New Costs Will Make Budgetmaking Tougher

By Steve Bigham

Newtown taxpayers last month approved a $72.9 million budget, resulting in a 1.7-mill increase in the tax rate. Much of that increase was the result of debt service costs for the construction of the 5/6 school and the anticipated purchase of Fairfield Hills.

Many considered the budget approval as evidence of community support for the town’s future. But that was not simply a one-year bullet-biting commitment. It was to be spread out over a number of years. And this week, financial impact estimates for both the 5/6 school and Fairfield Hills indicate the price will only go higher.

According to the reports, the two projects, if approved, will start the 2002-2003 budget off with expenses that will account for 1.6 mills of the tax rate. Board of Education figures show a 0.9 mill increase in debt service and operating costs in its first year of operation (which is only half the school year). Fairfield Hills, meanwhile, will cost taxpayers an estimated 0.73 mills in debt service and other costs.

Traditionally, town officials have worked hard to keep tax rate increases well below the two-mill threshold. During the 2002-2003 budget season, however, they will find themselves in nearly a two-mill hole at the outset.

In 2003-2004, the incremental impact of the two projects is slated to be an additional half a mill increase and there will be no incremental impact the year after that.

Finance Director Ben Spragg said the figures might be somewhat overstated because debt service interest will decrease as the town pays it off. Also, the figures are based on the assumption that the grand list will stay the same, which rarely happens, and the school came in at a lower price than first estimated. Still, he says, the town is taking on a major challenge.

“It’s an aggressive borrowing plan. We’re taking on $40 million worth of new debt service,” he said.

Of course, the proposed sale of the town-owned Queen Street homes will help defray the cost and there will likely be some money in the capital reserve to help ease the crunch.

 

5/6 School

According to a financial impact statement recently released by the Board of Education, the new school will cost the town an additional $1.8 million to run in its first year of operation (2002-2003). But since the school is slated to open in January (in the middle of the fiscal year), that cost will be split over two years.

The added costs should come as no surprise, say town officials who have some historical perspective. The opening of Head O’Meadow Elementary School in 1977 cost the town an additional $400,000 in new operating costs.

The new 5/6 school will not have to hire all new teachers since most of the fifth and sixth grade teachers currently at the elementary and middle schools will simply move over to the new building. However, the school board will require $461,327 for certified salaries and benefits (principal, assistant principal, guidance counselor and other specialists) and $662,734 in non-certified salaries and benefits (secretaries, nurse, custodians, mechanics, etc).

Other new net expenditures are $215,697 under plant operation (service contracts, site maintenance, custodial supplies, electricity, fuel oil, etc), $88,500 for purchased services (copy machines, telephone, water, and sewer) and as much as $400,000 in transportation/busing costs.

Fairfield Hills

According to a financial schedule prepared by Harrall-Michalowski Associates, the incremental costs will be equivalent to 0.73 mills in 2002-2003, with an additional 0.02 mills in 2003-2004. After that, the reduced management and debt services expenses will result in incremental decreases in the mill rate.

The principal impact is the debt service on bonds. According to Mr Spragg, this begins at a lower amount in the initial years before the full authorization is issued and increases as more bonds are placed. It reaches its peak when all bonds are outstanding and then gradually declines as principal is reduced by about $1 million annually.

Costs associated with ownership of Fairfield Hills in 2002-2003 include a $773,250 increase in debt service, a $500,000 jump in property management costs, and a $400,000 loss in state Payment in Lieu of Taxes (PILOT) funds, which the town receives each year for having Fairfield Hills within its borders.

The costs drop significantly in 2003-2004 despite some increased cost for operating Shelton House for town offices. The 2001-2002 budget already includes $500,000 for the management of the property.

Mr Spragg said there are a number of variables that can influence the forecasts, including the timing of the bond issuance and the pace of demolition activity at the project. The demolition of buildings is expected to reduce property management expenses. Another variable is the potential revenue from economic development of certain parts of the campus.