Select Board reviews proposed debt policy as town prepares for $109 million school project vote

Select Board members discussed a proposed municipal debt policy and how it would interact with a planned elementary‑school borrowing the town will consider on May 10.

Andrew (Select Board member) and Brian (finance staff) presented a draft policy that adapts new metrics in Standard & Poor’s January methodology, including measures such as net direct debt per capita and debt service as a share of governmental revenues. The draft sets internal targets (for example, a goal of keeping debt under roughly 2.5% of equalized valuation and per‑capita thresholds) and distinguishes general‑fund supported debt from self‑supporting enterprise or CPA‑supported debt.

Tony Roselli, the town’s auditor, attended the discussion and told the board he would review the draft policy and S&P’s new model to confirm whether the thresholds are reasonable for Southborough. Roselli said the new S&P approach places more weight on debt and liabilities (he said the category now counts for 20% of a credit score) and that some towns are still adapting to the change. He offered to “take a look at it” and provide feedback “pretty quickly.”

Board members raised several technical and policy questions: whether CPA and enterprise‑fund revenues should be included in the same debt‑to‑revenue ratio; whether a $100,000 minimum borrowing threshold for town projects was too low; and whether the draft should require bonds to be amortized with a substantial portion of principal retired within the first 10 years (a structuring choice that can improve S&P scores). Several members favored raising the minimum project threshold to $200,000; a change to that effect was made in the draft during discussion.

Andrew and staff presented a scenario modeling the town’s current debt profile and future debt if the proposed $109 million elementary‑school project (the NEARIE project) proceeds. The board heard that the state’s Mass. School Building Authority (MSBA) is expected to contribute about $35 million; the town’s net borrowing needs were modeled at roughly $68 million assuming additional federal/state energy grants. Advisory and bond counsel modeling suggested any downgrade risk would be modest—possibly one notch under some worst‑case assumptions—and that the likely market cost impact would be small in basis points.

Action/Directions: The Select Board asked audit partner Tony Roselli to review the draft debt policy and the S&P methodology and report back to staff and the board before the next meeting. Treasurer/finance staff will incorporate the changes discussed (including raising the project minimum) and circulate an updated draft.