The Carlisle Mosquito Online

Friday, November 14, 2003


Treasurer analyzes pay-off strategy for Hutchins-Robbins Fields

Town Treasurer Larry Barton returned to the November 4 Selectmen's meeting after three weeks of "pushing the numbers" with regard to paying down debt on the Hutchins-Robbins Fields on Curve Street (Wang-Coombs Land). It was during the Selectmen's meeting on October 14 that Barton disclosed that money taken out of the Stabilization Fund to pay down the $320,000 portion of the $2.15 million debt is eating away at the Fund due to the difference in interest rate between what the Stabilization Fund earns (about 1%) and what the bond requires (5.35%). Barton circulated three scenarios to illustrate the situation and to offer possible alternatives.

The 20-year General Obligation Bond for Hutchins-Robbins was issued on June 15, 2000 for $2,150,000. At a later date after the bond was issued, Carlisle received $320,000 through a grant from the U. S. Department of Agriculture. Since this money was received too late to reduce the original bond issue, it was deposited in the Stabilization Fund. Since then, we have voted at three Annual Town Meetings to withdraw a principal payment of $16,845 and the associated interest owed on the $320K portion of the Hutchins-Robbins bond equal to 5.35% of its principal balance. This balance will be $269,465 after completion of the third payment on June 15, 2004.

One of the three scenarios made no attempt to cover bond interest with stabilization funds and this is the approach that Barton is now recommending to the Selectmen. The total payments voted at Town Meeting through June 30, 2004 amount to $50,535 in principal payment and $48,757.22 in interest for a total of $99,292.22. During this time period, the funds earned only $18,460 in interest, leaving an excess in interest paid (on the bond) versus interest earned (in the Stabilization Fund) of $30,297.22. Barton chose to apply this excess interest to pay down principal (mentioned above as $269,465) instead of using it to cover the 5.35% interest on the $320K portion of the bond, leaving a balance of $239,167.78. The $320,000 debt can then be retired using an adjusted annual principal payment of $14,947.99 for the remaining 16 years.

Selectman Doug Stevenson would rather the town pay off the loan quicker rather than drag it out over 16 years. His concern is that after 10 to15 years of annual transfers at Town Meeting, nobody will remember the original conditions. "How about 10 years?" he asked. Chair Tim Hult acknowledged that the proposed reduced payments would increase the amount of taxes people pay. But although we're not required to pay debt out of the Stabilization Fund, he liked the Treasurer's proposal because it honors the town's implicit agreement to use the agricultural grant to help pay down the Hutchins-Robbins debt.

Selectman John Ballantine would like to see more discussion about use of the Stabilization Fund, which now stands at $784,000. "Maybe other uses are better," he suggested. Vivian Chaput believes, "The Stabilization Fund should only be used for capital projects, not dribbled away." Tony Allison asked, "What's the best deal for taxpayers? If we beef up the Stabilization Fund, then we won't have to do RANs (Revenue Anticipation Notes)." He pointed out that borrowing money from the fund for operating expenses in anticipation of future revenue would essentially be a free loan. Madonna McKenzie reminded everyone that maintaining a substantial balance in the Stabilization Fund is essential for a favorable bond rating, since our Free Cash is largely depleted.

Barton's proposal obviously opened a can of worms as far as use of the Stabilization Fund is concerned. There will be more discussion in the future, but the immediate issue prompted the Selectmen to force a decision now on the Treasurer's proposed plan. It was approved by a vote of 40-1, with Ballantine abstaining.

2003 The Carlisle Mosquito