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Finance Board Supports Council’s 2025 Bonding 'Vacation'



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Over the course of two meetings held two nights apart on January 13 and 15, the Board of Finance and Legislative Council finalized a five-year Capital Improvement Plan (CIP) that included a moratorium on bonding in the 2025 fiscal cycle — creating what officials have dubbed a “debt vacation.”

Town Finance Director Robert Tait told finance board members who eventually supported the measure by a 5-1 vote, that taking that single year off from borrowing not only saves approximately $900,000 in debt service, but creates an opportunity to shift about a half-million dollars into the municipal capital nonrecurring account.

Mr Tait and First Selectman Dan Rosenthal have long talked about adjusting the way the town and school district pay for certain capital projects. The plan is to measurably reduce reliance on borrowing or bonding, instead planning a savings schedule to build earmarked funds in the capital recurring account — creating a “pay as you go” situation for certain capital acquisitions or projects.

That plan would be particularly beneficial, Mr Rosenthal has said, when the anticipated service life or life span of a project or item being bonded is not anticipated to meet or exceed the average 20-year term of debt service on a typical bond initiative.

In the final few minutes of a lengthy January 8 meeting, the council voted to support the idea of clearing the 2025 fiscal cycle of capital borrowing. To achieve that, two $1 million project placeholders were shifted from the official five-year CIP, to year six of an informal ten-year bond planning schedule that is being maintained. However, that action effectively removed the projects from the official CIP.

School Board Memo

Anticipating that action, Board of Education Chair Michelle Embree Ku sent a memo to finance officials on the day of their meeting, January 13, saying her board would have liked the opportunity to deliberate where to schedule the now removed year five projects, long before they were quickly removed from the CIP by the council five days earlier.

By Town Charter, if the council makes any changes to the CIP once it is recommended to the panel by the finance board, the plan must go back to finance officials for a final review and approval.

“Important proposals, such as taking a year off from new bonding as part of a long-term plan, need to be carefully considered and clearly communicated,” Ms Ku wrote in her memo to the finance board. “I appreciate the message from the Legislative Council that they would like to see year-five bonding vacated. To be clear, though, the Board of Education has not had the opportunity to discuss this concept.”

While it is true that no formal communications or prior motions supporting the year five “debt vacation” were made to the school board, First Selectman Dan Rosenthal told the council and The Newtown Bee that during the 2019 CIP process he recalled mentioning to school officials he was going to clear the 2025 fiscal year of any capital bonding.

“I had been candid about those plans for over a year,” Mr Rosenthal said. “This is part of a public conversation we’ve been having for a year-and-a-half,” he said of the planned bonding moratorium. “I don’t think sending a formal e-mail to the Board of Ed was required.”

Mr Rosenthal said his intent was plain to see in the 2020 CIP document, because there were no municipal projects being financed that year. But the school board did include what was described as a $1 million placeholder for the purchase and installation of a generator at Hawley School, and $1 million for window modifications at Middle Gate School.

When asked about the conversation between the first selectman and superintendent that apparently telegraphed the planned debt vacation last year, Ms Ku replied, “Between the 28 people elected to the combined boards of the BOS, BOE, LC, and BOF and the many conversations that happen throughout the year, communication and processes aren’t always straightforward.”

‘Communication Is Missed’

The BOE chair said that sometimes ideas are brought up at meetings, and it is not until a board takes a vote that it becomes evident that there is full support of the idea. “And sometimes, because the Board of Education does not sit at the table with the BOF or the LC,” she added, “communication is missed.”

Ms Ku said “the Board of Education could have been made aware of the implications of the decision to take a year off from borrowing,” during prior discussions about the town’s debt policy.

“Alternatively, the Board of Education could have been engaged by other boards in a conversation about a bonding-free year at some point during our nine-month long process of CIP development,” the school board chair added.

Based on the current policy, had the Board of Education known of the intent of the other boards, some of the projects that the Legislative Council removed from the CIP could have been moved to year one, which she said currently has one $300,000 BOE project — and likely would have remained well within the Debt Management Policy, if it was included.

The sole vote against supporting the council’s action, January 13, was made by former school board Chairman Keith Alexander, who is now in his second term on the finance board.

Once the finance board’s affirmation was brought back to the council January 15, the motion to accept the final CIP with no borrowing in year five was approved with Councilman Ryan Knapp casting the sole No vote. Mr Knapp said after the meeting that he did not agree with the approved CIP, because it prioritized replacing a newer boiler at Reed School, over a 42-year-old boiler at Head O’ Meadow School.

When explaining the January 8 motion to clear year five of all bonding, Council Chairman Paul Lundquist told the finance board the plan “represents a totally reasonable path” of debt management.

“These projects might be in year four next year, but we should plan to be bonding free in year five,” Mr Lundquist said.

The motion also resonated with finance board Chair Sandy Roussas who noted the plan, “advances the goal of a debt [vacation].”

“Although we’re fiscally healthy, we’re a little over reliant on debt,” she added, referring to prior comments made by bond rating agencies about the expanding town budget to debt ratios.

Finance Board member Ned Simpson agreed, saying the town should “make a serious commitment to a debt diet.”

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