustrates ways in which to enhance Watertown Square as a vibrant Town Center. To the west,a business cluster extends along Main Street between Lexington Street and Waverly Avenue,mainly serving local residents and nearby employees with shops and restaurants.The commercial character transitions further to the west along Main Street as residential development becomes the predominant land use.Along the town line with Waltham is the site of the historic Gore Place,which provides a unique historic and scenic open space 14 Chapter 1 -Vision and Land Use April 2014 DRAFT Figure 1-4 Enhancing Watertown Square as a Vibrant Town Center Enhancing Watertown Square as a Vibrant Town Center -46 -, Watertown 2013 Comprehensive Plan Strategies 1/41 Q Reinforce Watertown Square as aTown Center d r, e�►$' #( �' " _y' s © Strengthen the street edges to encourage walkability and pedestrian r' f '" y Xr o activities ' © Make the streets in Watertown Square more connected through L `C��`'• rS` ��"- advancing Complete Street strategies Enhance the sidewalks(walkability/livability) ,� �, P Z/ti•�' `� P.; ` © Study Watertown Square to identify transportation enhancements that r Tr,, r. are possible to enhance traffic,safety,and operations - xrrr /r •, �y ti- �r f � Q Improve pedestrian links to the river O Study parking needs and unlock the development potential for © ji Watertown Square 0 Understand and advance infill development opportunities to make ARSFn,,-,r Watertown Square a more cohesive district of blocks and streets Design and build a multipurpose trail system rr _ Enhance the existing riverwalk trail and programming of activities such d r as kayak and canoe rentals Make connections and streetscape improvements on the south side of the river and explore opportunities for the T station forTOD and/or _ _ is multimodal enhancements ',F ��_ `� �4, , r a r�iC` 15 Chapter 1 -Vision and Land Use April 2014 DRAFT Vanasse Hangen Brusthn,Inc. opportunity for area residents as well as the Town's only significant agriculture operation. This National Historic Landmark includes the house and estate of Massachusetts Governor Christopher Gore,as well as a small working farm. It is not anticipated that the Main Street corridor will change much over time. As described below,much of the future redevelopment opportunities will be realized along other corridors.Thus the goal for the Main Street corridor is to maintain the existing neighborhood character and commercial nodes,while focusing on ways to improve the aesthetics as well as transit,pedestrian and bicycle access and safety. ....................................................................................................................................................................... Galen Street Corridor As the only direct vehicular passage between the Massachusetts Turnpike and Watertown,Galen Street serves as a major connector between Newton, Watertown and beyond.Accompanied by heavy through traffic year round, the section of the corridor within Watertown is populated with a mix of higher density residential uses alternating with commercial uses such as office,retail,and automotive sales/ service. There is no unifying character to the land uses or the design of the buildings along this corridor.With the MBTA bus hub (the Watertown Yard)and land with development potential located on the north end of the corridor,this section of Galen Street has been considered as a site for potential higher density transit oriented development and an improved public realm that would reinforce the visual and pedestrian connections to Watertown Square across the river,as well as the river itself. If the MBTA bus barn were to become available,new development could create a new urban square and multi-modal transit center.Pedestrian and streetscape improvements can further enhance this area and create additional public open space that better connects Galen Street with Watertown Square, the bridge and the riverfront.Moreover,by taking advantage of mass transit connections,greater density in this area can create transit-oriented development and help in reducing automobile reliance.With careful consideration of building massing,new development can define the open space and activate the streets,building better pedestrian connections to the Square., Strategic Framework for Economic Development,August 2011,p.24 16 Chapter 1 -Vision and Land Use April 2014 DRAFT aVanasse Hangen Brustlin,Inc. ....................................................................................................................................................................... Arsenal Street Corridor The Arsenal Street corridor,located in the southeast section of the Town,is characterized by large format retail services,shopping malls and repurposed office and restaurant spaces that formerly served as places for the receipt, storage,and issuance of ordnance by the U.S.Army.Arsenal Street,as the Town's main spine in the south connecting directly to Boston,is an important gateway to the Town and possesses the most significant potential for positive land use change.Historically an industrial corridor,Arsenal Street today has been fragmented by different types and intensity of uses along its length. Automotive sales and services dot some of the prime locations near Watertown Square and along the corridor to the east. On the northern side of the street,large tracks of industrial land lie underutilized in the western half between Arsenal and Walnut Street and in the eastern half extending along the Watertown Greenway towards Coolidge Square as well as along Coolidge Avenue. The Arsenal on the Charles,with over 760,000 square feet of office space retrofitted from the early 19`h century Army complex,is the prominent development along the midpoint of Arsenal Street. To the east,the Arsenal Mall and Watertown Mall across the street from one another represent the major commercial uses in eastern Watertown and serves a regional market. The Watertown Target and Home Depot are among the highest grossing stores in the region. In the 2011 Watertown Strategic Framework for Economic Development study,three industrial sites along the Arsenal Street Corridor were identified as development opportunity focus areas(see 1FIgure 1-5)with potential for additional and improved office/lab or residential uses that will create a new identity for the corridor.6 Recognizing that this corridor is the source for much of the employment base in Watertown,it is important to the Town to maintain that focus.As a result,future land use along the Arsenal Street corridor should emphasize commercial,office and retail development. Mixed use can be encouraged as well with a required percentage commercial,but purely residential development should not be allowed with direct frontage on the corridor. s This study is discussed in more detail in the Economic Development element of this Comprehensive Plan.See Chapter X 17 Chapter 1 -Vision and Land Use April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Figure 1-5 Development Opportunity Focus Areas(properties with a--,, d values less than$30/sf highlighted in orange) .. � T'dAeloBOatl } .aver Street e,' �! �.!lr,,ttij5c: _. ant St eet - pJ W ALTHAM h � 'GA M RR I©GE Ftreet iRte ! a 0 lr w,, 4 JFy I~y'k .fy3 e^igf &2:�tyt�l�•- � Mt.Auburn l �b" .✓'tsa.., j `/ Cemetery / End o no .1 �~ O n Arsenal NottHi 4'� YVh �� ! S°tibth P-k hoof � l y/esterr f tl e Blind A�enel5t N E W TON Mass Pk,J 1-99 ry°Bea Ja i, B: .,N r nlBte 2a i Source:Strategic Franwork for Eooriomc Development,Torun of Mtertaw,2011 There is significant development interest in Arsenal Street that can transform it to a more vibrant mixed use environment for people to live,work,and play. Several proposals will likely to be advanced in 2014 and 2015 including a proposed hotel on the site of the former Saab dealership,the redevelopment of the Arsenal Mall into a more densely developed mixed use project (including the potential for some residential uses)that will bring the buildings closer to the street and add a number of amenities,and the redevelopment of Arsenal on the Charles by Athenahealth into a campus with a mix of commercial uses.Additionally,a proposal has been submitted and is under review by the Town to develop a site near the intersection of Arsenal and Irving Streets for an approximately 300 residential unit complex and 37,000 square feet of commercial space that could include a grocery store. Given this level of activity,it is important for the Town to craft a land use planning strategy that ensures that its vision for this key corridor is implemented as part of the planned redevelopment over the next five to ten years.The preliminary plans for the hotel,Arsenal Mall and Arsenal on the Charles projects provide opportunities to generate new jobs and tax revenues for the Town,but also create challenges to the Town due to the increased level of activity these projects will bring to the area from new visitors and workers.Anticipated increases in traffic(automobile,bus,bike and pedestrian)necessitate comprehensive transportation solutions(see Chapter 2 on Transportation,Circulation and Parking)and streetscape improvements to minimize impacts along the corridor.Through the recommendations of this Comprehensive Plan,the Town can consider establishing design and streetscape parameters for future development along the corridor,how it 18 Chapter 1 -Vision and Land Use April 2014 DRAFT Vanasse Hangen Brusthn,Inc. interfaces with the street,and how it functions internally through its expected mix of uses.The Transportation element will further discuss these potential solutions. There has been a significant amount of public input on the future of the Arsenal Street corridor.It is generally recognized that the corridor is the primary location for future economic development in Watertown. A summary of the comments heard during the planning process includes: > Increase and enhance the mix of uses along the corridor to include new residential uses, more restaurants,smaller-scale retail,hotels,and high- end office uses > The corridor should be more pedestrian friendly,including finding ways to reduce or slow down traffic > Provide pedestrian and bicycle connections to nearby residential neighborhoods,as well as the Charles River and Watertown Square > Increase the number of street trees and enhance the streetscape > Bury the utility lines Figure 1-6 Important Land Use Nodes along Arsenal Street Q, �'3, vlhanm vlaaq' Erin ` q • w w n g7r '+ IIIII Parts le i $ • 1 tRQ 3 r 8 q` �� �Y• S Y a N R 6•IIR � a �L •S �• a� g� o ii u m Arlington Street Five-way Intersection 4 � a• �`� ,4 Arsenal Mall Four-way Intersection wa.m.aS <� �+, iYlar�]ill ` G yV W�S i i P gs lS, Fat ply C J� MI I.ub a N Isl Falli r• � awlwd SI 4a a'r q Wok + 6 School Street Intersection pb } Lun enA 1 'x %a 4' IL Puman 9l 4s fI1PMnQ '� �ay.an191 `20 16 'ef J o� � tavrtl 51 o Plryprann s'Cypress St C Arsenq S[ E f A Paa� c IWansl e A N 9 �8f V Gd� aprolnrd union sl � -po fl r � £ c' ��' ss i Ellq St g $ %ly A- a C �IW Si 9 D• .. r Araan..l N PUR A mr43r ,ilsson 9t ` f ... ^h 4r aQ•► Pearl 9t asle `ama•bihY RQ y ChaNM flNer t ln" s n... IIa. I IIII� 19`5 91 ��4' 1My RQ K W Vlndinp8l o1on .. ... or•SI ANC �`4ua W a�sn 1 91 Hunnpr,err k j 9� �• gsodiidtl.Rd` I a.. Along Arsenal Street,there are three important nodes that should be the focus of activity(see Figure 1-6)given the existing traffic patterns and land uses (present and future). > Intersection of School Street and Arsenal Street,where Building 311 of the Arsenal complex is located to the south of Arsenal Street. On the north side of the street is the Lexus dealership and a gas station. 19 Chapter 1 -Vision and Land Use April 2014 DRAFT Vanasse Hangen Brusthn,Inc. > The four-way(non-aligned)intersection on Arsenal Street with the main entrance to the Arsenal Mall and an access road.Parking lots front this intersection on three sides. > The five-way intersection at Arsenal Street and Arlington Street, including the access road to the mall complex,Home Depot and a restaurant in the parking garage and office building.This intersection is also adjacent to the United Parcel Service (UPS)facility and is frequently congested with mall traffic,commuters heading to and from Boston via Greenough Boulevard and UPS trucks. In order to accommodate anticipated future development and address the issues raised during the public process,the zoning ordinance (Arsenal Overlay Development District —AODD and adjacent industrial use districts on the north side of Arsenal Street)should be amended in several ways. First, additional land uses need to be allowed in the district, specifically multi- family residential,retail and structured parking.Moreover,mixed use is not specifically listed as an allowed use. Second,the dimensional criteria should be updated to address potential increases in building height,building coverage and setbacks for new construction.For example,if buildings are to be allowed along the street line,the front setback should be reduced from the current 25 feet.Third,there is currently a minimum 15%set aside for open space.The Town may want to consider revising that standard to accommodate some form of public or civic space that can be incorporated as an attractive feature to the new development that should also include public art.Finally,the parking standards will have to be updated to reflect any new uses allowed within the district,but also provisions for shared parking and potential reductions if transportation demand management(TDM)measures are employed to reduce automobile use. A combination of zoning amendments and design guidelines can address the specific elements of the redevelopment plans including the project's interface with the street and project impacts. These recommendations to transform Arsenal Street into a complete mixed use corridor are illustrated in Figure 1-7. This shows the area being designated as a new area where a mix of commercial and office land uses serve a regional market area. Similar standards should apply in the adjacent zoning districts such as the I-1,I-2, and I-3 Industrial zones,as well where the redevelopment is anticipated,and the Town could consider extending the AODD accordingly in order to create a more unified vision for that section of the corridor. These include: > The zoning for the AODD references design guidelines established as part of the Historic Preservation Memorandum of Agreement(MOA)that cover: ➢ Building and structure exteriors 20 Chapter 1 -Vision and Land Use April 2014 DRAFT Vanasse Hangen Brustlin,Inc. ➢ Fenestration ➢ Scale ➢ Color ➢ Use of material ➢ Mass ➢ Views to,from,across the Olmsted-designed landscape New,updated design guidelines need to be established for the new buildings not included in the MOA. > Additional design guidelines should address streetscape improvements including planting street trees,incorporating sidewalk amenities, accommodating bicycle and pedestrian access,signage,burial of utility lines and creating public civic spaces,and including public art. > Project impacts,especially those related to transportation,should be addressed and mitigated.The Town should require a TDM plan that includes shuttle buses to local MBTA stops(the Watertown bus yard, Harvard,Alewife Station,etc.),employee transit benefits,carpooling, traffic calming,worker flextime,bicycle sharing programs,car sharing programs and access management. See more details in Chapter 2- Transportation,Circulation and Parking. > The principles of a complete streets policy,in which streets are designed and operated to enable safe access for all users,should be embodied in the future vision for Arsenal Street. See more details in Chapter 2 - Transportation,Circulation and Parking. Gj a b d V - Exarrple of a corrplete street showing trees,designated parking zone,bike lanes,and an outdoor cafe. Photo courtesy of Smart Growth America-National Corrplete Streets Coalition. 21 Chapter 1 -Vision and Land Use April 2014 DRAFT Figure 1-7 Transform Arsenal Street into a Dynamic Nixed-use Corridor Transform Arsenal Street into a m Dynamic Mixed-use Corridor Watertown 2013 Comprehensive Plan Strategies All a� 49 �i 01 AT Is' © A Oimplement"Complete Street"initiatives.Maximize traffic flow to facilitate growth along the corridor while balancing the needs of O Establish incentive bonuses torfuture clevelopment that allows additional stories or building height.Development or density other transportation modes including pedestrians,bicycles and transit.Special considerations should be given to sidewalk widths bonuses could be tied to achieving desired land use mix,activation of ground floor uses,articulation of building form,and the and streetscape amenities and the ability to accommodate either an on-street bicycle lane or cycle track where feasible. inclusion ofamenities such as plazas or public realm improvements. ©Enhance the visibility of pedestrian crossings at intersections to improve safety andwalkabllity. O Work with property owners to identify opportunities to make pedestrian,bicycle and other connections to adjacent areas along ©Identify goals and design criteria for streetscape elements such as street trees,plazas,public art and street furniture to help Arsenal Street. brand the corridor and improve its aesthetic.Develop design standards for sidewalks with a focus on special enhanced areas at 0 Supplement existing zoning with Architectural Design Guidelines that address form,scale,and other design features. intersections. 0 Develop goals and strategies for access a nd parking that consider best practices for access management of vehicles,and ODevelop standards for signage,light poles and banners that consider the needs of businesses,vehicles and pedestrians. preferences for placement of parking(and parking structures)at the rear of sites or potentially"wrapped"with development. ©Objectives for setbacks should be established to create outdoor plazas and public realm improvements that reinforce Establish goals for active ground floor uses at key locations that will reinforce pedestrian activities along the corridor. intersections,and pedestrianibicycle zones.These setbacks could vary to accommodate variety of urban forms such as buildings ® Consider establishing goals and criteria for limited use of parking in the front of buildings at key locations along the corridor to that have special architectural features that project into the corner,or that recede from the corner to create a plaza or small square. enhance the pedestrian and public realm. O Work with the MBTAto enhance bus stops and bus services along the corridor;by exploring items such as Bus Rapid Transit(BRT), exclusive bus lanes,and setting signal priorities. Note:This diagram is not site specific it depicts a variety of strategies that are contemplated for the Arsenal Street Corridor.Further considerahon by the Taw"and a more detaifed assessment will be required to determine the feasibility ofspecffic streerscape,traffic,bicyce,pedestrian,and land devefopmenr improvements thatare fliustrored above. 22 Chapter 1 -Vision and Land Use April 2014 DRAFT aVanasse Hangen Brusthn,Inc. ....................................................................................................................................................................... Coolidge Square and Mt.Aubum Street Corridor Mt.Auburn Street is a major throughway that runs from Watertown Square into Cambridge.Land use along this corridor is characterized by a mix of residential,commercial,and municipal uses.The west end is essentially the extension of Watertown Square filled with local restaurants and retail services,as well as small commercial plazas.The commercial area near the east end where Mt.Auburn Street meets Bigelow Avenue is known as Coolidge Square. This is a burgeoning and regionally popular neighborhood retail center in Watertown known for its diverse retail and services including ethnic and specialty food stores and restaurants,banking,small shops, and other services.Much of the commercial space is in either one or two story buildings. Residential uses line both edges of Mt.Auburn Street in between these two commercial clusters,with small corner retail stores intermittently located along the corridor where historic trolley stops where located.Residential uses include single and two-family homes,along with a few multi-family dwellings and mixed use residential located above businesses. The Town's only designated Historic Overlay District is on Mt.Auburn St. between Summer Street and Lincoln Street. Mt.Auburn Cemetery is located along the Town's border with the City of Cambridge.Mount Auburn,the first "rural"landscaped cemetery in the U.S., launched the 19th century rural cemetery and public park movements.In 2013,this cemetery was designated a Great Place in America by the American Planning Association. It is recognized as one of the country's "most significant designed landscapes"and is listed in the National Register of Historic Places as well as being a designated National Historic Landmark'. Dramatic changes to the character of this corridor are not anticipated,so preservation of community character is important.Any redevelopment activity along this corridor should remain smaller in scale and compatible with the one-and two-story buildings in existence.However,as is the case with other sections of town,design guidelines,fagade upgrades, pedestrian and bicycling amenities, and streetscape improvements such as street trees and planters,are deemed necessary.While Coolidge Square offers a diverse mix of ethnic restaurants and stores,public comment suggests that it needs more of an identity to distinguish itself from other commercial centers. This is an area that would lend itself to outdoor seating at restaurants,bistros and bakeries.Many of these uses do not provide off-street parking,which presents a potential constraint on future expansion of these uses or a change 23 Chapter 1 -Vision and Land Use April 2014 DRAFT Vanasse Hangen Brusthn,Inc. in use unless parking requirements are relaxed or addressed in a combined facility. ....................................................................................................................................................................... Pleasant Street Corridor Historically an industrial corridor known for its mills and factories along the riverfront and the rail lines,Pleasant Street today still shows a strong industrial character defined by light industrial uses,warehouses,and contractor yards along its length,particularly west of Bacon Street.It has long been recognized that a significant amount of land within the corridor is underutilized or vacant and the corridor itself has been generally characterized by single story buildings and parking lots.In recent years some new businesses including biotech,medical devices,and some small research and development facilities,as well as new residential development such as Repton Place and Riverbend,have emerged along the corridor. The corridor is adjacent to a number of residential areas which are primarily single and two-family neighborhoods.However,the most recent development along the corridor has been predominantly higher density residential,although recent projects have also included some commercial uses. In March 2007,the Watertown Town Council established a six-month moratorium on development along the Pleasant Street Corridor in order to allow the Town Council,staff,and constituents to determine the appropriate response to several proposed residential projects in the former 1-3 industrial district.To help create a vision and implementation strategy for the corridor, the Town initiated the Pleasant Street Corridor Concept Plan and Implementation Strategy study in April 2007.The study developed a number of goals to guide the planning and future of the corridor. > Long term development of Pleasant Street should help define the character of the corridor with appropriate scale,size,and mix of uses. > Enhance connections and open space opportunities through improved access to the Charles River and protect wildlife habitat,manage stormwater,calm traffic,and improve transit,bike and pedestrian access. > Future development should support the Town's tax base while creating incentives for appropriate development along the corridor. The study also identified development potential along the corridor for business centers,residential neighborhoods,as well as neighborhood retail and restaurants.For implementation,the study suggested a number of priority actions including amendments to the zoning ordinance,seeking opportunity for Chapter 40R zoning,providing financial incentives,and advocating for transit improvements.Ultimately,the Town adopted the 24 Chapter 1 -Vision and Land Use April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Pleasant Street Corridor District in 2008,which is described in the section below. One of the goals of the new zoning was to encourage a mix of uses including residential,office,research and development,hotel and retail.However,that has not materialized as envisioned,in part as a result of the recession that started as the new zoning was adopted. Since 2008,several major residential developments sprouted along the corridor,introducing hundreds of rental units in to this part of the Town.While these new projects further stimulated redevelopment of the Pleasant Street corridor,their impacts have been controversial among various stakeholder groups,particularly local residents. Concerns include traffic congestion,decreased pedestrian safety,impeded view and access to the riverfront,and unappealing aesthetics resulting from large scale developments that were not set back sufficiently from either the street or the river,although they often are set back further than pre-existing uses.Although concerns were raised regarding impeded views and access to the river,it should be noted that visual access is limited from Pleasant Street as a result of existing buildings,trees and topography.Access to the river is available,but could be enhanced by better signage. In order to address these issues,it is recommended that the Town consider a number of changes to the district regulations including: > Given that much of the new development along the corridor has been residential,revised zoning should specify that mixed use and commercial development nodes be incorporated within the district to better match the vision espoused in the 2007 Concept Plan for the corridor and refine how and where particular uses should be established. The corridor could be separated into three separate "sub-districts"as a way to maintain the economic diversity along the corridor and direct future development in a manner that respects the character of the corridor. From the Waltham line to Bridge Street,Pleasant Street is primarily commercial with the exception of the new residential projects such as Repton Place.Bridge Street is a major connecting roadway to Newton.Future development within this node should be confined to commercial or mixed use where any residential component is removed from direct frontage on Pleasant Street. Between Bridge Street and Rosedale Road,the emphasis should be on commercial or mixed use given that the existing land use there is primarily commercial.Opportunities to provide pedestrian connections to the Charles River should be identified,including use of a Town-owned parcel across from Rosedale Road. From Howard Street east toward Watertown Square,the land use transitions to a mix of residential until Church Lane,where there are 25 Chapter 1 -Vision and Land Use April 2014 DRAFT Vanasse Hangen Brusthn,Inc. some offices within reused historic buildings adjacent to the Square.In order to maintain that character,the existing mix of residential development should be maintained. Setbacks from the street should be revisited,as the current build-to line regulation creates concerns when combined with the current heights. The building height regulations should more clearly identify appropriate heights within the district to create context sensitive design that better reflect the character of the surrounding neighborhood.The maximum allowable height should be revised to limit development at the street edge to be no more than two stories while allowing buildings to reach the current maximum height only if buildings are stepped back a sufficient distance to avoid sight lines in order to avoid the "canyonization"of the corridor along Pleasant St and along the Charles River. Additional stories would continue to be allowed with greater step backs if development enhancements identified in the ordinance are included such as public open space,structured parking,alternative transportation,and conforming with design or sustainability guidelines. > The zoning should continue to promote areas along the corridor where breaks should be provided for public access points to the Charles River, as well as view corridors to the river. Opportunities for buffers and public spaces should continue to be considered for future development proposals. > Streetscaping,lighting and other amenities should be provided along the corridor. > Design guidelines should be established to address issues of building massing,the relationship among the building,street and river,and overall aesthetics. > Better wayfinding is needed to provide enhanced visual and physical access to the Charles River. The Pleasant Street cross-section diagram (see Figure 1-8) illustrates some of the above-mentioned recommendations. 26 Chapter 1 -Vision and Land Use April 2014 DRAFT Figure 1-8 Define Pleasant Street as an Inviting Riverside Corridor Define Pleasant Street as an Inviting Riverside Corridor Watertown 2013 Comprehensive Plan Strategies Identify standards for upper level building Potential bonus height for achieving stepbacks and refine/enforce zoning provisions development incentive credits such for bonus height building stepbacks as enhancing public open space to avoid'canyon ization"of the corridor and incorporating structured/ underground parking Ensure appropriate building As of right setbackfrom the Riverto help building heights maintain the natural integraty 54'/5 stories of the Charles River corridor •---------------------------------- ------ -------------..._ '� —I �urm�akrv— Promote conformance with Encourage developments that Promote sustainable Establish oafs and Design Guidlines to ensure help increase and strengthen practices such as Low g e design criteria for buffer sihtlines and harmony and consistency g p Impact Development and g to adjacent uses such as in streetscapes,building connections to the River green buildings to better fences and landscaping characters,and signage manage stormwater, co ut vc i i.—.i resources and reduce development Identify appropriate building stepbacks impact from environmentally sensitive areas such as the River as well as low and medium density residential areas to mitigate potential negative impacts ®Yanusse Hangen BrusHrn,Inc. 27 Chapter 1 -Vision and Land Use April 2014 DRAFT Vanasse Hangen Brusthn,Inc. ■ Zoning Regulations vs. Future Land Use Land use in Watertown is regulated by the Town's Floor Area Ratio fFARI Zoning Ordinance and The floor area ratio is the total square Zoning Map. There are footage of a building divided by the total thirteen types of general zoning districts,including square feet of the lot the building is located seven residential districts, on.Higher FARs tend to indicate more three business districts,and dense development. three industrial districts.In addition,the Town has six Floor Area Ratio(FAR) 1:1 Ratio special zoning districts. The following is a summary of the different zoning districts based on definitions,the use table and the dimensional 1 story 2 st `1 4 stones regulations. The general (100%Mcovarag®} p50S bt--ragQ r2s%m coveragef zoning districts do not Building Healthy Communities: include purpose sections describing the districts. httD://land.lacity.orl3/. � J ....................................................................................................................................................................... Residenoe Districts > The two Single Family zoning districts(S-6 and 5-10)allow single-family residences only.The minimum lot size in the S-6 district is 6,000 square feet and is 10,000 square feet in the 5-10 district. Most of the land zoned for single-family in Watertown is S-6. > Much of the land zoned for residential uses is within the Two Family zoning district(T). Both single-and two-family homes are allowed,with a minimum lot size of 5,000 square feet. > The Single Family Conversion district(SC)allows single-family development by right and conversions of single-family to two-family dwellings by special permit.Two-family dwellings are also allowed with a special permit.The minimum lot size is 6,500 square feet. > There are two residential multi-family districts(R.75 and R1.2),which allow single-and two-family homes by right,and multi-family homes with a special permit with site plan review. For the R.75 zoning district, the minimum lot size is 5,000 square feet,the minimum lot area per dwelling unit is 1,500 square feet,the maximum height is 35 feet,and the Floor Area Ratio(FAR)is 0.75.Within the R1.2 district,the minimum lot 28 Chapter 1 -Vision and Land Use April 2014 DRAFT Vanasse Hangen Brusthn,Inc. size is also 5,000 square feet,but the minimum lot area per dwelling unit is 1,000 square feet.The maximum height is 45 feet and the FAR is 1.2. Most of the land zoned for multi-family housing falls within the R.75 district,much of which is located around Watertown Square. > The Cluster Residential district(CR)can be found in two locations — around the Oakley Country Club along the Town's border with Belmont and a small area in the western part of town. Single-and two-family homes are allowed by right,while multi-family is allowed with a special permit with site plan review.Development within the CR district requires a minimum lot size of 40,000 square feet and a minimum lot area of 10,000 square feet per dwelling unit. ....................................................................................................................................................................... Business Districts > The Neighborhood Business district(NB)allows some multi-family housing with a special permit with site plan review,and a variety of business,retail,and consumer service uses.New construction or conversions in excess of 4,000 square feet requires a special permit with site plan review.There is no minimum lot size,the maximum height is 35 feet or 2'/2 stories,and the maximum FAR is 0.5.These districts are scattered among various residential neighborhoods around the Town and tend to be relatively small. > Similar to NB,the Limited Business district(LB)is exactly the same as NB in terms of the Table of District Regulations.It also does not have a minimum lot size,but the maximum height is 40 feet or 4 stories and the maximum FAR is 1.0.The LB district is generally located along sections of the Town's major corridors such as Mt.Auburn St.around Coolidge Square,and Mt.Auburn St.,Galen St.,and Main St. in the vicinity of and heading away from Watertown Square. > Watertown Square is the location of the Central Business district(CB). Multi-family housing is allowed by site plan review (up to three units)or with a special permit with site plan review (greater than three units)as part of a mixed use project where the first floor is a retail or business use. All business,retail and consumer service uses are allowed,along with offices. Similar to the other two business districts,a special permit with site plan review is required for new or expanded businesses greater than 4,000 square feet.There is no minimum lot size requirement,the maximum height is 55 feet or 5 stories,and the FAR is 4.0. Additionally,there is a Watertown Square Design Overlay District,which governs fagade alterations and signs.In 1989,the Town adopted a detailed Watertown Square Design Handbook,focusing on fagade improvements,which establishes the applicable standards and guidelines. 29 Chapter 1 -Vision and Land Use April 2014 DRAFT aVanasse Hangen Brustlin,Inc. ....................................................................................................................................................................... Industrial Districts The Town's three industrial districts(I-1,I-2,and I-3)are largely located in the eastern portion of town along Arsenal St. (including land currently occupied by the Arsenal and Watertown Malls),Coolidge Ave.,and Grove St. The uses allowed are,for the most part,the same in each of these districts.All three allow both commercial and industrial uses. The main exception is that heavy industry is permitted in the I-1 district and the I-3 permits multi-family and mixed use with a special permit with site plan review.The dimensional regulations are also consistent between these zoning districts —no minimum lot size and a maximum height of 50 feet or 5 stories.The FAR is 2.0 for the I-1 and I-2 districts,and 1.0 for the I-3 district except for mixed use developments (where it is 2.0)and for residential uses depending on the lot size in which R.75 and R1.2 regulations apply.A special permit can be obtained to increase the FAR up to 2.0. ....................................................................................................................................................................... Special Zoning Districts > The Assisted Living Overlay District(ALOD)establishes the standards for assisted living projects and the only designation for this district on the zoning map is the location of Brigham House at 341 Mt.Auburn St. > The Open Space and Conservancy District(OSC)covers the Town's open spaces and parks,including Mt.Auburn Cemetery and the Charles River Reservation. > The Revitalization Overlay District(RO)can be designated by the Town Council to encourage redevelopment of parcels within the overlay zone. The only one so designated at this point is along Galen St. south of Watertown Square and encompasses land occupied by the MBTA bus yard. Specific standards are established including a minimum lot size of 10,000 square feet and increases in height,FAR and density are allowed to try to encourage redevelopment. > The Limited Redevelopment District(RD)allows more flexibility in the retail uses allowed in the designated RD district to encourage revitalization of the property.The only area zoned RD is on Pleasant St. along the Waltham border. > The Religious/ School Building Overlay District(R/ SOD)was established to encourage the reuse and redevelopment of former school and religious buildings.A former church on the corner of School St. and Mt.Auburn St. has been redeveloped into a condominium building and the Apartments at Coolidge School have been built pursuant to this provision. > The Pleasant Street Corridor District(PSCD)was established after the completion of the 2007 Pleasant Street Plan described earlier. The 30 Chapter 1 -Vision and Land Use April 2014 DRAFT Vanasse Hangen Brusthn,Inc. intention was to encourage a mix of uses,although most of the development since adoption of the zoning change has been residential. The maximum FAR in this district is 2.0 for mixed use projects and 1.0 for all other development(some incentives are provided which allow the FAR to be increased). The minimum height is 24 feet and the maximum height is 54 feet or 5 stories. Height can be increased to 79 feet or seven stories by special permit if certain benefits(open space,connections to the Charles River,structured or underground parking,and alternative transportation)are provided and step backs are incorporated into the design.Parking reductions can be granted by special permit as well. The district regulations include design and environmental sustainability guidelines. ....................................................................................................................................................................... Future Land Use Figure 1-9 shows the Land Use Vision for the Town that identifies the Town's residential neighborhoods as areas to preserve,key commercial centers such as Watertown Square and Coolidge Square as areas to enhance (this also includes some neighborhood retail centers and the Main Street and Mt. Auburn Street corridors),and the Pleasant Street and Arsenal Street corridors as areas to transform. Figure 1-10 is the Future Land Use Map for Watertown and it provides additional detail to the Land Use Vision.It illustrates the future land use designations and shows the changes that are envisioned for Pleasant Street and Arsenal Street that are outlined in this chapter of the Plan.Based on these two maps,the future land use designations are described below in Table 1-2. It is important to re-emphasize that these land use designations describe the Town's existing character and fabric and do not represent wholesale changes to land use in Watertown.Nor are they intended to create new zoning districts. Rather,it demonstrates that future land use changes will be focused along Pleasant Street(where commercial and residential mixed use will be encouraged instead of only residential development)and on Arsenal Street, which will transform from a commercial corridor dominated by large format retail into a regional commercial mixed use corridor with streetscape and public amenities that make a more inviting place that is also pedestrian and bicycle friendly. 31 Chapter 1 -Vision and Land Use April 2014 DRAFT Figure 1-9 Land Use Vision for Watertown t Land Use Vision �•, Wakertown 2013 Comprehensive Plan Strategies • B E L M 0 T WALTHAM .• CAMBRIDGE pip . , NEWTON Feet BOSTON land Use Vision Areas to Preserve Areas to Enhance Areas to Transform ®�Hasse Haman arasuin,Inc, 32 Chapter 1 -Vision and Land Use April 2014 DRAFT Figure 1-10 Future Land Use Map for Watertown Future Land Use Map W*ertown 2013 Comprehensive Plan Strategies BELMONT WALTHAM • �••� ' C A M B R I D G E • • L 111 • .j qjN.ST. • • r • , ^+:I sr.corrsruoa ,.� �..• / . i ~—r--� .�. -ter � •. '`-, • rr- '•�.. �{ • - • ARSENAL l'Ii r y • S?,CoRRin A� I S' • � • a —� lam/ • •' n ' f • f� •�....... .�• ••`•' 'r'•• , NEWTON BOSTON Legend Town Boundaries(Watertown/Others) b Established Commercial Squares Law Density Residential N§NNN Neighborhood Commercial Streets(Watertown/Others) ,• Retail Centers/Blocks Medium Density Residential Regional Mixed Use �A Open Water •� Neighborhood and Commuter Connections High Density Residential Community Amenities and Schools Open Space in Neighboring Communities Residential Mixed Use Industrial Commercial Mixed Use Office/Industrial Mixed Use ®y rase Ha X—Br Uim Inc. 33 Chapter 1 -Vision and Land Use April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Table 1-2 Future Land Use Designations Future Land Use Predominant Future Land Use Description Zoning Districts Low Density Residential S-6 Existing residential areas to be preserved with lower density S-10 (bed 6,000-10,000 sq.ft.lots), primarily single family homes Medium Density Residential T Existing residential areas to be preserved with medium density Sc on 5,000-6,500 sq.ft. lots, primarily where single and two LB family homes are allowed, including the conversion of single family dwellings into two family High Density Residential R1.2 Existing residential areas to be preserved with higher density, R75 primarily multi-family and duster residential development CR Residential Nixed Use PSCD Areas to be enhanced(primarily along the middle portion of 1-3 Reasant Street and the Union Market area)with mixed land LB uses where multi-farnly residential development is the primary use,along with some retail a office use C„.,.,-,.'al Nixed Use PSCD Areas to be enhanced such as Watertown and Coolidge LB Squares,and transfom-ed,including parts of Pleasant Street, CB with mixed land uses where oomrrlerdal development is the primary use, including light industrial, research and 1-3 development,office and retail uses NB Neighborhood Cormiercial LB Commercial dusters serving local residential neighborhoods NB featuring neighborhood retail businesses that are to be T enhanced S-6 Regional Nixed Use 1-1 Area along the Arsenal Street corridor that is to be transformed 1-3 and has some existing residential uses, but where a mix of retail (large and small scale)office,and research and development uses serve a regional market area Schools and Corrrn7unity OSC Areas set aside for schools,municipal facilities, parks and open Amenities PSD spaces where the land uses are to be preserved and the 1-3 facilities enhanced T Industrial 1-2 Areas designated predominantly for industrial uses that are likely to remain mostly unchanged Officelindustrial Nixed Use 1-2 Areas of nixed use with primarily office, light industrial and 1-1 research and development uses that are to be transformed along Arsenal Street The recommendations in this Plan address both the use designations and the design elements that will help to transform both Pleasant Street and Arsenal Street.Additionally,the Plan suggests how neighborhood character can be preserved and their retail centers enhanced. 34 Chapter 1 -Vision and Land Use April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Goals The Land Use Element addresses the future land use direction for Watertown's main corridors,commercial centers and residential neighborhoods. Based on input received during the public outreach process and the baseline assessment,the following land use goals have been established. Goal 1. Address design issues along the major corridors and Watertown and Coolidge Squares that enhances aesthetics while preserving neighborhood character. Goal 2. Through the use of innovative zoning tools,encourage Watertown's business districts to thrive by redeveloping vacant or underutilized parcels and allowing a mix of businesses that attract foot traffic. Goal 3. Identify strategies to develop and maintain economic vitality within major squares and corridors with a diverse mix of innovative business and residential choices. Goal 4. Establish criteria for development along Pleasant Street to ensure projects are sensitive to the Charles River. Goal 5. Maintain existing character of residential neighborhoods. Reconymidabons Goal 1.Address design issues along the maior corridors and Watertown and Coolidge Sauares that enhances aesthetics while preserving neighborhood character. A. Enhance building,parking,and streetscape aesthetics by adding design and landscaping standards to the Limited and Central Commercial district regulations,including provisions for public art. B. Incorporate `green'building practices to encourage energy efficiency and that projects are planned,designed,constructed,and managed to minimize adverse environmental impacts.This would include: 1. Low impact development standards to reduce and retain stormwater on-site 2. Energy efficient design inside and outside of the buildings 35 Chapter 1 -Vision and Land Use April 2014 DRAFT Vanasse Hangen Brusthn,Inc. 3. Consider using tools like LEED criteria for green buildings or other programs to recognize leadership in green building. 4. Amenities that promote health and wellness 5. Support successful commercial use of existing historic neighborhood business blocks. C. Update the Watertown Square Design Handbook and relevant sections of the zoning ordinance to include signage and street fagades and extend to other business districts. Goal Through the use of innovative zoninQtools, encourajze Watertown's business districts to thrive by redeveloping vacant or underutilized parcels and allowing a mix Of businesses that attract foot traffic. A. Within the squares,create a diverse retail mix with shopping and dining choices to encourage foot traffic and browsing of restaurants,cafes,retail boutiques,and bookstores. Consider incentives such as expedited permitting to encourage mixed-use development where appropriate and allow for increased density in Watertown Square. B. Support infill and redevelopment of vacant/ underutilized sites 1. Incorporate flexible zoning standards that allow developers to adapt to existing site constraints. Density bonuses,mixed uses,and reduced parking standards (or shared parking)are examples of the types of incentives that can be applied to this type of redevelopment. 2. Work with prospective developers to assess the specific obstacles to expanded reuse and/or redevelopment of historic and other existing properties,and create public/private partnerships to address those obstacles. 3. Create flexible minimum lot size and frontage requirements to encourage infill development. C. The AODD and the adjacent industrial use districts should be revised to create a mixed use gateway to Watertown through the redevelopment of the Arsenal Mall and the expanded Arsenal on the Charles project.These changes include updating the list of allowed uses,changes to the dimensional regulations,new design guidelines that incorporate streetscape improvements, signage,provisions for new public spaces,and building design standards. Goal 3. Identify strateeies to develop and maintain economic vitalitv within maior squares and corridors with a diverse mix of innovative business and residential choices. 36 Chapter 1 -Vision and Land Use April 2014 DRAFT Vanasse Hangen Brusthn,Inc. A. Develop an inventory of and strategy for reusing vacant or abandoned properties. B. In light of potential redevelopment of targeted areas along the Arsenal Street corridor and Watertown Square,establish design guidelines appropriate to proactively plan for redevelopment.The guidelines should focus on the building massing,setbacks and streetscape/landscaping improvements along Arsenal Street to ensure an attractive and healthy connection with the street.Parking should be removed to the rear of the buildings. C. Adopt the recommended zoning changes described earlier in the Arsenal Street Corridor subsection of this element.The objective is to ensure that future land use along the corridor emphasizes commercial,office and retail development. Any mixed use development should have a minimum required percentage of commercial space,and purely residential development should not be allowed.Other changes include allowing multi-family residential,retail and structured parking;reducing the setbacks to allow buildings to be built to the street line;revising the required open space set aside to be used as a civic amenity;and updating the parking standards. D. Adopt design guidelines for new construction and proposed improvements to existing buildings to protect and retain the local historical context(prevailing streetscape and the traditional building styles found in the neighborhoods). E. Consider transit-oriented mixed use development around the site currently occupied by the MBTA yard.A number of buses go through this yard on a daily basis and there may be opportunities to redevelop some of the land utilized by the MBTA.When that land becomes available,it should be zoned for higher density mixed use development with retail uses that cater to the needs of commuters and have reduced parking standards in light of the onsite mass transit connections. Goal 4.Establish criteria for development alonz Pleasant Street to ensure Droiects are sensitive to the Charles River. A. Revise height requirements to require the first two stories of a building be built to the build-to-line along the street edge,but require the additional stories (up to five)to be stepped back a sufficient distance to minimize sight lines.Additional stories(no more than seven total)should be stepped back further if certain development enhancements are provided. The current ordinance allows buildings to go to seven stories if projects provided public open space,structured parking,alternative transportation,and conforming to design or sustainability guidelines. Incentives for the additional height could also include historic preservation renovations,providing public and/ or visual access to the 37 Chapter 1 -Vision and Land Use April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Charles River,developing a mixed use project,and including greater than the minimum of 10 percent affordable housing as part of the development,for example. B. Ensure projects are sensitive to the Charles River along Pleasant St.The step backs should apply along Pleasant St.and for any buildings on the Charles River side.Increase rear setbacks and landscaping requirements for buildings along the Charles River. C. Refine the Pleasant St. Corridor District by identifying areas where mixed-use is mandatory and where only commercial development is allowed. D. Provide development incentives to encourage preservation and restoration of buildings in addition to the other incentives provided in the district. E. Provide for public access,as well as visual corridors,to the Charles River' where practicable. F. Seek opportunities to bury utility lines along the corridor. Goal 5.Maintain existing character of residential neiehborhoods. A. Review zoning requirements for conversions of single-to two-family homes in the CR, SC,T,R.75 and R1.2 districts to determine whether the locations of such conversions should be specified within those districts.In the T district,conversions on lots less than 7,500 square feet are allowed as long as the FAR does not exceed 0.50. Similar restrictions could be considered in other districts in order to avoid conversions that are out-of- scale when compared to the neighborhood in which the home is located. B. All residential structures should be required to front toward the street and have its main entrance along the frontage. C. Allow accessory units in separate structures (such as carriage house conversions),as these would be opportunities to provide additional units without tearing down or substantially adding on to an existing single family. D. Enhance streetscape amenities,crosswalks and traffic calming measures (see Chapter 2-Transportation,Circulation and Parking). E. Continue to require new development to include sidewalks,and to connect to municipal sidewalks where feasible (see Chapter 2- Transportation,Circulation and Parking). F. Incorporate basic design criteria for roof types,dormers,and encroachments into setbacks(overhangs,open porches,etc.) 38 Chapter 1 -Vision and Land Use April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Additional Zonine Considerations A. New construction or conversion form one use to another in excess of 4,000 square feet generally requires a special permit with site plan review. This is a relatively low threshold and probably captures projects with very little real impact to adjacent properties. The Town could consider raising the threshold for a special permit and site plan review. B. The zoning ordinance categorizes all retail uses the same way in the Table of District Regulations. Since not all retail uses have the same impacts in terms of traffic generation and parking requirements,the Town should differentiate retail uses in more detail.For example,convenience and grocery stores are different from other retail stores such as shoe and clothing stores.Thus,projects that will generate more traffic and parking can be mitigated properly. C. The parking standards should be reviewed and updated to reflect current practices,including clarifying the shared parking provisions to consider allowing off-site parking. The breakdown of land uses in the parking regulations is more detailed than in the Table of District Regulations,so there is no consistency between the two.In some districts,it appears as if the parking requirements are additive if mixed uses are proposed (i.e.in the RO district). Site Plan Review is conducted by the Planning Board and the Special Permit Granting Authority is the Board of Appeals.In order to simplify some of the permitting processes,the Town could consider consolidating the special permit and site plan review process so that the Planning Board is the sole review and permit granting authority. To further streamline the process,the Town could consider designating certain projects as "minor" projects requiring only an administrative review by staff or be limited to a single meeting by the reviewing authority. 