To the Editor,
Why is a tax override or debt exclusion needed to fund the renovation and upgrade of the 5 Watertown Public Schools?
During this recent election season, tax increases were discussed with a lot of passion both for and against the proposed surcharge to fund the Conservation Preservation Act (CPA). Another discussion conflated the CPA tax and a tax override or debt exclusion to pay for proposed renovations to Watertown’s aging schools. The message presented was that if the CPA passed, residents would be facing a second tax increase to pay for the schools.
I disagreed with the premise that an override/exclusion was necessary and the only option to fund the school upgrades (http://www.mass.gov/dor/docs/dls/publ/misc/levylimits.pdf). I also disagreed with the argument that the town would have to borrow between $200 and $400 million. My disagreement with the amount was twofold: first, the argument implied that the full sum would need to be borrowed all at once so that all five schools could be done at the same time, which is both inaccurate and not feasible. Second, the $400 million number represents brand new construction of five new schools – something which is extremely unlikely in Watertown due to a number of factors, lack of viable building sites being a very big one.
Just for reference, a $200 million bond offering for 20 years at 2.5% translates into a monthly payment of a little more than $1 million, or $12.7 million annually.
So the basic question remains: How will Watertown pay for the significant investment in our schools and the future of education here?
My idea is this:
Borrow the funds for each project as the project is about to start – roughly every two years – until all five schools are addressed, a 10 year span.
To pay for the debt service, the town could make use of a portion of the free cash currently allocated to OPEB (Other Post Employment Benefits) expenditures, projected to be $15.6 million per year starting in FY2020.
Why do this now? There are several reasons to consider doing this very soon:
• Delaying this work any further will not address the space needs of our students and teachers.
• Keeping the buildings as they are will not help us provide the 21st century education and best practices that all of our students deserve.
• Interest rates are very low, so the town should make use of their AAA bond rating to borrow at low rates.
• The town is in very good fiscal condition, so given all of the anticipated growth, we can afford this investment in the future of education, without a debt exclusion or tax override.
• Utilizing a portion of the OPEB free cash, we can service the debt, still pay into the OPEB fund and have no negative impact on the town’s operating budget, as currently projected.
• Every other town department has received significant infrastructure improvements over the past decade and now the schools need that same type of investment.
Most importantly, the sequence of the projects has not been decided, design ideas have not been discussed in detail, drafted or agreed upon yet, and finally, no detailed cost estimates have been created. We, as a community, need to agree on the sequence of the school projects, in order to begin the discussions about the details and get this work scheduled.
Being a cost conscious taxpayer, parent of a Middle School student and citizen concerned about the future of education in Watertown, I started doing some research, sketching out some ideas and analyzing recent town budgets for ideas.
In the FY2017 Town Budget (http://www.ci.watertown.ma.us/DocumentCenter/View/19143), on page 14, expenditures for the town are discussed, including this:
The Watertown Contributory Retirement Board Funding Schedule approved by the Public Employee Retirement Administration Commission has the Retirement System fully funded in FY2019. Pension costs are projected to increase $1.54 million in FY2018; $750,000 in FY2019; and decrease $15.62 million in FY2020. A long-range financial plan for addressing the Unfunded Other Post-Employment Benefits (OPEB) Liabilities will be created and commence in FY2020 with $15.62 million available for pay down of the Town’s OPEB Liability.
Line item expenditures and the forecast are shown on page 15 of the budget.
As a member of the School Building Steering Committee and former Chair of the Buildings and Grounds Subcommittee, we discussed many ideas and options for the future of the schools, with an emphasis on creating spaces that were flexible and could be utilized in various configurations to meet the needs of a 21st century education. Teachers, administrators, School Committee members, parents and community members all gave input into the process, either in the meetings or at the three public forums. SMMA, the firm hired by the District for this process, took all of that input and generated some ideas for each of the schools, ranging from basic renovation to renovation + upgrades, and finally new construction. Each of these options was given an estimated cost based on square footage and current construction costs.
For the sake of this write up, I have used the second option, for each school – renovation + upgrades. New construction is not feasible and basic renovation is less than needed to build for the future. For the Hosmer School, there were two renovation + upgrade ideas presented, so I have taken the average of the two cost estimates.
The sequence of the projects has not been decided, but for this write up, I have tried to order them in such a way as to avoid having any one cohort of students impacted by construction every year of their education.
