Andover would likely have its AAA bond rating lowered and pay more for future borrowing for capital projects if it funds a $460 million project to rebuild Andover High School by taking on new debt.
“I can sit here tonight with a high level of confidence and say we will get downgraded if we were to go and fund the project tomorrow,” Town Manager Andrew Flanagan told a joint meeting of the select board and the finance and AHS building committees at Memorial Hall Library Wednesday. “I would not be meeting my obligation if I didn’t present this information to give the community an opportunity to weigh it, as they’re going to weigh every aspect of this project.”
The debt rating is assigned by Standard & Poor’s and dictates the interest rates Andover pays when it borrows money in the municipal bond market. While Andover currently has the highest, AAA rating, Standard & Poor’s warned it had a “weak debt profile” in a December rating letter.
Flanagan said how much of a drop is unknown, but it could be as many as two levels, which would significantly increase future borrowing costs.
Tuesday’s joint meeting included an update of the building committee’s work since it was formed last year, a deep dive into the problems at the existing school and a detailed breakdown of preliminary cot estimates released in March.
In addition to the impact on its bond rating, the project also threatens to put Andover over a state-mandated debt limit. State Sen. Barry Finegold (D-Andover) said he expects the final state budget for the fiscal year beginning July 1 to include an amendment that would exempt debt for school construction projects from the cap.
Andover has opted to move forward with the project without help from the Massachusetts School Building Authority. Finegold does not expect more funding for MSBA, despite increased construction costs that have resulted in budget overruns in every Massachusetts school building project approved in the past four years. And Andover, Finegold said, is no closer to getting MSBA approval, given the level funding for MSBA will mean it can support fewer projects.
“There are a lot of people in line ahead of us,” he said.
Even without MSBA help, Finegold is firmly behind Andover moving ahead without MSBA aid. He said the Town made a “big mistake” when it renovated instead of rebuilding Andover High School in 1995.
“And because of that decision, all of you are here tonight,” Finegold said. “And every single year that we don’t build this project, [the price] is going to increase.”