39 Chapter 1 -Vision and Land Use April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Transportation, Circulation, and Parking Introduction The Town of Watertown is located in Middlesex County of eastern Massachusetts. The community is bordered by Boston and Cambridge to the east,Belmont to the north,Waltham to the west and Newton to the south. Watertown is approximately six miles west of downtown Boston. The roadways in the community offer excellent local access and mobility; however,the community is somewhat isolated from the regional transportation network. Roadways that are classified as arterial roadways within Watertown are summarized below. An arterial roadway is typically used for mobility more so than access. Main Street/North Beacon Street (Route 20): an arterial roadway that bisects the Town and provides east-west mobility to the regional highway system;I-95 to the west and Interstate 90/ Massachusetts Turnpike to the south. Watertown Street/Galen Street/Mt.Auburn Street:(Route 16): an arterial roadway that bisects the Town and provides north-south mobility and is one of four roadways that cross the Charles River in Watertown. Arsenal Street: an arterial roadway on the easterly side of Town that provides east-west mobility and serves as a principal retail,commercial and industrial corridor. Galen Street:the portion of Galen Street that is not part of Route 16 is an arterial roadway that provides north-south mobility and access to the Interstate 90/ Massachusetts Turnpike via Newton. Belmont Street/Orchard Street:an urban minor arterial that runs east-west along the Belmont Watertown line. Orchard Street intersects near Belmont 40 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Street/ Lexington Street near the Belmont Town line,but traverses southeasterly toward (and eventually intersecting)Common Street. Common Street:a collector roadway that provides a north-south route to Belmont Center and traverses southerly intersecting Mt Auburn Street. Nonantum Road:is a two-lane arterial roadway that travels east-west along the south side of the Charles River between Watertown and Newton. This roadway provides a connection to Route 20 and Soldiers Field Road to the east. Greenou.eh Boulevard:Is a four-lane arterial roadway that travels north-south along the Charles River between Arsenal Street and Memorial Drive (Route 3) in Cambridge;planted medians are located leading up to the intersection of Arsenal Street. It is noted that there are a number of other significant streets that serve the community,these "collector"roadways include: Pleasant Street,Waltham Street,Howard Street,Myrtle Street,Green Street,Lexington Street,Waverly Avenue, Summer Street,Church Street,Walnut Street,Charles River Road, School Street,Dexter Avenue,Nichols Avenue,Arlington Street,Coolidge Avenue,California Street and Jackson Road. The locations of the arterial, collector and local roadways are illustrated later in this chapter. Figure 2-1 illustrates the Watertown transportation network. While Watertown does not have direct access to the commuter rail,each of the adjacent towns offers access to commuters traveling east to Boston,or west to a variety of destinations. In addition,the Massachusetts Bay Transportation Authority(MBTA)provides eight bus routes along Galen Street,Mt.Auburn Street,Arsenal Street and Main Street. Prior planning efforts locally and regionally have identified a number of challenges for the community;which need to be taken into account as part of this plan so that future improvements can be focused on. During outreach meetings with the community,Town officials,and online surveys,a number of transportation themes were identified,including: > Safety:there are seven intersections/roadways in Town that may be eligible for Highway Safety Improvement Program (HSIP)funding through MassDOT/ FHWA; > Congestion:there is extensive vehicle queuing and delay in Watertown Square and along Main Street due to the significant commuter traffic in Town,and it appears that most of this traffic is actually traveling through Watertown to other destinations in adjacent communities; 41 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Figure 2-1 Roadway Network and Jurisdiction Map,Watertown, MA NO;M,W,mlwu LD1 1239.00IGIsIProlealTrmsporc�tion_madJN-dlcu--d BELMONT WALTHAM CAMBRIdGE Ak s t.3��'.•.l /�( �� � " � �rc�. r�" �+a��F ?�Q e �� Payson Pah d .,�E & s 0 MtAuburn� �+ .w. ea F"i ry FryIE xw�01 "xs r FE .pTb g F b �epc,(4,.,.v'7'7f 2 p"Wrvmryy,aen7 `krvKp,q ,/ a �,.s �t.@'�u.,as..o3 ��$ N.11T�in sF•sr�ec.�,�w � � -�� NEWTONtun.a � BOSTON Nerth Brighton Va"asse flangen Brustlin,Inc. Roadway Network/Jurisdiction Map Road Type by Ownership Source:Watertown Assessor's Database may 2013 MassDOT-owned Roads -DCR-owned Roads Town-owned Roads Camprehensive Plan Watertown,MA 42 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Vanasse Hangen Brusthn,Inc. > Function:due to congestion on major roadways/ intersections,drivers are seeking alternative routes through local roadways that are more residentially developed; > Multi-modal:not all roadways within Town accommodate bicycles or have bus routes; > Implementation:need a plan to address existing issues and future transportation concerns;and > Corridor use experience:lack of streetscape and more oriented to the automobile. This Transportation Element identifies the range of transportation issues, needs,and deficiencies over the near and long-term and establishes goals and strategies for physical enhancements and policies that should be implemented. Basel I ne A►SSessmeit ■ Regional Context Watertown is positioned on the westerly edge of the cities of Boston and Cambridge,bordering Boston's neighborhoods of Allston and Brighton. The Town also borders Newton to the south,Waltham to the west,and Belmont to the north,all of which produce significant through traffic. Local roadway connections that lead to the regional network are provided via Route 20, Route 16,Arsenal Street and Galen Street. The Massachusetts Turnpike (Interstate 90)runs just south of the Town and can be accessed in Newton,via Galen Street,and in Allston,via North Beacon Street(Route 20). Route 2 is located to the northeast and can be accessed via Mt.Auburn Street(Route 16) or via Belmont. While the town is positioned close to other major urban centers,Watertown is identified as a thriving center of business and commerce. 43 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Background ....................................................................................................................................................................... Regional Planning For the development of this Comprehensive Plan, it is important to acknowledge and understand past transportation planning and land use efforts in town and the region to ensure that recommendations are consistent and complementary. Regional planning agencies(RPAs)play a key role in the development and execution of any municipality's planning efforts. As overseers of a larger area,RPAs help ensure that regional plans are complementary to each community. The Metropolitan Area Planning Council(MAPC)is the RPA to which Watertown belongs. The MAPC also provides support for the Boston Region Metropolitan Planning Organization (BRMPO). The past studies/plans worth noting include: BRMPO Regional Bicvcle Plan (2007): The Boston MPO Regional Bicycle Plan outlines a number of goals and strategies related to bicycle travel for the future of the region. This plan was structured off the MAPC Regional Bicycle and Pedestrian Plan (1997)and the Massachusetts Statewide Bicycle Transportation Plan (1998). The following summarizes the regional goals: > Encourage more trips by bicycle in each community; > Make bicycling and bicycle accommodations a part of"standard operating procedure"; > Improve evaluation and prioritization of bicycle project proposals; > Assist and encourage local initiatives; > Work with state and federal agencies to simplify and coordinate funding programs; > Increase regional knowledge about bicycling;and > Improve the time and cost efficiency of the transportation system; Path's to a Sustainable Region BRMPO Long-Range Transportation Plan —Needs Assessment(2011): The BRMPO Long-Range Transportation Plan summarizes existing transportation conditions within the region as well as providing a needs assessment for the specific locations in the region. Route 20 and Route 16 in Watertown were listed as having priority intersections as part of the assessment. The following summarizes some of the regional transportation related goals and needs identified as part of this study: 44 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Vanasse Hangen Brusthn,Inc. > Envisions a highway system that is well maintained and has less congestion and fewer severe crashes. Route 16 in Watertown was noted as a critical bottleneck area. > Envisions a transit system that is safe and maintained in a state of good repair and generates greater use to reduce auto dependency and emissions causing climate change. The lack of transit service in portions of Watertown was noted as an issue to watch. > Envisions a transportation system in which all freight modes operate efficiently. > Calls for linking bicycle,pedestrian and transit facilities in a network, increasing the use of sustainable modes and improving options and accessibility for all modes of transportation. The lack of roadways with on-road bicycle accommodations was noted as a concern. > Envisions a transportation system that provides affordable transportation options and accessibility and does not inequitably burden any particular group. BRMPO Newton Corner Rotary Studv Phases I&IT While located in the adjacent community of Newton,the Newton Corner interchange is a critical node for regional transportation. This interchange;which controls access to and from the Massachusetts Turnpike(Interstate 90),is one of the major controlling points for vehicles entering or leaving Watertown to the south. Local Master Plans: Several abutting cities and towns have conducted planning studies in recent years,including: ➢ Belmont(2010):The Town ofBelmont's Comprehensive Plan was approved in April 2010 and focuses predominantly on Land Use and Zoning issues. Specific elements focus on Historic Preservation, Commercial Development,Open Space,Transportation &Energy, Housing and Public Facilities&Finance. Several issues relevant to Watertown were noted including: o Advocating for improved transit connections between Belmont and Watertown Center; o Investigating connections to existing and proposed bicycle trails in Waltham and Cambridge;and o MBTA is considering eliminating one of the existing commuter rail stations in Belmont due to lack of users. ➢ Waltham (2007):The Waltham Community Development Plan was finalized in June 2007.The Plan was developed by the Metropolitan Area Planning Council(MAPC)in connection with the Central Transportation Planning Staff(CTPS)and the Waltham Planning Department.The main objective called out that Watertown is 45 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Vanasse Hangen Brusthn,Inc. working with DCR on the long-range plan for extending the Charles River Greenway. ➢ Harvard University,Allston Campus:Harvard University's Institutional Master Plan was approved by the Boston Redevelopment Authority(BRA)in October 2013.Development in this area will likely increase traffic volumes on major east-west roadways in Watertown such as Arsenal Street and North Beacon Street(Route 20);however,an assessment of Watertown's transportation network was not conducted. While these plans focus on specific issues to their community,each has several similar underlying goals: > Improved traffic safety; > Upgraded facilities and access for pedestrians and cyclists; > Adopt complete streets methodologies;and > Pursuit of a wide-range of funding sources. ....................................................................................................................................................................... Local Planning For the development of a Comprehensive Plan,it is also important to acknowledge and reflect on previous plans developed in town. The Town of Watertown has undertaken several planning efforts over the past ten years that should be noted and referenced,these include: BicvcleAccommodation Master Plan and Bicvcle Parkin z Plan:The purpose of the plan,prepared in 2002,was to recommend bicycle accommodations including bike lanes on Watertown roadways,signage and directional devices,roadway designs,and safety improvements.The focus of the plan was to review existing conditions for bicycle accommodations on selected roadway corridors,identify key destination points,and establish a town wide bicycle network. Watertown SauareParkine Studv:A draft plan was prepared a few years ago, but there was no consensus on how the Town should proceed.Parking in Watertown Square continues to be an issue that should be addressed because parking constraints can hamper future development in the Square.This makes it difficult to achieve the vision for the Square with a wider variety of retail,restaurant and other uses designed to attract people to visit. 46 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Vanasse Hangen Brustlin,Inc. The Watertown Communitv Path: The State completed a portion of a multi-use path in 2010 from School Street west to Arlington Street. The Watertown Community Path is intended to develop a similar multi-use path that would run east-west from the Charles River near Howard Street,through Watertown Square and connect to the completed portion of the State path at School Street and Arsenal Street. The intent is to provide a connection to the 18-mile Charles River Reservation Path and the 11-mile Minuteman Bikeway. Some of the recommended actions include the following: > Incorporate the Community Path into the Town's Comprehensive Plan; > Begin to complete sections as redevelopment occurs; > Design portions that are not subject to redevelopment opportunities;and > Place portions under Town control into the CIP for construction to provide the most critical connections in the short term,and a complete corridor in the long term. Watertown Community PathAIR preferred route IM section numbers J, Watertown "40 ak A3 0_ h 35 Watertown Community Path Merbm Cornmunity Path ■ EAsting Conditions Mobility in and around Watertown is the central theme of the Transportation Element of the Comprehensive Plan. The sections below discuss the components that comprise the existing transportation network in Watertown. During the community outreach sessions,several major assets were identified for Watertown. It is important to note these so that as the existing transportation conditions are reviewed,one can begin to strategize on how to capitalize on these assets. The following provides a list of these assets in order of importance as noted by the community: 47 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT +� Vcanasse Hangen Brustlin,Inc. 1. Proximate location to Boston; 2. The Charles River; 3. Diversity;and 4. Community and people. Community Assets local Independent businesses I ility eiing Proximity to Boston Wsrwi:iliry ing PotenAal ,People bomnlunl'spirit Prp[imiiyt9HWY 1 U � Small sue Public transportation . &he Palh o m m u n ity (Ever Path Neighhodionds _ Chades Ewer Lib TarY bensiy The Arts Loc-a ion Diversity aver ....................................................................................................................................................................... Roadway Jurisdiction/Functional Classification The jurisdiction of roadways in Watertown is depicted on Figure 2-1 and summarized on Table 2-1. The jurisdiction of a roadway indicates the ownership and responsibility for maintenance,enhancements,and repairs. Table 2-1 Jurisdiction of Roadways in Watertown Length Length Roadway ownership (miles)' (ON Town-ovmed roads 74 92.5 MassDOTowned roads 1 1.3 DCR-owned roads 4 5.0 Unaccepted roads 2 2.5 Total 81 100.0 Source:Office of Geographic Infarliation(MassGIS),Cammm ealth of NW IrTfan-abon Technology Division 1. All values are appro)dri 2. Does not indude driveAays/internal roadways(totals approTaniately 24.5 roles) The majority of the roadway system falls under the jurisdiction of the Town of Watertown (74 miles,or 92.5 percent). The Department of Conservation and Recreation (DCR)controls the next highest percentage of roadway within the Town (4 miles,or 5.0 percent),as it controls Charles River Road, Nonantum Road and Greenough Boulevard. The state owned roadways 48 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Figure 2-2 Roadway Functional Classification and Multi-use Paths Map,Mertown, MA Patic llvhblymlWao L�11335].Ob1G151ProjealTransporotion bikepadi.nad Waverley 1 l BELMONT \ L � WALTHAM p ] r ` clPm / sPm 11 . CAMBRIDGE Prays Park ` S,micn d _ 8g Kgg rc � �r a� "��' vo� � � � 4�•� � �- lArAn bum I ••• `�� � �� �`"e `�,.� �� Leo i° cae, mu°�"� �*� � �• ^� / • rat vn," � � s c Nav:tnn ev �aaasar.weE a� �1` ��Er � b �� .•if/�♦ r..r�+l �,.wre��f �fE tRe •••��aa"� m eg:x yes"i-�"eyn+�;�•..• NEWTON —SIR er `�••i�`� m�+' %�� ........r. '�......... .........'� BOSTN O.r Bri gluon 0 - Roadway1Classification1 Roadway Functional Classification Multi-use Paths source:Watertown Assessor's Database Arterials Dr.Paul Dudley White Charles River Bike Path May 2013 —Collectors Watertown Greenway Wa ertownnst�ItvAe Plan Local Roadways 49 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Vanasse Hangen Brustlin,Inc. include the segment of Route 20(Main Street)between the Waltham city line and Myrtle Street,as well as multiple bridges. The functional classification of roadways in Watertown is depicted on Figure 2-2 and summarized in Table 2-2. A roadways functional classification indicates its design function to serve local demands with multiple driveways to maximize access;or to serve regional demands with limited access points to maximize mobility. Table 2-2 Functional Classification of Roadways in Watertown Length Length Functional Classification (miles) (°/a) Interstate 0 0 "I'll 11................................ Arterial 12 15 Collector 11 14 ................................................ Local Roadways 58 71 Total 81 1000/0 Source:Office of Geographic Infonn-ation(MassGIS),Corrrrumealth of M4lnforrrntion Technology Division The majority of the roadways in Watertown are classified as local type roadways,with approximately 58-miles,or 71-percent of the all roadway miles (81-miles in all)in Town. Arterials and Collectors follow as the second highest;which each comprise 12-percent of the roadway network. There are no Interstate roadways in Town,and as such Route 20 and Route 16 provide mobility through Town,while Main Street and Arsenal Street provide access to a significant amount of retail and commercial type land uses. ....................................................................................................................................................................... Roadway Network Vehicular traffic in Watertown is carried on several key roadways. The major northeast-southwest roadway in Watertown is Mount Auburn Street(Route 16),and the major east-west roadways are Main Street(Route 20),North Beacon Street(Route 20),Pleasant Street and Arsenal Street.Belmont Street runs along the northern perimeter. Two regional roadways travel through the Town:U.S.Route 20 in the east- west direction and MA Route 16 in the north-south direction. These roadways provide local access to Interstate 90(MassPike),and Interstate 95. It is noted that there are a number of other significant roadways in town, these "collector"roadways include: Pleasant Street,Waltham Street,Howard Street,Myrtle Street,Green Street,Lexington Street,Waverly Avenue, Summer Street,Church Street,Walnut Street,Charles River Road,School 50 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Street,Dexter Avenue,Nichols Avenue,Arlington Street,Coolidge Avenue, California Street and Jackson Road. All arterial,collector and local roadways are illustrated in the Roadway Functional Classification map presented in this chapter. The following section provides an overview of the arterial classified roadways in Town. Main Street(Route 20) Main Street(Route 20)provides the primary east to west access between Watertown Square and the City of Waltham and beyond to Interstate 95. Main Street is a two-lane roadway with on-street parking provided on both sides. Sidewalks are also provided on both sides of the roadway along its entire length. Land use and roadway characteristics along Main Street vary from local retail and restaurants in the area of Watertown Square,to residential uses as the corridor moves towards the Waltham City Line. Main Street also serves as a principal commuter route to Boston for residents of Watertown,Waltham and communities further to the west. The portion of Main Street between the Waltham City Line and Myrtle Street is under MassDOT jurisdiction.Route 20 from the Waltham line to Watertown Square is part of the National Highway System (NHS). North Beacon Street(Route 20) North Beacon Street(Route 20)provides the primary east to west access between Watertown Square and the City of Boston. North Beacon Street is a two-lane roadway with striped bicycle lanes and on-street parking provided on both sides for the majority of its length. Sidewalks are also provided on both sides of the roadway along its entire length. The land use and roadway characteristics along North Beacon Street vary between commercial, industrial,institutional and residential type uses. Similar to Main Street, North Beacon Street also serves as a principal commuter route to Boston for residents of Watertown,Waltham and communities further to the west. Mt.Auburn Street(Route 16) Mt.Auburn Street(Route 16)provides a southwest to northeast access between Watertown Square and the City of Cambridge,as well as providing access to the regional roadway and transit network beyond the Town. Mt. Auburn Street is a narrow four-lane roadway with on-street parking provided on at least one side for the majority of the roadway for its entire length and two-sides for short segments. Sidewalks are also provided on both sides of the roadway along its entire length. The land use and roadway characteristics along Mt.Auburn Street vary between commercial,institutional and residential type uses. Mt.Auburn Street serves as a principal commuter route between Watertown,Cambridge and communities further to the north and east. Route 16 from Watertown Square to Cambridge is part of the National Highway System (NHS). 51 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Arsenal Street Arsenal Street provides an alternate east-west route between Watertown Square and the City of Boston,with indirect access to the City of Cambridge. Arsenal Street begins as a two-lane roadway at its westerly end,before transitioning to a four-lane roadway just west of School Street. Starting at Louise Street,striped bicycle lanes are provided for a length of approximately 800-feet before transitioning to a shared use path ending at School Street and providing a connection to the Watertown Greenway path. A sidewalk is provided on both sides of roadway for its entire length. The land use and roadway characteristics along Arsenal Street vary between commercial,retail and industrial uses. Belmont Street/Orchard Street Belmont Street,while not entirely in Watertown,is an important corridor that runs along the Belmont Watertown line.Not only does this roadway serve as a busy commuter roadway,but it connects Watertown with residential neighborhoods and community business centers in Watertown and Belmont. Land use on the Watertown side of Belmont is predominantly residential, although there is some commercial activity as it nears the intersection with Mt.Auburn Street. Orchard Street;which intersects the Belmont Street/ Lexington Street area consists primarily of residential homes;in addition, there are numerous residential side streets intersecting Orchard Street. The Town's Department of Public Works and Victory Field are also located on this roadway;which eventually intersects Common Street to the southeast. Common Street Common Street runs in a north-south direction that runs from Mt.Auburn Street through Cushing Square on the Watertown —Belmont town line to Belmont Center. It carries local residential and business-oriented traffic as well as serving as a significant commuter route. Nonantum Road Nonantum Road is a two-lane arterial roadway that travels east-west along the south side of the Charles River between Watertown and Newton. This roadway provides a connection to Route 20 and Soldiers Field Road to the east and consists of mostly industrial/ commercial type uses along with the MBTA bus maintenance facility. Greenough Boulevard Greenough Boulevard is a four-lane arterial roadway that travels north-south along the Charles River between Arsenal Street and Memorial Drive(Route 3) in Cambridge;planted medians are located leading up to the intersection to Arsenal Street and there are no land uses that intersect this section of the boulevard;although Grove Street intersects the boulevard just south of the Cambridge line. 52 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT ® Vanasse Hangen Ifrustlin,Inc. ....................................................................................................................................................................... Vehicular Traffic To gain an understanding of existing travel patterns,historical traffic data and transportation mode choice data were obtained. Traffic Volumes Table 2-3 summarizes traffic volumes on various roadways throughout Watertown using MassDOTI historical traffic volume data and traffic volume data collected in the town for other transportation or development projects. The volumes summarized below are being provided for the town's future reference when assessing future growth along some of the town's major corridors. Table 2-3 Traffic Volumes on Select Roadurys in Watertown Count Average Daily Route Source Date Traffic Volume' Galen Street south of the Charles River MassDOT 2013 42,800 Route 20 between Spring and Church MassDOT 2009 24,800 Streets Mt Auburn Street,northeast of Common V\bildTech 2010 23,380 Street Route 20 between Le)dngton and Olney MassDOT 2009 20,700 Streets Route 20 between Beal and Brigham MassDOT 2009 15,600 Roads Ail ington Street MassDOT 2012 10,000 School Street MassDOT 2012 7,300 Source:Historical N/lassDOT and traffic study traffic count data 1.Average daily traffic volumes e>gxessed in vehides per day(vpd).Traffic on Galen Street vas projected based upon a 0.5%per year grovAh rate,from the year 1990. The total traffic in 1990 was 38,130 Journev-to-Work A review of the most recently available US Census American Community Survey journey-to-work data,for Watertown residents and employers reveals commuting trends -specifically work location and mode choice. Tables 7-4 and 7-5 summarize these data. 7 http://www.mhd.state.ma.us/default.asp?pgid=content/traffic0l&sid=about,accessed October 12,2010 U.S.Census Bureau,2006-2010 American Community Survey 53 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Vanasse Hangen Brustlin,Inc. Table 2-4 Census Journey-to-Work Data for Vllatertom Residents Location of Employment Percent of Residents Boston 25% Watertown 17% Cambridge 12% Waltham 8% Newton 6% Lexi ngton 2% Burlington 2% Belmont 2% 124 other communities(totaled) 26% Source:U.S.Census Bureau,2000 Census Journey-to-Wbrk Data 1.Other towns and dties not listed comprise one percent or less each of errployment locations of Watertam residents. Approximately 25 percent of the 18,918 Watertown residents surveyed commute to Boston;which is significantly higher than the 17 percent of residents that remain in Watertown. Following Boston the top commute single destinations outside Watertown were the adjacent communities of Cambridge(12 percent),Waltham (8 percent)and Newton (6 percent). The remaining commuting destinations represent a variety of Massachusetts cities and towns,the majority of which are located in Middlesex County and within 15 miles of Watertown. The table above summarizes three other communities (Lexington,Burlington and Belmont)that draw approximately two percent of residents working outside Watertown. The balance of the residents,or approximately 26 percent,worked in a total of 124 other communities. The journey-to-work census data was also reviewed to determine where people live who commute to Watertown; Table 2-5 summarizes this data. Table 2-5 Census Joumey to-Wbrk Data for Vuertom Employees Location of Residence Percent of Employees Watertown 21% Boston 12% Waltham 8% Newton 4% Cambridge 4% Sonaville 3% Belmont 3% Medford 2% Mington 2% Brookline 2% 202 other corrmunities(totaled) 39% Source:U.S.Census Bureau,2000 Census Journey-to-\Abrk Data 1.Other towns and dties not listed comprise one percent or less each of resident locations of Watertown employees. 54 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Approximately 21 percent of 15,753 Watertown workers also live in Watertown. Approximately 12 percent of people employed in Watertown resided in Boston,while the next three top locations were all Cities adjacent to Watertown (8 percent in Waltham,4 percent in Newton,and 4 percent in Cambridge). The majority of the remaining locations of residence of employees of Watertown are within Middlesex County or other areas of eastern Massachusetts. The table above illustrates five other communities that have between two and three percent of workers in Watertown. The balance of the workers in Watertown,or approximately 39 percent,traveled from 202 other communities. Mode Choice Similar to the journey-to-work evaluation, Table 2-6 summarizes the mode choice for Watertown residents. Table 2-6 Watertom Journey-to-work Node Choice Percent of Employed Mode Residents Single-Occupant Automobile 68% Multiple-Occupant Automobile 8% Transit 15% Walk/Bicyde/Other 4% Work at Horne 5% Total 100'/0 Source: U.S.Census Bureau,2007-2011,Arrerican CormUnity Survey Approximately 76 percent of Watertown residents take a car to work —either alone (68 percent)or with others(8 percent). Approximately 15 percent of Watertown residents use public transportation,while approximately 4 percent walk,use a bicycle or commute via other means. The low walk/bicycle mode share for Watertown residents and workers reflects that the majority of Watertown residents likely work outside of the Town. ....................................................................................................................................................................... Safety Potential transportation safety issues in the Town of Watertown were identified through the MassDOT crash cluster database;which depicts locations in town that could be considered eligible for safety funding under the Highway Safety Improvement Program (HSIP). A total of seven locations in Watertown could meet the 2010 HSIP eligibility requirements. The locations,in no particular order, include: 55 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Vanasse Hangen Brusthn,Inc. 1. Watertown Street(Route 16)at Galen Street/Nonantum Road,where 34 incidents were identified including 8 injuries; 2. Route 16 at Route 20(i.e.Watertown Square)where 34 incidents were identified including 9 injuries; 3. Mt.Auburn Street(Route 16)at Irving Street/Palfrey Street,where 18 incidents were identified including 8 injuries; 4. Arsenal Street at Greenough Boulevard (south),where 32 incidents were identified including 12 injuries; 5. Mt.Auburn Street(Route 16)at Mt.Auburn Cemetery/ Aberdeen Avenue(Cambridge),where 28 incidents were identified including 8 injuries; 6. Watertown Square (pedestrian cluster),where 9 incidents were identified including 8 injuries;and 7. Main Street(Route 20)—Whites Avenue to Mt.Auburn Street(bicycle cluster)where 9 incidents were identified including 8 injuries. As can be seen in the list above,Watertown Square is listed separately as a crash cluster for vehicles,pedestrians and bicycles. This location was ranked 137"and 193`d,respectively,on the 2008 and 2009 list of Top 200 Intersection Clusters for the region. In 2007,MassDOT began a Road Safety Audit(RSA)program to study roadways in which fatal and incapacitating injuries had occurred. Today the RSA program has become an integral part of their HSIP program. MassDOT now requires that all HSIP locations have a RSA performed to determine if they are eligible for HSIP funding. As noted above,seven locations could be eligible for funding if a RSA was performed and improvements justified. ....................................................................................................................................................................... Transit The availability of public transit provides greater mobility to populations that do not have access to a private automobile such as low income, disabled community,young adults,and the elderly. The MBTA is responsible for public transportation services within the region. While Watertown does not have direct access to the commuter rail,each of the adjacent communities offers access to commuters traveling east to Boston,or west to a variety of destinations. In addition,the MBTA currently provides nine fixed bus routes that pass through Watertown,with eight of the nine passing through either 56 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Watertown Square or the Watertown Transit Yard at Nonantum Road;which is on the southerly side of the Charles River. The nine current bus routes are: > Route 502—Express Bus Watertown Yard/Coplev Sauare.Boston:This route runs between the Watertown Transit Yard and Copley Square in Boston, via Newton Corner and the MassPike. The headway for this route is 8 minutes in the morning and 15 minutes in the evening. > Route 504—Express Bus Watertown Yard/Downtown,Boston:This route runs between the Watertown Transit Yard and the Financial District in Boston, via Newton Corner and the MassPike. The headway for this route is 10 minutes during peak periods and 30 minutes off-peak. > Route 52—Dedham Mall. Dedham/Watertown Yard:This route runs between the Dedham Mall and the Watertown Transit Yard,via Oak Hill and Newton Center. The headway for this route varies between 30 and 40 minutes. > Route 57— Watertown Yard/Kenmore Station.Boston:This route runs between the Watertown Transit Yard and the Kenmore T Station in Boston,via Newton Corner and Brighton Center. The headway for this route is 10 minutes. > Route 59—Needham.function. Needham/Watertown Sauare.•This route runs between Needham Junction,in Needham and Watertown Square,via Newtonville. The headway for this varies between 30 and 45 minutes. > Route 70—Central Sauare. Waltham/University Sauare. Cambridge.•This route runs between Central Square in Waltham and University Square in Cambridge,via Main Street,Watertown Square and Arsenal Street. The headway for this route varies between 10 and 30 minutes. > Route 70a—Central Sauare. Waltham/University Sauare. Cambridge:This route runs between Lincoln Street in Waltham and University Square in Cambridge,via Main Street,Watertown Square and Arsenal Street.This route does not run on Sundays. The headway for this route varies between 30 and 60 minutes. > Route 71—Watertown Sauare/Harvard Station. Cambridge:This route runs between Watertown Square and the Harvard Red Line Station in Cambridge,via Mt.Auburn Street. The headway for this route is 7 minutes in the morning and 10 minutes in the evening. 57 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Vanasse Hangen Brusthn,Inc. > Route 554—Waverly Square. Belmont/Downtown Boston:This route runs between Waverly Square(commuter rail station)in Belmont and the Financial District in Boston,via Belmont Street in Watertown,Central Square in Waltham,Newton Corner and the Massachusetts Turnpike. This is the only bus route that runs through the northwest portion of Watertown. The headway for this route varies between 30 and 60 minutes. > Route 73— Waverly Sauare/Harvard Station. Cambridize:This route runs between Lexington Street in Belmont and Massachusetts Avenue in Cambridge. While it does not travel through Watertown,it runs along the entire northerly edge of Town along Belmont Street and Trapelo Road,and plays a substantial role in serving the commuter population in northern and eastern populations of Town. The headway for this route is 5 minutes during peak periods and 10 minutes off-peak. ....................................................................................................................................................................... Bicycle Facilities There are several current planning efforts that aim to improve bicycle facilities and provide continuous routes through Town. Currently, the Watertown Greenway;which runs between the Arsenal Street/ School Street intersection and the Nichols Avenue/Arlington Street intersection is a designated off-road multi-use facility within the Town. Based on the BRMPO's Long-Range Transportation Plan (LRTP), on-road bicycle facilities are limited to approximately 2.5 miles of roadway that include designated bicycle lanes. As noted previously,the Community Path is a proposed multi- use path running east-west between Pleasant Street and the Watertown Greenway at School Street. Watertown also participates in the Boston Region MPO's program for funding the installation of bicycle racks. The Paul Dudley White Charles River Bikepath is a 14-mile loop that follows both banks of the Charles River from the Museum of Science in Boston to Watertown Square,in Watertown.The pavement varies from 12 feet wide with center stripes to 4 feet wide with 6-inch drops at the edges.In some places it is barely wide enough for one bicycle to pass another safely;in others,there are separate bicycle and pedestrian paths. The Urban Parks Division of the Massachusetts Department of Conservation and Recreation (DCR)manages and maintains this path. This path should be reviewed more closely to see if enhancements can be made to meet current standards;in addition, a connection to/ from the Watertown Greenway should be made. The DCR,in cooperation with both private donors and the Town have permitted a project to improve the Charles River Path from Watertown Square to the Yacht Club,with the first phase to be constructed in the spring of 2014. 58 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Vanasse Hangen Brusthn,Inc. The following exhibit is an extraction from the MassDOT Project Development&Design Guide. Exhibit 11-2 Shared Use Path Dimensions �q g Q� � 7 I �=so..a�aasr��om — �&14R 71 sear tlr�rw Fiebdsmtein A.Ib art r rteewo-n J aan xan ICJ 4 exam .I wm.ya.. r Wit 11 ut io-urt aerrt.a Sow3e.Adapted from the VTrans Pedestrian and Bicycle Facility Planning and Design Manual ....................................................................................................................................................................... Pedestrians Facilities Pedestrian facilities are widely available providing a well-connected network throughout the Town. Based on the LRTP,approximately 86 percent of all roadway miles(70 out of 81 total miles)within the Town have a sidewalk on at least one side of the road.However,there is concern that due to the number of corridors with a wide pavement cross sections that require pedestrians to cross long distances without refuge. This can have safety impacts as well as decreased efficiency at signals due to the amount of time vehicles are required to stop. The Department of Conservation and Recreation and MassDOT prepared the Charles River Basin Pedestrian and Bicycle Connectivity Study in May 2013. The goal of the study was to identify "gaps that preclude a seamless connection across the ten Charles River Basin bridges and their adjacent intersections and along the path system throughout the Charles River Reservation".Recommendations are made to enhance connections between the municipality and the Reservation.This study is addressed in more detail in Chapter 5 -Open Space and Recreation. 59 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT aVanasse Hangen Brustlin,Inc. ....................................................................................................................................................................... Bndges There are several bridges in Watertown that are routinely inspected by MassDOT using National Bridge Inspection Standards(NBIS). The primary purpose of the NBIS is to locate,evaluate,and act on existing bridge deficiencies to ensure that the bridges are safe for the traveling public. Each NBIS bridge is inspected at regular intervals of two years with certain types or groups of bridges requiring inspections at less than two-year cycles. The following is a list of bridges that are routinely inspected by MassDOT in Watertown: > Bridge Street over the Charles River; > Pedestrian Bridge (Joseph U.Thompson)near Fifth Avenue Charles River; > Galen Street(Route 16)over the Charles River; > North Beacon Street over the Charles River;and > Arsenal Street over the Charles River. According to the MassDOT 2005 NBIS list,all of these bridges need some corrective action to improve deficiencies,whether it is the superstructure, substructure or deck/roadway. It is noted that the pedestrian footbridge near Fifth Avenue over the Charles River is currently being redesigned and is listed on the TIP but a construction year has not been identified. ■ Future Condtions The next step in the planning process is to identify growth trends in the area. These trends are often based on previous traffic volume patterns(as described in Table 2-3),past and forecasted population growth,and major development projects. ....................................................................................................................................................................... Future Challenges Watertown's population has been declining slightly over the last three decades,but this trend is expected to change in the near future. MAPC is projecting a 13 percent increase in population between 2010 and 2030. While the population has been decreasing,congestion appears to be increasing or remaining constant,which might suggest that the issue is being exacerbated by increasing business growth, as well as residents from other communities using Watertown as a cut through to their final destination. In addition to major assets that were identified by the community in the outreach meetings,major issues or challenges were also identified. The 60 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Vanasse Hangen Brusthn,Inc. following provides a list in order of importance as determined by the community: 1. Traffic; 2. Overdevelopment and density; 3. Transportation and parking; 4. No trees and lack of green space; 5. Schools; 6. Road repair; 7. Over-paving and lack of street curbs;and 8. Watertown Square. Community Issues Green S�6 DensiqTraff i c -paving,Rd5d e W.'aiseity rtown Square 6 op'.SpAe ver pair ti ' . ; ' e ra e e Sidewalkslk kAdm,"u 4 Tash tDE'g'n_t6_wn ,...f... ve mn or 4 r!der • • dm""gTra'nsportation ,=�Nojr Schools StreetLack of Curbs ....................................................................................................................................................................... Planned Devel.,,r...;,-lw If not planned for correctly,future redevelopment or development in Watertown could have a negative impact on the Town's transportation system. The following identifies areas in town that could be enhanced or transformed in the future,as described in the Land Use element of the Plan and the Land Use Vision map: > Along the Pleasant Street corridor from the Waltham line to Myrtle Street; > Around the Watertown Transit Yard at Nonantum Road and Galen Street; > Along the Arsenal Street corridor; > Nichols Avenue southerly side near Verizon; > Grove Street near the Atrium School;and 61 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT ® Vanasse Hangen Brustlin,Inc. > Coolidge Avenue corridor from Arlington Street to Grove Street. In addition to potential development areas (or redevelopment areas), Table 2- 7 summarizes developments in Town that are currently planned,under review or are in the planning stage. Table 2-7 Planned or Projects Currently Under Review Project Name Address Project type status Repton Place Phase 11 Pleasant Street 206 dwelling units Under construction Alta at the Estate Waltham Street 150 dwelling units Under construction Bacon Howard development Bacon Street 65 dwelling units with 10,000 s.f.retail Approved Residence at Watertown Square Spring Street 90 assisted living units Under construction 300 dwelling units with 37,000 s.f. Submitted and under Ionics Site Arsenal Street retail/grocery review Arsenal St& Plrolli Ste Irving Nixed-use concept Reinvention/Expansion of Arsenal on the Charles Arsenal Street To be detemined Planned Arsenal Mall Arsenal Street Nixed use redevelopment Planned 270 Pleasant Street Pleasant Street Nixed use development Under construction Lexus expansion Arsenal Street Relocate used car dealership Approved Saab dealership Arsenal Street Hotel Planned Source: Tmn of Mtertarn Goals This Transportation Element identifies the range of transportation issues, needs,and deficiencies over the near and long-term and establishes goals and strategies for physical enhancements and policies that should be implemented. Goals identified include: Goal 1. Traffic Calming. Encourage traffic calming measures and other techniques at appropriate locations to create safer roads for all forms of transportation while maintaining needed capacity. Goal 2. Exnand Mass Transit. Work with the MBTA and others to expand mass transit. Promote alternative transportation in town by further improving intermodal access and connections. Goal 3. Pedestrian and Bicvcle Access. Improve and enhance pedestrian and bicycle access and facilities to ensure that Watertown can accommodate non-motorized forms of transportation. 62 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Vanasse Hangen Brusihn,Inc. Goal 4. Improve Roadwav Infrastructure. Improve roadway infrastructure using Complete Streets techniques and considering all users,and consider bike share and shuttle service options as ways to improve capacity in problem areas. Goal 5. Reduce Congestion and Efficiencv. Reduce congestion and improve efficiency at major intersections and corridors. Goal 6. Alternative/Reduced Parking. Consider zoning revisions to relax parking requirements in the business districts. Assess current and long-term parking needs along the major corridors and business centers. I e.%J1 1 1 mil 1{.abo s Watertown's transportation network must meet the needs of its residents, commuters,and businesses through vehicular,public transportation,bicycle and pedestrian means. Transportation needs to be convenient,safe, aesthetically pleasing and environmentally friendly as it meets the complex needs of residents and travelers. A comprehensive transportation plan; which both provides active and passive connectivity internally to neighborhoods within Watertown (and to the greater region)is essential to ensure a sustainable system over the long-term. The goals and strategies described in this section are based upon this framework. Taking into account the existing and future issues,needs,and the goals of the transportation element,the following strategies have been developed to assist in meeting the previously identified goals. Goal 1. Traffic Calm in L-Policies: A. Consider Traffic Calming Measures Traffic calming involves changes in street alignment and other physical measures to reduce traffic speeds in the interest of street safety and livability. The following are some of traffic calming elements could be considered for the Watertown Square area and within established neighborhoods that abut high-volume roadways,or any residential streets that experience high volume cut through traffic: 1. Curb extensions/bump outs/neckdowns along with complimentary on-street parking. 63 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Vanasse Hangen Brusthn,Inc. 2. Narrowed travel lanes and widened shoulders with potential for bike lanes. 3. Raised crosswalks or table top intersections. 4. Roundabouts. Goal 2.Expand Mass Transit Policies: D. Encourage the enhancement of bus stops and expanding of bus routes to reduce the use of the single occupancy vehicle should be explored. E. Consider the creation of a transit sub-committee or a liaison that can work with the MBTA and others to expand mass transit service,particularly along the 470/ 70A,71 routes and 73 routes (this is currently being considered by the Town). F. Work with the MBTA to install more bus shelters and benches at bus stops to encourage more people to utilize the service. G. Coordinate with private businesses and residential complexes,especially along areas likely to be transformed such as Arsenal and Pleasant Streets, to provide expanded,shared shuttle bus services to accommodate demand between business locations and key transit stops such as Harvard Square,Alewife,etc. H. Develop a bus rapid transit route along Arsenal Street to accommodate anticipated future growth as the area is transformed. Goal3.Pedestrian and Bicvcle Policies: A. Pedestrian 6. Design ADA compliant sidewalks that include a landscaping buffer, where feasible,between the sidewalk and roadway. 7. Where appropriate,replace the existing faded crosswalks with imprinted/textured crosswalks at intersections and mid-block locations along major redevelopment corridors such as Arsenal Street and in Watertown Square. 8. Construct crosswalks that enhance the awareness of drivers to pedestrians such as raised crosswalks,textured treatments or table top at intersections and other common pedestrian crossing points (especially on wide streets). 9. Enhance the areas in and around public open spaces(parks,schools, athletic fields)so that children and parents who live nearby can make choices about how they travel between home and these uses. This will include enhancing our street tree inventory which provides both 64 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Vanasse Hangen Brusthn,Inc. protection and shade. Currently,in many locations,automobile use is perceived to be the safest mode of transportation. 10. The Town should continue to look for ways to expand the Safe Routes to School Program and encourage the use of tools like the "walking school bus"programs at the elementary and middle schools. 11. Install crosswalk signage to reinforce vehicle and pedestrian awareness. 12. Install countdown pedestrian signal heads at signalized crossings that do not currently have them. 13. Educate public to "Stop-Look-and Wave"at crosswalks. 14. Investigate locations for installation of future walking trails and connections with existing trails in addition to the "Community Path" such as along Pleasant Street and the Charles River Reservation. Existing and future streetscape enhancements along roadways should connect directly to the Reservation. 15. Where there is a suitable ROW,encourage wider sidewalks to better accommodate pedestrians and to allow for outdoor dining in places like Watertown Square and other business districts. B. Bicycle 1. A Bicycle Transportation Plan was prepared in 2002.It includes a number of recommendations regarding bicycle safety and roadway design,including specific recommendations for a number of streets in Watertown. The routes identified in this plan should be reviewed and updated as needed to reflect current land use/ bicycle demands, and an implementation/ prioritization plan should be put into place. 2. Develop and sign/ stripe on-road bicycle routes in accordance with the recommendations in the Bicycle Transportation Plan. 3. As Arsenal Street is redeveloped,ensure that complete streets techniques are used that include the option to provide bicycle lanes/features along the entire corridor. 4. Bicycle racks should be installed at all public and private activity centers. 5. Improve bicycle mobility on residential roads through the implementation of roadway markings(sharrows)and share the road signs. 6. Educate the public of existing bicycling opportunities through wayfinding signage,maps and information on the Town website. 65 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Vanasse Hangen Brusthn,Inc. 7. Continue to identify potential opportunities for off-road bicycle connections between corridors and traffic destinations. 8. Investigate the feasibility of a bike share program,perhaps through the expansion of the Hubway program. Goal 4.Roadway Infrastructure Improvement Policies: A. Encourage the incorporation of multimodal designs into roadway projects to ensure that streets are shared by all users and not dominated by cars. B. An emphasis on green design elements that promote an environmentally sensitive,sustainable use of the public right-of-way should be a priority. Greener designs incorporate street trees,rain gardens,bio-swales,paving materials and permeable surfaces,with plants and soils collecting rain water to reduce flooding and pollution. C. Encourage the use of smarter technology-assisted design elements that incorporate intelligent signals,electric vehicle sharing, car and bicycle- sharing,way-finding and social networks for greater system efficiencies and user convenience. D. The Town should develop a complete streets checklist or toolbox that is appropriate for the community goals. Elements should be respectful of the specialized needs and any environmental resources within the Town. These should be balanced with the overarching goal of providing for all modes of transportation. E. Durable landscaping that is close to roadway corridors or along new or existing medians can increase the driver's awareness of the immediate environment and alter behavior,resulting in slower speeds and a safer street. The following streetscape strategies should be considered: 1. Consider expanding streetscape and hardscape elements as enhancements along Arsenal Street and in Watertown Square and Coolidge Square,creating key gateways or nodes at specified locations. 2. Include a landscaping buffer between the sidewalk and roadways were feasible. 3. Where appropriate,replace the existing faded crosswalks with imprinted/textured crosswalks at intersections and mid-block locations where appropriate along major through routes and Watertown Square. F. Develop access management and traffic impact study guidelines and incorporate them into the zoning ordinance and subdivision regulations. Minimizing curb cuts and greater separation between driveways improve safety, appearance, and the viability of roadways. An access 66 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Vanasse Hangen Brusthn,Inc. management approach could benefit many corridors were vehicle conflicts are present or there is an opportunity for future redevelopment and transformation including Arsenal Street,Pleasant Street,etc. G. Review the zoning ordinance and consider amendments that would encourage mixed-use(residential,office,retail)and compact/ clustered development in areas already served by transportation infrastructure, particularly in the areas to be enhanced and transformed including Watertown Square and in transition areas. H. The Town should address signage clusters on town roadways,and develop a wayfinding signage program that enhances the "Watertown Experience": 1. Remove existing sign clutter along major corridor roadways. 2. Revise and update the Town's sign ordinance to address current sign technology such as flashing and LED signs that can distract drivers. 3. Commission a "Way-finding Program"to promote and celebrate Watertown's distinct neighborhoods and promotes key nodes in Town including:Galen Street,Coolidge Square,and Watertown Square. 4. Upgrade the overall consistency of traffic signage throughout Town by reviewing current regulatory signage and assuring that it is consistent with the current Manual on Uniform Traffic Control Devices(MUTCD)guidelines. Goal 5.Roadwav Congestion and Efficiency Policies: The existing vehicle congestion has far-ranging impacts that can impact bus efficiency,increase cut-through traffic within residential neighborhoods that are to be preserved, and generate higher numbers of crashes at intersections. A. A concerted effort should be made to develop a Town-wide traffic counting/ monitoring program to help determine overall vehicular, pedestrian and bicycle travel patterns and volumes. This information will help identify demands and opportunities to expand multi-modal options for improving congestion.Note that some of this data would likely be generated/ reported as part of the permitting process. B. Locate new residential,commercial and other services in transit-oriented locations(i.e.,Arsenal,Galen,and North Beacon Streets,Watertown Square)to reduce the need for cars and enable people living near transit and services to reduce auto trips. C. Encourage higher density/mixed use housing and commercial infill development that is consistent with this Plan (as illustrated in the Future 67 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Land Use map)and zoning standards in areas adjacent to existing public transportation services. D. Encourage child-care facilities and other high volume traffic generator services in residential or commercial facilities/developments to reduce traffic impacts associated with child-care drop-off and pick-up. E. Establish multi-modal levels of service (LOS)standards that consider all modes of transportation,including transit,bicycles, and pedestrians in addition to automobiles. 1. Development should be reviewed for their measurable impacts on the level of service and should be required to provide appropriate mitigation measures to ensure that they do not reduce the existing LOS for a particular mode/ all modes over what it is currently, especially in areas that are expected to be transformed.When the mitigation for vehicular traffic is infeasible,the Town may consider alternative mitigation measures or in-lieu fees. 2. Establish transportation demand management mitigation measures, including improvements to transit,bicycle, and/ or pedestrian facilities,for projects whose required traffic mitigation would result in an unacceptable impact on an affected neighborhood or Town street. F. Where appropriate,install timed signals along Arsenal Street and other major streets to allow traffic to move at a steady rate to minimize air quality impacts from "stop and go"traffic. Also consider signal prioritization for transit,in coordination with the MBTA. G. Work with the State to apply for funding through the State Transportation Improvement Program (TIP) and address intersection congestion under the Highway Safety Improvement Program (HSIP) through the Healthy Transportation Policy established by MassDOT.A number of intersections and corridors in Town are problematic. Traffic flow,character,and safety needs to be reviewed and improved. MassDOT has identified several intersections eligible for HSIP funding; which should be investigated by the Town for improvements. These previously identified HSIP clusters should be reviewed in greater detail to understand operational deficiencies. Road Safety Audits(RSA)should be conducted (with key public officials input)to determine issues and opportunities for these areas. H. Develop corridor improvement strategies for major roadways in Town subject to future enhancement or transformation in order to accommodate anticipated growth,including but not limited to,Arsenal Street,Pleasant Street,Galen Street,Mt Auburn Street,etc. Incorporate improvements that focus on roadway/intersection operations,pedestrian/bicycle accommodations,and traffic calming strategies,as described above. 