AN EXPLANATION ON THE FINANCING OF THE ACQUISITION OF
PRINCE COVE MARINA, HYANNIS GOLF COURSE AND
BARNSTABLE WATER COMPANY (INCLUDING BARLACO)

The Town of Barnstable has adopted the Enterprise Fund accounting methodology for certain town operations including the Barnstable Municipal Airport, Golf Course operations (including Olde Barnstable Fairgrounds and Hyannis Gold Course), the Solid Waste Transfer Station in Marstons Mills, the Water Pollution Control Facility on Bearses Way in Hyannis, the Water Supply operations (formerly known as Barnstable Water Company), the four town owned marinas (Bismore, Gateway, Prince Cove and Barnstable Harbor), and the Sandy Neck Recreational Park. The intent is to have these operations fund their on-going operational and capital costs with user fees and no taxation. Enterprise fund accounting provides a clear delineation of the financial activity of these operations resulting in better capital maintenance policy, management control and accountability over these businesses.

Recent acquisitions made by the town including the Prince Cove Marina, Hyannis Golf Course and Barnstable Water Company were folded into the Enterprise fund accounting methodology so that the town could track all financial activity associated with each operation separate and apart from all other General Fund activity.

PRINCE COVE MARINA

In January of 2003 the Town of Barnstable acquired the Prince Cove Marina. No tax dollars were used for the acquisition. Instead the town issued a one-year short-term note for $1,850,000 and used these loan proceeds to pay the seller of the property. Subsequently, the town converted this short-term loan into a 20 year loan in June 2004. Additionally, a new revenue source for the town was generated from the slips fees and other revenue at the marina. The annual revenues generated at the marina exceed the annual debt servicerequirements on the short term and 20 year loan eliminating any general fund support, or taxation, needed to repay the loan. Revenue from this operation started to be collected in FY03 and the first loan payment was due in FY04 (an interest payment on the short-term loan). The following schedule illustrates the loan payments for the next 20 years and the revenue generated over the first years of operations.

HYANNIS GOLF COURSE

The Hyannis Golf Course was purchased for $9.5 million dollars. This acquisition was partially offset by a contribution $5.5 million from the landbank fund. The landbank program has issued $5.5 million in long-term bonds to cover the cost of the purchase assigned to the conservation restriction placed on the property. The repayment of the $5.5 million bond will be made from the surtaxes collected on real estate tax bills from the landbank program (now known as the Community Preservation Program). The remaining balance of $4 million will be paid with the issuance of a combination of short and long-term borrowing. The interest payments on the short-term borrowings will be madeby the sellers of the property. The principal and interest payments on the long-term borrowings will be made from the new revenue source generated by the golf activities at the course when the town assumes control of this property. The long-term bonds of $4 million will be issued in December 2006 to retire the short term loan with the first loan payments due in FY08, (July 2007).

BARNSTABLE WATER COMPANY

Similar to the other two acquisitions combinations of short-term and long-term borrowings are being used to finance the acquisition of this purchase. The water company was purchased for $10 million and the BARLACO land for $1 million. The town issued a $10 million 12 month loan to pay for the water company and used no tax dollars. The short-term loan option was used for three reasons; a rate study needs to be performed, possible financing through the Mass Water Pollution Abatement Trust is being sought, and a pending lawsuit that remains outstanding. This loan will be paid in June 2006 when the town issues a long-term bond. In FY0 the town will only have an interest payment due of $375,000 and no principal payment. In FY07 a principal and interest payment will be made.

The BARLACO land acquisition will be financed with the issuance of a long-term bond and mitigation funds received from the Cape Cod Commission. The repayment of the long-term bond will come from taxation. The annual debt service on this bond is estimated to average $52,000 per year which has a tax rate impact of $0.004 per $1,000 of valuation or $2 per year on a home assessed at $500,000. The borrowing authorization being assigned to this acquisition has already been approved by a previous town council in 1998 for open space land acquisitions, in essence, dedicating this taxation for land acquisitions already.

information provided by Town of Barnstable Finance Director, Mark Milne