Village at Little River will have positive financial benefits

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Village at Little River will have positive financial benefits By Frank Remley

After an internal analysis, the Newbury Finance Committee hasconcluded that the Village at Little River will have a distinctlypositive impact on Newbury's currently difficult financial outlook.The project, if approved, will take up to six years to be developedand populated. However, it should increasingly help to mitigate aworsening operating deficit for Newbury. There are othersignificant financial benefits as well.
Starting with an outside consultant's financial impact assessment,the Finance Committee constructed its own six-year cash flow modelof the project, and has assessed risks under six different businessscenarios. All potential costs to the town were examined, and keydepartment heads consulted. In every case, the results werepositive in every year, even under negative market conditions.Under the best case, once fully completed and operational asplanned, the development will generate revenue net of expenses ofover $550,000 per year. In what was considered a "worst casescenario" — involving a 20 percent drop in market conditions,delay of 52 phase two high-end townhouses, and 50 percent moreschool children than projected — the town will still generate$240,000 per year in net revenues. This was contrasted with currentrevenues for the same property, which are only $10,800 per year.Net revenues can only improve as the market improves. In addition,Newbury should receive an attractive, front-end capital infusion,about half from a state-sponsored 40R incentive payment, and therest in permits and fees. Some of this will be used to improvepedestrian connectivity and eliminate anticipated train horn noiseon Hanover Street, which is to be shared with the developer. Therest is available for other capital needs for which Newburycurrently has no money.
All risks being considered, the committee was satisfied that theproject can help the town. Perhaps the biggest financial risk ofall for Newbury is to do nothing! With average revenue growth atonly 2.6 percent, the total costs growing at 3.4 percent per year,current projections show an increasing annual deficit. This"structural deficit" will grow worse as years pass unless Newburyfinds substantial new revenues. Current projections show that bythe year 2014, we could experience annual losses of over $1 millionper year. Yes, the economy will improve, and we will continue towork on ways to reduce costs and raise other sources of revenue.However, there is a limit to these measures. It is like havinghousehold costs higher than one's net earning, but making up thedifference with creative, one-time windfalls. For FY09 our luck hasrun out and we have had to make significant cuts in town services.While the Village at Little River is not the total answer to ourneeds, it can provide substantial help, possibly cutting ourprojected deficit in half. If we can do that, the problem becomesmore manageable, possibly even avoiding tax overrides. This projectcan add as much as $175 per year, per household in tax value.
In addition to the fiscal benefits, Newbury will gain a new SeniorCenter for which there is otherwise no capital available. It willprovide the town with a stronger commercial tax base. It willresult in the cleanup of a contaminated site and open up the LittleRiver environment for all to enjoy. With the help of the developer,it will also provide walkways to the planned rail trail, the trainstation and Newbury center. It will result in job opportunities forindividuals and for local contractors. Working with Newburyport thedeveloper hopes to infuse a needed $4.4 million capital improvementto the water and sewer system serving the Newbury Elementary Schoolas well as the entire Route 1 circle. The project will clearly notbe "all things to all people," but, if approved, it will providethe considerable overall value to all Newbury taxpayers.Opportunities such as this to improve our net revenues and thusreduce our operating deficit rarely come along.
Frank Remley is chairman of the Newbury Finance Committee.