Orleans Officials Address Town’s Debt

By: Ryan Bray

Topics: Municipal Finance , Orleans news

A wave of retirements is anticipated in the Nauset Public Schools over the next decade, and school officials say they need to find housing to attract young teachers and staff to the district. FILE PHOTO

ORLEANS – Town officials last week attempted to correct the record on information presented in the annual town meeting warrant that they say painted an inaccurate picture of the town's finances.

The annual report from the finance committee that was included in the warrant addressed the town's debt service, the amount of money the town annually puts toward paying down principal and interest on funds borrowed for town projects. Citing data from the state Division of Local Services, the committee said that at 20 percent, the town ranked second among the state's 351 towns in 2020 in the percentage of its annual budget that it puts toward debt. The committee also said Orleans ranked number one in debt service per capita in 2020, with a figure of $1,153 per person.

"The resulting debt service is paid from town revenues and thus limits the town's financial resources to fund expanded town services and reduces financial flexibility to address unexpected needs," the report reads.

At his board's May 11 meeting, Select Board Chair Mefford Runyon raised concerns with the accuracy of the figures presented in the committee's report. He called upon Finance Director Cathy Doane and Town Treasurer Scott Walker to address the information reported in the letter at the board's following meeting on May 18.

"If there are errors or misleading information in the report, then it is important for us to set the record straight," he said last week.

Walker, who was in attendance at town meeting May 9, said he overheard discussion of the debt service from outside the Nauset Regional Middle School gymnasium.

"I thought to myself, 'My goodness. That's not accurate,'" he said. '"That's not correct.'" Walker said he had not read the finance committee's report ahead of town meeting.

During the May 18 meeting's public comment period, Finance Committee Chair Lynn Bruneau defended the committee's report, noting that all data, including a chart included as part of the report, was cited from sources including the DLS website and the town's own debt book, which was published in January.

"All of this information is accurate," she said. "All of the information in the chart at the bottom of page 18 in the warrant is accurate."

Walker said the committee correctly noted that the town's debt service tripled from $2.4 million in 2016 to $7.3 million in 2020. This is due to borrowing on projects including the new police station and the DPW building on Giddiah Hill Road.

The chart in the report showed how the $7.3 million Orleans paid in 2020 compared to debt service paid that same year by neighboring towns including Chatham ($6.1 million), Brewster ($2.2 million) and Eastham ($4.1 million). But Walker said more context needs to be given to those figures.

Orleans, he said, chose to pay off its debt over 20 years instead of 30, in an effort to save the town roughly $3.5 million in interest. Chatham's debt service is lower, but Walker said there is no background behind how it arrived at that figure.

"Maybe they've amortized their debt over a longer period," Walker said. "They may also incur some lower interest rates. They may be at the end of their repayment term, where the debt payments per year decline as time goes on. None of that is revealed here."

Orleans' $36.7 million budget in fiscal 2020 was also leaner than those in Chatham ($40.1 million) and Brewster ($39.9 million), which Walker said also could explain how the town arrived at its debt service figure for 2020.

Walker also said that town population figures taken from DLS that the committee used to back up its debt service per capita claim also were presented out of context. Specifically, he said the division's reporting does not take into account summer residents, which account for 52 percent of property owners in Orleans.

When taking into account seasonal property owners, the town population jumped from 6,307 to 12,079 in 2020, according to town assessing data. That brings down the per capita figure to $604 per person, which is 35th in the state. The credit rating agency Standard and Poor's, meanwhile, had the overall town population for 2020 at 22,000, bringing the per capita figure $332 per person, or 106th in the state.

"You're using a metric where you're lopping off half of the tax base and putting it in a published document at the annual town meeting," he said.

Select Board Chair Mefford Runyon also noted that the $7.3 million figure doesn't take into account the $1.5 million in annual revenue from short-term rental taxes that will be put toward lowering the town's debt service each year. It also doesn't reflect debt incurred from water and the community preservation committee, which isn't put on the tax rate. Factoring those in, the town's annual debt service falls closer to $5 million.

The town's most recent credit report from Standard and Poor's from January praised the town's "consistent and prudent financial management policies and practices," Walker added. The report also noted Orleans' "strong institutional government framework," its financial flexibility and its ability to absorb unanticipated debt, he said.

Doane called the figures put forth by the finance committee "irresponsible," and said there needs to be better communication between town committees and staff at town hall.

"You can't take what's published on the DLS website as Bible," she said. "It's a data dump."

Andrea Reed of the select board agreed, and said that more also needs to be done to better inform residents about the town's debt and how it is paid off. She said she has been receiving calls and emails from residents since town meeting expressing concern over the town's debt. In some cases, she said, residents discussed leaving Orleans over fears about the town's financial management.

"I would appreciate more of these discussions, not fewer of them, and if it's joint meetings with fincom to examine these issues and find the right balance, that's fantastic," she said.

Tim Counihan of the finance committee said his committee may not have used "the most elegant metric" in preparing its findings. But with projects including future sewering, a new fire station, a new library and a possible community center either in the works or being planned, he said the committee hears concerns from residents about how much debt the town is taking on.

"We need to be talking about debt more," he said. "We need to talk about affordability."

Town Administrator John Kelly said that the town is working to forecast its capital improvement plan further out into the future to better give residents a picture of what projects might be funded and how debt will be paid down the road. The plan currently projects spending five years out, but Kelly said he would like to see it forecasted 15 to 20 years ahead.

Walker said he has a good working relationship with the finance committee, members of which have approached him with questions about debt and how it works on the municipal level. He said he welcomes more conversation with town committee members about debt and other aspects of town finance.

"I hope going forward if there are going to be statements publicly made we can at least discuss or vet it with each other and be proactive," said Michael Herman of the select board. "I hope we can do that as a town."

But finance committee members expressed frustration with the tone of the debt discussion during their meeting the following night. Constance Kremer said she found Walker to be defensive in his presentation, and was disappointed that the select board appeared to accept his explanation of the town's debt situation as fact over the committee's. She said the purpose of the committee's warrant report was to reach a better understanding of the town's debt situation, both for the committee and the community in general.

"Here we are just fiddling our thumbs trying to figure out how Orleans voters can look at these benchmarks and understand them, and I just think that would have been such a better conversation to have last night," she said.

Chris Kanaga of the committee stood by the data as reported in the warrant report.

"There's nothing to defend," he said. "The facts speak for themselves."

Email Ryan Bray at ryan@capecodchronicle.com