To the Editor:

The current plan is to borrow $6.9 million to fund the Town House renovation. Based on a 20-year term and the projected 5% interest rate, the interest cost over twenty years will be $3.6 million.

Marion’s debt was lasted rated by Standard & Poor’s (S&P) in 2014. I obtained a copy of Standard & Poor's report on Marion. Among many factors, S&P tracks the Town’s total indebtedness and annual debt service and how these numbers compare to the Town’s annual revenues and the assessed value of real estate.

Total indebtedness is the total of principal and interest the Town owes on its debt at any point in time. Debt service is the amount of principal and interest the Town is obligated to pay to its lenders each year.

Based on information provided me by the Town’s Financial Director, the Town total indebtedness is projected to be $36,029,939 as of July 1, 2018, before including the new debt on the warrant for approval at the May 14 Town Meeting. (This July 1 projection doesn’t include Marion’s 27% share of ORR debt, which currently is a little less than $1.6 million.) The Town’s annual debt service, again before including any new approved debt, is projected to be $2,774,779 for FY 2019 and $2,863,571 for FY 2020. (These debt service numbers also do not include debt service related to Marion’s 27% share of ORR debt.)

At the May 14 Town Meeting, citizens are being asked to approve $817,105 for a new water main on County Road, $2,500,000 for upgrades to the waste treatment facility related to EPA permitting

requirements, and $6,932,269 to fund the Town House renovation. If approved, this new debt totals $10,249,374. Projected total interest payments over the term of this debt is estimated to be $4,645,686, of which $3,639,269 is for the Town renovation.

Total new indebtedness (principal plus interest) owed ($10,249,374 plus $4,645,686) thus will add up to $14,898,061.

How will these borrowings impact the Town’s total indebtedness and annual debt service? The Town’s projected total indebtedness as of July 1, 2018 will increase to $50,927,098, up from the $36,029,037 currently projected as of July 1, 2018, a 41% increase.

These new borrowings, if approved, will take place in FY 2019, so they will impact the Town’s FY 2020 required debt service payments which is when the first principal and interest payments come due. Debt service for FY 2020 on the Town House loan will be $693,227. When added to the projected debt service on the sewer and water loans of $151,129 and $81,711 respectively, the total increase in the Town’s annual debt service in FY 2020 will be $931,066.

Consequently, the Town’s total projected debt service for FY 2020 will increase to $3,794,637 in FY 2020 from $2,836,571 currently projected, up 33%.

The Town House Building Committee points to the pay-off of ORR debt in 2024 as offsetting the Town House borrowing, but Marion’s current 27% share is less than $1.6 million and 2024 is six years away.

More importantly, the Town’s new capital plan calls for spending $60.4 million over the next ten years, of which a significant percent is tied to repairing and upgrading the Town’s critical infrastructure. A determination has not been made regarding how the Town will fund these capital projects. It is a safe guess that the Town will need to borrow a significant percent of this $60.4 million, maybe $30 million to $40 million?

If the Town votes to approve the $6.9 million loan for the Town House renovation at Town meeting, it will account for most of the 41% increase in Marion’s total indebtedness as of July 1, 2018, and most of the 33% increase in the annual debt service requirement projected for FY 2020. The other debt is to finance critical infrastructure improvements and not optional.

These significant percentage increases will be huge red flags for the rating agencies such as Standard & Poor’s and they will start to dig deeper into the Town’s finances. With additional borrowings of $30 million or more on the horizon for critical infrastructure improvements and, by the way, approximately $35 million in unfunded liabilities for post-retirement employee benefits, ask yourself: is issuing $6.9 million in debt for the Town House renovation prudent?

Credit for Marion works just like our credit cards. The more we borrow against the limits on our credit card, the lower our credit score (in Marion’s case, bond rating) and the less banks like to lend to us. If we max out borrowings on our credit cards, all sudden banks will not approve new credit for us.

John Waterman

Marion, MA