Override not needed? Project may be funded regardless of May vote (Updated – again)

by beth on March 10, 2017

Post image for Override not needed? Project may be funded regardless of May vote (Updated – again)

Above: Two Town Officials question the need for a proposition 2 1/2 override to fund the police and fire station at the golf course. (photo left by Susan Fitzgerald, right posted to Facebook by Charles Kerbel Sr.)

Yesterday, I posted that the $27M project for the Public Safety Building at St. Mark’s Golf Course hinges on a May ballot outcome. That information is now being questioned.

What I shared was based on Town Administrator Mark Purple’s understanding of what is required. But two other informed Town Officials believe that is wrong.

Al Hamilton and Kathy Cook both opined the project can happen without an override approval by voters (at least this year).

Hamilton says that if an override doesn’t pass the Town would likely need a prop 2 ½ override down the road in order to cover escalating operating costs. That is something that voters have approved in past years rather than slash services.

Based on their comments and my updated posts, Purple clarified his statement from yesterday:

While the Board of Selectmen have chosen to fund this project through a debt exclusion, the Town currently has excess levy capacity that could fund the project without the need for a debt exclusion vote. It has been the policy of the Selectmen to exclude capital projects of this magnitude. The Finance Director would need to do more analysis as to the long-term impact to the Town of funding the project in this manner, including impacts to departmental operations, and the potential for an operational override at some point in the future, before we could comment on the sustainability of this approach.

Hamilton was a member of the Public Safety Study Committee (and former chair who researched the Town’s ability to fund the project). His comments to my post from yesterday included:

3. If the ballot fails, the project can still proceed, however, the funds required to repay the debt would have to be counted against the Prop 2.5 limit. As things stand right now, we could do this without impacting services. I believe we have about $2,000,000 of unused taxing authority before we reach the Prop 2.5 limit. The debt service, by my calculation is about $1,500,000.

4. We are unlikely to see any significant impact on our tax bills until the FY 2020 budget. Which is when the project would be bonded. Whether we would still have a Prop 2.5 cushion at that point is anyone’s guess. There are other significant claims on that money such as our very large unfunded retirement obligations.

So there is the real prospect, if the ballot measure fails, that in the future we would have to cut services or authorize a permanent operating Prop 2.5 override.

Finally, one of the items that came up in the Advisory debt analysis is that our tax rate (Taxes/$1000 of assessed value) has been steadily rising and there is a hard cap at $25/$1000. Other towns will reach this limit before we do but the trend is in this direction in the long run.

Cook is a member of the Advisory Committee which conducted its own study of the Town’s ability to pay for the course. Responding to a similar comment Hamilton posted earlier, she agreed:

I am not sure why Mr. Purple said that the debt exclusion ballot question failure kills the project. Mr. Hamilton is correct in pointing out that we could pay for the project within the annual levy limit. Using a 3% interest rate and financing $27MM over 30 years requires about $1,400,000 of annual debt service which currently fits into our levy capacity. Putting the new debt service inside the levy spending would certainly force Southborough to tighten its fiscal belt – which might be a good thing. So I agree with Mr. Hamilton that the failure of the debt exclusion does not kill the project. In fact we should have a robust debate as to where the debt belongs – i.e. inside or out.

Updated (3/10/17 11:58 am): I inserted a clarification from Town Adminstrator Mark Purple.

Updated (3/10/17 12:30 pm): I mistakenly referred to Al Hamilton as a current member of the PSSC. He resigned a few weeks ago.

 

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