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WVN # 47: Latest Numbers

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  • waylandvoters
    Wayland Voters Network November 18, 2004 Dear Wayland Voter, The following report on the Nov. 10 meeting of the High School Building Committee was prepared by
    Message 1 of 1 , Nov 18, 2004
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      Wayland Voters Network
      November 18, 2004

      Dear Wayland Voter,

      The following report on the Nov. 10 meeting of the High School
      Building Committee was prepared by Michael Short.

      LATEST ESTIMATE: $57.3 million

      The High School Building Committee struggled with what to
      propose as the cost of demolishing Wayland High School
      (except the Field House), constructing a new school and
      renovating the Field House. The committee finally settled on
      $57.3 million, down $400,000 from the previous estimate.
      Though member Mary Lentz argued for staying with the $55.5
      million figure circulated for several weeks, members who have
      construction experience were wary.

      Ultimately the HSBC agreed that $57.3 million is an estimate
      that should stand up. But they warned that if built-in factors for
      inflation and unforeseen events prove inadequate, the cost could
      be higher.

      Voters will decide at the January 25 Special Election whether or
      not to provide the first $4.2 million in design and preparation
      fees, about seven percent of the total cost. Because the
      remaining money would not be put to a vote until late 2005 or
      2006, the HSBC is concerned about being able to persuade
      voters that the current estimate is credible.

      Since the price tag is only part of the story, Lentz discussed the
      latest draft of a property tax impact estimate. The estimate was
      already out of date to some extent because it was based on a
      $55.5 million job.

      Voters can look at the estimate somewhat as they would at a
      fixed-rate mortgage: X dollars per year for a certain number of
      years. In this case, though, citizens won't know the true value of X
      when they vote in January because they won't know the interest
      rate until years later.

      Some of the HSBC figures in the latest tax impact estimate
      assume that high school-related debt payments could increase
      property taxes from 3.5 to 4.9 percent. Member Josh Bekenstein
      estimated that the outer range could be 8 or 9 percent.

      Wayland Voters Network had determined that the outer range
      could add 10.7 percent of current year taxes to a homeowner's
      tax bills. HSBC members criticized WVN for publishing this
      information. (In a letter to WVN, Lentz called the figure
      "misleading.") But WVN's estimated outer range was accurate,
      as it was based on the HSBC's own figures at the time for the tax
      impact if there is no state aid for the project.

      WVN's estimate of an increase of as much as 10.7 percent is
      now outdated by the latest tax impact draft statement discussed
      at the Nov. 10 meeting. Those figures estimate that without state
      reimbursement, a house assessed at $498,000 (said to be the
      Wayland median) would be taxed an extra $755, or 11.3 percent
      of presumed 2005 taxes.

      Another way of looking at it is to estimate what the owner of a
      $498,000 house will be paying in 2010 when the major impact of
      a $55.5 million debt would take effect. In the past five years
      Wayland taxes have risen by more than 30 percent. If you
      assume conservatively that a $6,702 tax bill (the FY05 bill on that
      median house) thus becomes $8,713 in 2010, then adding $755
      produces a total tax bill of $9468. With the added high
      school-related debt, 2010 taxes would be 41.3 percent higher
      than in 2005. (Once the HSBC revises its estimated tax impact
      to assume a $57.3 million project, those figures will increase
      accordingly.)

      Voters should remember that any estimate is only an estimate
      and carefully examine the financial assumptions and projections
      that lie beneath any tax impact estimate.

      After a few years of short-term financing, long-term loans would
      presumably begin in 2010 and continue for 22 to 27 years. Is the
      outer range of HSBC estimates high enough? That depends on
      what you think interest rates will be.

      The one thing almost everybody agrees on is that a period of
      historically low interest rates is ending. One worst-case
      scenario goes something like this:

      The dollar, already at a record low against the Euro, continues its
      slump. Federal deficits remain at record levels. Foreign
      countries, which have bought more than 90 percent of new U.S.
      debt in the past four years, seek better investment opportunities
      elsewhere. U.S. interest rates head toward historically high
      levels.

      Those levels, incidentally, were reached within the past 25 years.
      In 1981 the prime rate was 18.9 percent. Municipal loan rates
      topped out at 11.57 percent.

      Many voters remember those days. Even those who don't may
      want to calculate a worst case more costly than the HSBC draft
      contemplates.

      The total cost to citizens could be lessened by aid from the state,
      but this factor, like interest rates, remains unknown. The good
      news is that the new Massachusetts School Building Authority is
      supposed to provide quick reimbursement after it begins
      approving projects in mid-2007. The bad news is that it plans to
      spend only $500 million a year (adjusting the figure upward in
      later years for inflation); if a municipality is turned down, it will be
      allowed to reapply annually.

      Also unknown is how the state will set priorities. Failing school
      buildings (and in some cases failing school systems) have
      been in the news recently. In Southbridge, a blue-collar town a
      bit larger than Wayland, teachers have to share classrooms and
      some school buildings are endangered by structural defects and
      mold. Will the state look after the neediest cases first? That is
      unknown at this time.

      "There's going to be reimbursement," said HSBC member Jim
      Howard. But in fact there is no guarantee. Massachusetts,
      which faces a billion-dollar deficit, plans to reimburse a backlog
      of more than 400 approved school projects before helping to
      fund new proposals.

      The HSBC has announced three public forums to present the
      $57.3 million proposal and plans to put displays in schools and
      other public places. Members will present programs in other
      venues not yet announced.

      The HSBC meets again on Thursday, Nov. 18, at 7:30 p.m. at the
      High School Commons conference room. The architect and
      project manager will present their final report to the committee.

      Thank you for reading this WVN newsletter. Please forward it to
      your friends and neighbors in Wayland. If they want to receive
      their own copy, they can send an email to
      waylandvoters@... and they will be signed up for the
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      Click reply and send after receiving an e-mail confirming the
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      information from WVN by regular mail please email their name
      and address to waylandvoters@....

      Wayland Voters Network
      Margo Melnicove, Chair
      Michael Short, Treasurer
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