Council On CIP:

Stick To Debt Cap

By John Voket

The Legislative Council’s finance subcommittee spent more than five hours Wednesday evening poring over financial minutia mostly related to the school district.

In the first of three marathon of sessions, starting at 6 pm, the subcommittee first reviewed, then recommended the new three-year teachers’ contract to the full council. That was followed by a session with the Board of Finance on the town’s overall capital improvement plan (CIP) and a joint special meeting of the finance board and full Legislative Council. By 11:30 pm, the financial review had reaffirmed the town’s commitment to its ten percent debt cap.

The final meeting provided council members an extended opportunity to review and question three possible five-year capital spending scenarios, with varying expenditures for a high school expansion project dominating each proposal. And when all was said and done, the Legislative Council’s consensus was to budget an expansion for 2,022 students, include artificial turf for the Blue and Gold Stadium, and to fit as many other spending priorities into the mix without exceeding the town’s ten percent debt cap.

Besides an overall operating budget that is expected to exceed $100 million in the 2007-2008 fiscal year, the combined town and school capital spending priorities currently on the table would tack on well over $100 million more by the end of 2012, even if no new capital projects are proposed in that period. Many officials conceded in recent weeks that there was a way to fund virtually all those priorities, but it was not until Wednesday evening that a clear mandate was articulated to make it happen while maintaining a fiscally conservative control on how much total debt to incur.

Early on in the session, Board of Finance Chairman John Kortze admitted that while it is his board’s mission to craft a responsible five-year plan of spending, it is difficult to do without looking past that short-term window.

Although the school expansion project is scheduled to be fully funded within the five-year CIP window, much discussion has centered around whether or not the finished product will accommodate student populations going out ten to 20 years into the future. The Board of Education and finance board vice chair James Gaston have consistently advocated building out to the maximum allowable student reimbursement rate, suggesting that eventually the school will require that space.

Other officials, including the remaining five finance board members, have maintained that the maximum buildout cannot be fully justified considering myriad statistics from declining birthrates, to diminishing housing starts and the amount of buildable land remaining in Newtown for future residential development.

The first spending scenario the council heard about Wednesday was formulated by town Finance Director Benjamin Spragg. That proposal funds the maximum high school population projection, but completely removes lower prioritized projects. The second, tendered by finance board members Michael Portnoy and Joseph Kearney, reflected slightly more conservative population projections along with every other current CIP priority plugged into a five-year formula.

In a third scenario, suggested by Mr Gaston, the high school is funded to the maximum population projection, certain projects are pushed out more than five years, and certain capital expenditures including a fire department pumper truck are moved from the CIP into the annual budget. That proposal factors in about $9 million in alterations to the current CIP, or outright cuts, and projects that are moved out in the timeline are reprojected incorporating expected inflation.

The finance board also detailed other points contributing to a broader, long-term view of municipal finances. One concern is that current spending trends that would protect the debt cap are based on existing CIP proposals and an annual town budget assuming a six percent annual growth in revenue.

Mr Kortze argued that the six percent revenue projection may not come to fruition depending on a host of local regional and even global factors like continuing employment rates, maintaining average local household incomes, future applications for local building permits, interest rates, and other economic trends.

“We are not going to have the cash flow that we have had in recent years,” he warned.

Mr Gaston discussed the debt cap compared to the average of all Connecticut’s municipalities, which average 7.7 percent, well below Newtown’s cap of ten percent.

“Any towns carrying 10.5 or 11 percent debt caps have net grand lists that far exceed or even double ours,” he said. “Newtown can only carry the ten percent because our average earnings are substantially higher than many other towns.”

In the final hour of the meeting, council members also looked at using approved spending for open space purchases and what could be up to $2 million in uncommitted money in the Fairfield Hills redevelopment plans as buffers to help keep the existing CIP proposals on track, while holding the debt line at or below ten percent.

The finance board is tentatively set to meet Monday, December 18, to finalize its CIP recommendations.