Town Council Hears About Four Ways to Pay for Amherst’s Major Capital Projects

Report on the Meeting of November 18, 2024

This meeting was held in a hybrid format and was recorded.

Present
Lynn Griesemer (President, District 2), Mandi Jo Hanneke, Andy Steinberg, Ellisha Walker (at large), Freke Ette and Cathy Schoen (District 1), George Ryan and Hala Lord and George Ryan (District 3), Pam Rooney and Jennifer Taub (District 4), and Ana Devlin Gauthier and Bob Hegner (District 5). Absent: Pat DeAngelis (District 2).

Staff: Paul Bockelman (Town Manager) and Athena O’Keeffe (Clerk of the Council), Melissa Zawadzki

Finance Director Melissa Zawadzki, who began working in Amherst in July, has updated her predecessor Sean Mangano’s 2021 financial model for building the new Central Fire/EMS Station, a new DPW building, and funding the project to expand the Jones Library, while maintaining the town’s operating and capital budgets. Zawadzki presented four scenarios for how the building projects could be completed under the current economic realities. Because the new elementary school is to be paid by the debt exclusion override approved by voters in May, 2023, it is not included in the model.

The model assumes a cost of $30 million for the fire station, $35 million for the DPW building, and $15.8 million for the town’s portion of the Jones Library expansion. The interest rate for borrowed money is calculated at 4.5% over a 30-year term for the fire station/EMS and DPW and 4.0% over 20 years for the library. $3 million per year is allocated to other capital expenses to maintain roads, sidewalks, and town buildings and to purchase needed equipment.

In the first scenario, the percentage of the budget devoted to capital expenses is reduced from 10.5% per year to 10%, which means $15.5 million of the reserves are needed to complete the three projects. In this model, the library begins construction in Fiscal Year 2026, the DPW building in 2027, and the fire station in 2028. The second scenario keeps the capital allocation at 10.5% with the same project start dates and uses $11.2 million from reserves.

Zawadzki was less enthusiastic about the last two scenarios.  One possibility would be to delay the start of the DPW building to FY2028 and the fire station until FY2030. This model would only use $10.5 million in reserves, but she noted that both buildings were in severe disrepair and might require substantial repairs prior to the projected replacement date. She added that interest rates and construction costs were less certain the farther out the projects were pushed. 

The last scenario was the least expensive, but the most risky, according to Zawadski. This model involves investing $23 million from reserves and borrowing less to complete the projects. She estimated the total cost to the town of $118.9 million, as opposed to $143.8 million for her preferred option 2, $148.1 million for option 1, and $155.2 million for option 3. However, the lower cost comes with a loss of flexibility to deal with unexpected expenses because it exhausts most of the reserves, and it has a high risk of lowering the town’s bond rating. She noted, however, that if the town continues to allocate $3 to $4 million a year from free cash to the capital reserve fund, the amount borrowed could be reduced, along with the total cost to the town.

For the model to be implemented in the timetable laid out, the council must commit to the locations for the new fire house and DPW building by December 2 and commit to the financing plan by December 16.  Town Manager Paul Bockelman said that the most feasible place for the DPW is where it is currently located on West Street, with excess equipment being stored at the Ruxton storage site in North Amherst. He said the town looked into several other sites, but none were satisfactory. Locating the new building at the current site would involve finding swing space to accommodate staff during construction, an additional cost.

Bockelman stated that the optimal site for the new fire station is at the former Hickory Ridge golf course on Pomeroy Lane, although some firefighters have said that the location should be closer to the center of town, which is where the majority of calls originate. The advantages of this site, Bockelman said, are that the town owns it and it has the required space. It is also in the radius where it can respond to calls quickly and provides an easier return trip from Cooley Dickinson Hospital for ambulances than the current downtown location. The town has budgeted for feasibility studies for both the DPW building and the fire/EMS station.

Town Councilor Cathy Schoen (District 1) asked if the interest payments on the short-term bonds that would be needed to finance the Jones Library project were included in the models. Zawadzki said those expenses were not incorporated. Mandi Jo Hanneke (at large) pointed out that repayment on any new debt acquired over the next 30 years of this model would need to come out of the $3 million in annual capital, further limiting what the town can spend on other needed capital expenses. Zawadzki admitted that $3 million per year was “a very small number” but that was what was left of the 10.5% of the budget for capital after payments for the big projects were subtracted.

Council President Lynn Griesemer noted that the model “assumes we are going ahead with the library, and yet, we may not. But the reality is we’re going to spend at least that much money to repair the library. So taking the library out of here, does not all of a sudden create a huge cash flow because I think then we would have a different problem to solve, which is the maintenance of that building similar to any of the other projects.”  She speculated that the town may receive a large gift from one of the higher education institutions in town and said that State Representative Mindy Domb and State Senator Jo Comerford have proposed that the state create a municipal building fund, similar to the Massachusetts School Building Association (MSBA) or the Massachusetts Board of Library Commissioners (MBLC).

The council will discuss the options for funding the major capital projects at future meetings, discussing the DPW and Fire/EMS sites on December 2, and the financing model on December 16.