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Funding Future Projects

More than $5 million in deferred projects addressed.

Herndon's Town Council has begun examining options for funding of major town capital improvement projects over the next six years after passing a historically reduced budget earlier this month.

The $42 million fiscal year 2008 budget was passed as smaller than last year's amended plan after about $5.5 million in projects were removed from the previous council's projected capital improvement program (CIP).

Council members discussed plans for allocating those funds at a May 15 work session. The plan was scheduled to be amended and voted on by the council at its May 22 public hearing.

The amended CIP for future projects next year is expected to include the issuance of bonds and is slated to be 75 percent larger than this year's approved CIP, according to Mary Tuohy, director of finance for the Town of Herndon.

BECAUSE OF THE REDUCED CIP passed for the upcoming fiscal year, which begins on July 1, the town will not need to issue new bonds to cover those projects, Tuohy said. Debt service paid on existing bonds that were issued prior to this year will equal about 9.3 percent of general fund spending this year, she added.

A safe average debt service would equal between 10 and 12 percent of total general fund payments each year, according to Tuohy.

"We have the capacity to take on more projects right now," she said, "but financial capacity isn't the only factor that the Town Council examines in making that decision."

As per the council's desire to see a constrained CIP, mostly "new" construction projects were eliminated from this year's budget, Tuohy said. Some of those projects included $175,000 for installation of street lights, $515,000 for athletic field turf, and $63,000 of money reduced for new sidewalks, according to town documents.

The largest item removed, a $4.5 million downtown parking garage, will be examined for possible future funding from a public-private development partnership, Tuohy added.

THE CIP REFLECTS a desire of a council that ran on fiscal conservative platforms to set priorities first on maintenance of existing town assets before creating of new ones, according to Vice Mayor Dennis Husch.

"I believe that this council will apply capital improvement project dollars only to those items that are in the general interest of the public," Husch said. "New construction projects that are only of interest to special interest groups in town will not be considered until we first deal with those issues."

That same budget philosophy was the starting point for the council expressing to staff a desire to identify funds where they were not necessary, according to council member Dave Kirby.

"The budget process this year went very smoothly, I think ... because we worked with the staff to make some very soul-searching decisions about where cuts could be made," Kirby said.

Calls made to Mayor Steve DeBenedittis for comment were not returned.

BUT THE DEFERRED projects from this year's budget were not all new construction. Other examples were $30,000 for renovation of Bready Park tennis courts, $45,000 for municipal center security and $30,000 for aquatic center ceiling improvements.

They are projects that eventually will need to be funded by the town, said council member Harlon Reece.

"Putting these kinds of things off doesn't really save us money in the long run because of rising construction costs," Reece said. "I think we're going to have to face up to the fact that we're eventually going to need to issue a bond to cover some of these things."

The council and staff are working on a plan to borrow just enough money to allow the town financial flexibility while still funding necessary improvements in the future, Husch said.

Covering some of those projects is the reason that the CIP may be planned to include $3.3 million in spending next year and look to issuing more than $2 million in bonds, he added.

"We've kept taxes flat, we're focused on all the things we've wanted to fund this year," Husch said. "When we look at it for next year, we'll have enough money to sit back and look at what we can handle ... and get some of those amenities that the public wants in town."