Finance Board, First Selectmen Discuss Revising Capital Plan

By John Voket

“I’m not talking about the merits of it, I’m talking about the mechanics of it,” said John Kortze summing up one of the challenges the Board of Finance and the town are having in deciding exactly where to fit three installments totaling $1.5 million committed to Newtown Hook & Ladder in the tight and complicated scheme of the current Capital Improvement Plan (CIP).

On February 9, the Legislative Council agreed to return the CIP to the finance board for possible revision after hearing several requests and ideas about moving requests around within its five-year timeline. The council also received a recommendation from its finance committee to take advantage of a one-year dip in debt service during year five of the plan, to permanently lower the town’s borrowing cap from ten to nine percent.

During discussion on that subject, First Selectman Pat Llodra reminded the finance board that anything that might be added into the CIP ahead of its fifth year would mean extending projects already earmarked in year five even further out in time, possibly into the sixth or seventh year, or beyond.

That is because year five is already maxed out at $30 million in capital requests. To achieve the reduction necessary to reduce the debt cap to nine percent, $10 million of those requests would have to be dropped or moved back in the plan. And as Mrs Llodra explained, only $5 million in bonding capacity is available in both years six and seven, with another $10 million available in year eight.

“If we lop off $10 million in year five, we’re not going to do it painlessly,” Mrs Llodra told the finance board. “That’s ok, but we want people to understand the pain.”

At the same time, the first selectman and finance board were looking at the $1.5 million promised to help Hook & Ladder secure and eventually pay down a mortgage on a new headquarters facility. That project is currently in limbo because the volunteer company was unable to secure a wetlands variance to construct the building on a donated site on Sugar Street.

The first $500,000 installment is budgeted in the current fiscal year, which ends June 30, 2011. The balance of the two installments were approved for the 2011-12, and 2012-13 fiscal years.

After some discussion on the matter, the finance board requested Finance Director Robert Tait to draw up a CIP scenario and related implications if the current $500,000 is shifted to the CIP in 2013. Mr Tait was asked to present that information to the finance board Thursday, February 17 (after this issue of The Bee went to press).

Following the finance board’s discussion four days earlier on February 14, Mrs Llodra further explained the fragile nature of the CIP structure in the coming years, and how even slight adjustments or additions could launch a domino effect that could have far-reaching implications on projects that might not be scheduled for seven to eight years out.

“The CIP is very tightly organized,” she told The Bee. “Projects have been prioritized and funded for each year depending upon what money is available to bond. Each year of the CIP, the debt gets close to but does not exceed the ten percent debt cap.”

The current challenge as the first selectman sees it is how to schedule the town’s commitment to Hook & Ladder. Given the current situation with the building project, Mrs Llodra said the finance board must assess the viability of “leap frogging” the current fiscal year commitment in relation to Newtown’s requirement to remain below its ten percent debt cap.

“Is there room in year three to take on that debt?” she asked. “The ‘contract’ between H&L and the town has to be defined before any transfer of funds occurs.  And that contract has not been developed.”

She said the current discussion calls into question whether there should be a formal understanding between the town and all its volunteer fire companies regarding facilities, property, etc. 

“In the case of Hook & Ladder, for example, the question has been raised, if the company should discontinue for any reason does the town have rights to the building, given that we have used $1.5 million in taxpayer money to fund its construction.”

Mrs Llodra said the three main questions to be answered are:

*What happens if the H&L should default on its mortgage?

*Does the town have any obligation?

*And, what becomes of other fire company properties should the town ever change to a paid service?

At the same time, the other end of the CIP is still in flux as the town determines how to reduce the debt level from ten to nine percent by year five (the 2015-2016 cycle of the CIP)?

“If a project cost is reduced for year five by $10 million, and those dollars are put into year six and seven — which could happen with the community center or the police station — then virtually no additional projects will be allowed,” Mrs Llodra explained. “On the other hand, reducing the debt cap to nine percent in one step effectively means that some significant elimination and/or reduction will have to take place in the existing plan; and no projects other than what is already on the books can be considered until at least 2017.”

Ultimately, Mrs Llodra believes the town can successfully reduce the debt cap to nine percent over a period of time, beginning in 2015-2016 and culminating in 2017-2018, while using the operating budget and capital nonrecurring account to pay for some of the CIP items, such as the fire tankers, Fairfield Hills walking trails, and utility infrastructure.

And whenever possible, address existing projects with other sources of revenues, such as grants.