68 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Goal 6.A lternative/Reduced Parkiniz Policies: A. Create a parking plan that focuses exclusively on the current and future needs of Watertown Square.Addressing parking options in the Square should be done in order to focus on meeting economic development goals for the Square and should consider the conditions under which the parking requirements could be reduced,including shared parking. B. Evaluate future development proposals with an eye towards increasing the publically available parking supply,particularly in Watertown Square. C. Revise zoning to provide incentives to (re)development projects that develop creative ways to reduce or share parking needs. D. Reduced parking requirements should be considered for certain projects when located within a five minute walk radius from an existing or planned and funded bus stop/route. E. Encourage reduced parking for local development/ employers that implement: 1. Trip reduction incentives; 2. Flexible work hours and telecommuting to reduce peak-hour commute congestion; 3. Shuttle bus service to area MBTA stations. F. Encourage shared parking agreements,which would make the most efficient use of existing and new parking. G. Encourage consolidation of surface parking lots into structured parking facilities and redevelopment of surface lots with residential or commercial development where allowed by zoning. 69 Chapter 2-Transportation,Circulation,and Parking April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Housing Introduction Watertown is a built-out community with just over fifty percent of its land categorized as residential.Many of the Town's residential neighborhoods have been long established and are dominated by single-and two-family homes.Aside from concerns raised about teardowns and conversions of smaller homes to larger ones or two-family homes,these neighborhoods are not likely to change.Future residential growth will come from infill redevelopment along the Town's major corridors. This scenario is described in the Land Use element of this Plan and the Future Land Use Plan,which shows preservation of the character of the residential neighborhoods as an important focus of Watertown's long-term vision.These neighborhoods provide housing for a diverse range of income levels and are predominantly built-out.Recommendations in the Land Use element include several that are designed to preserve the architectural heritage and fabric of Watertown's existing residentially zoned areas,and prevent development that is out of scale with surrounding homes.Additionally,residential neighborhoods,such as the one near Coolidge Square,can be further enhanced through streetscape and pedestrian improvements designed to make them safer and more attractive. Development of multi-family housing is projected to occur in the areas of Watertown that are likely to be enhanced or transformed,particularly along Arsenal Street and Pleasant Street.Multi-family housing has been recently developed in these areas over the last few years,particularly along Pleasant Street.As described in the Land Use element,there is potential for several new multi-family projects along Arsenal Street in conjunction with the proposed redevelopment of the Arsenal Mall and Arsenal on the Charles. They are likely to provide housing opportunities for people working in Watertown and nearby communities. 70 Chapter 3-Housing April 2014 DRAFT Vanasse Hangen Brusthn,Inc. In 2013,the Metropolitan Area Planning Council(MAPC)prepared a Housing Production Plan (HPP)for the Town of Watertown. That plan was prepared to comply with the Massachusetts Department of Housing and Community Development's regulation that allows municipalities that are under the ten percent affordable housing threshold established under Chapter 40B. The goal of a HPP is to encourage communities to make steady progress in producing affordable housing on an annual basis,which allows municipalities to manage housing growth and meet their affordable housing needs. This element of the Comprehensive Plan will summarize the key findings and recommendations of the MAPC housing plan and addresses housing as it relates to the other elements of the Comprehensive Plan. Basel i ne Assessn 1e1$ ■ Demographics In the Watertown HPP,MAPC prepared two sets of population projections, Current Trends and MetroFuture9.MetroFuture projections were developed for MAPCs regional plan,MetroFuture. Current Trends projections are based on a picture of likely future growth patterns if historical trends in population change are extended.For the purposes of this document,MAPC's MetroFuture projections will be used,since they are based on extensive technical analysis developed to quantitatively analyze patterns of future growth as envisioned in the region,including focusing growth in already developed areas to use land more efficiently,protecting open space,and reducing the need for more infrastructure. s MAPC's MetroFuture and Current Trends projections were calculated prior to the release of 2010 Census data.Updated projections are currently under development, but were not available within this project's timeframe.The existing figures used for this analysis are the best population and household projections currently available 71 Chapter 3-Housing April 2014 DRAFT ® Vanasse 11angen Brustlin,Inc. Table 3-1: Population Change, Census and IVIAPC Projections Change % 2000 2010 2020 2030 2035 20 2035 Change 2010-2035 Census 32,330 31,915 Na Na Na rVa n/a MetroFuture 32,330 31,915 31,395 31,804 32,297 382 1.2% Current 32,330 31,915 31,212 31,872 32,471 556 1.7% Trends Source:US Census and NWPC Note:MetroFuture and Ourreit Trends figures revised to reflect 2010 Census data. According to U.S. Census data,Watertown's population decreased 1.3%from 2000 to 2010. The MetroFuture projection indicates that this trend will be reversed by 2030. By the year of 2035 Watertown is projected to have a population of 32,297,which is a 1.2%increase from 2010(see Table 3-1). Given the recent projects that have been approved by the Town,as well as those that are in the pipeline, especially along Arsenal Street,it is likely that the population decline could be reversed sooner than 2030.While no significant population growth is projected,Watertown's elderly population (65 years old and over)is expected to grow by 85.9%or 1,931 total residents between 2010 and 2035 while all other age groups are expected to decline (see Table 3-2 and Figure 3-1). Table 3-2:Age Trends, MetroFuture Projections,2000-2035 Change %Change 2000 2010 2020 2030 2035 2010-2035 2010-2035 0-4 1,504 1,823 1,641 1,636 1,685 -138 -7.6% 5-19 3,784 3,578 3,423 3,238 3,360 -218 -6.1% 20-34 9,768 8,704 8,794 8,000 7,910 -794 -9.1% 35-54 9,380 9,242 8,415 8,338 8,664 -578 -6.3% 55-64 2,498 3,786 3,154 2,712 2,598 -1,188 -31.4% 65-74 2,544 2,249 3,369 4,077 4,180 1,931 85.9% 75+ 2,857 2,533 2,599 3,899 3,899 1,366 53.9% Source:MAPC 72 Chapter 3-Housing April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Figure 3-1:Age Trends, MetroFuture Projections, 2000-2035 12,000 10,000 8,000 — r_ 0 j,000 — 0. 0 a 4,000 — 2,000 — 1 0 0-4 5-19 20-34 35-54 55-64 65-74 75+ 2000 2010 2020 2030 2035 Source:Census 2010 Watertown has seen a 5%increase of the number of households between 2000 and 2010. Coupled with the slight decrease in population during the same decade,the average household size in Watertown dropped from 2.17 in 2000 to 2.15 in 2010,which is significantly smaller than the MAPC region and the state(see FRgure 3-2),reflecting the downward trend seen nationally.Among all Watertown households in 2010,half were family households while 36% were single person households.More than 10%of all households contain a single person 65 years of age or older.MAPC projects that by 2035 Watertown will have an additional 1,401 households with the majority senior citizen households. These changes,particularly the increase in elderly populations,mirror the demographic shifts that we see throughout the MAPC region,the state and nation,and will have major implications on the housing types needed in coming years.As Watertown's elderly population increases,the need or preference for smaller units with lower attendant costs,as well as the need for special housing facilities such as assisted living and nursing home units,is likely to increase.A 90 unit assisted living facility is currently under construction just outside of Watertown Square. Additionally,with middle-aged,young-adult and under-19 cohorts expected to decline,there will be less need for larger units resulting in increased demand for one-and two-bedroom units,typically in multi-family structures. Analyzing household types is important to help project the type of housing units that will be needed within a specific community over time. Since Watertown has a large number of non-family households and couples 73 Chapter 3-Housing April 2014 DRAFT ® Vanasse Hangen Brustlin,Inc. without children,the Town should ensure that housing options such as multi- family rental and condominium units that are attractive to these households are available in the community. Recent multi-family residential projects built along the Pleasant Street and Arsenal Street corridors have included mostly smaller dwelling units. Figure 3-2: Household Size,Mertom vs. MAPC Region and State,2000- 2010 2.6 2.51 2.5 1.1' 2.48 2.44 a 2.4 N N s 2.3 a� D = 2.2 717 L.1S 2.1 2 Watertown MAPC Massachusetts ■Average household size, 2000 Average Household Size, 2010 Source:Census 2000 and 2010 Table 3-3: Households by Type,2010 Number % Total households 14,709 100 Family households 7,412 50.4 With oven children under 18 years 2,876 19.6 Husband-Wife spouse 5,690 38.7 With oven children under 18 years 2,274 15.5 Male householder,no spouse present 499 3.4 With oven children under 18 years 118 0.8 Female householder,no spouse present 1,223 8.3 With oven children under 18 years 484 3.3 Nonfamily households 7,297 49.6 Householder living alone 5,260 35.8 Householder 65 years and over living alone 1,774 12.1 Average household size 2.15 n/a Average family size 2.87 r✓a Source:ACS 206-2010 Note:The above household and family household breakdown is provided by the U.S.Census Bureau. 74 Chapter 3-Housing April 2014 DRAFT Vanasse Hangen Brusthn,Inc. ■ Housing Characteristics The following section looks at Watertown's current housing stock and how it changed over time.Understanding the types,age and size of existing units is essential for housing planning because it assists with determining what type of new housing might be needed to meet the current and projected population. ....................................................................................................................................................................... Housing Stock by Type&Age Watertown's housing stock tends to be more diverse and older than in surrounding communities,with single family structures making up a third of housing units in Watertown.More than a third of Watertown's housing are 2- family structures,with the remainder of units in multifamily structures,most of which are found in structures with 20 or more units. Table 3-4: Housing Units by Type,V1Fatertown, 2010 Units % Single Family 4,932 32.1% Two-Farrily 5,686 37.0% 3 to 4 1,751 11.4% 5 to 9 445 2.9% 10 to 19 497 3.2% 20 or more 2,003 13.1% Other 34 0.2% Total 15,348 100% Source:Census 2010 Watertown's housing stock is older than in many surrounding communities. Over 55%of all units were built prior to 1940,the third highest percentage when compared with nearby communities.Further,only 2%of units were built after 2000,which ties for the lowest percentage(this number is deceptive because the total number of new multi-family units is high as described below).This is significant because older structures often lack modern heating and energy standards,which adds to monthly utility costs,impacting affordability for both owners and renters.Additionally,many of these structures were not built to today's accessibility requirements,and may present challenges to residents who wish to remain in Watertown as they age. Occupied housing units in Watertown are evenly split between owner- occupied and renter-occupied (52%and 48%,respectively). This is quite different from the majority of communities analyzed for comparison,where owner-occupied units are the majority.The high percentage ofrental units 75 Chapter 3-Housing April 2014 DRAFT Vanasse Hangen Brusthn,Inc. may indicate a more short term residential community.According to American Community Survey(ACS)estimates,more than half(56%)of all households moved to Watertown between 2000 and 2010.Further,when looking at the breakdown of owner-occupied and renter-occupied units by age,the largest number and highest percentage (by age)of renter-occupied units are people under 25(see Figure 3-3). Figure 3-3: Flousing Tenure by Age,Total Units,2010 3,500 3,000 N 2,500 1,078 2,000 2,307 1,314 do c 1,500 0 = 1,000 459 400 241, 0 288 500 9 r 546 775 V 6 J 157 23 243 Under 25 to 34 35 to 44 45 to 54 55 to 59 60 to 64 65 to 74 75 to 84 85 years 25 years years years years years years years and over . Owner-occupied Renter-occupied Source:ACS 200E-2010 Renter-occupied households on average are smaller than owner-occupied units,and few have children under the age of 18.Thus,many of these rentals are occupied by single person households or couples without children. Family households with children are more likely residing in Watertown's ownership units. Figure 3-4: Renter-Occupied Units with Children Under 18 %with own children under 18 ' %without own children under 18 Source:ACS 200E-2010 76 Chapter 3-Housing April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Table 3-5:Average Household Size by Tenure HH Size Watertovun—Al HHs 2.15 Q ier-occupied 2.29 Renter-occupied 2.06 Source:Census 2010 ....................................................................................................................................................................... Vacancy Watertown's 5.6%vacancy rate is lower than that of the MAPC region (5.9%) and significantly lower than that of the State(9.3%).A larger percentage of the vacant units on the market in Watertown are for rent versus for sale (34.4%for rent; 19.7% for sale). ....................................................................................................................................................................... Building Permits Between 2000 and 2011,Watertown issued a total of 101 building permits for new housing structures. Of this number,28 were for single family structures, 61 were for buildings with 2-4 units,and 12 were for buildings with 5+ units. When looking at actual numbers of housing units permitted,it is clear that Watertown permitted a total of 733 housing units,the majority of which (573) were in multi-family buildings(5+units),or in 2-4 unit structures (108).A significant number of units (220)were permitted in 2011,the majority of which (214)were in buildings with over 5 units. Many of these projects were located on Pleasant Street. Several multi-family projects (with 500+combined units)are either under construction,permitted,or proposed. ■ Housing Market Conditions Housing market conditions influence affordability of the housing stock within a community.Competitive housing markets tend to have a limited supply of available units (ownership or rental),compared to the number of households looking to live in or move to the community. This can lead to increasing housing prices and rents.These factors can significantly reduce affordability within a community,both for potential new residents or existing residents who can no longer afford their current unit. Generally,Watertown's single family and condo median sales prices are lower than the subregion average, despite that the median sales prices for single family homes and condos have increased 148%and 124%,respectively, over the last 20 years.Rents in Watertown are moderate compared to other surrounding communities,but 77 Chapter 3-Housing April 2014 DRAFT Vanasse Hangen Brusthn,Inc. still above Fair Market Rents established by the Department of Housing and Urban Development(HUD). ....................................................................................................................................................................... Median Sale Prices and Total Annual Sales Over the last two decades,Watertown's median single-family sales price rose 148%from $179,500 in 1991 to $446,000 in 2011 ($441,000 in 2013)10.Prices peaked in 2004($470,000),and have fallen slightly since. In 2011, Watertown's median single-family sales price was $193,670 less than the subregion average,and was the fifth lowest in the subregion. Watertown's median condominium sales price increased 124%over the last two decades from $142,500 to $319,000 in 2011 ($322,500 in 2014)11. Condominium prices peaked in 2008($338,000)and remained relatively stable through 2011.Like single family home values,the median sales price for Watertown condos is lower than that of the subregion and the fourth lowest of all comparative communities. Figure 3-5:Annual Volume of Single Family Hare Sales vs. Condos, 1991-2011 400 350 300 0 V) 250 200 �► -0 150 E OF z 100 50 0 �y P'l' 0� P� �� 00 01 04' 00 00 Oy Ol 0� O� O� 00 01 04' 00 y0 yy Nc ti0 ti0 ti0 ti0 ti0 ti0 ti0 10 -0 ,y0 1y0 y0 y0 y0 y0 y0 y0 y0 y0 y0 Houses Condos Source:The Warren Group Town Stats,2012 10 The Warren Group,Town Stats,April 2014. Ibid. 78 Chapter 3-Housing April 2014 DRAFT aVanasse Hangen Brustlin,Inc. Figure 3-6: Single Family Horne and Condo Prices,V1Fatertom vs. Subregion 1991-2011 $800,000 $700,000 $600,000 Q) $500,000 u Ao $400,000 a� N $300,000 $200,000 $100,000 $0 791911,99 799 799 799 799 799 79g 799 799 �00 �00 �00 �00 �00 �00 �00 �00 "00 �00 �01 �01 7 " a' 9 S 6 8 9 O 1 " a' St S 6 8 9 O 7 Watertown-Single Families Subregions Average-Single Families Watertown-Condos Subregion Average-Condos Source:The Warren Group Town Slats,2012 ....................................................................................................................................................................... Gross Rents Rents within Watertown are moderate compared to the subregion.According to the Census,average gross rent12 in Watertown in 2010 was $1,368,which puts it in the middle range ofrents when compared to other subregion communities.However,Watertown's gross rent is somewhat higher than the average gross rent for the Boston-Cambridge-Quincy MSA,which is $1,146. This may indicate a housing cost burden for many rental households. ■ Housing Affordability A housing affordability assessment examines the overall demographic profile of Watertown,along with the household income ofthe population and housing costs to determine how the Town can best meet its needs for providing a diverse and affordable housing stock for its citizens. 2 Gross rent is the sum of the rent paid to the unit's owner plus utility costs incurred by the tenant such as electricity,gas,water and sewer,and trash removal services.Telephone and other communications services are not included.If the owner pays for all utilities,then gross rent equals the rent paid to the owner. 79 Chapter 3-Housing April 2014 DRAFT aVanasse Hangen Brustlin,Inc. ....................................................................................................................................................................... Household Incorre In 2010,Watertown's estimated median household income was $74,081,an increase of 24%over the last 15 years.It is lower than that of the Boston- Quincy-Metro area($94,400),and in the bottom third of subregion communities.Approximately one third of households earn more than $100,000 annually,with 42%earning in the middle income ranges between $40,000 and $99,000.It is worth noting that nearly 25%of households earn below $40,000,the fourth highest percentage of all comparative communities. ....................................................................................................................................................................... Affordability Gap Another way to measure housing affordability is to compare the median home sale price in a community to the price that a household at the community's median income can afford.The difference between these values is defined as the affordability gap.As housing prices increase,the affordability gap widens. Households are considered cost burdened if they pay more than 30 percent of their gross income for housing costs,which include rent,utilities and fuel costs for renters.They include mortgage or purchase contract payments, utilities,fuel costs,taxes and insurance for homeowners. To afford the 2011 median sales price of a one-family at$446,000,a household would have to earn $110,775 annually.A household earning the FY2012 HUD metro area median income (AMI)of$97,800 could not afford a home priced at this amount,assuming it spent no more than 30%of gross income on housing costs.Housing cost burden is a significant issue in Watertown.45%of owners and 35%of renters are cost burdened and 16%of owners and 15%of renters are severely cost burdened (spend more than 50%of gross income on housing costs). To afford the 2011 median sales price of a condominium at $317,132,a household would have to earn $80,470 annually. This figure factors in the cost of both monthly mortgage costs and utilities.A household earning the FY2012 HUD metro AMI could afford a home priced at this amount. A Watertown household earning the median household income of$74,081 could afford a home priced at$368,000,resulting in an affordability gap of $78,000 for a single family home.However,there is no affordability gap for the median priced condominium. 80 Chapter 3-Housing April 2014 DRAFT Vanasse Hangen Brusthn,Inc. ■ Chapter 40B Inventory The state goal for affordable housing under Chapter 40B requires 10 percent of a community's year-round housing stock to be affordable.According to the Massachusetts Department of Housing and Community Development (DHCD)Subsidized Housing Inventory(SHI), as of April 30,2013, 1,010 units (6.5%of the Town's housing stock)are on the inventory.The DHCD inventory is based on 15,521 year-round dwelling units,meaning that the shortfall for Watertown is 542 units. With the adoption of its Housing Production Plan,the Town is considering a variety of options to close this gap. Of Watertown's 1,010 affordable units, 80%of units are affordable in perpetuity or for at least the next 30 years.However, 156 units could expire in 2013(Arsenal Apartments),dropping the Towns SHI to 5.5%.For Watertown to make progress toward the 10% SHI threshold,it is important to work with the owner of these expiring units in order to recertify the units,while continuing to work to add more units to the inventory. Projects in the permitting pipeline will create new units for the inventory,although more will be needed to reach the 10%. Goals The HPP prepared by MAPC included goals that were established through the public input process and that plan's findings.Those goals are carried forward for this comprehensive plan and are as follows: Coal 1. Set and achieve affordable housing production goals and maintain inventory. Goal 2. Adopt zoning changes to advance affordable housing production. Goal 3. Maintain a diverse housing stock with increased opportunities for lower-and middle-income households. Goal 4. Provide seniors and persons with disabilities with greater housing options. Goal 5. Identify new funding sources for affordable housing production. 81 Chapter 3-Housing April 2014 DRAFT aVanasse Hangen Brusthn,Inc. 1 1k v,.; .i.1 I latio s Goal 1. Set and achieve affordable housing production goals and maintain inventory. A. The HPP sets a goal of producing 78 SHI units per year in order to be in compliance.A variety of strategies are recommended in the HPP,and if successful,the Town could meet the 10%target within seven years.The Town should review its progress annually and adjust as needed. B. Ensure that expiring uses are recertified so that they remain on the SHI. Goal 2.Adopt zoninz chances to advance affordable housinz production. A. Multi-family development requires a special permit for 3-4 units,or a special permit with site-plan review for projects with four units or more. Allowing multi-family structures by right for up to four units with site plan review would provide opportunities for more affordable condominium or rental units.For larger projects,a special permit would still be required with site plan review.As an incentive,consider allowing more units by right with site plan review if a certain number of affordable units are provided as part of the project. B. Analyze Industrial and the Pleasant Street Corridor zoning districts to identify areas more appropriate for mixed-use and/ or multifamily development,and potentially rezone. See the recommendations for Pleasant Street in Chapter 1 -Land Use regarding land use and design standards to be considered. C. Explore opportunities to allow for greater densities in the Cluster Residential zoning district. Consider allowing for greater densities,or providing a density bonus for projects with smaller unit sizes(e.g.cottage developments),to provide an opportunity to create more affordable housing options. Consider allowing for higher density if affordable housing is provided.Cottage style development,especially as an option for elderly housing,is an example of a newer style of clustered housing. See http://www.lvpc.org/pdf/ cottageHousingDev.pdf and §185-221 of the Barrington,RI Zoning Ordinance (http://www.ci.barrington.ri.us/). D. Amend the parking requirements for multi-family developments,which currently range from 1.5 spaces for a studio unit to two spaces for three or more bedrooms.Consider lowered minimum parking standards or tandem parking,particularly where transit is available. E. Amend the inclusionary zoning requirements to increase the percentage of affordable units to be provided from 10%to 12.5%.Also lower the threshold for providing affordable housing units from 15 to six.Reducing the minimum size of dwelling units can encourage greater housing choices. 82 Chapter 3-Housing April 2014 DRAFT Vanasse Hangen Brusthn,Inc. F. Adopt an accessory housing ordinance where appropriate,which could provide for additional opportunities for smaller scale and affordable dwelling unit alternatives. Currently they are not allowed. Goal 3.Maintain a diverse housinz stock with increased opportunities for lower-and middle-income households. A. Identify site(s)for mixed-use developments to provide housing units in amenity rich environments to meet the preferences of households.As described in Chapter 1 -Land Use,this could include parcels along high ridership bus routes,surface parking lots along Arsenal Street,and other I-3 zoned land where multi-family housing is allowed by special permit. Identifying nodes for mixed-use in the Pleasant Street Corridor zoning district could also be a possibility. B. Hold discussions with developers to better understand local,regional and statewide housing market development trends. C. Continue to invest in acquisition/rehab projects to increase the supply of affordable housing. Continuing to invest resources through partner organizations,including the use of HOME funds,will enable the Town to further increase its affordable housing stock. Consider options to purchase existing two-families throughout the community and rehabbing for use as affordable and middle income units. D. Ensure that setbacks and other dimensional regulations are met for proposed teardowns.Review existing dimensional requirements and consider design guidelines to maintain existing neighborhood character and promote greater symmetry between the old and new structures. Goal 4.Provideseniors and persons with disabilities with-ereater housinz options. A. Work to address senior needs through supportive housing policies. The Housing Needs analysis identified a significant number of senior households in need of potential housing assistance due to cost burdens and related issues with maintaining their homes.The Town of Watertown should continue to support developing new housing that is handicapped- adaptable or fully accessible to people with disabilities,including seniors, and integrate or connect community supportive housing services into new development. Consider incorporating accessibility standards for new housing construction. See http://concretechange.org/ construction/construction-guidelines/ .The Watertown Housing Partnership should coordinate with the Watertown Commission on Disability and other senior advocates to help households in need get the support they deserve. See "Aging in Place —A Toolkit for Local Governments",M. Scott Ball,Atlanta Regional Council and Community Housing Resource Center. B. Explore mechanisms to allow Watertown's seniors to age within the community and to better serve persons with disabilities,through housing 83 Chapter 3-Housing April 2014 DRAFT Vanasse Hangen Brusthn,Inc. rehabilitation/modification programs.Watertown should promote existing programs,including the Home Modification Loan Program,and match these funds with local HOME funds for additional home improvements. C. Support emergency repairs programs designed to provide assistance to income-eligible Watertown residents to make repairs and alterations to their homes for safety and health reasons. Senior and disabled households should receive priority assistance. Goal 5.Identifv new fundine sources for affordable housing production. A. Consider the adoption of the Community Preservation Act(CPA). The CPA allows communities to create a local Community Preservation Fund for affordable housing,open space protection and historic preservation. Community preservation funds are raised through a tax surcharge up to 3%of the tax levy against real property,which can only be adopted through a town or citywide ballot referendum.Of monies raised,at least 10%must go to affordable housing initiatives. 84 Chapter 3-Housing April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Economic Development Introduction ax .» la `.;titl", .i ai th:, Gharles Ria, :»»Lwest ofo�. This chanter identifies the communitv's economic development goals as expressed through other Dlanning documents.Dresents baseline information regarding the state of the local economv,and suggests Dotential imDlementation strategies that could be undertaken by the Town to help advance its economic develoDment goals. In the 19"century the mills and factories of Watertown produced numerous innovations,from the "duck"cotton sail cloth used on the U.S.S.Constitution to the once-popular Stanley Steam Engine automobile. During the 1800s the 93-acre Watertown Arsenal on the Charles River was the site of a major storage complex that,in the 20"century,became an armaments manufacturer and military scientific complex. In 1968 the Army sold approximately half of the complex to the Watertown Redevelopment Authority. The Arsenal Mall,a 225,000 square foot redevelopment,opened on this site in 1983.The remainder of these historic buildings were converted to civilian uses in 1995, and the site is known today as the Arsenal on the Charles,a commercial and office complex. Much of the Town's economic activity is still concentrated on Arsenal Street,in Watertown Square,and along a few other commercial corridors.Two formerly industrial areas,Pleasant Street and Coolidge Hill, have transformed i-frteover time. Pleasant Street now has a mix of industrial. wholesale.office,research and develoDment,and multifamily housing developments and aalong its corridor.Coolidge Hill is Drimarilv a residential and neighborhood retail area, with some manufacturing still located there. Likewise,the Charles River is no longer an industrial asset,but a natural one. 85 Chapter 4—Economic Development April 2014 DRAFT Vanasse Hangen Brustlin,Inc. Watertown's economy is closely tied to that of Greater Boston and the surrounding towns to the west of Boston and Cambridge. Watertown is part of a suburban commercial corridor that also includes Waltham and Newton. Watertown also benefits from good access to the key economic,medical,and elite educational institutions in Boston and Cambridge, ft"a several.fthew. hftv-:, ✓✓✓.t a., .f .. ., .,a t YMINM ap-arlt IftOM tl Z-d.-6 X u.Ye. Watertown is no 13-nbz,-. rxlirb managed to not be substantiallv impacted by the Great Recession,compared to the rest of the country.By 2012, 82 percent of jobs lost in Boston had been recovered,a rate almost twice that of the nation's.13 That growth has been driven by the high-tech and life sciences sectors,which are among the state's growth industries. Watertown has strengths in several of t-lrethese industries,including in re life sciences, design and engineering,information and media,and advanced manufacturing industry.The strength of the regional economy and Watertown's own economic,social,and physical assets put it in a strong position to eontinue to gF e economically sustainable over the lone term. However,Watertown's success in capturing this market depends on its success in leveraging the untapped potential in its commercial corridors.As discussed in the 2011 Strategic Frameworkfor Economic Development, Watertown lacks a clear and cohesive image.In contrast, other area communities have been able to brand themselves as the type of vibrant live- work-play centers in demand by the knowledge economy.Though it is one of the region's densest communities,the Town has a substantial area dedicated to car-centric,.fief`atio_ with little development and urban form that diminishes the sense of place aft-d-found within Watertown's squares. With the historic road network,there have been limited options for '-expanding the bicvcle network,creating walking connections,or expanding the transit network.Watertown Square and major roadway corridors such as Arsenal Street,.,.mai diffie-'`are beins improved for pedestrians because of the narrow corridors are limited,and while the first phase of the recently completed I.Na1rWatertown Greenwav provides an additional non-automotive option to get around, as dedicated bicycle mobilityo tp ions in Watertown is .are limited. There are also opportunities that the Town is Dursuiniz to improve the connectivity and visibility of the Charles River•wMeffi:Xit,zvV✓✓alfy i� Evate eReservation along its entire leneth within Watertown. Watertown has the potett can continue to beeomeprovide an affordable alternative to Cambridge and Boston for gfowitttgstart-ups and smaller companies that are seeking to fie-instart or grow within the efe&Boston 3 Jones Lang LaSalle,High-technology Office Outlook,United States,2013 86 Chapter 4-Economic Development April 2014 DRAFT Vanasse Hangen Brusthn,Inc. region. Several commercial corridors in town have the potential to stand out as prime business locations for new and growing companies in the region. According to real estate experts,the commercial real estate market in Watertown can offer rents up to 30 percent lower than rates in Cambridge and Boston.14Improvements to the design character of the streetscape can also help create a sense of place along the commercial corridors.The Town is actively supporting the development of an urban form that attracts workers in the creative economy,including compact residential development and amenities such as restaurants,retail,and parks. Thio aNhap,'a 3:�des the germs as expfessA th:�xzbh hlx laaz�z�r�gflaa :»wait ,l7eseftt;,�t✓J.��:rx f-eg&IMif.g the StEtte OfthZ lwal tk c T rrw� Goals and Strategies from the 2011 Strategic The strategy presented in the 2011 Strategic Frameworkfor Economic Development identifies potential growth industries for Watertown that would provide the greatest economic benefits.The plan was developed over a 15- month period that involved coordination and engagement with the public, the Town and its elected officials,and local businesses,as well as state and regional economic development entities such as the Mass Office of Business Development,and the Mass Biotech Council. The plan identified the need for a balance between the Town's unique historical and environmental context,the needs of larger and smaller firms, the benefits of supportive retail and restaurant establishments,and quality of life factors for its diverse resident and employee populations.The vision statement below shows a strong orientation towards the innovation economy that has driven economic recovery in Cambridge and Boston over the past five years. The Strategic Framework envisions a Watertown with better infrastructure and clear communication channels between public agencies and private businesses. Closely aligned with the beautiful Charles River, Watertown can become a vital location for innovative businesses that grow out of the strong regional economy emanating from the universities and medical centers in Boston and Cambridge. Ongoing investment in infrastructure will create benefits for residents and employees, enhancing the Town's identity with convenient transit,pedestrian friendly streets, and a network of trails and parks. Strong ^Strategic Framework for Economic Development,Town of Watertown,2011 87 Chapter 4—Economic Development April 2014 DRAFT Vanasse Hangen Brusthn,Inc. communication among Town leaders, business leaders, residents, and civic interests will lead to a setting where private investment is encouraged for the role it can play in creating jobs, strengthening the tax base, and building the future of the Town. The goals outlined in the 2011 plan are as follows: > Capitalize on key industry clusters. > Strengthen the identity of the Town. > Promote investment in under-utilized areas. > Shape the character of new development. > Link jobs and infrastructure. The implementation strategies described in the 2011 Strategic Framework call for making the Town more attractive to high-technology companies that have outgrown Cambridge and Boston.High-tech workers have indicated a preference for urban amenities,itt l such as restaurants,retail,and walkable places.As such,the Strategic Framework encourages the development of destination retail and restaurants and a mixed-use,walkable urban environment along key commercial corridors to reflect the environment these companies would be leaving behind.The implementation strategies include actions such as establishing a point-person in town to help businesses with location decisions,improvements to infrastructure, streetscapes,and access,abalone with public/private partnerships that would help facilitate these investments. This Comprehensive Plan builds upon the 2011 Strategic Framework.The specific strategies recommended in this Comprehensive Plan are adopted from the Strategic Actions recommended in the 2011 Strategic Framework and include development policies,infrastructure investment,marketing and outreach,and public/private partnerships.Likewise,the five redevelopment areas identified in the strategy align with the focus areas identified in this Comprehensive Plan.These include the West End / Pleasant Street Corridor, South Square,Union Market,Arsenal North, and Coolidge Hill. Basel I ne ASSeSSrnel$ The following economic profile inventories key indicators related to the performance of the local economy,including information on the labor force, local and regional economic development efforts,local business establishments and commercial space in Watertown,and target industries identified in the 2011 Strategic Framework. While these measures can enhance understanding of the economic situation,there are other less tangible 88 Chapter 4—Economic Development April 2014 DRAFT Vanasse Hangen Brusthn,Inc. elements such as quality of life and business climate perceptions that can also influence local conditions. ■ Labor Force Characteristics Watertown has a population of 32,863 as of 2012 and a labor force of 20,006 workers based on a 2007-2011 estimate.Like much of the surrounding community,Watertown's workers are highly educated.Fifty-five percent of the Watertown labor force holds a Bachelor's degree or higher,and another 17 percent have a college or an associate's degree.In 2000,47 percent of the workforce held a Bachelor's degree or higher.The highly educated workforce reflects the knowledge industries based in this region. The median household income was $76,718 according to the 2011 American Community Survey(ACS)5-year estimates, significantly higher than the median income of$59,764 in 2000.Median income has climbed steadily over the course of the recession from $71,377 in 2009 to $74,081 in 2010.Incomes in Watertown tend to be higher than in communities with a strong foothold in the research and tech industries,including Cambridge ($69,017),Boston ($51,739),and Waltham ($60,632).The suburban communities of Newton and Brookline have significantly higher median incomes,$109,724 and $97,250, respectively.Belmont,at $70,400, also falls in the middle of the range. Watertown consistently has a lower unemployment rate than the state. Watertown's unemployment rate,at 4.9 percent in 2011,was generally around one percentage point lower than the Massachusetts unemployment rate between 2006 and 2011.The most current reported unemployment rate was 4.7 as of August 2013. The median age of the community speaks to community character and can be an indicator of Watertown's suitability as a potential live-work-play hub for workers migrating out from Cambridge and Boston.Watertown has aged slightly over the past decade. In 2010,the median age in Watertown was 38.3 years,compared to a median age of 36.7 in 2000.In comparison to its neighbors,Watertown's population is younger than Belmont(41.5 years)and Newton (40.5 years)and older than Waltham (33.9)and Brookline (34.0). The median age in the urban center is significantly lower-30.2 in Cambridge and 30.8 in Boston. 89 Chapter 4—Economic Development April 2014 DRAFT Yanasse Hangen Brusthn,Inc. WATERTOWN FACTS Population' 32,863 Median Agee 38.3 years Education(above H.S.)3 91.50% Labor Force(16+years)3 20,006 workers Travel Time to Work,mean3 25.7 minutes Housing UnitS2 15,584 Household Income,median3 $76,718 Watertown Employment Trend,2001 to 20124 Unemployment Rate, 2006-2011 Year(s):2006-2011 • Source:IYIA EOLWD ES-202 Unemployment Rate 2006-2011 8.0 8.0 4.0 2006 2007 20M 2009 2010 2011 •Wamgawn • Massachusetts Educational Attainment of Watertown Residents3 D20% El Less than high school graduate ❑High school graduate ElSome college or 55 o associate's degree ❑Bachelor's degree or higher Data Sources:12012 Population Estimates,22010 Demographic Profile,32007-2011 American Community Survey 5-Year Estimates,4 Massachusetts Executive Office of Labor and Workforce Development,2012 90 Chapter 4—Economic Development April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Language skills af-ecan be an important factor in obtaining employment. Thirteen percent of Watertown's population speaks English less than very well as of 2011.In recent years,the foreign-born population in Watertown has increased from 20.3%in 2000 to 25.9%in 2011. Close to half of the foreign- born population in Watertown is Asian (47%),just under a third are European (27%),and about one out of five is from Latin America.Any workforce development programs at the local level should consider the needs of non- native English speakers. ■ Institutions Supporting Local and Regional Econonic Development Watertown-Belmont Chamber of Commerce The Watertown-Belmont Chamber of Commerce is a nonprofit organization suDDorting local business in Watertown and Belmont.As of November 2013 the member directory listed 154 Watertown businesses ranging from international corporations to local businesses,nonprofit organizations,and local institutions. The Chamber hosts events and networking opportunities that "develop,encourage,promote,protect,and advance Watertown and Belmont businesses"and "promote the civic interests and general welfare of the communitv."In addition,the Chamber provides small business services such as SCORE counseling and arouD health insurance. The Chamber of Commerce nlays an important role in supporting local businesses in Watertown and Belmont.In Darticular,the Chamber hela local business by offering a varietv of networkinc and small business services,as well as advocating for local legislation that suDDorts economic development. Metro North Workforce Investment Area The Town is part of the Metro North Workforce Investment Area,which serves twenty communities located northwest of Boston,from Cambridge and Watertown north to Burlington,Wilmington,and North Reading.Although Watertown DarticiDates in this collaborative,it has not defined Watertown's economic development efforts. The Metro North Regional Employment Board (REB)is a public-private partnership that sets local workforce policy, determines how state and federal funds are best used for workforce development,aligns the needs of employers to the needs of area residents, and oversees the Metro North One-Stop Career Centers where both job search and employer services are provided. The Metro North REB's FY 2013 —FY 2016 Strategic Plan presents goals that are in line with the 2011 Strategic Framework for Watertown.Its primary goal is to close the skills gap for the region's target industries by connecting 91 Chapter 4—Economic Development April 2014 DRAFT Vanasse Hangen Brusthn,Inc. directly with businesses to develop training and educational programs for youth,unemployed adults,and the incumbent workforce. The plan identifies five target industries that match or are closely tied to the five industries identified in the 2011 Strategic Framework.These include Advanced Manufacturing,Healthcare,Information Technology,Life Sciences,and cross- cutting STEM (Science,Technology,Engineering,and Math)Occupations. The Metro North REB is focused on developing partnerships and funding resources in these target industries,identifying entry-level job opportunities, and aligning education and training programs to those opportunities on a regional level.The Metro North REB advances Watertown's economic development goals by implementing training and education programs for the workforce,by marketing and filling local hiring needs,and by building capacity with strategies that complement and strengthen Watertown's target industries. Watertown Belmont Chamber of r,..,...,..,...,... The Watefto B,.1.....ont Gta 3bc- &2 zM6xi Ydr/p,,Tt zg 1;-1 buri.AIM-9 :� xxm vPirccr�/I/:1 aad Dz�:1N-Ylt.As ,.rT.r,._-,... be 20 4 Skz m"Nmbar difeetofy listed 154 xx4 tei tzerra b.►3r iV,+ zN� :NvA&kNx;t$ 1a1;11-rasin a.vi lvl�a1:tut Na&.The CLiu by hosts events Emd ttetw�N,-vk&xg that "develop, asd Dc���'Ylt bttsifies a6,urtand g-NAx l wo\'fafe of the m-mmu.x-�hj-. in 1Yxztidas smallbtts fte35 811et. as SGGRE eaunseling a hml'ch iftsufattee.T, J't ✓-G✓llm-, a3-S aft irp-eat t-rc�c in vaVpaf�g lvl l-ra3inesses in Wale•t& uz�i lz p-af:'K�cila:,th;, hc�p 1;>c-_l a variety 0 z�a��`xxvl»>b az�l mall biz» �a��;vv,a v/al a� a ���tzlg 0 a1 xt1/pa%ts zN�nau.�c 3evelopffient. ■ Local Business in fttertam The number of jobs in Watertown remained steady at around 19,000 jobs from 2009 to 2012. There are slightly fewer retail trade establishments but more jobs,which may reflect the presence of large format retail at the Arsenal Mall. The most consistent wage gains were observed in the knowledge industries— Professional and Technical Services (9%),Information (23%),and Finance and Insurance (7%). The number of jobs in Information and Manufacturing has held an even keel in spite of one out of five firms in the Information industry and one out often firms in Manufacturing leaving Watertown between 2009 and 2012. Regional job growth in the Metro North Workforce Investment Area is expected to increase from 399,819 jobs in 2010 to 446,232 jobs in 2012, according to state job projections.Watertown is poised to capture job growth 92 Chapter 4-Economic Development April 2014 DRAFT Vanasse Hangen Brusthn,Inc. in its established industry clusters in healthcare-related,engineering and design,and educational industries,as well as retail and food service industries.Reeent! the T;,-Kii hai also,-,.,ame aThe regional center€efla-fge €ofma-tlocated on Arsenal Street continues to provide lareer destination retail opportunities,including Home Depot,the Arsenal Mall,Best Buy,and Target; 93 Chapter 4—Economic Development April 2014 DRAFT Vanasse Hangen Brustlin,Inc. Watertown Employment by Sectors,2009 to 2012 Nam#of Avg. % chg Establi Avg. Employ 2009 to shmen % Weekly % NAICS Code - Industry ment 2012 is chg Wage chg 44-45 - Retail Trade 3,000 13% 144 -4% $641 4% 54 - Professional and Technical Services 2,171 -17% 150 -1% $1,918 9% 51 - Information 1,980 -2% 47 -20% $2,263 23% 52 - Finance and Insurance 1,940 5% 41 3% $1,491 7% 62 - Health Care and Social Assistance 1,610 7% 88 -1% $726 0% 61 - Educational Services 1,508 0% 28 0% $968 7% 31-33 - Manufacturing 1,121 1% 38 -10% $1,463 12% 23 - Construction 1,018 -1% 105 -1% $1,465 2% 72 -Accommodation and Food Services 1,058 17% 81 1% $370 4% Other 3,332 0% 373 16% $1,010 13% Total,All Industries 19,038 1% 1119 3% $1,232 6% Source:Massachusetts Executive Office of Labor and Workforce Development(MA EOLWD)ES-202,2012 Watertown's Top Employers Athenahealth Tufts Health Plan Perkins School For the Blind Vanasse Hangen Brustlin Inc. Doble Engineering Co. Harvard Business Review Harvard Business School Publishing Corp. Home Depot J C Cannistraro LLC Sasaki Associates Inc. Super Stop&Shop Target Source:MA EOLWD,2012 94 Chapter 4—Economic Development April 2014 DRAFT Vanasse Hangen Brusthn,Inc. ■ Targeted Industry Clusters Identified in the 2011 Strategic Framework The 2011 Strategic Framework identified four industry clusters that would complement Watertown's strengths in the regional economy. These four industries,defined below,would help diversify Watertown's economy by capitalizing on its existing building stock and development potential, transportation connections,and proximity to the Boston-Cambridge markets. This section introduces the four target industries. Key industry clusters:15 > Life Sciences are the basis for a diverse industry that includes pharmaceuticals,medical devices,diagnostics,and biotechnology. > Information and Media includes software development,computer systems design,digital media,telecommunications,and internet services > Design includes firms engaged in architecture,landscape architecture, structural and systems engineering,environmental consulting,and interior design. > Advanced Manufacturing involves the application of science and innovative technology to improve the design,control,fabrication,and assembly of products,including instrumentation and precision components. Life Sciences The Boston-Cambridge area is one of the nation's epicenters for the life sciences industry,which includes pharmaceuticals,medical devices, diagnostics,and biotechnology.As firms have grown from research into production and distribution, some have moved into parts of Greater Boston, like the Route 128 corridor,for larger and lower-cost facilities. Watertown's employment in the life sciences has more than doubled since 2001.The four neighboring communities have experienced slightly greater growth in scientific research and development,indicating this is a growth opportunity for Watertown.Between 2001 and 2008,industry employment in the four adjacent towns increased by over 5,000 jobs (40 percent),with most of the growth in neighboring Cambridge.The Town's largest research and development(R&D)employers a�eis New England Research Institute,which conducts a varietv of contract research for biomedical firms and Boston mar✓mh Inli*4einstitutions. Additionally.Watertown hosts a number of smaller pharmaceutical and medical device manufacturingfirms. irms. 5 Strategic Framework for Economic Development,Town of Watertown,2011 95 Chapter 4—Economic Development April 2014 DRAFT Vanasse Hangen Brusthn,Inc. The 2011 Strategic Framework also identified a growth opportunity in pharmaceutical manufacturing. Information and Media Over the past decade,the evolution of digital technologies has had an enormous impact on how business is done and how people interact.The research institutions and research-oriented business environment in Boston/ Cambridge primed it to become a leader in this industry,which includes software development,computer systems design,digital media, telecommunications,internet services,and related consulting services. As in the life sciences,firms have migrated outward as they have grown.In Watertown,the Arsenal on the Charles has become the hotspot for digital technology firms.The 2013 petehfse-e€announcemcnt that Athcnahcalth acquired the Arsenal Mull u.1 Arsenal on the Charles by Boylston Pf Op ef ties ~ate.DuV.,rmspeetively,is expected to augment the tech sector presence along Arsenal Street. D✓flay»Piepe�Athenahealth has also pttfehased the old Saaba:ladiil ul:»L-described Dlans for the whieh is complex that include space to lir.zd✓a✓p-cd a5 a hotel.accommodate startups that are associated with their industrv. Bush is GE49 of Athenahealth,an electronic medical records company that is Watertown's largest software firm and one of Watertown's largest and fastest-growing employers. Between 2010 and 2013,Athenahealth grew from 500 employees to 1,100 employees.The company recently accepted $9.5 million in state tax credits on the promise of growing the firm to 3,000 jobs by 2023,the state's biggest incentives package in recent history. The New England Sports Network(NESN)is also located on Arsenal Street. NESN was launched in 1984 and is one of the countrv's first regional sports networks. It is owned by the Boston Red Sox and Boston Bruins and delivered to over 4 million homes throuehout the six-state New England reeion and nationallv. Design and Gofistndeti-&ff Architecture and engineering is the largest and strongest segment of Watertown's professional and technical industry.The industry took a hit as construction dropped during the recession,but is expected to recover at a modest national growth rate of 1.6 percent through 2018. Watertown employs a combined 600 workers at the headquarters for two large planning,design,and engineering services firms—Vanasse Hangen Brustlin and Sasaki Associates.J.C.Cannistraro,a mechanical systems company,employs over 300 employees.Altogether there are 20 firms in architecture and engineering,most of which employ 25 or fewer workers. 96 Chapter 4—Economic Development April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Advanced Manufacturine Advanced manufacturing is the rapid development and production of new products from emerging technologies.Watertown's location and building stock make it a suitable competitor for similar types of businesses that emerge from the area research institutions. Watertown's building stock and proximity to Boston and Cambridge positions it to capture a fair share of growth in advanced manufacturing. Watertown has long been home to engineering and manufacturing firms like Doble Engineering,Radiation Monitoring Devices,and United Electric Controls. In recent years,the Town has also proven itself as a competitive location for the headquarters of firms that are innovating in the life sciences and engineering.WiTricity graduated from a startup location on Coolidge Hill Road to a larger location on Grove Street. Other advanced manufacturing companies in Watertown include Exergen Corporation,creator of the first temporal artery thermometer,and Seven Cycles,a manufacturer of high-end bicycles.In 2012 FORMA Therapeutics opened its new headquarters with support from the Massachusetts Life Sciences Center.The headquarters supports FORMA's high-throughput screening,computational and medicinal chemistry,and biology teams. ■ Cormiercial Spade in Vlbtertown Watertown has approximately 10 million square feet of commercial and industrial floor area sited on a little over 500 acres. This commercial inventory includes office/ flex space in historic and newer buildings, lab/R&D buildings,flexible incubator space for start-ups,manufacturing buildings,warehouse structures,and vacant structures. Strategic investments from local businesses over the past few years have rehabilitated the historic buildings along the Arsenal Street corridor into some of the Town's most in- demand retail and business locations.The redevelopment of the Watertown Arsenal has transformed the Town into a regional center for large format retail,with the Arsenal Mall,a 225,000 square foot mall with shops like tie II,3,nic tips Forever 21, Snorts Authoritv.Marshall's,and Golfsmith which is adjacent to a separate Home Depot.Target and Best Buy occupy space across Arsenal Street in the Watertown Mall. Further east on Arsenal Street, the Arsenal on the Charles campus houses 760,000 square feet of office and retail. 