Fails to make DEP 2010 SRF list; officials divided on next moves
As engineers were wrapping up their work on the designs and specifications scheduled to go to contractors for bids this spring, the committee that manages construction of the new town center system approved by Harvard voters last year hit a financial barrier that threatened to indefinitely delay the start of the $2 million project.
The obstacle, not entirely unexpected according to Town Center Sewer Building Committee (TCSBC) Chairman Chris Ashley, was the word last week from the state’s Department of Environmental Protection (DEP) that Harvard is not among the towns whose wastewater projects the agency plans to support in 2010 with money from its federally subsidized, low-interest state revolving fund (SRF).
Town officials have long considered the DEP’s Clean Water SRF to be the best source of loans for the new sewer and improved treatment facility, said Finance Director Lorraine Leonard in an interview this week. Bills for projects that qualify for SRF money can be submitted directly to the DEP for payment, and interest on the total amount the town borrows is fixed at 2 percent once the project is complete and all costs known.
When the selectmen asked Harvard voters to approve the project at Annual Town Meeting (ATM) last year, they set the 2 percent SRF rate as a “circuit breaker,” which, if exceeded, would require them to return to Town Meeting for further instructions. That number cannot be found in any of the enabling articles that passed last year, nor was it reported in the 2009 ATM minutes. At a recent meeting of the Town Center Sewer Policy Committee (TCSPC), Town Counsel Mark Lanza went further, saying that none of the circuit breakers proposed by the selectmen in their financial model last year are legally binding. Still, said Leonard, in her opinion a verbal commitment from the selectmen is as binding as a written contract.
“I’m not a lawyer,” she added, “but any lawyer will tell you that a Town Meeting is a meeting of minds.” Just because the “trip wires” in the sewer plan are not part of either the home rule petition or the minutes of Town Meeting doesn’t mean they can be ignored, she said.
The setback at DEP leaves the town with several options. The building committee could, for example, sit on the final engineering design, due March 22, until SRF financing becomes available. Ashley and others think the odds are high that Harvard will move up from its 48th position on the DEP list. Out of 69 project applications, the DEP chose what it considered to be the top 33, using a complex ranking system. Work to correct serious storm-triggered sewage overflows into Massachusetts rivers and bays tended to get a higher ranking, for example, especially when directed to communities such as New Bedford and Holyoke, where household incomes are well below the state median. Such so-called “environmental justice” projects and projects considered “green” topped the 2010 list.
But voters in some of those towns have yet to approve spending for their projects, while others do not have the engineering plans needed to open bids and put shovels in the ground anytime soon. Towns that are not ready to begin work by October will lose their places on the list, and voters in towns facing severe financial constraints may decide to withdraw. Harvard, by contrast, is ready to start work. “We did things backwards,” said selectman Tim Clark in a phone interview. “We approved the project and voted to fund it, and then went to look for the money.”
In the meantime, Leonard said, Harvard could finance construction using short-term annual notes, which are available today at rates well below 2 percent. Ultimately, she says, the town would need to convert those notes to long-term bonds at much higher rates once the project is complete and the total cost known. The rate of interest on more traditional 20- and 30-year municipal bonds is currently between 4 and 5 percent, said Leonard. Clark, who is the Board of Selectman liaison to the building committee, believes that creative financing from other sources, such as the U.S. Department of Agriculture rural water fund, could keep interest below the 2 percent trigger.
“These are important questions of public policy and as such must be discussed by the committee in an open forum,” said Ashley. “I can’t really speculate on what the committee’s position or response might be.”
“Personally,” Ashley said, “I would find it difficult to support proceeding with any public project whose long-term cost of borrowing is not known. If the economy turns around or foreign interest in U.S. debt changes, interest rates could increase dramatically.”
Clark disagrees. “The time for low-cost construction spending is now,” he said. “If we hold our breath and wait only for SRF, I think that’s a huge mistake. There are other sources out there. [SRF] is a well known [option] and we should use it if we can get to it. Is it the only one? No.” Asked if he thought the building committee should proceed with bids and then construction once the engineering design is complete, Clark answered, “Yes.”