LONGMEADOW — The Longmeadow Select Board is clearing the air on a few concerns the Finance Committee had about the town’s ongoing fiber project.
Voters will decide if $8.6 million is put toward construction of the project’s initial phases in Article 7 at the Annual Town Meeting on May 12.
The Select Board and Finance Committee held a joint meeting to discuss the Town Meeting warrant on April 6. The Finance Committee decided to recommend every article besides Article 7 on the warrant at its own meeting.
Finance Committee Chair Erica Weida included seven examples of what went into the committee’s decision not to recommend the article in a report on the town warrant, stating the committee is “not against this project moving forward in the future and appreciates the work that has been invested,” but that the presentation by the Select Board did not “sufficiently answer numerous financial questions.”
The Select Board created a memo responding to each of the Finance Committee’s concerns and held a special meeting to discuss each of its responses on April 16.
Select Board member Vineeth Hemavathi said it was important that the town had “all the information that they need to make an informed decision” since the warrant will be sent out to every home in Longmeadow.
“My hope is that they’re able to take a look at some of these responses and think about whether they’re changing support, whether there is a change in support,” Hemavathi said. “It’s also for our town residents to take a look at the responses and see how these questions and concerns have been addressed.”
The committee’s first example states that there is no information on how the Municipal Light Plant will make financial decisions. The MLP allows the townwide expansion of fiber to residents, and Hemavathi said it is governed by state statute with strict rules about annual audits and annual financial reports with everything done by open meeting.
The Select Board’s response memo states, “by statute, the MLP has limits on what percentage their rates can be of total cost and other statutory restrictions. There are over 40 MLPs operating in Massachusetts.”
“Our counsel, luckily, represents a lot of other MLPs and understands the space and has been very helpful in providing guidance on this,” Hemavathi said. “The Select Board is the MLP, but we’re waiting for the state Legislature to approve our charter change, where at that time, a three person MLP board can be populated.”
Another one of the committee’s examples states “it has not been clearly explained how rates will be set to fairly allocate the cost between the taxpayers and the subscribers.”
Hemavathi said that rates would be set by the MLP board and that rates used in the modeling need to be competitive with other providers and are based on covering operating expenses, building a retained earnings fund and covering buildout costs of the entire town.
He added that the current $90 per month subscriber rate for fiber is a lower rate than what Comcast offers for the same 1 gigabyte per second internet speed, and that fiber provides better value to residents paying for lower speeds if they wanted to switch.
The committee’s third example states it has “concerns regarding the length of debt service and have not been shown any other options for how it could be shortened.” The memo said that the 20-year debt service is “appropriate for an asset” that will last over 50 years and that a shorter length would increase the tax impact on residents.
The committee also looked for clarity on who bears the risk of the debt and Hemavathi said it would be the rate payers by statute.
“If the MLP completely were to fail, like if our sewer system or if our water system completely failed, then the town would be on the hook for it,” Hemavathi said. “This has not happened anywhere in Western Massachusetts and nowhere in Massachusetts that we are aware of … in fact, the opposite has occurred where once borrowing has been paid off, subscriber rates have actually decreased.”
The committee noted that it had also not been made clear on what taxpayers will get in return for their investment and the memo states taxpayers will get a “service that works, meets their needs and can easily be upgraded.”
“This will earn revenue indefinitely, it builds an estimated $6 million in reserves by [fiscal year 2051] and then again because we control it, we get to control how the service works, meeting the needs of our residents and thinking about this, again, as a long-term investment ” Hemavathi said. “Once the borrowing is paid off and more people are signed on, you get to continue decreasing that monthly internet subscription rate and then it’s something that really becomes, you know, a perk of living in Longmeadow.”
The committee’s sixth example states that the town will be “voluntarily violating its debt policy without sufficient or emergency justification which may impact future borrowing.” Hemavathi said that the middle school project borrowing is already putting the town over the debt policy and that fiber would only add .4% more to it.
The memo states that “it is not clear at all that this would negatively impact future borrowing. In previous meetings with our bond rating agency, they said Longmeadow would be well-served and aided by exploring revenue generating opportunities. This is one such opportunity.”
The final example states “at the time of the Finance Committee vote, the financial model had not been fully vetted and finalized, this should have been a requirement for moving the warrant forward.”
Hemavathi said that the model had been put together by Finance Director Ian Coddington and vetted by both Coddington and Fiberspring’s finance director.
The memo states that “the Finance Committee asked why inflation was not included in the model. 80% of the costs will occur in the next five years. We do not know what inflation will be. The model included conservative estimates for construction, make-ready costs, interest rates and manager compensation. All of those items could very well come in lower. We do not know what the construction costs will be until we go out to bid. The bids may come in lower than our conservative estimates. We have seen this happen just over the last three years where road and water main projects came in at millions of dollars lower than what we estimated. Despite all of this, if the Finance Committee feels strongly that inflation be included, we can include it at the rate they want.”
Hemavathi added that fiber is a “low depreciation asset that does not need much maintenance,” and that the financial model “really sets aside a lot of money for the reserve fund.”
Chair Josh Levine said that he hopes to continue collaborating and having conversations with the Finance Committee and that he would like to hold another joint meeting before the Annual Town Meeting.
