WESTWARD – The city’s financial adviser presented city council with a path forward that would allow borrowing money to repair roads, schools and the municipal sewage plant. If carefully plotted, the advisor said, the route could avoid damaging the city’s bond rating.
The board, after listening to a presentation Monday from Steve Maceroni, director of PFM Financial Advisors LLC, decided to hold a special meeting on Tuesday to vote on adding an $ 11 million road bond proposal as a matter of voting. for the May 4 referendum. The referendum will also include a question asking voters to approve a $ 2 million loan for school renovations, including a new roof at Dunn’s Corners School. The results of the council vote on Tuesday were not available at the time of going to press.
Maceroni, who was the city’s financial advisor for several years, referred to “strong numbers” and a “very healthy tax base” to describe the city’s current financial situation. While the city is slightly more in debt than some of its Rhode Island and New England peers, he said the weight of its tax base is offsetting the rise.
The board invited Maceroni to make his presentation as it continues to examine some significant potential spending, including between $ 12 million and $ 15 million to repair and upgrade the sewage treatment plant, a large-scale school construction project. ladder and a new road repair project. .
The city bond rating by Moody’s Investors Service is Aa3, the service’s fourth highest rating out of 21 levels, and AA, S&P Global’s second highest rating. Departments assign ratings based on existing debt, tax base, and other indications of a borrowing entity’s ability to repay.
The city’s total unpaid debt is $ 66.8 million; its net debt service as a percentage of the general fund is 8.4%. According to Maceroni’s report, 78.2% of the current debt will be repaid in 10 years. Annual debt principal repayments are between $ 6.5 million and $ 7 million for 2021-2025. In fiscal 2026, debt service is expected to decline by approximately $ 2.2 million.
Councilor Philip Overton asked how the municipal bond rating would be affected if the city borrowed $ 15 million for the sewer plant, $ 11 million for roads and $ 50 million for the larger school project.
“If there is a thoughtful plan to move forward with the schools that you fully communicate with the agencies and the plan is to take advantage or wait until you have the fall of 2026, I think the project is manageable and it won’t impact your rating, ”Maceroni said.
Maceroni also presented an approach whereby the city could potentially start the school project by using bond anticipation notes before issuing actual bonds which he said would allow construction to begin and delay the transfer of the city. essential debt in the city’s books.
City and school officials say the smaller $ 2 million school project would have little to no effect on the current tax rate or spending levels, as the loan would be offset by savings from refinancing existing debt for a previous school construction project.
The council had previously considered a $ 9 million road bond proposal, but raised it to $ 11 million on the recommendation of its public works subcommittee to include more sidewalk work in the project.
Councilors Brian McCuin and Sharon Ahern have raised concerns. McCuin said he was inclined to suspend a new road obligation, saying he was concerned that budget problems could lead to less state aid to cities.
“I feel like I’m being pushed to say ‘yes’ to all of these things,” McCuin said.
Ahern said she was hesitant to ask voters to approve funding for a new highway bond before the sewer plant bond was considered. The exact cost of the sewer plant is unlikely to be clear until the summer, which means another referendum will likely be held in the fall. Work on the wastewater treatment plant will need to be completed as a condition for the State Department of Environmental Management to issue a new permit for the plant.
“We absolutely must have [the sewer plant upgrade]. I would wait on the roads until we have a round of questions on the bonds, but I can see that we have a majority that wants the $ 11million bond proposal to be considered on Tuesday night, ”he said. said Ahern.
Councilor Caswell Cooke Jr. lobbied for the road bond in the May referendum, saying the city could undertake road works before prices rise.
Councilor Christopher Duhamel, who asked for an overview of the city’s borrowing capacity last week, said he was comforted by Maceroni’s presentation.
“I was worried about the priorities and how everything would fit into the sewer obligations and the declared obligations to schools and schoolchildren … I think we were put at ease tonight by Mr Maceroni and its presentation – that it is possible to do these projects and prioritize them, ”said Duhamel.