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Jul 11

From the Town Administrator's Desk - July 12, 2018

Posted on July 11, 2018 at 12:18 PM by Elizabeth Dukes

FROM THE TOWN ADMINSTRATOR’S DESK

            By Gregory T. Federspiel

For the last few years you have heard a fair amount about the large backlog of capital improvements we need to make.  From repaving roads to replacing water and sewer pipes, from upgrading buildings to purchasing replacement vehicles we have a long list of needs.  Fortunately we have been able to make good progress on a number of these needs and have been able to do so without increasing our indebtedness as any new debt has been off-set by old debt being retired. 

To maintain our current non-school infrastructure, which is valued at over $100 million, we need to be spending roughly $3 million each year on capital projects. We are within striking distance of doing so on a cash basis and can achieve this milestone within a few years.  In the last two budgets voters have approved replacing the amount of retiring debt exclusions with a like amount of capital exclusions, meaning we have taken the funds that were used to pay off a past borrowing and instead used the cash raised to pay directly for a particular capital improvement project.  This has the advantage of eliminating interest payments.  Such votes do not increase taxes but they also do not allow taxes to decrease if we simply retired the debt without replacing it with new capital or debt exclusion votes. 

This is just one of nearly a dozen strategies we might want to utilize as we continue to address our capital needs going forward.  There remains the more traditional option of approving new debt exclusions.  Historically this is what has been done for both Town and School capital needs.  However, continuing this approach means taxes will increase at a rate well above the limits of Proposition 2 ½ .  The middle high school was financed this way.  We are not quite half way through paying off the bonds for this project which currently adds approximately 5% more to one’s property taxes.  A new elementary school would likely have a similar impact depending on the final cost of the project.  

Communities often pursue new commercial development as a way to grow the tax base to help pay for capital needs.  This has not been a big part of Manchester’s strategy in the past.  However, as part of the master planning process, interest has been expressed in exploring ways to expand development in the areas to the north of Route 128 as long as strong environmental protection provisions are maintained.  This is likely to be a recommendation that emerges from the new plan.

Another tradition which we could alter is being less conservative in our estimated local receipts. We collect excise taxes on cars and boats, permit fees, rental fees, etc. which traditionally we have been very conservative in estimating annually.  Monies collected above what we estimate flow into our rainy day account which we use for one time capital needs.  Even with this use the rainy day account (fund balance) has continued to grow above our target amount thus we could be less conservative in our estimates while still being prudent in maintaining a healthy fund balance in case of emergencies.

We will also have opportunities to redirect current spending toward capital needs in the future.  While the early 2030’s may seem like a long way away, for long-term capital needs another 15 years is not that far off.  Assuming we do not borrow for non-school capital needs over the next 15 years, we will have retired another million in annual debt payments and we should no longer be needing to contribute to pension and other retiree liabilities by then, raising the total amount of funds that we can redirect to capital needs to $2 million.  Thus the timing of new large capital projects becomes an important factor. 

Finding operational savings, boosting user fees, and continuing to be aggressive in the pursuit of grants (we have received over $4 million in the last 5 years) are other strategies that can help us fund our capital needs.  With the fall votes scheduled for the possible new elementary school, discussions around these various strategies will become even more important.