WESTERLY — The Town Council continued its analysis of the proposed $71.4 million school building project Monday and received updated projections from the town’s financial advisor.
The town is expected to issue bonds for the project if it moves forward and is approved by residents at a referendum.
“I think we’ve demonstrated there is some capacity ... however the question also is the affordability to the town and to the residents,” said the advisor, Steve Maceroni, director of PFM Financial Advisors LLC of Providence.
Maceroni, who reviewed the project in December during a joint meeting of the Town Council and School Committee, provided updated figures that included an assumption of an additional $5 million “contingency bond” for other projects that will likely be needed in the early years of payment for the school project. Once the town’s current debt obligations drop off significantly in 2026, the town will have additional capacity to borrow for other projects over and above the school project and the $5 million contingency, Maceroni said.
To show the project’s potential effect on the tax rate, Maceroni presented four sample scenerios. The scenarios are based on the state’s assurance of providing $3.75 million in upfront “paygo” funds meaning the bonded component of the project would be $67.68 million.
Under the first scenario, which assumes a 4.5 percent interest rate for the school bond, a 4 percent interest rate on the $15 million road bond approved by voters in November, and a 4 percent interest rate on the $5 million contingency bond; and assuming the school project is reimbursed by the state at a rate of 35 percent, the tax rate would increase by 83 cents per $1,000 of assessed value. Under scenario two, which was based on the same interest rates but a 50 percent reimbursement rate from the state, the tax rate would increase by 69 cents per $1,000 of assessed value.
The project would have less of an effect with lower interest rates. Scenario three assumes an interest rate of 4 percent for the school project, and 3.75 percent for both the road and contingency bonds and 35 percent reimbursement of the school project by the state for a 79 cent per $1,000 of assessed value effect. Scenario four assumes a 50 percent reimbursement rate by the state and the same interest rates as scenario three for a 65 cent per $1,000 of assessed value effect.
“That’s the range, that’s what the voters need to know. Based on our best guess, today, this is what the project could cost,” Maceroni said.
Councilor President Christopher Duhamel asked whether the town’s operating budget, which includes annual debt service payments, could absorb the financial impact of the proposed project, and stay under the 4 percent maximum annual tax levy increase imposed by state law.
In the second year of paying the school bond, Maceroni said the bond would likely push the tax levy increase slightly over the 4 percent limit and require the town to seek permission for an override from the state. But Maceroni also said the use of bond anticipation notes and other approaches might reduce the overall effect of the project on the tax levy and the operating budget. “There are strategies to try and get below that 4 percent during construction,” Maceroni said.
In the year 2026, the town’s current debt obligations will drop significantly as older debt is paid off. “In 2026 you have significant capacity for more debt,” Maceroni said.
Richard Smith, a former longtime member and chairman of the Board of Finance, asked the council to carefully study the effect of the project over a three- to five-year period and determine if the scope of the project has to be reduced. He also asked the council to consider economic conditions and forecasts. “If $50 million or $40 million is the best we can do, you have to communicate that,” Smith said.
The project calls for razing the current State Street School and replacing it with a new $41.9 million building to house all of the district’s Grade 3 to 5 students. Dunn’s Corners School would undergo $10.2 million in renovations, reconfiguration and additions, and $3.48 million in renovations, reconfiguration and additions are planned for Springbrook School.
The projects also call for $206,587 to prepare the Tower Street School Community Center for use as temporary quarters for students during construction, as well as $4.2 million in improvements at Babcock Hall and $9.3 million in improvements at Ward Hall. An additional $1.9 million in districtwide improvements would also be made.
The council is expected to vote on Feb. 11 on whether to approve sending the project along for a Stage 2 review by the state Department of Education. An application for the Stage 2 review is due to the department by Feb. 15. Local school officials have said they anticipate a 50 reimbursement rate from the state.