Seekonk's Backdoor Override

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 Seekonk's Backdoor Override

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mkreyssig
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20090129
PostSeekonk's Backdoor Override

Much of this info is included in the Document that Tom posted as I too was hammering Bruce for details. I imagine he is wondering what the heck is going on...lol

http://seekonkrepublicans.blogspot.com/2009/01/seekonks-backdoor-override.html
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Seekonk's Backdoor Override :: Comments

Re: Seekonk's Backdoor Override
Post on Thu Jan 29, 2009 4:15 pm  tombenoit
This is not completely accurate. I have some understanding of the way the school building projects and reimbursements work. I was chair of the school committee and finance subcommittee in the early 1990s an chaired the North School project. I have also confirmed my understand with the Director of Finance.

What happens is the following:

1) The NET amount (debt payments minus reimbursements) is added to the tax base due to the over-ride.

2) The NET amount to the tax base AND reimbursement amount is recognized as revenue.

3) The GROSS amount MUST then be paid for the bond payment.

NOTE #3 and #4 are not necessarily equal. The reason is that the reimbursements typically start 3-4 years after the bond payments are due. That means that for the first few years, there are no reimbursements and the town must foot the full bill and for a few years after the bond is paid off, there is no bond payments but the reimbursements still come in. If you look at the schedule that was posted, you will see that in 2009, there will be ZERO payments for North School but we will receive a little over $150,000 in reimbursements. That goes away in a couple of years.


The timing can be tricky and confuse thing - but it is an artifact of the way reimbursements are paid. Of couse, if the town wanted to avoid any confusion, it could turn down the nearly 70% reimbursement. affraid (just joking)
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Re: Seekonk's Backdoor Override
Post on Thu Jan 29, 2009 10:54 pm  mkreyssig
Yeah...I get that the payments do not coincide...so, so maybe this is perfectly legit.

But....if it is, then we should not be told otherwise. I am only 29 years old, so I have very little experience in these matters, and I thoroughly researched this within the best if my ability to ensure I was not a pawn in someone else's agenda. But it is absolutely true that we are pitched in any debt exclusion that I have voted for, that the amount we vote for is the absolute top of the spectrum. I have emials from people who are planning the senior Senior Center that say just that, that they are seeking grants, other funds, and that even without those the cost may be less than 5.1 million due to construction costs plummeting. But the fact of the matter remains, if we agree to a debt exclusion to fund 5.1 million dollars, they are going to tax us that full amount even if the building only comes in at 3.1 million.

Am I wrong?

BTW - There seems to be a bug in the text box...when i correct my spelling the words seem to be overlapping....weird...maybe it's my browser....
Re: Seekonk's Backdoor Override
Post on Fri Jan 30, 2009 12:45 am  tombenoit
Mike - don't feel bad, it can be confusing with all the steps. Let me try to answer some of your questions. The group that sets the maximum amount that can be spent is Town Meeting. That is typically based on some estimates derived by the building design committee during their analysis. In the case of the Senior Center, I believe that the Capital committee fronted about $100,000 to pay for the initial design work - but - I can be corrected on the amount.

The project and estimate is then presented to Town meeting which has to approve the maximum dollar amount to be spent, contingent on a debt exclusion. Then, if the debt exclusion succeeds, the design committee becomes a building committee and starts the building process. They would proceed with getting detail design specs and going out to bid. They would grant the bid and proceed with construction and so on. It seems somewhat strange but the spending limit is based on estimates before we have any detailed designs or a bid in hand. The reason is that the process of getting design specs and going to bid can cost many hundreds of thousands. The process is set up to avoid that if the voters won't support it.

Now to your question - what will we be taxed on. In fact, the actual amount added to tax is only what is spent.

Now the real question - how much will be spent. The committee is authorized to spend up to the amount that town meeting approves. A committee can tell us that they are looking for grants - but - even if a committee were to get grants, they could still expend every penny appropriated by town meeting and simply add more to the project. The reimbursement are a different animal. We could only spend what was appropriated and the reimbursement did not create any chance to add more.

If a committee wanted more, they would have to go back to town meeting - even if it was after the debt exclusion vote - within some parameters that are set up by the state. A perfect example was the High School/Martin School project. It was originally approved by town meeting at, I believe, 18.2 million. Then it was increased by town meeting - twice. The final amount was the highest that town meeting could increase it to without going back to the voters.

