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Revision of Branford Animal Shelter Capital Expense Agreement Suggested to North Branford
As the Town of Branford heads for a final vote this week regarding a potential pathway to fund an unanticipated $1.7 million in increased project costs for the Daniel Cosgrove Animal Shelter expansion and renovation, North Branford's Town Council was informed of a July 8 letter from Branford's Finance Director to North Branford's Finance Director suggesting a revision to the capital expense provision of the municipal shelter-use agreement between the towns. Branford owns and operates the shelter; North Branford pays its share for services provided.
Based on animals processed annually, the agreement currently calls for North Branford reimbursing approximately one-third of capital principal and interest costs financed by Branford. With Branford now considering financing a $4.595 million shelter project bottom line, that would add up to North Branford paying out approximately $1.8 million back to Branford, over a proposed schedule of 15 years. The revised language proposed would drop North Branford's total reimbursement cost to approximately $1.4 million over 15 years.
The revised capital language would follow the logic of the agreement's current operating expense language, amended in 2020. The amended language allows North Branford to pay one-third of operating net expenses, after revenue provided by shelter programs, such as its animal camps, is factored in. Last year, North Branford paid $131,000 for shelter operating expenses. The municipal services sharing agreement between the two towns began in 2005 and is based on population.
At the Town Council regular meeting July 13, North Branford Finance Director Anthony Esposito and Town Attorney Vincent Marino (Marino, Zabel & Schellenberg, PLLC Orange) discussed the proposal in the letter with council members as well as some possible options North Branford may now want to consider, running the gamut from signing off on the revised capital language to breaking the municipal arrangement with Branford and beginning a new shelter use agreement with another municipality (See "Issues for North Branford Town Council to Consider" below).
Expanding and Renovating the Shelter
The shelter first opened in 2003, located at 749 East Main St. in Branford. The expansion project will double the size of the shelter to 6,350 square feet and provide needed upgrades to the facility.
In 2020, the Cosgrove Animal Shelter Commission, which includes a North Branford representative, began efforts to raise at least $1 million to offset the project's anticipated cost of between $2.5 million to $2.9 million. As previously reported, in September 2020, Branford's Representative Town Meeting (RTM) approved a $2,895,000 bonding appropriation to fully finance the expansion project.
The Town of North Branford has been kept apprised of the ongoing project; including a Dec. 1, 2020 Town Council meeting (via Zoom) where Branford First Selectman Jamie Cosgrove and Shelter Director Laura Burban discussed the need for the project as well as Branford's recent approval to appropriate $2.895 million to finance it, as well efforts to create cost savings for the project such as the shelter's fundraising campaign to raise $1 million; participating in matching grant programs and options such as receiving energy incentives. Branford Finance Director Jim Finch also attended the meeting; as did North Branford's shelter commission member, Stephanie Malkin, who updated the council on the shelter services provided to the Town of North Branford in 2020.
As previously reported, when the shelter expansion/renovation project bids were opened in Branford in May 2021, due to escalating market costs and other factors, it was determined that a new total of $4,595,000; or an extra cost of $1.7 million, was required to complete the project. As part of the question of whether to finance the additional expense, Branford's governmental bodies began reviewing scenarios presented by Finch. An initial proposed scenario involved North Branford contributing $214,500 to help defray the extra cost. That concept was then shared by Esposito the Town Council finance sub-committee; with no action taken.
On June 28, Branford's Board of Finance (BOF) voted unanimously to recommend to the RTM the initial $1.7 million financing scenario, which involved using $650,000 from Branford's General Fund (which currently tops $28 million), bond proceeds of $250,000, additional donations and contributions of $585,500 raised by the ongoing CosgroveSavingLives campaign, and a proposed contribution of $214,500 from the Town of North Branford. On July 7, a joint meeting of Branford's RTM Ways and Means and Public Services committees took place to review the BOF recommendation for financing the $1.7 million. According to minutes of that meeting, testimony was given by Cosgrove, Finch, Burban and representatives of the project's construction management team from Enterprise Builders (Norwalk). By a vote of 4-1, two changes were approved by the Public Services Committee that night – to make the North Branford cash contribution $0 and to increase Branford's bond proceeds to $464,500. The Ways and Means committee voted unanimously to recommend to the full RTM a revised scenario allowing for a $650,000 fund balance transfer, together with $585,000 raised by campaign donations and contributions, and bonding of $464,000 to reach the $1.7 million figure and fully finance the project. A final vote on that recommendation is anticipated to take place at a special meeting of full RTM meeting at 8 p.m. Wed. July 21 at Branford Fire Headquarters.
Issues for North Branford Town Council to Consider
One issue the council discussed on July 13 is the fact that North Branford is investing in a facility in which it currently has no ownership. Speaking with Esposito and Marino on July 13 during a regular Town Council meeting, the council began learning about possible options ranging from signing off on the revised language to breaking the municipal arrangement with Branford and beginning a new shelter use agreement with another municipality.
Speaking to the council via phone July 13, Marino said the issue is what the future may hold for North Branford.
"The primary issue is if that we agree to the language as proposed, the town then must accept whatever Branford decides. So if they decide to incur $25 million for their animal control, you're paying the proportionate share of that without having the conversation with them, or without having a seat at the table. And that just seems unfair," said Marino.