Here is a list of the schools, the project cost (in round numbers) and construction time, based on the SMMA Master Plan document.
|
Cunniff
|
$30 million
|
2 years
|
|
Lowell
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$33 million
|
2 years
|
|
High School
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$53 million
|
2.5 years
|
|
Hosmer
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$48 million
|
2 years
|
|
Middle School
|
$46 million
|
2.5 years
|
The Town could borrow the necessary funds via 20 year bond offerings as each project is preparing to start – approximately every 2 years. Then, by using some of the available $15.6 million to service the debt, the net impact to town expenditures could be significantly reduced. For this exercise, I’ve used 2/3 = $10.4M for debt service and 1/3 = $5.2M for OPEB service.
In conclusion, I would urge the School Committee to begin the discussion to prioritize each school renovation project in order to determine the first project in the sequence. Once that is decided, I would urge the Town Council to work with the School Committee to determine the next steps in the process, including public discussions regarding timing and the financing of the project. I would also strongly urge the Town Council to review this idea in order to fulfill two very important goals: avoiding a tax increase for the citizens, and investing in the future of education and of Watertown.
Michael Shepard
Summer Street
Hi Mike,
I attended all but one of the Master Facilities Planning Steering Committee meetings and Public Forums this summer. As discussed in the last meeting: the final report is due out in the next few weeks; it’s been recommended that a joint presentation be set up with the School Committee and the Town Council (open to the public); and town-wide community discussions will begin after the 1st of the year.
Your letter is a nice summary of the many issues/concerns that were discussed throughout the summer including increasing enrollment numbers, changing education mandates, construction options, construction sequencing, and financing options. Hoping that people turn out for the community meetings to learn first hand about the issues, to ask questions and share concerns, and to offer their suggestions.
Thanks,
Elodia Thomas
It is appreciated that someone is thinking outside the box. The only questions I have is under your plan how long would it take to fix all 5 schools? And, what would the negative impact on the students be during that timeframe? Again, thanks for thinking about the issue
Hi John,
Thanks for your feedback. Regarding the time to update all the schools, that depends on the sequence of the projects and the details of each. The estimates I included in my letter were general based on what the architects estimated. Regarding the student impact at each school – the goal is to minimize disruption, but renovations are always disruptive. These are good questions and part of the myriad details that will need to be addressed as we undertake these projects.
Keep those questions coming!
Mike, thanks for bring this issue to the forefront. This(funding) was brought up at the steering committees this summer. The thoughts were to have multiple sources of funding the school renovations(including overrides). The SC really needs to get on the ball and move this along: community input needs to start asap in order to get to the next phase: feasibility. Also, there will be an override for our schools regardless of if they are spread out or not(ie voters will be voting on another tax increase). A full path/plan(timeline/costs/what is included in costs/choices of plans with costs) will need to be communicated very very well to the residents before residents will have buy in and vote for an override. On that note I would also offer that there are 6 schools, the Phillips was not included in the SMMA master plan. I’m not certain as to why(and asked many times!) but this school needs to be part of our overall solution(especially given overcrowding). My thoughts would be to invest also in Phillips and use this as the swing space for the Elementary schools when they are being renovated. Later we could then use this if universal pre-k is needed(or more preschool).
Kate – thanks for your response. Funding was brought up, briefly, at the Steering Committee meetings, but no decision of any sort was made regarding where and how the funding would be obtained. The next step in the process is to review the final version of the Master Plan, then determine the order of the projects. After that, then the discussions about the details, including feasibility studies and project planning, can begin.
Why are you so certain that a tax override is necessary? The goal of my “what if” letter is to present an idea to AVOID a tax increase via override or debt exclusion. By borrowing only the funds needed as they are needed, rather than all at once, the debt could be serviced out of town revenue and some percentage of the OEPB funds.
Lastly, the Phillips school. You should remember the numerous times this was discussed over the past few years. To bring the building up to school readiness is cost prohibitive vs. any additional space that could be gained – swing space or general education. The life skills program for special needs students currently occupies the 2nd floor, and this space was just renovated in the summer of 2014 or 2015.
Thank you Mr. Shepard for a great explanation of an alternative to a tax override; it was very clear, concise, and obviously well researched. This is an idea that should definitely be taken into consideration when going forward with the plans to renovate the schools and I hope that a good deal of consideration of this idea will be made. It seems that Ms. Coyne completely missed the point of your letter. Thank you for further elaborating on the situation with the Phillips School, as it seems that Ms. Coyne is also not quite up-to-date on the facts revolving around the schools’ need for renovations and the planning process.
To Unamed: There was never any up to date data on the cost(which is my point) for the Phillips so no one really knows how ‘cost prohibited’ renovations would be. The last discussion on Phillips was Jan of 2016(when we were discussing how to deal with the overcrowding at the Elementary level) where Dr Fitzgerald mentioned that this(Phillips) had been looked at years ago and was cost prohibited. When asked how costly, there was never any answer. Modular units were also asked about and also we were told they were cost prohibited. Again no answers as to how much this cost either. SMMA has modulars in their plan while they have no plan for Phillips?
