Town Council Hears About Four Ways to Pay for Amherst’s Major Capital Projects
The building housing the Amherst Department of Public Works is a 100 year old former trolly barn. Photo: Stephen Braun
Report on the Meeting of November 18, 2024, Part 2
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 (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.
I am not sure how the numbers add up for repairs to the existing Library systems costing as much as replacing all the systems and adding a massive addition. Could the estimates from contractors that were used to arrive at this astounding result be published, perhaps with the funding-raising reports for the last two months?
And could the “estimates from contractors” to which Joe Cook refers perhaps include an estimate for geothermal/ground source as well as for hydrocarbon-based heating and cooling?
As of about eight years ago, I had occasion to notice that an estimate for geothermal was less than half as much as an estimate to install oil for heating and cooling the Jones Library. All of the wells were on the Library property. Thereafter of course it had no cost for fuel, as well as markedly less pollution. Finally, geothermal freed up 400 SF of space in the Library’s ground floor now occupied by boilers. Seems simple enough, does it not?
In response of the November 5 federal election, and the fiscal policies proposed by the incoming administration, municipal bond market yields increased sharply, albeit briefly.
While floating 30-year bonds for 4.5% is not unrealistic today, a year from now the story will be different, so wouldn’t it make sense for the Finance Director to include a range of rates in the models presented (in math, this is called “interval arithmetic” and in the quantitative sciences “error bars”)?
Council President Griesemer’s warning that if the Town does not go forward with the Library renovation-expansion then repairs will cost the Town at least as much is both irresponsible and ill-informed.
She is working off inflation-adjusted estimates from years-old analyses by Western Builders and Kuhn-Riddle Architects (KRA) which hardly represent independent studies of lowest-cost solutions for addressing the Jones Library’s most urgent repair needs. Both firms were hired and given working orders by the Library, not the Town, apparently without a public competitive bidding process. John Kuhn, a founder of KRA, served on the Library Feasibility Committee that set the size and scope of the now $46.1 million project.
Notably, Griesemer’s characterizations of repair costs have never included any fundraising by the Library, nor has she acknowledged that in the 90 years before she was elected, the private Jones Library, Inc. has been largely self-sustaining. It asked for only $1 million from the Town to complete its most recent major renovation-expansion in 1993. That was a $5 million, 15,000 sq. ft. addition that the current project proposes to demolish and deposit in a landfill.
Completing the current library project will require an investment of Amherst taxpayer funds of more than $1 million a year for twenty years. That is money that won’t be available to the schools, roads and sidewalks, long-planned town building replacements, or other priorities for approximately the next generation.
And…is it that the Town Council’s $ commitment to the current Demolition/Expansion Plan would be automatically transferable to an Upgrade/Renovation Plan? Asking for a friend.
Whatever happened to the interactive capital budget modeling tool the town was going to provide for public use? https://www.amherstma.gov/ArchiveCenter/ViewFile/Item/10911