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Mascoma Financing Has Twist

Loans Would Be Repaid Over 25 Years

West Canaan — In order to minimize the tax impact from the proposed $21.5 million renovation of Mascoma Valley Regional High School, school officials have been working with Mascoma Savings Bank on three staggered loans intended to capitalize on today’s low interest rates.

If at least 60 percent of voters in the district approve the project on Town Meeting Day, school officials could move forward with a financing plan that would lock in interest rates estimated to range from 3.02 percent to 4.42 percent for the next 20 years.

The favorable terms come with one hitch — because the bank would amortize the loans to the school district over a 25-year schedule, taxpayers in the district do face some uncertainty about the terms of the financing around 2035.

Under the amortization, or estimated schedule for payment of principal and interest, the school district would still owe the bank about $6.2 million after the 20-year loans expire, and interest rates could be higher than they are now.

Minutes of the school district’s Jan. 14 public bond hearing describe the financing project as “a bit unique” for the school district.

The structure of the loans would be geared toward the three phases of renovation, with about $4.1 million drawn upon by the school district through the end of this year, up to $10 million drawn from the bank by the summer of 2015, and almost $7.4 million drawn by the end of 2015.

Officials at the meeting said the 20-year-loans would be amortized over 25 years, meaning monthly payments would be lower, but there would still be a significant amount of money owed at the end of 20 years.

They also confirmed that the remaining balance of the loan in 2035 would have to be refinanced at that time.

Although the amount was not specified in the minutes, bank and school officials on Friday confirmed that amount would be roughly $6.2 million.

“The interest would be fixed for the first 20 years and then the market interest rates would impact the balance for the last five years,” the minutes state.

School officials also told voters about the 25-year amortization schedule at the Feb. 1 deliberative session, though the project is generally discussed as a 20-year bond.

The renovation proposal would expand the 51-year-old high school from 60,000 to 90,000 square feet, upgrade plumbing and electrical systems, build new classrooms, a library and an auditorium, and create a bigger gymnasium and cafeteria as well.

Mascoma renovation projects fell short at the polls in 2012 and last year, by fewer than 25 votes.

Superintendent Patrick Andrew said the financing proposed this year is similar to a proposal from Mascoma bank a year ago.

Andrew said the interest rates Mascoma bank is offering are more than a percentage point lower than what might be available from the New Hampshire Municipal Bond Bank, and that the staggered timing of the loans would also be a benefit to taxpayers.

“Since this is a renovation, we don’t need the full amount in year one. We need it over time,” Andrew said. “Those three installments save us a lot of money in interest, because we are not paying the full amount of interest (immediately), because we have not taken the full loan.”

“We are not borrowing the whole amount of the money right now,” added School Board Chairman Jim Gerding, of Enfield. “We’ve got two years before we go for the big money.”

The staggered loans also help keep the tax rate impact low in the first two years of the project, a key point in winning voter approval.

In Enfield, the largest town in the district, for example, taxpayers would see a 2-cent hike in their school tax rate per $1,000 of valuation in the first year, another 41 cents in the second and then 62 cents in the third, accumulating to $1.05 per $1,000 of valuation. That $1.05 rate would translate to $210 in taxes a year on a $200,000 home. Mascoma Valley also includes Canaan, Orange, Grafton and Dorchester.

Another benefit from working with Mascoma Savings Bank, Andrew said, was school officials like the idea of doing the financing with a bank headquartered in the Upper Valley.

“I think the three reasons are it allowed us to get a better rate, it allowed us to do it over the three years that we are doing the project, and it allowed us to work with a local organization,” he said.

Canaan resident Kimberly Depelteau-Tracey, a project engineer for construction projects who spoke against the proposed renovation at the Feb. 1 deliberative session, this week said there is a perception among voters that the loan would be paid off in 20 years. She also noted that interest rates in 2035 could be considerably higher than the near-record lows available now.

“There is no guarantee what the financing will be” in 20 years, she said in a phone interview Thursday. “We’re going to owe almost 29 percent of what they are proposing. My children will be paying for this.”

Debra Ford, the Mascoma School District’s business administrator, said the interest rates offered by the bank for the 20 year loans “are very favorable,” and she said she is confident that the bank would refinance the remaining $6.2 million in 2035 at favorable terms.

“It will all be relative to what everything else costs. I don’t think we are sticking future generations with a lot of debt,” she said.

Bank officials said the 20-year loans are driven by limits for obtaining money from the Federal Home Loan Bank of Boston. A November 2013 letter to Ford from Arlene Adams, a Lebanon-based vice president of commercial lending for Mascoma Savings Bank, also said the loans would be contingent on the bank “engaging another lender to participate in the transaction” with at least $10 million of its money.

Adams, who attended the public hearings, acknowledged that interest rates could change at the end of 20 years, but said the bank would work closely with the school district to offer favorable terms.

“We are committed to a 25-year amortization, so it’s not like they have to go out after 20 years and find a funding source,” she said.

Voter approval of the bond does not lock the school district into the deal with Mascoma bank, and school officials could still negotiate with other lending institutions, officials said.

Steve Hamilton, the director of the New Hampshire Department of Revenue Administration’s Municipal and Property Services Division, said the wording in the article on the Mascoma warrant appears fairly standard and would allow the school district to take out either a bank loan or a bond.

“What we see is the bond language meets the requirement of the law,” Hamilton said.

Sheila St. Germain, the executive director of the New Hampshire Municipal Bond Bank, said rates the quasi-independent state agency was offering ranged from 4.5 percent for a 20-year bond to 5.5 percent for a 30-year bond, though she said those are conservative, and could drop.

St. Germain said Mascoma School District could still check with the Municipal Bond Bank’s rates if voters approve the project, and was reassured about the Mascoma bank financing plan and timetable after Ford told her that the school district’s bond counsel had approved of the financing plan.

“What would make me comfortable if I was told their bond counsel reviewed this, and it meets the law. That would be enough for me to know that it’s OK,” she said.

John Gregg can be reached at or 603-727-3217.