Lanesborough FinCom Asks Mount Greylock to Make Debt Principal Payments
LANESBOROUGH, Mass. — The Finance Committee is recommending that the Mount Greylock Regional School Committee immediately start to make principal payments on the debt incurred for its building project.
The Finance Committee unanimously urged on Monday that payments be made on both interest and principal in fiscal 2017 instead of delaying the tax impacts by only paying interest.
Committee member Steven Wentworth estimates that over the course of the bond, making principal payments immediately will save as much as $1 million.
"There is no question that if you pay sooner, you pay less," Wentworth said.
School administrators presented two options to the Finance Committee, both with estimated costs as "worst case scenarios." The plans used interest rates expected to be higher than anticipated.
"We are hoping the numbers will come in less," School Committee Chairwoman Carrie Greene said.
Business Manager Nancy Raucher provided estimates for 2017 as being $362,287 if only paying interest and $560,993 if making payments on interest and principal. By choosing the second option, in fiscal 2018, the gap between the two closes and in the third year (2019) option B is less than option A.
"That's the year the principal and interest payment is actually less," she said.
By 2020, the payments level off to become more stable. But by making payments on principal in those first three years, the district will save on interest. The interest-only option would have lower payments at first, but ramp up over those three years.
Chairman Al Terranova said while he understands that some residents would rather delay taking such a hit on the tax rate, the town will ultimately be better served in the long run.
Williamstown's Finance Committee has the same option as Lanesborough's and voted last week for the same option.
"They chose to go with the interest and principal because they would prefer to stair step it more gradually and have more of an upfront cost," Greene said.
The money for the project is a part of the Mount Greylock budget. The current budget proposal calls for about a $13,000 decrease in Lanesborough's assessment.
However, on Tuesday, the School Committee will choose to add additional funds for the debt services as an amendment to the budget.
"These are estimates and whatever the School Committee chooses will be a 'no greater than' number. We won't be able to spend any more than that number on debt services," Greene said.
The exact terms of the bond or multiple bonds won't be known until the fall, when the School Committee will borrow the money. Until then, short-term bond anticipation notes are being used to fund further design work.
Tags: bonding, debt service, Finance Committee, MGRHS school project, MGRSD_budget,
