April 24, 2023

Select Board Reviews Financial Impact of Andover High School Project, Approves Adjusted Water Rate Plan, and Receives Update on Pension Obligation Bond



  • Select Board receives report on financial impact of proposed Andover High School Project;
  • Reviews proposed water rate adjustments in a second reading and approves plan; and
  • Receives update on the performance of the Town’s pension obligation bond.



ANDOVER, MA - The Andover Select Board met on Monday, April 24 in the Robb Senior Center’s Lifelong Learning Room, marking the Board’s final meeting prior to Annual Town Meeting on May 1. The Board reviewed two significant topics in second readings – a tree removal and replacement policy, and an adjusted water rate plan for FY2024 through FY2029 – voting to approve both. Other topics that came before the Board on Monday night included the creation of an EMS Bike Team in the Fire Rescue Department, the financial impact of the proposed Andover High School building project, and the performance of the Town’s pension obligation bond. 

Columbus Day/Indigenous Peoples’ Day Working Group

Town Manager Andrew Flanagan provided the Select Board with an overview of the process by which the Town will consider recognizing Indigenous Peoples’. The report comes following a request made by the Commission on Diversity, Equity, and Inclusion for the Town to observe the holiday on the second Monday of October.


The proposed process entails the creation of a working group comprised of two members of the DEI Commission, two members of the Andover Knights of Columbus three at-large members. The Town Manager intends to appoint members to the working group in May 2023. Two public forums will be held to provide opportunities for residents to provide input on the discussion. 


Flanagan anticipates that a recommendation produced through this process will be brought to the Select Board in October 2023. If the recommendation requires action by Town Meeting, it will likely be considered at Annual Town Meeting in 2024. 


EMS Bike Team   
The creation of Andover Fire Rescue’s EMS Bike Team was announced to the Select Board. The new program will deploy EMS personnel on bikes at largescale community events where navigating crowds by ambulance may be challenging, such as Andover Days and the Feaster 5K. The improved mobility enabled by the Bike Team is intended to improve emergency response times in high-density settings. 


Costs of the program, including purchasing bikes and training courses for personnel, was offset by contributions made by the Dave McGillivray Finish Strong Foundation, and the Merrimack Valley Striders.


Fourteen members of the Andover Fire Rescue Department have completed a 16-hour training course to prepare for providing emergency response services by bike. It is anticipated that the Bike Team will see its first deployment during the Town’s annual Memorial Day festivities this year. 


Allen Ryan, a Municipal Innovation Fellow in the Town Manager’s Office, provided the presentation to the Select Board. Ryan, a graduate student at Merrimack College who completes his Fellowship with the Town of Andover this week, was instrumental in supporting the launch of this program. 


Andover High School Project Financial Impact

Earlier this month, the Andover High School Building Committee (SBC) voted to recommend a preferred design option for the proposed Andover High School project, selecting the “Campus 2” option with a new theatre. According to a preliminary cost analysis presented to the SBC on March 30, the estimated cost of this option is $480,847,000 – the least expensive of the three options considered.


Under Chapter 44, Section 10 of Massachusetts General Law municipalities in Massachusetts have a debt limit, or maximum amount that they may borrow, that is equal to 5 percent of the full and fair cash value of property in that community. Andover’s debt limit is $510 million, of which the Town has $101 million in qualified debt outstanding, leaving a balance of $409 million in available debt capacity. 


Debt incurred for certain projects, including school projects built in partnership with the Massachusetts School Building Authority (MSBA), is considered outside of the debt limit. As such, some recent projects undertaken by the Town of Andover, including the West Elementary and Shawsheen Preschool project, do not impact the debt limit. 


Because the Andover High School project is not currently supported by the MSBA, it would not be excluded from the debt limit, and would count against the Town’s debt capacity. 


Flanagan mentioned several options that could be pursued to enable the project to advance in the future given limitations posed by the Town’s debt limit. One potential solution would be legislative action to authorize debt incurred from municipal school building projects undertaken without MSBA support to be considered outside of the debt limit. Andover’s legislative delegation has begun to pursue this change to Massachusetts General Law through an amendment filed to the state budget filed in the House of Representatives. 


