BOF Mulling Capital Debt Service Reductions Beyond Nine Percent

By John Voket

Members of the Board of Finance have been hinting at or recommending vociferously for years that the town should begin reeling in its ratio of annual borrowing versus the proportionate amount of spending in corresponding budgets. Currently Newtown maintains a ten percent debt cap for capital borrowing.

But a concerted effort by the finance board and First Selectman Pat Llodra to initially reduce borrowing to nine percent gained added traction March 24 when finance officials began exploring even further borrowing reductions as soon as 2016.

The five-year Capital Improvement Plan (CIP) has been bouncing around between the boards of selectmen and finance and the Legislative Council in recent weeks as all the lead elected groups in town began taking a hard look at Mrs Llodra’s proposal to step down borrowing between year five and year ten of the CIP. Finance Chairman John Kortze said his board voted to recommend the step-down from ten to nine percent take place in year five, however, and went a step further by asking the council to support “aggressively” cutting debt service to perhaps as low as eight percent.

“While we voted to recommend the step-down to nine percent, we supported moving away from the ten percent debt cap more aggressively,” Mr Kortze said, adding that the reduction in borrowing expenses should be considered as part of a larger plan that includes building back the town’s surplus fund, and remaining steadfast in not using that fund balance to offset revenue shortfalls.

Mr Kortze said the speed and degree with which the town would be able to cut capital borrowing between 2015 and 2020 would depend heavily on maximizing the efficient use of municipal space, and having serious discussions about how school enrollment trends and demographic shifts to an increasingly aging population are going to justify shifts in how town services are delivered.

The finance official said that he expects discussions to that end will begin in June or July when the new CIP for 2012–2016 is rolled out, with roughly $10 million less in anticipated borrowing in the final year.

Mrs Llodra also requested the finance board work to help craft policies for future personnel and officials that will ensure the town continues on the right track of maintaining financial management practices put in place today.

“Policy language is needed to guide future decisionmakers,” she stated. “It is a package of behaviors that is only powerful if it works together.”

During previous discussion on the matter, Mrs Llodra reminded finance officials that anything added into the CIP ahead of its fifth year would mean extending projects already earmarked in year five even further out in time, possibly into the sixth or seventh year, or beyond.

That is because year five is already maxed out at $30 million in capital requests. To achieve the reduction necessary to reduce the debt cap to nine percent, $10 million of those requests would have to be dropped or moved back in the plan.

And as Mrs Llodra explained, only $5 million in bonding capacity is available in both years six and seven, with another $10 million available in year eight.

“If we lop off $10 million in year five, we’re not going to do it painlessly,” Mrs Llodra told the finance board. “That’s ok, but we want people to understand the pain.”