Cheshire reviews $60 million bond sale, bond premium and plans to pare capital projects ahead of FY26 budget

Town of Cheshire staff told the Town Council at a workshop Thursday that the town completed a $60 million financing last week to fund two new elementary schools and is weighing how much of a $1.9 million bond premium and existing reserves to apply to next year’s debt service.

The discussion, which focused on debt-service projections and the capital improvement program, came as staff presented initial assumptions for the proposed fiscal 2026 operating and capital budgets and asked the council whether to add new capital borrowing this year.

Sean, a staff member who presented the sale, said the transaction included $40 million of long-term bonds and $20 million of bond anticipation notes that come due in one year and are expected to be folded into next year’s bond issuance. “We did get bond premium… This year was $1,900,000,” Sean said. He told the council the bond sale produced an interest rate of about 3.6% on the $40 million tranche, close to projections, and that the town will need to use a portion of the premium—about $170,000—to align accounting with the budgeted rate. Jim, a staff member, gave the current debt-service reserve balance as about $4,000,000; after the premium allocation Sean said that puts the reserve at roughly $5,700,000.

Why it matters: the town’s debt-service-to-budget ratio is projected to climb above the council’s 10% policy target in the next fiscal year as the schools’ payments come online. Staff emphasized that the most durable way to reduce future pressure is to reduce new capital borrowing rather than rely on one-time reserves.

What staff presented and the council’s response

Finance and capital staff walked council members through a chart isolating the new-school borrowing and projecting out 20 years of debt service for those projects. Sean said the near-term cash picture includes an interest-only payment next fiscal year that he presented as about $131,300 (interest-only for the first year), and that the yellow/blue/green chart showed the multi-year profile as the town completes school construction and finishes remaining borrowings.

Staff highlighted options for ‘‘front-loading’’ use of bond premium and other offsetting resources to ease next-year operating pressure, and flagged the limits of such one-time measures. “The real way to bend that curve is gonna be to approve less capital,” Sean told the council. Jim and other council members discussed the trade-offs of using premium and reserve balances now versus smoothing costs over future years.

Council members pressed staff on the potential revenue from the North End development and the town’s TIF (tax-increment financing) structure. Staff said an estimate for full North End tax revenue was about $5.0–$5.5 million annually once certain arrangements and the developer obligations conclude (staff said the timing of the full revenue realization is expected in roughly two years as existing credit-enhancement obligations are paid). Staff explained the TIF split: 75% of non-CEA parcels’ incremental property tax goes to a town TIF account for infrastructure, with 25% to the general fund while the credit-enhancement obligation is in place. Council members asked whether money in the TIF account could be directed to capital projects; staff confirmed the council can authorize transfers or “sweep” funds once obligations are satisfied.

Capital project backlog and closing old accounts

A large portion of the workshop centered on a line-by-line review of older CIP (capital improvement program) and CNR/C&R (cash-funded capital) accounts. Jim distributed lists and told the council that many projects dating from 2018–2024 contain small residual balances or are ripe for formal closeout. Staff recommended identifying projects with 0% expenditure long on the books (several examples from 2012–2018 were cited) and closing those accounts so authorization or cash could be reallocated to higher-priority items without issuing new bonds.

Council members asked for a focused follow-up: a short workshop with relevant department heads (public works, board of education representatives, planning) to identify which older accounts can be closed and how much cash or borrowing authorization that would free. Sean and Jim said they would return with a cleaned-up list showing available bond authorization or cash from closed projects and a recommendation on whether to keep the town’s CNR appropriation at the manager’s proposed level.

Other program and project notes

- Band shell (town green): staff said retainage, change orders and recently discovered foundation work mean the project still has active obligations; staff estimated the project is approximately $200,000 under budget so far but cautioned that final retainage and possible change orders remain.

- Veterans memorial funds: a $200,000 state-funded allocation remains available; staff said the state awarded a two-year extension to expend the funds and council members asked staff to keep momentum so the grant is not forfeited.

- Parks/open-space and CNR accounts: staff noted ongoing park improvements and small recurring CNR requests (typically roughly $150,000 every other year) and said some park accounts are grant-restricted and cannot be reallocated.

Council direction and next steps

Council members expressed broad support for limiting new debt in the coming budget cycle and for a targeted cleanup of older capital accounts to free cash first. Several members urged staff to return with specific dollar estimates showing how much available bond authorization and cash could be recovered by closing long-inactive accounts. Staff agreed to prepare a one-page CNR summary and a cleaned CIP/CNR list for the council and to schedule a focused workshop with department heads (including Board of Education representatives) to mark items for closeout or reauthorization.

Formal action

The meeting concluded with a procedural motion to adjourn; the motion was moved by Mr. Walsh, seconded by Mr. Villever, and approved by unanimous voice vote.

Ending note

Council members emphasized they want to avoid adding new long-term debt for FY26 and would prefer to use recovered cash or bond premium to cover limited, high-priority cash-funded projects. Staff asked for time to finalize projections and bring back a revised capital package and debt-service charts before council adoption of the operating budget later in the spring.