Foskett calls for stop on Dallin School rebuild

Foskett on Dallin project, 11/10/02

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Capital Planning chairman addresses Dallin issues

Calls for stopping the project

Letter dated Nov. 10, 2002, from Charles T. Foskett, chairman of the town Capital Planning Committee, to David W. McKenna, chairman, Arlington School Committee

Last week on November 6, in a report to the Town Meeting, Bill Shea of the Permanent Town Building Committee raised the issue of whether or not it was advisable to proceed with the rebuilding of the Dallin School in light of current local, state and national economic and fiscal conditions. Mr. Shea’s concern is appropriate and timely. The two most relevant issues are the large over-run of the PTBC forecasts for the total costs of the Phase II Rebuild Project (voted in the April 1, 2000, Debt Exclusion Referendum) and the extended delay in and increasing uncertainty of Arlington receiving SBAB reimbursement for theses projects.

First, please consider the projected cost over-runs. Voters were told prior to the debt-exclusion vote that costs would be capped at $34.5 million and that various Town committees and boards were unequivocally committed to this “cap”. The table below summarizes the current status of the projected over-run.

Comparison of Over-run to Original Committed Cap

Current articles in the financial press frequently raise the specter of “deflation”. In this environment, it is difficult for inflation to account for a 41.2% overrun, especially since the Rebuild Campaign (of which, along with Selectman Jack Hurd and School Committeeman Denis Sullivan, I was co-chair) incorporated inflation and contingencies into the professional third-party financial cost estimates provided by the School Department.

According to Mr. Shea's account, the Town may not see state reimbursements for five years, possibly more. Recent communications from the SBAB ⁱ [state School Building Assistance Bureau] indicates that only 13 projects in Arlington’s category List B, were funded this year, and Arlington’s Peirce and Dallin Schools are 96 and 97 respectively on the list. This implies that, even with no reductions in the SBAB program due to current state fiscal problems, reimbursement for the Dallin is 7.4 years away. Indeed, the uneven distribution of reimbursements could imply a delay beyond the 7.4 years. The looming possibility of further reductions as the state faces a structural $2 billion deficit in an uncertain economy implies that the reimbursements delay could go even further.

Christine Lynch, Director of the SBAB ⁱⁱ, has forecast reimbursement delays rising from just a few years to between ten and twelve years and possibly more. This is the case for schools that are not yet approved; even schools on the Category B list already approved may not be funded for many more years. All of this is consistent with Arlington’s experience: The Ottoson was finished seven years ago; the state has still not begun to pay the balance of our reimbursement amount of approximately $274,000 per year. Because of this delay, Arlington has had to fund almost $2 million that should have been reimbursed by the Commonwealth.

It is indisputable that Arlington voters were promised in March 2000 that their tax levy would not be impacted beyond the limits of spending $34.5 million with 63% reimbursement. It is clearly recorded in presentationsⁱⁱⁱ and letters^iv of the Rebuild Campaign, and in minutes of both the Arlington Board of Selectmen” and the Arlington School Committee”^vi. The data calculating the average homeowner impact assuming the cap and 63% reimbursement were prepared and provided by Alan Tosti, who also supported the Rebuild Campaign” ^vii.

It is also interesting to note that the SBAB views the reimbursement schedule as increasingly remote and uncertain. In a recent advisory” ^viii, the SBAB commented:

“In years past, municipalities and districts with approved project applications were almost always assured of funding within a reasonably short (3- to 4-year) period. We can no longer offer such assurances. The length of time to receive funding has increased substantially, to the point where we cannot even provide likely time frames for individual projects. This uncertainty will make it much more difficult for districts to decide whether to prepare and submit applications, and whether to begin construction once applications are approved. Cities and towns will have to weigh this uncertainty against the urgency of their needs.”

In the same advisory the SBAB comments on the high risk of the use of BANS:

“In the past, many districts started construction prior to the grant award through the use of bond anticipation notes (BANs). These BANS, which are limited in duration to five years, allowed districts to defer all principal payments until after the grant award was received and permanent bonds were issued. Because of the growing length of the waiting list, legislation is currently being considered to extend the temporary borrowing period to seven years. But even if such an extension is approved, many projects will not receive their grant awards within that period. Therefore, applicants who intend to begin construction prior to receiving the grant award must be prepared to issue the permanent financing, and begin repayments of principal, well in advance of any state reimbursement. Applicants must submit, prior to start of construction, a vote of the local appropriating authority (as defined in M.G.L. c59 s.21C) acknowledging that placement on the waiting list does not guarantee a grant award within any particular time, and therefore it may be necessary for the municipality or district to issue permanent financing before a grant award is received.” (Emphasis added by writer.)

