Vinson-Owen Project Could Cost More than Expected

The are a little more than a week away, and will be held on Tuesday, March 29. As that date slowly approaches, the , Town Management and continue to urge voters to support the

Over the last few months, the board, as well as the school department, have said that a failed override would require the town to , while schools will be forced to According to Acting Town Manager, Mary Ellen Lannon, those municipal cuts will range from the potential closing of the West Side Fire Station to the elimination of positions in the Department of Public Works, among other decreases in services and positions.

While has said that a failed override could force the schools to layoff close to 30 teachers over the next three years.

But according to Assistant Town Manager, Mark Twogood, another potential impact to the town regarding a failed override would be the potential loss of its Aaa bond rating. The rating, according to selectman Brian O’Connor, allows Winchester to borrow at .5 percent interest rate. But, O’Connor said that if the town drops to Aa that rate could increase to two, three or four percent.

“The Aaa bond rating is an important thing because it lowers the cost of borrowing in terms of the interest rate,” Twogood said.

That’s one of the reasons, according to selectmen chairman, Thomas Howley, that the town will have service reductions and layoffs rather than use the town’s operating reserves if the override fails. Because it is difficult to replenish free cash, a depletion of those funds could lead Winchester to lose its Aaa rating. The town is one of 26 communities across the state that has that rating.

“Once our Aaa is lost, in my opinion, it’s not going to be an easy thing to get back,” Twogood said. “It’s going to impact all the other projects we have coming down the pike. With this current economic climate, once we lose it, it’s not going to be an easy thing to get back.”

The most immediate project that would be impacted is the Vinson-Owen construction, according to Twogood. A loss of the Aaa rating could increase the cost of the Vinson-Owen project by approximately $400,000. The flood mitigation project, as well as potential improvements to the high school could all be affected by the loss of the rating.

“It would be shortsighted to use more free cash in FY2012 in order to avoid expense reductions and deplete the town’s operating reserves, placing the Town’s Aaa bond rating in jeopardy,” Lannon said. “It has been estimated that if the Town’s bond rating were to be lowered it would cost approximately $300 to $400k more in interest for the VO School Project, over the life of the bond.”

In 2011 the town used $2.5 million in free cash. That number is slated to decrease over the next three years – $1.48m (’12), 1.35m (’13) and 1.3m (’14).

“We’re trying to wean ourselves off of the use of free cash,” Twogood said. “We need to stop using it for recurring expenses. The problem if the override fails is that we will have a $2.5 million override in 2014 and there will be an urge to fill the gap with our reserves, and that’s going to be a serious problem.”