The good news: Westport is in excellent financial shape.
The bad news: We’ve got some big capital expenses coming up. At least one new elementary school; Longshore renovation; a new firehouse or two — those are some big-ticket items.
The bottom-line news: It’s time to think about them.
At least one Westporter is. Brian Stern has served on the Board of Finance since 2009, and is a former chair. He earned a Harvard MBA and spent 35 years with Xerox, beginning as a finance director and progressing to president of 4 divisions. After retiring in 2007 he invested in and managed 2 high-tech start-up companies.
The other day, we chatted about town finances.
Thanks to continued good governance and a strong tax base, he said, our financials are “very strong. Most towns would love to have the grand list increases we’ve had.” They’re consistently 1 to 2.5%; next year’s is 2.2%.
The tax levy is $190 million on property. That’s one positive effect of teardowns, Stern says: Demolishing a house that’s $800,000 on the grand list, and replacing it with a $6 million one, enables us to keep the same mill rate year after year.
New apartment buildings on the Post Road help. So will converting the former Save the Children non-profit on Wilton Road to high-priced condos.
“Our reserves have never been higher,” Stern notes. “We can withstand any imaginable fiscal crisis.” And our AAA bond rating won’t change.
“All signs are good,” he reiterates. “We are, and will be, a fundamentally attractive town.”
But Stern repeats the warning bells he sounded at the May 11 Board of Finance meeting.
The town’s 5-year capital plan includes many important and “justifiable, well thought out” projects. Yet taken together, he says, they’ll run up a “massive bill, unlike anything we’ve seen before.”
Through no one’s fault, he foresees “dramatically increased spending” for the town and Board of Education budgets. Together with national trends like increasing interest rates — from below 2%, to 4% — and rising inflation, the combination will be costly.
Stern says that the town’s current debt is $105 million. Bond costs have been in the @% range; the most recent came in at 3.4%.
Our current debt service of $11.5 million a year is about 5.2% of the total operating budget. That works out to about $3,870 per Westport man, woman and child.
Looking ahead to projects like a new Long Lots Elementary School ($50 million to $70 million), and possibly a new Coleytown El; other school projects like a roof at Staples high; a $40 million firehouse; $20 million for much-needed Longshore improvements; bridges; the $12 million downtown master plan — and factoring in state grants of about 11% — Stern sees our total debt increasing from $105 million to $350-$375 million, over 10 years.
Debt service will increase proportionately, from $11.5 million to $40 million. Over a decade or so, per capita debt will rise from $3,870 to $13,500.
“The decision to build is much easier than the decision to finance,” he notes. “Whatever we decide will be with us for 25 years.”
And what happens if we get a “surprise,” as we did with the sudden need to rebuild Coleytown Middle School a few years ago? “Our risk profile would change,” Stern acknowledges.
It would change too if certain projects that are not currently in the capital plan are added in. There are currently “zero dollars,” he says, for things like Baron’s South and affordable housing.
This is not the first time Westport has faced several big projects at once, however. Stern points to the late 1990s and early 2000s, when construction of the new Staples High and Bedford Middle School, plus the conversion Saugatuck El, among others — rocketed our debt from $57 million to $175 million.
People like Steve Halstead and Dan Kail — town leaders who lived through those projects, and their financing — are still around, Stern says. “We should talk to them, and ask about their experiences. Would they have done anything differently? There’s not much that’s free today, but their advice would be.”
Stern notes too, “When we build a school, we get something in return. There was a benefit from those new buildings. These are important investments in our community.”
Of course, they are investments by one generation that subsidize another. Of course too, that’s always the case.
“Someone paid for us,” Stern says. “We have to pay it forward.”
Though some of the projects may slip to a later date, Stern does not view the capital plan as a wish list. “We need these,” he says. Still, he asks, are they all needed at the funding level requested? For example, he wonders, can Long Lots be renovated for less than it would cost to construct an entirely new school? Perhaps we can do with a $25 million firehouse, rather than one costing $40 million.
He urges a “creative” look at spending. Greenwich, for example, pays down its debt faster than the traditional 25 years. Of course, that increases taxes in the short term.
Perhaps the town could consider selling some assets, Stern says. He points to a portion of Longshore near the river that is now “brambles, weeds and a parking lot.” It could fetch $5-$10 million, he thinks.
Stern is not providing any answers. He just wants Westporters to “understand consequences, and make decisions with spending and financing in mind.”
He urges town officials to “keep their heads up and their eyes open — not stick them in the sand.”
Despite the warning signs, he says, “we’ve been through this before. We have a great high school and middle schools, and amenities. This is why I live here.
“We’ve decided, as a community, that we will pay for these things. People don’t always like to talk about the price of things.
“I’m not telling them to tap the brakes. But I am saying: Be cautious.’