Friday, March 14, 2008
Selectmen approve short-term borrowing
At the Selectmen’s meeting March 4, Finance Director Larry Barton proposed renewal of a bond anticipation note which is coming due April 3. The current borrowing of $775,000 was approved for renewal at $1 million and will be allocated as follows: $500,000 for a fire truck, $300,000 for a boiler for the school, and $200,000 for two cisterns, all approved at Town Meeting in 2006. The interest rate is expected to drop from 3.73% to about 3.3%.
Questioned about interest rates, Barton said “Carlisle’s bond rating is still pretty good.” He later noted that a few years ago the town was on the cusp of improving from an AA2 to an AA1 bond rating. While the town is not longer in that enviable position, there is little chance the town would be downgraded in the near future. On the other hand, “it would take some investment work on our part” to get back to where Carlisle would again be considered for an AA1. Bond ratings agencies such as Moodys assign these numbers to inform investors about the safety of the town’s bonds, and they have a heavy impact on interest rates.
Renewing the bond anticipation note is less expensive than long term bonding of this small amount. Barton said he will wait to see if there are other upcoming capital projects before rolling the amount, along with other borrowings, into a long term bond, perhaps in 2010.
Financial questions also arose as to the treatment of a shortage in funds for paying off the Benfield tax judgement against the town. In 2004, money was put into the Stabilization Fund against the possibility of this judgment, but $36,349.07 still needs to be covered. Is there a difference between taking the funds from Free Cash versus the Stabilization Fund? Barton noted that auditors view the Stabilization Fund as “quite real” because it can not be decreased by operational shortfalls during the year as can Free Cash. In addition, the Stabilization Fund requires a 2/3 vote versus simple majority for Free Cash, so it is “a more deliberative process” to remove funds. “Ratings agencies put a bit more weight on the Stabilization Fund,” he said.
He noted the most important thing the ratings agencies look for is “A good set of policies and plans and good management.” The fact the town put aside money in 2004 when the lawsuit first arose will be favorably viewed. Regular put-asides are also preferred over savings that swing up and down, “They’re looking for a plan.”
There is no one on the Cable Advisory Committee, and the Comcast contract is up for renewal this year. Selelctmen felt it is important to get this group going so it can get up to speed on the current contract and identify factors to be renegotiated. It is a three-year commitment, as after the contract is negotiated, the committee provides information to the public and monitoring of requirements. ∆
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