Simsbury, CT - August 31, 2006

The Special Meeting of the Board of Finance was called to order at 7:00 P.M. in the Main Meeting Room of the Town Hall, 933 Hopmeadow Street, Simsbury, Connecticut. The following members were present: Chairman Paul Henault, Peter Askham, Nicholas Mason, Anita Mielert and Kevin North. Member Candace Fitzpatrick was absent due to a family emergency that required her to be out of town. Also in attendance were First Selectman, Thomas Vincent; Town Attorney, Robert DiCrecenzo; Finance Director/Treasurer Kevin Kane; the Trust for Public Land representative, Melissa Spear and other interested parties.

Mr. DiCrecenzo gave a presentation to the Board similar to the one presented to the Board of Selectmen earlier in the week. He referred to his handout entitled “Term Sheet Re: Acquisition of the Ethel Walker Open Space by the Town of Simsbury” (Addendum 1), which outlined the terms that were the basis for the resolutions passed by the Board of Selectmen.

Mr. DiCrecenzo stated that the purchase price for the property is $13,850,000. Under the current proposal, the amount to be paid by the Town of Simsbury at closing in March 2007 would be $7,000,000 at which time the Trust for Public Land would also pay $2,750,000. At closing, the Ethel Walker School would transfer a fee interest in two parcels.

Mr. DiCrecenzo reviewed the proposal to divide the Ethel Walker property into three large parcels that currently do not exist but would be created as part of this conveyance. He stated that the land to be conveyed in March 2007 would be 336.5 acres, which would be comprised of 283± acres referred to as the “Western Parcel” and 78.5± acres long Bushy Hill Road referred to as the “Eastern Parcel”, less a 25± acre parcel that would be retained by the Ethel Walker School for the equestrian center.

The second portion of the resolution states that a $1,000,000 deposit will also be made by the Town of Simsbury in March 2007, which will 1) establish a conservation easement on the “retained parcel” and 2) serve as a five-year “put” option for the Town to purchase land westerly of a division line within the “retained parcel” for $2,000,000 and the remainder of the “retained parcel” for another $1,000,000 (i.e., total balance paid by the Town for all remaining land would be $4,100,000). The Town would have three responses to the put option: 1) acquire the parcel; 2) acquire half of the parcel and, thereby, extending the put option on the remaining half for another two years; or 3) decline to acquire any further land and forfeit the $1,000,000 deposit.

Mr. DiCrecenzo indicated that all purchases would be fee simple with certain rights going back to Ethel Walker School to assure that it remains as open space and conservation land available to their use as a school. Mr. Henault asked about the language in the proposed resolution before the Board that refers to “fee simple, conservation easement, or development rights” and Mr. DiCrecenzo responded that the language of the resolution was stated so as to allow for maximum flexibility for the Town as the deal develops into contract. He stated that the Board of Selectmen have indicated that they favor fee simple interest acquisitions. Mr.DiCrecenzo also pointed out that certain State grants require that the land be kept in its natural state according to certain State conservation easements that may be imposed and that there be public access along defined trails as well.

Mr. North asked who were the parties to the term sheet and Mr. DiCrecenzo replied that currently there is an existing contract between the Trust for Public Land (“TPL”) and Ethel Walker School (“the School”) and that the term sheet does not match up with that contract. He envisioned that Phase I of the acquisition will also be between TPL and the School and then the Town will have a contract with TPL and that there will be a simultaneous closing in March 2007. However, Phase II would be a transaction between the School and the Town. Mr. North asked where the risk would lie if TPL fails to raise the amount of money they say they are going to finance. Mr. DiCrecenzo stated that it would depend on the language in the contract between the Town and TPL and that the contract should state that the Town’s obligations are contingent on certain actions by TPL. Melissa Spear of the TPL stated that the they are currently in the process of drafting a revised contract that mirrors the provisions of the term sheet and that it is contingent upon the ability of the TPL to raise the funds necessary to meet the purchase price.

Mr. Henault asked Ms. Spear where the fundraising stood at this point and she replied that, although they have not actually launched a campaign, they do have one anonymous $500,000 grant as well as two additional $100,000 grants. Mr. Henault asked what would happen if TPL were to raise in excess of the $2.75 million and Ms. Spear indicated that any excess would come to the Town to help offset any project costs that had not been covered by the donation that the School will be making to the project.

