Town releases cost of Wentworth bond

In advance of a $39.1 million bond vote, town releases impact to taxpayers, if passed

SCARBOROUGH — There seems to be little question that Scarborough needs a new intermediate school. Out of dozens of people interviewed on the topic over the past three weeks, only one person – Town Council candidate James Benedict – has expressed doubt that the school needs to be replaced at all.

Instead, those who oppose the $39.1 million bond question poised to appear on the Nov. 8 ballot tend to echo Ted Tibbals, a local master electrician.

“I definitely agree, a new building is overdue,” he said last week. “But then they go in and come up with this grandiose thing and you’re between a rock and a hard place. We need it, no doubt, but no way can we afford what they’re presenting. They’re putting a real burden on the senior citizens in this town. So, I’m not going to vote for it.”

Now, as the bond vote approaches, Tibbals and others in town are getting a clearer picture of how the Wentworth project might affect property tax bills. According to Town Manager Tom Hall, Wentworth will bump tax bills 46 cents per $1,000 of property valuation, boosting the tax rate from $13.03 to $13.49.

In other words, he said, given that “the average home in Scarborough is valued at $300,000,” if the Wentworth bond is approved, the average tax bill will go up $138.

“That can be further boiled down to $2.65 a week,” he added. “It’s up to each person to decide, is it worth it? Can I absorb that?”

But a word of warning: The fiscal note that appears on the backside of the paper ballot is hardly fixed in stone.

Hall calls his calculation a “worst-case scenario.” If voters give the nod, he said, the town won’t conduct its bond sale until next year. It’s to be determined if the there will be one all-encompassing bond sale, or a series of smaller auctions. Still, Hall assumes an interest rate of 4.5 percent. That means by the time the $39.1 million Wentworth bond is paid off in 2042, the project will have tipped the scales at $66.3 million.

“When voters look at the fiscal note on their ballots, it really is a staggering figure,” Hall said. “I can appreciate that.”

But, the town manager points out, the two most recent bond sales in Scarborough, both for annual capital improvement projects, drew interest rates “under 3 percent.”

Hall claims that when the actual interest figure is known, taxpayers will save $3 million off his $66.3 million projection for each half-percent below the 4.5 assumption. So, if the 3 percent rate holds, the final bill may come in closer to $57.3 million.

“I think – in fact, I know – we are going to do better than 4.5 percent,” Hall said. “But I have a responsibility to be quite conservative in my estimates.

Hall also stresses, as does Paul Koziell, the chairman of the Wentworth building committee, that the $39.1 million voters are being asked to approve is a cap on spending. It’s “very likely,” both say, that Wentworth will dress out at somewhere south of the price on the ballot.

Still, while the interest rate and borrowing total used by Hall indicate a worst-case scenario, he admits his tax rate calculation is made on a best-case assumption.

“It does assume no other borrowing,” he said last week.

The first bond payments on Wentworth, totaling $3,004,650 (at the 4.5 interest rate) would not come due until FY 2014. That same year, Scarborough will retire $968,327 in debt, for a net impact to the budget of $1.7 million.

But this does not include borrowing that may occur in either 2013 or 2014. Given that Scarborough has historically sold bonds every year to fund capital improvements, it seems unlikely that Wentworth would be the only outlay driving the town into the red.

Already on the table for FY 2013, as part of Scarborough’s five-year capital improvement plan, is $1.6 million in equipment requests, including $1 million for the fire department (primarily for new ladders), $400,000 for five new public works vehicles and $100,000 for new police cruisers.

“None of that is done until the council approves it,” said Hall, explaining why those dollars are not factored into his fiscal note for Wentworth. “Clearly, we have laid out a plan and, it’s possible, this new Wentworth bond might cause the council to question that.”

That said, it appears that while Wentworth, by itself, would add 46 cents per $1,000 of valuation to property tax bills, the bottom line of next year’s budget will likely grow by a wider margin.

“Capital projects are something I think we can slide on,” Hall said. “We can push some of that further off into the future. But the equipment – I’ll do everything in my power to stay on track in that respect.”

With $68 million in outstanding town and school bonds even before the Wentworth vote, Scarborough has a debt load six times higher than the next most-in-debt communities in the region – Yarmouth and South Portland, though the latter has recently approved a $41.5 million high school project.

That debt, however, is just 1.87 percent of Scarborough’s total assessed value – $3.57 billion, according to Town Assessor Paul Lesperance. State law says municipalities must keep their borrowing below 15 percent of assessed value.

“So, while some communities, primarily in other states, have run into trouble recently, I don’t think we’ll have any problem selling our bonds,” said Hall.

“We met with a financial adviser recently,” said finance committee member Michael Wood, at a recent Town Council meeting. “He said we’re all set. We’re right where we want to be. He said the ratings agencies actually like to see you have some debt.”

Although that sounds counter-intuitive, Hall explained that too little debt intimates a town is not keeping up on routine maintenance, which could lead to one giant spate of borrowing when things inevitably break.

“This town has, better than most, if not all Maine communities, really committed itself to taking care of its infrastructure,” Hall said. “And that means spending money.”

Credit rating agency Moody’s Corp. gives Scarborough an Aa2 grade, while Standard & Poor rates the town at AA. In both cases, the rating is two steps below the very best grade, but still indicative of bonds that are “high quality, with very low credit risk.”

None of that helps to sway Tibbals, however, who jokes, “I should be buying school bonds instead of CDs (certificates of deposit).”

“I can’t, in good conscience, approve this project,” he said. “It’s just too much.”

A Closer Look

School building comparison

School                         Year   Grades        Students      Cost      Sq. Feet       Cost/Sq. ft.

Falmouth Elem.           2009    pK-5             917       $49.1M    139,600          $351

Ellsworth Elem./Mid.  2009    pK-8             905       $38.7M    146,600          $327

Gorham Elem.            2010     pK-5            550        $26.9M      82,300          $327

Brunswick Elem.        2010      3-5              600        $29.7M      94,800          $313

Durham Elem.            2009     pK-8            505        $25.4M      87,500          $290

Brewer Elem./Mid.     2010     pK-8         1,050        $41.2M    156,400         $264

Lewiston Elem.          2008     pK-6            624        $23.9M      90,700         $263

Wentworth Inter.        2012      3-5              800        $39.1M    163,000         $240

Kennebunk Elem.      2003     K-5               600       $19.2M     104,200        $184