Finance Bd To Consult With Council—

Capital Projects Balloon Projected Debt

By John Voket

If taxpayers fund only currently proposed capital projects, preliminary projections revealed Monday by the Board of Finance put the town well beyond its self-imposed ten percent debt cap as early as the 2009 fiscal year. Such a course could jeopardize Newtown’s current AA2 bond rating, which permits current borrowing at a highly favorable interest rate, potentially costing taxpayers millions more beyond nearly $100 million in proposed capital spending in the next five years as the cost of debt service skyrockets.

The precarious nature of Newtown’s future financial status has motivated the finance board to seek a joint meeting with the Legislative Council. In a previous report, Board of Finance Chairman John Kortze said a joint meeting with the council would help his board determine the direction and scope of cuts to certain projects to keep spending for other proposals from exceeding the cap.

On Monday, the decision to hold the joint meeting was solidified with the finance board vowing to work with Newtown Finance Director Benjamin Spragg to craft two or three possible spending scenarios to present to the council at the joint meeting. The need to expedite such a meeting was apparently inspired by an updated graph produced by the town’s financial planners showing debt service blowing through the ten percent cap in 2009 and growing to in excess of $13.6 million by 2012.

To remain below the debt cap, debt service must level off between $12.5 and $13 million in that year. But if the spending trend holds true to projections, by 2010 Newtown could be overspending for debt service against the municipal cap by almost $2 million.

Finance board member Michael Portnoy estimated that his board needs to push out or cut $5–$10 million in proposed spending as early as next fiscal year, and as much as $15–$17 million by the end of the 2009-2010 fiscal cycle to keep at or just below the cap.

Finance board vice chairman James Gaston warned school board members and administrators in attendance that if the town supported a $47 million high school expansion project, it would be able to afford little else in the way of school capital spending.

“If we go to $47 million for the high school, the board of ed isn’t going to like going without anything else except Hawley or the middle school roof,” Mr Gaston said, referring to two of numerous other capital proposals that amount to more than $100 million over the next five years.

Board of Finance member Harrison Waterbury seemed exasperated at the thought.

“I’m not sure we can make it work,” Mr Waterbury said. “I’m trying to figure out how to do this. I’ll look to input from the Legislative Council on how to manage the negative impact if we exceed the ten percent [cap].”

Joseph Kearney encouraged his fellow board members to try and find a way.

“I recognize this chart is based on a revenue stream [growth] of six percent per year,” he said. “Based on our history, I don’t think we can fool with that line.”

Mr Spragg, who was on hand, told the finance board that depending on other needs that might enter into the financial picture, including moving the construction of a new pool for the Parks and Recreation Department, the debt cap might be reached or exceeded as early as 2008.

“We don’t want to give 2008 a pass. If the pool was moved forward, it has a [financial] impact all the way through [the CIP],” he said.

Mr Kortze said that Newtown’s financial stability was directly linked to its continuing growth, noting that financial experts are projecting “anemic” financial and employment growth statewide in the near future. Ironically, it is a theory that Newtown’s student populations will continue to grow that is supporting the maximum buildout option in the high school expansion proposal.

This subject dominated discussions during a recent joint meeting with the finance board, selectmen, and Board of Education. During this week’s meeting, Mr Kortze polled each finance board member on their thoughts about that previous meeting.

Mr Portnoy said he came away thinking nobody could defend building the high school to accommodate the highest consultant population projections.

“We would be well-reasoned to build to the mid number,” Mr Portnoy said. He suggested some creative thinking was called for — possibly curtailing some of the school expansion in favor of building a tournament-sized gymnasium as part of a recreation center at Fairfield Hills, instead of spending to increase the size and configuration of the gym at the high school.

Mr Kearney agreed that consultant projections simply did not justify building to the high population number.

“Although this is what the Board of Education recommended, there wasn’t a compelling case to do that,” Mr Kearney said. “I’m more comfortable building to the middle projection.”

Finance board member John Torok said he did not think taxpayers would agree to fund one single big-ticket project in favor of foregoing ongoing maintenance for things like roads and municipal facilities.

“We need to plan comprehensively,” Mr Torok said, noting that investing in projects like the tech office park would bode well for enhancing the commercial tax base.

Mr Gaston was the lone dissenting voice among the finance board members, saying he could see an eventuality where the high school student population could swell to the maximum projected capacity.

“We will reach it,” Mr Gaston said. “My father always taught me if you’re going to do something, do it right, whether we build to the 12-year [projection] or the eight to ten-year [projection].”

But Mr Gaston countered that the maximum buildout would come at a cost to virtually every municipal and educational department, saying in order to finance the $47 million high school proposal, the Hawley School heating and air conditioning project would have to be pushed out four years, and that new playing fields, a new senior center, and police headquarters renovation would have to be taken out of the Capital Improvement Plan (CIP).

Following some further discussion, the board of finance members agreed to meet once more to review the data researched by Mr Spragg, and to formulate the options that would be presented to the Legislative Council.