CIP Scenarios—

Juggling Projects

And Debt

By John Voket

Newtown Finance Director Robert Tait introduced several bonding scenarios to the Board of Finance November 14, illustrating the town’s options for capital project borrowing and how debt service on existing projects will factor depending on how much of an increase officials and taxpayers agree to support in next year’s municipal budget.

While the introduction of these bonding forecasts may represent the first official presentation of the next budget season, finance board Chairman John Kortze said he would reserve any discussion until after three newly elected board members take office in December.

As a result, Mr Kortze has cancelled the board’s regular meeting for Monday, November 28, and will presumably resume discussion on bonding options at the new board’s first meeting December 12.

Mr Tait said he wanted to provide finance officials with an idea of the level of future borrowing the town might do within its 10 percent debt cap, while moving forward with either a zero increased budget, or increases of 1.5 and 1.75 percent in 2012. The finance director then outlined how those future borrowing ranges would play out over the course of the current, proposed five-year Capital Improvement Plan (CIP).

All three year one variables then roll out assuming a 1.75 percent increase in years two through five.

If officials and taxpayers approve a zero-percent budget increase next year, the most evident impact on potential borrowing occurs in the third year of the CIP, where officials currently expect to be able to borrow up to $5.4 million for capital projects.

That $5.4 million possible under the cap, however, shrinks by more than half to just $2.5 million if next year’s budget increase comes in at or about zero, Mr Tait explained.

Some of the newly proposed projects in year three include capital road and bridge upkeep, phase two of three in the Fairfield Hills walking trail initiative, and what would be an installment investment in the Sandy Hook streetscape program.

Any or all of those projects would be coupled onto existing debt service, primarily for the new high school addition and the middle school roof project according to documentation provided by the finance office. While a significant portion of the bonding that will be carried forward is for school district projects, the debt service is applied to the Board of Selectmen’s or the town-side budget.

Mr Tait said that he is also in the process of preparing a borrowing scenario that would ratchet the borrowing cap down to nine percent beginning in year four. Mr Kortze subsequently told The Bee that year four was an optimum year to lower the debt cap because it represents the first borrowing opportunity following the retirement of a large chunk of bonding.

Documentation bears that out with the comparatively modest request in year three being dwarfed by a whopping $28.9 million in capital project requests in year four, including a $10 million construction phase for a new community center, $6 million for building demolition at Fairfield Hills, and $5 million for a Hawleyville sewer line extension.

That sewer extension has been touted by economic development officials as a key to attracting potential large scale commercial development to the Hawleyville area, particularly around the intersection of Routes 25 and 6.

Mr Tait also noted that under the current proposed CIP, maintaining a 1.75 percent budget increase in all five years will still require a slight adjustment in year five, where the approximate current borrowing projection drops from $12.9 to around $10 million.

The finance office documentation also takes into account approximately $850,000 in anticipated savings from bond refunding savings in 2012 and 2013.