Finance Committee Ponders Spending Potential Savings from School Project Instead of Passing Them on to Amherst Taxpayers

With bids for the new school building project coming in millions of dollars under budget, some town councilors have started eyeing those potential savings to pay for proposed traffic improvements on the town road in front of the school (South East Street, between Main and College Streets) rather than simply taking only what is required for the school from taxpayers. There has also been talk of revoking the use of $5 million of capital reserves which had been allocated to the school project in order to decrease the burden on taxpayers. The Finance Committee discussed both of these at their most recent meeting.

History of Funding Authorization
On April 2, 2023, the Town Council appropriated funds “for the purpose of paying costs to construct, originally equip, and furnish an elementary school on the Fort River site located at 70 South East Street.” The order (FY23-06C) authorized $92,492,297 in borrowing and directed that “Five Million Dollars shall be transferred to pay costs of this project from the Town’s Capital Stabilization Fund”. It was anticipated that most, if not all, of this $5 million would be replenished at the completion of the project with Inflation Reduction Act and green energy funds. The reason for this use of capital reserves was to decrease the burden on taxpayers. There had been significant debate about the amount of capital reserves to use with Town Councilor Ellisha Walker (at large) advocating for $10 million. Councilor Cathy Schoen’s (District 1) suggested lower amount of $5 million ultimately prevailed. A second vote unanimously directed the Town Manager to “develop options to reduce the financial impact of the debt exclusion for the Elementary School Building Project on residents by proposing a financing plan that identifies an additional $5 million of alternative funding to be presented to the Town Council by November 30, 2023.” However, the Town Manager reported on November 13, 2023 that he had not identified any other options.

The Town’s website explains, “Debt Exclusion, allows a municipality to raise funds outside the Levy Limit for the limited period of time needed to repay the debt and interest on a loan for a particular capital purpose.” This requires a vote of the residents to allow their property taxes to be raised over and above the 2 ½ annual increase. Amherst voters weighed in on a ballot question on May 2, 2023 that used the following language:

Shall the city known as the Town of Amherst be allowed to exempt from the provisions of Proposition two-and-one-half, so called, the amounts required to pay for the bonds issued in order to construct, originally equip and furnish an elementary school on the Fort River site, located at 70 South East Street, Amherst, Massachusetts, including the cost of architectural design, project management, demolition of the existing building and other necessary site improvements and all costs incidental and related thereto?

The debt exclusion override passed with 81% of those voting in favor (with a 30% turnout). 

Can School Debt Exclusion Money Be Used for Roadwork?
During the Finance Committee’s discussion on budget guidelines on December 11, 2024, Chair Bob Hegner (District 5) said that he and Schoen (who was absent) did not think that unspent debt exclusion funds could be used for the South East Street road work. Hegner said “I think that the debt exclusion language was pretty straightforward; that said it was for construction of a school and not for other purposes.” Resident member Bernie Kubiak concurred stating, “My belief is that it’s for the construction of the school and that’s it.” Councilors Andy Steinberg (at-large) an Mandi Jo Hanneke (at large), however, argued that the road work is “an expense that’s being incurred because of the construction of the school”, so it might be an allowable use of the debt exclusion funding. Both Hanneke and Steinberg opined that it was solely the larger size of the new school that necessitates the proposed road changes, but the road in question has long been a source of traffic complaints and there are new housing construction projects slated for the area in the near future. 

There was general agreement that legal counsel should be sought from the town attorney and/or the Department of Revenue to determine whether funds from the debt exclusion override can be spent on the adjacent roadway. Meanwhile, Finance Director Melissa Zawadzki clarified that “Any money that is not spent associated with the school will not be borrowed, and therefore whatever savings is passed back to the taxpayers.” 

Possible Revoking of Capital Reserve Funds
Hanneke questioned, “Should we still use the $5 million in reserves [to pay for the school project], or should we max out the debt authorization before we use those reserves?” She argued that “We get to choose which order we pay for things, and I think we should have a conversation about whether we continue to want to use reserves for a project that is coming in under budget.” Kubiak agreed, stating “Whether we choose to claw back some of that $5 million or reduce the overall impact of the override, that’s up for debate and I would welcome that.”  

Zawadzki, however, noted that “We gave that money, so how do you vote to take it away before we’ve figured out if we have enough money to cover the project.” Hanneke responded with “I guess we could always rescind the financial order like we do with rescinding borrowing authorizations.” 

Walker reminded the committee that “The whole reason why we voted on using that [capital reserves] was to offset the impact to taxpayers. If we aren’t using it on the front end, then it’s not doing that.” She also noted that the council favored the lower amount of capital reserves spending because that money would be coming back to the town in the form of green building rebates and credits. Zawadzki added that these payments back to the town would occur at the end of the project, not the beginning. Hegner and Steinberg concurred with Walker’s recollection.  

No Resolution
There was no discussion about how residents might feel about the town spending debt exclusion override funding that was voted for the school project being used for other purposes instead of lowering their property tax increase. Zawadzki thought the discussion of how to spend savings from the project was premature. “I hate to be doom and gloom here, but costs are rising and they look good today, but I just don’t assume that they will look good a year and a half from now,” she said. She did not anticipate knowing the final total cost of the project until FY27 given its slow start’.” The project has been delayed by several weeks because construction contracts could not be signed until bid protests have been resolved (see here and here). The Attorney General denied the bid protests on December 4, but executed contracts have not yet been announced.

No decisions were made or votes taken about the funding issues raised. The Town Services and Outreach Committee met on December 12 to discuss roadway changes which have faced pushback because the proposal was for a series of four roundabouts along the less than ¼ mile stretch of South East St.