Jamestown bond counsel outlines bond options, explains limits on financing affordable housing

Jamestown — David Ferrara, the town’s bond counsel, told the Town Council on Oct. 12 that Jamestown can finance capital projects through either a financial town meeting (FTM) or by requesting a bond act from the Rhode Island General Assembly followed by a public referendum, and that the rules and costs differ depending on the project and the source of reimbursement.

Ferrara said the town generally issues bonds for capital projects and that some specialized borrowing (for sewer, water or energy-efficiency) can proceed through the Rhode Island Infrastructure Bank without the same requirements. He said school-project bonds seeking state aid must meet additional requirements and often must go through the Rhode Island Health and Educational Building Corporation (RIHEBC) unless a legislative exemption applies. “You must have General Assembly approval either in a bond act or retroactively of an FTM vote,” Ferrara said.

Why it matters: the choice of financing route affects voter procedures, legal disclosures, how long the town can amortize debt and the likely interest rate. That in turn affects the budget and the town’s ability to pursue projects such as affordable housing or major equipment purchases.

Ferrara explained tax-exempt versus taxable bonds. Public-purpose capital (municipal buildings, roads, schools in most cases) can often qualify as federally tax-exempt bonds and therefore carry lower interest rates, but tax-exempt issuance carries stricter requirements: a detailed project description, estimated total cost (including financing), a project timetable, and a useful-life analysis of the asset so bond terms do not exceed the asset’s expected life. He warned that courts have overturned referendum language that left an average voter unable to understand the borrowing’s purpose.

By contrast, Ferrara said, bonds issued to finance affordable housing are “more likely than not” to be taxable because they may benefit private parties or specific classes of persons. Taxable bonds typically carry higher rates and shorter terms; Ferrara said banks often prefer purchasing taxable municipal paper directly and may underwrite such loans on commercial terms, usually for shorter maturities (for example, 10 years) though some banks will go longer.

On a specific local question, Ferrara discussed a council member’s interest in financing a roughly 99-unit workforce-housing project on town-owned land. He said the town’s options include advancing money from the general fund and later replacing that advance with bonds after an FTM appropriation, or approaching banks with a request-for-proposal to see appetite and terms. He cautioned that bank interest can vary week to week and that smaller, taxable issues rarely attract public-bond-market buyers, so the town would likely negotiate directly with local lenders.

Councilors pressed Ferrara on whether tax-exempt financing was possible for affordable housing; he said tax-exempt affordable-housing financings typically involve very large issues (tens of millions) that can absorb the compliance costs. “I’m not saying that there aren’t tax‑exempt bonds for affordable housing, but they tend to be $50 million or $100 million,” Ferrara said, “and there’s room in them for an awful lot of compliance that is impossible to manage at this level.”

Ferrara also advised that Jamestown’s municipal credit is strong — he said the town’s rating was “double A” from Moody’s — and that for some projects the town can obtain attractive interest rates on its own without involving state financing entities, although that tradeoff depends on relative pricing and administrative costs.

Council members asked practical questions about timing, steps and bank interest. Ferrara said the benefit of Jamestown’s FTM charter form is speed: “you can fairly rapidly schedule something to take advantage of an opportunity,” potentially within 30 to 45 days. He described a common sequence: define the project, seek voter approval to authorize bonds, allow the finance director (with counsel approval and pending issuance) to advance general-fund cash and later reimburse that advance from bond proceeds.

Ending: Ferrara offered to provide more specific advice if the council supplies project details; several councilors said the briefing helped them reassess an earlier plan to seek a bond for affordable housing and planned follow-up to test bank interest and refine project scope.