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Debt Payments Expected To Rise Over The Next Several Years

Debt Payments Expected To Rise Over The Next Several Years


The Town's long-term borrowing costs are expected to increase over the next 10 fiscal years, according to projections.

Figures show long-term debt payments currently account for just over $6.6 million of nearly $114.6 million in general fund expenditures during the current fiscal year in Cheshire. Those payments represent about 5.8 percent of the Town’s general fund budget expenditures.

The percentage had been declining for more than a decade. In 2009, debt payments had comprised nearly 11 percent of the Town’s overall budget, but by 2015 that percentage had been whittled down to 7.3 percent. In 2019, it was down to 5.9 percent.

But, as the Town’s Finance Director Jim Jaskot told the School Modernization Committee earlier this week, the forecasts calculate the increases by factoring in recent capital expenditures — including the repayment of a $25 million Clean Water Fund loan from the state. The loan had been used to fund a more-than-$30 million project to upgrade the town’s wastewater treatment plant, which was completed in 2015.

By fiscal year 2024, forecasts show that debt payments may account for 7.6 percent of the Cheshire budget, which officials estimate will grow to more than $126 million.

By fiscal 2030, officials estimate that debt service will comprise 8.5 percent, or more than $12.4 million, of that year’s  budget, which is forecast to be around $146.1 million.

Jaskot said the overall budget growth is projected on the conservative side — around 1.5 percent annually — while the town’s grand list is expected to grow about 0.7 percent each year.

Projections do not forecast an increase in state funding, which has steadily declined over the past decade as a share of the overall town budget.

Jaskot noted that the calculations on borrowing expenses assume the regular addition of $25 million in bond funding every other year, for both one-time expense items and recurring expenses, like sidewalk and bridge improvements and the purchase of heavy equipment, including fire trucks.

Those projections, Jaskot said, do not include any forecasted borrowing for school renovations or new construction.

The town currently has a AAA bond rating from Standard & Poor’s and Fitch, in large part because the debt payments are well below the 8 percent threshold those rating agencies set as a debt service target, Jaskot explained. That bond rating was upgraded as the Town’s debt to general fund ratios improved.

The 8 percent benchmark was explained during an exchange when Rene Martinez, who serves as vice chairman of the School Modernization Committee, asked Jaskot, “What is the normal debt amount?”

Jaskot said the Town’s adopted policy has been to maintain a debt service level under 10 percent.

“Our target is to stay underneath that,” Jaskot said, adding that the Town did exceed that level in the early 2000s after projects, including a new community pool and improvements to the high school building’s facade, had been undertaken.

Officials had been able to offset increases in the Town’s debt burden by tapping into recent budget surpluses.

Should the Town need to bond future school renovations or construction projects, its percentage of debt versus general fund may exceed the ratios preferred by rating agencies and set by town policy.

School Modernization Committee chairwoman AnnMarie Kemp asked Jaskot to work with the group as it develops options to show the financial impact to town taxpayers.

“Obviously our town credit rating is very important, and a lot of factors go into that,” Town Council Chairman Rob Oris Jr. said during Jaskot’s presentation. “I guess my question is, what would happen if we lost that AAA rating? Obviously our borrowing costs go up quite a bit. What other risk factors does that present other than the cost of borrowing?”

Jaskot responded, “I think that’s the most significant one. Where the rubber hits the road it’s the dollar impact to the town.”


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