Can Wilton’s Grand List Keep Pace with Mounting Debt Service Obligations?

First Selectwoman Lynne Vanderslice attended the Tuesday, July 12 meeting of the Board of Finance (BOF) to highlight significant changes in Wilton’s debt service obligations over the next few years.

With over $19 million in debt referendums just approved by voters at the May 2022 Annual Town Meeting, Wilton is also likely to see $25 million in additional bonded projects proposed over the next three years, creating a challenge for mill rate management by the BOF — a challenge even more complex in an environment with higher interest rates, potential budget increases, and inflation.

Changing Times

Vanderslice began the discussion by pointing to a major shift she sees coming in Wilton’s debt service levels.

“Over the last five approved budgets, annual debt service has declined from $11.8 million to $9 million, which has certainly helped to minimize the mill rate increases,” Vanderslice said. “But beginning with FY2024, that trend will reverse.”

Vanderslice proceeded to give a detailed presentation to the board, explaining the new debt referendums that she anticipates will be presented at the next three Annual Town Meetings (for budget years 2024-2026.)

“$19.4 million was approved as bonding projects at the [2022] Annual Town Meeting,” Vanderslice noted. “There’s $25 million of additional bonded projects that are expected to be requested over the next three years.”

In addition to the millions of dollars in projects already identified in Wilton’s 5-year Capital Plan, the new debt would include $2 million for a new turf field (which could be offset through some private fundraising efforts by the Wilton Athletics and Recreation Foundation before bonding); $5.5 million for critical upgrades at Town Hall, Wilton High School and Middlebrook facilities; and $800,000 for major renovations at the “Yellow House” at Ambler Farm.

Vanderslice pointed out that without the BOS’ success in securing grants, the debt picture could look quite different.

“Even though we’re borrowing $25 million, we avoided borrowing another $25 million because we were able to secure state and federal grants for those projects,” Vanderslice said, citing examples such as the nearly $1 million in grant money obtained for the Town’s new emergency communication system.

“We’re going to continue that focus on grants as a way to avoid bonding projects but also to avoid operating expenses,” Vanderslice said.

Servicing the Debt

Using an interest rate assumption of 3.5%, Vanderslice estimated the cost of debt service would be $680,000 in FY2024 and $1,100,000 by FY2025.

Vanderslice went on to characterize the Grand List growth that would be required to support the debt service as “huge,” breaking it down by year in her presentation.

• “A $680,000 debt service increase currently requires $24 million of incremental assessed growth, or $34 incremental market growth.”
• “A $1,100,000 debt service increase currently requires $39 million of incremental assessed growth or $55 incremental market growth.

“You can see my concern,” Vanderslice told the board members, noting that inherent financial uncertainties and even modest annual BOS and BOE budget increases would only heighten the concern.

“There’s a lot of conversation about trying to raise revenue,” Vanderslice said. “The question is can you cover that additional debt service with incremental Grand List growth?”

Vanderslice highlighted 2022 new building permits as one potentially favorable indicator.

But she also noted that in the near term, there is a finite set of large-scale projects that could grow the Grand List in a significant way, such as the new apartment building under construction at 141 Danbury Rd., which is expected to yield an increase in annual tax revenues of about $900,000 — but not until 2025.

“We can’t expect we’re going to see another million-dollar taxpayer come on” beyond those already on the Town’s radar, Vanderslice said. (She also noted that Wilton Center commercial landowner Kimco already has a significant assessment, and only the net increase of any redevelopment would be incremental to the Grand List.)

Budget Targets

BOF member Stewart Koenigsberg asked Vanderslice if she felt the debt levels were approaching a “danger zone.”

“We’re fine in terms of the total debt,” Vanderslice assured the board. “We have the capacity to handle it. The question is… what is [the BOF] willing to put forth as mill rate increases? That’s what the BOS needs to understand.”

Vanderslice specifically asked the BOF to provide FY2024 budget increase targets that could guide the budget planning process by the Board of Selectmen and the Board of Education.

In recent years, the BOF has purposely avoided providing such targets, on the premise that they could discourage the BOS and BOE from recommending the budgets they feel are truly needed — whether that is higher or lower than what the BOF might set as a target.

Vanderslice pressed for the budget targets as “meaningful” to the BOS “to have a sense for where the [Board of Finance] is going.”

“We’re always focused on trying to align any big jump in expense with Grand List growth if we can, or any savings that we know about, [but] we want to be able to understand what an acceptable mill rate increase [might be] well before we start our budget,” Vanderslice said.

Though he did not expressly offer a commitment to provide the targets Vanderslice requested, BOF chair Michael Kaelin concluded his comments after Vanderslice’s presentation by calling it “important information” as the BOF’s work “is just getting started.”