Should the town finance construction of a fire station outside the taxation limits of the state law known as Proposition 2½?
That decision is expected on May 13 during consideration at the Select Board’s regular meeting that evening. The vote on the project will be at a June 11 Special Town Meeting.
This week, the architect for the proposed facility at 139 The Great Road released cost estimates totaling almost $32 million.
An approval threshold of two-thirds of the voters present is required for bonding. If the debt exclusion is part of the package, there’s an additional requirement: a majority vote in a Town Election within 90 days.
Proposition 2½ permits excluding the cost of major projects from the law’s tax levy limits. The debt exclusion would accommodate only the fire station and would expire when the bond is paid. This differs from a Proposition 2½ override, which establishes a new baseline for future tax calculations.
Earlier this week at a meeting of financial boards and committees, town officials weighed the pros and cons of this approach.
Town Manager Matt Hanson noted that excluding the debt means there would be no impact on the town’s unused tax levy. He noted that in normal operations, as bonds are paid off, borrowing continues. “Here it really becomes a comfort decision,” he said.
“Historically, if we can pay them within reason, we do not use exempt debt,” said Finance Committee Chair Ben Thomas. “If we can possibly afford it within the tax levy, that’s where we go.” He said this and other related topics will be on the committee’s May 9 agenda.
“Exempt debt is the way to spend even more taxpayer dollars,” he said. “It gives you more room to spend more money.”
Board member Paul Mortenson said he is leaning toward a debt exclusion, because “I’m afraid if we cut it too close, future overrides could be much more difficult to pass.” He commented, “We are not going to be profligate spenders just because we can. It’s very normal to have a debt exclusion for this size project.”
Board member Dan Brosgol asked if the Town Election would delay the project and increase costs. Hanson explained that the design development phase, which has been financed by Town Meeting vote, would continue, so no construction delay is anticipated. The architect said on Monday he targets the spring 2025 to start.
In answer to a question from Select Board Chair Shawn Hanegan, Hanson said if the ballot fails, the issue does not revert to Town Meeting approval.
“I think the town is looking to get this done,” Hanegan said, and if there’s a debt exclusion requiring ballot approval, there is still uncertainty.
In answer to a question from Select Board member Emily Mitchell, Assistant Town Manager Amy Fidalgo noted that upgrading school boilers and roofs are the major capital drivers over the next six years.
Mortenson said that a “conservative” approach would be a debt exclusion “if there’s any risk of cutting ourselves short.” Hanson said that inflationary pressures are having unexpected impacts in some area towns, particularly related to collective bargaining contracts.
Walter St. Onge, a former Select Board and Finance Committee member, said that keeping the project under the levy limit “serves as handcuffs on ourselves. We need to stop and take a deep breath and say what is affordable. The unused tax levy should be used for emergencies. If we want to make the town more affordable, we need to spend less.”
Hanson noted that the debt exclusion decision could be deferred for two years since initial costs will be covered by short-term borrowing. He acknowledged, “That might cause some confusion among residents since the project will be already under way.”
He pointed out that the town also could exclude debt on subsequent capital projects.
Lead architect Sean Schmigle presented a cost breakdown to members of several town department heads, boards, and committees at the meeting late Monday afternoon.
Actual construction costs, estimated at $15,230,000, comprise less than half of the total. “Soft costs” such as testing, security, technology, communication, and peer reviews are about $6 million. Other major components are site development ($3,530,000); contingencies ($2,950,000); and contractor “general conditions” ($2,450,000); insurance and bonding ($485,000); contractor’s overhead and profit ($750,000); and cost escalation allowing for the interim until bid invitations ($430,000). The total estimate of the project is $31,933,000.
Hanson told the committees that an interest rate of 3.75 percent is projected over the 30-year bond. A fixed-debt structure would result in a payment of about $1.9 million each year. A declining debt model has higher costs in the early years, but ultimately would save about $3.5 million, he said.
The town’s financial policy has a ceiling on annual principal and interest payments of 10 percent of the operating budget. Hanson said the addition of the fire station would not exceed that ceiling.
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Are there any grassroots fund raising plans/events happening to help support this project? Every little bit helps.