Mr. Askham asked who paid the TPL fee and Ms. Spear responded that it is paid by Ethel Walker’s charitable donation to TPL and that the project would have to close before they would receive their donation. Mr. DiCrecenzo noted that the Town does not currently have a contract with TPL or the School and, when an actual contract is drafted, it would contain all the usual representations and warranties. He also noted that this transaction does not constitute a subdivision as it is specifically excluded as “land being acquired by a municipality”.

Ms. Spear noted that any fee simple transaction would have to have a provision for a conservation easement being placed on the property in order for the TPL to raise any funds. Mr. North asked why the proposed language of the resolutions states anything other than fee simple acquisition. Mr. Henault asked about the various stages of a contract. Mr. DiCrecenzo stated that, should the Board of Finance adopt this resolution, it would then go back to the Board of Selectmen and that the resolution is already before the Planning Commission. The Board of Selectmen would then be required to set the date for a Special Town Meeting for no more than 21 days nor less than 14 days before the referendum. If the referendum passes, then there is an approved appropriation for the acquisition of these parcels and the designated agent for the Town in acquiring the parcels would be either the Board of Selectmen or the First Selectman as long as that acquisition is consistent with the resolution that was passed.

Mr. Ian Sorrel, a representative of the Board of Directors of Ethel Walker School was acknowledged by the Chairman and he stated that the original agreement currently in place with the School and TPL refers to a “conservation easement” and that the change to a fee simple purchase must be brought before the School’s Board of Directors. Mr. Sorrel also indicated that many donors are looking for a conservation easement or a preservation order on the land and that the term “fee simple” does not necessarily convey that. Mr. DiCrencenzo stated that the intention is to take title by fee simple and then create those assurances through conservation easements from the Town back to the seller; the grantee of the conservation easements would be Ethel Walker School. Mr. DiCrecenzo stated that the wording of the resolution is intended to accommodate events that can not be presently foreseen. He also noted that it is the Board of Finance resolution that goes to referendum and that the Board of Selectmen must use the Board of Finance language.

Ms. Mielert asked about how the grants referred to in the letter dated August 31, 2006 from Senator Thomas Herlihy and State Representative Robert W. Heagney (Addendum 2) come into play. Mr. DiCrecenzo stated that one of the benefits of the put option is to allow time to explore any federal resources of funding that may be available.

Mr. Henault referred to the Board of Selectmen’s two resolutions (Addendum 3) and stated that bond counsel had made certain recommendations for the Board of Finance to consider in its wording of any resolutions. He noted that the language as presented to the Board would require bonding in March 2007 and would not allow the Board the flexibility of taking money out of reserves. He asked the Board to review some updated wording and asked for discussion from other Board members.

Mr. Askham asked for an update on all grants that had been applied for, if there were any that could be counted on and how they would get dealt with in bonding language. Mr. Vincent referred to Messrs. Herlihy and Heagney’s memo and indicated that grants #1 and #2 had been applied for ($266,000 for 60 acres and $195,000 for 50 acres) and stated that he, Mr. Herlihy and Mr. Heagney were at the State to verify that these grants are there. Mr. Askham confirmed that these relate to the $7 million acquisition. Mr. Vincent also indicated that TPL has submitted a grant request that should hopefully be approved late September/mid October. Mr. Vincent also noted that the division of the properties allow them to go after the same grants in future years and that there were several other potential grants that could be available (Items #3-#6 in the letter). Mr. North clarified with Mr. Vincent that, presupposing that grant #3 gets approved, there would be approximately $912,000 to offset the initial purchase and asked for a clarification of the timing of the other three grants. Mr. Vincent indicated that there is a possibility to obtain grant #4 prior to the actual closing and that “special legislation” would be required.

Mr. Henault asked for a discussion on the use of reserves and in connection with the original motion, which requests $1 million in reserves vs. a proposed language modification to use up to $2 million and an amount not to exceed $5 million from bonding. Mr. Askham asked Mr. Kane to explain how anticipated grants would affect the amount to be bonded. Mr. Kane replied that the net amount would be bonded, i.e., whatever shortfall is left after the use of reserves and/or grants. Mr. Mason stated that he thought that $2-$3 million would be required out-of-pocket fairly soon. Regarding the $1 million deposit option, Mr. Askham asked if some of the other two grants could be applied for as soon as possible so as to be placed against it. Mr. Kane stated that the $1 million is not actually buying anything, but that the grants could be applied toward the actual other purchases of $2.1 and $1.1 million. Mr. Kane also noted that those additional purchases would again have to go before the voters in future years as the second resolution does not authorize actual purchase of these additional parcels.

