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Aug 22

From the Town Administrator's Desk - August 23, 2018

Posted on August 22, 2018 at 9:17 AM by Elizabeth Dukes


            By Gregory T. Federspiel

By many indicators, the Town is on sound financial footing.  We enjoy a Triple A rating from the bond agencies. We have a very healthy raining day fund and we are on track to fully fund our long term liabilities for retirees (pension and health insurance). We are embarked on an aggressive capital reinvestment plan as we aim to catch up on years of deferred infrastructure maintenance.  And we benefit from a stable tax base with modest new growth annually. Town services are at a high level and also are stable with the exception of our call fire fighter force being in flux.  Our multi-year operating projections for the Town reveal modest expenditure growth that can be handled by typical new growth and relatively modest property tax increases that are no higher than 2.5%.  Our recent success with securing grants (over $4 million in the past 5 years) gives an important boost to our infrastructure projects and we anticipate this success to continue.  Finally, momentum is growing to expand our tax base by allowing additional development that is environmentally sound in the Limited Commercial District which lies to the north of Route 128.

Despite this good news, these accomplishments have been accompanied by relatively high tax increases over the past 20 years (driven largely by a large amount of capital borrowing and three operating override votes) and there are new challenges looming for the Town.  School Operating Costs are projected to grow at a faster pace than inflation and beyond the revenue limits of Proposition 2 ½. And the capital needs of the School District – updating or replacing two old elementary schools (67 and 61 years old!)) and a middle/high school that will need upgrades as it ages – present significant challenges to our financial picture.   Longer term we face expensive and hard choices as we confront the impacts of sea level rise and more damaging storms.

To meet these challenges, a new ten point plan is being developed that increases our tax base, seeks to lower operating costs, redirects funds as current liabilities are paid off, and strategically times the largest of our capital projects so as to better manage our debt load.  Significantly, for non-school capital needs, we have an opportunity to go to a cash basis for the next fifteen years.  Within four years our annual debt payments will decline by $1 million.  With voter approval, we can replace this amount of debt exclusions with a like amount of annual capital exclusions to bring our yearly capital expenditures to $3 million.  This will allow us to direct 100% of our funds to project costs, saving significantly on interest payments.  Over the course of 15 years we can make $45 million worth of improvements to our roads, our vehicles, our utilities and our town buildings putting us on a solid trajectory for keeping up with our infrastructure needs.

While still some 14 years out, by the early 2030’s we will have fully funded our pension and OPEB liabilities.  The dollars currently allocated toward these liabilities will become available for other uses.  We also will no longer have non-school debt by this time, freeing up yet another million dollars. However, we are facing the necessity of a large new school borrowing now.  Some of our short-to mid-term strategies may help soften the burden of this new borrowing but taxes will need to be increased in order to pay for the new Memorial school project.  

Our financial strategies rely on the following:

1)      Maintain current operations within the revenue limits of a 2.5% annual tax hike and taxes from new development (Annual Town operating increase between 2-2.5%; School District at most 3.2%);

2)      Cap current tax exclusion levels for non-school needs, move to a cash basis for Town capital needs using capital exclusions in place of retiring debt exclusions;

3)      Seek voter approval for a new debt exclusion to pay the bonds for the new Memorial School; Time the major Essex Elementary School Project to coincide with the pay down of the middle/high school debt; fund other school capital needs through the District’s operating budget and reserves;

4)      Promote new growth in the Limited Commercial District as a means to increase tax revenues;

5)      Continue to seek opportunities for shared services with neighboring towns in order to lower operating costs.

As fall approaches discussions on these strategies and how to fit our various needs within these measures will intensify particularly in the context of the proposed new elementary school project.  Stay tuned for more details!