Board approves bonding to fund new high school

Date: 11/23/2010

Nov. 22, 2010

By Chris Maza

Reminder Assistant Editor

LONGMEADOW --The Select Board's recent approval of permanent bonding to finance a portion of the new high school building project was a measure taken in order to save the town and its taxpayers money, according to Finance Director Paul Pasterczyk.

Pasterczyk made the recommendation to the Select Board to use permanent Bond Anticipation Notes (BAN) to borrow $27 million of the projected $44 million the town is on the hook for because of good current bond rates and the town's cash flow requirements.

"This is a way to solidify a portion of what we're borrowing at an opportune time," Pasterczyk said. "We're trying to take advantage of a good bond market to address our present cash flow needs. The alternative would be to borrow temporarily and in doing that, the town would have to pay interest and financing costs. By bonding permanently, the town is avoiding a lot of those costs."

According to a press release from the town, the 30-year financing plan will save the taxpayers money over the first five years of the project. The town projects that, with a projected 4.5 percent interest rate on the 2013 bond, the payment plan will have a maximum tax impact of $1.40/$1000 evaluation. In May, the town initially estimated the tax impact to be $1.67/$1000.

Should the interest rate be lower than 4.5 percent, the tax impact will be reduced accordingly.

Pasterczyk added that the town did not finance the total amount because the final projected costs of the construction have yet to be determined.

"The project hasn't been put to bid and the costs have not been determined," Pasterczyk said. "Once we know the actual cost, which most likely will be in the spring or early summer, we will have a better idea of how much the town needs to borrow and how to go about it."

The town hopes to have the project completely financed by 2014, but Pasterczyk said that is not a deadline that is set in stone and that several factors will affect the decision making process.

"We're looking for the right timing, depending on our cash flow needs, the bond rates and other considerations," Pasterczyk said.

Also, $2,774,940 was approved by the Select Board to be permanently bonded in order to pay for the town's water and sewer infrastructure projects, another measure taken to alleviate the burden on the taxpayers.

"We have 10 authorized projects on the town's books," Pasterczyk said. "Some we are borrowing temporarily on because we received a good rate and we are able to pay it off in a shorter amount of time.

"But there are four projects that are too large to absorb, like the water and sewer project. If we were to borrow temporarily, the costs we would absorb would raise the water and sewer rates too much."