The Phillips school was just renovated for preschool and as Mike notes elsewhere, is currently being used for Life Skills. If kids are there now, then the school must be mostly up to school readiness. Therefore, I again would ask the School Committed to really look at the Phillips as a 6th school in our Master Plan(ie update Master Plan or educate the residents as to why we are not using it in a Master plan with real data). If it is truly cost prohibited please let the residents understand why(. Possibly we need more space at the Phillips too(a small wing and better facilities for the current kids in there). There may be legitimate reasons why we are not using the Phillips in a bigger sense and using it in the limited(but needed!) manner we are today, though we should all understand these reasons. I would ask if the cost of updating the Phillips for all students would be greater than a Universal Pre-k which the SMMA planned in one of the Hosmer options(it was very cost prohibited IMO). We can not answer that question because the SMMA did scope out the Phillips in a Master plan(which is my point:>). We should be looking at all our options, as Mike has one scenario for funding, keeping an open mind to all possibilities. If we want to get our schools done we need to be fully informed with good information about why choices are made or not made.
Kate-You seem to be contradicting yourself; in one post you say “there will be an override for our schools regardless of if they are spread out or not”, then you say in another post “We should be looking at all our options, as Mike has one scenario for funding, keeping an open mind to all possibilities.”. In Mike’s scenario, he has suggested that we may not need an override and proposes an alternative funding option. It seems to me that you are not “keeping an open mind to all possibilities” when you say that “there will be an override for our schools regardless”. It seems to me that you didn’t understand the alternative plan presented by Mr. Shepard.
No I’m sorry but allowing all options to be presented, digesting this information and then disagreeing is not contradictory. I’m open to all and any ideas but don’t have to agree with them in the end. All ideas should be presented and understood. That is the point again, which I believe you are missing. Mike did explain his idea, and I applaud it but disagree that an override will not be needed, having also been to all meetings and discussed finances with others. As for the Phillips, this was dropped off the Master plan without good information or understanding. Many others had asked for real numbers to back up statements that the school is ‘Cost Prohibited’. We all want the best Schools for our Children and town that our funds can get. We need all ideas out on the table to be vetted by many. Yes, I can make this statement and then look at the ideas and bounce my opinion(and questions) after that..this is how good solutions are created. I would think that bouncing ideas/data off of people in a constructive manner the best policy. You may disagree with my opinion, which is fine, but ultimately we should come to a better solution by discussing differences with each other. I’m hoping that you can understand my points.
Kate – Your statement, “there will be an override for our schools regardless of if they are spread out or not”, appears to be definitive. This says to me that you are not “keeping an open mind” to the possibility that an override may not be needed. Whether it be Mr. Shepard’s alternative plan or someone else’s, it seems to me that you already have your mind made up.
For those who suggest that there will be no need for a debt exclusion, think again.
The high price of a high school
http://edition.pagesuite.com/popovers/article_popover.aspx?guid=0d9cd8b8-7b53-41fc-acaa-15c67fa0cb4d
Thanks Elodia,
I’m a little puzzled why you continue to reference Somerville and Newton as examples of the costs involved with school improvements. Newton seems to be an example of scope changes gone wild, while Somerville represents a consolidation of services and expansion of programming (vocational offerings). Somerville is also a very densely populated urban environment, which brings many complex construction and logistical challenges. Newton had no such space or land considerations.
As I remember, you were at most (if not all) of the Master Plan Steering Committee meetings and the three public forums. During several of those meetings, SMMA and Steve Magoon stated that the enrollment projection numbers did not warrant new construction. The schools, as they are now, have adequate square footage (and solid structures), but are not configured optimally for the number of students, or for the best learning environment for our teachers and students.
I think that there are at least two key differences with the Somerville and Newton comparisons:
1. Both towns only focused on one school, not five, as we have here.
2. Neither of those town budgets showed $15 million in available cash flow to service the debt. Translation: if there’s no available free cash in a town budget to service the bonds to pay for the work, a debt exclusion would be necessary to make the project feasible.
Lastly, since Watertown is land locked with few, if any, viable building sites for a new school, it appears that new construction might be a long shot. Because of that, renovation and on site expansion seems to be an option for further discussion.
Norwood managed to renovate and expand their high school years ago using a model school design, and they did it on time and UNDER the projected budget.
http://archive.boston.com/news/local/massachusetts/articles/2011/04/07/first_school_to_use_recycled_design_is_set_to_open_in_norwood
I again ask my initial question: why is a debt exclusion the only option to be considered, especially when over $15 million in yearly revenue will be available after the unfunded pension liability will be paid off in 18-24 months?