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Staff modeling shows tax-funded capital shortfall later in 10-year plan; CTL increases reduce deficit but debt service ratio still out of compliance
Summary
Budget staff presented sensitivity scenarios showing a 'significant cumulative deficit' in projects funded by taxes under the revised base case; increasing the capital tax levy reduces the deficit, while extending debt maturities improves guideline compliance but raises total debt and borrowing costs.
Budget Director Agnes Cawai presented financial-model scenarios showing a notable funding gap in the Town's 10-year capital projection and options to address it.
Under the revised base case, the model showed a "significant cumulative deficit in the 'Projects Funded by Taxes' category" in the latter half of the ten-year projection, Ms. Cawai reported. Increasing the annual capital tax levy (CTL) was shown to "substantially reduce or eliminate that deficit," she said, but the model still showed the Town's debt service ratio "remained out of compliance." Committee member Joe Pellegrino cautioned that, based on the current capital plan, the Town will struggle to comply with its guidelines within five to ten years.
The staff reviewed scenarios extending debt maturities to 10 and 20 years while holding the CTL constant. Members noted longer maturities improve compliance with BET guidelines but increase total debt outstanding and borrowing costs over time. The Committee requested further analysis of the trade-offs among CTL increases, debt maturity extensions and impacts on total debt as a percentage of the budget and Grand List.
