Date: Fri 15-Sep-1995

Publication: Bee

Author: KAAREN

Quick Words:

tax-rate-capital-projects

Full Text:

Capital Projects Will Swell Tax Rate In Coming Years

B Y K AAREN V ALENTA

Local property taxes could increase by more than three mills over the next

four years if all of the town's proposed capital projects are approved,

according to Finance Director Benjamin Spragg.

Mr Spragg presented a "statement of debt maturities" and their impact on the

mill rate at a meeting of the Legislative Council's finance committee Tuesday

afternoon at Edmond Town Hall. The finance director attempted to assess the

impact of borrowing to pay for the new sewer system, the Cyrenius H. Booth

Library addition, the high school and Hawley School projects and annual road

bonds.

Using what he described as approximate, preliminary figures for projects like

the schools and the sewers, Mr Spragg said the mill rate increase would peak

at 3.62 in 1999 and begin to drop, to 3.01 the following year, and lower each

subsequent year as the debt is paid off.

For a property with an assessed value of $100,000, one mill reflects $100 in

taxes.

Mr Spragg cautioned, however, the mill rate increase for capital projects does

not take into account any increase needed in the town/school operating budget

each year.

"The budget has been growing about five percent per year, or $2 million," Mr

Spragg said. "Taking into account the growth in the grand list, it knocks down

this number to about $1 million."

In recent years the town has wound up with a surplus, funds which have been

used both to reduce the tax impact and to be put into a capital reserve fund

to offset part of the cost of future capital spending.

But Council President Joseph Mahoney said operating costs will rise more

quickly if school and library additions are completed.

"Obviously if we wind up spending $30 million on school projects, there will

be an increase in operating expenses because more teachers will be needed," he

said. "With a growing population more police officers will be needed and there

will be more roads that have to be plowed. There is also the potential need

for a new elementary school."

"Many people are already hurting financially in Newtown," Council member

Marion Stalk said. "It doesn't take much imagination to see how (the mill rate

increase) will impact people with fixed incomes."

Part of the tax increase will be needed to pay the town's portion of the new

sewer system. This portion includes both the benefit assessment on town-owned

buildings and the part of the system's capital costs for sewer capacity that

is not yet being used.

Mr Spragg said the presentation of the sewer costs made by the Water Pollution

Control Authority and its consultants at the last council meeting revealed

that residential sewer users wouldn't be paying enough of the total cost.

"The average benefit to residential sewer users is $14,000," he pointed out.

"But the WPCA is using an $11,000 figure described as `the mode' and taking 90

percent of it, or $9,600, as the assessment for a four-bedroom home. I think

those numbers should go up. The average is not $11,000, it's $14,000."

Finance Committee Chairman Joseph McGowan said he believed the $4.1 million

library expansion project should be tabled until all of the information about

the potential mill rate increase can be discussed and reflected upon by the

council.

"The rates have been presented to us. I think they should be presented to the

council at the meeting next week and not then, at the same meeting, take

action on the library proposal with all of the library supporters there," he

said.

Council Vice Chairman Melissa Pilchard disagreed.

"The library project has been on the agenda for a month," she said. "We all

know the cost of the project and have known it for a long time. If we don't

act now, the library may lose its $350,000 state grant and the project may

have to go out to bid again."

The mill rate projection made by Mr Spragg (see chart) does not reflect the

results of the 1995 revaluation, which will be felt in the 1997 budget year.

The sewer system bonding will impact the 1999 fiscal year then begin to drop

as property owners within the sewer district begin to pay to use the system.

For the high school and Hawley School projects, Mr Spragg used a cost of $30.3

million, of which $10.3 million would be reimbursed by the state, leaving the

town to finance the remaining $20 million. The projections also include

bonding $1 million per year for roads, a cost that will be cumulative,

compounding the road debt each year as additional borrowing is done.

Mr Spragg said he used an interest rate of 6.5 percent to compute the cost of

the debt and based revenues on a 2 percent annual increase in the grand list.

He said the impact on the tax rate of the projects would be .04 mill in fiscal

1996, increasing to 1.85 mill in fiscal 1997. In 1998 the tax rate increase

would go up to 3.04 and peak at 3.62 mills the following year, before dropping

to 3.01 in the year 2000.

Mr Spragg said the Board of Education has estimated the cost of a new

elementary school, when it is eventually needed, at $10.5 million plus site

acquisition. This figure was not included in Mr Spragg's projections and he

recommended that the committee be cautious in accepting the $10.5 million

estimate.

"I agree. I haven't seen a new elementary school built for under $14 million

in recent years," Mrs Pilchard said.

Mr Spragg's projections will be presented by the finance committee at the next

council meeting which is scheduled for 8 pm next Wednesday in the Middle

School library.