Impact of Revised Bolton Green Debt Strategy based on New Opinion of Bond Counsel

Bolton Green, Financial Summary Oct 14, 2011 Partners for Planning, a citizens task group that is exploring solutions for the contaminated Smith garage property in the center of town (715-723 Main Street), proposes that the town purchase the 8.3-acre site, clean up the contamination, and implement a redevelopment plan. Purchase of this site is a unique opportunity to control what is built at this keystone location and to leverage many benefits only available to municipalities for redevelopment projects such as this. The proposal features the creation of a Town Green and the building of market rate and affordable housing on the currently blighted site. The proposal requires an investment by the town that, unlike many town expenditures, has a direct economic benefit with few ongoing operational expenses. Because the plan involves housing that will generate property and excise taxes, the project will produce a positive cash flow by year 7 and a complete payback by year 13. Over 20 years, the project will generate a significant positive cash contribution to the town, while permanently enhancing the beauty, character, and use of the town center. The total project cost is expected to be $765,000. A sum of $125,000 will be transferred from the Affordable Housing Trust and grants from MassDevelopment and the EPA will total $232,500, which results in the request to authorize borrowing up to $440,000 to fund the project. The grant assumptions have been rigorously vetted and funding agencies could provide additional grants of over $800,000, if necessary.

With the addition of $440,000 of borrowing for Bolton Town Green, town debt will still decrease every year from $16.7 million in 2012 to $10.9 million in 2016. Tax revenues (property and excise taxes) received from the housing are projected to be $81,000 at occupancy and will exceed the present property taxes of $14,000. Over 20 years, this project will generate a positive cash flow of $411,000 at a NPV of 3%. Tax receipts will exceed costs and the investment will have an IRR projected to be 16%. An average single family home assessed at $455,800 with taxes of $8,852 will experience a increased taxes of $14 per year ($71 for the first five years). The same single family home will experience a tax decrease of and average of $18 per year ($370 over 20 years). Breakeven occurs in year 2024. The FY2012 town budget will increase by approximately $1,500 and the FY2013 budget will increase by approximately $5,000. On October 12th, because of a recent change in the Municipal Relief Act of 2010, Bolton Bond Counsel advised the Selectmen that the Town must approve borrowing for total project costs. Bond Counsel said that no matter how strong the assurances by State and Federal officials that grant funds will be available for the Towns clean up costs, if the voters approve the purchase, borrowing for clean up also must be approved by the voters. Warrant Article 5 has been revised, therefore, to request borrowing approval for $640,000 instead of $440,000, the figure proposed by Partners for Planning in consultation with all of the relevant Town Boards, Commissions, and Committees. A high degree of confidence exists that clean up costs will be fully covered by grants, based on conferences with key officials. Should even the full $640,000 have to be borrowed, however, the average cost per single family home would increase from an average of $14 per year ($71 five-year total) to $19 per year ($97 five-year total) The 20 year Town revenue for a single family home would drop only $109 (from $370 to $261).
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