Can we afford four building projects? Yes! Here’s how

By Sarah Marshall

What is the Town’s plan for paying for the Jones Library expansion and renovation, a new or renovated elementary school, a new fire station, and a new DPW facility, all to be constructed over the next 10 years? Are we in for huge increases in our property tax bills? How can Amherst afford this infrastructure push? [Answers: Read on, No, and Read on.]

If you are nervous about undertaking so many significant projects, and worried about the Town Council’s appropriation of $35.3 million for just the Jones Library, or if you wonder whether we can build a school if we pursue the library expansion, please read to the end, because you should have a clear understanding of the ballot question you will see on Nov. 2.

First, a quick explanation of the Council’s April 2021 vote to appropriate $35.3 million for the Jones Library renovation and expansion project, which we will be asked to affirm on Nov. 2.  Much erroneous information has circulated about that vote, so it is time to set the record straight. Council’s “appropriation” amounts to authorization for the Town to borrow up to that amount of money. The “appropriation and borrowing authorization” language is standard for large construction projects – Town Meeting voted on such matters in the past. In addition, appropriated money is not limited to tax revenue but can include grants, donations, and other funds.

But why would the Town need to borrow $35.3 million, when the ultimate cost to Amherst will be $15.8 million?  First, Amherst will probably not borrow that much, but the Massachusetts Board of Library Commissioners (MBLC), which has granted almost $14 million to the project, asked Town Council to authorize borrowing for the total project cost. Second, because some funding may arrive after the bills are paid (for example, private donations and receipts from the sale of historic tax credits), the Town may need to borrow some money for which it will later be reimbursed. The Town will not be on the hook for a $35.3 million library project. Here is the table showing who will pay what, in the end:

Appropriation & Borrowing Authorization Order FY21-06C

  • MBLC Grant Contribution $13,871,314
  • Jones Library Inc. Trustees $ 5,656,576
  • Town’s share $15,751,810
  • Total $35,279,700

It is this set of numbers that you will see on the ballot.

But what about the Town’s share, $15.8 million? How will that be paid for? Will it prevent us from undertaking other projects?

Here it is useful to have a basic understanding of the plan developed by the Town’s Finance Department and presented to the Finance Committee and Council in February 2021. Town Council requested that Town staff develop a plan for financing all four major projects in a timely fashion, specifically to learn whether it is feasible for us to undertake them all in a way that voters are likely to support.

The ensuing financing plan (which indeed makes many assumptions) shows that the Town can afford to build the four projects without severely constraining our public services or ability to fund smaller capital projects such as sidewalk repairs and snowplow purchases, or by unreasonably burdening taxpayers. Basically, the plan is to borrow funds for three of the projects (Jones Library, Fire/EMS station, and a DPW facility) and to pay off the debt over time from our existing revenue streams, including grants and donations; only for a school project will taxes be raised for a limited time. We may have a couple of years of tight budgets, to be sure, as the projects begin, but several factors will work in our favor:

  • Low interest rates for loans overall,
  • The Town’s strong bond rating and financial record, which let us borrow at advantageous rates,
  • The Town’s strong cash reserves (i.e., savings), which can ease some of the early spikes in debt payments and, if necessary, contribute towards annual operating budgets,
  • Very low levels of Town debt currently, which will be entirely paid off within a few years,
  • Continued new growth in taxable real estate, which raises annual revenue and spreads excluded debt over more taxpayers,
  • Imposition of cost caps on each project, so that we know in advance what our total payments of principal will be,
  • Disciplined policy of directing a portion of property tax revenue to capital expenditures,
  • Conservative annual budgeting, which means that the Town typically has cash on hand at the end of the fiscal year that can be placed in reserve.

For a new elementary school, the financing plan envisions a debt exclusion override for the Town’s contribution (approximately half of the total cost will be contributed by the Massachusetts School Building Authority). This type of override raises property taxes only for the period while the debt is paid off; it does not permanently raise property taxes. Why an override for the school borrowing? Because voters approved an override for an elementary school project in 2016, and a majority of voters (but not the required 2/3) again supported the override after Town Meeting would not agree to the necessary borrowing, planners feel they are likely to support an override in the next year or so.

Delaying projects any further is likely to cost us more in the end, or give us less for the same price. The Finance Director, Sean Mangano, noted that an elementary school project, when it finally begins, will cost us substantially more than the project that was rejected several years ago. He also noted that continued delays require us to spend large sums on repairs to buildings that are at the end of their useful lives. The Town also should get the present projects completed and paid off before other parts of its infrastructure need to be significantly renovated or rebuilt several decades from now.

From a fiscal standpoint alone then, prudence demands that we voters stop arguing over design details, agree to compromise, and step up to our civic responsibility to maintain our public infrastructure, parts of which have deteriorated to dangerous and shameful degree. We need to say “Yes” on Nov. 2 to affirm Council’s vote to proceed with the Jones Library project and “Yes” in a year or so when a debt exclusion for the elementary school is put on the ballot. Financially, there is no better time to undertake this work.

[Note: You can find more information about the plan by clicking on the “Overview of the Four Major Capital Projects” page on the “Town Government 101” drop-down menu on this website.]

3 thoughts on “Can we afford four building projects? Yes! Here’s how”

  1. We are getting the kind of in-depth analysis we can sink our teeth into that we’re not getting any place else, pieces with explanatory power. Thank you for all you are doing at the Amherst Current. I am still hoping for some kind of detente that leads to some respectful inter-silo conversation between the two startlingly cohesive opinion groups in Amherst, something that would get us to clearly defined “agree to disagree” moments. I’ll admit: I have no idea how that would happen, because there are no brokers. But I think that we would be a better town for it.

    Like

  2. Well done, Sarah! Thank you for this.

    KC

    On Mon, Aug 30, 2021 at 1:30 AM THE AMHERST CURRENT wrote:

    > The Amherst Current posted: ” By Sarah Marshall What is the Town’s plan > for paying for the Jones Library expansion and renovation, a new or > renovated elementary school, a new fire station, and a new DPW facility, > all to be constructed over the next 10 years? Are we in for huge inc” >

    Like

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