Andover would likely need to get an exemption from state rules on municipal debt to build a new high school without the Massachusetts School Building Authority helping pick up the tab, according to a note Town Manager Andrew Flanagan sent to the Andover High School Building Committee this week.
The state prohibits towns from taking on debt greater than five percent of its cash value. The town’s current debt limit is $510.2 million, with approximately $409 million in available debt capacity. Some types of debt are excluded from the cap — including debt to build new schools in partnership with the MSBA.
In an interview Thursday, Flanagan, AHS Building Committee Chair Mark Johnson, and Town CFO Patrick Lawlor said the town was in the early stages of finding a workaround for the potential glitch in starting construction after special town meeting approval next year. Flanagan, who also sits on the building committee, said those options include legislative changes and filing special legislation for an exemption for the AHS construction project.
The town could also seek approval from the Municipal Finance Oversight Board, a state body which can approve increasing a debt limit to as much as 10 percent. MFOB approval could, however, impact the town’s bond rating. “At this point, that is not an option I’d recommend,” Flanagan said Thursday.
Since 2008, MSBA denied eight applications the town filed for help to build a new high school. Since forming last summer, the Andover High School Building Committee has wanted to move forward without state funding, saying MSBA is unlikely to approve the project until the town closes the West Elementary School Construction project.
Johnson said MSBA is currently only funding overlapping projects in three districts — Boston, Lawrence and Springfield. He also said the amount of assistance MSBA is offering is not rising as fast as construction costs, meaning waiting could make it a bigger burden on Andover taxpayers.
The town will likely need an exemption to move forward with the project. Flanagan told the committee that even if the project estimates came in at under $409 million, “it would not be advisable” to use most of the town’s remaining debt for capacity for a single project.
“If the Town were to devote a substantial majority of its debt capacity to this or any other project, the Town would be severely constrained in its ability to meet future and unexpected capital needs,” Flanagan said.
The town has successfully obtained exemptions in the past by filing special legislation. But Flanagan said the town is also talking with state legislators about overhauling the state’s rules on debt. With MSBA likely to be funding fewer projects as costs escalate, the situation is likely to affect other school districts in the coming years.
“Given it may become a more frequent issue, the time may be right to take a look at the legislation,” Flanagan said. He said the town is also talking with bond counsel, financial advisors and MSBA to determine its options.