97 Chapter 4—Economic Development April 2014 DRAFT Vanasse Hangen Brustlin,Inc. Watertown has also attracted new business expansion. Watertown's location in close proximity to the Harvard expansion project in Allston (including a$1 billion science center)could play a possible role in terms of related research and start-ups,as well as retail and restaurant demand. On A+setta1Pleasant Street,the Riverworks complex,part of the renovated Aetna Mills building at 480 Pleasant Street, signed three-new tenants in 2012 eebe2inninQ the tenantine of the former Boston Scientific P+ap-eiheadauarters.These companies are the Alzheimer's Association Massachusetts/New Hampshire Chapter,Sabre Hospitality Solutions,and Education Resource Strategies (ERS}l.and Mimecast,amonl?others. Two significant redevelopments on Arsenal Street have the potential to signifieatifly improve the attractiveness of Watertown as a location for businesses in its target industries.The first is a redevelopment plan of the Arsenal Mall,which is still in its conceptual stages. To the west at the 29-acre Arsenal on the Charles,Athenahealth announced,. in September 2013. a vision for 150,000 square feet of new office space, accelerator space for health information startups,as well as related amenities such as a theater,restaurants,beer garden,museum,parks,paths and other civic spaces in Ocptcmibef 2013..Athenahealth envisions a transformation of the complex into a "permeable"office complex that is "not a closed corporate park,but an open place —a community center where lots of thinking people want to be."Its approach will be to "plan in ways that are delightful each year,so that something new happens to bring us all together.",, rthz l:iz wor k p;ay lcfansfeffflatien ,.FW,.teft,.._,. .hefe Sfee1iiM the =gal zxnv�K-x afid Coolidge Hill. .Agc II I,,n-kh P\zz1,;u�tvua t..,-,. .. _,.a,._,,,.:�,p-.namt f6f th;, A;14:tionally,a Stf eet. Goals Looking forward,Watertown will need to compete with other inxefsuburbs in the M Inner Core area to capture its share of the growth of its 6 Breitrose,C."Watertown Arsenal Making Yet Another Transformation"Watertown Patch,September 5,2013. htto://watertown.patch.com/arou os/busi ness-news/o/watertown-arsenal-makina-vet-another-transformation 98 Chapter 4—Economic Development April 2014 DRAFT Vanasse Hangen Brusthn,Inc. target industries. This section identifies opportunities to make Watertown a more attractive place to do business and to promote its many existing assets. The strategies presented in this plan will improve the development and marketing of a live-work-play lifestyle in Watertown along Arsenal Street,as well as improvements to the neighborhood retail districts in Coolidge StfeetSauare and Watertown Square.It also presents tools to facilitate new growth and development in underutilized corridors such as Galen Street-, Main Street and dte-Pleasant Street The economic development strategy focuses on supporting job growth and creating identity by building upon the Town's strengths in the life sciences,advanced manufacturing, information and media,and design and engineering industries. Goal 1. Promote and maintain conditions that support the growth of the Town's key industry clusters in the life sciences,advanced manufacturing,information and media,and design and engineering industries. Goal 2. Retain and support the growth of existing businesses in Watertown. Goal 3. Unlock development potential in existing commercial corridors and centers. Goal 4. Align education and training opportunities with careers in the region's growth industries. Goal 5. Strengthen the identity of the Town as a vibrant,livable riverfront community. Goal 6. Build capacity for implementing economic development projects in Watertown. FIGa.ul 1■1 for Growth and change are already underway in Watertown's mixed-use and commercial corridors.The strategies detailed in this section builds on the recommendations in the 2011 Strategic Framework for Economic Development and help shape the evolving identity of the Town and make Watertown a more vibrant and attractive place to do business. 99 Chapter 4—Economic Development April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Goal 1.Promote and maintain conditions that support the Qrowth of the Town's key industry clusters in the life sciences,advanced manu_facturinQ, information and media,and design and engineering industries. A. Promote Watertown as a favorable municipal environment for biotech firms. 1. Seek a platinum rating from the Mass Biotech Council.Watertown currently has a second-level gold rating,while the competing communities of Boston,Cambridge,Lexington,and Waltham have achieved the platinum rating." B. Encourage the provision of affordable,right-sized office space for growing and mid-sized firms. 1. Provided expedited permitting incentives that encourage the inclusion of small-scale,flexible incubator space as a potential amenity. 2. Coordinate with business incubators at nearby universities to provide space and services in existing Watertown facilities. C. Facilitate the development of a continuum of housing options that supports the live-work-play lifestyle preferred by workers in the Town's target industries. 1. Provide financials incentives to encourage mixed employment and residential uses in redevelopment proposals. Goal 2.Retain and support the Qrowth of existing businesses in Watertown. A. Encourage investment in the roadway and utility infrastructure. 1. Seek MassWorks infrastructure funding for roadway and utility improvements,such as along Arsenal Street and the potential reconfiguration of the intersection with Arlington Street and Coolidge Avenue. B. Strengthen networking opportunities for local businesses. 1. Continue to coordinate with the Chamber of Commerce in providing small business outreach and services. 2. Convene a regular CEO Roundtable to focus on issues of particular concern to large employers. C. Promote Watertown as a great place to do business. 1. Coordinate with gestate and regional agencies,including the Mass Office of Business Development,and relevant industry councils such "See page 36,Strategic Framework for Economic Development,Town of Watertown,2011 100 Chapter 4—Economic Development April 2014 DRAFT Vanasse Hangen Brusthn,Inc. as the Massachusetts Biotech Council,Massachusetts Medical Device Industry Council(Mass MEDIC),and the Massachusetts Technology Leadership Council to create informative messaging materials to market available commercial real estate in Watertown. The Town can Provide more Drecise information on specific sites re2ardine zonine, real estate taxes,etc. Goal 3. Unlock develotiment potential in existinQ,commercial corridors and centers. A. Promote investment in vacant or underutilized properties on the Pleasant Street,Arsenal Street-Ccerv�- cr.Main Street and Galen Street :i✓.»Kx Corridors. 1. Develop materials to promote development-ready sites where the property owners are interested in redevelopment opportunities and there are minimal impediments to redevelopment such as site remediation. B. Identify and designate potential development sites for the M.G.L.c.43D Expedited Permitting Program. Sites that meet certain criteria including the capacity to develop at least 50,000 square feet of gross floor area can be considered. The Town would revise its permitting process to ensure that permits can be obtained within 180 days. T4tr-eeTwo sites on Pleasant Street were designated in 2008 and others could be contemplated. C. Set in motion the remediation of the 25 properties identified by the Massachusetts Department of Environmental Protection as needing or potentially needing environmental remediation. 1. Set up meetings with MassDEP to verify the inventory and develop partnerships with property owners and/ or potential developers interested in the properties. D. Build institutional capacity to improve existing business districts by unifying businesses and helping them connect to the community. 1. Convene key stakeholders to gauge interest in Business Improvement Districts (BIDS)in Watertown Square and/ or Coolidge Square to improve the visual quality of the public realm through measures such as street cleanings and signage improvements. 2. Establish a local perks or discount program for participating retail and restaurant businesses to encourage residents to shop local. E. Reduce barriers to growth by implementing zoning changes that link commercial development with contributions to community benefits. 1. Consider use of incentive zoning techniques to facilitate mixed-use development and other sustainability enhancements such as energy efficient construction. 101 Chapter 4—Economic Development April 2014 DRAFT Vanasse Hangen Brusthn,Inc. 2. Establish expedited permitting procedures for installation of energy conservation devices on residential or commercial buildings(e.g., green permit program). 3. SeekConsider future use of District Improvement Financing (DIF) as a tool to support roadway and streetscape infrastructure improvements for large-scale private sector development that achieves significant civic goals such as the proposed Arsenal Street redevelopment projects. Snecific infrastructure needs will need to be identified, especially as thev relate to potential development opportunities. Goal 4.Align education and training opportunities with careers in the reeion's growth industries. A. Ensure children and young adults are prepared to participate in the Town's employment base. 1. Collaborate with local universities to introduce Science,Technology, Engineering,and Math (STEM)careers to K-12 students in Watertown's public schools. B. Connect the workforce to training and continuing education opportunities that are tied to the strengths of the local business community. 1. Partner with the Metro North Regional Employment Board to develop training programs that directly link to employment opportunities in the Town's growth and target industries. Goal 5. Strengthen the identitU of the Town as a vibrant, livable river_front community. A. Develop marketing strategies that celebrate recreational opportunities and facilitate recreation-oriented concessions. 1. Encourage special events programming to celebrate Town's history and heritage in Watertown Square,Coolidge Square,and Arsenal Street. 2. Celebrate recreational opportunities on thefeeefA-lyany completed sections of the Community Path and Greenwav,at Mt.Auburn Cemetery,Gore Estate and along the riverfront. B. Improve the quality of street life and sidewalk culture on primary commercial corridors ti,-A-hey the Afs xn,i 6trjatGerfidor. 1. Increase the number of liquor licenses available in Watertown through legislative action. 102 Chapter 4—Economic Development April 2014 DRAFT Vanasse Hangen Brusthn,Inc. 2. Develop design solutions that address traffic noise,air quality,and safety concerns in Watertown Square,such as the traffic calming measures recommended in Chanter 2-Transportation,Circulation and Parkine. 3. Work with the MBTA and State officials to advocate for improved service on the#70/ 70A,71, and #558 routes and for transit station improvements in Watertown and South Square. 4. Coordinate with private businesses on expanded,shared shuttle services oven to the public between primary residential and employment hubs.. and transit hubs. 5. Revise and update the sign regulations to reflect current sign technolo2v and to allow for site appropriate siena2e in evolvinLy mixed use districts such as alone the Arsenal Street corridor. C. Promote neighborhood retail in Watertown Square,Pleasant Street (through mixed use in targeted areas),Main Street and Coolidge Square. 1. Advance the-design guidelines and commercial facade improvement ptsgrnroerams that will make retail spaces in Watertown Square and Coolidge Square competitive in the current market. 2. Modify regulations that inhibit development of restaurants and entertainment uses that help to enliven and extend activity in commercial districts,cajl;wally- :n Wateftowri Oquarc, oue- to larriats- to ett KK r ``»gig-(including parking requirements that discourage outdoor dining as part of restaurant exTa expansions)and overly onerous parking regulations. 3. Develop streetscape guidelines for features such as street trees, lighting, street furniture,bicycle,pedestrian and transit accommodations,and wayflnding signage to be applied in association with redevelopment activity within squares and along the eeffidarcorridors. 1. R rXv axd-&pAftte-11z, rigx✓; & e=�_-'%'O'--iniv xt mggi fit;, ally-ri rotti NN�xedse 4isti4e'%3 :uck a3 along the Afsettal Stz,NI ;vviijh . 4. See Land Use and Transportation Elements for recommendations to improve parking,urban design,and pedestrian safety. D. Ensure that Watertown provides and promotes the arts to attract live- work-play residents. 1. Consider establishing a cultural district in Watertown. Cultural districts assist the local arts community to improve the quality and 103 Chapter 4-Economic Development April 2014 DRAFT Vanasse Hangen Brusthn,Inc. range of their public programs.They enhance the experience for visitors and thus attract more tourist dollars and tax revenue.They can also help to attract artists,cultural organizations,and entrepreneurs of all kinds -enhancing property values and making communities more attractive. 2. Reauire public art to be incorporated into nroiects and public spaces. 4-.3. Continue the collaboration and sunnort of the Arsenal Center for the Arts and its various nroerams. Goal 6. Build capacity for implementing economic development projects in Watertown. A. Create a "one-stop shop"in Town Hall to attract businesses interested in locating in the region,including marketing of development-ready sites and guidance for permitting and other business needs. The Town could establish a permanent Economic Development Commission and/or create a new position nlcan.ic Nit Di:Nm,�o.�-dedicated to economic development. B. Strengthen partnerships with local institutions to improve business retention and attraction at the local level e.g.,Chamber of Commerce and industry councils. C. Build relationships with state and regional agencies for infrastructure, training,education,and networking.e.g.,Metro North Regional Employment Board for training/education opportunities and MassWorks for infrastructure. 104 Chapter 4—Economic Development April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Open Space and Recreation Introduction Watertown residents spoke often about the value they place in the Town's open space and recreation facilities during the public input process. The Commonwealth recognizes this importance and encourages each community in the state to have a current Open Space and Recreation Plan (OSRP),which is to be updated every seven years.When an OSRP is completed and approved by the Division of Conservation Services(DCS),the community is eligible for grant programs administered by DCS to fund open space acquisition or enhance recreational facilities. Watertown's latest Open Space and Recreation Plan was completed in 2005. It represented a strong collaborative effort led by a municipal Task Force and included various stakeholders in the community with a concerted and thorough public outreach component. The OSRP was approved by DCS and the plan was modified in 2008.This extended the DCS approval through October 2013. The key points from both the OSRP are summarized and updated in this element of the Town of Watertown Comprehensive Plan.While open space resources,passive and active recreation are discussed in this chapter,natural resources,such as water and wildlife,are discussed in more detail in the Natural and Cultural Resources chapter. Existing Conditions The Town of Watertown has a wide variety of open space resources within its four square miles. The 2008 OSRP included a detailed inventory of Watertown's open spaces and recreational facilities.There are several important issues to consider regarding open space resources in Watertown. 105 Chapter 5-Open Space and Recreation April 2014 DRAFT Vanasse Hangen Brustlin,Inc. What is Onen Snace? According to the Massachusetts' Executive Office of Energy and Environmental Affairs, open space is: "conservation land, recreation land,agricultural land, corridor parks and amenities such as small parks,green buffers along roadways or any open area that is owned by an agency or organization dedicated to conservation." Passive Recreation refers to things such as walking,picnicking, relaxing on a park bench,hiking,bird watching,etc.Active Recreation includes field sports,running,golf,Frisbee,and similar activities. J First,much of the Town's open space is privately held. Second,a high percentage of that land is not accessible to the public. Third,aside from the Charles River Reservation land that is managed by the Department of Conservation and Recreation (DCR),many of the Town's public spaces are small and heavily used —mostly as parks providing active recreation opportunities,rather than for passive use.Lastly,Watertown falls below the "industry"standard for the amount of open space available on a per capita basis,with little available land to expand its inventory. As described in the OSRP,there are approximately 115 acres of public owned and publicly accessible open space distributed across the town. That is approximately 3.48 acres per 1000 persons,significantly less than what had been considered a standard of 10 acres per 1000 persons (National Recreation and Park Association).NRPA has recently established a new set of guidelines based on level of service rather than applying the "across the board" 10 acres per 1,000 people.Using the newer approach,each community must be considered on an individual basis in order to tailor the most appropriate range,quantity and quality of recreational facilities based on local demographics and within the community's fiscal limits. From this perspective,while the Town offers extensive and diverse programming through its parks and programs,resources are limited and the ability to expand public open spaces is very limited.- $Interview with Peter Centola,September 24,2013 106 Chapter 5-Open Space and Recreation April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Additionally,there was a detailed description of many of the specific open space and parks along with recommendations. The following is a summary of the key sites,along with updates on recent upgrades and planned improvements slated to be implemented in the next few years. ■ Private Open Space Resources Within Watertown's boundaries are three privately owned but regionally recognized landscapes;the Mount Auburn Cemetery,Gore Estate,and Oakley Country Club. They play an important role in Watertown's open spaces by providing relatively large expanses of scenic open landscape,as well as the ecological benefits of permeable surface,local habitat, sunlight, and air circulation. Among the more significant open spaces are those that are held privately, including Mt.Auburn Cemetery and Gore Estate. Approximately 281 acres of open space is privately held,but only half is publically accessible. The largest contiguous open space is the Watertown portion of Mt.Auburn Cemetery, which consists of 151.1 acres of well-manicured grounds with numerous species of both indigenous and exotic tree and shrub species. The cemetery extends into Cambridge to the east. It is on the National Register of Historic Places and was recently designated a Great Place in America by the American Planning Association. Founded in 1831,it was the first large-scale designed landscape in the United States that was open to the public.It is credited as the beginning of the American public parks and gardens movement and set the style for other suburban American cemeteries. The cemetery is important for both its historical aspects and its role as an arboretum. Mount Auburn has a massive and renowned collection of over 5,500 trees and includes nearly 700 species and varieties. Thousands of maintained shrubs and herbaceous plants thrive among the cemetery's hills,ponds,woodlands,and clearings.The cemetery contains more than 10 miles(17 km)of roads and many paths. The Gore Estate,with approximately 30 acres of land in Watertown,is located along the Town's western border with Waltham and is currently used for limited agriculture.A large historic home,which is over the Town line and located in Waltham, is set atop a hillside towards the northern edge of the site. Several small ponds and a stream are present on the property. Development of the site is restricted by these wetland areas as well as the historic nature of the estate itself. The Gore Estate was the 19th century estate of Massachusetts Governor Christopher Gore.The property includes a small farm with an elegantly furnished mansion considered by architectural historians to be the most significant Federal period mansion in New England. The grounds of the estate lands were developed with respect to the 107 Chapter 5-Open Space and Recreation April 2014 DRAFT Vanasse Hangen Brusthn,Inc. contemporary ideas of Sir Humphrey Repton,one of the last great English Landscape Architects;in an informal fashion with broad lawns,open fields, ponds,clumps of trees,and inconspicuous gardens. It is this area of Town that offers some opportunity for expanded open space. Adjacent to the Gore Place property were large swaths of land that once served as manufacturing and industrial purposes, were visually blighted, and served as large parking areas. Although some of these parcels,mostly to the south,have been redeveloped,they could also serve to connect the northwest part of Watertown to the Charles River both visually and programmatically. Oakley Country Club is another significant track of private open space situated in the northern bounds of the Town and provides both a well maintained private golf course and limited wildlife habitat. The Oakley Country Club was founded in 1898 on the grounds of the Otis Family Estate; Harrison Otis was the Mayor of Boston for three consecutive terms.The estate was later known for its wide variety of imported trees and shrubs.However the estate got its name from the abundance of local oak trees in the vicinity, some estimated to be nearly 800 years old. The Oakley was one of the first golf courses in the country. Currently the site consists of several individual parcels zoned as CR(Cluster Residential).The site is surrounded on three sides by residential development and has Belmont Street as its northern boundary.19 ■ Watertown Park and Recreation Facilities and Prograrrs ....................................................................................................................................................................... Park and Recreation Facilities According to the Town's website and discussions with the Recreation Director,Watertown maintains 13 multi-purpose parks and playgrounds.The size of these parks range from one acre at the Cunniff Elementary School to 14 acres at Filippello Park,which was recently upgraded. There are 16 tennis courts and 15 basketball courts with approximately half of those facilities having lights for seasonal evening use. The Town also has two street hockey courts and one skate park for all skill levels. There are nine little league size baseball/ softball fields,two major league size baseball fields, and one football field with stands that can accommodate 1,500 spectators. 9 2008 Watertown Open Space and Recreation Plan,pp.38-40 108 Chapter 5-Open Space and Recreation April 2014 DRAFT Vanasse Hangen Brusthn,Inc. One of the more significant recreational facilities in Watertown is Victory Field,which was mentioned frequently by residents during the public outreach process.Adjacent to Victory Field is an important passive open space park known as Whitney Hill. Victory Field was originally dedicated in May of 1922 to those who served and died in World War I. The field is heavily used by the School Department,Recreation Department programs and leagues and local youth organizations.Victory Field also includes a 400- meter rubberized track that is also used by residents for walking and running and is used year-round.There is a multi-use field within the track and a baseball field with artificial turf with recently upgraded and energy efficient lighting. The baseball field includes seating and baseball related amenities (bullpen,batting cages,scoreboards and dugouts).Many of these improvements,along with more efficient lighting,were recently completed as part of a multi-phase improvement program for the Field.Victory Field is the home for Watertown High School sports and the Watertown-Belmont Pop Warner football program. r' �z it■ rc 4ICTowe rICLO __ xIf MA.. Victory Feld Improvements.Source:Tom of Waterta m There are 15 tot-lots(many of which are located within the Town's park and recreation facilities)that have or will have a rubberized safety surface and new equipment.There is a 400-yard walking path at Filippello Park where young children can also ride bicycles. The John A.Ryan Skating Arena is a NHL-size skating rink owned and operated by the Town of Watertown. This important venue serves as the home to a number of youth and adult hockey leagues, as well as high school and collegiate school teams.The arena has a seating capacity for 1,250 109 Chapter 5-Open Space and Recreation April 2014 DRAFT Vanasse Hangen Brusthn,Inc. spectators. It is generally open from August until April and can be rented out for events such as birthday parties. The Town is also the location for Dealtry Pool,which is an outdoor facility owned and operated by DCR near Watertown Square. The pool is equipped with an adult lap section as well as a wading pool for younger swimmers. Due to the demand for park and field use,the Recreation Department has instituted a permit application policy for the use of fields,picnic areas,ice time at the Ryan Arena,and other facilities. These are typically issued on a first-come first-served basis. Indoor recreational facilities are maintained by the School Department and rented to the Recreation Department for their use.The Department of Public Works is charged with maintaining the outdoor recreational facilities, although there is also some outside assistance provided by the adult youth and adult leagues,as well as private organizations that provide stewardship to specific parks. In addition to the recent improvements to Victory Field,other scheduled facility upgrades include tennis court enhancements and a multi-purpose court in Casey Park,energy efficiency improvements at several locations, playground renovations behind the police station,improvements to the Grove Street entrance at Filippello Park,and upgrades at Moxley Park.The Town is also committed to create a number of dog parks within the community to allow for off leash recreation. ....................................................................................................................................................................... Park and Recreation Programs The Watertown Recreation Department has a robust recreation program for residents of all ages.It estimates that over 2,000 residents are served through these programs annually,which are seasonal — some of them are indoors.The highest demand occurs in the summer,when the Town hires over 90 seasonal employees to run the programs to supplement the 15 —20 year-round part- time and three full-time employees. The schedule includes after-school programs at each elementary school, seasonal sports for youth and adults,lessons and clinics,crafts,and theater programs.Watertown Recreation collaborates with Belmont Recreation to service Special Persons Organized for Recreation Time (SPORT),a special needs program. Funding is provided by the Towns of Belmont and Watertown,as well as user fees and private donations. 110 Chapter 5-Open Space and Recreation April 2014 DRAFT aVanasse Hangen Brustlin,Inc. ....................................................................................................................................................................... CofT1T1a1 der's Wnsion The OSRP also lists several other categories of public land including town buildings and town-owned spaces along roadways.The most significant of those properties is the historic Commander's Mansion,a seven acre parcel including the building and grounds. The Commanding Officer's Quarters is considered to be one of the highlights of the Watertown Arsenal site. It remains virtually unaltered after over 100 years'residence by Watertown commanding officers. The three-story brick Bracketed style mansion, approached by way of the tree-lined Talcott Avenue(originally known as Main Avenue)overlooks the Charles River.It is now used for a variety of events including weddings,bar mitzvahs,holiday parties,etc. The building is in the National Registry of Historic Places and,with the manicured Olmsted designed landscape,provides a significant scenic presence to the adjacent park and local area. ■ Charles Rver The Charles River is a regional historic,environmental,and recreation resource.Although the river is not considered pristine,its water quality has been steadily improving and the presence of a regional waterway through Watertown offers a significant number of scenic and historic landscapes. These are considered to be of paramount importance to area residents, including views to and from the river.The Charles River Bikeway,which extends into Boston,provides relatively untouched areas of riverbank as it passes through Watertown.There are many areas east of the Watertown Dam where pedestrians and bike riders enjoy river ecosystems that have been enhanced and protected over the years. DCR's Charles River Reservation is a linear park stretching from Boston Harbor up the river for 20 miles,four of which are within Watertown, encompassing approximately 53 acres of land.The lower half of the Reservation,from downtown Boston to the Watertown Dam,is the Charles River Basin,which includes the Esplanade on the Boston side.The basin abuts the campuses of MIT,Boston University and Harvard.The Upper Charles River section of the Reservation begins at Watertown Square and meanders to Riverdale Park in West Roxbury.The Reservation includes the heavily used Dr.Paul Dudley White Bike Path,an approximately 18 mile loop from Science Park in Boston to Watertown Square. ill Chapter 5-Open Space and Recreation April 2014 DRAFT Vanasse Hangen Brusthn,Inc. The Reservation offers many passive recreational opportunities for urban dwellers.Whether one is interested in walking,birdwatching,canoeing or in- line skating,the Charles River is a wonderful resource.- There have been several planning efforts aimed at addressing access and connectivity issues along the Charles,as well as identifying ways in which the scenic and recreational assets of the river could be enhanced.In 2002,the Charles River Basin Master Plan was prepared which looked at(as it relates to Watertown)extension of access improvements eastward into the Charles River Basin,improving the landing at Watertown Square,and improving visual access from the area. Currently,DCR and the MA Department of Transportation (MassDOT)are collaborating on a Pedestrian and Bicycle Connectivity Study for the Charles River Basin.Recognizing that the existing trail system on both sides of the river are heavily used by walkers,runners and bicyclists,the study seeks to identify ways in which the varying needs of these user groups can be accommodated.It also examines other existing and currently fragmented trail networks that feed into the Charles River Basin to see how they all can be better connected to those along the Charles. The study identifies barriers that discourage non-motorized transportation such as adjacent parkways,the Massachusetts Turnpike,rail yards and a variety of automotive dependent land uses. The draft study identifies uncontrolled and unmarked access points for pedestrians and bicyclists,including the area between the Arsenal Mall and the river. Given the proposed redevelopment of the Mall and the Athenahealth office complex,there are opportunities to enhance these connections. A number of preliminary recommendations are being contemplated as the study moves toward completion.They include: > Creation of wider paved and parallel soft-surface trails along the river wherever possible. > Establishing traffic signals that are exclusive to pedestrians where feasible. > Streetscape enhancements in Watertown and Newton along roadways that connect to the Reservation. > Several new on-street connections are proposed from North Beacon, Arsenal,Mt.Auburn and Galen Streets > New pedestrian and bicycle bridge is proposed on Maple Street 20 htto://www.mass.aov/eea/aaencies/dcr/massoarks/reaion-boston/charles-river-reservation.html 112 Chapter 5-Open Space and Recreation April 2014 DRAFT Vanasse Hangen Brusthn,Inc. The plan describes the enhancements in greater detail including the locations of crosswalks,multi-use paths,bicycle lanes,etc. ■ Watertown-Cambridge Cwwway The Watertown-Cambridge Greenway is designed to provide an alternative route for cyclists and commuters utilizing sustainable modes of transportation that are traveling between the west and urban centers in Arlington,Cambridge,and Boston.It also serves as a recreational greenway and passive park with abundant native plantings and wildlife.Phase 1,a one mile segment completed and opened to the public in 2011, runs from School Street to the intersection of Arlington,Nichols,and Coolidge Streets and connects the Watertown Mall and local businesses to residential areas of Watertown and Filippello Park. In June 2013,the Commonwealth acquired a 4.2 acre corridor from B&M Railroad for $1.3 million ($829,000 of DCR's Land Acquisition funds and $470,000 of federal funds for green transportation). The corridor is located between Grove Street in Watertown and Huron Avenue in Cambridge. The new acquisition will link the Charles River corridor,Fresh Pond Reservation,Fresh Pond f Shopping Center,Alewife Greenway and MBTA station,the Minuteman WatertwurCarrbridge Camay,Source:City of Bike Path,and the Mystic River Carr&dge Reservation. In a separate but equally critical transaction,the City of Cambridge also acquired from B&M Railroad,a section of former railroad corridor to the north,between Huron Avenue and Concord Avenue with Community Preservation Act funds. Cambridge reserved for DCR a 14-foot-wide trail easement over the 2,000 linear feet above Huron Ave.These two acquisitions have more than doubled the length of the original greenway;expanding the greenway from 4,600 feet to 10,200 feet in length,and connecting it with many more miles of trail.2� An additional connection will be established by the Watertown Community Path,which is a multi-use path that will provide pedestrians and bicyclists with a safe and easily accessible route through much of Watertown. A project spearheaded by the Town of Watertown,Watertown Bicycle and Pedestrian 21 htto://www.cambridaema.aov/citynewsandoublications/news/2013/06/maiorareenwayslinkforwatertowncambridaeareenwavacauired.asDx 113 Chapter 5-Open Space and Recreation April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Committee and Watertown Citizens for Environmental Safety,the path is expected to run from the intersection of School and Arsenal streets in East Watertown,through Watertown Square and to the intersection of Pleasant and Howard streets near the Charles River.It will provide a link between the Minuteman Bikeway and the Charles River Reservation Path. Approximately 1.75 miles in length,the preferred route roughly follows a former railroad right-of-way(ROW).It suggests a minimum 8-foot-wide two- way cycle track along Arsenal Street-a bicycle path separated from traffic by a physical barrier -and a 10-foot-wide shared-use path when not adjacent to sidewalk.- Open Space and Recreation Needs The OSRP identified a number of specific resource and community needs, many of which are still valid. They include improving the health and quantity of town-owned trees;proper delineation,mapping,and documentation of the Town's wetland resources;care and maintenance of ponds(recognizing that many of them are located on private property;working with DCR to ensure that the condition of the Charles River and its environs continue to improve; addressing land use,zoning,and development issues that impact open spaces;and issues related to the Town's park and recreation facilities, including maintenance and upgrades necessary to meet the requirements of the Americans with Disabilities Act(ADA). The OSRP noted that walking and bicycling were among the most frequently cited recreational activities among Watertown residents.Meeting their needs was an important consideration in that plan and continues to be a commonly mentioned issue during this planning process.In response to the need to meet ADA standards,the Town undertook a comprehensive assessment of its facilities in an effort to achieve ADA compliance.Establishing a tree inventory,improving communication with DCR,and providing the Department of Public Works(DPW)with the staff and resources for park maintenance were among the key management issues raised in the OSRP. Given the land use and development history of Watertown,additional acquisition of substantial new open space parcels is unlikely.Therefore,the Town's efforts are focused on maintaining and enhancing its existing open space and recreation inventory. Town residents recognize that parks,open spaces and trees create a high quality of life in Watertown and place a high value on these resources. htto://www.ci.watertown.ma.us/index.asox?nid=602 114 Chapter 5-Open Space and Recreation April 2014 DRAFT Vanasse Hangen Brusthn,Inc. In an effort to extend the availability of fields and courts in the Town's parks, artificial turf was installed at Victory Field and an additional turf field is being considered.Artificial turf is more expensive to install,but it can reduce maintenance needs and expenses in the long run. It also can lengthen the amount of available playing time because artificial turf stands up to heavy use and requires no irrigation or trimming. An additional four fields are lighted,as are numerous basketball and tennis courts,to extend the number of hours of available playing time. Continuing to maintain and enhance these services represent a challenge to the Town's Recreation Department and DPW. There is a solid relationship with the Parks Department within the DPW for field grooming,repairs and striping,equipment repairs,and the upgrading of picnic facilities. The Recreation Department has programmed some improvement projects for the next couple of years. In the longer term,the Department will be addressing the following issues: > Coordinate more with the senior center on programs for the elderly > Partner with clubs and other private groups such as the Boston Ski and Sports Club on programming > Establish a Park Ranger program that can welcome visitors,assist with parking,check field permits,etc. > Work with sports leagues on maintenance sites recognizing that some fields are overused because demand outstrips the supply of fields(a problem that is exacerbated when inclement weather forces cancellations). Fees for field use and recreation programs cover much, but not all,of the maintenance required. > Recreation coordinates on Health and Wellness with the School Department to coordinate programs for youth. Recreation wants to continue to integrate programs with the schools,particularly to promote public health. > Offer a more diverse range of programming > Work with the Bicycle and Pedestrian Committee > Establish and monitor several dog parks within town and adjust regulations as necessary. Goals Goal 1. Identify opportunities to create new parks in underserved neighborhoods,while improving accessibility and the overall condition of Watertown's recreational resources. Goal 2. Preserve,protect,and enhance publicly owned conservation, passive,and active open space. 115 Chapter 5-Open Space and Recreation April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Goal 3. Encourage private land owners to permanently preserve open space on their parcels. Goal 4. Create new opportunities for recreational access along the Charles River,such as boating,trail networks,bicycling,and appropriate related amenities. Goal 5. Promote active and healthy lifestyles. Recommendations and Strategies As mentioned earlier,the Town's Open Space and Recreation Plan "expired" in October 2013. Therefore,one overarching recommendation relating to open space and recreation is to update it in order to maintain eligibility for Massachusetts Local Acquisitions for Natural Diversity(LAND)and Parkland Acquisitions and Renovations for Communities(PARC)grants. Since much of the background information will not change,and this public process will inform an update in meeting some of the necessary outreach aspects,updating the plan will focus on a re-examination of resources, community and management needs,and the preparation of a new seven-year action plan.That seven-year action plan can build and expand upon the recommendations in this Plan. Another general recommendation is to reconsider adoption of the Community Preservation Act. Given the value people have placed in open space and recreation during the public outreach process,it is important to continue to maintain and improve the Town's open space and recreational resources.Although the only attempt to adopt CPA in Watertown failed in 2005,the Town should reconsider adoption in order to provide needed funds to meet the growing demand on the Town's parks,playgrounds,playing fields,and open spaces. Such an effort is assumed to be a grass roots or citizen led effort. Additional recommendations are as follows: Goal 1.Identifv opportunities to create new parks in underserved neit-hborhoods. while improvinz accessibility and the overall condition of Watertown's recreational resources. A. In an effort to provide better access to park and recreational facilities,the Town should identify potential locations for small parks,pocket parks, playgrounds and tot lots,especially in conjunction with large new commercial or residential developments. 116 Chapter 5-Open Space and Recreation April 2014 DRAFT Vanasse Hangen Brusthn,Inc. /0000 Community Preservation Act The Community Preservation Act(CPA)is a state-wide legislation which allows communities to adopt a property tax surcharge,with revenues from this surcharge to be used for open space preservation,the creation of affordable housing,preservation of historic buildings and landscape,and the creation of recreational opportunities.Dependent on the total number of communities in Massachusetts participating in the CPA and the number of deed transactions that generate fees for the fund,the state matches the town's surcharge revenues. At least 10 percent of the Town's revenue generated annually by the CPA must be spent or reserved specifically for historic preservation, open space,and community housing.No more than 5 percent is utilized for administrative costs.The remainder of the revenue can be spent or reserved for recreation projects,in addition to historic r preservation,open space,and community housing. B. Establish Level of Service(LOS)standards for park and recreation programs and fields.Based upon the existing demand for and usage of the playing fields,the number of fields available,the hours of availability (lighted vs.non-lighted fields),and the number of permits applied for, the Town can establish some baseline LOS standards that at a minimum should be maintained over time. The LOS standard can then be used as a basis for planning new playing fields or playgrounds if demand increases over time and outstrips the supply of available park facilities. C. Continue efforts to upgrade park and recreation facilities to meet applicable ADA standards as improvements are made. Goal Z Preserve. protect, and enhance publicly owned conservation. passive. and active open space. A. Encourage the creation of"friends of groups to provide stewardship of other parks.These groups can help to sponsor cleanups and similar activities,as well as flag issues that the Town may need to address but may not be aware of. B. Management plans should be developed for each major town-owned facility. Expand maintenance management planning for park and 117 Chapter 5-Open Space and Recreation April 2014 DRAFT Vanasse Hangen Brusthn,Inc. recreation facilities. In addition to planning for the routine maintenance of the facility and grounds,long-term capital needs and repairs can be identified and scheduled.This should be a joint effort between the DPW and the School Department.The OSRP has identified the condition,key issues and ADA minimum compliance recommendations for each of the major parks. This maintenance planning effort will build on that assessment and help to prioritize park upkeep needs. Maintenance plans should establish standards designed to achieve specific results considering the following: 1. The condition of each facility after satisfactory completion of routine maintenance work 2. The tasks required to achieve that result 3. The procedures for completion of those tasks 4. The time necessary to complete a particular task,as well as frequency 5. The number of people required to meet the standard 6. The equipment needed to complete the task 7. The materials and supplies needed to complete the task A. Seek better coordination with outside groups to leverage p ark and field maintenance and stewardship.A cooperative arrangement between the Town and the various leagues and sports associations will enhance this effort. This would create a shared understanding of what it takes to accomplish certain tasks,how to ascertain staffing needs,how to identify specific needs,and how to rectify any deficiencies. It would also be useful to track the costs involved with the various items in the maintenance plan so that long-range projections could be made for allocating staff and fiscal resources. B. Continue to inventory playground equipment on a regular basis. Playground equipment generally has a life expectancy of fifteen years when used under normal conditions. If playgrounds are heavily used or if the equipment is routinely used by children that are older than for which it was designed,that lifetime may be shorter.The Town should inventory playground equipment and the dates of installation to determine when equipment replacement may be necessary. Goal 3.Encourage private land owners tO permanently vreserve open space on their ,parcels. A. Amend the zoning ordinance to require that open space be set aside for new or redeveloped residential and commercial land and.As redevelopment occurs,especially along the Arsenal and Pleasant Street corridors,look for opportunities to establish new open spaces to serve those developments and the Town. 118 Chapter 5-Open Space and Recreation April 2014 DRAFT Vanasse Hangen Brusthn,Inc. B. Continue to encourage that properties acquired through tax default are considered for open space before resale or redevelopment. C. Pursue remediation,acquisition and/ or public access to Walker Ponds,as well as Sawins and Williams Ponds.Each of these wetland areas need various levels of remediation and should be restored and integrated into the town's open space network,in near or long term. Goal 4. Create new opportunities for recreational access alonz the Charles River, such as boatinz, trail networks, bicvcline, and appropriate related amenities. A. Work with DCR to finalize and implement recommendations for the Charles River Basin Pedestrian and Bicycle Connectivity Study. B. Work with developers to create or enhance multi-use connections between their development projects (including the Arsenal Mall and Athenahealth redevelopment projects)to increase physical and visual access to the Charles River. Goal S.Promote active and healthv lifestvles. A. Consider development of a multi-use,multi-generational community center to provide a variety of activities throughout the year. B. Look for ways to better integrate services and programming with the Senior Center and the public schools and their facilities,as well as ways to incorporate public health and physical fitness programs. C. Continue developing safe walking paths that connect existing open spaces and parks.New paths should be handicap-accessible and multi- use,serving walkers,runners,bicyclists and wheelchairs. D. Create several dog parks within Town to allow or off lease recreation. 119 Chapter 5-Open Space and Recreation April 2014 DRAFT Vanasse Hangen Brusthn,Inc 6 Natural Resources Introduction Being an inner core community of the Greater Boston region,Watertown has experienced significant urbanization in recent decades.The Town's natural environment has been altered as changes in land use occurred.Today the Town is nearly built-out,so it is important for Watertown to focus on the preservation and enhancement of its natural resources and maximize the opportunities for its citizens and visitors to enjoy them.Watertown's natural resources play a critical role in supporting the environmental health and social viability of the community. This section of the Comprehensive Plan provides an assessment of the existing natural resources in Watertown,the environmental challenges facing the Town,and the steps that can be taken to pursue a more sustainable future. Baseline Assessment ■ Geology, Soils and Topography Typical of most communities in the Boston Metropolitan Region,Watertown is located in an area known geologically as the "Boston Basin",which extends south to Weymouth,north to Medford and west to Weston.With a faulted and folded terrain that extends northeasterly in Massachusetts Bay,the basin is characterized by the Cambrian Age rock formations,Cambridge Argillite and Roxbury Conglomerate.Most of Watertown is underlain by the Cambridge Argillite,which has been intruded by igneous dikes and 120 Chapter 6-Natural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. interbedded with volcanic ash from the Brighton Volcanic Complex and Lynn Volcanics. Topographically,Watertown's elevations range from less than ten feet along the banks of the Charles River to 220 feet near the Oakley Country Club. Prominent hills such as Whitney Hill, Strawberry Hill,and Coolidge Hill dot the landscape and provide excellent views of the Charles River basin and the Boston skyline to the east.These hills are geologically drumlins,composed of large mounds of glacial till(i.e.,clay and rock)formed when the glaciers reshaped the landscape some 10,000 to 12,000 years ago.Much land in coastal areas was pushed below sea level by the glacier's massive weight as they moved across New England.The bedrock below the glacial till is the result of the erosion of a high mountain range that existed 350 million years ago to the west of the Boston Basin. The general topography of Watertown has remained stable since the glaciers and subsequent sea level changes occurred several thousand years ago. Human activities have had considerable impact on the post-glacial landscape. For example,damming of the Charles River to harness water-power for the burgeoning Industrial Revolution of the mid to late 19"century changed the river's course and altered its character so that it is no longer the swift-moving waterway of yesteryear.Large wetlands that used to provide natural flood buffers or filtration of surface runoff are not present anymore.Human modifications to the land include paving,filling,and grading for dense residential and commercial development and transportation networks.The only areas that have not been altered from the original post-glacial topography are those in which the slope is too steep to grade or the substrate too difficult to manipulate, such as Whitney Hill. Figure 6-1 Soils Map of Watertom snits MapsOnllne Source:Town of Mtertaun Open Space and Recreation Plan,2008 121 Chapter 6-Natural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Watertown's surficial geology is composed mainly of deposits left behind by the glaciers of the last ice age,sedimentation from upland areas,and post- glacial sea level changes.Today,the majority of the Town can be classified as "urban land complex"(bituminous or concrete pavement)and loamy sand. The once well-established agricultural community supported by the alluvial soils along the banks of the Charles River now only exist at the Gore Estate located at the west end of town.From the general soils map completed with the assistance of the Soil Conservation Services (SCS),it is evident that Watertown has been highly urbanized23.Much of the wetland soil along the Charles River has been filled and built upon during the late part of the 19`h century,although a significant band of wetlands remain along the river on the Department of Conservation and Recreation (DCR)property. ■ Landscape Character Being a community that is mostly built-out,Watertown's landscape is characterized by its dense suburban and urban setting.However,there are a number of scenic features among the heavily developed neighborhoods.The most valued jewels in town are the Charles River that winds along the town's southern boundary and the DCR walkway along the river that provides scenic vistas and access to valuable natural resources for pedestrians and bicyclists. Several prominent hills in town provide vistas of the Boston skyline,such as from the hill and tower(136 feet)at Mt.Auburn Cemetery and along Coolidge Hill Road. In addition,Palfrey Street at its peak offers excellent semi-urban vistas of the hills and valleys to the west towards Waltham,while the Oakley Country Club also provides excellent views. Charles Rver.Image source:VHB za Town of Watertown Open Space and Recreation Plan,2008 122 Chapter 6-Natural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. ■ Water Resources Most of Watertown is located within the Charles River Watershed.The river, which forms the majority of the Town's southern boundary,not only is considered a major part of the Town's quality open space,but also connects to Watertown's rich waterfront industrial history.Improved water quality in recent years has spurred an increase in water-based recreational uses along the river including rowing,sailing,fishing,and canoeing,although this section of the river is not yet clean enough for swimming 24.The Charles River Watershed Association (CRWA)conducts an annual swim event to demonstrate that the water quality is improving. Since stormwater runoff from urban activity has been identified as a major source of pollution affecting the water quality of the river,it is critical to continue reinforcing stormwater management along the river corridor to achieve the long term vitality of the Charles River.The Town has routinely employed stormwater management best management practices for current and proposed municipal infrastructure projects and private development21. Groundwater used to be plentiful in Watertown and supported both drinking water and irrigation for agricultural ventures.For example,Artesian springs near Whitney Hill were historically used for irrigation of pear groves along Orchard Street.Watertown relies on the Massachusetts Water Resource Authority(MWRA)for its potable water supply rather than depending on groundwater.It is not fully known how and to what extent groundwater has been affected by land use changes and associated pollution over the years,but significant contamination was identified at the Arsenal site. In terms of surface water resources,most of the Town's natural springs were incorporated long ago into the municipal storm drains. Currently there are nine small ponds located in Watertown.All of the ponds are privately owned, three of which are located in Mt.Auburn Cemetery. Sawins Pond and Williams Pond,both considered to be contaminated,and the ponds at the Perkins School and the Gore Estate are not accessible to the public.Most of the Town's documented 100-year flood plain is located near the southern town boundary along the Charles River,primarily west of the Watertown Dam,and includes several development sites between Bacon Street and Paramount Place.For example,the 11 acre site of the Stop &Shop at the western end of Pleasant Street is entirely within the 100-year floodplain. The eastern section of the Charles River is contained within its banks except the open space along Greenough Boulevard north of Arsenal Street. 20.Town of Watertown Open Space and Recreation Plan,2008 zs Ibid 123 Chapter 6-Natural Resources April 2014 DRAFT Figure 6-2 Water Resources,V1Fatedom, MA N&MAWALDW11335].00IG 151Projecriwaar resources.mRd II 1 l _ BELMONT \ ' so � CAMBRIDGE WALTHAM 20 / Q ,% € �OWE4n�ENrvf wH�,N ; 2 c / 71�t 6 ��"€a ` r 20 - / W wk,N yh 49 s �r �00ty o�Nw a 100 20 ''/ narFfEr.;tN!s� /� \ v�aasr,rs. °„3��R 3�eF`" rho°c�.9�� u,Nw srnEer o uuwe�srnEE. , �`0'WCNaono �rvs �' _ rcsrFEEr 4 c"� NSSNEE! �ESAEpr ' �®��fn°Orv.gaFE FBENgI srq FR'.�r �4 `� "OasE '°esvzEE "'EEr 16 '9e`�E?av�EsrF "4gceeavEanorvo` BOSTON NEWTON zo 0 _—=r.. I Legend Source:M.