As has been well documented now in various public meetings and media outlets, over the summer the Town received notification that state funding for our public safety building was not included in the Governor’s capital budget. Furthermore, my confidence that it would be included in future state capital budgets is significantly diminished after discussion during this same time period. To further complicate matters, policy changes at the federal level (i.e. tariffs) and the overall macroeconomic picture have in turn required us to revise our cost forecasts from a total construction cost of $25 million to now $29 million, with an anticipated 8% increase in costs for each year we wait.
Both developments are extremely disappointing, but they do not negate the increasing necessity of a new building to better equip our first responders, provide enhanced public safety services for residents, and provide pivotal redevelopment opportunities at the “old” police and fire stations downtown. Indeed, the most recent cost escalation forecasts further demonstrate that the longer we wait, the more it will cost taxpayers in the long run.
The prospect of having to fund the entire cost of a $29 million public safety building at the local level obviously presents significant challenges, but I think they can be boiled down to three important points:
- Cost to Residents - How do we make sure that this is an affordable proposition for all Ashland residents, especially in light of the fact that a renovated or new Mindess School (another necessity) is on the horizon?
- Ensuring we Build the Right Facility - In trying to accomplish #1 above, can we still ensure that we are building a facility that will be good for the next 40-50 years instead of 20?
- Allowing for Future Opportunities - Can we find a way to structure any financing package so that we can still use state funding to offset the local costs if and when it became available?
Over the last two months, I along with the Public Safety Building Committee and the Finance Director have worked to develop a plan that addresses all three points above which I will review here.
- Cost to Residents - This is undoubtedly the most difficult of the three to both solve and explain. The plan outlined here will require a debt exclusion vote in May 2020. While a debt exclusion vote will still be required, through a careful combination of internal efficiencies and declining/restructured payments on previous projects, the amount of taxes that homeowners spend on debt excluded projects should remain the same or lower than what they are spending now.
If you look at the average tax bill in Ashland (approximately $7300 today), $375 of the annual tax bill goes to fund debt service on projects that have been voted to be excluded from the limits of Proposition 2.5 (debt exclusions). These projects include the Town Hall Renovation, Library Renovation and Expansion, Community Center, High School, Valentine Property purchase, Mindess School Feasibility Study, School Roof Repairs, and the Design & Engineering of the Public Safety Building. We should use that $375 figure as the baseline moving forward.
As you can see, this debt and its corresponding tax impact declines steadily and then significantly drops off in FY24. One of the reasons for this is because the town made the decision in 2014 to refund (another term for refinance) a number of the other projects mentioned above that we had previously borrowed for, and in the process shortened the term length for those allowing them to be paid off earlier. This is a good example of smart decisions made by the town in the past that provide a benefit to the town now.
With this declining debt service already in place, what would the impact be if we had to do a debt exclusion for the full amount ($29 million) for a new public safety building? In that case, over a 30 year term at conservative rates, the result of a $29 million debt exclusion amount requires an annual debt service payment of a little over A$1,500,000. This equates to an increase of $230 annually to the taxes that the average homeowner pays for debt excluded projects.
This additional impact will spike the amount of taxes that residents and business owners spend on debt excluded projects to $583, and doesn’t really drop below the $375 figure again until year 2025. This would be a significant tax burden, especially with a new/renovated Mindess School on the horizon. This is an unacceptable scenario for myself, the Public Safety Building Committee and the Select Board.
With this in mind, we focused on reducing the amount that we have to borrow through a debt exclusion. After careful analysis over the summer, we feel that we could reduce this debt excluded amount by half by taking the following actions: raising revenue from non taxpaying sources and redirecting appropriations to help pay for the building. Specifically, the actions include:
- $300,000 will come from funding already appropriated through Ashland’s municipal departments. We can accomplish this through transferring some of the general fund expenses to the Meals Tax for economic development. Some will also be found by savings in our public safety departments by moving to the new building. We can do this without impacting existing services, although it will limit our ability to add services in the future.
- $200,000 will be covered through an increase in ambulance fees. These fees have not been adjusted in quite some time and are now almost half the amount of the next highest town. It is important to not that this increase will NOT be applied to the rate for Medicare patients, and the majority of this cost will be borne by insurance companies.
- $200,000 will be diverted from our Pay-As-You-Go Capital program. We have made significant infrastructure and equipment improvements in our town and schools through our capital program in the last few years and can afford to make this shift.
- Finally, by applying what’s known as a bond premium to the borrowing costs, we can save approximately $100,000 annually.
By utilizing these factors, and by structuring the debt to have less of a principal payment in the first three years in exchange for a slightly larger amount of total interest paid over the term, we can continue to stay at or below that $375 baseline number for debt excluded projects. It also provides significant capacity in years 2024 on to pay for a new/renovated Mindess School before reaching that $375 figure.
We feel that this plan is good balance between fiscal prudence and investment in our infrastructure while maintaining affordability for Ashland taxpayers.
2. Ensuring We Build the Right Facility - The Public Safety Building Committee worked closely with both our Police and Fire departments over the last couple of months to look at the programming of the building and see if there are any reductions to the building that could be done without jeopardizing the ability of the building to service the community for the next 40 to 50 years.
While the departments made a couple of changes in some areas, the impact to the size of the building and the costs to the building are negligible. Any significant changes to the size/cost of the building would reduce the longevity of service for the building exponentially. What this means is that in twenty years we would already be at a place where we needed to build another facility. This is simply repeating mistakes of the past like when the Police station was built in the 1970’s. We can’t make those same mistakes again.
3. Allowing for Future Funding Opportunities – This financing plan is structured in a way that if state funding does become available, whether through the bond bill or another state funding vehicle, we would have the opportunity to apply that assistance to further minimize the impact to Ashland taxpayers. We will continue to advocate for state funding, and know that our state delegation will continue to advocate for us as well.
What are the next steps? As mentioned towards the beginning, the construction funding for the building will need to be voted on at Town Meeting and through a ballot measure. But both of these actions will be scheduled for May 2020 at the earliest.
Both the Select Board and Finance Committee reviewed this plan within the last month and supported these actions. After the fall Special Town Meeting in November, we expect to have several public forums related to the Public Safety Building, similar to what we did in the fall of 2018. We can give an update on the plan presented here, as well as where we are with the design process and any other updates we may have. Residents will have ample opportunity to ask questions about both the building and the funding for the building.
In conclusion, while the absence of state funding makes constructing this building more difficult, waiting to construct it until we are forced to construct one because of building code and compliance issues will only make it more expensive for taxpayers. Furthermore, the construction of a new public safety facility is important not just for our public safety personnel, but it is also important to the community at large to improve response times for medical/fire personnel, and it also provides an opportunity to vacate the current police and fire facilities is important for our downtown revitalization efforts. I anticipate having more conversation about the future use of the police and fire station in the next few months.
While we cannot do anything about the cost of the facility or lack of state funding, we can find a way to make this as least impactful on taxpayers as possible. I hope you find this plan both responsible and creative on a number of levels. We have secured the land through a donation and we are in the process of design and engineering. The last step is the appropriation of the funding to construct this long-awaited and long-needed facility. If you have any questions or comments please feel free to contact me at firstname.lastname@example.org