Ms. Mielert asked how the new resolutions that were just passed out at the meeting differs from the one that the Board received in their packets. Mr. Henault replied that the newer version states that $2 million may be funded from fund balances in the Town’s General Fund and that the Tow issue bonds or notes in an amount not to exceed $5 million to finance the remaining portion of the appropriation, whereas the original version stated that the Town would issue bonds or notes in an amount not to exceed $7 million to finance the appropriation. The purpose of the change would be that the use of reserves lessens the amount to be bonded, thereby mitigating the tax implications. Also, the newer version stipulates a ten-year term vs. a fifteen-year term in the original version.

Mr. Mason felt that the resolutions should give maximum flexibility, namely the use of reserves and the ability to use a term up to twenty years. Mr. Henault stated that using a stipulated term enables the Board to give the voters a handle on a project’s actual cost and enables him to give a much cleaner indication to the voters at the Town Meeting of what the project is actually going to cost and, therefore, how it will impact their taxes.

Mr. Askham asked if the use of reserves would keep the Town’s bond rating where it is. Mr. Kane stated that, although he could not speak for the rating agencies, he has been advised by them that most AAA communities maintain a 10% reserve rate. He felt that the use of reserves for this project would result in a 7% rate and that he prefers an 8% rate. Mr. Kane noted that he can not finance more than is necessary and, if grants are in hand, they must be used to reduce the bonding amount.

Mr. Mason asked what Mr. Kane anticipated level of reserves available might be at the end of the current fiscal year and Mr. Kane replied that it is too early to predict. Mr. Mason stated that he did not feel the bonding agencies will penalize the Town for the use of reserves for the acquisition if they know the reserves will be replaced.

Mr. Henault asked for additional discussion on the terms of the bond. Mr. Askham noted that the Board approved a twenty-year bond term for the high school project but actually bonded a fifteen-year term due to favorable rates. Mr. Mason reiterated that allowing a flexibility of terms would allow them to take advantage of more favorable interest rates. Mr. North expressed his concerns about what is an appropriate contribution by the Town towards this transaction, but felt that ten years is an appropriate term and that the use of $3 million in reserves would be appropriate. He noted that, in the absence of a contract, the use of “development rights” and “conservation easements” should not be in these resolutions.

Ms. Mielert felt that the Board should not unduly limit itself in the language of these resolutions. She noted that dividing the purchase into more palatable chunks makes the project more doable for the Town. She also observed that the difference between a ten- or fifteen-year term is not as significant for a $5 million amount as it would have been for an $11.1 million amount. She asked if the Board really had to determine all these fine points this evening.

Mr. Henault noted that typically there has been a discussion around the term, but that the language could be pulled out entirely. Mr. Kane stated that, by removing the language, it would automatically have the effect of implying the maximum term allowed, which is twenty years. Mr. Mason noted that the decision regarding the term is not normally made until it is time to bond. Mr. Askham also noted that each project is not necessarily bonded on its own and can be combined with other approved bonding projects and, therefore, a consistency of terms would be appropriate.

Mr. North stated that there has been no change in his position because he is troubled about adding a $5 million project to what is already in the six-year plan without knowing of any items that will be delayed or eliminated. He felt that $5 million should be the maximum Town contribution and that the sources for those funds should be $3 million from reserves and an acceleration of the open space acquisition items that are currently on the six-year plan. He noted that “ad hoc” projects concern him in that they are out of the context of the Town’s financial plan because the sum total of this project debt plus an anticipated OPEB contribution of $650,000 and other matters could very well put the Town in the position of having to consider a budget that starts to reverse the good progress that the Board has made on managing tax increases and mill rate increases.

