AMHERST — Changing economic conditions, accelerating construction costs and rising interest rates are prompting Amherst officials to reassess a financial plan from February 2021 that will guide the town in paying for four new municipal buildings.
The Finance Committee learned this week from Finance Director Sean Mangano, Comptroller Sonia Aldrich and Town Manager Paul Bockelman that assumptions in a report from almost 18 months ago, showing how Amherst can pay for $90.8 million in building projects, are out of date.
“There’s not going to be a happy ending,” Mangano said, explaining that revisions are needed to create a financial plan that is both affordable for taxpayers and has reliable sources of revenue. “It’s not necessarily a tragedy, but there’s not going to be a single model that checks all the boxes of what we hope to achieve.”
Significantly, the costs to the town of building a new elementary school, renovating and expanding the Jones Library, and constructing a new South Amherst fire station and new Department of Public Works headquarters have risen by about $40 million, based on estimates provided by Mangano.
Mangano said any new financial plan would continue to rely on a Proposition 2½ debt-exclusion to cover debt payments for the school project, in which both Wildwood and Fort River schools would be replaced by a new building on the Fort River site on South East Street.
That vote will be scheduled by the Town Council in the fall, with voters possibly heading to the polls next March.
With the new reality, District 1 Town Councilor Cathy Schoen said councilors may need to reconsider completing all four projects, understanding the $70 million number for the school project, which is strictly what the town would pay, could be a scary number. The remaining expenses related to the school project will be reimbursed by the Massachusetts School Building Authority.
“I think we need to rethink the plan, that the world has shifted dramatically,” Schoen said. “Now I want to more strongly say it: I’m not sure we can go for all four.”
The concern is that the higher costs could depend significantly on more use of town reserves, putting pressure on operating budgets at a time when Amherst has created two new departments, the Community Responders for Equity, Safety and Service, and Diversity, Equity and Inclusion, and is also committed to offering a program for reparations to residents of African heritage.
In the February 2021 model, the town would have had to pull $4.6 million from reserves, over a number of years, to make the payments work on the projects. The borrowing for all projects, except the Jones, were to be done with 30-year loans, and 10.5% of the tax levy would have been set aside for capital spending each year, with $3 million going for other capital needs.
“Looking back, we’d love to have this model back,” Mangano said.
The two new models that the town could pursue factor in the increased costs for the various projects.
Under the first model, in which the fire station would be put off for almost a decade, the projects would each rely on 30-year loans and $13.4 million would come from town reserves over a number of years, with 10% of the tax levy set aside for capital spending each year, and $3.5 million going for other capital needs.
The second new model would also use 30-year loans for each project, $5.7 million would come from town reserves over a number of years, with 10.5% of the tax levy set aside for capital spending, but just $3 million going for other capital needs.
Council President Lynn Griesemer said the idea of limiting other capital spending worries her, especially knowing that road and sidewalk infrastructure is important.
“I’m really increasingly concerned about whether or not the amount we’re putting aside for other capital is really sufficient,” Griesemer said.
Schoen wondered whether American Rescue Plan Act money might be available for the school project.
Finance Committee member Bernie Kubiak said he would like to see the funding model’s timeline be compressed by having the projects done more quickly. That would mean getting cost estimates and plans developed for the DPW and fire station soon.
“Amherst hasn’t demonstrated that it can do things rapidly, and time’s money,” Kubiak said. “We’re paying the price of not acting five years ago — we’re paying the price for taking our time, for whatever reason.”
Bockelman said the town has already lost millions of dollars by rejecting the twin-school project in 2017, and the costs of the Jones Library work have been driven up by delays caused by the legal wrangling following the Town Council’s approval of the project in April 2021, which later forced the council to bring the project to voters in November.
Griesemer said she worries about delaying getting a new DPW and fire station built because that will mean that existing buildings continue to deteriorate, and the town will have to throw good money after bad.
Bockelman confirmed that. “The situation in our two public safety buildings, the DPW and the fire, is getting bad,” Bockelman said.
Griesemer said she appreciates the “chilling presentation” from the finance team, noting that it will help the Town Council make decisions in the fall.
“It gives us the other part of the budget picture that has been alluded to but not shown,” Griesemer said.
Scott Merzbach can be reached at smerzbach@gazettenet.com.