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New Bond Plan for Westbrook

Sometimes $2 million is not enough, but $3 million can be just right—at least when making a municipal bond sale to investors. That’s causing Westbrook officials to re-shuffle some already-planned spending on items including fire trucks and bridge work.

Towns frequently issue bonds (a loan the town promises to repay over a fixed period) when using the money for items or projects that provide long-term benefits like vehicles, facilities, or roadwork. Finance Director Andrew Urban said that because the costs associated with a bond sale are relatively fixed, a town gets the best value if the total is at least $3 million. Urban said this general advice was confirmed recently in his conversations with the town’s bond advisor, Mark Chapman of IBIC.

Since the spring bond sale the town originally planned would have been $2.1 million, Urban decided to investigate whether capital spending planned for future years could be added and included in the issue. In this examination, he identified $845,000 in planned capital spending that could be moved into this year. This added spending would bring the new total for the town’s spring bond sale to $2.98 million.

This plan requires town leaders’ support and new bonding resolutions to move forward, however.

A May 2013 Town referendum authorized $1.9 million in short-term notes to finance the purchase of three new fire pumper trucks and another $190,000 for other infrastructure needs like bridge replacement work. The town originally planned to issue three consecutive short-term notes of $600,000 each over a five-year period, buying one truck in Fiscal Year 2016, one in 2018 and one in 2020. When the town’s leaders in November 2015 saw savings and advantages in buying all three pumper trucks at once, however, the town’s plan had to change.

Under the new proposed plan, the town would sell $2.98 million in 20-year municipal bonds in late February or early March 2016 to buy three firetrucks now and raise funds for other needed capital projects and purchases. This action requires approval of new bonding resolution language and $845,000 in new capital project spending by the Board of Selectmen, Board of Finance, and the Town Meeting.

The projects and purchases it would fund are from those already listed in the town’s Capital Improvement Plan (CIP), but planned for future years. This five-year CIP, revisited and updated each year by town leaders, identifies capital projects and purchases, costs, and the year the spending will occur.

On the list of add-ons are replacement of Public Works’ 2000 Elgin street sweeper for $185,000 (originally slated for replacement in 2018), replacement of the 1992 International dump truck (originally planned for 2019), replacement of the 2000 John Deere loader at $190,000 (2020) and support for installation of air conditioning at the Westbrook Middle School at a cost of $300,000 (originally set for 2018 or ’19).

Also receiving financing from this proposed bond issue would be capital infrastructure projects already approved by the voters, but which now need more funding than the 2013 bond resolutions anticipated.

“Since the adoption of the CIP, several situations have presented themselves that require additional financing within the next 12 months,” Urban wrote in his capital financing report to the boards of Selectmen and Finance.

“In 2013, we sold $1,350,000 of an authorized $1,540,000 of infrastructure bonds, including the Lynn Road and Winthrop Road bridges. Both bridges are eligible for the state’s Local Bridge Program grant which will cover 45.06 percent of eligible costs. After the bonds were sold, the estimates of the cost of bridges increased substantially. Funding for Lynn Road will fall short by $168,000 while funding for Winthrop Road will fall short by $224,000,” continued Urban.

To address the shortfalls, Urban suggests using $200,000 of unspent bond funding that was allocated—but not used—for paving projects and $190,000 in authorized infrastructure spending that was not issued as debt to pay for the Winthrop Road bridge project shortfall.

All of the already authorized and proposed capital spending the bonds would finance would lead to a February or March bond sale of $2,980,000. The additional $845,000 in new bond fund spending would require Board of Selectmen, Board of Finance, and Town Meeting approval to be included in the issue.

“Because $845,000 of current CIP projects will be removed from the need for self-financing, the General Fund contribution can also be reduced by a similar amount and help offset the additional debt service for the first three years,” wrote Urban.

The Board of Selectmen and Board of Finance will discuss and act on the capital spending plan at their meetings this month.