BRATTLEBORO—Selectboard Chair David Gartenstein said the board faces a “mammoth decision” on the best way to structure a bond for the $14.1 million police/fire facilities upgrade project.
During discussion of the bond at the May 7 Selectboard meeting, held at the Municipal Center, Gartenstein said some residents have expressed concerns about the project’s price tag.
He hoped residents would educate themselves on the bond and its impact on the property tax rate before the board votes on it at its next board meeting, May 21.
The project’s costs are “foremost in everybody’s minds,” he said.
Finance Director John O’Connor outlined three bonding options. All three options split the $14.1 million into two bonds: $5 million and $9,130 million.
The first option, recommended by the nine-member Police/Fire Facility Building Committee, showed the greatest savings of about $1 million compared to bonding for the entire $14 million at once, said O’Connor.
It also had the biggest increase in the tax rate for fiscal year 2016 compared to options two and three.
The town would borrow $5 million in fiscal year 2014 with a 10-year payback period. The second $9.13 million bond would come in fiscal year 2015 and have a 20-year payback.
Bonds typically have the highest interest rate in year two but then decreases over time, said O’Connor. Option one’s highest rate is 11.5 cents in fiscal year 2016.
Option two, said O’Connor, has the $5 million bond with a 15-year payback and the $9.13 million payed back over 20 years. The highest tax increase in fiscal year 2016 is 10.23 cents.
The town’s savings decrease, however, to $560,000.
With option three, both bonds would be paid back over 20 years. The highest tax rate in fiscal year 2016 would be 9.66 cents.
O’Connor said the tradeoff for the lower tax rate, however, was a savings totaling nil.
Gartenstein said essentially the board would vote at its next meeting to approve the first bond of $5 million. The board would also decide on the length of payback, he said.
Deciding on the structure for the second bond would wait until 2014.
Town Manger Barbara Sondag said that when organizing a municipal bond, the town researched the best balance between keeping interest rates low and minimizing the impact on property taxes.
Splitting project costs across two bonds will allow the town to seek other funding sources, such as grants, before applying for a second bond, she said.
Sondag also noted that the Town Meeting Members approved the fiscal year 2014 budget during Representative Town Meeting on March 23.
That budget contains interest payments based on bonding for the entire $14.1 million, she said. Bonding for only $5 million this year may leave surplus interest payments.
Sondag suggested the board apply anticipated remaining monies toward reducing taxes in the next fiscal year.
The town’s application to the state bond bank is due May 15. The town can change the requested amount until the end of May.
The first round of funds will be available mid-July, said Sondag.