-G1S _ Jan 2014 Watertown Townline - tnterstate I _ Watershed Boundary C—prehensN.Plan Townline(other) U.S.Highway Surface Water Watertown,MA - State Route W10 DEP Wetlands 124 Chapter 6-Natural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Watertown also has several areas of wetland resources associated with its surface water resources, such as Williams Pond on the western edge of town between Waltham Road and Pleasant Street,and Sawins Pond in east Watertown at Arlington Street and Coolidge Road.Two isolated and relatively small areas of wetlands connected with the Charles River have been identified on Sunrise Island at Charles River Road and North Beacon Street, and on the border of Watertown and Boston at the North Beacon Street Bridge.In addition to state legislation and regulations that protect wetland resources,the Town adopted the Watertown Wetland Ordinance in October 2010 to reinforce the protection of wetlands,water bodies, adjoining land areas and related resources.Virtually any activity —with rare exceptions — that occurs in a wetland resource area,including any removal,filling, dredging or alteration of the wetlands,is subject to both the state and town wetlands protection requirements.Activities outside of the resource area, such as within a Buffer Zone (100 feet under state requirements and 150 feet under the Watertown Wetland Ordinance),are subject to regulations if they will alter the resource area26. ■ Vegetation Since most of Watertown's surface is paved,large tracts of woodlands and species associated with forested areas are rare resources in town.While most original forests were cleared long ago for agriculture or pastures,with the exception of isolated areas such as the Oakley Country Club where several oak trees are thought to date back to America's colonial era27,the trees seen today in Watertown's yards,streets,and parks are the result of plantings or natural pollination of species over time.The Town's contiguous woodland vegetation is mostly limited to the Charles River basin within the DCR's network of open space,and the only large remnant of forested land is the 6.1- acre Whitney Hill Park near Victory Field.Nonetheless,Watertown has a variety of native and non-native plant species (listed below*),with no species listed by the Natural Heritage &Endangered Species Program (NHESP) as rare,threatened or endangered: > Common hardwoods:red maple,white oak,beech,hickory,birch,and black oak. > Common softwoods:white pine and hemlock. > Common herbaceous plants:vervain,goldenrod,asters and joe pye weed. 21 Watertown Wetland Ordinance.htto://www.watertown-ma.aov/DocumentCenter/Home/View/l414 2'Town of Watertown Open Space and Recreation Plan,2008 125 Chapter 6-Natural Resources April 2014 DRAFT Vanasse Hangen Brustlin,Inc. > Invasive species:Norway maple,buckthorn,garlic mustard and euonymus. > Others:numerous fern species near the forest floor as well as cattail stands towards the far western and eastern borders of the town. *This is not an exhaustive list. Of particular note is Mt.Auburn Cemetery,the largest contiguous and publicly accessible open space in Watertown that consists of 151.1 acres of well-manicured grounds with numerous species of both indigenous and exotic tree and shrub species. While the cemetery is a significant historic heritage site in Watertown as the nation's first garden-style cemetery,it also serves as an arboretum with a massive and renowned collection of over 5,500 trees and nearly 700 species and varieties thriving among its hills,ponds, woodlands,and clearings. N � A N ' •'f 6A 4 Thriving plant diversity in U.Aibum Cemetery.Image source:VHB Street trees,an essential component of the Town's natural resource inventory, received a great deal of attention during the public outreach process of the Comprehensive Plan.Town residents who participated in public forums and online MindMixer discussions generally expressed strong support for more tree plantings and better maintenance and protection of existing trees in Watertown.Having recognized the social and environmental benefits of street trees in a highly built-out community,the Town has identified improving the health and quantity of town-owned trees as a priority in its 2008 Open Space and Recreational Plan.The Watertown Tree Warden is responsible for the planting,protection and management ofpublic shade trees in town. On average,nearly 120 trees are planted in the combined spring and fall seasons each year,and the mix of tree species in Town was modified over the years in response to the amount of salt used during winter. 126 Chapter 6-Natural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc- D 61,6 E a.- .. 2-s o .h ms.w..a.-�.o-M _ A-� r.�wo.ua+• ivu ::i �sT'i©:.. �- Rb�p"N�.•. _.�b Ea� � o., 9-R ,•. ❑•e.:t�ww .:o Rc no- cart vM e�cm.n, e.w=ae.ms e.rcwm, waw., xrp � ,15 y�w cep u J� C«. p,a _ ap.sv. p e� <s Sarrple interface of the GIS street tree inventory database(last updated in Jtly 2011).Data source:Tom of V%Uerbm In July 2008,the Town created the first street tree inventory for Watertown. This Geographic Information System (GIS)database of street trees has been subsequently updated by Watertown's Tree Warden when trees are planted or removed and is maintained by the Department of Community Development and Planning.The street tree inventory will help better forecast and coordinate tree replacement,requests and maintenance as well as assist in identifying issues that affect the long-term health of the Town's stock of urban forest. ■ Fisheries and Wildlife The Town has limited land available to provide habitat for wildlife.As of 2012,the Massachusetts Natural Heritage and Endangered Species Program had not identified any endangered or threatened species within Watertown, although it is believed that the Town has at least one vernal pool at the Mt. Auburn Cemetery and potentially other undocumented vernal pools near the ponds in the west end of town.Vernal pools collect water from rain or seasonal flooding and dry up in the later spring and early summer.They provide essential habitat for several species such as spotted salamanders,a state listed endangered species that has reportedly been seen in Watertown. Species such as salmon once swam up the Charles River to spawn providing an integral component to the area's seasonal wildlife cycles.With the damming of the river,some of these indigenous aquatic species vanished and with them numerous related species.Today the river's fish populations above the Watertown Dam include(but are not limited to)Alewife,Herring,Yellow Perch,American Eel,and Banded Sunfish.The Watertown Dam which crosses the Charles River just west of the Galen Street crossing was built sometime in the mid-17th century and was used for industry that later 127 Chapter 6-Natural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. developed along the river corridor.The dam is still intact and contains a fish ladder that allows native Alewife,Herring and other fish to cross and extend their habitat upstream28. ■ Scenic Resources and Unique Environments Although there are no DCR designated scenic landscapes in Watertown,the Town has a number of unique landscape features that offer scenic escapes from the built environment.Views of the Charles River Valley and the Boston skyline can be seen from drumlins in Mt.Auburn Cemetery,Prospect Hill at an elevation of400 feet,and Whitney Hill. The primary scenic resource in Watertown is the Charles River,a regional waterway and historic,environmental,and recreation resource.With over four miles of riparian corridor within Watertown,which is entirely within DCR's Charles River Reservation,the river not only offers unparalleled opportunities for recreational uses,but also connects to a number of iconic cultural landmarks along its way,such as the Perkins School campus,the Watertown Arsenal,and the Aetna Mill complex. The Charles River Bikeway, which extends into Boston,passes through the relatively untouched areas of natural riverbank in Watertown.Many areas east of the Watertown Dam allow pedestrians and bicyclists to enjoy intermittent views to downtown Boston as well as the progressively restored river ecosystems as local industry abated,while the river bikeway to the west of the dam provides similar scenic quality in some locations but with more variety. In addition to the Charles River,there are three privately owned but regionally recognized landscapes within Watertown's boundaries.They are the Gore Estate,Oakley Country Club,and the Mount Auburn Cemetery (more details are discussed in Chapter 5 -Open Space and Recreation). Together these large tracts of open land help balance local environmental health in this relatively dense community by providing scenery and habitat, retaining the ecological benefits of open land,and stimulating air circulation. ■ Environmental Challenges Typical of other communities within the Boston region,Watertown is faced with a number of environmental challenges associated with its industrial heritage,evolution of land use changes,and new development trends. 29 Town of Watertown Open Space and Recreation Plan,2008 128 Chapter 6-Natural Resources April 2014 DRAFT aVanasse Hangen Brustlin,Inc. ....................................................................................................................................................................... Hazardous ftste Site The General Services Administration's (GSA)site is located between Arsenal Street and Greenough Boulevard along the Charles River in the southern corner of town. Once used by the Army for equipment storage and burning uranium waste,this 13-acre site is considered one of the more contaminated parcels in the area.Presently owned by the Federal Government,the site has been undergoing an extensive environmental remediation effort. Once the restoration is complete,it is planned for use as limited passive recreation including walking trails and bird and wildlife watching will be permitted.Public access will be limited to specific areas. Once the cleanup is complete,the GSA property will be transferred from the federal government to DCR29. Additionally,the Department of Environmental Protection (DEP)has listed over 200 sites in its registry of reported releases. This includes contamination at Sawins and Williams Ponds.Most of these sites are located in historically industrial and commercial corridors such as Pleasant Street,Mt.Auburn Street and Arsenal Street. They typically represent previous industrial uses or gas stations with underground storage tanks and they are in various stages of assessment and cleanup30. ....................................................................................................................................................................... Dwdopl'Y1 r t InVuLt As described in Chapter 1 -Land Use,Watertown is a community with significant redevelopment potential particularly along the Arsenal Street and Galen Street corridors.In recent years,Pleasant Street has seen considerable redevelopment of its former industrial and warehouse uses and underutilized or vacant parcels,and the entire corridor has transitioned to more mixed use and residential development,especially since the adoption of the Pleasant Street Overlay District. Most of these new development opportunities are generally recognized as being important in strengthening the Town's tax base and advancing the Town's goal of becoming a more livable and attractive community.However, it is imperative to ensure that appropriate mitigation measures are implemented to reduce any negative environmental impacts that could undermine the quality of life in town.Efforts should also be made,when possible to ensure that new projects incorporate publicly accessible open space into the development program. zs Information from Army Corps of Engineers,as quoted by The Charles River Parklands at httD:Hchariesriverconservancv.bloasDot.com/2012/06/watertown-arsenal.htm I ao See htto://Dublic.deo.state.ma.us/SearchableSites2/Search.asox,accessed February 2014 129 Chapter 6-Natural Resources April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Goals The public outreach process of the Comprehensive Plan revealed strong consensus among residents and town officials on the significant benefits of restoring and preserving natural resources in Town.In an era where a community's strategic competitiveness relies more and more on its quality of life,Watertown is poised to create a more livable,playable,and workable community that preserves the integrity of its natural resources while maximizing their social and environmental potential.Building upon this vision,the following natural resources goals have been established. Goal 1. Improve the environmental integrity of the Charles River while enhancing its recreational,cultural,and educational values for the community. Goal 2. Protect and enhance Watertown's urban forest. Goal 3. Promote public awareness and education on preserving the Town's valuable natural resources. Goal 4. Take advantage of any opportunity sites for open space acquisition. Goal 5. Carefully consider any opportunities to restore historical natural features of the Town. Re.wi 1 m I ir- R.atiOI S Goal 1. Improve the environmental integrity of the Charles River while enhancing its recreational, cultural, and educational values for the community. A. Enforce stormwater management best management practices to improve water quality of the river by reducing non-point source pollution in the river corridor.The Town has a Stormwater Advisory Committee whose charge is to review and make recommendations for ordinances that address stormwater management. The Town recently adopted an ordinance to bring the Town into compliance with EPA requirements regarding pollution reduction in stormwater discharges.Additionally,the Town should consider adopting a Low Impact Development(LID)ordinance to minimize the volume,as well as the pollutant level,of post-development stormwater runoff. Review the design,construction,and maintenance of stormwater "best management practices"both by the Town and private 130 Chapter 6-Natural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. developers to ensure that the Town is taking advantage of the most recent and effective approaches to LID. B. Continue to work closely with DCR during the transition of the GSA site along the Charles River to ensure the restoration of wetlands and accessibility to the passive recreation areas from Watertown neighborhoods. C. Implement new design guidelines(as recommended in the Land Use chapter)along the Pleasant Street corridor to ensure that the river is physically and visually accessible for active recreational uses. D. Encourage cultural and educational activities that promote the river's rich history and abundant natural resources. E. Continue to work with stakeholder groups to provide stewardship, protection and access for the Charles River and ensure high water quality to support flora,fauna and good health. F. Continue to promote access to the River,both physical and visual,to promote appreciation and understanding. Goal 2. Protect and enhance Watertown's urban forest. A. Adopt policies that will result in better protection and maintenance of Watertown's public street trees. 1. Incorporate street tree planting and maintenance standards as part of the streetscape improvements proposed as part of the redevelopment of the Arsenal and Pleasant Street corridors as described in Chapter 1 —Vision and Land Use. 2. Minimize harm to street trees from road salt,construction activity, and deteriorated infrastructure. 3. Build or upgrade sidewalks and curbs in a manner to facilitate tree plantings. B. Encourage the protection of established trees while promoting the planting of new shade trees on private property. C. Collaborate with local groups to maintain the tree inventory for better protection and management. Goal 3. Promote public awareness and education on preserving the Town's valuable natural resources. A. Make information about Watertown's natural resource areas easily accessible on the Town's website. B. Enhance public education on sustainable practices that can help reduce the environmental footprints of Watertown citizens. 1. Improve education on proper and environmentally safe waste disposal,composting,gardening,pest control,and lawn care. 2. Educate and encourage homeowners to help address stormwater runoff on their property through the reduction of impervious 131 Chapter 6-Natural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. pavement and the use of rain barrels,rain gardens,pervious pavers, etc. C. Consolidate educational signage at resource areas to facilitate the learning experience while encouraging pride and self-identification with the Town's natural resources. Goal 4. Take advantage ofanv opportunity sites for open space acquisition. A. Work with developers to identify opportunities to incorporate publicly accessible open space into new projects. B. Develop and formalize a policy to ensure that properties that the Town acquires through tax default are considered for open space before resale or redevelopment. C. Establish a "pocket park"program to encourage public/private open space in neighborhoods. Goal 5. Carefully consider anv opportunities to restore historical natural features of the Town. A. As mentioned in the Open Space and Recreation element,pursue remediation,acquisition and/or public access to Walker Ponds,as well as Sawins and Williams Ponds. 132 Chapter 6-Natural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Historic and Cultural Resources Introduction Watertown's nearly 400 years of existence as a town and the diverse nature of its development and many residents and business owners has resulted in a rich array of historic and cultural resources.Many are well-recognized and celebrated,while others need more discovery,awareness,and promotion. The following sections provide an overview of the historic resources,cultural attractions,and preservation goals and strategies in Watertown. Baseline Assessmert 0 Purpose There are many active and successful preservation efforts in Watertown and the importance of historic resources and cultural attractions is recognized by many in the community. The purpose of this assessment is to provide a summary of Watertown's historic and cultural resources and the current work of the Town's Historic District Commission and Historical Commission and the major issues they face. There are many strategies that may be adopted to assist in the continued appreciation and preservation of the town's historic and cultural resources,which are discussed later in the chapter. 133 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. ■ Significance of Watertown's Historic and Cultural Resources Watertown's historic resources are associated with many important periods of development and several are recognized for their individual roles in the town's importance.A brief summary of some of Watertown's many historic resources is recounted below. ....................................................................................................................................................................... Early European Settlement and the Colonial Era When the Massachusetts Bay Colony first sent settlers to Watertown,its strategic location along the Charles River had been attracting Native Americans to the area for thousands of years.First known as "Saltonstall Plantation"after leader Sir Richard Saltonstall,the early English settlers had the advantage of the falls near what is now Watertown Square,which was the furthest navigable point along the Charles River from the harbor,as well as well-traveled paths into Cambridge and other surrounding strategic areas. In May 1630,a party led by Roger Clap,landed on the steep banks of the Charles River at a point near the present site of Perkins School for the Blind. He tells of the first encounter with the Pequossette Indians when they approached Clap's landing party with a large bass for which they were given a biscuit by the settlers. This scene is commemorated on the official Town seal.31 The town was officially established in 1630 and originally included Weston,Waltham,and Lincoln, •r which became individual towns prior to the Revolutionary War. Land from Watertown also " contributed to the current extent of Belmont and Cambridge. However,the early settlement along the river was kept intact as the industrial,municipal,and institutional heart of Watertown,influencing the 4 development of the town "M around it during the last nearly _ 400 years. Watertom Square,c.1860s."South side of Main Street, above Galen Street.,"Digital Commormealth,accessed February 7,2014, Mp://digitalcDrrrrumealth.orgliten-s/shav/5315 31 http://www.ci.watertown.ma.us/index.aspx?NID=199 134 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Watertown is fortunate enough to have several reminders of the earliest days of settlement.The c. 1698 Abraham Browne House at 562 Main Street was constructed by one of Watertown's earliest families.Acquired and restored by William Sumner Appleton as part of the organization now known as Historic New England,this house is an invaluable study property,and is open to the public a few times each year.The Old Burying Place at the corner of Mount Auburn Street and Arlington Street is the final resting place of Watertown's earliest settlers,dating as far back as 1642. In 1755,the decision to construct the town's third meeting house closer to the falls solidified the Watertown Square area as the municipal and institutional heart of the town. The site of this First Parish Church Meeting House is commemorated on an 1895 marker located within the Common Street Burial Ground at the corner of Mount Auburn Street,itself used by parishioners and later residents between 1785 and the mid-20`h century. The foundation for Watertown's role in the Revolutionary War was laid at an early date.A 1632 protest in Watertown against taxation by the British for the construction of a fort is touted as the first "taxation without representation" protest in the colonies. The Massachusetts Provincial Congress(1774-1780), which served as the interim government for the rebels until a new Massachusetts constitution was adopted,met at the 1772 Edmund Fowle House,which was moved from Mount Auburn Street to its current location at 26 Marshall Street and is the headquarters and museum of the Historical Society of Watertown. The Massachusetts General Court met here between 1775 and 1778,and during the siege of Boston,its town meetings were held in Watertown.A 1914 marker notes the former location of the Coolidge Tavern on Galen Street,where Washington met with the General Court in 1775. r „Coolidge Tavern,"Digital 03Ttr medth accessed February 7,2014, http://digitaloorrrrawmdth.orgrterrs/shovn6453708. 135 Chapter 7-Historic and Cultural Resources April 2014 DRAFT aVanasse Hangen Brusthn,Inc. ....................................................................................................................................................................... Growth of Industry During the 19`h century,the early grist and lumber mills at Watertown Square and in the Bemis neighborhood blossomed into major industrial hubs,leading to a steady growth in population.William May's paper mill was established at Watertown Square in 1839,which became the site of the c. 1867 Hollingsworth and Whitney Mill(and later the Union Bag and Paper Company)at 36 Pleasant Street.The site of a Colonial Era grist mill along the river at Pleasant Street in West Watertown became the location of the Bemis Mills in the early 19`"century.Transitioning the business from raw cotton processing to fine combed cotton,owner Seth Bemis made Watertown a popular source for sail cloth.In 1862,the mills were purchased by wool manufacturer Aetna Mills,which stayed in business and continued to add buildings to the mill complex well into the 20`h century. 8 : _, ; . O r; ,.......r.. u 411.711�1 ............i ................... ... .... 1874"Pleasant Street buildings."Digital Camionveealth,aocessed February 7,2014, http://digitalcomTwvvealth.org/iterrs/sho✓u/53131. Meanwhile,the Watertown Arsenal was established in 1816 as a munitions storage facility,and its earliest buildings were designed by Boston architect Alexander Parris.Later in the century it changed over to arms manufacturing and continued to expand into the 20th century,serving as an important facility during WWI and WWII.Later,a portion of the Arsenal would serve as the Army Materials Technology Laboratory,and in 1982 the American Society of Civil Engineers designated the complex as a Historic Civil Engineering Landmark.The Arsenal underwent a major redevelopment project in the 1990s and early 21't century into the office and retail space that occupies it today.In the mid-19`h century,the arrival of the Fitchburg Railroad's Watertown Branch opened up even more transportation possibilities for Watertown's industries,which already had the advantage of the river. Several spurs were constructed right into the manufacturing complexes,giving direct 136 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. access to Boston and railroad points beyond.Passenger service ended on the Watertown Branch in 1938,and the abandonment of part of the rail line in the 1960s effectively ended freight service.However,the former railroad corridor (portions of which have been renovated to create the Watertown Greenway) is still characterized by large industrial buildings and warehouses,both from the days of the railroad operation and more recent years. 000l . "Hood PUber'Conpany,drea 1900."Digital Carmormealth,accessed February 7,2014, hV.//digitalcorrrrumealth.orgrtems/sh o\453755 As the industrial profile of Watertown was rising, so was its popularity as a residential center.The area around Watertown Square still retains the c. 1820 Federal style Reverend Convers Francis House at 6 Riverside Street,also known as the Lydia Maria Francis Childs House,who after growing up in the house became a known author and abolitionist.A number of surviving Greek Revival style houses from the 1830s-1860s are concentrated around Fayette Street and Summer Street,north of Watertown Square.Near the Bemis/Aetna Mills, Swetts Court is a good example of the workers'housing that grew up around the manufacturing areas.Watertown's location approximately seven miles outside of Boston also gave it a rural character, attracting farmers and agricultural uses.The area around Mount Auburn Street was interspersed with farmsteads such as the Jonathan Bemis/Deacon Arad Bailey House at 10 Bailey Road,constructed c. 1795,and the 1863 Miles Pratt House on Mount Auburn Street. At the highest end of the spectrum, wealthy Boston merchants established "gentleman farmer"estates in Watertown. These larger country homes were also used as working farms, where the owners could channel their interest in horticulture into crop experiments and greenhouses for exotic plants and fruits.Once found throughout the northwest section of Watertown on both sides of Lexington Street,an example of these estates can still be found at Gore Place,boasting a 137 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. large 1806 Federal Era mansion and grounds.Today the estate is operated as a museum and recreational and event space by the Gore Place Society.The large expanse of the former Oakley Estate is also apparent at the Oakley Country Club at Common Street and Belmont Street,where renowned Scottish golf course designer Donald Ross began his career in the United States,and the George N.March House on Palfrey Street is a fine example of an Italianate gentleman's estate house.The Abijah White House/Orchard House at 917 Belmont Street is a large c. 1840 Greek Revival style estate farmhouse,which was later used as the Orchard School for Girls. owl Institutions to serve the growing residential population were developed throughout Watertown.In 1830,Mount Auburn Cemetery became the first "rural cemetery"in the country,setting an example that would be imitated throughout the United 'evil War Soldier's Nbnument.,"Digital ComnonvLealth,accessed States,and becoming a February7,2014,http://digitaloDnyr -D e lth.org/iterrr-/show/53894 major impetus and archetype for the growing urban park movement.Unlike nearly all of the rural cemeteries that followed its model,Mount Auburn Cemetery still serves as both an ongoing burial ground and an educational and recreational destination. The adjacent Catholic Mount Auburn Cemetery (also known as Sand Banks Cemetery or Auburn Cemetery)off Cottage Avenue served the town's Catholic population from the 1850s to the 1880s.Noted Transcendentalist and abolitionist Theodore Parker established a school on Galen Street in 1832;although the original school is now gone,he is honored by the Colonial Revival Theodore Parker School at 124 Watertown Street,constructed in 1914.Further west, Saint Patrick's Roman Catholic Church School was established on Church Hill Street in 1888,to serve the growing Irish population who settled near the mills.The Soldier's Monument in Saltonstall Park was erected in 1889 to honor those who served in the Civil War.The statue was originally erected at the site of the Town Hall in Watertown's first public park,and when the new municipal building was constructed the memorial became the centerpiece of a tree-lined mall. ....................................................................................................................................................................... Growth of the"Streetcar Subuff Streetcar suburbs developed between the late 191 h and early 201h century,as the growing use of horse-drawn and electric streetcars along major arteries 138 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. allowed white collar city workers to commute into their city jobs from the greener suburban outskirts.Unlike factory workers who lived in smaller, rr often multiple-family,dwellings near "._ their places of employment,these city workers preferred to live in a "country" area without sacrificing the conveniences of the city.Taking the idea of the gentleman's estate down a notch, ■ streetcar suburbs are characterized by _ larger,detached homes on moderately- s sized lots that allowed a "garden"orM"s yard,within easy distance of a streetcar or train route.Not only were streetcar "Nbunt Aubum Street at Palfrey Street.,"Digital suburbs a descendent of the country CaTrrumealth,accessed Febmary7,2014, estate philosophy,but they were often http://digitalcomTmwealth.orglitenrs/slmu/53123. developed by subdivision of former estate properties.Neighborhoods in Watertown and the surrounding communities are textbook examples of this phenomenon,with finely-detailed homes in Queen Anne,Stick,Colonial Revival,and Shingle Styles.These homes were often architect-designed,with notable examples by Boston architect Charles Brigham and Watertown architect Alberto F.Haynes. Between the continuing popularity of the mills and Watertown's attraction as a garden suburb,the population skyrocketed from approximately 6,000 people in 1878 to 10,000 in 1900,and tripled to more than 35,000 residents by 1935. "Belmont Street.,"Digital ConTnormealth,accessed February 7,2014, http://digitalcomTK)n ealth.org/itens/shoN/53145. 139 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. t and Arsenal Street were both popular streetcar routes,and some of Watertown's finest streetscapes reflect the middle class suburban development that grew up around them.The Mount Auburn Street Historic District is one of the most visible,having developed adjacent to this major corridor.Not only does this district retain large,well-preserved examples of Queen Anne houses,but it is also home to high-style Tudor Revival style apartment complexes,reflecting its attraction to those seeking suburban living in slightly more affordable accommodations.When the Russell family estate was subdivided in the late 191h century,the garden suburb that developed on the slope of Meetinghouse Hill was designed with long,tree- lined lots oriented toward the street.Although a few earlier farmsteads are interspersed throughout this neighborhood,nearly 100 single-family homes were constructed between 1887 and 1930.This well-preserved neighborhood owes much of its character to the designs of Brigham and Haynes.Towered Queen Anne and wide Colonial Revival houses take advantage of the generously-sized lots, and most of the houses enjoy a setback from the street often shaded by large trees.A more modest example of suburban subdivision development can be found in the Laddville neighborhood.Tucked between Arsenal Street and the Charles River,this neighborhood developed in two stages.The earlier development,taking advantage of the central square created by South Irving Park,is similar to the suburban house forms in the neighborhoods along Mount Auburn Street.Like Meetinghouse Hill,the subdivision still retains an earlier farmstead building,the c. 1806 house at 77 Riverside Street.Later development in Laddville during the 1910s and 1920s would be more restrained in style and was often constructed for multiple families,which is reflective of much ofpost-1900 residential development in Watertown. The growing use of the streetcars and the influx of new residents affected non-residential development as well. Streetcar and railroad fA0#rklT* - stops also provided a , catalyst for nodes of — commercial development along their routes.These locations gave rise to small,concentrated areas of retail and °IVbuntAubum Street,drea 1930's,"Digital Ca7rnomealth,accessed commercial February7,2014,Mp://digitalcorettnwvealth.crcj/iten-s/shm/53139. establishments located around major intersections,such as the corner-oriented commercial Kelly and Hampson Commercial Blocks at Arlington Street and Mount Auburn Street, 140 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. which had a streetcar station.At Watertown Square,now a transportation hub as well as a center for institutional and municipal buildings,the Otis Building is an impressive Romanesque Revival style commercial block in the heart of the square.Further west on Main Street,the 1884 Watertown PYee Public Library was constructed in a similar style while the Brigham-designed Watertown Savings Bank adopted a Classical Revival style.In 1918,the Boston Elevated Railway Company reconfigured its tracks in this area,and in 1934 a new Cayman's Lobby,used for waiting and dispatch by the railway company,was constructed south of a Nonantum Road extension. ....................................................................................................................................................................... Residential and Industrial Development into the Modem Era Concurrently with the streetcar suburb phenomenon,Watertown continued to grow as a strategic industrial center,with well-developed river,road,and rail access.Along the Fitchburg Railroad near the Arsenal,the Harvard Carpet Mills,the Walker Pratt Manufacturing Company and the Boston Union Stock Market were prominent features,and the area remains largely industrial and commercial today.The Aetna Mills continued to grow into the 1920s,and the Lewando Dying and Cleaning facility occupied the 1904 brick industrial building (designed by Alberto Haynes)at Galen Street and Pleasant Street.The 1925 Western Electrical building (now owned by Tufts Healthcare)south of Mount Auburn Street at Arlington Street is an example of a more high-styled Moderne industrial design.Meanwhile,the majority of housing developed during the early 20`h century was largely created for the growing population of industrial workers,which included large numbers of Irish and Armenians among other immigrant populations. Subdivisions with smaller properties for two-family homes became the dominant form throughout West Watertown and the subdivision on both sides of School Street,and the later development of Laddville. �r 'View of Main Street,opposite Galen Street.,1920,"Digital Cormawvealth,accessed February 7,2014, hV.//digitalcormbrnnadth.orgriterrs/shond53161. 141 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brustlin,Inc. During the years before and after World War II,the character of residential housing changed once again,filling in the last of the former country estates in the northwest section of Watertown.As with other towns,the rise in the use of private automobiles,such as Watertown's own Stanley Steamer,led to the decline of streetcars and the railroad and opened up development options further away from major arteries.The Charles River Parkway,one of several designed parkways in the Boston region,combined quick connections for traffic with tree-lined avenues.Modest Colonial Revival and Foursquare houses,with later mid-20`h century Minimal Traditional examples,created denser neighborhoods that still afforded enough land for yards.This area, representing some of the latest periods of development,is concentrated around the large Ridgelawn Cemetery,anchoring the west boundary of the town. t , w r "First Baptist Church,Mount Aubum and Corrrrnn Streets,"Digital Corrrmmnealth,accessed February 7,2014, http://digitalcorrrnormealth.org/iterrs/show/53355. Watertown Square continued to develop and change,with the 1932 Town Hall off Thaxter Street,featuring a two-story Greek temple front.To serve the growing population,several schools and churches were developed throughout the town,reflecting the same styles that were popular for Watertown's houses.The 1915 Coolidge School on Arlington Street and the 1935 St.Joseph Hall on Rosary Lane were constructed in the Classical Revival Style,while the 1921 West Junior High School on Waverly Avenue and 1913 Old Watertown High School on Mount Auburn Street have distinctive Tudor 142 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Revival style elements,echoing the apartment buildings at the west end of the Mount Auburn Street District. The Perkins School for the Blind,which is internationally renowned for its educational program,the Perkins Brailler, and the Braille and Talking Books library,moved to Watertown in 1912. Students have come from around the world to study at Perkins,and the tall, elegant Gothic Revival bell tower atop the Howe Building is recognizable from both sides of the Charles River. Serving the streetcar suburb populations were Neo Gothic Revival style churches along Mount Auburn Street, including the 1899 First Baptist Church at Common Street,and the 1938 Saint Theresa of the Child Jesus Catholic Church at School Street which includes an earlier Shingle Style house by the prominent architectural firm of Hartwell, Richardson &Driver as its Rectory.Among the several churches that were developed in Watertown at the very end of the 19`h century and into the 20`h century,these two churches are notable for their recent conversion into residential condominiums.Across the street,the Saint James Armenian Church complex is important as a symbol of Watertown's prominent Armenian community,having been funded by a grassroots fundraising effort beginning in 1926.The rising 20`h century Greek community,founded the Taxiarchoe Greek Orthodox Church on Bigelow Avenue in 1949,which today is accompanied by the Hellenic Cultural Center. Industry and manufacturing continued to flourish until the 1930s and 1940s, and several industrial complexes were developed into commercial space during the late 20`h century.The Hood Rubber Company was founded in 1896 and was a major local employer for nearly 75 years,using as many as 10,000 laborers in its heyday. The Raytheon Company,established in Cambridge in 1922,had a testing facility on Waltham Street and employed a large number of Watertown residents.The Aetna Mills were sold in 1937 but still operated as a wool reprocessing plant into the 1960s.The Lewando Dying and Cleaning facility closed in 1965, and the Arsenal was completely redeveloped into commercial and retail space after being sold by the United States Army. The Union Bag and Paper Company moved out of their facilities a little earlier,relocating to Maine in 1911.The conversion of these buildings into commercial space has helped to preserve the character and heritage of the areas around them. ■ Designated Hstoric Resources Several properties in Watertown have been designated as historically significant.Both Gore Place (house constructed in 1806)and Mount Auburn Cemetery(established 1830)are recognized as among the country's most highly significant properties,as National Historic Landmarks. 143 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. n, There are two historic districts listed in the National Register of Historic Places("National Register"),the 1816 Watertown Arsenal Historic District and the Charles River Reservation Parkways district,which runs partially through Watertown along the river.In addition,the Watertown Arsenal Urban Renewal Parcel,which covers much of the eastern half of the fg - Arsenal complex,has been formally determined eligible for listing in the National Register by the Keeper of the Register. Mount Aubum Cemetery."Nathaniel BaMitch Monument.,"Digital Conn-u Health,accessed These districts are joined by seven February 7,2014, additional properties that are http://digitalconTnormealth.org/iterrs/shm/53376. individually listed in the National Register. The oldest of these is the c. 1698 Abraham Browne House on Main Street.The 18`h century is represented by the 1772 Edmund Fowle Jr.House on Marshall Street,home of the Historical Society of Watertown.The list also includes two Italianate residences,the 1863 Miles Pratt House on Mount Auburn Street and the Commander's Mansion (also known as the Rodman Mansion or the Commanding Officer's Quarters)in the Watertown Arsenal complex,which was constructed in 1865.Two early 20"century schools are individually listed in the National Register,the 1913 Old Watertown High School on Mount Auburn Street,and the 1915 Coolidge School on Arlington Street.Rounding out the individually listed resources is the Deluxe Town Diner at the corner of Mount Auburn Street and Bigelow Avenue,which sports a sleek Art Deco design from 1947. The Mount Auburn Street Historic District is Watertown's only Local Historic District,which is subject to design review by the Watertown Historical Commission.It extends along Mount Auburn Street between Summer Street and Lincoln Street,including dozens of properties on both sides of the road as well as portions of Marshall Street and Palfrey Street.There are some properties that are listed in the National Register or that have a Preservation Restriction that are included within the Local Historic District for protection at the local level.Watertown has also designated two Local Landmarks, including the c. 1806 Tyler Bigelow House on Riverside Street,which is the early extant farmhouse in Laddville,and the 1840 Orchard House on Belmont Street,also known as the Abijah White House. Preservation Restrictions are held on the aforementioned Gore Place, including the 1835 Theodore Lyman Jr.Farmhouse and the Robert Murray 144 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brustlin,Inc. Farmstead on the property;the Commander's Mansion at the Watertown Arsenal;the Abraham Browne House;the Edmund Fowle Jr.House;and the Miles Pratt House. ■ Inventoried Resources There are a number of properties in Watertown that have been recorded in the Historical and Archaeological Assets of the Commonwealth,an inventory of buildings,districts,structures,objects,and burial grounds maintained by the Massachusetts Historical Commission.These properties have not received an official designation,but further study of inventoried properties often identifies promising candidates for designation,and serves as a useful study tool and resource guide for the historical development of the town and its communities. Watertown has eight inventoried areas that have not been recognized with an official designation,as in the previous section.An area may be inventoried for a variety of reasons;in Watertown they are generally easily recognizable neighborhoods,characterized by cohesive streetscapes and similar buildings sizes,uses,and or architectural styles.Examples include the Meeting House Hill area,and the Laddville area. One of these inventoried areas includes a portion of the Watertown Arsenal that does not appear to have been included in either the National Register listed historic district,or the Urban Renewal Parcel that was determined eligible for listing by the Keeper.Altogether Watertown has 504 individually inventoried properties that have not received a designation.However,it appears that the vast majority of these properties have been included in the previously mentioned inventoried areas. Approximately 100 individually inventoried properties do not fall into any of the designation categories or within inventoried areas.These are interspersed throughout the town,with the least representation in the newest neighborhoods at the south end of School Street and the neighborhood around Ridgelawn Cemetery. Watertown's strategic location along the Charles River has made it popular for both Native American occupation and European settlement,which is reflected in the town's archaeological sites.Watertown has 11 recorded prehistoric sites dating before European contact,and five historic post-contact sites.12 32 The locations of known archaeological sites and archaeologically sensitive areas are generally kept confidential for protection of these resources. 145 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Figure 7-1 Historic Resources,Watertown, MA N& Lot 132 51.MGI51P-,WHistork resaurees.mn0 BELMONT \ a fi0 ` /'de gars+peer Abrjah White House/Orchard Home 5choaifor Girls ` WALTHAM � _ ���'SR CAMBRIDGE 20 / �OWE4nyFNef� �° / R g E a +"aeNs�er�Nve � p`�w m°HaUR°s"naasr�j 90 g � e^eevva d � i g o s F �, d ¢ `s ��� � �W�% � s 3� •� 3p" " `FWo°os�r $�:. m�f��P i Gore Place and Gore Place Farmhouse N` 1 Fw 11 Edmund Powle House PMt.Auhurn Street e,trict a� L q Coolid e5clwof I Robert Murray Farmstead Cgmplex — v, " y Aso a°r~o= Nk�Ocs'AveRNEm �O ' We,Pmtt House °Y E Watertown Nigh School o / 20 16 N s R�Er �s� mw.osr 4Rcrs - ` e �` � � BOSTON NEWTONE�L" °' We"Bigelow House 20 o_ = commanding Officer's Quortem Historic1 1 Legend source:MassGis MHC Historic Inventory Jan 2014 - Watertown Townline Interstate National Historic Landmark Individual Property,National Register of Historic Places Comprehensive Plan - Townline(other) U.S.Highway Historic District,National Register of Historic Places * Property with a Preservation Restriction Watertown,MA River - State Route Formal National Register Determination of Eligibility ♦ Local Landmark 0 Local Historic District Inventoried Area 146 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brustlin,Inc. ■ Cultural Assets Like historic resources,cultural assets contribute to and sustain a community's character and sense of place. They may include arts and cultural organizations,institutions (e.g.,museums,libraries), creative businesses and spaces (e.g.,performance venues,theaters,and art galleries),ethnic heritage sites (e.g.,neighborhoods,cultural centers),historic properties,and festivals or other special events.Cultural assets are shared,and enhance the quality of life for residents as well as create unique environments that visitors want to experience. The Town of Watertown has an eclectic inventory of cultural assets that help to develop and evolve its cultural heritage. Some of the major cultural assets in the Town include: ....................................................................................................................................................................... Arts and Cultural Organizations Watertown Cultural Council(WCC): The WCC connects,promotes,and provides financial support to individuals,schools, and cultural organizations in the arts,humanities,and sciences.In an effort to increase student exposure to these fields,the WCC also subsidizes cultural field trips to performances, educational tours,and exhibits.They are also working with the Town and private groups on the creation and preservation of art in public places. The WCC obtains the majority of its funding from the Massachusetts Cultural C ou n cil.33 Watertown Art Association:Founded in 1952,the Watertown Art Association supports the development of art and artists in the Town of Watertown.The Watertown Art Association holds monthly demonstrations,annual exhibitions of members'work,and provides an annual scholarship to a graduating Watertown High School student pursuing a degree in fine arts.34 The Historical Society of Watertown:The Historical Society of Watertown protects the history of the Town through the collection and preservation of the Town's historical artifacts and documents.It also encourages residents and visitors alike to discover the Town's history through the exhibition of these materials as well as through relevant special events(e.g.,discussions). The Historical Society of Watertown resides in the Edward Fowle House,an NRHP-listed property,and offers tours of the building.35 as Watertown Cultural Council.n.d.Watertown Cultural Council.htto://watertowncultural.oro/.Accessed February 4,2014. 34 Watertown Art Association.2014.Watertown Art Association.htto://watertownart.ora/.Accessed February 4,2014. 35 The Historical Society of Watertown.n.d.The Historical Society of Watertown:Home. htto://historicalsocietvofwatertownma.ora/HSW/.Accessed February 4,2014. 147 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brustlin,Inc. Friends of Mount Auburn Cemeterv: The Friends of Mount Auburn Cemetery was established in 1986 to protect and promote the natural,historic,and cultural significance of Mount Auburn Cemetery.36 As noted above,Mount Auburn Cemetery is NRHP-listed and is a National Historic Landmark. Amaras Art Alliance:The Amaras Art Alliance is a promoter of performance and visual art with a focus on the Armenian and American people.In addition,this organization offers educational programs that include seminars, camps,and public presentations.The activities and programs sponsored by the Amaras Art Alliance primarily encourage youth participation in the arts." ....................................................................................................................................................................... Irstift tl0113 Watertown Free PublicLibrary (WFPL):In addition to providing traditional library services,the WFPL is a community gathering space,an art gallery,and a protector and promoter of the Town's history.The WFPL avails three rooms to the community for meeting and establishing connections.Art is displayed throughout property as well as in the dedicated T.Ross Kelly Family Gallery. Local history is provided its own dedicated room that includes maps, photographs,historic records,databases and websites,newspapers,special collections,ancestral records,and yearbooks.38 - j Mertown Free Public Library.Photo courtesy dVl B,Inc. 11 Mount Auburn Cemetery.2014.The Friends of Mount Auburn Cemetery.hftp://mountauburn.org/2012/the-friends-of-mount-auburn-cemetery/. Accessed February 4,2014. 37 Amaras Art Alliance.2014.Amaras Art Alliance:About Us.hftp://amarasonline.com/amaras/index.htmi.Accessed February 4,2014. 38 Watertown Free Public Library.n.d. Watertown Free Public Library.hftp://www.watertownlib.org/.Accessed February 4,2014. 148 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brustlin,Inc. Perkins Braille and Talking Book Librarv:Through its Braille and Talking Book Library(BTBL),the Perkins School for the Blind offers free library services to those residents of Massachusetts who are not fully capable of reading print materials or have physical or learning disabilities. Services at BTBL include braille and audio books;Newsline,an on-demand audio news service that includes job classifieds;and audio described DVDs (movies).Although the BTBL currently serves more than 24,000 people,the library has noted difficulty marketing its services to the 150,000 individuals and agencies within the Commonwealth that are known to be eligible.3, There is also a Perkins Museum on site that traces the history of educating blind students and the school's history. PlumbinQMuseum:The Plumbing Museum is a unique space that provides visitors with an educational experience that explores the history of plumbing through displays of traditional and modern plumbing equipment. The Plumbing Museum's collection includes five exhibits:the History of Plumbing,Plumbing Systems,Technology,Machine Shop, and a Museum Library.40 Aetna Mills:Aetna Mills was one of a series of paper mills established along the Charles River.It was built in 1919,and has since been restored and is located on the corner of Bridge Street and Pleasant Street.Formerly the home of Boston Scientific,it was recently redeveloped as the Riverworks Complex, where some historic artifacts are displayed. Arsenal on the Charles:As part of its redevelopment plan,the developer of the Arsenal on the Charles property is considering the creation of a museum to display the history of the U.S.Army Arsenal operations. as Perkins School for the Blind.n.d.Braille and Talking Book Library.http://www.perkins.org/news-events/eNewsletters/insight/inside- story/btbl.html.Accessed February 4,2014. 41 The Plumbing Museum.2008.The Plumbing Museum.http://www.theplumbingmuseum.org/index.html.Accessed February 4,2014. 149 Chapter 7-Historic and Cultural Resources April 2014 DRAFT aVanasse Hangen Brustlin,Inc. ....................................................................................................................................................................... Creative Businesses and Spaces Arsenal Center for the Arts:The Arsenal Center for the Arts was the result of a community grassroots effort to see the development of an arts center in the Town of Watertown. The facility is a collection of multidisciplinary spaces that includes two theaters,classrooms and workshops, rehearsal spaces,artist studios,exhibition areas,and meeting spaces. The two theaters include the New Repertory Theater and the Watertown Children's Theater.The Quilters'Connection,a group of quilters and quilt aficionados,also operates out of the building.In addition to providing the space that supports creativity,the Arsenal Arsenal Center for the Arts.Photo courtesy of Center for the Arts sponsors art exhibits, VI-B,Inc. educational programs,and staged events.41 In addition to the Arsenal Center for the Arts,the Town of Watertown has several smaller creative businesses and spaces that include theatre companies such as The Revels,Delvena Theater Company, and Flat Earth Theatre Company;and art galleries such as The Gallery at Sasaki,Drive-By Projects, and Turtle Studios. ....................................................................................................................................................................... Ethnic Heritage Sites The Town of Watertown has a diverse population,including large Armenian- American and Greek-American communities.The concentration of these ethnic groups in the Town provides for unique cultural districts enriched with their own traditions,history,art,and cuisine. The Town of Watertown is one of the oldest and most concentrated Armenian communities in the United States.42 The Town is home to several prominent Armenian institutions,including the Armenian Museum of America and the Armenian Cultural and Educational Center.The Armenian Museum of America,formerly known as the Armenian Library and Museum of America, presents the history and culture of Armenia and its people through the display of artifacts,art exhibits,and records."The Armenian Cultural and Educational Center strengthens the sense of community among Armenian- 41 Arsenal Center for the Arts.2013.About Us.http://arsenalarts.org/about/.Accessed February 4,2014. 42 Hayk,The Ubiquitous Armenian.2013.Armenians in Watertown,MA.hftp://www.hayk.net/destinations/watertown-ma/.Accessed February 4, 2014. 43 Armenian Museum of America.2013.Armenian Museum of America:Welcome.http://wwww.almainc.org/.Accessed February 4,2014. 150 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brustlin,Inc. Americans in greater Boston by " offering gathering and reception spaces,recreational facilities,and classrooms for education and training activities.44 In addition to institutions described above,Watertown has many food- related Armenian businesses, predominantly centered on the Coolidge Square area, such as Sevan Bakery,Massis Bakery and Specialty " _' -! �'`- _7 Foodstore,Arax Market,and Armenian Market&Bakery. Together,they help define the Town ' as a specialized culinary destination. - =_ Armenian WaseumofATLdca.Phot000urtesyof The Greek-American community is VI-B,Inc. distributed throughout the Town, but is predominantly concentrated near the Taxiarchae/Archangels Greek Orthodox Church.The Taxiarchae/Archangels Greek Orthodox Church is a foundation of the local Greek-American population,hosting a number of community events,supporting youth groups,and sponsoring the Greek School,among other endeavors. The Greek School emboldens Greek culture by providing lessons on its history,traditions,and language.The school is available to children between the ages of 3 and 12.The Taxiarchae/Archangels Greek Orthodox Church owns and operates the Hellenic Cultural Center,which provides the community with space for gathering and connecting.45 Although Watertown is widely recognized as having large concentrations of Armenian-American and Greek-American populations,there are no official designations in terms of recognized neighborhood boundaries or cultural districts.As such,the Town has not fully realized the potential to create cultural destinations that strengthen community identity as well as increase tourism. ....................................................................................................................................................................... Historic Properties Open to the Public The Town of Watertown boasts a number of historic properties. Several of these properties are privately owned and operated,and are open to the public 44 Armenian Cultural and Education Center.2014.Armenian Cultural and Educational Center:Our Facilities.htto://acecwatertown.ora/.Accessed February 4,2014. 49 Taxiarchae/Archangels Greek Orthodox Church.Taxiarchae/Archangels Greek Orthodox Church.httD://www.aoarchanaels.ora/.Accessed February 4,2014. 151 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brustlin,Inc. for tours and/or displays of historical materials. These properties are identified below and discussed in detail in previous sections of this chapter. > Browne House; > Edmund Fowle House and Museum; > Gore Place Federal Period House Museum;and > Mount Auburn Cemetery. ....................................................................................................................................................................... Sp6CIal Bm11tS Faire on theSauare:The Town of Watertown,along with corporate entities, sponsors the Faire on the Square.This daylong event occurs annually in September,and offers musical entertainment,dance performances,children's rides and activities,food,and craft sales to residents and visitors alike.41 Watertown Open Studios:Watertown Open Studios is a creative celebration focused on the art of people who live and/ or work in the Town of Watertown. The free,self-guided event takes place annually over the course of a weekend in November.During the event,businesses and artists open their galleries,studios,and homes to the community.47 This event has a public art component that includes the Watertown Linear Path Mural.The Watertown Linear Path Mural,which was painted by student artists along with lead artist Gregg Bernstein,is a rare example of art in public spaces within the Town.48 Watertown Open Studios is funded in part by the Watertown Cultural Council.49 Armenian IndevendenceDav Festival:The Armenian Cultural and Educational Center sponsors the Armenian Independence Day Festival,an annual commemoration of when Armenia asserted its sovereignty from the Soviet Union.The daylong event celebrates Armenia and its people with native cuisine,music,games,and special performances. Grecian Festival:The Taxiarchae/Archangels Greek Orthodox Church supports the annual Grecian Festival,which takes place at the Hellenic Cultural Center over three days in June.The Grecian Festival celebrates the culture of Greece with the presentation of authentic Greek cuisine along with live music and performances.so 46 Faire on the Square.2013.About the Faire.http://faireonthesauare.ora/about.htm.Accessed February 4,2014. 