Most Library Trustee Candidates Appear Oblivious To Town’s Borrowing Costs
At the October 18 Candidates Forum organized by the Amherst League of Women Voters (LWV), the seven people vying for six Jones Library Trustee positions were asked, “Do you feel there is an upper limit to what the Library Expansion Project should cost the Town and what it should cost the Library?”
Their answers were telling, not only in that none was willing to specify an upper limit, but because all but one appeared not to recognize a critical result of inflation over the past two years. As Library renovation-expansion costs have risen $10 million over original estimates, the Town’s obligation to cover borrowing costs on all debt supporting the project has risen by several million dollars.
The response of Jones Library Trustee Lee Edwards, who co-chairs the Capital Campaign for the project, typified the candidates’ reply to the question.
“The town made a commitment in, I think, spring of 2021 of $15.6 million [actually $15,751,809] and at that time the president of the Town Council [Lynn Griesemer] said loudly, ‘And not a penny more’ and we agreed that that amount has not changed… it’s never going to change. We still don’t know what the total cost of the project will be because it’s not gone out to bid. But it’s very clear that the difference between what the town pledged and the ultimate cost of the project will be borne by the fundraisers for the project. It will not be borne by the town,” said Edwards.
She continued, “What may be causing confusion is that the town has to guarantee the total amount of the project and we don’t know what that is. But the difference between the amount that the town originally pledged and the total cost will not be borne by the town.”
No one called Edwards on an important flaw in her argument. By “guaranteeing the total amount of the project” Edwards means that the Town of Amherst must borrow the full project cost, currently projected to be $46.1 million, and must repay that debt with interest, while the proceeds from grants and fundraising efforts by the Library come in. The sum of these interest payments, exacerbated by increasing costs and rising interest rates, may exceed the Town’s supposedly capped commitment of $15.8 million by more than $10 million.
Moreover, during the past two and a half years the Library Capital Campaign has raised less than half of its projected commitment of $16,516,676. If, by late 2025 when the proposed library project is completed, the Capital Campaign has failed to raise the promised funds, the Jones Library must make up the difference with its limited resources – primarily an $8.3 million endowment that it relies on for operating expenses – or demand that the Town bail it out.
An updated project cost estimate is due next month, and should the past year’s inflation cause it to come in higher than $46.1 million, the town’s interest payments and the Capital Campaign’s fundraising commitment will be correspondingly higher.
At the LWV Forum only trustee candidate Ed McGlynn acknowledged that the Library project will cause the town to incur borrowing costs beyond its $15.8 million commitment. “Let’s not forget the $9 million in financing that goes along with that,” he said, urging “empathy and consideration for the people in town who are taxpayers.” He also called for better communication and reaching out to the public to learn about concerns.
The trustee candidates’ failure to account for the town’s interest payments may be explained in part by the fact that town leaders have done little to help the Trustees, the Town Council and the public understand the magnitude of borrowing costs for the project. In September 2022 former Finance Director Sean Mangano prepared a Library Cash Flow Analysis in preparation for a Town Council vote on whether to continue pursuing the library expansion after cost estimates came in $10 million higher than the previous borrowing authorization for the project. The document was included in the packet of exhibits for the September 19 Town Council meeting.
At the time, when project costs were estimated to be $36.3 million, Mangano projected debt service interest payments to total $8.9 million over the 20 years beginning in 2025. This figure represents $7.7 million in interest on General Obligation bonds covering the town commitment of $15.8 million plus another $1.2 million in interest on short-term Bond Anticipation Notes (BANs) to cover the gap between fundraising and cash flow requirements.
Neither Council President and meeting chair Lynn Griesemer nor any other participant brought up the document. Continued funding of the over-budget library project was approved by a vote of 8-5.
To put Amherst’s $8.9 million and growing library project interest rate liability into perspective, the Town’s entire FY24 budget for Community Services (Public Health, Senior Services, Veteran Services and Recreation) is $1.7 million. The FY24 Public Works Highway budget is $0.9 million. The FY24 Community Responders (CRESS) budget is $0.6 million.
In the past year the burden on the town to fund borrowing costs has quietly ballooned, driven by increases in project costs and interest rates. Since September 2022 the U.S. prime lending rate has increased by 36% while the estimated library project cost is up 27%.
Mangano has moved on from his job as Finance Director and an update to his debt service analysis has not yet been released. What is clear, however, is that if the library project moves forward, the town’s cumulative interest payments will be substantially higher than $8.9 million. We have heard of no offer by the Jones Library to cover project interest payments which must therefore be passed on to the taxpayers.
So when you hear a library trustee or town official claim that the Jones Library renovation-expansion, whatever its final price tag is, will cost the Town “not a penny more,” please correct them.