Somersworth NH means to fund new fire station after soaring costs
SOMERSWORTH – The city’s new fire hall project remains on track after city council agreed on Monday to use reserve funds to cover much of the recent $ 1.3 million increase for the new building.
The new fire hall is expected to replace the existing 8,100 square foot fire hall, built in 1976, at 195 Maple Street. The city initially authorized a bond of $ 7.7 million to fund the fire station, but city officials say the cost has since gone up to a guaranteed maximum price of $ 9 million. This maximum potential cost of the project does not include accrued interest on the existing obligation.
At a special meeting last week, city council discussed at length whether the project could be delayed or that the city could finance it now using $ 240,000 of the fund balance for this project, $ 600,000 in American Rescue Plan Act (ARPA) funds (for ventilation system costs in the new station), extending the five-year bond commitment and increasing the bond authorization by $ 460,000 for full bond authorization of $ 8.1 million.
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At Monday night’s city council meeting, Councilor Matt Gerding suggested that the city still use ARPA funds, but increase the reserve funds it plans to commit to the project in the near future. instead of extending the price and life of the bond, which city estimates could accumulate. $ 1.7 to $ 2 million in interest if extended.
The city’s reserve funds are where the city’s undesignated money resides, acting much like a savings account, Gerding pointed out.
“In my opinion, we have it for projects that have unforeseen costs and we have to tap into it, just like I would use my savings account if my oven were to die in my house, or all of a sudden I was doing a renovation and had to buy something else that I hadn’t planned on, ”said Gerding.
Gerding proposed an amendment to the resolution regarding the funding of the City Fire Hall to allocate a total of $ 700,000 from the unallocated balance of the General Fund.
“I tried to think of a creative way to encourage the city to continue moving forward with this project, but also not to impose more on taxpayers an increase in the deposit and a longer duration of the deposit. bail, ”Gerding said. “That way we’re taking an extra $ 460,000 instead of spending up to $ 2 million in long-term interest to extend the bond. Think of it like a down payment on a car, the more money you put in, the less you have to pay over the life of the loan.
Deputy Mayor and City Councilor Dave Witham said this was a more universal funding mechanism to fund the station, and although the fund is the city’s ‘piggy bank’, the fund is currently healthy enough to support ownership. He explained that he states in the policy that the fund balance should be between 5% and 15% of the city’s annual operating budget.
“It’s not much different than if you talk to a financial planner who says your home savings should be a percentage of what you earn annually,” Witham said. “By not having to bond additional years and additional capacity with the bond, it actually saves taxpayers money. It’s a cleaner, more streamlined, and more efficient way of doing business. ‘achieve the same end result. “
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While Councilor Kenneth Vincent has suggested the project be put on hold in the hope that costs will come down, Witham said that part of the reason it makes sense to go ahead and commit to this project now is due to bond schedules. The city has now repaid the bond it took to pay the police station two decades ago and the fire station could fit into that financial situation.
“It’s already built into the tax rate, so you can leverage that for a new project,” Witham said. “If we didn’t act now, that police station money would then essentially be deducted from the tax rate, and to build the fire station later in a year or two, instead of an impact of 20 cents on the tax rate, it would be more of an impact of 40 cents on the tax rate. “
Where does the increase in the cost of the first station come from?
Witham explained that the $ 1.3 million funding gap in the cost of the $ 7.7 million bond that the city approved at the new guaranteed maximum price of $ 9 million for the fire station results a long and complicated process.
He said that when the fire station was conceptually designed, it resulted in a very basic plan and a cost estimate based on the appearance of the building and the materials that will be used to construct it. More detailed drawings of where the pipes and wires run inside the walls are then worked out, and the city’s chosen construction management company, Harvey Construction, solicits bids from all of the various subcontractors. necessary to carry out the work.
“When the details of that station are released, from how much wire we will need to the type of windows we use, how many shingles we need, all of those details become a detailed analysis,” Witham said. “From there, Harvey Construction says it looks like your building is going to cost around X, but we’re not going to find out in full, until we’ve actually gone looking for offers from contractors.”
These offers came back higher than expected, he said. While the city was able to cut around half a million dollars from concept design earlier this year, when the contractor launched a bid, the rising costs of building materials required a larger budget.
“We had to close the funding gap,” Witham said. “If we can get it back below $ 9 million that’s great, but there’s no appetite to really cut corners on this project because we want to do it right.”
Councilors discuss the way forward
Councilor Martin Dumont raised concerns about the rising costs, stating that he also disagreed with the previous estimate. He still sees the National Guard Armory as an ideal site for the fire station, but said it could still be months before the National Guard completely leaves the premises. The city had considered the site but decided not to.
“I don’t like spending $ 9.1 million on a Taj Mahal at all,” Dumont said. “I’ve always maintained that $ 7.7 million was too much … I don’t agree that things aren’t going to get any cheaper, I don’t believe so.”
Councilor Crystal Paradis said Gerding’s funding amendment responds to the most important feedback she has received from residents on how the increase and extension of the bond will affect taxpayers in the long run.
“It’s a cleaner and much more financially responsible way of doing this project,” said Paradis.
While Councilor Don Austin admitted he was not sure he would support the amendment at first, since he is generally a supporter of optimizing finances rather than the savings account, he said he seemed like the best way to mitigate a possible spike in interest rates.
After much discussion, the amendment to keep the bond as it is and to make up the difference with city funds was unanimously approved.
“I certainly hammered the drum hard enough at the previous meeting to find a way to do it, because delaying the project was not the solution,” Witham said. “I am very happy with the outcome of the vote to move this forward in a way that makes sense.”