Flanagan also discussed the potential impacts to the Town’s bond AAA bond rating that may occur as a result of borrowing for a project of this magnitude. Due to the unique circumstances of the proposed AHS project, and because no projects with a comparable estimated cost have been undertaken by a municipality in Massachusetts without support from the MSBA, there is limited precedent that can be used to determine the exact impact to the bond rating. Flanagan has worked with the Town’s bond counsel to assess this matter, and will continue to evaluate potential impacts in the weeks ahead. 


Article 5 Revision

Flanagan presented a proposed revision to Article 5 on the Annual Town Meeting warrant, which appropriates funds for capital projects funded through General Fund revenue. The revision was prompted by an increase of $1,658,694 in state aid received by the Town of Andover, the result of a 15% increase in Chapter 70 funding over the current fiscal year. 


The amendment to Article 5 proposes applying $1.3 million of this revenue to the Doherty Middle School project. Borrowing for this project was previously authorized by Town Meeting, and was intended to be funded within the School Committee’s budget through a debt service offset totaling $8 million. This appropriation would reduce borrowing for the project to $6.7 million, producing a savings on interest costs. The project entails several safety-related improvements needed to bring Doherty Middle School up-to-code, including replacement of the school’s elevator and sprinkler system. 


The Select Board voted to approve the inclusion of the project in the revised article. 


Tree Policy

Reviewing the topic in a second “reading,” the Select Board voted to adopt a policy for the removal and replacement of removal of public trees. The policy aims to increase partnership with residents through improved outreach preceding the removal of a tree, and will establish a Town Tree Committee. The policy was previously introduced to the Board during their April 12 meeting


Water Rates

The Select Board, acting as Water Commissioners, voted to adopt a water rate plan for FY2024 through FY2029 after reviewing a proposal in a second reading. The proposal was initially presented to the Board on April 12


The approved plan will add two additional tiers, establishing higher rates for 12.2% percent of existing water users with the highest rates of consumption – generally largescale commercial users. Under the plan, the average annual water bill is expected to increase by an estimated $25.04 to $494.69 in FY2024 following a 9% rate increase across all five tiers.


As described by Town Manager Andrew Flanagan, the adjusted rate plan is necessary to enable the Town to continue its accelerated Water Main Replacement Program, invest in necessary capital improvements to water distribution infrastructure, continue to alleviate instances of brown water, and maintain service levels despite record inflation. Average annual water bills paid by Andover customers will remain lower than the average annual rate across comparable Massachusetts communities following the 9% increase in the first year of the plan.

Pension Obligation Bond Update

CFO Patrick Lawlor provided an update on the Town’s pension obligation bond to the Select Board. As recounted by Lawlor, Town Meeting authorized a plan to fund the Town’s pension liability through the issuance of pension obligation bonds in 2021. In December 2021, a $165 million pension obligation bond was issued. The Town benefited from low interest rates at the time of the bond’s issuance, which produced a net interest cost of 2.367%.


Investment decisions related to proceeds produced by pension obligations bond proceeds have been guided by the Investment Committee, which has worked collaboratively with the Retirement Board in developing an investment strategy. This strategy has focused on dollar costs averaging, or consistent investments at regular intervals, which has mitigated impacts of market volatility. Lawlor noted that the Contributory Retirement System maintains a substantial cash balance, currently totaling $25 million, which provides an advantage to the system in the event of a recession or prolonged market downturn, as cash assets can be used to leverage price decreases on equities. 


Lawlor emphasized that there is not sufficient history to fully assess the performance of the pension obligation bonds, however earlier indications have appeared favorable. In 2022, the Town saw a 4.75% return in actuarial value of assets, a positive sign given the market volatility seen throughout the last year. 


As a result of the issuance of pension obligation bonds, Andover’s retirement system was 95.6% funded as of January 1, 2023, among the highest in the state. In January 2021, prior to the implementation of the plan, the system was 46.9% funded. It is expected to be fully funded by 2032. 


Other Actions

  • The Board issued a proclamation in recognition of Motorcycle Awareness Season – a nationwide awareness effort intended to encourage drivers to exert caution around motorcycles on roadways. 
  • Flanagan provided an overview of public outreach being conducted by the Town in anticipation of Annual Town Meeting on May 1. This includes several new measures, including the production of short videos explaining key articles, and a hybrid Pre-Town Meeting Information Session being held on April 25. 


The full meeting can be streamed online through AndoverTV. The Select Board’s next regular meeting is scheduled for Monday, May 15.