47 Watertown Open Studios.2013.About Watertown Open Studios.httD://www.watertown-open-studios.ora/about.html.Accessed February 4, 2014. 48 The Boston Globe.Watertown Kids Paint Mural on Bike Trail Head.httD://www.bostonalobe.com/metro/reaionals/west/2013/08/07/watertown- kids-paint-mural-bike-trail-head/1iOS1AxK5shFF6tHOUf68N/storv.html.Accessed February 5,2014. 49 Watertown Open Studios.2013.About Watertown Open Studios.httD://www.watertown-open-studios.ora/about.htmi.Accessed February 4, 2014. 50 Boston.com.2009.Watertown Grecian Festival.httD://calendar.boston.com/watertown ma/events/show/871791 1 0-watertown-arecian-festival. Accessed February 6,2014. 152 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. ■ Preservation ., ow w a Watertown has several effective programs in place which assist in the preservation of historic properties. These programs are administered by the Watertown Historic District Commission and the Watertown Historical Commission,both voluntary regulatory commissions whose members are appointed by the Town manager.These programs are described briefly below. ....................................................................................................................................................................... Local Historic Districts and Landmarks Local Historic Districts (LHD)can protect the appearance of historic properties and encourage new construction to be designed to complement the district's historic setting.The designation of a LHD imposes a review and approval process by the Historic District Commission for proposed exterior changes to properties.The primary strength of a LHD is that it can be tailored to specific community needs while providing greater protection for local resources.Designation as a LHD is one of the most effective ways to protect the historic character of buildings,streetscapes,neighborhoods,and special landmarks from inappropriate alterations,new construction,and demolition. In addition to protecting historic resources,locally designated districts across the country consistently produce stable property values and greatly add to the attractiveness of neighborhoods. Watertown has one local historic district,which is located along Mt.Auburn Street between Summer Street and Lincoln Street and includes sections of Pulsifer and Marshall Streets which intersect with Mt.Auburn Street.Exterior changes visible from a public way to properties in this district,which include alterations to existing buildings,demolition,and new construction,are reviewed and approved by the Watertown Historic District Commission.The Historic District Commission reviews proposed changes with a detailed set of design review guidelines that cover such elements as windows,entrances, siding,chimneys,light fixtures,and walkways. The Town also has two recently-designated local individual landmarks at 77 Riverside Street and 917 Belmont Street,as a result of the 2010 historic landmark ordinance that is overseen by the Watertown Historical Commission. ....................................................................................................................................................................... Demolition Delay Ordinance The objective of a demolition delay ordinance,which has been instituted in many Massachusetts communities,is to encourage owners of historic 153 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. buildings to seek and consider alternatives to demolition and encourage preservation or relocation of significant buildings.Watertown's demolition delay ordinance,established in 1997, adds an extra level of protection to historically significant buildings by requiring demolition permit applications for all buildings over 50 years old to be reviewed by the Watertown Historical Commission.If a property is determined to be preferably preserved, it is then subject to a delay period in which alternatives to demolition should be explored. Buildings that are at least 50 years old,and/ or listed in the National Register of Historic Places(NRHP),inventoried by the Commission or within 150 feet of a federal,state,or local district must be reviewed before a demolition permit can be granted. The Historical Commission first determines if a structure is Preferably Preserved,and if so,they can still approve the demolition,or place a delay on the demolition up to one year. If the Historical Commission decides that the demolition of the building will not harm the historical,cultural,or architectural heritage of the town,the demolition permit is approved for issuance by the Inspector of Buildings. However,if the demolition of a significant building is determined harmful, no demolition permit may be issued for up to 12 months,depending on the recommendation of the Watertown Historical Commission (WHC).If demolition cannot be avoided,this period also allows more time for the owner and the WHC to work to ensure that every alternative can be pursued to reuse the building,or to preserve or document any historically significant aspects of the property.A daily fine and a two-year prohibition from obtaining a building permit for the property are the penalties for demolishing a building without proceeding with the review process. In recent years,the Watertown Historical Commission has been confronted with the proposed demolition of a number of older single family homes for redevelopment into two-family residences,the result of their location within the T-zone,a two-family home zone.The Historical Commission recognizes the relationship of this zoning to these demolitions and sees the vast benefit of re-zoning areas where mostly older single family houses currently exist to single family home only zones. ....................................................................................................................................................................... Designation and Irnerfty Programs Two major programs have been employed to document and recognize some of the town's historic resources.These programs are described briefly in this section. National Register of Historic Places 154 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. The National Register of Historic Places(NRHP)is the nation's official list of significant historic properties.Properties listed in the NRHP include sites, buildings,structures,districts,and objects that are significant in American history,architecture,archaeology,engineering,and culture.Contrary to popular perception,listing in the NRHP does not limit a property owner's right to alter,manage,or sell the property when using private funds.Instead, the designation acts as a key to access preservation programs and incentives at the federal,state and local level. Some of the key benefits to NRHP listing include eligibility for federal and state rehabilitation tax credits,access to income tax deductions for the donation of historic preservation restrictions,and matching grant funds for preservation related projects.NRHP listing also requires consideration in federal, state,and some local planning projects. Properties considered for National Register listing must be at least fifty years old (unless they demonstrate exceptional significance)and must possess physical integrity by retaining enough of its original materials to exhibit its historic appearance during the time period of its historic significance. The NRHP recognizes properties associated with famous figures and events,but also acknowledges places that are associated with the history of important themes and trends in American history and pre-history.NRHP listing is accomplished through a nomination process initiated by an individual,or a private or public entity.Property owners may object to the listing through a certified letter to the State Historic Preservation Office.If 51%of the property owners within a district object to the listing through the certified letter objection process,the district will not be officially listed in the National Register. The number of properties owned by a single owner is immaterial; each property owner has one "vote".The nomination addresses the significance and integrity of the resource through a thorough report documenting its appearance and history.The report is reviewed by the MHC staff,the Massachusetts Historical Commission's state review board,and the National Park Service before final designation. State Register of Historic Places The Massachusetts State Register of Historic Places was established in 1982 as a comprehensive listing of the buildings,structures,objects,and sites that have received local, state,or national designations (local historic districts and landmarks and National Register-listed properties)based on their historical or archaeological significance.The Massachusetts State Register of Historic Places is not a designation program per se and does not have a separate nomination process.Properties which have preservation restrictions or have been formally determined eligible for the National Register in the Section 106 review process are also included in the State Register.Every property that is listed in the State Register is also part of the Inventory of Historic and Archaeological Assets of the Commonwealth. 155 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Inventory Programs As noted above under Inventoried Resources,Watertown has many individual properties and areas that have been documented on Massachusetts Historical Commission inventory forms. The acceptance of the MHC of submitted forms places the properties in the Inventory of Historic and Archaeological Assets of the Commonwealth.The form is only a record of the historic and architectural nature of a property and is not a formal designation of the property's importance.An evaluation of the property's significance is only undertaken if a project under review by the Massachusetts Historical Commission and a federal or state agency affects the property. Survey efforts in Watertown were conducted in 1982 and more recently by the Watertown Historical Commission in 2011. ....................................................................................................................................................................... Federal and State Preservation Laws and Regulations Significant legislation exists to provide a review and consultation process to consider impacts from projects with state or federal involvement on historic properties. The Watertown Historical Commission is the local entity involved with these state and local historic preservation review processes. Section 106 of the National Historic Preservation Act Section 106 of the 1966 National Historic Preservation Act(NHPA),as amended,was originally enacted to address the widespread loss of historic properties during federally-sponsored urban renewal initiatives and highway construction projects during the 1960s.The law requires that any project that receives federal funds or is required to obtain permits or licenses from a federal agency is required to be reviewed for its effects on historic properties. Section 106 review is required for properties that are both listed or determined eligible for the National Register. This determination is part of the review process if the property has not been previously assessed for its eligibility. Typical examples of federal undertakings that can require Section 106 review are the use of Community Development Block Grants(CDBG)for housing rehabilitation,U.S.Army Corps of Engineers'permits,and Federal Highway Administration (FWHA)supported road improvement projects.If a property is determined eligible for the National Register,then the impact of the proposed federal project on the resource must be determined by the federal agency or its assignee and concurred upon by the Massachusetts Historical Commission.If the project is determined to have an adverse effect on the resource,the lead federal agency must consult with the Massachusetts Historical Commission (MHC))in order to determine mitigation options. 156 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. National Environmental Policv Act(MEPA) The National Environmental Policy Act(MEPA)requires all federal agencies to consider the environmental effects of their proposed actions and investigate alternatives and mitigation options that minimize any adverse impacts to the social,economic,and physical environment. Cultural and historic resources are included in the many categories considered in the NEPA process,and are addressed in an Environmental Assessment(EA)or Environmental Impact Statement(EIS). Often this review is coordinated with the Section 106 review to avoid duplication of efforts.Like the Section 106 process,the lead federal agency is responsible for identifying effects and proposing mitigation alternatives. M.G.L.Chanter 254 Chapter 254 of the Massachusetts General Laws (M.G.L.,Chapter 9, Sec.26- 27C,as amended by Chapter 254 of the Acts of 1988),like Section 106 at the federal level,requires that any undertaking involving state funds or licenses be reviewed to determine whether the proposed project will have an adverse effect on a property listed in the State Register of Historic Places.If it is determined that the project will have an adverse effect on a listed property, the state agency and/or the project proponent must consult with MHC to determine mitigation measures.Unlike Section 106,which considers NRHP listed and eligible properties,Chapter 254 considers properties or districts listed in the State Register of Historic Places,as well as inventoried resources that they believe are eligible for the National Register of Historic places. Massachusetts Environmental Policv Act(MEPA) The Massachusetts Environmental Policy Act(MEPA)is a comprehensive review process that requires state agencies to account for the potential environmental impacts of projects involving state licenses,permits or financial support.This public process requires a thorough study of potential environmental impacts and the development of feasible mitigation options designed to avoid or minimize those impacts.Historic resources,both above and below ground,are included in the list of environmental factors that must be considered in the MEPA process. If the project has a connection to state funds,permits,or licenses,certain thresholds must be met in order to initiate MEPA review.For historic resources,the threshold is met if the project involves the demolition of any part of a structure listed in the State Register of Historic Places,or(as of 1998) the property is listed in the Inventory of Historic and ArchaeologicalAssets ofthe Commonwealth.A detailed project information statement,known as an Environmental Notification Form,must then be prepared to assess the impact of the project on the resource. 157 Chapter 7-Historic and Cultural Resources April 2014 DRAFT aVanasse Hangen Brustlin,Inc. ....................................................................................................................................................................... Historic Tax Credit Programs Since 1976,a federal tax credit has been available for rehabilitating buildings listed in the National Register of Historic Places that are used for an income- producing use. This program offers a 20 percent tax credit for the qualified costs of a substantial rehabilitation of historic buildings when the work meets the Secretary of the Interior's Standards for Rehabilitation.5,A similar tax credit program at the state level in Massachusetts provides a state tax credit up to 20 percent of qualified costs. The programs have made an important contribution not only to the continued use and preservation of many historic buildings in Massachusetts,but have also resulted in the creation of additional jobs,revenue for municipalities,and housing units,among a number of proven benefits. To date,owners of three buildings in Watertown have successfully taken advantage of either the federal or state historic tax credit programs,or both, as they can be combined.Two former school buildings,the former Watertown High School at 341 Mt.Auburn Street and the former Coolidge School have been rehabilitated using these programs,for assisted living and active senior housing,respectively. Many other distinctive historic properties in Watertown have been rehabilitated for new uses in recent years,including the conversion of two church buildings on Mt.Auburn Street for residential condominiums and the re-use of older industrial buildings for office and commercial use. These projects,however,did not have historic tax credit involvement. Condominium conversion is not considered an income-producing use,unless every condominium unit is rented for at least five years. The requirements that the building be listed in the National Register of Historic Places52 and the rehabilitation must meet the Secretary of the Interior's Standards for Rehabilitation may be a deterrent to building owners and developers considering the use of these tax credits. ....................................................................................................................................................................... Other Preservation Program and Activities In addition to its role in project review and demolition delay,the Watertown Historical Commission is also active in their recognition of noteworthy preservation activities in the town through their annual Preservation Awards program.Recent awardees include Historic New England's restoration of the 51 A federal 10 percent tax credit for rehabilitating buildings that were built before 1936 and are not historic(that is,not listed in the National Register of Historic Places)is also available.The rehabilitation requirements are minimal and do not require approval. sz The Massachusetts Historic Tax Credit does not require the building to be listed in the National Register of Historic places,although the building must be documented on a Massachusetts Historical Commission(MHC)inventory form and be determined to be eligible for the National Register by the MHC. 158 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Browne House on Main Street;Carole Katz and Watertown Savings Bank for their work in carefully relocating the bank's Samuel Emrys Evan's murals; and Bill McEvoy,Jr.for his efforts to preserve the Sand Bank Cemetery. The Historical Commission recently participated in an endangered properties advocacy program offered by Preservation Massachusetts,the statewide non- profit preservation organization.As a result of the Watertown Historical Commission's nomination,the Abijah White property at 917 Belmont Street was successfully listed in the Ten Most Endangered list for 2012.The program calls attention to threatened properties so that solutions can be found to preserve them. Six properties in Watertown have Preservation Restrictions,most of which are held by the Massachusetts Historical Commission.A preservation restriction is a legal contract by which the property owner agrees the property will not be changed in a way that would compromise its historic and architectural integrity.Any proposed changes to the property are reviewed by the organization to which the preservation restriction is donated or sold. The preservation restriction runs in perpetuity with the land and is binding on both the owner who grants it as well as on all subsequent owners.A preservation restriction allows the owner of a historic property to retain title and use of a property and,at the same time,ensure its long-term preservation.The owner retains the major interest in the property and can sell or will it to whomever he or she wishes. Preservation restrictions are specifically tailored to the individual building and the elements being sought to be preserved. Some agreements only protect a building's fagade,while some include stipulations to protect elements of the interior,significant architectural details,or significant landscapes. The terms of the agreement are negotiated between the qualified organization and the property owner.The owner of the property subject to a preservation restriction must secure approval before undertaking significant changes to the property,such as altering the building's historic elements,constructing an addition or changing its use.The owner also agrees to repair and maintain the property to an agreed-upon level of maintenance. Significant federal income tax benefits result from the donation of a preservation restriction.If the property is listed in the National Register of Historic Places,the value of the development restrictions imposed by the preservation restriction is normally considered a charitable donation. Often a preservation restriction-holding organization will require a fee or endowment to provide adequate resources to monitor the preservation restriction in the future.According to Massachusetts General Law Chapter 184, Section 31-33, all historic preservation restrictions must be reviewed and approved by the Massachusetts Historical Commission.If the preservation restriction-holding organization is a private non-profit,the preservation restriction must also be reviewed and approved by the local municipality. 159 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Other preservation-related programs that can offer assistance to preservation efforts in Watertown,but which are not currently in place include the following: Design Guidelines Design guidelines provide a set of standards to owners and tenants of historic buildings to guide them in the maintenance and preservation of their properties in a manner consistent with a neighborhood's overall architectural character.By providing a consistent set of standards,a neighborhood can maintain its historic integrity and cohesiveness.Usually design guidelines cover such architectural elements as windows,exterior materials,new construction,and rooftop additions. Although generally associated with local historic districts and their standard for review processes,design guidelines are often employed in areas outside of local historic districts as a set of voluntary standards. Neighborhood Conservation Districts Similar to a local historic district,a Neighborhood Conservation District (NCD;also called Neighborhood Preservation Districts or Architectural Conservation Districts)protects architecturally and historically significant resources through a review and approval process at the local level.While NCDs typically regulate a more limited set of design elements than a local historic district,they provide more protection than a demolition delay ordinance alone.NCDs are appropriate in areas where substantial alterations have been made to individual buildings,but the general setting,design,and overall character remains.NCDs have been used effectively in Cambridge, MA and in communities across the country because they provide a flexible but effective tool for protecting the special historical and architectural character of an area. NCD guidelines are drafted with the input of local officials and property owners and seek to maintain consistency in architectural types,materials, massing,setback,and streetscape.These guidelines are not intended to dictate specific construction or alterations,but instead help to ensure the protection of the basic elements that contribute to the neighborhood's architectural significance. Because NCDs are initiated and administered with the support of neighborhood residents,they tend to receive broad support from citizens and public officials.Review can be completed by the Historical or Historic District Commission,but more often is governed by a dedicated NCD Commission which includes neighborhood residents. 160 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Demolition by Neglect Ordinance Demolition by neglect,defined as the deterioration of a building through abandonment and/ or inadequate maintenance is a serious threat to many communities. Such neglect can result in the deterioration of a building's structural systems and its external and internal appearance.In addition to being dangerous,deteriorating buildings are an eyesore and discourage investment and damages neighborhood pride. A Demolition by Neglect Ordinance protects individual derelict buildings as well as the physical integrity of an entire neighborhood by specifying a set of minimum maintenance requirements for all buildings.While historic buildings and neighborhoods are by no means the only structures to suffer from owner neglect,concerns about the high costs and hassles involved in rehabilitation of older buildings tend to make older structures more susceptible to abandonment. Only a few communities in Massachusetts have Demolition by Neglect Ordinances,but many cities and towns across the nation have adopted some version of this legislation.Many communities incorporate Demolition by Neglect regulations into their definition of demolition under a Demolition Delay ordinance. Certified Local Government Proeram The Certified Local Government(CLG)program is designed to help recognize communities that value historic preservation as a community asset.The federal program is administered by the Massachusetts Historical Commission and establishes a set of basic requirements for local historic preservation programs,including the operation of a preservation commission or board and the maintenance of a survey of historic resources.In return,CLG status gives participating cities and towns exclusive access to at least 10%of Massachusetts'annual Historic Preservation Fund. The funds are awarded to CLGs through a competitive survey and planning grant program on a percentage matching fund basis and can be used for preservation plans,comprehensive surveys,and National Register nominations.In addition to grant funds,the Massachusetts Historical Commission offers technical assistance to participating municipalities. Communitv Preservation Act The Community Preservation Act(CPA) is a program instituted in 155 communities across Massachusetts since its inception in 2001.Used for projects that help develop or acquire open space,increase the number of affordable housing units, and support historic preservation efforts,the CPA is funded through a property tax surcharge of no more than 3%. If adopted, 10% of the funds must go toward open space, 10%toward affordable housing,and 10%toward historic preservation.The remaining 70%can be divided as the 161 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. city or town determines among these three categories. The CPA ensures that funds will always be available for preservation activities. Properties receiving CPA funding for historic preservation projects must be listed in or eligible for the State Register of Historic Places,or deemed historic by the local historic commission.Funded projects can be owned publicly, privately,or by a non-profit organization,as long as they provide a significant public benefit. Watertown has not adopted the CPA.If Watertown were to adopt the CPA, associated funds could be used for a variety of projects such as the purchase of preservation restrictions,preparation ofNRHP nominations,inventory efforts,and the installation of historic area signage. Goais The Historic and Cultural Resources Element addresses the future direction for these resources through more effective preservation of important historic resources and support and development of cultural activities in Watertown. Based on input received during the public outreach process and the baseline assessment,the following goals for historic and cultural resources have been established. Goal 1. Maintain and protect the unique character of existing residential neighborhoods Goal 2. Promote the preservation of historic resources and encourage rehabilitation projects Goal 3. Support cultural events and place-making activities Recommendations Goal 1.Maintain and protect the unique character ofexistine residential neighborhoods. A. Adopt design guidelines for new construction and proposed improvements to existing buildings to protect and maintain the local historical character(prevailing streetscape and traditional building styles found in the neighborhoods). 1. Analyze existing character of selected neighborhoods in order to describe the significant features that should be preserved and maintained. 162 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. 2. Prepare design guidelines,based on features that are desired to be retained and preserved. 3. Educate residents and tenants in these neighborhoods about the guidelines through a publication and educational programs. Goal 2.Promote the preservation of historic and cultural resources and encouraize rehabilitation projects A. Maintain asset mapping for historic and cultural resources. B. Develop a marketing strategy to promote heritage awareness and preservation C. Provide incentives to encourage redevelopment of historic buildings 1. Publicize the existing federal and state historic tax credit programs through brochures or seminars with interested owners and developers that help them understand the benefits,process,and good examples 2. Determine if the Town can provide incentives, such as technical or personnel assistance if funding cannot be provided 3. Consider providing zoning relief for projects that preserve historic resources. Goal 3. Support cultural asset s and place-making activities A. Develop a marketing strategy to expand awareness of Watertown's cultural assets 1. Brand the Town's neighborhood concentrations of Armenian- American and Greek-American populations as cultural destinations 2. Install permanent signage to identify and direct residents and visitors to the Town's cultural assets as part of a signage program 3. Provide a descriptive list of the Town's cultural assets on the Town's official website B. Support the institutions and special events programming that celebrate the Town's multi-cultural and artistic identity 1. Use social media to communicate information on the Town's cultural assets and special events C. Develop a public arts program to foster lively and attractive streetscapes 1. Establish a public art trust for funding purposes 2. With neighborhood input,identify sites for permanent art installations,such public buildings,parks and transit structures 3. Collaborate with owners of vacant parcels to erect temporary art installations 4. Install public art as a required part of significant new development 163 Chapter 7-Historic and Cultural Resources April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Public Services and Facilities Introduction The public services and facilities element of a comprehensive plan should serve as a guide for decision-making about the public buildings, infrastructure,utilities and services provided by a local government.The adequacy of municipal and school facilities —which affects the ability of municipal employees to serve the community —is largely determined by four factors: > The form,size and organization of the local government; > Projected population and economic growth; > The community's land use pattern;and > The expectations of residents and businesses for the types and levels of services,and the ability of the Town to meet those expectations. What is a Public Facilitv? A public facility is any municipal property that has been improved for public purposes,such as a town hall,library,police or fire station,parks and playgrounds,and schools. It also includes municipal services and utilities such as water or sewer service,and solid waste facilities such as a transfer station or recycling center. J A Town's ability to provide adequate services to the community requires both short-and long-term planning.Effective capital planning and asset management policies are often challenged by limited revenue for government operations,which can put long-term investment at risk.Prioritizing and setting goals for short-and 164 Chapter 8-Public Services and Facilities April 2014 DRAFT Vanasse Hangen Brusthn,Inc. long-term investment needs can help a Town ensure that it meets the community's expectations for municipal services,which Watertown has largely been able to do.. Watertown receives limited funding from non-local sources and relies almost entirely on its residents and businesses for financial support. Some of Watertown's facilities are inadequate to meet current and future needs in order to accommodate the personnel,equipment,technology and records storage that government organizations need to run efficiently.Some departments are also under-staffed,yet it has been a challenge for the Town to balance demands for excellent schools with its other municipal needs. One of the key issues facing the Town is how to prioritize and pay for its many capital needs. Given the growing demands on public services and facilities,the Town is challenged in how it can meet and balance those needs. Economic development opportunities,such as those discussed in the Land Use and Economic Development chapters of this Plan,can provide the major source of funds to help to increase the Town's tax base to support improvements. This chapter includes an analysis of the adequacy of the following public services and facilities in Watertown. The services and facilities listed below are among the key issues that were identified by Town officials and residents through interviews,input from the public forums and MindMixer. (Figure 8-1 identifies the major public facilities in town.) > Public safety > Public Works > Water,wastewater,and roads > Solid waste and recycling > Health > Education > Library > Senior services Note that the Parks and Recreation Department is addressed in the Open Space and Recreation element of this Plan. 165 Chapter 8-Public Services and Facilities April 2014 DRAFT at'anasse Hangen Brustlin,Inc. Figure 8-1 Major Public Facilities in Watertown, MA P.,.--,�nhlpm�lw,,.Lovun.00lelslP.Ple�aPYbr�la��beaom.a / \ BELMONT / kalsl WALTHAM �p N �/�•q,�,��s�r � r `�'_�'�� CAMBRlDGE g • S 14 // s r L°a 0114vT �e Le 4e b, 1 i,,1 ,, _ / H,� f , "`"mro31 ° _ap a s a B a `i'°4Pe / 8 e L a,F�5 _ F �' S ; e °e Rn 3 r„mN+ _ ,, / % M1111 P Y FINE y IN Plinf Rn 3 '°ep • - 6 e n �'L i F",,.oP a ; aPx b' Rar �e P 4y P m gv� B W E4 rM 31 n 3 `8 v� y� PeA°� Eaa! C`eoW BSI FIeTN i 0k 3 � SAS;dFsrc�l all b �S Nt PJSJIn � � s S w n `avIwE 31 p w g� / �.o/°°dr ti � /\ �• a°� d+l wn�s ya^`� g �'S/q 6°�'la°'3[ °m,3,r����p d�g CPd�tlBe,s� u; Na'a xtl °;09 Q'a r�/ P/Na �� \ -, .9 J` �g 4 nS PYIIIlla 31 OJ SS FlipPella p I� MI br / an131 �� Ifi �fS� � Lwltl pl � - Plaryrwn�l eil F`. rypless Sl Pla/q,PPnJ unren so c c sr 2 % e� / e�iorsl a° s p r} �A/r°/51 9 - arty 4ve u .1i'_.I 1 salal Sl // „titl MP's zo send NEWTON �� • 1 '��� BOSTON 0- _— MajorIWatertown, PublicFacilities Babemap:ESRI Mrltl Street Map May 2013 School Police Station Council on Aging Comprehensive Plan waieriown,MA s w +Die, Town Hall 46 Fire Station �� Recycling Center DPW © Library 166 Chapter 8-Public Services and Facilities April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Basel i ne Assessment ■ Town Services The municipal services that Watertown provides are fairly typical of Massachusetts towns.Like most communities,Watertown does more for its population than it is required to do by law.Many local government services qualify as "essential"regardless of whether the state mandates them.For example,municipalities do not have to provide solid waste disposal services, recreation programs,a senior center or a public library,but the towns that provide these services often consider them important to the quality of life and an indispensable part of what it means to be a community. Table 8-1 below summarizes the essential municipal services provided by the Town. Table 8-1 Mertom's Public Services Administration and Finance Public Safety Public Works Town Manager Police Highway Central Motors Town Clerk Animal Control Water and Sewer Assessor Fire and Rescue Snow and Ice Auditor Solid VUaste/Recycling Purchasing Health Cemetery Parking enforcement Properties and Buildings Forestry Personnel Parks Town Treasurer/Collector Information Technology Community Development and Human Services Culture and Recreation Planning Building, Plumbing, Electrical Council on Aging/Senior Watertown Free Public Center Library Planning Commission on Disability Parks and Recreation Department Conservation Tree Warden Schools Zoning Enforcement Veteran Services Source:Watertown Town website,httn://www.watertown-ma.Qov/index.asnx?NID=8 167 Chapter 8-Public Services and Facilities April 2014 DRAFT Vanasse Hangen Brusthn,Inc. ■ Capital Improvement Plan The Town has an established capital improvement planning process in place. The Watertown Capital Improvement Plan (CIP)is a five year plan that includes all known capital needs for each department(including schools), regardless of the source of funding. The Town Council annually establishes guidelines for capital project budgeting in 2013. The key components of the CIP are as follows: > Status of existing capital funds and projects > Details on new projects > Coordination issues related to public works projects > Protection of investments The CIP planning process is an integrated and coordinated process and includes several key members of the administration. Such coordination is imperative to ensure that a comprehensive view of capital needs is considered rather than having each department operate in a silo with respect to their individual capital needs. The FY 2014-18 CIP includes over $128 million for equipment,vehicle replacement,street and sidewalk repairs(almost $94 million alone),and building upgrades.A number of items are carried over from previous plans including structured parking for Watertown Square,Coolidge Corner design improvements,and the reuse of old library and police facilities. What is a Canital Improvements Plan? A capital improvements plan (CIP) is a road map for planning and funding public facilities and infrastructure. It typically incorporates both the construction of new facilities and the rehabilitation or replacement of existing capital.Typically,a CIP covers a period of three to six years (Watertown's is a five year plan) and serves as a declaration of intent by a locality to make capital expenditures on the schedule indicated.A CIP may or may not consider multiple forms of funding(Watertown includes numerous potential funding sources). � J Recommendations from the 2008 Facilities Assessment Study are incorporated in the CIP as well.These items have no specifically identified 168 Chapter 8-Public Services and Facilities April 2014 DRAFT Vanasse Hangen Brusthn,Inc. funding source.These will continue to be considered along with recreation facility upgrades,records storage (an issue mentioned by several department heads)and town parking needs outside of Watertown Square. Capital projects that were brought forward for this year include improvements for roads and sidewalks,Victory Field,the skating arena, library, schools,and public works equipment. There is also a proposal from the School Administration to evaluate all of their facilities and begin the process to make any necessary upgrades in the future. ....................................................................................................................................................................... Department Of Public Woft The Department of Public Works operates with 53 staff members and is headquartered at 124 Orchard Street. There are currently nine divisions under the DPW umbrella,including Administration,Central Motors,Highway, Snow &Ice,Cemetery,Property&Buildings,Forestry,Parks,Water,and Sewer.In addition,there are a number of non-divisional functions such as Solid Waste,Street Lighting,Weights &Measures,and Recycle Center. The Administration Division is responsible for the overall management of the Department.It is also responsible for accounting,record keeping,water and sewer billing,permitting,and responding to service requests.The Department continues its effort to modernize and computerize these administrative functions,as well as the management of field computers used in the day to day operation of its many divisions. The Central Motors Division is responsible for the maintenance,repair and inspection of all DPW motorized equipment,as well as inspectional services vehicles,the Senior Center bus,and the skating arena vehicle.The Division is also responsible for repair and maintenance of snow and ice equipment. The Highway Division is responsible for all aspects of road construction and maintenance as well as applying traffic calming and management measures, and enhancing access for pedestrians to ensure compliance with the Americans with Disabilities Act.Additional responsibilities include loaming and seeding of planting strips,street sweeping and parking lot maintenance, and other special projects such as construction of the new recycling center. The Division is also responsible for permit review,issuance and inspection. The Snow and Ice Division performs deicing operations, snow plowing and removal,and sidewalk and bus stop clearing. 169 Chapter 8-Public Services and Facilities April 2014 DRAFT Vanasse Hangen Brusthn,Inc. The Town has undertaken a survey of all of the Town's streets and assigned a Road Surface Rating to each.A newly paved road would receive a rating or 100. The composite rating for Watertown's streets is 59. It is estimated that in order to bring the Town's 73.68 miles of roadways to the 100 rating,the Town will need to invest almost$94 million.The FY14 Annual Town Budget includes approximately $800,000 to augment money from MassDOT through the Chapter 90 program.Additionally,the CIP proposes loan orders for $10 million over the next four years for street and sidewalk improvements.53 The Water Division maintains over 80 miles of underground water mains of various sizes.It is also responsible for water services to residential and commercial buildings including meter reading.In addition,the Water Division maintains approximately 995 fire hydrants in town and is responsible for the annual flushing of the water system through fire hydrants. The Sewer and Drain Division is responsible for the operation and maintenance of approximately 78 miles of sewer line and 8,000 residential sewer connections in Watertown.It also maintains and operates approximately 80 miles of storm drain lines and 3,200 storm drains.Both of these Divisions work closely with the DEP,EPA,and the MWRA in various aspects of regulatory compliance and system monitoring. The major responsibilities of the Property and Buildings Division include installation of all regulatory and non-regulatory signage,installation of parking meter poles,and repair and maintenance of the Town's fire alarm system.The Division is also responsible for general building maintenance and electrical work. The Forestry Division is responsible for the pruning,maintenance and removal of street trees.The Division is also responsible for perennial and annual planting and maintenance at the Town Hall,Watertown Square, Knowles Delta,Public Works yard and numerous plant containers throughout the Town.The Parks Division maintains 88 acres of athletic and recreational facilities in Watertown.With a Certified Playground Safety Inspector on staff,the Division works with Recreation and the school Athletic Department to ensure that all fields are properly marked and groomed.The Cemetery Division is responsible for the daily operation of one active cemetery and two non-active cemeteries in Town,which in total comprise 30 acres of land.Each year the Division handles approximately 120 internments. In August 2013,the Edward J.Collins,Jr. Center for Public Management at UMass Boston conducted an organizational study of DPW. It noted that over the years,Watertown's DPW has a number of significant achievements. Constituents of the DPW have reported high levels of satisfaction with DPW's sa See Fiscal Year 2014-2018 Capital Improvement Program,pp.5-6 170 Chapter 8-Public Services and Facilities April 2014 DRAFT Vanasse Hangen Brusthn,Inc. snow and ice response.The Department's Water Division has received numerous awards for water quality from the State and MWRA.In addition, an LED street light replacement program has been implemented by the Department,and cemetery information has been made accessible online.The DPW also successfully launched the single-stream recycling program and automated trash collection program. It also identified several areas where improvements could be implemented such as having a limited capacity to engage in forward planning, customer concerns exist relative to some areas of operation,DPW does not use state-of- the art technology to enhance operations or provide public information,and there is an insufficient focus on preventive maintenance. These are all items that are being addressed by the Department with the Town Council and administration. In order to provide enhanced services and increase capacity,the DPW should improve its organizational management and planning,pursue a state-of-the- art information and technology system,and focus more on preventive maintenance of Town infrastructure. Trash is collected weekly and recyclable items (single-stream)every other week.There is a new recycling center located between Green River Way and Stanley Avenue off of Waltham Street. ....................................................................................................................................................................... FVice Depa1"t1 mrit The Watertown Police Department is headquartered at 552 Main Street,which was built in 2010. Currently,there are 65 sworn officers, 13 civilian staff and 23 part-time crossing guards.There are four divisions within the Police Department —Community and Staff Development,Detective,Patrol and Traffic.The Community and Staff Development Division oversees safety programs,training,and compliance with standards set by the Massachusetts Police Accreditation Commission. Staffing is considered to be inadequate given the thousands of calls it must respond to.The Boston Marathon terrorist attack had a significant impact on the police Department in 2013,but its long-term impact will be felt for years to come. The reality of the situation has ramifications on the Department's equipment,training,and emergency response protocol. The Department has thirty response vehicles under its jurisdiction including cruisers,motorcycles and SUV's.They are maintained and repaired internally by the Department with the exception of major repairs. The Town's CIP routinely allocates money for the replacement of the Department's vehicle fleet. 171 Chapter 8-Public Services and Facilities April 2014 DRAFT aVanasse Hangen Brustlin,Inc. ....................................................................................................................................................................... Fire Departmmnt The Fire Department maintains three stations: > Station 1 on 99 Main Street serves as the Department's headquarters.It was built in 1991. > Station 2 on 564 Mt.Auburn Street was built in 1912 and renovated in 1989. > Station 3 on 270 Orchard Street was built in 1959 and renovated in 2002. The Department has 83 uniformed and two civilian full-time staff.It operates three engines,one tower ladder truck,one aerial ladder truck,one ambulance and one command vehicle. In reserve,there is an additional engine and ambulance. The Department also has five administrative vehicles.As is the case with the Police Department,vehicle replacement is scheduled in the CIP. The fire stations will require upgrades in the future,as described below: > Station 1 -ESCO energy efficiency projects include efficient lighting fixture replacement and new boilers. However,the building has not undergone any significant upgrade since its opening,and a variety of upgrades are required. > Station 2-ESCO energy efficiency project includes new boilers.The facility needs include roofing repair and/or replacement. > Station 3 -ESCO energy efficiency projects include heating fixture improvements. This building is in extremely poor condition with many needs,including a new roof. e Watertown Fire Department.Image Source:VF-B 172 Chapter 8-Public Services and Facilities April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Overall,the Fire Department is concerned about its future level of service. Staffing is at its lowest level and recent development places even more strain on the staff as service calls are expected to continue to rise.The Department recently received a grant from the American Recovery and Reinvestment Act to hire,rehire or retain firefighters.In addition to staffing needs,the Department has identified enhancing the current EMS system as a high priority. As is the case in similar older communities,the Department is constantly challenged by the narrow and often congested roads,which can make access difficult when responding to emergency calls. ....................................................................................................................................................................... Medown Free Public Library The Watertown Free Public Library is located on Main Street outside of Watertown Square between the Town Hall and the Fire Station.It was originally constructed in 1884, a new wing was added in 1956(which has since been demolished),and the library was renovated and expanded in 2006, which effectively doubled the available space.In addition to the area occupied by the lending area and computer stations,the library has community meeting rooms and a caf6. Its mission statement reads: Watertown Free Public Library fulfills the informational, cultural, and recreational needs of the community by providing access to a wide variety of popular and reference materials, resources,services, and programs that extend theirpersonal and intellectual development and that reflect the town's cultural and ethnic diversity. The staff works to create an environment which welcomes and satisfies the needs of users of all ages and abilities, and works actively to attract new users to the library. According to its 2011 Annual Report,the library has a total circulation of over 632,000 items.In 2011,the library logged over 350,000 total visits.Recent technological upgrades include a new computer system and the purchase of e-readers,which expands the variety of items it can make available to visitors. 173 Chapter 8-Public Services and Facilities April 2014 DRAFT Vanasse Hangen Brustlin,Inc. t Merbmn Free PLbic Library.Image Source:Vl-B The library recently adopted a long-range plan for FY 2012—2016.It focuses on the types of services to be offered over the upcoming years and how those services are to be delivered. This includes expanding services for the children's,teen and adult libraries;becoming the primary source for local history materials;expanding the variety of formats in which reading material is provided;developing and implementing a technology plan;providing for the training and professional development of staff,reaching out to non-native English speaking populations;creating and implementing a maintenance plan for its building and grounds;expanding its hours of service when possible; and reaching out to the community about the services provided. ....................................................................................................................................................................... Council on Aging The Senior Center is located at 31 Marshall Street and is housed in a 3,600 square foot building constructed in 1993. It is attached to the back of the Phillips School,which is used for exercise classes and parties.That space is shared with children's day care groups and the alternative high school.In addition,there is some space used by the Watertown Food Pantry and a kitchen used to cater events for the Senior Center. The Senior Center building includes offices,a conference room,residential kitchen,and a multi-purpose room. 174 Chapter 8-Public Services and Facilities April 2014 DRAFT Vanasse Hangen Brusthn,Inc. The Senior Center is open Monday through Friday and provides a wide range of social,health,educational,recreational,advocacy and support programs to assist older Watertown residents remain a vital part of the community. Senior citizens come to the Center to socialize,get information,and attend classes and recreational programs.Additionally, services are provided for legal assistance,income tax help,fuel assistance,health insurance counseling,and health screenings.There is a case worker available as well to see clients either at the Center or at home. The Town provides local medical transportation through a private vendor and a shopping bus is available to provide rides to grocery stores and nearby shopping malls. In total,approximately 1,000 people utilize the Center each month for activities and twice as many people seek services. Building renovations are financed through a $10,000 allocation each year, which covers basic repairs and new furnishings.The boiler and more efficient lighting will be installed through the Town's contract with Johnson Controls, an energy services company(ESCO)hired to conduct energy retrofits on 14 Town and School buildings. ....................................................................................................................................................................... School District Like residents of other towns,Watertown voters have traditionally supported their public schools and worked hard to assure that children receive an excellent education.Good schools benefit a community's families and help to preserve high property values for everyone,so investing in public schools is very important.At several points during the public outreach residents mentioned the quality of the schools as a significant asset in Watertown. In addition,many people come into contact with school buildings,not only parents and children,but also residents participating in community or recreational activities that take place inside school facilities. A total of 2,708 students were enrolled in Watertown's three elementary schools(PK-5),one middle school(6-8),one high school(9-12),and one alternative high school in the 2013-2014 academic year,which put the overall school system near capacity. During the previous academic year,there were 2,688 students enrolled. School enrollment in the Watertown School District provides additional insight into recent population and economic trends within the Town.Total enrollment increased by approximately ten percent since 2002,which indicates continued growth in the younger aged population living in Watertown.However,it is important to note that the recent student 175 Chapter 8-Public Services and Facilities April 2014 DRAFT Vanasse Hangen Brusthn,Inc. population growth is not unprecedented.In fact,it brings total enrollment back to pre-1995 levels,when there were 2,686 students enrolled.54 There were 224.6 full-time equivalent teachers in the system during the 2013- 2014 academic year(compared to 230.3 during the 2012-2013 academic year), yielding a student-teacher ratio of 12.1 to 1 (11.7 to 1 in the previous academic year). The statewide average is 13.6 to 1.55 In 2012,the Town spent an average of$16,493 per pupil in 2012,up from $16,008 in 2011.By comparison,the statewide average was lower —in 2012 it was $13,636 per pupil,up from $13,354 in 2011.56 The School District operates six school buildings: > Watertown High School —built in 1930;last renovation 2004 > Watertown Middle School—built in 1922;last renovation 1998 > Lowell School—built in 1927;last renovation in 1996 > Cuniff School—built in 1954;last renovation in 1997 > Hosmer School—built in 1967;last renovation in 2002 > Phillips School—built in 1937;last renovation in 2001 -A rwOEM Vtkerbm Figh Sdiod.Image Source:V11B In March 2014,a Schools Facilities Assessment was prepared for the School Department by Oudens Ello Architecture,LLC.The report addressed the physical condition of each of the schools in Watertown and how each school sa Department of Elementary and Secondary Education,http://profiles.doe.mass.edu/profiles/student.aspx?oracode=03140000&oratvpecode=5& 55 Ibld 5s Department of Elementary and Secondary Education,http://profiles.doe.mass.edu/state report/ppx.aspx 176 Chapter 8-Public Services and Facilities April 2014 DRAFT Vanasse Hangen Brustlin,Inc. performed "its mission as a contemporary school".57 The following is a summary of the assessment: > Based on current education best practices,the schools look and feel tired internally based on the school's age,maintenance,design and construction quality > Classroom sizes are insufficient for contemporary needs > Laboratory space is inadequate in terms of numbers and size > There is a lack of smaller teaching spaces and separate counseling spaces > Spaces for teacher support are lacking > Parking is inadequate > The cafeterias,auditoriums and gymnasiums are generally adequate or betters$ In terms of the physical condition of the schools,all fall within the lower end of"good"condition,except for the High School which was rated at the higher end of`fair"condition.Given the age of the buildings,the Town has been able to do a good job in maintaining the buildings. The School Administrative Building,which was originally the 1937 Phillips Elementary School,is considered to be generally sound,although aging,in terms of its enclosure, structure and finishes. The report identifies several scenarios for improvements ranging from minimal renovations to a high cost solution that involves replacement of the High School and major renovations to the other schools designed to modernize the facilities and address capacity shortfalls. Implementation of the high cost options would take many years to implement because students would be relocated to other schools while renovations take place.Given the recent release of the report,the Town will need to consider the options and undertake additional studies to design the improvements and obtain firm estimates of the costs.59 ....................................................................................................................................................................... F balth Departrmnt The Watertown Health Department runs a number of programs that focus on protecting and promoting health,preventing diseases, and improving the health status of the community. > Programs for protecting health include developing and enforcing regulations for conducting inspections at food establishment,public swimming pools,tanning establishments,tattoo and body piercing 57 Schools Facilities Assessment,prepared for the Watertown School Department,Oudens Ello Architecture,LLC,March 2014,p.10. 