School Bd: NHS Expansion Cost Is $41 Million

By John Voket

Finance Board Chairman John Kortze was uncharacteristically quiet moments after receiving news that the Board of Education plugged the long standing “TBD” [to be determined] amounts on its Capital Improvement Plan (CIP) with almost $47 million in anticipated bonding requests. This week the school board and school administrators tendered estimates that included both a final number and top ranking priority for the Hawley School HVAC project, which came in at $5.46 million.

But the “very preliminary” estimate that school officials brought in, quieting the normally outspoken finance board chairman, was the second ranked priority: $41 million for high school additions and renovations.

“I’m really at a loss…,” Mr Kortze said, moments after he and First Selectman Herbert Rosenthal received news of the estimates.

The first selectman, however, offered a few thoughts on the matter.

“I would advise them to send the architect packing,” Mr Rosenthal said. “Obviously the Space Needs Committee has not approved this option, but there is no way the town can afford a 30- to 40-million-dollar project. It just won’t fit in any realistic way, into the town’s capital program.”

Mr Kortze did point out that the $41 million figure represented the most expensive among options suggested by the architect firm Fletcher-Thompson, and that scaled back projections ranged down to $27 million.

Contacted early Thursday morning, school board Chairman Elaine McClure and Tom Gissen, the Board of Education liaison to the Space Needs Committee, concurred that the district would likely recover as much as 34.75 percent of the overall high school project costs from the state. But this assertion did little to ease the evident frustration of municipal and finance officials reeling from the proposed expenditure.

During recent meetings, including a session in which finance board members held a workshop with school board representatives and administrators, it was pointed out that the TBDs on the school’s CIP not only stymied the town’s ability to adequately plan for future borrowing, but could also jeopardize an upward trend in enhanced municipal bond ratings that helped save taxpayers millions in recent years on the cost of debt service.

Under the advisement of municipal bond rating advisors, and in reports from the bond-rating agency itself, Newtown has maintained a policy of keeping its debt service at or below ten percent of its overall budget. Town Finance Director Ben Spragg has maintained that this practice is one of the primary reasons for favorable bond rating upgrades.

But he recently cautioned school officials that if the amounts to be determined for the high school pushed the town’s debt service above ten percent, it could be a contributing factor toward Newtown losing its current, highly favorable bond rating.

When asked whether he thought a $41 million projection for high school expansion would concern bond rating specialists, or put the community at risk for a downward bond rating adjustment, Mr Gissen said he has seen numerous examples of other local communities exceeding a ten percent ratio of debt service to overall budget expenditures with no bond rating consequences.

“There is no clear connection between debt service and bond ratings,” Mr Gissen told The Bee. “We [school board members] have been told we need to look at more cost-effective ways to pay for education, but I think finance officials need to roll up their sleeves and work on a more cost-effective way to finance municipal debt service.”

Mr Gissen said in some respects that the taxpayers may have been led to believe the town was in a no-win situation.

“In the worst case scenario, we’re being told the town could be forced to let its schools degrade, or have its bond rating degrade,” Mr Gissen said. “School construction is expensive, but that money is going to support students for generations to come.”

Mr Rosenthal, Mr Kortze, and Mr Spargg all pointed out that a high school expansion, even in a worst case/long-term population increase of up to 400 new students, could cost taxpayers $10,000 per student, per year in debt service if the $41 million project was to go forward. That is in addition to the roughly $10,000 annual cost of educating those students. Mr Spragg estimated that at its current bond rating, the town would pay about $4 million per year in debt service to borrow $41 million just for the proposed high school project.

“If we only see the eventual increase in the student population go to only 200 more than we have now, we’re looking at closer to $20,000 per year per student in debt service,” Mr Rosenthal stated.

But Mr Gissen said comments to that effect put the worst possible spin on a project that is absolutely necessary, perhaps even critical, at this point as the high school is currently exceeding its capacity.

“Equating students to dollars in debt service makes a good sound bite, but we’re building a school for the long run,” Mr Gissen said. “That’s looking at this project in the most financial negative light.”

Mr Gissen pointed to the Hawley School, which was originally completed in 1921 with two subsequent additions built on in later years.

“This 1921 building is still serving the taxpayers, despite its certain maintenance costs,” Mr Gissen said. “The taxpayers who will be paying for the high school are the same taxpayers that are getting the benefit from that 1921 building.”

Mr Gissen acknowledged that any expenditures for the high school expansion and other items on the school’s CIP — which includes the top-ranked $5.4 million Hawley heating and air conditioning project — would help further protect and reduce future erosion of residential property values in town.

“I know these costs are a burden on taxpayers, but our schools are what makes this town valuable,” Mr Gisson said. “Without these school improvements, taxpayers could lose tens of millions of dollars in value from their homes.”

He said that the extremely preliminary estimates for the high school represented a starting point after which a long process of refining hundreds or thousands of points would occur to achieve “value engineering.” He said the school board’s goals could not be achieved by putting a cap on expenditures during these initial stages of the planning process.

“We tell the architect to give us what we need, and then apply value engineering, combine features, and refine hundreds or thousands of elements to drive down the costs,” Mr Gisson said.

Ms McClure also assured town officials and residents that all school projects moving forward would do so at the lowest possible cost.

Mr Kortze, who was preparing for Thursday evening’s joint meeting between the boards of finance and education on its CIP projections concluded that education officials would have to be reminded again about not doing business in a financial vacuum.

“There are certain needs, and we are prepared to address them,” Mr Kortze concluded. “But after seeing these numbers, there doesn’t appear to be any concern about the overall picture. I think they’re making a mistake.”