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Home My WebLink About2014-12-17Minutes for December 17, 2014, adopted Nov. 18, 2015 Town of Nantucket I Capital Program Committee 1 www.nantucket- ma.gov Members: Phil Stambaugh (Chair), Peter Morrison (Vice - chair), Richard Hussey (Secretary) John Tiffany, Tobias Glidden, Nat Lowell, Peter McEachern MINUTES Wednesday, December 17, 2014 4 Fairgrounds Road, Training Room — 8:00 am Called to order at 8:00 a.m. Staff: Brian Turbitt, Finance Director; Martin Anguelov, Assistant Finance Director; Terry Norton, Town Minutes Taker Attending Members: Stambaugh, Morrison, Tiffany, Glidden, Hussey, Lowell, McEachern Absent Members: None Late arrival: Lowell 8:07 p.m. Documents used: Copy of December 10 minutes; Town Administration Recommendations for FY2016 Capitol Project Requests /endorsements by the Board of Selectmen; Financing Plan — Tax- Supported Debt Model dated 12/16/2014 APPROVE 1. 1. December 10, 2014, adopted by unanimous consent Presentation Stambaugh — The one thing that changed is that the Consue Springs went back to the consultant who stated $1M ought to be plenty. Based upon that, the Board of Selectmen (BOS) put it back on for FY2016. Discussion Tiffany — No one had a lot of enthusiasm for that since it came up several years ago. At that time it was quoted as $33M. Stambaugh — Ms Gibson added $1M from the real estate fund; it is being paid without borrowing. Anguelov — He will remove the remaining $2.5M out of FY2017. Turbitt — Looked at the estimate and it seems to be correct. Stambaugh — The model that Cinder McNerney, FirstSouthwest, will do will reflect that change. The next issue is the impact on debt service. This committee had asked for separate models each for the fire station and the new school. Turbitt — Those models did not change from this model. What has changed is the comparison tax -rate impact to the single - family home evaluation on all homes with an average value of $1.7M then a second on the average year -round residential with an average value coming in at $1.1M. Reviewed the debt model report showing debt service impact on taxes out to FY2049. The maximum term for borrowing out is 30 years. The model lists the terms the Town is using for borrowing. Morrison — He looks at this and sees he will be $600 a year more per million on taxes. He feels this is a minimal rise in taxes for an investment in the community. Tiffany — Asked upon what was the valuation assumption of the base. Turbitt — That is the valuation is the current certified by the Bureau of Local Assessment for 2015 and assumes no new growth or change. It is too far difficult to model out including change and growth. Page 1 of 3 . Minutes for December 17, 2014, adopted Nov. 18, 2015 Lowell — A simpler way should be found to explain the increase at Town Meeting. Tiffany — He is surprised something was not included for growth. Turbitt — It is not a good idea to do that because people "get married" to numbers. This model is the worst -case scenario. It is not realistic to come up with an accurate number for 30 years. Lowell — Suggested going back 30 years and using the construction of the High School as an example of what actually occurred in regards to the projected and actual affect on the tax rate. Morrison — This board is the entity to make assumptions about the future and give guidance. The assessed value of property will go up but it is very heterogeneous. The most conservative assumption would be a 1% increase in value. Turbitt — Conversely it would be a scenario that some of the projects will not occur. He can't make an assumption on one side and not on the other. He can't model valuation increases because then he would have to model what will happen and what won't happen. Stambaugh — The closest year we know will happen is 2016, the further out we go the worst it gets. If a project is pushed out 3 years, it would have little impact from 2016, and maybe 2017 and 2018. Turbitt — Could carry this report out for only 10 years. Morrison — We have asked for an analytic scenario that assumes with today's dollar and that the aggregate value of Nantucket property doesn't change, what the impact on property taxes will be. Tiffany — This board needs to hammer out the long term but don't have to decide that today. We need to focus on the short term needs the next 3 or 4 years; we know as it gets further out, assumptions gets shaky. Turbitt — In FY2016 we are going through a triennial evaluation and we could find what we guessed at is wildly off. Reviewed the model graphs. Tiffany — There are communities that live at about 8% debt exclusion and Nantucket looks to be high running around 12 %. Turbitt — Debt exclusion automatically has a revenue source attached. Continued review of the graphs. Tiffany — There will be increases in the operating budget; he assumes the Town can probably over a long time take care of those increases. The increase in value has, in the past, taken care of increases in the operating budget. Morrison — He would like a measure of the long -term change of Nantucket assessed value. He thinks it will show an increase in assessed value of 1% to 2% a year. As the debt of one project goes down, another one takes its place. The assessed value increase could take care of more of the debt service. Turbitt — The high point for assessed value was over $20B and it dropped precipitously with the recession to around $16B. We have been growing back since and are at about $18B now. The climb out has been slower than the boom -years average before the recession. Stambaugh — Asked about borrowing in relation to when the debt is incurred for major projects. Turbitt — If a project is approved in one year, the actual borrowing won't occur until the next year or later. The initial projection for the fire station is $4.81 per $100,000 of assessed value and school $16.09 per $100,000. Glidden — His concern is that people on fixed income won't be able to pay this. Looking at the principal $69M at 5.5% with $45M interest; asked if as opposed to capital override could do capital expenditure override for the fire station and school. That would eliminate $15M interest. The difference is that instead of authorizing and barrowing; it is rolled onto the tax role for that year and don't have to pay interest. Turbitt — For a project of this magnitude, they still have to borrow. They have to fund the project. Page 2of3 Minutes for December 17, 2014, adopted Nov. 18, 2015 Stambaugh — What Mr. Glidden proposes would be borrowing less. The only way to do that is to borrow less and pay the balance right off. Turbitt — He could model that but bear in mind that the borrowed amount will probably be 2.5% less than what the model shows. Glidden — We have $70M in projects pending. Interest on a round number $100M is $2M a year; we shouldn't be paying interest. Turbitt — Explained the innate ndtigation that exists in paying for projects in out years. He is suggesting putting the project on the tax rate only during the years of construction. Short -term interest cost will still be incurred. He doesn't think people will buy that because of the impact. Stambaugh — Going back to FY2016 projects, a lot of what is being recommended by this committee is maintenance and upgrade. Finance Committee is more concerned with FY2016 and not so much the long -term plans. Turbitt — Going back to projecting future grown on past growth, he expressed the concern that going back 20 years might skew the next 20. In the past, the real estate market fluctuated wildly, which is unrealistic to what is happening now. CAPCOM BUSINESS 1. Future topics: Presentation of recommendations to the Finance Committee on December 18, 2014. 2. Scheduling a meeting for mid January 2015. DATE OF Thursday, December 18, 2014, 4:00 p.m. at 4 Fairgrounds Road, Training Room Adjourned: 9:23 a.m. Submitted by: Terry L. Norton Page 3 of 3