We are extremely fortunate as a town to have gained access to the competitive Massachusetts School Building Authority (MSBA) program. Receiving over $18 million in funding gives Harvard the opportunity to complete a project it would never be able to do on its own.
The School Building Committee has proposed a new school that provides long-term value to the town. It is designed to last 50 years, is inspired by Harvard’s surroundings, is environmentally sound, and is a multiuse design that will support current and future educational standards.
The $34.8 million debt to fund the project will be the largest for the town, but it will not break the bank or preclude all other spending for years. Thanks to a well-defined building plan with sufficient contingencies, financing can be done before the building is completed, giving the town access to lower interest rates than earlier projected. The peak tax increase, once estimated at 16 percent, is now 11 percent over current tax bills, dropping to 8 percent after 5 years. Funding Hildreth Elementary School (HES) plus all major capital projects currently scheduled raises the peak increase to 12.8 percent. In the past, even when the average tax bill increased by 54 percent over a short period (2003 to 2008), the town continued to fund new projects and services in the following years.
The proposed bond would not endanger the town’s AAA rating. Lower borrowing costs due to earlier bonding, recent revaluation of town properties, and additional budget reporting processes improve components of the town’s rating, alleviating initial concerns raised last year. The town’s economic profile and excellent financial management are strong supporting factors, and the town finance director expects the bond to be highly competitive in the market.
Current debt plus the HES debt will initially use about 70 percent of the town’s $60+ million debt capacity (the total amount of excluded debt a town can take on), but within five years 50 percent of capacity is available again as debt comes off the books. Similarly, during most towns’ borrowing cycles, debt service as a percentage of the budget typically spikes up to 15 percent with major borrowings, then drops. The HES debt will increase the debt service to 12 percent of the budget, dropping to 8 percent within five years.
Some in town believe a renovation could be done for far less than the projected costs, either providing no supporting data or using much simpler projects as comparators. Others point to earlier, lower estimates for renovation as possibilities. A $13 million town share for a low-end renovation claimed in one letter mistakenly referred to an estimate of construction costs only. Town share of that full project was actually estimated at $20 million; later detailed estimates placed it at $25 million.
The need for new revenue sources is real and should be a priority. But this is not easily solved and at face value is not an argument to delay the proposed project. Instead, voters should support the town boards and committees as they seek to develop new revenue sources, from the Board of Selectmen’s plan to outline a potential merger with Devens, to improved zoning, and so on.
At this juncture, no matter what opinions on past decisions and cost estimates are, we have to look at the future impact and added costs of a delayed project:
- A new building is likely off the table. If it fails this vote and a potential second vote, the town and the MSBA will not consider this option in the future.
- Any future renovation scenario carries higher energy costs and capital maintenance than a new building.
- A new feasibility study and/or schematic plans would cost $350,000 to develop new schematics and redo portions of the current study.
- Roof, heating system, and other repairs will be required at HES due to the three-year delay.
- $1.1 million in capital expenditures for HES were removed from the Capital plan since 2015, given the upcoming building project. Some of these would have to be funded.
- A three-year delay in construction adds 12 percent inflation or more to current estimates (3% per year, which compounds to 10%, plus 2% to account for the fact that the estimates are nearly one year old) and, per the town’s bond counsel, causes interest rates of at least 5 percent on the borrowing. A minimal $25 million renovation project today becomes a $29.5 million project with an associated tax increase of 11 percent.
- Potential risks to our AAA rating increase as interest rates reach levels that cause concern.
We believe the perceived risks of approving a new building are far lower than the actual risks of a delayed renovation. A decision to reject the project means accepting some risk of not being invited back into the MSBA program and the certain risk of increased construction and borrowing costs that ensure we will get far less value for our dollar in the future than today.
Alice von Loesecke of Warren Avenue is a member of the Board of Selectmen, the Capital Planning and Investment Committee, and the School Building Committee. Previously, she served for four years on the Finance Committee, three years as chairwoman. Don Ludwig of East Bare Hill Road has been chairman of the Finance Committee since 2012. He is a member of the Personnel Board and the School Building Committee, and he served on the recent Master Plan Steering Committee.