58 Ibid.p.12 51 Ibid.pp.134-140. 177 Chapter 8-Public Services and Facilities April 2014 DRAFT Vanasse Hangen Brusthn,Inc. establishments,and at residences. Enforcing regulations ensures the safety and wellness of the public in the community. > The promotion of public health includes providing public health education lectures and collaborating with other Watertown agencies to increase awareness of healthy lifestyles. > Disease prevention and disability includes providing vaccines to the public for preventable disease,offering free public influenza clinics, tuberculosis screening,providing blood pressure clinics,and referrals to clinicians. > Programs for improving the health status of the community include the Live Well Watertown Task Force,the Watertown Housing Task Force and collaboration between Watertown agencies that focus on assessing the local needs and developing long term plans that will provide access to a safe environment. Future anticipated Health Department needs include storage space for record retention,emergency preparedness sheltering supplies, and a place to keep impounded or quarantined animals. The Department will be moving from paper records to electronic records in the near future and is looking for the correct technology to support this transition. The Health Department collaborated with the Community Development and Planning Department in the implementation of the Community Transformation Grant,which has been used to establish the Live Well Watertown project.This program is designed to encourage families to adopt an active and healthy lifestyle. Through the program website,participants can learn about exercise and diet while tracking their progress by using a variety of online tools and apps. Health indicator data generated thus far have shown high rates of hospitalization for obesity,heart disease,and stroke in Watertown relative to neighboring communities. Health priorities that were identified include safety,reduction of obesity, and improving mental health among young adults.Furthermore,Mt.Auburn Hospital conducted a Community Health Needs Assessment in 2012. This effort is based on: > Population data > Health indicators > Current community benefit programming at Mount Auburn Hospital > Health services in the area > Input from community members and public health departments The feedback for Watertown shows the following community member concerns: > High taxes > Lack of activities for youth > Lack of safety 178 Chapter 8-Public Services and Facilities April 2014 DRAFT Vanasse Hangen Brustlin,Inc. > Lack of street maintenance > Overcrowded areas > Youth substance abuse Community leader and service providers identified the following issues: > Immigrants ➢ Health care access ➢ Mental health issues ➢ Parenting support > Older adults ➢ Isolation ➢ Medication management ➢ Mental health issues > Youth ➢ Lack of mental health services ➢ Obesity ➢ Substance abuse,especially alcohol use Additional areas of concern included asthma,complications from obesity in children,particularly diabetes,the lack of bicycle infrastructure,and smoking-. These issues are reflected in the discussion below regarding the public health and land use connection. ■ Public Health and Land Use Connection There is a strong connection between public health issues and land use planning,as many planning goals and initiatives can be directly correlated with the public health of a community.For example,increasing access to local and healthy food sources can result in decreased diabetes and obesity rates. Development of bike lanes,sidewalks,rail trails,and other pedestrian amenities decreases automobile use which results in improved air quality and contributes to lower asthma rates.Development of these amenities also increases opportunities for active exercise,assisting with multiple public health concerns already mentioned.Improvements to pedestrian crossings and roadway networks increases public health and safety overall,as this can decrease the number of pedestrians/bicyclists collisions. Encouraging active transportation,enhancing local and healthy food access, addressing health issues such as substance abuse,tobacco use,mental health, and pediatric asthma are pressing issues that should be addressed to improve the Town's overall public health.In addition,providing and maintaining safe so Mt.Auburn Hospital 2012 Community Health Needs Assessment,pp.50—52. 179 Chapter 8-Public Services and Facilities April 2014 DRAFT Vanasse Hangen Brusthn,Inc. living environments for seniors to age in place are key concerns for the Town. Active transportation is synonymous with sustainable transportation,as it emphasizes "self-propelled transit modes,such as walking and bicycling,"61 as opposed to single occupancy travel by automobile.This physical activity reduces obesity rates. "In a 2009 report, Samimi found that a one percent decrease in automobile use is correlated with 0.4 percent reduction in obesity."62 Even increasing public transportation contributes to positive health benefits,as it has been found that light rail usage contributes to a 1.18 decrease in Body Mass Index(BMI)and reduces one's chance of obesity by 81 percent.61 Increasing active transportation and public transportation are positive ways to decrease obesity and other health issues,through development of sidewalks and trails,increasing the amount of public transit, and educating the general public of the benefits of decreasing automobile use and instead turning to more active options. Conventional food systems today rely heavily on large format retail corporations to provide food and household needs in one spot.The issues surrounding this system relate to the fact that these primary stakeholders span great distances from each other,requiring most residents/ shoppers to drive to these locations. Food deserts are defined as low-income census tracts where a substantial number or percentage of residents has low access to a supermarket or large grocery store.Low-access to a healthy food retail outlet is defined as households that are more than one mile from a supermarket or large grocery store in urban areas.64 While the Town of Watertown does not have food deserts following this definition,the Town can avoid these issues in the future and develop a healthier food system by increasing access to local and healthy food options,encouraging convenience stores to switch to healthier and more affordable food products,and educating the public of the importance of choosing healthier diets. See Appendix_to this Plan for a set of principles for healthy community design. 61 Tufts University and VHB.Community Planning Guide for Public Health.May 2013. 62 ibid. 61 MacDonald,John M.,Robert J.Stokes,Deborah A.Cohen,Aaron Kofner,and Greg K.Ridgeway.2010.The effect of light rail transit on body mass index and physical activity.American journal of preventive medicine 39:105-112. 64 United States Department of Agriculture,Economic Research Service,htto://www.ers.usda.aov/data-products/food-access-research- atlas/documentation.asox#.Ut z9Nlo691.Accessed January 29,2014. 180 Chapter 8-Public Services and Facilities April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Goals Watertown faces a number of challenges in meeting its short-and long-term facilities and service needs,especially as demand increases over time. The following goals were developed based on the information provided by various town departments and public input. Goal 1. Establish efficiency and cost-effectiveness as a guiding principle for the delivery of public services. Goal 2. Ensure the continued presence and operation of important institutions,like the Watertown Center for the Arts,Perkins School,and including partnerships with various organizations. Goal 3. Ensure that the Town can meet its infrastructure and service needs as demand increases. Goal 4. Given the often conflicting demands,establish priorities for building and facility preservation,upgrades,and replacement, including school,library,and public safety facilities. Goal 5. Ensure the availability of adequate public health and social services to meet the needs of all citizens and particularly those of an aging population. Goal 6. Promote sustainability in municipal operations and facilities. Goal 7. Ensure the school buildings and outdoor facilities are maintained, upgraded or replaced as necessary to accommodate the changing educational needs of the community. �'IJI I�1�iVI F7 Goal]:Establish efficiencv and cost-effectiveness as a guiding principle for the delivery of public services. A. Implement the long-range energy reduction plan for municipal operations,buildings and vehicles (see Chapter 9-Energy). B. Implement the recommendations for improving the efficiency of the Town's vehicle fleet(see Chapter 9-Energy). C. Continue the recent focus on equipment replacement. The UMass DPW study indicated that the average age of the Town's equipment is 9.8 years, which is close to the 10.8 year life expectancy. 181 Chapter 8-Public Services and Facilities April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Goal 2:Ensure the continued vresence and operation of important institutions. like the Arsenal Center for the Arts.Perkins School. and including partnerships with various organizations. A. Coordinate with these institutions to ensure that their short-and long- term needs are understood and addressed. B. Coordinate with these institutions so that they are involved and effective members of the community Goal 3:Ensure that the Town can meet its infrastructure and service needs as demand increases. A. Assess and prioritize school facilities to identify priority projects and seek funding assistance from state programs. B. Implement roadway and sidewalk improvements recommended in the Roadway Management Study and improve the Road Surface Rating for the Town's roadways. C. Keep an updated annual maintenance program and schedule for the DPW. D. As recommended by the UMass DPW organizational study, further investigate the feasibility of consolidating DPW facilities maintenance responsibilities with the School District.Both departments struggle with preventative maintenance and the School District has a computerized maintenance management system,so there are some efficiencies that can be achieved. Goal 4:Given the often conflicting demands. establish priorities for building and facility preservation, upgrades, and replacement, including school, librarv, and public safety facilities. A. Establish a Building Committee,which would include representatives from Town departments,to comprehensively review short-and long- term needs of municipal buildings and to make recommendations for prioritizing facility improvements. Such a Committee would provide input into the CIP process,but its focus will be on building needs for all departments. Similar committees have been established in Foxborough, Mansfield and Wayland. B. Implement the FY2014-2018 Capital Improvement Program. C. Review,update and implement the recommendations of the 2008 Facilities Assessment Study as appropriate. Goal 5:Ensure the availability ofadeauate public health and social services to meet the needs of all citizens and particularly those of an aging population. A. Participate in Mass in Motion programs that link public health with land use,transportation,and healthy lifestyles. See 182 Chapter 8-Public Services and Facilities April 2014 DRAFT Vanasse Hangen Brusthn,Inc. httD://www.mass.2ov/ eohhs/ eov/departments/dDh/Drograms/Comm unitv-health/mass-in-motion/community/ strategies/healthv- community-d esign-ma.htm 1. B. Educate Watertown residents of the importance of public health and its issues related to food access,transportation,and tobacco use through school programs,informational brochures,community workshops,and mailing flyers C. Implement educational programs to help seniors retrofit their homes in order to support aging in place. Goal 6:Promote sustain ability in municipal operations and facilities. A. Incorporate cost-effective Green Infrastructure strategies into all municipal projects for stormwater management and drainage. B. Retrofit and prepare Watertown's essential infrastructure to maintain critical functions through weather and energy related disturbances. Goal 7:Ensure the school buildinjzs and outdoor facilities are maintained, upgraded or replaced as necessary to accommodate the chanzinz educational needs of the community. A. Maintenance is essential to providing a healthy,safe learning environment for students. Perform needed maintenance on a regular basis,and approach it as an opportunity to upgrade facilities to become safer,healthier,more sustainable,energy efficient,and enriching. B. Ensure that all communication systems,such as computers,telephones and wireless Internet access,are current,accessible and meet state and federal regulations. The School District should plan to adapt to the evolution of technology to make it an asset to student learning,more efficient coordination between schools,and connection with central school administration and with the Town government as a whole. C. Review the recent Schools Facilities Assessment and evaluate the alternatives for renovating and/or replacing school facilities. 183 Chapter 8-Public Services and Facilities April 2014 DRAFT Vanasse Hangen Brusthn,Inc. En e rg y Introduction Energy is an essential component of municipal operations in Watertown.The Town needs energy for buildings,streetlighting,municipal vehicles and equipment.Energy requires a tremendous amount of infrastructure for both supply and distribution,which affects the region,state and globe.Traditional sources of energy and existing rates of consumption are not sustainable for the environment or for our economy.Burning fossil fuels has harmful impacts on the environment and the decreasing supply is increasing costs exponentially. Communities are responding by modifying their operations, with an emphasis on energy conservation and efficiency,renewable energy sources,and fuel efficient vehicles,which lowers the cost of municipal services while also reducing environmental impacts.This benefits the Town, state and planet. It is important to keep the local,regional and global perspective in mind when outlining the energy roadmap for Watertown.Energy planning is relevant to the Town's operations but also to residents and businesses living and operating within Watertown.The roadmap should not only consider strategies to reduce consumption but also the sources of energy,generation and distribution within the Town,security and reliability,and the impact on the local and regional economy. Energy issues are closely linked to several chapters of the Comprehensive Plan,including land use,housing,economic development, and transportation.It is important to view this section as a subset of all of these chapters since energy strategies will help to ensure sustainable development practices are used,housing is energy efficient,businesses have the resources they need to reduce energy costs and operate efficiently, and there are fuel efficient transportation options available.This section of the Comprehensive Plan outlines what Watertown has accomplished to date to lay out this 184 Chapter 9-Energy April 2014 DRAFT Vanasse Hangen Brusthn,Inc. roadmap and identifies goals and recommendations to help the Town stay on track. Basel i ne Assessment ■ Municipal Energy Projects and Programs Over the past 3-4 years,Watertown has implemented a number of measures to reduce energy costs,diversify the energy generation,and reduce greenhouse gas emissions related to municipal operations.This section provides an overview of municipal energy projects and programs that have been or are currently being employed by the Town to map out a low-carbon road for Watertown. ....................................................................................................................................................................... Green Camiunities Designation In December 2010,Watertown was designated a Green Community by the Massachusetts Department of Energy Resources (DOER). Watertown's decision to become a Green Community was driven by a desire to reduce greenhouse gas emissions associated with municipal operations while saving taxpayer dollars. The Green Communities Division strives to help all 351 Massachusetts cities and towns achieve their goals and find efficient energy solutions that reduce long-term costs and strengthen local economies.Once a community has been designated as a Green Community the Division provides technical assistance and financial support to improve energy efficiency and increase the use of renewable energy in public buildings, vehicles, facilities and schools.A community is also awarded grant funds to help implement local initiatives. In order for Watertown to be designated a Green Community, five criteria needed to be met: > Criterion 1:Provide as-of-right siting in designated locations for renewable/ alternative energy generation,research and development,or manufacturing facilities. > Criterion 2:Adopt an expedited application and permit process for as-of- right energy facilities. > Criterion 3:Establish an energy use baseline and develop a plan to reduce energy use by twenty percent(20%)within five(5)years. > Criterion 4:Purchase only fuel-efficient vehicles. 185 Chapter 9-Energy April 2014 DRAFT Vanasse Hangen Brusthn,Inc. > Criterion 5: Set requirements to minimize life-cycle costs for new construction.This can include adopting the Board of Building Regulations and Standards Stretch Code. The Town has been working to implement all of these criteria since the Green Communities designation was awarded in 2010. Those projects are outlined in the appropriate sections of this chapter. ............................................................................................................................................................................................. Municipal Energy Effiaency and Renewable Energy Becoming a Green Community has opened up a number of opportunities for Watertown to address energy issues in the Town.In addition to addressing the criteria required as a designated Green Community,the Town has begun working on nearly 100 energy efficiency projects to address inefficient building stock and has installed several solar arrays on municipal buildings. Although there is still a limited budget for renewable energy and energy efficiency projects,the Town has been able to leverage state and federal funding as well as utility incentives to implement these projects.This section will review the municipal energy audit that serves as a baseline for energy use in municipal buildings as well as the resulting energy efficiency and renewable energy projects in Watertown. Municipal Energy Audit In 2012,the Town conducted an energy audit of municipal buildings, including schools,to determine the energy consumption of its operations and determine where there might opportunities to implement energy efficiency measures.In October 2012,the Town Solar on DPVV Fadlity on Ordiard Street. approved a bond to spend httD://wAw.broadelec.corrYDdecLgMtertownDPW.htni $7.4 million to enter into a contract with Johnson Controls, an energy services company(ESCO),to conduct energy retrofits on 14 Town and School buildings,totaling 97 energy infrastructure upgrade 186 Chapter 9-Energy April 2014 DRAFT Vanasse Hangen Brusthn,Inc. projects.The result of this 20-year contract with Johnson Controls will be at least $1.8 million in energy savings.,,The projects include:,, > Lighting fixture retrofits in all of the schools and most municipal buildings > Weatherization of building envelopes for all 14 buildings > Boiler replacements at Lowell Elementary,Cunniff Elementary and Phillips School Buildings;Town Hall;Main and East Fire Stations;the Ryan Ice Rink;and the Senior Center > Water Conservation measures in eight buildings,including Watertown High and Middle Schools;Lowell Elementary and Cunniff Elementary Schools;Town Hall;and the Ryan Ice Rink > Once all of the projects have been implemented,Johnson Control has estimated that the simple payback from the initial investment from the Town will be 15 years. Energy Efficierrr Projects In 2012,the Town secured state and local funding to replace 1,269 sodium street lights with high-efficiency light emitting diode (LED)lighting.The funding came from the Massachusetts Clean Energy Center,a$192,000 Green Communities Grant,NStar energy incentives and some initial investment from the Town.Anticipated energy cost savings from these new LED lights is estimated at$29,806 per year with an annual energy savings of 203,363 kilowatt hours(kWh). As mentioned in the previous section,the Town has begun implementing energy efficiency improvements through the ESCO.Among the ongoing projects Johnson Control is working on includes upgrading the lighting and installing occupancy sensors in most of the Town's municipal buildings. Digital Data Controls are being installed and weatherization efforts have begun at most locations. Additionally,low flow toilets have been installed at a number of town buildings. For a complete list of the measures that were proposed for all 14 municipal buildings,please consult the Energy Saving Performance Contracting Program Review and Update Presentation to Town Council from October 2,2012 included in the Appendix. The Town has also invested in fuel efficient vehicles. To-date,the Town Manager's car and Inspectional Services Department vehicles are all hybrid vehicles.The Town is committed to purchasing additional fuel-efficient vehicles as they are deemed necessary and when it is practical.In the meantime,the Town can work on education for its employees smart driving ss httD://www.wickedlocal.com/x21084999/Watertown-to-spend-7-million-on-enerav-efficiencv ss Energy Saving Performance Contracting Program Review and Update Presentation to Town Council on October 2,2012. 187 Chapter 9-Energy April 2014 DRAFT Vanasse Hangen Brusthn,Inc. techniques that will save the Town money on fuel and reduce harmful emissions. Renewable Energy Projects In addition to energy efficiency upgrades to municipal facilities,the Town is also investing in clean energy resources such as solar photovoltaic arrays. Many of these projects were funded through state or federal grants which reduce the upfront cost of installing renewable energy.The following projects have been implemented to-date: Police Station Building — In 2010,a 30 kW solar or"O"M photovoltaic(PV)system was installed on the new police station on Main Street.The new station also has a community meeting space and a state-of-the-art geothermal heat pump, and is adjacent to a community park being = redeveloped on the former Solar Panels o,theVVatertamPolioe Station.Photosarm Browne School site.67 httr:/M wvwatertomwe.ciov?indexasDx?NID=777 Watertown High School —In October 2010,Watertown High School celebrated the installation of a 6 kW solar PV system which will be used for educational purposes while saving an estimated $1,000 per year in energy costs. Department of Public Works (Orchard Street) —In 2010,the Town secured funding to install a 50 kW photovoltaic array on the roof of the Department of Public Works building on Orchard Street.The funding came entirely from a grant through the American Recovery and Reinvestment Act.This system will create up to 52,000 kWh and save an estimated $7,000 in energy costs annually. 67 htto://www.watertown-ma.aov/index.asox?NID=777 188 Chapter 9-Energy April 2014 DRAFT Vanasse Hangen Brusthn,Inc. ■ Conyrunity Energy Programs and Projects While it is important for a municipality to take care of its own operations, engaging the community to take part in reducing energy costs is just as crucial for developing a sustainable community. The Town is taking a broad- scale approach to addressing energy efficiency,clean energy and sustainable development in Watertown.The challenge is that that there are limited number of large blocks of open space for renewable energy projects and most of the residential buildings are renter occupied which makes it difficult to convince building owners to install solar panels or retrofit the building to make it more energy efficient.However,the Town is working to overcome these challenges through a variety of channels,including local and statewide campaigns and incentive programs which will help to remove the barriers to renewable energy installation. ....................................................................................................................................................................... Community Energy Programs The following programs have been implemented in Watertown to increase the solar installations throughout the Town: Watertown Environment and Energy Efficiency Committee (We3C.org): Formed in 2005,Watertown Environment and Energy Efficiency Committee (We3C)is an appointed group of nine members that serves three year terms to advise the Town on a variety of environmental and energy related issues. The We3C Committee started a separate website that houses instructions on how to weatherize a home,the benefits of installing energy efficient lighting, responsible disposal of compact florescent bulbs that have expired,and publications for residents that are translated into Spanish and English (http://www.we3c.ora/publications.html).The We3C is responsible for or is involved with most of the programs in this section. Watertown Initiative to Save Energy(WISE):This program is offered through Next Step Living,which launched the Watertown Initiative to Save Energy(WISE)program,in cooperation with the Watertown Environment& Energy Efficiency Committee in 2013.The goal was to have 600 Watertown residents participate in Mass Save®energy assessments by the end of 2013. To begin,residents or landlords sign up for a no-obligation energy assessment,and are then given recommendations on how to save on energy bills by implementing certain measures.6'Watertown homeowners,landlords, and renters in buildings with one to four units,can then receive free energy 6'httD://www.nextsteDlivina.com/partners/wise?referrina=001 C0000012aAtY%a25C2%25AE=Reaion%25202 189 Chapter 9-Energy April 2014 DRAFT Vanasse Hangen Brusthn,Inc. saving light bulbs,shower heads,faucet aerators and up to $2,000 in utility incentives to insulate their home. Solarize Watertown Program:Solarize Massachusetts (Solarize Mass)is a partnership between the Massachusetts Clean Energy Center(MassCEC),the Green Communities Division of the Massachusetts Department of Energy Resources (DOER)which began in 2010.It works with local governments to increase the adoption of small-scale solar electricity through a competitive tiered pricing structure that increases the savings for everyone as more home and business owners sign contracts.Each participating community selects a designated solar installation company,which offers five tiers of pricing,with the savings increasing for everyone as more contracts are signed. On December 2,2013 the MassCEC and DOER announced the fifteen communities who will participate in the second round of the 2013 Solarize Mass program,including Watertown. Solarize Watertown will work with home and business owners who want to participate to either purchase the solar electricity systems directly or enter into a lease or power purchase agreement(PPA)with the installer.Under a lease or PPA,the installer will own,operate and maintain the system,while the home or business owner agrees to purchase the power generated by the system at an agreed-upon rate.6' Community Energy Strategies Pilot Program:The Communitv Enerev Strategies Program (CESP)is a pilot initiative developed by the Massachusetts Clean Energy Center(MassCEC)in collaboration with the Green Communities Division of DOER.The program's purpose is to provide financial and technical assistance to local governments to identify and enable a mix of relevant clean energy strategies and incentives best suited to address local interests,needs,and opportunities.The result is a Clean Energy Roadmap that lays out the best approach to achieve local goals. In September 2013 and January 2014,the We3C (with assistance from MassCEC,DOER,and the Town)organized two Energy Forums to begin crafting Watertown's Clean Energy Roadmap.The Watertown Community Energy Strategies Program forums provided participants the opportunity to share their ideas for the development of a comprehensive,community-wide Clean Energy Roadmap. Ultimately,this program will provides a forum for local residents and businesses to work with municipal leaders to identify, assess,and enable new energy efficiency,renewable energy,and renewable heating and cooling projects and programs that serve the Watertown community.70 69 htto://www.masscec.com/solicitations/solarize-watertown 70 htto://www.masscec.com/solicitations/ceso-watertown 190 Chapter 9-Energy April 2014 DRAFT aVanasse Hangen Brustlin,Inc. ....................................................................................................................................................................... Corrilmnity Renewable Energy Installations Although most of Watertown's renewable energy programs are just getting started,there are several solar projects that have been implemented: ➢ Thomson Family Adventures - 19 kW ➢ Perkins School for the Blind -27 kW (included as part of the development of a new lower school and is installed on the roof of that building) ➢ Arsenal on the Charles development -450 kW(installed on Building 311, and is one of the largest rooftop installations in Massachusetts). ....................................................................................................................................................................... Zoning for Energy Zoning Two of the criteria for Green Communities designation require that the community update the municipal zoning ordinance to remove the regulatory barriers to installation. Those two criteria to include: 1)as-of-right siting for renewable/ alternative energy generation,research and development,or manufacturing facilities;and 2)expedited permitting for as-of-right energy facilities.Watertown addressed both of these requirements (see Table 9-1)in the Light Industry,Wholesale,Laboratory section station that that projects (new and conversions)up to 4,000 square feet are allowed by-right in the Industrial Zones (I-1,1-2,and 1-3),the Pleasant Street Corridor District(PSCD) and the Open Space and Conservancy District(OSC).If the project is new construction or conversion greater over 4,000 square feet,the project requires Site Plan Review (SR),which means the project is permitted as of right subject to the procedures and standards of Site Plan Review by the Planning Board. Table 9-1 Table of Use Regulations for Renewable Energy Uses As a Principal Use 6 1U CR SC T R75 R1.2 NB LB CB 1-1 1-2 1-3 PSCD OSC Renewable or alternative energy research, development or 1.Al non-conversions; and,new construction N N N N N N N N N N Y Y Y Y N and conversions up to 4,000 s.f.of building area 2. New construction or conversion greater than N N N N N N N N N N SR SR SR SR N 4,000 s.f.of building area Source:Watertam Zoning Ordinance,2011,page 36. 191 Chapter 9-Energy April 2014 DRAFT Vanasse Hangen Brusthn,Inc. ■ Energy Opportunities in V1Fatertom There are a number of opportunities for Watertown to continue with and build upon the efforts they have started including: > Continue to work with the Massachusetts Department of Energy Resources and the Massachusetts Clean Energy Center to plot Watertown's energy future through the Clean Energy Strategies Program > Support Watertown's Solarize Mass engagement in 2014 > As residents change their lighting to be more energy efficient,ensure that the Town provides safe disposal opportunities for discarded florescent and compact fluorescent light bulbs > Continue to build a network of engaged stakeholders throughout the Town. Goals Using the baseline assessment as a foundation,along with public input at various workshops,the following goals were developed to increase energy efficiency,renewable energy deployment and fuel efficiency of the Town's vehicle fleet. Goal 1. Encourage energy efficiency,conservation,and sustainability in Watertown to reduce energy consumption and cost. Goal 2. Establish best management practices and technologies in future construction,renovation and maintenance of public buildings and facilities. Goal 3. Reach out to the community as a whole to inform and educate residents and businesses regarding energy conservation opportunities and sustainability principles. Goal 4. Increase the fuel efficiency of the Town's municipal fleet. 192 Chapter 9-Energy April 2014 DRAFT aVanasse Hangen Brusthn,Inc. 1 1k v,.; .i.1 I latio s Goal 1.Encourage ener-ev efficiency, conservation, and sustainability in Watertown to reduce ener2v consumption and cost. A. Develop a greenhouse gas emissions inventory of municipal operations and the entire community and communicate the results B. Create a Climate Action or Energy Master Plan and adopt it as addendum to the Watertown Comprehensive Plan Goal 2.Establish best manaizement practices and technoloizies in future construction. renovation and maintenance ofpublic buildings and facilities. A. Create case studies that track and report the progress of retrofitting municipal buildings through the ESCO 1. Work with an intern to document the project's progress 2. Promote work at conferences and increase exposure outside the community to learn about best practices outside Watertown B. Consider adopting a Sustainable Building Code(to go beyond the stretch) Goal 3.Reach out to the community as a whole to inform and educate residents and businesses ret-ardint-ener2-v conservation opportunities and sustain ability principles. A. Expand public outreach and engagement programs 1. Keep the websites relevant with up-to-date information on ways to be more energy efficient 2. Use Social Media 3. Consider recruiting neighborhood champions (similar to the Low Carbon Diet program)to increase exposure to and adoption of energy conservation and efficiency techniques. B. Create a Green Business Certification Program or encourage existing certification programs such as: 1. Sustainable Business Leaders Program (see http:// sustainablebusinessleader.org/) 2. Westchester County Green Business Certification Program (see http:// climatechange.westchestergov.com/wgb-certified) C. Update the zoning ordinance to provide additional incentives to encourage energy efficient,green businesses to redevelop or locate in Watertown (include recommendations for Rensselaer,NY as an Appendix). 1. Incentive Zoning/Development Bonuses:Incentive zoning is a rewards-based system to encourage a specific development goal. Typically,additional density above a zoning district's baseline is offered as an incentive or bonus in exchange for the provision of a specific defined community benefit. The public amenities provided 193 Chapter 9-Energy April 2014 DRAFT Vanasse Hangen Brusthn,Inc. with incentive zoning are typically open space resources or affordable housing. However,incentives can also be structured to facilitate mixed-use and residential development to support downtown vibrancy or to encourage energy efficient construction. Example:The City of Pittsburgh's zoning code's Sustainable Development Bonuses permits an additional 20%in FAR and height over the base zoning maximum for buildings that achieve LEED certification. (See htta:// librarv.municode.com/HTML/ 13525/level4/PIZOCO TITNI NEZOCO ARTVIDEST CH915ENPEST.html#TOPTITLE) Goal 4.Increase the fuel efficiencv of the Town's municipal fleet. A. Continue to implement the Green Fleets policy that outlines specific recommendations for purchasing only fuel efficient vehicles for municipal use when they are available and practical B. Create and adopt a policy to "right-size"the municipal fleet. C. Consider "Idle-right installation"devices for Police vehicles to increase fuel efficiency 194 Chapter 9-Energy April 2014 DRAFT Vanasse Hangen Brusthn,Inc 10 Implementation Introduction This chapter is arguably the most important in the entire Comprehensive Plan.The implementation chapter is based on the goals and objectives of this Comprehensive Plan and the data that was collected and analyzed.To ensure the implementation of these actions on a year-to-year basis,the Town of Watertown should clearly identify some entity comprised of representatives from Town staff and existing boards and commissions and other key stakeholders that will be charged with ensuring that this Plan is used and followed. This entity will be responsible not only for coordinating overall implementation of the Plan,but would also work to ensure that public outreach and education is achieved. Specifically,the best option is to create a Town Council-appointed Comprehensive Plan Implementation Committee that would operate under the auspices of the Planning Board,which is already charged with official adoption of the Plan pursuant to M.G.L. c.41 §81D. All planning elements will be initiated by the Planning Board. The Town Council and other Town Boards,Commissions and Committees with the assistance of the Town staff should use this Comprehensive Plan as a guidance and policy document for the period of 2014 to 2024. It is important to note that planning is a dynamic process and priorities can shift over time.A consistent review process allows for these issues to be acknowledged while keeping each specific recommendation on the table unless a situation dictates that it be reconsidered.A regular evaluation or follow-up procedure will at least indicate how a particular action item was ultimately addressed,or it calls out those that still need attention. In order to ensure follow-through on the recommendations of this Plan and provide some "accountability"for plan implementation,the Town should consider some mechanism for reporting on progress on a regular basis.This 195 Chapter 10-Implementation April 2014 DRAFT Vanasse Hangen Brusthn,Inc. reporting should include updates on progress and achievements as well as information on barriers to implementation that have been identified. Some communities provide this information in annual reports to the Town Council. Others have developed a follow-up evaluation form that specifically lists each action item and asks for responses. It will be important to consider the establishment of a separate entity to coordinate implementation of the Plan.The Planning Board will be responsible for a number of the Plan's recommendations,so a separate Comprehensive Plan Implementation Committee can help in reducing the burden on the Planning Board. The appointment of such a Committee could assist in the oversight and coordination of the Plan's implementation. The implementation plan intends to deliver on the promise of the goals and objectives expressed throughout this process,with a program of tangible steps for the Town to take over the next ten years and beyond.There is a high level of activity on these issues,based upon the input received during the planning process. Table X-1 below summarizes the specific recommendations found at the end of each of the plan's elements.The timing for implementation of the recommendations are assigned for years 1 —2,years 3 —5,and years 6— 10 to assist in determining the timeframe in which each item is to be considered. Some recommendations do not necessarily fall into those designations and are noted in each column to reflect that they are ongoing in nature.The responsible parties are also listed. If more than one entity could be charged with implementing a particular strategy or recommendation,the "lead agency"is listed first in bold.Table X-2 sorts the recommendations by the agency that has the lead responsibility for implementation. The following list identifies the acronyms used for responsible parties in the table: > B&P —Bicycle and Pedestrian Committee > CDP —Community Development and Planning > ConComm —Conservation Commission > CoA —Council on Aging > Cul—Cultural Council > DCR—Department of Conservation and Recreation > DPW —Department of Public Works > FD —Fire Department > H —Health Department > HA —Housing Authority > HC —Historical Commission > HDC —Historic District Commission > HP —Housing Partnership 196 Chapter 10-Implementation April 2014 DRAFT Vanasse Hangen Brusthn,Inc. > Lib —Library > MBTA > MWCD —Metro West Collaborative Development > PB—Planning Board > PD —Police Department > Purch —Purchasing Department > Rec—Recreation Department > SD —School District > TC —Town Council > TM —Town Manager > Traf—Traffic Commission > TW —Tree Warden > WBCC —Watertown —Belmont Chamber of Commerce > WCOD —Watertown Commission on Disability > We3C —Watertown Environment and Energy Efficiency Committee 197 Chapter 10-Implementation April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Implementation Matrix Table 10-1 Plan -Priority and Responsible Party Time Period for Implementation (years) # Land Use Recommendations 1-2 3-5 6-10 Ongoing Responsible Party 1A Enhance building,parking,and CDP,PB,DPW, streetscape aesthetics by adding TW,Traf design and landscaping standards to the Limited and Central Commercial district regulations. 1B Incorporate'green'building CDP,We3C, practices to encourage energy WBCC,PB efficiency and that projects are / planned,designed,constructed, V and managed to minimize adverse environmental impacts. 1C Update the Watertown Square CDP, PB Design Handbook and relevant sections of the zoning ordinance to / include signage and street fagades V and extend to other business districts. 2A Within the squares,create a diverse CDP,PB,new retail mix with shopping and Economic dining choices to encourage foot / Development traffic and browsing of restaurants, V Commission cafes,retail boutiques, and bookstores. 2B Support infill and redevelopment of / CDP,PB vacant/underutilized sites. V 2C The AODD and the adjacent CDP,PB industrial use districts should be revised to create a mixed use gateway to Watertown through the redevelopment of the Arsenal Mall and the expanded Arsenal on the Charles project. 3A Develop an inventory of and CDP,PB strategy for reusing vacant or abandoned properties. 198 Chapter 10-Implementation April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Table 10-1 Plan Priority and Responsible Party Time Period for Implementation (years) # Land Use Recommendations 1-2 3-5 6-10 Ongoing Responsible Party 3B In light of potential redevelopment CDP,PB of targeted areas along the Arsenal Street corridor and Watertown Square,establish design guidelines V appropriate to proactively plan for redevelopment. 3C Adopt the recommended zoning CDP, PB changes for the Arsenal Street Corridor. 3D Adopt design guidelines for new CDP, PB, HC construction and proposed improvements to existing buildings to protect and retain the local / historical context(prevailing V streetscape and the traditional building styles found in the neighborhoods). 3E Consider transit-oriented mixed use CDP, PB development around the site ✓ currently occupied by the MBTA yard. 4A Revise height requirements to the CDP,PB first two stories of a building along the Pleasant Street edge,but require the additional stories(up to five)to be stepped back at least ten feet. Additional stories(no more than seven)should be stepped back 15 feet if certain development enhancements are provided. 4B Ensure projects are sensitive to the CDP, PB Charles River along Pleasant St.The step backs should apply along Pleasant St.and for any buildings on the Charles River side. 199 Chapter 10-Implementation April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Table 10-1 Plan Priority and Responsible Party Time Period for Implementation (years) # Land Use Recommendations 1-2 3-5 6-10 Ongoing Responsible Party 4C Refine the Pleasant Street Corridor CDP,PB District by identifying areas where mixed-use is mandatory and where only commercial development is allowed. 4D Provide development incentives to CDP,PB,HC encourage preservation and restoration of buildings in addition to the other incentives provided in the district. 4E Provide for public access,as well as CDP,PB,DCR, visual corridors,to the Charles V1 B&P River where practicable. 4F Seek opportunities to bury utility / CDP,DPW lines along the corridor. V 5A Review zoning requirements for CDP, PB conversions of single-to two-family homes in the CR,SC,T,R.75 and R1.2 districts to determine whether the locations of such conversions should be specified within those districts. 5B All residential structures should be CDP,PB required to front toward the street ✓ and have its main entrance along the frontage. 5C Allow accessory units in separate CDP,PB,HP structures(such as carriage house conversions),as these would be opportunities to provide additional units without tearing down or substantially adding on to an existing single family. 5D Enhance streetscape amenities, DPW,B&P,Traf crosswalks and traffic calming measures. 5E Continue to require new PB,DPW,B&P development to include sidewalks, ✓ and to connect to municipal sidewalks where feasible. 200 Chapter 10-Implementation April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Table 10-1 Plan R__.,....._....1►:�tions-Priority and Responsible Party Time Period for Implementation (years) # Transportation 1-2 3-5 6-10 Ongoing Responsible Party Recommendations 1A The following traffic calming / DPW,Traf elements could be considered for V the downtown Watertown Square area and within the established neighborhoods that abut high- volume roadways: 1. Curb extensions/bump outs/neckdowns along with complimentary on-street parking. 2.Narrowed travel lanes and widened shoulders with potential for bike lanes. 3.Raised crosswalks or table top intersections. 4.Roundabouts. 2A Encourage the enhancement and / TM,TC,MBTA,Traf furthering of bus stops and V expanding bus routes to reduce the use of the single occupancy vehicle should be explored. 2B Consider the creation of a transit / TM,TC,MBTA sub-committee or a liaison that can V work with the MBTA and others to expand mass transit service, particularly along the#70/70A and 71 routes. 2C Work with the MBTA to install / TM,TC,MBTA more bus shelters and benches at V bus stops to encourage more people to utilize the service. 2D Coordinate with private / CDP,PB,TM businesses and residential V complexes,especially along Arsenal and Pleasant Streets,to provide expanded,shared shuttle bus services to accommodate demand between business locations and key transit stops such as Harvard Square,Alewife, etc. 201 Chapter 10-Implementation April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Table 10-1 Plan tions-Priority and Responsible Party Time Period for Implementation (years) # Transportation 1-2 3-5 6-10 Ongoing Responsible Party Recommendations 2E Develop a bus rapid transit route / MBTA along Arsenal Street to V accommodate anticipated future growth. 3A Pedestrian Imvrovements DPW, CDP,B&P, 1.Design ADA compliant WCOD sidewalks that include a landscaping buffer between the sidewalk and roadway on residential roadways. 2.Where appropriate,replace the / DPW existing faded crosswalks with V imprinted/textured crosswalks at intersections and mid-block locations along major redevelopment corridors such as Arsenal Street and in Watertown Square. 3. Construct crosswalks that / DPW,Traf enhance the awareness of drivers V to pedestrians such as raised crosswalks,textured treatments or table top at intersections and other common pedestrian crossing points(especially on wide streets). 4. Enhance the areas in and / Rec,SD,CDP,DPW, around public open spaces(parks, V B&P schools,athletic fields)so that children and parents who live nearby can make choices about how they can travel between home and these uses. Currently,in many locations,automobile use is perceived to be the safest mode of transportation. 5.The Town should continue and ✓ SD,B&P look for ways to expand the "walking school bus'programs already in place at the Lowell and Hosmer Schools. 202 Chapter 10-Implementation April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Table 10-1 Plan tions-Priority and Responsible Party Time Period for Implementation (years) # Transportation 1-2 3-5 6-10 Ongoing Responsible Party Recommendations 3A 6.Install crosswalk signage to / DPW reinforce vehicle and pedestrian V awareness. 7.Install countdown pedestrian / DPW signal heads at signalized V crossings that do not currently have them. 8. Educate public to"Stop-Look- / PD and Wave"at crosswalks. V 9.Investigate locations for CDP,B&P,DCR installation of future walking trails and connections with existing trails such as along Pleasant Street and the Charles River Reservation. Existing and future streetscape enhancements along roadways should connect directly to the Reservation. 10.Where there is a suitable ROW, V1 CDP, PB encourage wider sidewalks to better accommodate pedestrians and to allow for outdoor dining in places like Watertown Square and other business districts. 3B Bicvcle Imvrovements / B&P CDP 1.The Bicycle Transportation Plan V should be updated to reflect current conditions,and implemented to address both commuter and recreational bicycling. 2.Develop and sign/stripe on-road / DPW,B&P,Traf bicycle routes in accordance with V the recommendations in the Bicycle Transportation Plan. 3.As redevelopment plans for DPW,B&P,Traf Arsenal Street are considered, sufficient ROW should be provided to allow for bike lanes. 203 Chapter 10-Implementation April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Table 10-1 Plan tions-Priority and Responsible Party Time Period for Implementation (years) # Transportation 1-2 3-5 6-10 Ongoing Responsible Party Recommendations 3B 4.Bicycle racks should be installed / DPW,PB,B&P at all public and private activity V centers. 5.Improve bicycle mobility on / DPW residential roads. V 6. Educate the public of existing B&P bicycling opportunities through wayfinding signage,maps and information on the Town website. 7.Look for opportunities to / B&P provide off-road bicycle V connections between corridors and traffic destinations. 8.Investigate the feasibility of a / B&P bike share program,perhaps V through the expansion of the Hubway program. 4A Encourage the incorporation of / DPW,CDP,B&P,Traf multimodal designs into roadway V projects to ensure that streets are shared by all users and not dominated by cars. 4B An emphasis on green design / DPW,CDP,B&P elements that promote an V environmentally sensitive, sustainable use of the public right- of-way should be a priority. Greener designs incorporate street trees,rain gardens,bio-swales, paving materials and permeable surfaces,with plants and soils collecting rain water to reduce flooding and pollution. 4C Encourage the use of smarter / DPW, CDP,B&P,Traf technology-assisted design V elements that incorporate intelligent signals,electric vehicle sharing,car and bicycle-sharing, way-finding and social networks for greater system efficiencies and user convenience. 204 Chapter 10-Implementation April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Table 10-1 Plan tions-Priority and Responsible Party Time Period for Implementation (years) # Transportation 1-2 3-5 6-10 Ongoing Responsible Party Recommendations 4D The Town should develop a DPW, CDP, B&P, Traf complete streets checklist or toolbox that is appropriate for the community goals. Elements should be respectful of the specialized needs and any environmental resources within the Town. 4E Consider expanding streetscape / DPW,CDP and hardscape elements along V Arsenal Street and in Watertown Square and Coolidge Square, creating key gateways or nodes at specified locations. 4F Develop access management and / CDP,PB,DPW,Traf traffic impact study guidelines and V incorporate them into the zoning ordinance and subdivision regulations. 4G Review the zoning ordinance and / CDP,PB, consider amendments that would V encourage mixed-use(residential, office,retail) and compact/clustered development in areas already served by transportation infrastructure, particularly in the downtown area or in transition areas. 4H The Town should address signage / DPW,CDP,Traf clusters on town roadways, and V develop a wayfinding signage program that enhances the "Watertown Experience". 5A A concerted effort should be made / DPW,B&P,Traf to develop a Town-wide traffic V counting program to help determine overall vehicular, pedestrian and bicycle travel patterns. 205 Chapter 10-Implementation April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Table 10-1 Plan tions-Priority and Responsible Party Time Period for Implementation (years) # Transportation 1-2 3-5 6-10 Ongoing Responsible Party Recommendations 5B Locate new residential, CDP commercial and other services in transit-oriented locations(i.e., Arsenal,Galen,and North Beacon Streets,Watertown Square)to reduce the need for cars and enable people living near transit and services to reduce auto trips. 5C Encourage higher density/mixed / CDP use housing and commercial infill V development that is consistent with this Plan and zoning standards in areas adjacent to existing public transportation services. 5D Encourage child-care facilities and CDP, PB other services in residential or commercial facilities/developments to reduce traffic impacts associated with child-care drop-off and pick-up. 5E Establish multi-modal levels of / CDP,DPW,B&P,Traf service(LOS) standards that V consider all modes of transportation,including transit, bicycles,and pedestrians in addition to automobiles. 5F Where appropriate,install timed / DPW,Traf signals on along Arsenal Street V and other major streets to allow traffic to move at a steady rate to minimize air quality impacts from "stop and go"traffic. 5G Work with the State to apply for ✓ DPW,CDP,Traf funding and address intersection congestion under the Highway Safety Improvement Program (HSIP). 206 Chapter 10-Implementation April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Table 10-1 Plan tions-Priority and Responsible Party Time Period for Implementation (years) # Transportation 1-2 3-5 6-10 Ongoing Responsible Party Recommendations 5H Develop corridor improvement / DPW,CDP,Traf strategies for major roadways in V Town,including but not limited to,Arsenal Street,Pleasant Street, Galen Street,Mt Auburn Street, etc. 6A Create a parking plan that focuses / TC,TM, CDP,Traf exclusively on the current and V future needs of Watertown Square. 6B Evaluate future development CDP,PB proposals with an eye towards increasing the publically available parking supply,particularly in Watertown Square. 6C Revise zoning to provide / CDP,PB incentives to(re)development V projects that develop creative ways to reduce or share parking needs. 6D Reduced parking requirements / CDP,PB should be considered for certain V projects when located within a five minute walk radius from an existing or planned and funded bus stop/route. 6E Encourage Local Hire Programs. Local businesses 6F Encourage reduced parking for / CDP,PB local development/employers. V 6G Encourage shared parking / CDP,PB agreements,which would make V the most efficient use of existing and new parking. 6H Encourage consolidation of surface / CDP,DPW parking lots into structured V parking facilities and redevelopment of surface lots with residential or commercial development where allowed by zoning. 207 Chapter 10-Implementation April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Table 10-1 Plan tions-Priority and Responsible Party Time Period for Implementation (years) # Housing Recommendations 1-2 3-5 6-10 Ongoing Responsible Party 1A The HPP sets a goal of producing 78 ✓ HP,CDP SHI units per year in order to be in compliance.A variety of strategies are recommended in the HPP,and if successful,the Town could meet the 10%target within seven years.The Town should review its progress annually and adjust as needed. 1B Ensure that expiring uses are / HP,CDP recertified so that they remain on the V SHI. 2A Allowing multi-family structures by / TC,PB,CDP right for up to four units with site V plan review would provide opportunities for more affordable condominium or rental units.As an incentive, consider allowing more units by right with site plan review if a certain number of affordable units are provided as part of the project. 2B Analyze Industrial and the Pleasant / PB,CDP,HP,HA Street Corridor zoning districts to V identify areas more appropriate for mixed-use and/or multifamily development,and potentially rezone. 2C Explore opportunities to allow for / TC,PB,CDP greater densities in the Cluster V Residential zoning district. 2D Amend the parking requirements / TC,PB,CDP for multi-family developments, V which currently range from 1.5 spaces for a studio unit to two spaces for three or more bedrooms. 