Southold Road Hearings Continued Again
In a standing room only meeting of the Board of Selectmen Monday night, town officials outlined some of the alternatives available to Auburn as it pertains to the 49.39 acres off Southhold Road owned by the Post family and currently the focus of a potential development.
Town Manager Julie Jacobson announced that the Town has been approached by an anonymous party offering a $1 million donation toward the purchase of the land. One condition of this donation, should Auburn accept it, is that the land must be maintained as open space and not developed.
Town CFO, Ed Kazanovicz presented several funding scenarios that Auburn could use to purchase the land. The first would be to utilize free cash. According to Kazanovicz, in the most recently certified audit, Auburn has about $6 million in free cash.
However, Kazanovicz cautioned that using $2.86 million of this free cash to purchase the Southold Rd. land could jeopardize Auburn’s strong bond rating. Auburn is currently rated A++ by Moody’s, one step below the highest rating a municipality can earn, according to the CFO.
Kazanovicz added that, with the short-term borrowing for the new middle school set to convert to long term borrowing in September 2015, a downgrade in Auburn’s bond rating would increase the interest rate the town would have to pay on that debt.
Several options were presented that involved using funds raised through tax levy. In the first, the Town would accept the $1 million gift, which would be applied against the amount owed over a 4 year period ($250,000 per year). The bond would be rolled over in each of those four years, at a lower amount each time.
The difference would need to be borrowed. Kazanovicz estimated that, at FY2015 tax rates, the impact to homeowners would be about $0.02 per thousand in valuation. For a median value home in Auburn – about $227,000 – this would equate to a tax increase of about $4.54 for the land acquisition. Kazanovicz went on to present several variations based on different borrowing terms, with costs to taxpayers ranging up to about $13.67 per homeowner per year.
Another option was for the Town to not accept the $1 million, and to borrow the full $2.86 million. Kazanovicz estimated the cost to the taxpayer to be about $36.48 using a 15 year term, and $18.24 at a 30 year term. The borrowing costs to the town and, ultimately, the taxpayers are less the shorter the borrowing term.
The rationale for this last option is that the Town would retain the ability to resell some of the parcels, or to develop the land in some way. One suggestion had been to build a solar farm to help offset the costs of borrowing the money to buy the land, as an example. With the $1 million donation stipulating that the land must be maintained as open space, such alternatives would be off the table once the donation is accepted.
Jacobson also clarified that there were two separate purchase and sale agreements. One is for the 49.39 acres, and the other for an additional approximately 6 acres. Jacobson stated the Town’s position is that we can exercise our right of first refusal on the 50 acres that is under a 61a tax classification without having to also purchase the smaller lot. The seller believes the Town does have to purchase both tracts of land under a 61a right of first refusal. Representatives from both sides are working to clarify this issue.
After another lengthy round of citizen comment and some further Board discussion, the Board of Selectmen opted to keep the hearing open, and to continue it to 5:30pm on Monday, November 10 at Town Hall. The regular Board of Selectman agenda that evening also contains the annual tax rate and classification hearing.
A Special Town Meeting has been scheduled for November 18 where Town Meeting Members will be asked to authorize the borrowing necessary to purchase the land. If Town Meeting votes to authorize, then the Selectmen have until December 9 to elect or not to elect to exercise its right of first refusal.