Virginia Sardelli wasn’t sure what to expect on her Thursday morning walk on Gauvin Drive, a quiet neighborhood of mature trees and expansive lawns behind Inskip Motors, a stone’s throw from busy Route 2 and Centerville Road.
In front of her was the Channel 12 news van, a cameraman and officials standing in the street in their suits. Could it be that another bear had been sighted, she thought.
What she was about to learn, indeed, could be as rare as a black bear in Warwick. Standing in front of an easel holding a placard declaring “Mayor Solomon’s Roadway” was the mayor himself. Joseph Solomon was about to go on camera to announce his plan to spend about $16.4 million over the next three years to improve roads and install cost-effective LED lights throughout the city.
“I guess my call paid off,” she said when she heard Gauvin Drive, which Solomon estimated hasn’t been repaved in at least 20 years, would be resurfaced if the City Council goes along with his plan to enter into an agreement to borrow $13.2 million for the design, construction, repair, rehabilitation and improvements of city streets and sidewalks, including, but not limited to, paving, traffic control devices, and drainage and safety improvements and landscaping from the Rhode Island Infrastructure Bank (RIIB). A second component would include an appropriation of $3.2 million through the RIIB for the purchase of streetlights and the conversion of existing fixtures to Light-Emitting Diode (LED) technology.
Michael D’Amico, financial consultant to the mayor, called the financing vehicles “appropriation bonds” as opposed to general obligation or revenue bonds. Appropriation bonds, he said, are issued on the good faith of the municipality and are not bound to be repaid by increased taxes of general obligation bonds if required. He said the city already has $3 million in bonding approval for drainage work and that the additional $10 million would go into repaving.
“This is not simple maintenance, this is an investment project,” D’Amico said.
He said when the administration first looked at financing with the RIIB, rates were at 1 percent and that he expects they would be no more than 2 percent for the road package.
With such low interest rates, D’Amico reasoned when compared to the escalating cost of roadwork the city could save money by doing the work in the next two to three years rather than doing it piecemeal through the operating budget.
In a follow-up email, D’Amico wrote, “The annual debt service on the proposed $16.2 million bonds would be approximately $1.8 million per year for 10 years at current interest rates. However, the infrastructure investment is expected to save the city at least $500,000 and potentially as much as $700,000 annually in electricity and maintenance costs. This will help to offset some of the debt service payments. The net cost to the city after the savings would be $1.3 million per year for 10 years for $16.2 million in bonds.”
As of Monday, the city had not submitted a financing application with the Infrastructure Bank. When that happens – presumably after City Council approval – the RIIB staff will review, work with the applicant and make a recommendation. The request then moves to the RIIB Board for approval.
According to Michael Baer, Managing Director, Program and Business Development at the bank, road and bridge improvements are funded through RIIB’s capital or they go out to bond. The terms of the loans are no more than 20 years. Interest rates are discounted 30 percent when compared to the private market.
Streetlights would be funded through the Efficient Building Fund (EBF). EBF is funded through an energy efficiency charge, and in some cases it goes out to bond. The projects are a cash flow positive, where savings outpace debt service payments. The term of the loans are no more than 15 years. Interest rates are discounted 20 percent when compared to the private market.
The $3.2 million for the lighting program is based on bids opened earlier this fall for the lighting project. A contract has not been awarded and no formal recommendation on a contractor has gone to the City Council yet.
Efforts to step up road improvements have been stymied by budget woes.
Earlier this year the council budgeted $4 million for repaving only to re-appropriate most of it to schools that had scheduled to cut 46 line items and programs, including all athletics, to balance its budget. Chances of repaving roads were greatly reduced and, going forward, the prospect of additional funding for road programs seemed dim.
But Solomon reasons the timing couldn’t be better for the city to borrow the money. He said the city’s AA Standard & Poor’s bond rating has been reaffirmed and that interest rates have never been lower.
Joining Solomon for the announcement and voicing their support were Councilmen James McElroy, Ward 4, Steve McAllister, Ward 7 and Anthony Sinapi, Ward 8.
Solomon said legislation is being drafted, which, if approved by the council, will give him the green light to move ahead with the initiative.
City Council President Steve Merolla said Sunday he has issues with borrowing funds for infrastructure improvements especially if those improvements don’t last the time it takes to repay borrowing. He would prefer that infrastructure repair and replacement come out of operating budgets.
Ed Ladouceur, chair of the council finance committee, said Sunday he has not seen the numbers relating to the proposal. Nonetheless, he said roads are in need of repair and if money is to be borrowed to make improvements – an obligation taken on by all taxpayers – then the program should be extended to roads within areas where sewers are being installed. He argues residents should not have to pay for repaving with sewer assessments when roads are for the benefit of everyone.
Ward 6 Councilwoman Donna Travis endorsed the mayor’s initiative, saying roads are a priority and improvements are necessary.
This is not a general obligation bond that would not only require council but also General Assembly and voter approvals. As a councilman Solomon was reluctant of using bonds that usually have a 20-year payoff of funding projects that have a 20-year life or less. In this case the plan calls for the bond to be repaid over 10 years.
With the plan in place, Solomon expects only a minimal amount would be annually in the city’s operating budget for road repaving.
“This initiative will help us to greatly speed up our efforts to improve our infrastructure and make roads and neighborhoods throughout our community safer and more attractive,” Solomon said reading a statement. “Addressing these important issues has been a priority of my administration. This initiative will also enhance our efforts to increase economic development, since it sends a strong signal to developers and business owners that we are invested in our city.”
Solomon said roads in all nine of the city’s wards would share in the repaving program with a priority given to the worst roads. Where possible the program would be paired with funding from National Grid as that company upgrades natural gas lines. Depending on the extent of the work, Grid has agreed to pay for a portion of road resurfacing.
Gauvin Drive was one of those roads showing not only the cracks of age but also where Grid had made cuts to replace gas lines.
In addition to the cost savings and energy efficiencies of LED technology, other reported benefits include the ability to target the light for optimal roadway illumination and the fact that LED lights, unlike traditional lights, do not need to warm up in cold weather and instead turn on immediately.
“The LED component of my initiative could enable us to turn on street lights that have been “red capped” for many years and have been a safety concern of many residents throughout our community,” Solomon said in a statement. “These improvements will benefit our residents and businesses, and further ensure the well-being of all who visit, live and work in our City.”