Borrowing over a long period of time concerned some council members. At the meeting, council members instructed staff to also explore shorter-term borrowing options.
"We told the community that it's a short-term problem (the cash flow issue) and it feels fundamentally dishonest to say, 'It's actually a 10-year problem,'" said council member Mike Lempres.
The town does not need to decide the term or exact amount to be borrowed before proceeding with the financing process, which will take about 15 weeks to complete, according to a presentation for the Sept. 4 meeting put together by town consultant Urban Futures.
Vice Mayor Rick DeGolia suggested that a resident has expressed interest in loaning the town money for the project, which includes a new mission-style building housing police offices, town administration, building and planning offices, and a council chamber/emergency operations center connected to the new library. DeGolia said the resident could have his or her name put on a building or be similarly recognized in exchange for a zero-interest loan.
"With respect to a loan, any funding option that is not considered a straight donation must conform to the requirements of Municipal Finance Law," said City Manager George Rodericks in a Sept. 13 email. "The Town is limited in its options in this regard."
Any loan, even one from a private resident, has to follow the same legal requirements as the COP process, he said. That means town staff would prepare a request for proposals to secure an underwriter and bond counsel and prepare a draft debt policy, he said.
Town staff will also explore shorter-term COPs, lines of credit, and tax revenue anticipation notes (a one-year lending option).
The town's available projected funding for the project is $31.6 million, but that's subject to modification based on future projections of expenditures and ERAF revenue, short for educational revenue augmentation fund, which is not guaranteed revenue in any given year.
A representative from Urban Futures told council members that the extra funds would protect the town if the project ran into problems. Predicted interest rate ranges are low right now on this type of funding — from 1.48% to 2.66%, depending on the amount borrowed and the term of repayment.
Unlike bonds, COPs do not require public approval.
Town staff earlier estimated that a $7 million COP would be sufficient to cover the town's reserve requirements. The town's policy is to maintain a reserve fund of 35 percent of general fund expenditures.
"While the council previously advised that the Town's Operational Reserve could be used toward the Town's cash flow needs, it is the recommendation of Urban Futures and staff that the Town's reserve policies continue to be met as they will be required by the underwriter for credit rating purposes and to show the ability to maintain debt service payments in the event of an economic downturn," a staff report states.
Council members and staff also called into question whether Atherton Now, a nonprofit created to help fund the civic center project, would contribute as much funding as it anticipated based on residents' pledges. Atherton Now had raised a little over $6 million as of June.
Atherton Now will send a report for the council to review at its Sept. 18 meeting, said Sandy Levison, the group's campaign co-chair, in a Sept. 6 email.
"We have made every payment the Town has requested to date," Levison said. "We have had some donors who have reconsidered their commitments based on the size and scope of the project."
Staff will prepare a longer-term draft debt policy for the council's consideration in October or November, Rodericks said.
Atherton had to go back to the drawing table after bids for construction of the new center came in 40 percent higher than expected, at $56.4 million.
Watch the Sept. 18 meeting at tinyurl.com/AthertonCOPs.
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