Although these comments are framed in the sleep-inducing meter of bureaucratic memoranda, they are a direct warning, and indeed are formal legal notice by the SBAB, of the clear and present danger that things are no longer as they were and that municipalities proceed on these adventures at their own risk.

The promise to the voters was that only 37% or $12.8 million of the $343 million would impact the taxpayers. In rebuilding the Peirce at $10.3 million, a cost 25.3% higher than the original plan, the Town has spent 80% of the amount of funds that it promised would impact Arlington taxpayers. If the PTBC proceeds with the Dallin School project, the impact amount, without the reimbursements that are nowhere in sight, will be $7.9 million over the amount approved by voters. In my opinion, this is an untenable position.

There are three major considerations that cry out for leadership by Town officials to stop the rebuilding of the Dallin until either reimbursement can be obtained or voters can vote on a larger debt exclusion:

1. Voters were given a promise by both the Rebuild Campaign and Town leaders that a) the expenditures would not exceed $34.5 million and b) the full $34.5 million impact would be reduced by state reimbursement of 63%. Indeed the most compelling argument for “keeping the promise” to complete the last four schools was that the town would only spend 37 cents for every $1 required for the renovation. The voters “kept the promise” and voted for the debt exclusion. Now it's time for the Town to keep the promise with the voters. The combination of the cost over-runs and the lack of reimbursement increase the burden on the taxpayer by 281% over what was promised by the rebuild Campaign and Town leaders or by a factor of 3.81 times.

2. There is no guarantee that the Town will ever receive the reimbursement. This was made patently clear not only by the SBAB warning, but also by what we read every day in the newspaper, and is reinforced by the SBAB’s failure to pay the seven-year old reimbursement on the Ottoson Middle School. Failure to obtain these reimbursements may jeopardize our bond rating in light of the fiscal outlook for the Town. It is possible that the Town and the Arlington taxpayers could afford to pay the full cost of these projects, if properly spaced and planned on a reasonable budget. But what Mr. Shea is proposing at this time fits neither of those criteria and is not what Arlington voters were promised.

3. It is very likely that the Town is facing a huge fiscal crisis in its non-exempt operations over the next several years. State aid and local receipts have dropped over the past several years. Growth in local aid is a distant memory. Health care and pension Costs are rising rapidly. Governor-elect Romney has committed to veto tax increases, and the State reportedly faces a $2 billion structural deficit. It is unlikely that local aid will escape unscathed. Arlington will need the support of all its voters to hold its own in this environment. If the Town violates its pledge to the voters in the 2000 debt exclusion, it is likely that voter alienation will preclude any support in our difficult times ahead.

I respectfully call upon your Committee to carefully review the arguments I have presented and seize the mantle of leadership to demand that the Permanent Town Building Committee and other Town departments keep the commitment made to the electorate in March of 2000. What I am asking is that we stop the Dallin project and spend no more money on rebuilding the infrastructure until either we receive reimbursements from the state on a timely basis or we obtain, through another debt exclusion vote, permission from Arlington citizens to spend 3.8 times the original amount of the debt exclusion or follow some equivalent path. This decision belongs with the voters.

We are a nation of laws, and Proposition 2 1/2 is the law of the Commonwealth. If we expect citizens to be law-abiding, so must be government. As important, Arlington’s quality of life is predicated on trust and comity between its citizens and Town government. Let us not abandon these principals that have made us what we are. Let us take the more difficult but more ethical path. Arlington’s voters have always stood strongly with the Town. If the Town treats them with the respect and trust they deserve, they will do so in the future. Dallin and the other schools will still be there to rebuild, and the voters will be here to rebuild them.

Sincerely,

Charles T. Foskett

Town Meeting Member, Precinct 8

Cc: Denis Sullivan, Barbara Goodman, Joani LaMachia, Paul Schlichtman, Martin Thrope, Alan Tosti, and Bill Shea

Footnotes:

ⁱ School Finance: School Building Assistance Administrative Advisory 02-3.

ⁱⁱ Presentation to ATFC November 2000.

ⁱⁱⁱ Rebuild 2000 Presentation February 2000.

^iv Rebuild Campaign Op-ed Letter March 2000.

^v “Arlington Town Website, Board of Selectmen Minutes, March 20, 2000.

^vi Arlington Town Website, School Committee Minutes, March 14, 2000. “

^vii Excel spreadsheet, January 22, 2000.

^viii School Finance: School Building Assistance Administrative Advisory 02-1.