Sutton Town Administrator informs board about town’s debt projection
BY TOM REILLY
Sutton Town Administrator Smith said that Hersom had asked for the presentation on the debt but that he thought that it was something that everyone on the Board was interested in, especially with the high school/middle school debt coming on this year. He said the tax rate would continue to grow significantly over the next few years and it was important to know not just when the debt was coming off but also how the town would be able to pay for things like a new track, new highway department facility or a new police station.
Smith said the town had a number of ways to fund capital improvements. The first was through the use of the capital stabilization fund, a plan that was created back in 2007 as part of the override for the purchase of the Shaw Farm. The cost of that property was $45 million over 20 years. Smith said the town borrowed level principle, so while the principle payment stayed level, the interest payment would decrease by about $10,000 per year. Smith said six years into the plan, the current balance is $80,000 and $200,000 in 2014. The town administrator said if the town purchases a new fire engine in Manchaug from this fund and doesn’t use any of the remaining money on anything else the balance will still be in the $200,000 area in FY2015. He noted that the appropriation goes up by 2.5 percent every year. He said this
was a significant funding source for small items—say, under $1 million—but it would not work for larger projects like a new police station.
Mike Chizy pointed out that it was Geraghty who had come up with this plan at the time the town acquired Shaw Farm.
The second was through the use of a debt exclusion override, which Smith said until recently was the only way to fund long term projects. The item would be requested at town meeting and if the measure received a two/thirds majority it would then be voted on in a town election.
Smith showed a 12 year chart of the town’s debt, showing how the town has gradually decreased its debt from $2.3 million in FY2006—mostly due to sewer expansion—to roughly $1.8 million in the intervening years. In FY2012, the debt has increased to $2.4 million. He noted that the debt would have amounted to $796,000 had there been no school project. Smith said this will rise to $3.7 million in FY2014, after which it will begin to decrease, eventually going down to $3.2 million by FY2018.
Smith noted that interest rates are currently at historic lows, meaning that the cost of borrowing money is at a historic low as well. He noted that if the town borrowed $10 million at 3.5 percent for 10 years, it would save $550,000 over borrowing that moneyat4.5percent.Iftherewasa2percentage point difference, the town would save over $1.1 million.
The third method—free cash—was becoming more and more of an option as the town no longer puts much of it into the budget, said Smith. Since free cash is no longer being used as a revenue source, it becomes more available for the purchase of capital items.
Smith offered the selectmen several options. The first was to allow the middle school/high school debt to reach its maximum in FY2014 and allow for it to begin rolling off. Smith said he was also recommending the town sell the gravel pit on Hatchery Road and put that money to the construction of a new highway building on Shaw Farm. Smith said that Highway Supervisor Mark Brigham has been using very little sand treating streets and that the town’s salt shed is not on town property, meaning that the town pays $2,000 a year for this facility. The town administrator noted that this land will not be available to the town once the Stop & Shop project begins.
Smith suggested prioritizing the following projects—a highway facility, a town track, a soccer field, a baseball field, and a police station—at the cost of $12 million. He recommended using the capital stabilization fund for anything costing less than $1 million.