While the town boards annually prepare the fiscal year’s budget and operations plan, there is also a process of looking ahead at the capital needs of both buildings and infrastructure. Within the annual budget proposal are components that deal with the ongoing obligation to take care of what we have. The consideration of major capital is taken up on a more cyclical/periodic basis, driven by assessment of need as well as financial consideration of rationally integrating cost into upcoming budgets to avoid mill rate spikes and instability over time.
Choices must be made. Timing of new debt service and other buffering mechanisms allow major capital cost to be feathered into future budgets in a manner that provides a degree of year-to-year stability in the mill rate. Once the boards have sufficient common ground on a project, it may advance to the board of selectmen and then to the board of finance for approvals. If approved, a Town Meeting is scheduled for public discussion ahead of a subsequent referendum vote.
A key interim process is CPPAC—the Capital Program Priority Advisory Committee—the clearing house for the three boards to review and focus on critical projects to be considered and potentially be included, deferred, or eliminated from a proposed five-year capital plan.
Although the overall town’s Capital Improvement Plan goes out for a decade, and the CPPAC financial model that the BOF utilizes goes even further, it is the five-year window that we tend to focus on. Typically, five years is the time frame for a capital project to move from discussion to board and voter approvals to financing and completion of construction. From that forum will evolve a five-year capital plan, which may include one or more items, to be discussed for approvals in tandem or at different dates within that five-year window. Each individual referendum question carries a legal cost and each bond issue has its own costs. Collectively they are not insignificant; they ran roughly $100K and $50K for the last two bond issuances in 2021.
CPPAC is evaluating projects and assembling a plan that currently looks to be in the $15-20M range for submission to the board of selectmen. From the fiscal end, we anticipate that we can cover the debt service at the lower threshold within the total capital combined line items in this year’s FY26 budget of $1.836M through FY34 provided we bank the upcoming drop off in debt service within the Capital Non-Recurring Expenditure Fund (CNEF)—the capital set-aside—and then draw upon it when the new bond costs hit the books in future years. In this way, we cover the variances over the $1.8M until the next drop off occurs in FY34, at which point the full debt service line item then drops back to $1.8M as another existing bond is paid off.
Using the capital set-aside mechanism, which has been done historically, and phasing in the contemplated new debt service, we should be able to handle $15M in bonding while maintaining the $1.8M level in current capital cost carried in the FY26 budget given the combined debt service and CNEF feed-in and draw-on line items in the upcoming years’ budgets. There should be no increase in the mill rate to cover the debt service for up to $15M of new capital bonding if we preserve the existing commitment to capital being paid now through the FY26 budget in the debt service and CNEF line items. Maintaining that current level of capital cost in today’s budget positions the town avoiding the need to raise the mill rate to cover the higher level of debt service when the bonding for up to $15M hits the books in upcoming years, if approved. A higher level of bonding— $20M—would add a total of 1 percent in mill rate increase, feathered in incrementally over the next few years.
So, while the prep work falls into place, the boards and ultimately the voting public will make the final decisions on what does or does not get approved within the next few years. By the end of this decade, the next round of capital discussions will take place as needs change and infrastructure and buildings age. The goal is to maintain a reasonable yet steady cadence in how we maintain those buildings and infrastructure, while balancing it with the cost to do so.