Municipal Buildings: The Finances: Funding is the other half of the equation
(from Maine Townsman, March 1998)
By Jo Josephson

Keep the public informed. Anticipate the questions. Do your homework. Maintain a neutral stance. Municipal construction projects are all about building trust.

But it is only half the equation. The other half has to do with the financial package you put together and how you present it, which is part art and part science and circumstance, and yes, part politics, as the following examples indicate.

MINIMIZE THE TAX IMPACT

It helps if you do not have to raise property taxes. It helps if all of your debts are paid. It helps if you have saved slowly for the project and put the money away in reserve accounts. It helps if you share the costs with someone else. It helps if you get a grant or a low interest loan.

Smyrna: U.S. Postal Service

Talk about timing. Just when the Town of Smyrna (pop. 398) decided it was time to replace its 100-year-old town office, which it shares with the Town of Merrill (pop. 294), the lease on the U.S. Post Office in Smyrna was up and the Postal Service was looking for new space. The fact that the $60,000 in reserve accounts set up for the shared new town office wasn’t nearly enough, prompted Candis Roy, who serves as manager in both towns, to approach the Postal Service and see if they couldn’t strike a deal that would benefit both.

"I understood that several other towns had done something like this in Maine and figured maybe we could too," says Roy. Smyrna wound up building a new town office at a cost of $325,000, sold a portion to Merrill for $37,500 (an amount it had already put aside), and leased space to the post office for a little over $2,000 a month, an amount that was enough to cover the monthly mortgage for the entire building!

Waterford: Community Development Block Grant

It took Waterford three tries to get a $250,000 Community Development Block Grant (CDBG) from the Maine Department of Economic and Community Development to build its fire station and public works garage. With another $76,000 in a reserve account, Waterford’s Town Meeting said "Yes" when asked to give the selectmen the authority to borrow a sum from a local bank not to exceed $400,000 (a town office was included in the plan). In the end only $265,000 was borrowed at a rate of 4.7 percent.

Initially there was some resistance to going after the grant for the fire station, says John Tucker, who chaired the building committee. "People didn’t want the paperwork that was required; they also said they didn’t want someone telling them what to do." But the vote to go after the grant was near unanimous. The town spent $1,500 to hire a professional grant writer who then, paid for by the grant, became the grant administrator.

Lovell: Sale of Timber

In Lovell (pop. 890), the project was a new town garage, measuring 60 by 80 feet, four times the size of the old one, at a cost of $125,000. But no new monies were raised for the building, reports Selectman Charles Eastman.

"Given the summer population, we are well-to-do, but even so, if you were to go and ask for $125,000 for a new building at town meeting, the immediate answer would be no," says Eastman. It helps if you already have money in hand; so you had better look down the road and anticipate your needs, says Eastman. As such, about $40,000 for the project came from the sale of timber off town land; half the monies came from surplus and the rest from excise taxes.

Kittery: Surplus

When Kittery (pop. 9,406) set about to construct a new municipal complex to house the town office, police department and superintendent of schools, it had already put aside $1.5 million in a reserve account and needed another $1.8 million, which it planned to borrow with voter approval. What it hadn’t counted on, says Kittery Town Manager Philip McCarthy, was a johnny-come-lately competing $2 million bond issue to renovate the schools. The school bond issue passed by a 2-1 margin; the municipal complex lost by 27 votes. With almost $3 million in surplus, the Council, encouraged by the close vote, dipped into surplus and continued on with its plans.

Scarborough: Jobs Bond Grant

It’s all well and good to have the money in hand, but what if the project costs out at $2.7 million and you only have about half of that in hand and have no other resources? As noted previously, Scarborough was in the right place at the right time, with a building project ready to go, except for the funding. With the project having been recently turned down by voters, when the state floated a Jobs Bond in 1992, town officials applied and received a grant for $750,000.

The grant required that other monies be available, such as the $645,000 that was in a building reserve fund and $723,000 available from a so-called Town Center TIF. All it needed to do was issue a $551,000 general obligation bond. If the bond had been over $700,000 the town would have had to go back to the voters; as it was less, it only took action by the council. While the previous vote on the issue was close, it was not clear how a second referendum would have come out, says Betterley.

Westport: Volunteers

By the time Westport (pop.696) went to town meeting, it had about half of what it needed towards a $150,000 municipal office/social hall, with most of the money coming from a reserve account fed over the years from surplus. Voters had no problem approving the request to borrow $75,000 from a local bank, says First Selectman Charles Cromwell, especially since the town was banking on reducing that amount by using lots of volunteer labor. While there were lots of donated materials from local contractors to help reduce the cost of the 1,850 square foot building, there wasn’t a lot of donated labor, reports Cromwell.

"If you are going to depend on volunteer labor to cut your costs, you had better build up the hype and even then it will be a struggle," says Cromwell. To begin with, you have got to organize. You need someone in charge. You need to set up a phone tree. You need to set up work groups. Because once the construction starts rolling, it rolls. Those who are being paid to work need to get in and get out…fast, says Cromwell. As to be expected, Westport’s volunteers were those who worked for themselves or were retired.

