Thank you for your note! I'll do my best to answer your questions.
1) Has the FinComm committee guaranteed (can it?) that borrowing to build the community center will not negatively affect Lincoln’s credit rating?
As you suggest, "guarantee" is a very strong word, and we don't have any control over the criteria the rating agencies use for our bond rating.
With that said we (fincom + town finance staff) feel strongly that if we stay within our debt limit and our debt service limit (slide below), we should have a very good chance of keeping our AAA rating. That of course depends on the final budget for the proposed CC project, and how much of our stabilization fund we end up using (which will depend on the final community center budget, and, any other competing capital projects that we find ourselves facing this budget cycle).
2) Has there been any consideration about the cost of building materials, etc, give current interest rates?
There seems to be a consensus that if the town waits to build another big building it will only cost more.
Those are very good questions for the CCBC, and questions the Finance Committee will (almost certainly) be asking when they present the project options to us before the special town meeting in December.
For our recent school project, the budget had "escalation factors" - an annual percent increase assumption on the increasing cost of building materials and labor. As you might imagine, coming up with that percentage is a bit of an art and a crystal ball exercise. But it's a critical factor: if we're building in (say) 2025, then we've got a year and a half of cost increases to account for in the budget.
But what if the town were to wait until costs came down with lowered interest rates…
Historically, the Finance Committee has refrained from recommending "market timing" regarding interest rates, because nobody really knows where the rates are going to go, and it's very easy to get it completely wrong.
Also, it is sometimes possible to get municipal bonds that can be "refinanced" after some period (like 10 years), just as you would refinance a fixed mortgage when rates go down. I wouldn't assume that's possible here, but that might be part of the discussion as the CCBC gets further into specific budget points.
I hope that answers your questions, please let me know if you have any other questions. Also, please feel free to share this email with anyone you wish, including Lincoln-talk, with the caveat that I am speaking only as one committee member.
Thank you again,
-andy
Thank you,
Kathy Madison
Concord Road
781-259-1764