2E Amend the inclusionary zoning / TC,PB,CDP requirements to increase the V percentage of affordable units to be provided from 10%to 12.5%.Also lower the threshold for providing affordable housing units from 15 to six. 208 Chapter 10-Implementation April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Table 10-1 Plan tions-Priority and Responsible Party Time Period for Implementation (years) # Housing Recommendations 1-2 3-5 6-10 Ongoing Responsible Party 2F Adopt an accessory housing / TC,PB, CDP ordinance where appropriate,which V could provide for additional opportunities for smaller scale and affordable dwelling unit alternatives. 3A Identify site(s)for mixed-use / PB,CDP,HP,HA developments to provide housing V units in amenity rich environments to meet the preferences of households. 3B Hold discussions with developers to / HP,CDP better understand local,regional and V statewide housing market development trends. 3C Continue to invest in / HP,MWCD acquisition/rehab projects to increase V the supply of affordable housing. 3D Ensure that setbacks and other / CDP,PB dimensional regulations are met for V proposed teardowns. 4A Work to address senior needs / HP,WCOD,CDP, through supportive housing V MWCD policies. 4B Explore mechanisms to allow / HP,WCOD,MWCD Watertown's seniors to age within V the community and to better serve persons with disabilities,through housing rehabilitation/modification programs. 4C Support emergency repairs / CDP,HP,MWCD programs designed to provide V assistance to income-eligible Watertown residents to make repairs and alterations to their homes for safety and health reasons. 5A Consider the adoption of the HP,CDP Community Preservation Act(CPA). 209 Chapter 10-Implementation April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Table 10-1 Plan Priority and Responsible Party Time Period for Implementation (years) # Economic Development 1-2 3-5 6-10 Ongoing Responsible Party Recommendations 1A Promote Watertown as a favorable / WBCC,new Economic municipal environment for biotech �/ Development firms. Commission 1B Encourage the provision of / CDP,PB,WBCC affordable,right-sized office space V for growing and mid-sized firms. 1C Facilitate the development of a / CDP,PB continuum of housing options that V supports the live-work-play lifestyle preferred by workers in the Town's target industries. 2A Encourage investment in the / DPW,CDP roadway and utility infrastructure. V 2B Strengthen networking / WBCC,new Economic opportunities for local businesses. V Development Commission 2C Promote Watertown as a great / WBCC,TC,new place to do business. V Economic Development Commission 3A Promote investment in vacant or / WBCC,MWCD,new underutilized properties on the V Economic Development Pleasant Street,Arsenal Street, Commission Main Street,and Galen Street Corridors. 3B Identify and designate potential / CDP,MWCD,new development sites for the M.G.L.c. V Economic Development 43D Expedited Permitting Commission Program. 3C Set in motion the remediation of / CDP the 25 properties identified by the V Massachusetts Department of Environmental Protection as needing or potentially needing environmental remediation. 210 Chapter 10-Implementation April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Table 10-1 Plan Priority and Responsible Party Time Period for Implementation (years) # Economic Development 1-2 3-5 6-10 Ongoing Responsible Party Recommendations 3D Build institutional capacity to ✓ WBCC,CDP,MWCD, improve existing business districts new Economic by unifying businesses and Development helping them connect to the Commission community. 3E Reduce barriers to growth by / CDP,PB implementing zoning changes that V link commercial development with contributions to community benefits. 4A Ensure children and young adults / WBCC,new Economic are prepared to participate in the V Development Towri s employment base. Commission 4B Connect the workforce to training / WBCC,new Economic and continuing education V Development opportunities that are tied to the Commission strengths of the local business community. 5A Develop marketing strategies that / WBCC,B&P,CDP,HC, celebrate recreational V new Economic opportunities and facilitate Development recreation-oriented concessions. Commission 5B Improve the quality of street life / CDP,TM,Traf and sidewalk culture on primary V commercial corridors. 5C Promote neighborhood retail in / CDP,new Economic Watertown Square,Pleasant Street V Development (through mixed use in targeted Commission,PB,Traf areas) and Coolidge Square. 5D Ensure that Watertown provides / CDP,Cul,new Cultural and promotes the arts to attract V Department live-work-play residents. 6A Create a"one-stop shop"in Town TC,TM,new Economic Hall to attract businesses Development interested in locating in the region, Commission including marketing of development-ready sites and guidance for permitting and other business needs. 211 Chapter 10-Implementation April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Table 10-1 Plan Priority and Responsible Party Time Period for Implementation (years) # Economic Development 1-2 3-5 6-10 Ongoing Responsible Party Recommendations 6B Strengthen partnerships with local TC,TM,new Economic institutions to improve business Development retention and attraction at the local Commission level e.g.,Chamber of Commerce and industry councils. 6C Build relationships with state and / TC,TM regional agencies for V infrastructure,training,education, and networking.e.g.,Metro North Regional Employment Board for training/education opportunities and MassWorks for infrastructure. 212 Chapter 10-Implementation April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Table 10-1 Plan tions-Priority and Responsible Party Time Period for Implementation (years) # Open Space and Recreation 1-2 3-5 6-10 Ongoing Responsible Party Recommendations 1A In an effort to provide better access / Rec,CDP,PB to park and recreational facilities, V the Town should identify potential locations for small parks,pocket parks,playgrounds and tot lots, especially in conjunction with large new commercial or residential developments. 1B Establish Level of Service(LOS) / Rec, SD standards for park and recreation V programs and fields. 1C Continue efforts to upgrade park Rec,SD and recreation facilities to meet applicable ADA standards as improvements are made. 2A Management plans should be / Rec,DPW developed for each major town- V owned facility.In addition to planning for the routine maintenance of the facility and grounds,long-term capital needs and repairs can be identified and scheduled. 2B Seek better coordination with Rec,DPW, SD outside groups to leverage park and field maintenance and stewardship. 2C Inventory playground equipment. ✓ Rec,SD 3A Amend the zoning ordinance to / CDP,PB require that open space be set V aside for new or redeveloped residential and commercial land. 3B Continue to encourage that TM,TC properties acquired through tax default are considered for open space before resale or redevelopment. 3C Pursue remediation,acquisition ConComm,TC,Rec and/or public access to Sawins and Williams Ponds. 213 Chapter 10-Implementation April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Table 10-1 Plan tions-Priority and Responsible Party Time Period for Implementation (years) # Open Space and Recreation 1-2 3-5 6-10 Ongoing Responsible Party Recommendations 4A Work with DCR to finalize and / CDP,B&P,DCR implement recommendations for V the Charles River Basin Pedestrian and Bicycle Connectivity Study. 4B Work with developers to create or CDP,PB enhance multi-use connections between their development projects(including the Arsenal Mall and athenahealth redevelopment projects)to increase physical and visual access to the Charles River. 5A Consider development of a multi- / Rec use,multi-generational V community center to provide a variety of activities throughout the year. 5B Look for ways to better integrate Rec, H, CoA,B&P,SD services and programming with the Senior Center and the public schools and their facilities,as well as ways to incorporate public health and physical fitness programs. 5C Continue developing safe walking DPW,Rec,B&P paths that connect existing open spaces and parks. 214 Chapter 10-Implementation April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Table 10-1 Plan tions-Priority and Responsible Party Time Period for Implementation (years) # Natural Resources 1-2 3-5 6-10 Ongoing Responsible Party Recommendations 1A Consider adopting a Low Impact / CDP, DPW,PB Development(LID)ordinance to V minimize post-development stormwater runoff. 1B Work closely with DCR during the / ConComm,Rec,DCR transition of the GSA site along the V Charles River to ensure the restoration of wetlands and accessibility to the passive recreation areas from Watertown neighborhoods. 1C Implement new design guidelines / CDP,PB along the Pleasant Street corridor V to ensure that the river is physically and visually accessible for active recreational uses. 1D Encourage cultural and / DCR,HC,Cul educational activities that promote V the river's rich history and abundant natural resources. 1E Continue to work with stakeholder ConComm,DCR groups to provide stewardship, protection and access for the Charles River and ensure high water quality to support flora, fauna and good health. 2A Adopt policies that will result in TW better protection and maintenance of Watertown's public street trees. 2B Encourage the protection of / TW established trees while V incentivizing the planting of new shade trees on private property. 2C Collaborate with local groups to / TW maintain the tree inventory for V better protection and management. 3A Make information about / TM,ConComm Watertown s natural resource V areas easily accessible on the Town's website. 215 Chapter 10-Implementation April 2014 DRAFT ® Vanasse 11angen Brustlin,Inc. Table 10-1 Plan -Priority and Responsible Party Time Period for Implementation (years) # Natural Resources 1-2 3-5 6-10 Ongoing Responsible Party Recommendations 3B Enhance public education on We3C sustainable practices that can help reduce the environmental footprints of Watertown citizens. 3C Consolidate educational signage at ConComm resource areas to facilitate the learning experience while encouraging pride and self- identification with the Towri s natural resources. 216 Chapter 10-Implementation April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Table 10-1 Plan tions-Priority and Responsible Party Time Period for Implementation (years) # Historic and Cultural 1-2 3-5 6-10 Ongoing Responsible Party Resources Recommendations 1A Adopt design guidelines for new HC,HDC,CDP,TC construction and proposed improvements to existing buildings to protect and maintain / the local historical character V (prevailing streetscape and traditional building styles found in the neighborhoods). 2A Maintain asset mapping for / HC,new Cultural historic and cultural resources. V Department 2B Develop a marketing strategy to CDP,HC,HDC,new promote heritage awareness and Cultural Department preservation. 2C Provide incentives to encourage HC,HDC, CDP,TM, redevelopment of historic TC buildings. 3A Develop a marketing strategy to CDP,Cul,WBCC, expand awareness of Watertown's new Cultural cultural assets. Department 3B Support the institutions and CDP,Lib,PB,Cul, special events programming that / TC,TM,WBCC,new celebrate the Town's multi-cultural V Cultural Department and artistic identity. 3C Develop a public arts program to CDP,Cul,PB,DPW, foster lively and attractive new Cultural streetscapes. Department 217 Chapter 10-Implementation April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Table 10-1 Plan Priority and Responsible Party Time Period for Implementation (years) # Public Facilities and Services 1-2 3-5 6-10 Ongoing Responsible Party Recommendations 1A Implement the long-range energy TM,TC reduction plan for municipal operations,buildings and vehicles. 1B Implement the recommendations / TM,TC for improving the efficiency of the V Town's vehicle fleet. 1C Continue the recent focus on / TM,TC equipment replacement. V 2A Coordinate with local institutions TM to ensure that their short-and long-term needs are understood and addressed. 3A Assess and prioritize school SD facilities to identify priority projects and seek funding assistance from state programs. 3B Implement roadway and sidewalk DPW improvements recommended in the Roadway Management Study and improve the Road Surface Rating for the Towri s roadways. 3C Keep an updated annual DPW maintenance program and schedule for the DPW. 3D As recommended by the UMass / TM,DPW, SD DPW organizational study,further V investigate the feasibility of consolidating DPW facilities maintenance responsibilities with the School District. 4A Establish a Building Committee to / TM,TC comprehensively review short- V and long-term needs of municipal buildings and to prioritize facility improvements. 4B Implement the FY 2014-2018 ✓ TM,TC Capital Improvement Program. 4C Review,update and implement / TM,new Building the recommendations of the 2008 V Commission Facilities Assessment Study as appropriate. 218 Chapter 10-Implementation April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Table 10-1 Plan Priority and Responsible Party Time Period for Implementation (years) # Public Facilities and Services 1-2 3-5 6-10 Ongoing Responsible Party Recommendations 5A Participate in Mass in Motion H,CDP,DPW,B&P programs that link public health with land use,transportation,and healthy lifestyles. 5B Educate Watertown residents of H,SD the importance of public health and its issues related to food access,transportation, and tobacco use through school programs, informational brochures, community workshops,and mailing flyers. 5C Implement educational programs / HP,MWCD to help seniors retrofit their homes V in order to support aging in place. 6A Incorporate cost-effective Green / DPW Infrastructure strategies into all V municipal projects for stormwater management and drainage. 6B Retrofit and prepare Watertown s / TM,DPW essential infrastructure to maintain V critical functions through weather, energy and economy system related disturbances. 7A Maintenance is essential to SD providing a healthy,safe learning environment for students.Perform needed maintenance on a regular basis,and approach it as an opportunity to upgrade facilities to become safer,healthier,more sustainable,energy efficient,and enriching. 7B Ensure that all school / SD communication systems,such as V computers,telephones and wireless Internet access,are current,accessible and meet state and federal regulations. 219 Chapter 10-Implementation April 2014 DRAFT aVanasse Hangen Brusthn,Inc. Table 10-1 Plan Priority and Responsible Party Time Period for Implementation (years) # Energy Recommendations 1-2 3-5 6-10 Ongoing Responsible Party 1A Develop a greenhouse gas / We3C,Purch,Town emissions inventory of municipal V Departments operations and the entire including Schools community and communicate the results. 1B Create a Climate Action or Energy V/ We3C,CDP,PB, Master Plan and adopt it as Town Departments addendum to the Watertown including Schools Comprehensive Plan. 2A Create case studies that track and / We3C,Town report the progress of retrofitting V Departments municipal buildings through the including Schools Energy Services Company(ESCO). 2B Adopt a Sustainable Building ✓ CDP,PB,We3C Code(to go beyond the stretch code). 3A Expand public outreach and / We3C engagement programs. V 3B Create Green Business / We3C, CDP,WBCC Certification Program or V encourage existing certification programs. 3C Update the zoning ordinance to / CDP,We3C,WBCC, encourage energy efficient, green V PB businesses to redevelop or locate in Watertown. 4A Create and adopt a Green Fleets / DPW,We3C,Purch, policy that outlines specific V CDP recommendations for purchasing only fuel efficient vehicles for municipal use when they are available and practical. 4B Create and adopt a policy to / DPW,We3C,Purch "right-size"the municipal fleet. V 4C Consider"idle-right installation" / PD,We3C,Purch devices for Police vehicles to V increase fuel efficiency. 220 Chapter 10-Implementation April 2014 DRAFT aVanasse Hangen Brustlin,Inc. Table 10-2 Plan R--.-....ndations-"Lead Agency" Time Period Action Lead By 1 2 years 3 5 years 6-10 years Ongoing Planning Board H-213, H-3A, E-4C, LU-5E,T-3A-8,T- 3B-4 LU-1A, LU-1B, LU- 2A, LU-2C, LU-3A, LU-313, LU-3C, LU- LU-1C, ED-513, ED- 3D,LU-4A, LU-4B, 5C,T-3,49,T4F,T- LlJ-2B,LU4E, LU Community Development and LU-4C,LU-4D, LU- 5E, H4C,OSR4A, 5B,ED-1 C, ED-5D, Planning 5A, LU-5C, ED-1 B, OSR-4B, HCR 2B, LU-3E,LU-4F,T-6H, T-2D,T-3A-10,T- ED-3B, ED-3C, ED- HCR 3A, HCR 3C, 5B,T-5D,T-6B,H- 3E,T4G,T-5C,T- E 2B, E 3C,T-5G, 3D, HCR 3B, 6C,T-6D,T-6F,T- T-5H, 6G,OSR 3A, NR 1A, NR 1C, Conservation Commission OSR 3C, NR 1 B, NR 1 E, NR 3C, T-2B, PFS-1B, PFS- T-2A,T-2C, PFS- OSR 3B, PFS-1C, Town Manager 4A, PFS-4B, 1A PFS-3D, PFS- PFS-2A, PFS-4C, Town Council ED-6A, H-2A, ED-6C,T-6A, K2C, ED-613, H-2D, 1+2E, H-2F, LU-5D,T-3A-1,T- ED-2A,T-3A-6,T- T-313-2,T4D, E-4A, 3A -2,T-3A-3,T-3A- 3B-4,T-313-5,T4A, Department of Public Works E413 7,T-313-3,T-4E,T- T-1A, T-413,T-4C,OSR 4H,T-5A,T-5F,T- 5C,PFS-3C, 5G,T-5H, PFS-6A, T-3A-4,OSR 1 A, Recreation OSR 1 B,OSR 2A OSR 5A, OSR 1 C,OSR 2B, OSR 2C, Health PFS-5A, PFS-513, Historic Commission HCR 1A HCR 2C, HCR 2A, Bicycle and Pedestrian T-313-1,T-313-8, T-313-6,T-3B-7, Committee Watertown Beimont Chamber ED-1A, ED-213, ED- of Corry ce ED-3A 2C,ED-3D, ED-4A, ED-413, ED-5A, Watertown Environment and E-1A, E-1 B, E 2A, E 3B, NR 3B, Energy Efficiency Committee E-3A, EAA, E-413, Police Department Housing Partnership H 3B, H 5A H 1A,H-113, H-3C,H4A,PFS-5C, META T-2E, T-3A -5,PFS-3A, School District PFS-7A, PFS-713,T- 3A-4 221 Chapter 10-Implementation April 2014 DRAFT Vanasse Hangen Brusthn,Inc. Time Period Action Lead By 1-2 years 3-5 years 6-10 years Ongoing Tree Warden NR 2A,NR 2B,NR 2C,NR 3A, Purchasing E-1A, EAA,E-4B, Department of Conservation and Recreation NR 1D, Local Businesses T-6E 222 Chapter 10-Implementation April 2014 DRAFT A 2'khenahealth Exhibit 21 Confidential AL m2014 4t V)ftErto lve Ran rm r y +f F ' l37 �4t� _ l Y . • '4 ■ I �• V v. �Li. 1 June 18 , 2014 Public Foru Town of Watertown Agenda • 6:30 — 7:00 Sign-in & Preview of Plan Recommendations (open house format in hall way and cafeteria) • 7:00 — 8:00 Comprehensive Plan Presentation (Auditorium) • 8:00 — 9:00 Discussion on Implementation and Priority (resume open house format) Plan Elements: • Vision and Land Use • Housing • Economic Development • Transportation • Resources: Natural • Historic • Cultural Open Space • Public Facilities and Energy • -.T - , hat we heard 41 i f ~ } l Assets local Independent Businesses ■ 9 5rnafl Town Feeling to Boston Walkability roximit Potential People Community spirit Proximity to HWY Y., N art;�an p t 0 keiSmall Puhlic irai3 Path CommunisRiver�Path �LISf7l7+]'t7t,:;i; a Charles%ver A'" library Ran. 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Town of Watertown 671 220 45 Days remaining Watertown 2013 My idea is... Comprehensive Plan ®.�Te Facebook ? Creating a Better Watertown Select Language i.i '- P—d 6y Gu,jle Traasfate What is the biggest obstacle to improving quality of life 0 CONTRIBUTORS in Watertown? Select two problems that you think our _ 0 1 n community needs to address first: 2 What we earned WALTHAM BELMONT y i CAM 9 RIRGE :*_ NEWTON � [sEL AiF(}N T � 1 l l � 4� a Historic Land Use in 1971 MMM CA jp de 41 =� O. r -Adwff { #ter KEWTON aos�or� tAnd Use Ty" -� � � OPM WM& Existing Land Use in 2013 � � V"L -- . .. we � .� . 4 - - 2 �P F ai l & . —i . . . , I ,% _ � . ' r 6 k .■ - 4ftdk Jr TO �:k _ -� ��� ` � � ���`/, - - a K� �. , - . �� $ ■�� � .� . �� �. . � . \ , � f� � / �� 2 � .&�. ■ � / _r - . . . . . . , . • . , . . , • lAnd U�*Type u M�d%ftpyx Swa-cow _ t fmrmly ��_F_ mdac_PMPEMES H-Mg PAC--" . . ` opw Fan*!" M CUWW F_ M Chid CWCFoolon V&MMLXW D&VMPN�Pe lwwr.*Nwgd ftew,_ = _ I_�GMFWTS vmwe LAM-� offEff M kaomwe-Lai�_bwwxEs M i,k�_i f-_ M Rwaoo Saws SAw-DC;R Land Use Focus Areas Mt. Auburn Street Corridor Main Street Corridor _ -I � . .� =_ ._ Coolidge Spuare Ij 5 , �r Y Pleasant Street Corridor - _; Watertown Spuare Arsenal Street Corridor Charles River Corridor Galen Street .. F- Neighborhoods talt ��y14� '"� F is �� ✓�� ,y � C 5f aii�•.., y a� p��_`. 4I-.'' Challenges Opportunities • Aging housing stock • More community facilities • Conversions • Better maintained trees, roads and sidewalks • Parking ban • Continuation of bike path • Road and sidewalk maintenance • Neighborhood branding program • Pedestrian connections • land use compatibility and density Watertown Square Coolidge Square ' - WAIS Watertown Square Coolidge Square • Traffic congestion • Ethnic and cultural diversity • Parking accommodation • Streetscape improvements • Not a destination-need more attractions! • Traffic calming • Pedestrian accessibility • Lack of character • Lack of identity as a town center Charles River Corridor -iat ........ ...... ,fie �'. �_ LL•• � _ �r—F'� �{+���s�Z •" /'� ..ti„� - �. Challenges Opportunities • Maintenance • Riverfront activities • Water quality • Pedestrian and bicycle circulation • Development along the river • Improved connections • Public access • Wildlife corridor enhancement • Amenities • Educational opportunities • River crossings Pleasant Corridor 7 j � � E wour y2�;JA3 _z .�:.= 00*0 Challenges Opportunities • Density — "Canyonization" • Long term vision • Cohesiveness and character • Enhanced open space and river connections • Connections/views to the River • Improved multi-modal transportation — • Public transportation vehicles, transit, pedestrians, and bikes Galen Street Corridor fir. �� - �• as �,,.��. 44 Nil tv � Challenges Opportunities • Traffic congestion • Streetscape enhancements • Pedestrian/bicycle safety • Transit oriented development • Lack of unified character and identity • More amenities at bus station 0 Improved connections to Charles River Main Street Corridor - , Challenges Opportunities • Lack of place identity • More mixed-use development • Traffic congestion • More diverse businesses • Land use mix and compatibility • Improved streetscape and pedestrian • Inconsistent design environment • Unfriendly pedestrian environment • Traffic calming 0 Highlight Watertown's rich history Mt, Auburn Street .z; lip 7�: � = r WT Challenges Opportunities • Land use mix and compatibility • Improved streetscape and pedestrian • Traffic congestion amenities • Pedestrian/bicycle safety • Mixed-use development • Peak hour bus service • Stronger neighborhood identity • Unified streetscape • Commercial attractions } Arsenal Street Corridor Challenges Opportunities • Land use mix and compatibility • Transformative development corridor • Vehicle dominated • Extend Watertown Square along Arsenal Street • Poor pedestrian environment • Streetscape enhancements • Lack of street trees • Traffic calming • Connect to River and surrounding neighborhoods • Extend bike path • Create more open space and parks What the Plan ■ Vision v' Priority (short-term) Implementation Actions _� � � :� ��•} r ..ti•� .- wry � � ,a a� .k Vision for 2025 We envision a vibrant and diverse future that builds upon our rich foundation of neighborhoods, culture, commercial squares and corridors, civic assets, and proximity to the Charles River and Boston. Our future includes: • Stronger relationship with the Charles River • Commercial squares and corridors that reinforce Watertown as a great place to live, work and play { • Leader in innovative economic development • Proactive in maintaining public infrastructure and services • Celebrating our diverse population, unique neighborhoods and '1r s� historic and cultural heritage • Attractive streetscapes along roadway corridors ..r • Progressive about sustainability Promoting an active and healthy lifestyle KeyImplementation Actions Land Usp- Goal projects are planned, designed, constructed, and managed to minimize adverse environmentalCoolidge Squares that enhances aesthetics while preserving neighborhood A. Enhance building, parking, and streetscape aesthetics by adding design and landscaping standards to the Limited and Central Commercial district regulations. B. Incorporate 'green' building practices to encourage energy efficiency and that • . •`��:�f.n � "��r��{,-�7jp';�'•�""r�•� :•�k `. Py .A° b 57 h �• a . `_ y . `'�" Nth � �� rT!•.'. e i l-1� .. �r� 1L ..Ty • •+ �. KeyImplementation Actions Land Us • - - , • • • • • . • • • • • • . • - • • • • • • • - • • • • • , , • , • • • - • - • • • • . . . • w 0 w w v w •' �y,, � r • +.� tip. 1• 1 r t2 �'`^ ^: �.+' ,.., � 74 ip Ila �` a � h � ■�� i i�� _ .. �r� t ry �. i.," °#Ad'�, Key Implementation ActionS on Land Usp--, Goal 3: Identify strategies to develop and maintain economic vitality within major squares and corridors with a diverse mix of innovative business and residential choices. A. Develop an inventory of and strategy for reusing vacant or abandoned properties. B. In light of potential redevelopment of targeted areas along the Arsenal Street corridor and Watertown Square, establish design guidelines appropriate to proactively plan for redevelopment. C. Adopt the recommended zoning changes for the Arsenal Street Corridor. D. Adopt design guidelines for new construction and proposed improvements to existing buildings to protect and retain the local historical context (prevailing streetscape and the traditional building styles found in the neighborhoods). f Key Implementation ActionS Land UsS—.i-- Goal 4: Establish criteria for development along Pleasant Street to ensure projects are sensitive to the Charles River. A. Revise height requirements to the first two stories of a building along the Pleasant Street edge, but require the additional stories (up to five) to be stepped back at least ten feet. Additional stories (no more than seven) should be stepped back 15 feet if certain development enhancements are provided. B. Ensure projects are sensitive to the Charles River along Pleasant St. The step backs should apply along Pleasant St. and for any buildings on the Charles River side. C. Refine the Pleasant Street Corridor District by identifying areas where mixed-use is mandatory and where only commercial development is allowed. D. Provide development incentives to encourage preservation and restoration of buildings in addition to the other incentives provided in the district. INS Wow KeyImplementation Actions Land Use Goal 5: Maintain existing character of residential neighborhoods. A. Review zoning requirements for conversions of single- to two-family homes in the CR, SC, T, R.75 and R1 .2 districts to determine whether the locations of such conversions should be specified within those districts. B. Allow accessoryseparate . • - house conversions), these would be opportunities to provide additional units without tearing down or substantially adding on to an existing single family. MR + \ Ai r ,�8�i�,R ")Sr• •+ •�. SLY R� � I .X � •� �~' a�.� , l \ / \ Land Use Vision fl « wn 2013 Ca rel mm@■P m Sirafmr erE ¥ oNT \ � wALTHAM \ c%MBR10GE dip • , . � � / � NEW70N 2 —� WdUm Mm — « &ems Prmne Emm Areas to hanc* Areas memkirm r Future Land Use Map � � �i{i'ft►rNrN7r t�at�f}Im�+�'l�icn4lti�r�li1A�frr��t�ur.# r 9ELMONT , , �\ .. WALTHAM tom;. S 4 �+ +/R■+ pI D 4.. IRS� R L I •Rt���#f�„•+ AA Ir 01, Ire P. / Ir11 i a+ . NE iht T O N '��•�* ' BOSTON LayNld town Board~31 #Wwz.vnr hill E94b&ih*d CoRnnw"5.7umm Lcm Dw"ny R mwen1'aC "Awl {fjRlhmar-w r,htftLWalrrlorwottwo Mvomt OrhayAr•s+Asrrtlw � R"ic."Ml*dVw O rnwalRF 1Mgh ►44 ar+d Q Cam+* �►Prt! Ho D""AyilL� -MEER! 5ChK>a A+tidC4r r++urt�#r r+�rr Open Um"on"fmod s""Com"x"m ArandmTW W—ed Uw Indumtil Commorud Mjed Lh �� 1 Mr�d Ubie Ymasse ffa�ageu l3rxnsfNn.Inc. -wa, i''`' - ' , rEnhancing1 at r-town Square as a Vibrant Town Center Rfur~c'rfutt-rr HI Plan Sfrtrtrgiei i• 'E r r • x Ift • .��' afa /rs Rehnfurc WaterT wn Sgvme di a Tmm Ctwer a ' f .; �' / .e a s! StmH)gthen the sereet edges to encourmge waRablllty and pedestrian r a actlVltieS 1} Make the streets In Watertown Square mare oonnected 9 hro-Ugh +'q,�, `• a,r L} advandng Complete 5tmet wat[gkts - ErIhdnr,e the skiewalk3{w,fkilblllty�ll•vabllltyE Stuwty Watertown Square to IdentlfytranTortmion enhancem?ntsthat s. { • — are possible to enhance traffic,safety,and operations � a*• ter' �*°+ +�}f� 10 Improve pedestrian links to the rarer 5tudfyr parking needs and unlock the development potential for f � r �--•r.,r � WI toftown Sq uare { _ ' f, 111 r 'u 10 Understand and advanro�rrR dowlmprnentopportunities to mane 'f Waterumn Square a mumcchesive disErics of hboeks and streets �- ,L design and huBd a multipurpme bail system - ib Enhance the eki5trhg rlvetwalk lydil and prflgramming of aClYvltll'•S such as kayak and came rental4 Make connections and stmemape improvementr,on Mhe smith side of the river and explore opportunities fw I he T station lar TO[}andfQr �a I—N -- —_ multlr�tiodal�rrhanc2rnettits '• ��� ... '..�.� � r• Transform Arsenal Street into a _ Dynamic fixed-use Corridor '� - niiYr►#t��►1 f r ra1T�r,rc7ecrrr f'7�.rn ►rrtn��• � - . . . . ..a MPUMSO.CrAwiil.4 wv*4 svr w mcw�q mh whhr huw=w of M4%01 10 -awo nmwmbpww ftr scuw a y ltvffa v MA alkhm apuxwsernsoe billw G OFFIll t' 3c1- encktnd6Kh19[+'dWEMNIb milid nmu&Spba3kcamAnrown likodd bagiii xb,dr.lwOhm -,r cKwh. w5dtwffm.uminEgRizi.dooaWMIraroJmdbr1bojtolft Brild tie l ffr� x ffm Ow Bbity kpmw ed mf—6m plebe v P & npowol LV%W ce Uv tdNA" . . i _. .of e _� �wrill�. � Wkwi l p awlQsSo*,Nfy A*0FUM N.atr p k,,bw7dm evd cAw OEM El kkitllF Vk h d&.W tt.For _. _mch m 5wem oillillilli�pban ply se aW smvm hvrbi w r,dp Allill will 4.i dit aon D&OIM kr F;errs iA 0 Slipp"Oweeirn x'V_fm Owww1a4i Del Ql%W ad0di W. &W aetee *ores mduwwnw4- 0 L4'+t'InD gads.nd WAM;e,ftl ,," *do""owe[a..aie.artQ A bw ... a oR.Ar.9rs w4d 04x4p . I .reblY€fi7 V ag R gr v+tl aid pa"sKin o sfsftn or pie deaktNwR 01 . , .*'i hp RC4665WID. W4P*kI*v F �*gxQw9.�..��owa.e4� as�n�eF#at� ar"Pi 1bill. ems aid srftub cmr. .. _.. Y . . i . . a b� E4►N�p4t f+� 49*+�AM COMM�f 41�ed 1eeYl R��MyJ A OW 1 ir�l1�.riftyZ�M m *whYee m[kiecLdr kaeadl� c1 the nmc�Min�oede h®die�mn t o�tg4ot a rniH w.�r� ■rhu�oe ehr peontrun aBd pAhk GO&L lY¢kntlrfirJl�F�L�ehh�ioe hrnvlop�aid hva seevaa/aq�rmndor.by �4+dr+6 Krh a 6�e F�id Fareu,3flF_ esUd"bv4 Lwrl DV X"M%.WLA pwMilin Define Pleasant Street as an Inviting Riverside Corridor I�errt err+�'�I _7013 C On?prOJWfrs[,,'e P1aU.%WtVgJ4Fs Identtfy st3ndUdcfOr LFpWr leve9 bmUng Vwennallba-uaheiglTtf eadbeyiog aM reli�ori:emnmg pm1kcro. dumlapmenlga IwecrEdrawd+ roe d ux hrLpza kpn' rlg emff kx and ng umW [ff a'raid�ryerrrrualian'aF the r�r>•Idgr ur,dea�murr� x4rry bism ApprcTn le bwldlrq As h r1*4 setback f o n t he Po W r to help 9 heVTN makQ!R aw mcurdl iM2graiy Sd'!�seurki d�ClTpde�flJvCr r�seNdm Fri m*o canrormr Romoee UNIOin7NLI CiesipnChidllnestac-ri liMp -LILm:aand211m%Lhrn Ili ahKrtwr wLu+r i fl�fdtTotl * tr MXMyandCnnsis,8n r V94", Widwdef#Iillin ImpartDeae4niiintind -Eunneciorm Ea theRi'ver nreenwildr`aiwbelTef to-A e"usn3Wh4 fences mid Tarr mmIng rra s7[}+rrlwaWf r torts natural rasaurres rla>p t k1 see rks and aedrxedevctop LVw a pf)W 4 f nMpa.t from k-nww-Trenially sense a areas such the Rrwil-T as wHi qk low and m dIUM tensity resdenng areas tQ mTogade gatfIT 4rx+cpllyeMp3M 1Lnrur HMi{h+ N."Aw.Fm Key Implementation ActionS Transportation Goal 1 . Traffic Calming . Encourage traffic calming measures and other techniques at appropriate locations to create safer roads for all forms of transportation while maintaining needed capacity. Goal 2. Expand Mass Transit . Work with the MBTA and others to expand mass transit. Promote alternative transportation in town by further improving intermodal access and connections. A. Consider the creation of a transit sub-committee or a liaison that can work with the MBTA and others to expand mass transit service, particularly along the #70/70A and 71 routes. 1 r. 4* _ L I 1 Key Implementation ActionS Transportation Goal 3. Pedestrian and Bicycle Access . Improve and enhance pedestrian and bicycle access and facilities to ensure that Watertown can accommodate non-motorized forms of transportation. A. Bicycle Improvements: • The Bicycle Transportation Plan should be updated to reflect current conditions, and implemented to address both commuter and recreational bicycling. • Develop and sign/stripe on-road bicycle routes in accordance with the recommendations in the Bicycle Transportation Plan. • Investigate the feasibility of a bike share program, perhaps through the expansion of the Hubway program. ,1 I Pod PO NIP L. I �i 4 Key Implementation ActionS Transportation Goal 4. Improve Roadway Infrastructure . Improve roadway infrastructure using Complete Streets techniques and considering all users, and consider bike share and shuttle service options as ways to improve capacity in problem areas. A. The Town should develop a complete streets checklist or toolbox that is appropriate for the community goals. Elements should be respectful of the specialized needs and any environmental resources within the Town. B. Review the zoning ordinance and consider amendments that would encourage mixed- use (residential, office, retail) and compact/clustered development in areas already served by transportation infrastructure, particularly in the downtown area or in transition areas. Pod WO FPO NIP 5 � L. �1.�► E r 4 Key Implementation ActionS Transportation Goal 5. Reduce Congestion and Efficiency . Reduce congestion and improve efficiency at major intersections and corridors. A. Encourage higher density/mixed use housing and commercial infill development that is consistent with this Plan and zoning standards in areas adjacent to existing public transportation services. 4 I l L f 3 _ 1 ILO WO 11 Key Implementation ActionS Transportation Goal 6. Alternative/Reduced Parking . Consider zoning revisions to relax parking requirements in the business districts. Assess current and long-term parking needs along the major corridors and business centers. A. Revise zoning to provide incentives to (re)development projects that develop creative ways to reduce or share parking needs. B. Reduced parking requirements should be considered for certain projects when located within a five minute walk radius from an existing or planned and funded bus stop/route. C. Encourage reduced parking for local development/employers. D. Encourage shared parking agreements, which would make the most efficient use of existing and new parking. 00 �' rr Key Implementation Actions Housing _j Goal 1 . Set and achieve affordable housing production goals and maintain inventory. Goal 2. Adopt zoning changes to advance affordable housing production. A. Allowing multi-family structures by right for up to four units with site plan review would provide opportunities for more affordable condominium or rental units. As an incentive, consider allowing more units by right with site plan review if a certain number of affordable units are provided as part of the project. B. Analyze Industrial and the Pleasant Street Corridor zoning districts to identify areas more appropriate for mixed-use and/or multifamily development, and potentially rezone. M LWI - r 'I ICI , .0r� Will Key Implementation Actions Housing I _j Goal 3. Maintain a diverse housing stock with increased opportunities for lower- and middle-income households. A. Identify site(s) for mixed-use developments to provide housing units in amenity rich environments to meet the preferences of households. Goal 4. Provide seniors and persons with disabilities with greater housing options. Goal 5. Identify new funding sources for affordable housing production. Key Implementation ActionS Economic Development Goal 1 . Promote and maintain conditions that support the growth of the Town's key industry clusters in the life sciences, advanced manufacturing, information and media, and design and engineering industries. A. Encourage the provision of affordable, right-sized office space for growing and mid-sized firms.Analyze Industrial and the Pleasant Street Corridor zoning districts to identify areas more appropriate for mixed-use and/or multifamily development, and potentially rezone. Goal 2. Retain and support the growth of existing businesses in Watertown. Key Implementation ActionS Economic Development Goal 3. Unlock development potential in existing commercial corridors and centers. A. Promote investment in vacant or underutilized properties on Arsenal Street Corridor and Galen Street Corridor. B. Identify and designate potential development sites for the M.G.L. c. 43D Expedited Permitting Program. C. Set in motion the remediation of the 25 properties identified by the Massachusetts Department of Environmental Protection as needing or potentially needing environmental remediation. D. Reduce barriers to growth by implementing zoning changes that link commercial development with contributions to community benefits. MIA�xk 'abbe- -, Key Implementation ActionS Economic Development Goal 4. Align education and training opportunities with careers in the region's growth industries. Goal 5. Strengthen the identity of the Town as a vibrant, livable riverfront community. Goal 6. Build capacity for implementing economic development projects in Watertown. A. Create a "one-stop shop" in Town Hall to attract businesses interested in locating in the region, including marketing of development-ready sites and guidance for permitting and other business needs. FA r � 4 it Key Implementation Actions Resources Open Space Goal 1 . Identify opportunities to create new parks in underserved neighborhoods, while improving accessibility and the overall condition of Watertown's recreational resources. A. Establish Level of Service (LOS) standards for park and recreation programs and fields. Open Space Goal 2. Preserve, protect, and enhance publicly owned conservation, passive, and active open space. A. Management plans should be developed for each major town-owned facility. In addition to planning for the routine maintenance of the facility and grounds, long-term capital needs and repairs can be identified and scheduled. .,ra,V�ff..� " fig' ��`��•� ill ��N� � I Key Implementation Actions Resources Open Space Goal 3. Encourage private land owners to permanently preserve open space on their parcels. A. Amend the zoning ordinance to require that open space be set aside for new or redeveloped residential and commercial land. Open Space Goal 4. Create new opportunities for recreational access along the Charles River, such as boating, trail networks, bicycling, and appropriate related amenities. Open Space Goal 5. Promote active and healthy lifestyles. r _ • 'rj%MWIj.r r Key Implementation Actions Resources Natural Resources Goal 1 . Improve the environmental integrity of the Charles River while enhancing its recreational, cultural, and educational values for the community. A. Consider adopting a Low Impact Development (LID) ordinance to minimize post- development stormwater runoff. B. Implement new design guidelines along the Pleasant Street corridor to ensure that the river is physically and visually accessible for active recreational uses. Natural Resources Goal 2. Protect and enhance Watertown's urban forest. Natural Resources Goal 3. Promote public awareness and education on preserving the Town's valuable natural resources. Natural Resources Goal 4. Take advantage of any opportunity sites for open space acquisition. Natural Resources Goal 5. Carefully consider any opportunities to restore historical natural features of the Town. Key Implementation ActionS Resources Historic Resources Goal 1 . Maintain and protect the unique character of existing residential neighborhoods. Historic Resources Goal 2. Promote the preservation of historic resources and encourage rehabilitation projects. Historic Resources Goal 3. Support cultural events and place-making activities. i r _ - Key Implementation Actions Public Facilities and Services Goal 1 . Establish efficiency and cost-effectiveness as a guiding principle for the delivery of public services. A. Implement the recommendations for improving the efficiency of the Town's vehicle fleet. Goal 2. Ensure the continued presence and operation of important institutions, like the Watertown Center for the Arts, Perkins School, and including partnerships with various organizations. Goal 3. Ensure that the Town can meet its infrastructure and service needs as demand increases. r rt r k k f Key Implementation Actions Public Facilities and Services Goal 4. Given the often conflicting demands, establish priorities for building and facility preservation, upgrades, and replacement, including school, library, and public safety facilities. A. Establish a Building Committee to comprehensively review short- and long-term needs of municipal buildings and to prioritize facility improvements. B. Implement the FY 2014-2018 Capital Improvement Program. M 00 k k f Key Implementation Actions Public Facilities and Services Goal 5. Ensure the availability of adequate public health and social services to meet the needs of all citizens and particularly those of an aging population. Goal 6. Promote sustainability in municipal operations and facilities. Goal 7. Ensure the school buildings and outdoor facilities are maintained, upgraded or replaced as necessary to accommodate the changing educational needs of the community. r - CA rt r k k f Key Implementation ActionS Energy aim Goal 1. Encourage energy efficiency, conservation, and sustainability in Watertown to reduce energy consumption and cost. A. Develop a greenhouse gas emissions inventory of municipal operations and the entire community and communicate the results. B. Create a Climate Action or Energy Master Plan and adopt it as addendum to the Watertown Comprehensive Plan. 3 - T Key Implementation Actions Jnergy mom A Goal 2. Establish best management practices and technologies in future construction, renovation and maintenance of public buildings and facilities. A. Create case studies that track and report the progress of retrofitting municipal buildings through the Energy Services Company (ESCO). - T Key Implementation ActionS Energy di Goal 3. Reach out to the community as a whole to inform and educate residents and businesses regarding energy conservation opportunities and sustainability principles. A. Expand public outreach and engagement programs. Key Implementation ActionS Energy Goal 4. Increase the fuel efficiency of the Town's municipal fleet. A. Create and adopt a Green Fleets policy that outlines specific recommendations for purchasing only fuel efficient vehicles for municipal use when they are available and practical. B. Create and adopt a policy to "right-size" the municipal fleet. F i _z - _ _ ---- ■; may.`L. ;�„ f�f T -_ ` - • -yj ' _ THE ARSENAL 014 THE CHARLES 4'lf } •'� . .' A 2'khenahealth Exhibit 22 Confidential EXISTING CONDITIONS AND ISSUES This stretch of river serves as Watertown's waterfront.Residential neigh- borhoods face directly onto the reservation,and a half dozen local streets %- -�H 1 to I_ intersect Charles River Road.Despite these benefits the Watertown Front seems unconnected both to the river and to the neighborhood.There is an opportunity here to reshape the river's edge and invite more people to ^' enjoy the reservation. F —1 The mile-long Charles River Road operates well below capacity as a four-lane parkway. ��� Quiet much of the day and evening,it is a \V\� ,\ �I—IE R T O \V\� I \ favorite location for bicycling.Its width and IF I� �� � �� (ioN ) alignment,however,encourage speeds well above the posted limit.Charles River Road's recent Charles River Road between North Beacon Street and Galen Street Bridge narrowing through restriping has helped to calm traffic.Because North Beacon Street connects . KEY RESOURCES directly to Watertown Square,development at the Arsenal site is not expected to add substan- • Possible prehistoric sites tial traffic to this parkway. '' • Charles River Road(r9o2,r9zz) .- • Galen Street Bridge(z9o7) Crosswalks between Watertown neighbor- • Memorial to the founders of Watertown(z93z) hoods and the reservation are few and poorly i • Watertown Boat Landing(1937) marked.For much of its length the main river 01v 154 • Memorial to the r6 o landing o Ro er Cla and the Dorchester Men r pathway runs along Charles River Road with no setback or protection CHARLES RIVER 3 g .f g P (947) P Y g • Watertown Square:Thomas Mayhew Memorial;Benjamin Robbins from roadway traffic.A steep embankment near the Perkins School for ROAD BEGINS Curtis Memorial;Hood Rubber Company Memorial the Blind diverts the main path from the parkway in a confusing and AT WATERTOWN SQUARE(VISIBLE dangerous turn.Joggers regularly step off the path and run along the IN THE LOWER travel lane at this point.An informal secondary path along the wooded LEFT CORNER) INTRODUCTION AND HISTORY shoreline is very narrow and has severely eroded the embankment in AND FOLLOWS A BROAD ARC TO places,particularly at the base of the Perkins School hill. NORTH BEACON The Metropolitan Park Commission acquired the river frontage STREET(RIGHT between the Cambridge Hospital and the Watertown Dam in L9ro and The wooded banks and open meadows along Charles River Road are CENTER). awarded a contract for construction of Charles River Road that same isolated from the rest of the reservation and underused.The river,much year.The Watertown boat landing,built in 1937,marks the upper termi- narrower along this stretch,is almost entirely screened from view.The nus of the Basin.It replaced a landing located just upstream,one of six landscape in this section is a mixture of thick,wooded areas and open built along the river in 1911.. meadow.The woodland areas are overgrown with a number of invasive RECOMMENDATIONS species,including poison ivy.Before trees grew to block their view, benches at the crest of the knoll once commanded views of the Boston Eliminate two travel lanes and nar- skyline to the east row Charles River Road by fifteen to twenty feet.Maintain three-foot shoul- The Pat and Gabriel Fatten Playground and the basketball court near ders to accommodate on-road bicycle Irving Street lack any landscaping and intrude on the river setting.Much traffic.Provide pullouts for parallel of the playground and ball court equipment is damaged or out of date. parking near Watertown Square,next '` The historic Watertown Landing just below the Galen Street Bridge is in to the playground meadow,and close need of restoration.Haphazard plantings around the landing screen it to North Beacon Street.Redesign the ; and the river from view.The Saltonstall monument is as impressive as multiuse pathway and provide a six-to i any monument on the Esplanade,yet it is hidden from view on the ten-foot planting strip for parkway I / north side of Charles River Road.The area also includes several benches trees.Reassess the location of guardrails and three additional memorials: and remove any that are extraneous. • to Thomas Mayhew,a leader in Watertown affairs from 1635 to 1645; (A restriping of Charles River Road • to Benjamin Robbins Curtis,the United States Supreme Court justice reduced driving lanes to two and added who wrote the dissenting opinion in the Dred Scott decision;and biking lanes during the summer of • to the Hood Rubber Company employees who died in the two world 2000;the Watertown Arsenal Develop- EXISTING CONDITION(TOP)AND PROPOSED TREATMENT(ABOVE) wars. ment Corporation provided financial assistance for the project.) The entrance to Charles River Road and the parkway system at Water- town Square is cramped by side streets and in need of stronger plantings. • Redesign the existing multiuse pathway and widen it to ten feet to accommodate two-way traffic.Add crosswalks and"Yield to Pedes- trian"signs at key neighborhood streets,including Irving Street. GOALS 155Ow • Redesign the existing shoreline path as a soft woodland path at least • Enhance the horticultural health and diversity of the six feet wide.This width may require construction of a retaining wall reservation. at the base of Perkins School hill.Remove the broken asphalt. • Unite the park and the river with scenic vistas at key points. • Limit the impact of cars on the visitor experience. • Install a new pedestrian footbridge across the river at a site near • Improve the character of the pathways. Maple Street in order to divide one of the longest walking loops in the reservation into two shorter loops and to provide splendid views up and down the river.A new pedestrian bridge would link Watertown neighborhoods to the recreational opportunities at Daly Field. PLAN ALTERNATIVE and games.Establish hardy groundcovers,such as a fes- F F r P cue grass mix,on such steep slopes as the one running Am, C between the parkway and the playground meadow. F'c'e "CTtTF�T -^ -.. i.-• f,•MrJ.pOnl —r •Remove the intrusive and damaged spray foun- r tain,fencing,and broken playground equipment and selectively replace them with new play structures ✓F {{���. chosen and sited to be as unobtrusive as possible. Relocate the basketball court to a city lot.Because { d brightly colored playground equipment and fences would be out of place along this natural riverfront, • Reinforce a continuous street-tree edge along Charles River Road, develop instead a natural-landscape play area with climbing trees, particularly abutting residential neighborhoods.Mark the Watertown boulders,and landforms that would help introduce young children Square gateway with ornamental shrubs,grasses,and perennials. to the natural environment. • Reestablish scenic vistas,including views from Watertown Square Remove the parkway trees in front of the Saltonstall monument to the river and toward downtown Boston from the knoll near the to permit an unobstructed view of it from the parkway and paths.It Perkins School.Align vistas to the river with neighborhood streets. should be possible to see glimpses of the river from the monument as well.Repoint and conserve the monument. • Maintain the rich mixture of open fields and wooded banks along the river that characterizes this section of the reservation.Promote Restore the landscape at the Watertown Square landing.Reduce the understory shrubs and trees in woodlands and add evergreens to pro- paved area and replace asphalt with pavers to match the character of the vide winter interest.Control invasive plants such as poison ivy.Prune dead stonework.Restore the granite balustrades.Redesign plantings to frame and dying trees along the walkways.Establish meadow grass and wild- seating areas and reduce exposure to passing cars.Protect existing oak t1v 156 flowers in place of mowed field while maintaining enough turf for picnics trees as major landscape assets.Provide pedestrian lighting. �i"1 -. T; ill M1s �.. .� 1 .� 1.. "7r•¢F ,4. �.�a+ ' .,,. r � - �� i• _J' I l r � 1��'�• tee ' .-=f,- �-rp.,�.� THE SKETCH ABOVE SHOWS EXISTING CONDITIONS.THE PROPOSED TREATMENT(RIGHT) INCLUDES OPENING NEW VIEWS TO THE GALEN STREET BRIDGE;REPAVING AND REPLANTING THE OVERLOOK;AND SPECIAL MAINTENANCE OF THE LARGE OAKS ALONG NORTH BEACON. �" - EXISTING CONDITIONS AND ISSUES • Establish a reconfigured overlook at the seawall with interpretive The continuous fence along the Arsenal site detracts from the setting and elements relating to the Arsenal.Maintain the seawall and remove cuts the Arsenal parkland off from the reservation.Vegetation is so heavy trees and shrubs growing from cracks. in some sections that the river's presence is totally concealed.The old • Broaden the field at the eastern end of Greenough Boulevard and re- Arsenal seawall stands in contrast to the wooded banks and opens up shape the paths and plantings to create a park within the reservation. views to the river and the North Beacon Street Bridge.Trees are starting to grow from the cracks in the seawall but pose no immediate threat to its integrity.The trees and ground next to the seawall are in poor condi- tion.Paths seem arbitrarily laid out. GOALS • Preserve the parkway in its current state. '� z �:,•• • Integrate the Arsenal Park(see Segment ION)with the reservation. • Open views to the river. • Reconfigure the area near the seawall as a special overlook. S Q U1 II IB N O C K Ir T PARK (ioN) RECOMMENDATIONS North Beacon Street between North Beacon Street Bridge and Watertown Yacht Club • Remove the boundary fence along the north side of the parkway, thin the woodland slope to open views and promote better growth, KEY RESOURCES and provide direct pedestrian access between Arsenal Park and the reservation. Sunrise Island 15 I Ow _ North Beacon Street(zpos) mom • North Beacon Street Bridge(zpz7) • Watertown Yacht Club(.rp42) INTRODUCTION AND HISTORY Densely wooded ridges frame this part of the Charles River Basin. Squibnocket Park includes a three-and-one-half-acre field on a filled ter- race and two and one-half acres of woodland along the shore.The honey THE ARSENAL SEAWALL ALONG THE WESTERN STRETCH OF GREENOUGH BOULEVARD. locusts scattered throughout the field create a lovely pastoral setting.This _ open ground fills up on warm week- sight lines and speeding cars.Drivers had difficulty making a left turn ends with sunbathers,picnickers, from Greenough Boulevard at certain times of day.North Beacon Street's ' x and strollers.The wooded Sunrise recent narrowing through restriping has helped to calm traffic. Island forms one side of a narrow channel that provides the only access Park users approaching Squibnocket Park from upriver and local 5� to the Watertown Yacht Club. neighborhoods must get around the Watertown Yacht Club,which takes up hundreds of feet of shore.A hidden pathway follows the wooded shore R Squibnocket Park and half of the and side channel formed by Sunrise Island and retreats back to the road Watertown Yacht Club site were at the Watertown Yacht Club fence. once a part of the Watertown -� Arsenal and used for military pur- North Beacon Street and a historic Arsenal fence cut Squibnocket poses.Because of ground contamina- Park off from the redeveloped Arsenal Park.Pedestrian activity between tion,the Environmental Protection this new park and Squibnocket Park will increase in the next few years. Agency has designated this a Super- There will be an increased demand for parking in the area,which will fund site.The U.S.Army recently increase pedestrian crossings of North Beacon Street. finished remediation of contami- nated soil at the Arsenal site just At the request of the Town of Watertown,the Massachusetts Highway north of Squibnocket Park.This site is being redeveloped for commercial Department has narrowed North Beacon Street to two lanes between Water- uses and the seven-acre,public Arsenal Park,which will include adapting town Square and Charles River Road and added parking and bicycle lanes the former Arsenal Commandant's House for a museum and community on both sides.There has been little increase in traffic along this stretch in center.Remediation of contaminated soil at Squibnocket Park is under- recent years,and projected volumes—even taking into account the Arsenal way with the guidance of an MDC conceptual park design. development—are moderate.The PEDESTRIAN CROSSINGS OF NORTH BEACON calming effect on traffic of the STREET ARE LIKELY TO INCREASE WITH THE narrowing has been noticeable. REDEVELOPMENT OF ARSENAL PARK. CVV 152 EXISTING CONDITIONS AND ISSUES Canada geese,attracted by the mowed turf,have become an increasing nuisance in recent years.Only zoo to 300 feet of the 1,700 linear feet of shoreline along Squibnocket Park are open to the river.Dense trees and a low herbaceous border block views upriver.Several factors isolate Squib- �4 nocket Park from the rest of the reservation and nearby neighborhoods. - The excessive,6o-foot width of North Beacon Street and the absence of curb cuts along it once encouraged speeding.Cars entered the residential neighborhood at high speeds,causing numerous accidents.Pedestrians had difficulty crossing North Beacon Street at the bridge because of poor GOALS • Improve Squibnocket Park and North Beacon Street to provide greater access to the reservation for neighborhood residents and _ regional users. • Make Squibnocket Park a model for achieving environmental health and balancing park use with natural resource protection. RECOMMENDATIONS • Coordinate with the U.S.Army Corps of Engineers to improve the environmental condition and the value of Squibnocket Park as a passive recreation area. PROPOSED PATH EXTENSION PAST THE WATERTOWN YACHT CLUB. • Support the Army Corps of Engineers'plans to mitigate contami- Connect Squibnocket Park and Arsenal Park with improved cross- nated sediments in the river.If dredging is required,insure that walks at the North Beacon Street Bridge and a new pedestrian sufficient water depth is achieved to maintain boat access to the crosswalk at the midpoint of North Beacon Street leading to a new Watertown and Newton Yacht Clubs.In the event that dredging is not gateway and path to Arsenal Park.Place signage at the crosswalks to feasible and the yacht club sites become inaccessible to vessels,restore protect pedestrians.If these signs are ineffective,consider full signaliza- these sites to parkland and passive use. tion of these intersections. • Preserve Sunrise Island as a wildlife bird sanctuary.Prevent access Provide an improved pathway connection between Charles River to this island. Road and Squibnocket Park through the Watertown Yacht Club. Such an action will require phasing out on-site boat storage and 153 caw • Restripe North Beacon Street to accommodate travel lanes,park- reclaiming the storage and maintenance yard for a pathway extension. ing lanes,and bicycle lanes along either side of the parkway. Coordinate this work with Army Corps site remediation plans. • Provide short right-turn lanes at the Arsenal site,Charles River Develop a continuous soft path set back at least twenty feet from Road,and Greenough Boulevard if required.Maintain the two lanes the shore. eastbound across the North Beacon Street Bridge for cars to queue. Westbound,use one lane as a dedicated right turn lane,and,if practi- Provide one or two small wooden landings along the shore for cal,place a pedestrian island at the Greenough intersection to improve canoes and kayaks. pedestrian safety.