Council’s Finance Panel Proposes Reducing Newtown’s Debt Cap

By John Voket

As an intense winter storm approached Tuesday, January 11, the Legislative Council’s Finance Committee met and put forth a plan that could protect Newtown taxpayers from being snowed under by excessive municipal debt in the coming years.

Finance Committee Chairman Ben Spragg introduced the idea after confirming that a combination of factors has opened up an opportunity for Newtown to bond as much as $30 million for capital projects in year five of the proposed Capital Improvement Plan (CIP).

Since that opportunity for increased borrowing, with its related debt service, was made public last year by Finance Director Robert Tait, Mr Spragg said departments have requested close to $30 million in proposed projects for that 2015-2016 cycle in the CIP.

“I’d like to see us reduce our reliance on debt,” Mr Spragg said, noting that 60 percent of the CIP’s current project requests come in that year five cycle.

His proposal was met with agreement from fellow committee members Gary Davis, Kathryn Fetchick, and Kevin Fitzgerald; council representative Jan Andras was absent.

To accomplish reducing the debt cap, which is a mandated limit on borrowing that should not exceed ten percent of the overall projected budget in each fiscal year, Mr Spragg suggested rolling back the limit on borrowing in year five from approximately $30 million to $20 million.

By reducing borrowing costs by one-third, the corresponding debt service would roll back to nine percent.

“If we send a plan out there that’s ten percent [in year five], it will be ten percent forever,” Mr Spragg said.

To help achieve the goal, Mr Davis suggested reformatting the CIP to provide a new column for projects that are viable for the purpose of planning, but not yet solidified to the point that they might be held in the CIP, effectively blocking other more viable capital projects from consideration for bonding.

Mr Spragg said he would suggest the finance board work on a system that considers such “place holder” projects. He also plans to ask the Board of Finance to consider reducing borrowing capacity from $30 million to $20 million in year five to affect the debt cap adjustment down from ten to nine percent.

During the meeting, the Finance Committee also received a request from Deputy Director of Land Use Rob Sibley to consider reimplementing capital borrowing to preserve town open space earlier in the CIP. He suggested that there are enough viable parcels available for the town to consider for open space preservation, that at least $1.5 million could be utilized as soon as the 2011-12 CIP cycle, which would impact the upcoming budget.

The council committee will also ask the finance board to consider pushing out committed capital funding to assist Newtown Hook & Ladder in establishing a new headquarters facility, and reallocating a total of $1 million already earmarked in two $500,000 increments in the current budget and in the 2011-12 proposal.

In other business, the committee heard a request from First Selectman Pat Llodra to move proposed capital funding for a Hawleyville sewer line extension into the 2012 CIP cycle in anticipation of a commercial development in the works on a parcel at the intersection of Routes 6 and 25 (see separate story).

Ms Fetchick also suggested the finance board examine a projected surplus for the Newtown Middle School roof replacement project. She told the Finance Committee that the architect has provided several optional add-ons to the project that might be requested to be paid for by those savings.