Loading...
HomeMy WebLinkAbout2009-11-12-CPC-min (730PM) Community Preservation Committee Financial Policy Meeting Thursday, November 12, 2009 Room G-15, Town Offices 7:30 pm Present: Betsey Weiss, Chair; Joel Adler, Norman Cohen, Marilyn Fenollosa, Jeanne Krieger, Wendy Manz, Leo McSweeney, Nathalie Rice, Admin. Asst; and Sandy Shaw. Members of the Capital Expenditures Committee attending were Charles Lamb, Chair; Ted Edson, Bill Hurley, David Kanter and Shirley Stolz. The Appropriations Committee members in attendance were Alan Levine, Vice-Chair, Richard Eurich, Molly Garber, Glenn Parker and Joe Pato. Members of the Board of Selectmen attending were George Burnell, Norman Cohen (a CPC member), Jeanne Krieger (a CPC member), and Peter Kelley. Mr. Carl Valente and Mr. Rob Addelson were also in attendance. Absent: DickWolk and Leo McSweeney, members of the CPC. Ms. Weiss called the meeting to order at 7:35 pm. The purpose of the meeting, which was sponsored by the CPC, was to bring the CPC, financial committees and the Board of Selectmen together in order to discuss and formalize CPC financial policies. 1.Rob Addelson – Review of CPC Budget Projections. Mr.Rob Addelson, Assistant Town Manager of Finance, reviewed a model he had formulated for the CPC as a planning tool. The model was designed for a five year planning period, and tracked the property surcharge and State match revenues, offset by projected projects costs. Mr. Addelson explained that the present available balance in the CPC accounts totals $10,181,318. He said this figure included the $98,000 bonding fees for Busa, but did not include the cost of the Busa acquisition. In addition to handing out the CPC spreadsheet, Mr. Addelson also gave attendees a handout on debt service scenarios, relative to the Busa acquisition. The chart showed potential debt payments at 4% for 5, 10 and 20 year periods for the $4,197,000 Busa purchase. 2.Financing guidelines – Mr. Carl Valente – Mr. Valante, Town Manager, next addressed the meeting, and presented a set of Draft Financing Guidelines he had prepared for the CPC. He explained that his two page document was only for discussion purposes, and that it had only been reviewed by Mr. Addelson. The document suggested in its “General Guidelines” that a $500,000 balance be kept in each of the reserve accounts from year to year, including $500,000 in the Undesignated Fund Balance, which supports recreation projects. Mr. Valente then summarized the Specific Guidelines in the document. In regard to Financing New Fixed Assets, such as land or new affordable 1 housing, he said he believed the CPC should use cash whenever possible. In considering Large Fixed Asset projects, the CPC may choose to bond, but might wish to choose a standard for retiring the bonds. (One such standard is the retirement of 70% of the debt in a 10 year period. This is the standard the industry uses for AAA rated debt.) He said it was important only to use debt for projects for which there would be a long term benefit to the Town, thereby making the distribution of the payments over time equitable to taxpayers. In regard to Financing Renovations or Rehabilitations for Existing Assets, Mr. Valente suggested such projects should always be paid with cash, unless the cost of the project greatly reduced the balance in the CPC accounts. Finally in regard to Private Projects, Mr. Valente suggested that only cash be used, so as not to inequitably obligate future taxpayers for such debts. 3.General Discussion a.) Suggestion of $500,000 in each “Bucket” – After Mr. Addelson’s and Mr. Valente’s introductions, the meeting was opened to a discussion of the points raised by Mr. Valente. Discussion first focused on the recommendation that $500,000 be kept in each of the CPC “buckets”. Mr. Kanter questioned the premise of having each group feeling entitled to “their $500,000”. Mr. Levine suggested that if the CPC needed cash for a large project, they might wish to rethink having dedicated monies to specific buckets (which cannot be used for any other non-designated purpose). In the event such a project was considered, Mr. Valente responded that the CPC could always bond its cost or consider a BAN or bridge loan. Mr. Levine suggested that one could make distributions based on percentage, rather than specific amounts, similar to the 10% distributions. He