SOMERSWORTH — The city’s new fire station project remains on track after the City Council agreed Monday to use reserve funds to cover a large chunk of the recent increase of $1.3 million for the new building.
The new station is slated to replace the outdated existing 8,100-square-foot fire station, built in 1976, at 195 Maple St. The city originally authorized a $7.7 million bond to finance the fire station, but now city officials say the cost has since gone up to a guaranteed maximum price of $9 million. This maximum potential cost of the project does not include interest accrued from the existing bond.
In a special meeting held last week, the City Council discussed at length that the project could be delayed or the city could finance it now by using $240,000 from the fund balance towards this project, $600,000 in American Rescue Plan Act (ARPA) funds (for ventilation system costs in the new station), lengthening the bond commitment by five years and increasing the bond authorization by $460,000 to a total bond authorization of $8.1 million.
During Monday night’s City Council meeting, Councilor Matt Gerding suggested that the city still use ARPA funds, but that it ups the reserve funds it plans to commit to the project instead of extending the price and life of the bond, which the city estimates could accumulate $1.7 to $2 million in interest if extended.
The city’s reserve funds are where the city’s undesignated money sits, acting much like a savings account, Gerding pointed out.
“In my opinion, we have this for projects that have unexpected costs and we need to tap into it, just like how I would utilize my savings account if my furnace were to die in my house, or all of a sudden I was doing a renovation and I had to buy something else that I did not anticipate,” Gerding said.
Gerding proposed an amendment to the resolution pertaining to financing the fire station for the city to appropriate a total of $700,000 from the general fund unassigned fund balance.
“I tried to think of creative ways to encourage the city to still move forward with this project, but also not burden taxpayers more with an increase on the bond and a longer term on the bond,” Gerding said. “This way we are taking out an additional $460,000 as opposed to spending up to $2 million in interest in the long run to extend the bond. Think about it like a down payment on a car, the more money you put down the less you have to pay in the life of the loan.”
Deputy Mayor Dave Witham said that this was a more universally appealing funding mechanism to finance the station, and while the fund is the city’s “piggy bank,” the fund is currently healthy enough to support the appropriation. He explained it states within the policy the fund balance should be somewhere between 5% and 15% of the city’s annual operating budget.
“It’s not much different than if you talk to a financial planner who says that your savings at home should be a percentage of what you make annually,” Witham said. “By not having to bond additional years and additional capacity with the bond, this actually does save the taxpayers money. This is a cleaner, more streamlined, effective way to get to the same end result.”
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While Councilor Kenneth Vincent suggested the project be held off with hopes that costs come down, Witham said that part of the reason it makes sense to move forward and commit to this project now is due to bond schedules. The city has now paid off the bond it took out to pay for the police station two decades ago and the fire station could fit into that financial spot.
“It’s already baked into the tax rate so you can leverage that for a new project,” Witham said. “If we didn’t act now, that money from the police station would then be basically taken off of the tax rate, and to build the fire station down the road in another year or two, instead of a 20-cent impact on the tax rate, it would be more like 40-cent impact on the tax rate.”
Where did the increased cost of the first station come from?
Witham explained the $1.3 million funding gap in the cost of the $7.7 million bond the city approved to the new guaranteed maximum price of $9 million for the fire station comes out of a complicated, lengthy process.
He said when the fire station was designed conceptually, it resulted in a very basic blueprint and cost estimate based on what the building will look like and what materials will be used to build it. The more detailed drawings of where pipes and wires run inside walls are then drawn up, and the city’s chosen construction management firm Harvey Construction solicits bids from all of the various subcontractors needed to do the work.
“When the details of this station get fleshed out, from how much wire we are going to need to what kind of windows we are using, how many shingles we need, all of that detail becomes a detailed analysis,” Witham said. “From there, Harvey Construction says it looks like your building is going to cost about X, but we’re not going to know that in full, until we actually go out to get bids from contractors.”
Those bids came back higher than expected, he said. While the city was able to trim roughly half a million dollars from the conceptual design earlier this year, when the contractor went out to bid, the rising construction material costs created the need for a bigger budget.
“We needed to bridge the funding gap,” Witham said. “If we can bring it in under the $9 million, that’s great, but there isn’t an appetite to really cut corners on this project because we want to do this right.”
Councilors debate how to move forward
Councilor Martin Dumont raised concerns about the rising cost, stating he didn’t agree with the previous estimate either. He still sees the National Guard Armory as an ideal site for the fire station, but said it may still be months before the National Guard has fully vacated the premises. The city had considered the site, but decided against it.
“I don’t like spending $9.1 million at all on a Taj Mahal,” Dumont said. “I’ve always argued that $7.7 million was too much … I do not agree that things aren’t going to get cheaper, I don’t believe that.”
Councilor Crystal Paradis said Gerding’s amendment on financing addressed the biggest feedback she’s gotten from residents, which is concern over how adding to and extending the bond would affect taxpayers in the long run.
“It’s a cleaner and much more fiscally responsible way to get this project done,” Paradis said.
While Councilor Don Austin admitted he wasn’t sure about supporting the amendment at first, since he’s usually a proponent of leveraging finances as opposed to relying on the savings account, he said it seemed like it was the best way to mitigate possible soaring interest rates.
After much discussion, the amendment to keep the bond as is and make up the difference with city funds was approved unanimously.
“I certainly pounded the drum pretty hard at the prior meeting that we needed to find a way to do this because delaying the project was not the answer,” Witham said. “I’m very happy with the outcome of the vote for this to move forward in a way that makes sense.”