Proposed capital projects could lead to tax rate increase in Meredith

MEREDITH — The selectboard has tasked David Thorpe, a community volunteer, with providing three plans involving capital improvement projects.

That includes an aggressive plan, minimalist plan, and something in between. If the aggressive plan is followed, which includes several major projects, Thorpe said there could be a significant increase in the tax rate in the next several years.

Priorities

Thorpe is a member of the Capital Improvement Plan Committee, as a volunteer assisting the selectboard. He said committees like CIP don’t have direction around what is most important.

“That is what this exercise is about,” Thorpe told the selectboard Sept. 14. “I know there has been some sensitivity that we are doing CIP’s work. I do not agree at all. We are hopefully just giving CIP some high-level guidance, that says these projects are more important than these other projects. We want them to be in schedule ahead of time.”

Thorpe said they aren’t trying to set budgets, but are trying to define priorities on the long list of big-ticket items, that include several projects with huge price tags, such as the Town Hall and Prescott Park.

Thorpe said department heads produced worksheets which were much more thorough than last fall, which sparked the idea of a comprehensive spreadsheet, which he brought before the board. He said they did a great job and it was helpful, but now it was time for the selectboard’s first pass on looking into the work started in prioritizing.

Thorpe went over the spreadsheet, which includes 10 years’ worth of projects, and an array of charts and graphs.

The spreadsheet includes large infrastructure projects Thorpe said are suggested to be funded by bonded debt.

The three largest projects — Main Street rehabilitation, Town Hall, and Prescott Park — could be funded by debt, or changed if desired. These projects total $34 million, but are much less than that annually if spread out over 20 years. Then there are 23 other “large infrastructure projects” totaling about $19 million.

Thorpe said department requests are primarily for vehicles like fire engines and DPW equipment.

Thorpe suggested a 5% inflation rate per year on the totals, and suggested they need about 165% of annual spending in expendable trusts to smooth cash flow. He also listed the net taxable valuation of the town and incorporated a 2% inflation rate, followed by calculating the effect on the tax rate from project expenditures.

“The mid-set of 23 projects are to a very large extent water and sewer, and DPW,” Thorpe said. “If I take the spreadsheet the way it’s laid out here, it amounts with adding existing debt to about $50 million over eight years.”

Thorpe said this averages to about $6.3 million over each of the eight years. He said in 2025, capital spending was $0.47 of the tax rate, and in 2026, it was $0.51. With the $50 million over eight years, that could relate to a significant jump, to about $1.58 in the tax rate.

“Now it is looking as though, for the next eight years, there’s a potential we’re going to be up to about three times that number,” Thorpe said. “Unless we make some changes. And you may or you may not. You may decide this is very necessary work, and you really want to do it, and you’re OK with bringing the effect on the tax rate up to $1.58.”

Thorpe said the $18 million Prescott Park project could use “management judgment,” noting it is in the early stages. It is a large project with a big chance for grant funding to reduce the price. Thorpe said the board could make a management decision on how much of that project could be covered with debt to bring down the price.

He said it would make more sense to bring the Prescott Park project down several million.

Thorpe said the town is on the verge of spending two to three times the amount on capital than they have in past years, and he blamed the pandemic, which “put a one-shot deal into inflation.”

“That has, especially in large equipment, not gone away,” Thorpe said. “Lead times on large equipment really lengthened, particularly on fire equipment. So, if we continue the practice, which is a good one, of putting down significantly large deposits to reduce the cost, we have to put that money up earlier. That’s put a crunch on the budget, particularly, again, with fire equipment.”

Thorpe said it is also clear that for many years, the town has been stingy in maintaining infrastructure. He suggested that in the past, when he was faced something like this, if he looked at the extremes on both ends, he could get a sense of a middle ground. For that reason, he recommended the board use the spreadsheet he brought forward as an “aggressive plan,” and compare with a “minimal” plan.

“What’s the minimal plan that you think you could get by with,” Thorpe said. “Not make it stupidly minimalist, but something you could live with, but if you thought the budgets were extremely austere.”

Thorpe said he would work with Town Manager Judie Milner and Finance Director Robert Carpenter to bring three plans to the next meeting.

“I think it’s a way forward, and I think it makes sense,” Thorpe said.

Chair Steve Aiken spoke on behalf of the Prescott Park Committee, and said they recently had a meeting to discuss getting to better pricing. The committee will come to the next selectboard meeting to present the next steps, which was the group’s ultimate focus. The selectboard would then make the next decisions about the process.

Milner said one decision they were looking for was whether or not they estimate what they expect to receive for grant funds for a larger project, and adjust the costs of the plan. She said they could back into when they need to produce their match to get certain grants, and then back that number out to see what the real numbers with the tax rate are.

Thorpe said there are three projects already reduced due to grant funding, including the replacement of the 12-inch water main, the North water tower and the Leavitt Beach rehabilitation project.

“I rather suspect the plan you have in front of you is the aggressive plan,” Thorpe said. “You might want to do some tweaking, and one might be, of course, to make a judgment on any grants possible for Prescott Park to try and bring that one down. Other than that, I think you pretty much have the aggressive plan right in front of you."

Selectboard member Jeanie Forrester said she sees the minimalist plan as being about “needs versus wants.” Thorpe said the question is whether the town wants to move forward, in some way, with the three large projects: Prescott Park, Main Street and Town Hall.

“Will the minimalist one have any work on those projects?” Thorpe said. “I think that’s a decision that is really critical.”

Thorpe pointed out Milner requested $500,000 per year for roads, which he believes is necessary. He added the water treatment plant work, and some dock work, will likely increase in liability if they wait longer. Most maintenance projects, he said, are needed.

“The three big ones are clearly wants,” Thorpe said. “The problem would be if you push town offices off very long, then you need to invest in some interim maintenance.”

He said the minimalist plan, in his opinion, wouldn’t involve any of the big three projects. Thorpe said if any of those projects get critical — like Main Street and the town offices — they could be reprioritized.

“That is where some judgment call will come,” Thorpe said. “I think if we could do an aggressive plan and a minimal plan, when we come here you can help us decide where to stage those three really large projects.”

Thorpe said one way the selectboard could help the process is to look at what the middle-ground items are to create a practical plan. The minimalist plan will be created easily by him, Milner, and Carpenter, but he said the middle plan will be a bit of a tussle with the three big projects around scheduling which is most important.

'Transparency is key'

Thorpe asked what he said was a difficult question, which might not be answered.

“Is there some limit in the tax rate that at some point you just choke?” Thorpe asked. “If you’re spending about 50 cents on the tax rate now, and you have for many, many years, and in two or three years you’re going to approach $1.50 instead of 50 cents, is that a non-starter?”

He asked if there is a limit where it just gets so high they can’t tolerate it. Forrester said transparency is key to the taxpayers, and she thinks it needs to be all laid out on the table and avoid having taxpayers be blindsided.

Thorpe’s projection shows by 2032, there could be an effect of $2.50 on the tax rate, rising $2 since 2025, but even by 2027, it looks like an increase is coming.

“It sure looks to me like we’re heading for $1.50 in the tax rate, unless we do something very different,” Thorpe said.

Forrester said taxpayers should be aware.

“I think the sooner they know what’s going on, and they are engaged in the process, the better we’ll know as a board about where we should be heading,” Forrester said.

The selectboard meets next on Monday, Sept. 28.

The spreadsheet, including graphs provided by Thorpe, can be found on pages 43-51 in the meeting materials.