Mr. Askham stated that the project is not in the budget cycle, which makes it difficult as it is impossible to see the whole financial picture. Unfortunately, this project would be a “given” when the Board enters budgeting season in March and that puts the Board in the position of starting with a 1%-2% tax increase. He also felt that $5 million is an amount that is affordable for the Town and would mean that the Town is not leading in the project (i.e., taking ownership of greater than 50%). He stated that he is troubled by the debt size and that due diligence under such a tight timetable makes it difficult to ferret out pertinent information in order to make an informed decision on such a large project. He stated that he is now looking at the $5 million amount before grants, but the risk of anticipated grants not materializing ultimately would fall back on the Town. He stated that he likes this new proposal better than the last one as it breaks the purchase into pieces rather than one large piece and, therefore, gives some flexibility and some time to maneuver. He stated that he would want to use reserves and is comfortable with a 7% rate and also favors a ten-year term. He also noted that he is concerned about the unknown as to what capital will be hurt by this project and foresees wanting a decrease in future capital and/or operating budgets.

Mr. Mason stated that he is in favor of the proposal and the second resolution that allows the Board to bond if needed. He stated that he is bothered that Board has not seen a revised capital plan and, since this project has been on the horizon for approximately ten months, it is conceivable that it could have been in the capital plan even without a dollar amount. He noted that, given the grants in hand and the fact that the capital plan does have $2-$4 million of open space allocations over the next couple of years, he does not see a problem with the project.

Mr. Henault reiterated that his concerns center around the effect of this project on the six-year plan, the importance of maintaining the Town’s debt policy and its impact on future capital projects. He also noted concerns relative to fair market value and the aquifer issue in that the DEP does not restrict residential development on an aquifer. He felt that the Board of Finance did the right thing at its prior meeting of not approving the previous proposal in that it forced the Board of Selectmen to rework the proposal so that it now meets some of the Board of Finance’s requirements and smooths out the project into more manageable pieces that are better suited to its planning process. He stated that the Board of Selectmen will now have to rework their six-year capital plan and that there will be some pain it that, but noted that the Board of Selectmen has indicated that it will bear the brunt of that pain and that it will not be pushed out to the Board of Education. He stated that he would be more comfortable with a stated bond term upfront, but would defer to the rest of the Board. He also stated that he favors the resolution that allows the use of reserves.

RESOLVED, that the Board of Finance recommends that the Town of Simsbury appropriate $7,000,000 for the acquisition, by itself or with other parties, of development rights, conservation easements or fee simple ownership of two parcels of land comprising approximately 360 acres west of Bushy Hill Road owned by the Ethel Walker School, except for an area reserved for the equestrian center, and for the acquisition of three additional parcels of land now owned by the Ethel Walker School at 42 Longview Drive, 186 Stratton Brook Road and on the south side of Stratton Brook Road, for the preservation of open space and other municipal purposes; that $2,000,000 of the appropriation be funded from fund balances in the Town’s General Fund; that the Town issue bonds or notes and temporary notes in an amount not to exceed $5,000,000 to finance the remaining portion of the appropriation.

RESOLVED, that the Board of Finance recommends that the Town of Simsbury appropriate $1,000,000 for the acquisition, by itself or with other parties, of (a) development rights for a period of at least five (5) years of an approximately 45 acre parcel of land west of Bushy Hill Road owned by the Ethel Walker School, consisting of the area to the southeast of the westernmost parcel referred to in the prior resolution, (b) the option to acquire at the end of such five year period for an additional sum not to exceed $2,000,000, by itself or with other parties, development rights, conservation easements, or fee simple ownership of such land, for the preservation of open space and other municipal purposes, (c) development rights for a period of at least seven (7) years of an approximately 45 acre parcel of land west of Bushy Hill Road owned by the Ethel Walker School, consisting of the remaining area between the two parcels referred to in the prior resolution, and (d) the option to acquire at the end of such five year or seven year periods for an additional sum not to exceed $1,100,000, by itself or with other parties, development rights, conservation easements, or fee simple ownership of such land, for the preservation of open space and other municipal purposes; and that the Town finance the appropriation by the use of fund balances in the Town’s General Fund.

Mr. Henault confirmed that the $1 million goes to deposit and, if the Town decides to exercise its option, the proposal to do so would go to Special Town Meeting, having been initiated by the Board of Selectmen to the Board of Finance. Mr. DiCrecenzo stated that the deposit would go into escrow that is typically interest-bearing, but that detail would need to be incorporated into the bargain. Ms. Mielert asked if bond counsel does not need the Board to authorize the entire purchase price at this time and Mr.DiCrecenzo replied that there is no binding obligation for the Town to exercise the option. Mr. Kane added that, according to the Town Charter, the life span of any appropriation is three years.