When asked by the council what the incentive would be for North Branford with regard to keeping the arrangement, Marino pointed out North Branford could otherwise be paying 100 percent for its own animal shelter services; "...so presumably, you're saving money by sharing this service with Branford. But there may come a point in future where the relationship has become so expensive, it's better to share with another."
The July 8 letter from Finch to Esposito is also copied to Cosgrove and Burban. It outlines the proposed language change to allow North Branford's one-third share of expenses toward shelter capital improvements to become based on net costs after proceeds such as those from grants, donations and contributions are factored in. Assuming 15 year bonds at 2.5 percent interest and a 33 percent cost share by North Branford, without the proposed language change, the cost for North Branford's share of the shelter expansion/renovation project would be $1,816,444. With the revision, North Branford's cost share would be $1,425,600; a savings of $390,844 over 15 years.
In the letter, Finch wrote, "As Branford began the process of planning and funding the animal shelter renovations, we acknowledged that the capital formula was based on total costs with an allocation based on the number of North Branford animals processed through Branford on an annual basis. Branford recognizes that since the shelter renovation budget anticipates significant pledges and donations the current language is intentionally unfair. I believe a reasonable approach is to align the capital formula with the operating formula."
"What he said is we should probably have similar logic that we have for the operating cost [on] the capital spectrum – gross costs minus any revenue sources they receive [to determine] net costs, and we'll divvy up that based on population," Esposito told the council on July 13.
Finch factored in a minimum donation total of $895,000 (to date, the campaign has over $1.4 million pledged) together with $100,000 in Animal Control Revenues and $695,000 assigned from the Branford General Fund as revenue offsets in the new capital formula he proposed to North Branford. The proposal would reduce North Branford's share of the project repayment $121,096 annually over 15 years (based on contributing the $1.8 million figure) to $95,040 per year based on the $1.4 million figure.
Even with the proposed reduction in costs, as Esposito said to the council, "...$1.4 million is real money," the impact of which will be felt by paying nearly $100,000 more per year for the duration of the project's capital pay-back period.
Asked by Deputy Mayor Tom Zampano what North Branford's total annual costs for operating expenses and the capital project repayment would be if the current municipal agreement remained as is, Esposito estimated that, beginning by 2022-23, operating expenses and capital costs to North Branford could add up to about $260,000 per year over the 15-year capital project repayment period.
"I feel like we're wading into a weird situation," council member Tara Downes commented. "I feel like we're paying them for a service, but now suddenly we're getting neck deep into their capital investments."
Esposito pointed out to Downes the current agreement between the towns "...speaks to both the operating costs, how we're going to divvy that up; and the capital costs. So it is contemplated in the agreement that there's going to be capital costs."
Esposito said it was also interesting to note that, to date, "a couple hundred people from North Branford have donated" toward the project's fundraising campaign, together with support from several North Branford businesses. However, Esposito noted there is also no guarantee that all of the money pledged will be realized; while on the other hand, the campaign, which is ongoing, could bank more money than what is currently pledged.
The council also asked how the shelter agreement may or may not differ from other municipal agreements North Branford has in place with other towns. Most notably, North Branford has sewer use facility agreements with Branford and North Haven, based on capacity, and North Branford also pays a proportionate share for capital projects as part of those agreements. The difference, Marino said, is that while North Branford has no ownership in the sewer facilities, funding those needed capital projects is enhancing North Branford's grand list by providing an essential infrastructure component allowing for development.
"You can't put in projects without it," Marino said. "What does this [shelter project] do? The service you're currently getting today is going to be the same service tomorrow; it's just going to be a nicer facility that the Town of Branford going to own...so I think there is a meaningful distinction."
The council also asked if the Town of North Branford would be placed on the property deed or receive future proceeds as a result of its capital project payment share into the shelter expansion and renovation.
"I think that this is owned and operated by the Town of Branford, and your funding does not give you, in and by itself, an ownership interest in that parcel of property," Marino answered. "So if you fund this, then I think you're wedding yourself to this relationship, because it's a lot of money you're spending; as opposed to saying we will pay for services and offset your employee costs."
Marino also noted the Towns of Woodbridge and Orange faced a similar situation and "broke up" after Orange disagreed with Woodbridge's expansion project, leading Orange to then pay for services from the Town of Milford.
"You want to leave yourself that flexibility," he told the council. "Once you commit yourself to paying this type of money, without getting more value in return... I don't see the merit to it. You're not going to be an owner. I don't see anything in the agreement that says if you disband your relationship at some point in the next five years you're going to get a pro rata return on your investment."
With regard to possible next steps, one potential direction suggested by Marino was that the Town of North Branford secure a date-sensitive notice through an action such as having Branford's first selectman notify North Branford's town manager of the proposed capital language revision, then adding a 60-day decision window to the process.
"If we use that as the notice date; and then propose the Town Council of North Branford has 60 days from that date to either agree to proceed with Branford and pay its proportionate share, or to terminate the agreement," said Marino. "Because again, you may find you can do an agreement with [another] adjoining municipality where you can save your taxpayers money ... if you don't have the flexibility to say 'no,' then you're stuck. And that's my primary concern."
The council expects to continue its discussion on the matter after Marino contacts Branford's representation this week.