PROVIDE CHOICE

While there are those who put all of their eggs in one basket (warrant article or referendum question), when seeking approval by the voters, there are others who offer not one but several choices for voters to consider and say it has often worked to their advantage.

Eustis (pop. 632)

At this year’s town meeting, voters in Eustis were given a choice of spending $50,000 to renovate the 50- year-old community building where town meeting and other community functions are held or to spend $100,000 to build a new one. Voters approved the latter, saying the $50,000 price tag was well below the actual cost of the needed repairs, so they might as well go for a new building. Authority was given to borrow money locally at 4.5 percent interest.

This is not the first new building the town has approved. Back in 1990, it built a new town office/library complex at a cost of more than $200,000. The fact that Stratton biomass plant pays 47 percent of the taxes in town clearly affected the outcome of the votes. In Eustis, it takes an expenditure of $80,000 to raise the .0145 tax rate by one mill.

Sidney (pop. 2,881)

When voters in Sidney were asked to approve monies for an addition to their ten year-old town office last year, they were given two choices. Give the town authority to borrow up to $110,000 to add 1,300 square feet to the existing structure or give the town authority to borrow up to $167,000 to add 2,400 square feet. At an open town meeting, they chose the latter by a vote of 61 to 34.

Both the selectmen and the budget committee had recommended the more expensive option in that it would allow for a meeting room for committees and allow for the code enforcement officer and planning board to move out of the nearby Grange Hall, which did not meet ADA standards, into the town hall. It was important for some to leave the Grange Hall historically intact for town meetings, reports Administrative Assistant Gloria Ripley.

Ripley says voters in Sidney like options; it’s always been that way; they seem to take it better if they have an option. As noted previously, Sidney was down on its debt, so the loan would not increase taxes.

Old Orchard Beach (pop. 7,861)

When arson damaged the Town Hall in Old Orchard Beach to the tune of $50,000, the town figured it could seize the opportunity to do one of three things: spend $500,000 to make major repairs to the century-old building; spend $1.5 million to do an historical renovation of the building; or spend $1.2 million to purchase land and construct a new building.

As former Town Manager Jim Bennett explains it, voters were faced with two articles on the issue. One article, which he described as "advisory", presented the three options repair, renovate, or build a new. It was followed by a separate article that gave the town authority to borrow up to $1.5 million to fund the voter’s choice.

We were convinced that the taxpayers did not want the first option as it would be throwing away good money, says Bennett. What they went for was the costlier of the three the historical renovation. Which was not surprising, given the fact that the tax impact was worked out so that annually it would have been the same but just spread out over a longer period. But equally as important, was the fact that the building had "symbolic value." As Bennett explains it, the building had been the pride of the town in the past.

SIDEBAR:

Two Funding Sources

Become a Landlord: U.S. Postal Service

The Town of Smyrna is able to cover its mortgage on its town office with rent received for space leased in the building to the U.S. Postal Service. According to Terry Brooks, Real Estate Specialist for the U.S. Postal Service in the northeast, of the 475 post offices in Maine, the Postal Service only owns 20. If it is over 8,000 square feet in size, we own it; if it’s under, we lease, says Brooks, noting that the leases are for 20 years and cannot be cancelled.

While the total number of municipalities who have entered into this type of arrangement is not immediately known, there are at least three others besides Smyrna Kenduskeag, Wytopitlock, and Dixfield. Dixfield has had such an arrangement for at least 30 years, receiving slightly more than $1,000 a month in rental fees; the Post Office pays for its own heat.

The Town of Cherryfield is currently in discussions with the Postal Service to construct a new 3,100 square foot post office on land owned by the town. Some have suggested that the town double the size of the building to include the town office and the library, says Cherryfield Town Manager Vance Merritt.

Brooks says the Postal Service likes to deal with the public sector because it is an entity that won’t go away. While the Postal Service may prefer dealing with the public sector, it is a preference that sometimes does not sit well with the private sector, says Brooks. In at least one instance he recalls that an arrangement between the town and the Postal Service was defeated because of this.

For those interested in learning more about such arrangements, Brooks can be reached at P.O. Box 800, Winthrop, ME 04364

Apply for a Grant: Community Development Block Grant (CDBG)

CDBGs are given for fire stations, police stations, libraries and recreation facilities. CDBGs are not given for the construction of a town office, says Program Manager Aaron Shapiro. But that has not stopped towns like Waterford and Machiasport that have received $250,000 CDBGs for their fire stations from incorporating a town office into the building. While none of the CDBG monies can go for the town office, by joining the two, say those who have, costs for the town office are less, especially when sharing a water system or a septic system, say those who do.

To apply for a grant, a municipality must prove that 51 percent of its households earn 80 percent or less of the county or state’s median income, whichever is higher. As the median income figures are taken from the 1990 Census, Shapiro notes they may not necessarily be accurate, especially in small towns. As such, a municipality can conduct their own random survey using a HUD approved methodology.

While this year’s deadline for grant applications was January 23, it’s not too early to think about a CDBG Public Facility Infrastructure Grant in 1999. The maximum grant is $250,000; the next deadline is December 1998. Thirty percent of the total grant must be matched in the case of fire stations; 20 percent in the case of other buildings. For information, contact Shapiro at 287-8476.