suggested the distributions to each bucket could be doubled, for instance. A lengthy discussion ensued, in which Ms. Weiss, Ms. Manz and Mr. Eurich felt the distribution of $500,000 into each of the buckets would restrict the CPC in funding future projects. There was no specific sense of the meeting on this topic, but there was a general hesitancy to “tie up” funds in a manner that would make them less available to Special Town Meetings if needed. b.)Minimum Balance - The discussion then turned to the policy of keeping a minimum total balance in the CPC accounts. Ms. Levine asked the group if there was general agreement with the figure of $2.5 million as a minimum balance. Mr. Lamb said he had suggested $3.0 million in a paper he had emailed to the meeting participants, but voiced no serious objection. 2 c.)Bonding - The topic of bonding was raised, with Mr. Kanter stating that he was not sure if Mr. Valente’s suggestion of 70% retirement in the first 10 years of bond payments was aggressive enough. He offered 10 years as the total bond length, stating that he would be hesitant to lock the Town in for any longer periods of time. He noted that if the CPA were ever repealed, there would have to be enough left to pay off the bond. (The Town can also assume this debt if the CPA were not able to pay it through remaining account balances.) Mr. Cohen pointed out that a long term bond might be appropriate for land acquisitions, since such purchases benefit future generations. Mr. Eurich noted that bonding gives the impression that the CPA has more funds that it actually does, and that there can be a downside to this approach. He said his preference would be only to bond for short terms. Mr. Levine agreed with this, saying that a 5-10 year timeframe would be acceptable, especially with 10 million dollars in the fund. Mr. Burnell echoed this conservative approach, but went further to state that he would not recommend bonding until “he was broke”. He felt there were costs associated with bonding, and that it was unwise until absolutely needed. Revisiting this point later, he agreed that a minimum balance was necessary, and that his comments about bonding did not mean the CPC should exhaust their entire balance. Mr. Lamb raised the issue of bonding every purchase over $1,000,000 as suggested by Mr. Valente. He said it seemed to be the sense of the meeting that bonding should be undertaken very conservatively, and voiced his opposition to this policy suggestion. Mr. Kelley brought up the point of political integrity, noting that he felt the CPC should be cautious in approving projects in general. He felt there was a downside to having taxpayers feel that the CPC approves all projects, and that it was willing to incur debt to so. He reiterated the sentiment expressed by Mr. Burnell that projects should be paid in cash, and added his opinion that private projects should not be approved under any circumstances. Ms. Garber summarized the lengthy discussion on bonding stating bonding should be used only when absolutely necessary and only for short terms. d.)Maximum Balance - Mr. Lamb noted that there had been no discussion of a maximum balance for the CPC accounts. He stated that the Town would never pass an override if the CPC held $10 million in cash at all times. There was no further discussion of this specific topic. e.)Next Step – Mr. Lamb asked the CPC what their next step would be. Ms. Weiss responded that the CPC would meet and discuss the policy 3 suggestions from the meeting. Ms. Krieger added that the CPC would make refinements to the policies and hopefully come back to the assembled group for further fine-tuning. There was no discussion of bonding as it related to the Busa acquisition. The meeting was adjourned at 9:24 pm. Respectfully submitted, Nathalie Rice Administrative Assistant Community Preservation Committee The documents discussed at this meeting include the following: 1.Draft-for Discussion Purposes – Financing Guidelines, Community Preservation Act Projects, dated 10/09. Submitted by Mr. Valente. 2.Community Preservation Budget Projections, dated 11/12/09, submitted by Mr. Addelson. 3.$4.197 Million Issued at Various Terms at 4%, undated. Submitted by Mr. Addelson. 4.Talking Paper on Funding of Community Preservation Act Project for Mini- Summit, dated 10/12/09. Submitted by Mr. Lamb. 4