Wishful Thinking in Financial Models Imperils Town Needs

Town Manager Paul Bocklelman has asked the Town Council to pick one of four financial models that are supposed to show how the town can pay for the so-called “four major capital projects”, that is the elementary school, Jones library demolition/expansion, South Amherst fire station, and DPW headquarters. In reality, the models show that we can’t afford to prioritize these four building projects as currently defined without causing significant harm to the rest of the town’s budgets (N.B. The school project will be funded with a debt exclusion override so will not affect the budget). The models are also fundamentally flawed by dubious assumptions about the costs and funding capacity for these projects, most notably the proposed library demolition/expansion. It is time for town leaders to challenge these assumptions and realign the town’s budget to reflect the needs and values of its residents.

Garbage In, Garbage Out
All of the models rely on assumptions that are highly unlikely (e.g., that the town will only spend $15.8 million for the library project), call for deep cuts in other capital spending (e.g., limiting spending on all other capital needs to $3 million annually–more than a 50% cut from current levels– for the foreseeable future), and use ballpark estimates for the cost of a new fire station and DPW headquarters. No scenarios were developed that examine the possibility/probability that the town will end up having to cover a lot more than $15.8 million for the library project because of increased costs and/or fundraising shortfalls. No details were provided about exactly what capital expenses will have to be put on hold for 10 years or more in order to cut the annual capital spending in half. If either of these assumptions prove to be wrong, the models fail; in other words, we can’t afford what they are modeling. 

The Library Project Will Cost the Town Far More Than $15.8 Million
The Town Manager is relying on a Memorandum of Agreement that calls for the Jones Trustees to pay the difference between funding from the state ($15.6M) and the town ($15.8M) and the cost of the project ($46.1M). That means the library would need to come up with $14.8 million, and fundraising is many millions of dollars short of that. The Library Trustees already owe the town $900,000 in promised payments since January 2024, with another $4 million due this month. 

The most recently available figures show that the Capital Campaign has secured only $3.7 million, which includes $1 million in Community Preservation Act funds from the Town of Amherst. The Trustees claim that another $2.3 million has been pledged and they include $2.1 million in federal grants (NEH and HUD) in their reporting, even though those federal funds are very much at risk because of a failure to address the adverse impacts of the project on this historic building. The project has already lost $2 million in historic tax credits because the project violates 5 of 10 of the Secretary of the Interior’s Standards for the Rehabilitation of Historic Properties (a fact that several Town and Library leaders withheld from the Town Council and the public for many months and during several key decision points). Even if all the pledges and federal grants materialize, that still leaves a more than $7 million fundraising gap (more than $11 million without them). For some perspective, when the Town Council first approved borrowing for the project in 2021, the Library needed to raise $5.7 million for what they said was a $36.3 million project.  

When expenses for the Capital Campaign were last reported in August 2024, they totaled nearly half a million dollars, costs that will be subtracted from any total funds raised. The endowment for the Jones Library is ~$9 million, less than the Library’s share of the project.  Interest and, at times, principal, from that fund is needed every year to help fund operating costs. 

If design changes are required to comply with federal grant requirements, or if the contingency budget does not cover unanticipated construction costs in this century-old building, the total cost of the project will rise, and with it the amount required from the trustees. This final cost cannot be known until the project is completed, but once ground is broken there will be very little option but to pay for any and all necessary additional costs. 

Finally, all interest, from both short and long term loans, is to be paid by the town. The net result is that the town could easily be on the hook not for $15.8 million, but for well over $20 million in principal alone, and between $30 and $40 million with interest. 

$3 Million per Year Is NOT Enough for Everything Else
Finance Director Melissa Zawadzki has tried multiple times to explain to the Finance Committee that limiting capital spending to $3 million per year for the next decade was what she had to input to “make the model work.” This figure represents the amount of money left from the capital levy each year after all debts have been paid for items the town borrowed money to fund. It includes expenditures for things like equipment, repairs/maintenance, vehicles, roads and sidewalks. Over the past four years, the town has spent between $4.9 and $7.2 million per year on these items and includes dipping into free cash outside the usual budget cycle for road and sidewalk work. Meanwhile, the backlog of deferred maintenance has barely been dented and several other infrastructure projects are waiting, not so patiently, in the wings (school roofs, youth center, senior center, etc.). By cutting the cash capital in half for a decade or two, as has been modeled, we would be making the same mistake that got us into this mess in the first place, namely poor maintenance. The Finance Committee has asked for a list of what pending capital work could be done within the $3 million limit, but the equally important question is: what will we NOT be able to do? Zawadzki has suggested that if more than $3 million were to be needed in any given year, the town would have to borrow to pay for these expenses, thereby increasing debt service–a scenario which is not accounted for in the model. The models will force a painful reassessment of priorities.

What Are Models For?
What would the model look like if the library was allocated $5 or 6 million to complete critical work (like HVAC replacement) and annual capital spending was held at $5 or 6 million per year? What would be the effects if the library project comes in over budget and/or the trustees can’t come up with the funding they promised? Given the uncertainty and volatility of national politics, what effect would higher interest rates or cost escalations have on the ability to fund not large capital projects, but the town’s overall budget? The model could and should be used to understand not just the best case, but also various less sunny scenarios in order to inform decision making before we are in a crisis of our own making.

Will the Town Council Do Its Job?
A little over a year ago, the Town Council spent weeks analyzing the financial implications of the library project before taking their vote to authorize more borrowing. Councilors clearly understood at that time that it was not just their right, but their responsibility, as stewards of the town’s fiscal well-being, to delve deeply into these questions. We now know that they were not then aware of the risks of losing ~$4 million in funding. We also know that fundraising and library payments have remained woefully insufficient and remain many millions of dollars short and that costs are likely to rise. The council can, and should, call for a thorough re-accounting of the financial status of the library project to determine not only its viability, but also the impact of pursuing it at the risk of failing to meet the town’s many other pressing needs. If the project is allowed to proceed and the cost balloons or the fundraising falls short, it will be too late and this Town Council will be responsible for the fallout.

Some on the council are adopting a hands-off approach, opining that decisions about the library project are no longer the council’s business since they already took a vote to authorize funds. They claim that the library trustees are in the driver’s seat and the Town Council must stay in its own lane. These are largely the same councilors who were more than happy to chastise the school committee when it lobbied for increased funding to prevent job and programmatic cuts. Many of the other councilors simply fall in line, seemingly intimidated by their colleagues. Some did try to resist in June 2024 when a motion to end the project failed by a single vote (information about the loss of funding was still being withheld from them at this time). A petition signed by well over a thousand people called for an end to the project, a large number of whom had previously supported it but no longer do, but the Town Council has never even addressed this plea from their constituents. Whatever the reasons, their inaction has consequences. If they stand by and do nothing, the town will end up committed to a money pit of a bloated project that will permanently harm an historic building and consume resources that are desperately needed for other things.

The Town Council could rescind its authorization of borrowing $46 million for the library project and instead commit capital funding for critical improvements like the HVAC system and the roof. It could also insure the completion of  similar critical improvements in other town buildings. It could make real progress in fixing the town’s embarrassingly poor and dangerous roads and sidewalks, not just tossing leftover funds at this chronic problem at the end of each year. And it could demand that the fire station and DPW get more than lip service, finally making sure that time, energy, and resources are devoted to these projects instead of the failing library project. They have a choice to make, and they will own the repercussions of that choice. The least they can do as our representatives is to do the analysis, discuss the hard truths honestly, and be open to course corrections. 

Everything is decidedly NOT awesome.