Hopefully, I have answered some question and helped clear up some confusion - without creating more.
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Re: Seekonk's Backdoor Override
Post on Fri Jan 30, 2009 11:52 am  mkreyssig
Okay...let me see if I'm following. Let me simplify it for myself and see if I am catching on. I'll use the senior center, not to pick on it, but because the numbers are more recent.

So let's say the debt exclusion had passed for 5.1 million dollars.

Let's say the project ended up costing exactly 5.1 million dollars.

The Town gets a grant for 2 million dollars to help cover the cost.

So because the cost of the project was still 5.1 million we will get taxed on that amount because that is the actuall debt, and the grant money is a reimbursment for the debt, but is not taken off the "gross amount" that we are taxed on?

****************************

Next senario.

We vote for and pass a 5.1 million dollar debt exclusion.

The actual cost of the project turns out to be 3.1 million without any other funds/grants applied.

Can the town still tax us up to the 5.1 million limit that we voted for, or is it only the actuall cost of the project that can be taxed?

******************************


Mindboggling stuff....

There must be a better way....??
Re: Seekonk's Backdoor Override
Post on Fri Jan 30, 2009 1:02 pm  tombenoit
I don't believe that the town can get a grant to help cover the costs of an approved project. They can get a grant to do something that was initially included. So using a scenario method.

Say the debt exclusion passed for 5.1 million dollars to "build and originally furnish and equip the senior center".

Say the town gets a grant to buy all the furniture and equipment and that totals 1 million.

The committee would not have to buy 1 million dollars of furniture and equipment.

The committee can simply spend the 4.1 million needed to complete the project - or - they can spend the unneeded 1 million on something else that would fit into the description. There is nothing that requires them to spend less if it is not needed.

At the end of the day, we will only have the actual amount spent by the committee added to our tax.
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Re: Seekonk's Backdoor Override
Post on Mon Feb 02, 2009 11:29 am  mkreyssig
If the town cannot get a grant to cover the costs of a project, how is it that the grant payment schedule for the Martin and SHS projects, states at the top "Martin School Construction Project" and "SHS Construction Project"?

That is where it does not seem like the way you are explaining things is the way things are happening. We are getting 1.2 million a year to cover the two projects. The town is not using that money to cover the cost of the projects. They are using that money as revenue and applying it to the opperating budget. The taxpayers are paying the full cost of the 1.8 million that is due.

So to say that the grant money may end before the balance of the debt is paid...fine...when will the debt be paid? I can't see it going much past 2024. Did we take out a 20 year loan/bond or a 30 year for these projects?
Re: Seekonk's Backdoor Override
Post on Mon Feb 02, 2009 4:17 pm  tombenoit
If the document you have says that 1.2million is a GRANT, then it is just a terminology difference between a grant and reimbursement. The school project were eligible for reimbursement. I was using the term grant in the same way that Senior Center Committee was using the term. They were saying that the project was 5.1 million but could be less because they were looking for grants.

In the case of the school building reimbursement (a.k.a. grant) that money was coming in as general revenue to help pay for the bond. This is kind of like if my kid had a $200/month car payment and I gave him $50 to help. He gets the $50 - but he still has to pay the $200.

In the case of the Senor Committee grant - some agency would be providing funds, separate from the bond, to buy or build something. I would equate this to my kid wanting to buy a car for $15,000 with a remote starter/alarm included. I tell him that I will buy the remote startyer/alarm after market and have it installed. If the remote starter/alarm was $500, he could either buy the car for $14,500 or he might just use the money for something else on the car.

The finance director should be able to tell you how long the bond is for. I believe that it also may change during the term as they can and do refinance bonds and combine them when rates or bond rating changes. I won't even prtend to understand any more than that.

Hopefully this help.
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Re: Seekonk's Backdoor Override
Post on Mon Feb 02, 2009 10:59 pm  mkreyssig
I think I need private lessons!
Re: Seekonk's Backdoor Override
Post on Mon Feb 02, 2009 11:01 pm  tombenoit
Not a problem. Wanna schedule a chat session here?
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Re: Seekonk's Backdoor Override
Post on Tue Feb 24, 2009 10:07 pm  mkreyssig
BTW Tom, I got of copy of Uni-Banks payment schedule for all of the Towns Debt. Wouldn't you know it shows right on the spread sheet that it deducts 1.2 million dollars right off the payment, because it know we have a grant thats that portion of the debt....
Re: Seekonk's Backdoor Override
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