Sunday, November 30, 2008

Postpone Mt. Lebanon's High School Project?

Way back in September, I posted a quick note wondering whether the collapse of the financial markets meant that the Mt. Lebanon School District should reconsider its plans to renovate or rebuild Mt. Lebanon High School.

No one commented on that post, but I was hardly the only person asking that question. School Commissioner Director James Fraasch has been crunching the numbers and, more important, has been working on an alternative proposal.

Read Commissioner Director Fraasch's proposal at his blog.

His starting points:

In putting this proposal together I used some principles to guide me to my conclusion. The criteria I used were the following:

1) We need a project that does not require a 15-20% millage increase next year

2) We need to do some things immediately with the high school to ensure the safety and proper education of our students

3) Over the longer term we need to put a plan in place that will reduce debt and put us in position to tackle large scale construction projects going forward


The bottom line is that Commissioner Fraasch proposes to

(i) invest a significant amount of money in near-term capital improvement projects at the high school;

(ii) minimize near-term property tax increases, which otherwise may run in the neighborhood of 20%;

(iii) pay down some of the District's already very high debt; and

(iv) postpone a large scale renovation project for roughly ten years.

The departure from "all is well" thinking is refreshing. The plan makes sense to me.

Your thoughts?

Updated (December 3, 10:30 am): In response to a comment that questions the assumption that a significant tax increase would be called for if the School Board goes ahead with a $100-million-plus construction/renovation project, James Fraasch sent me this note:

According to the Costs slide at the July forum (which I had nothing to do with).
[http://www.mtlsd.org/highschoolrenovation/stuff/july22hspresentation-07-costs.pdf]

$225,000 house pays $65 more per month for $130,000,000 school

$65 more per month = $780 per year

$225,000 * x = $780

$780/$225,0000= .0035 or 3.5 mills

2007-2008 Millage of 23.56 plus increase of 3.5 mills equals 27.06 mills.

That is equal to a 14.9 % tax increase.

When you consider that we have been told that soft costs are not included in the $130,000,000 project and Bethel Park added 12% for cost escalations alone, the project cost for a new high school according to the July estimates would far exceed the $130,000,000 construction only cost estimate. I think in most of my presentation I state that there will be a 15-20% tax increase. In fact, the minimum tax increase for a new school according to the numbers presented at the forum would be 15%. A new school would easily fit into the 15-20% range after furniture, fixtures, equipment, and escalation costs. Mind you, this millage increase calculation is ONLY for a school project and does not take into consideration any other possible budget concerns.

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19 Comments:

Blogger Bill Matthews said...

“I will gladly pay you Tuesday for a hamburger today"

James would FAIL out of the Wimpy School of Economics. Keep up the good work!

December 01, 2008 7:38 PM  
Blogger Mike Madison said...

For those readers who are too young to pick up Bill's excellent reference, read this Wikipedia entry.

December 01, 2008 7:41 PM  
Anonymous Anonymous said...

This is not a threat nor a promise, just a statement of fact. The only thing that separates Mt. Lebanon from Upper St. Clair is Connor Road. Upper St. Clair has already invested in a superior physical plant for its schools and administrative complex. They are finishing completion on a MAJOR upgrade to their athletic facilities. If Mt. Lebanon continues to go down the route of just maintaining things that have clearly outlived their shelf lives, many a family will start seriously considering evaluating the real estate for sale a mile or two to the south......

December 02, 2008 5:58 PM  
Anonymous Anonymous said...

I thought that Mr. Fraasch had a fundamental understanding of numbers; it appears not. He assumes that we will have a 20% millage increase if anything is done with the high school. Why not 50% or 80%? Those numbers are just as ridiculous as anything else he can pull out of thin air. He assumes a number of things that have no basis in reality, particularly considering the fact that there has yet to be a discussion on the alternatives. However when you live in a fantasy world, facts and reality don't matter. His ideas are the sort of thing that one might find from a gifted and talented 8th grader given the assignment, "How I would make my school better". We really do need grown-ups on the school board.

December 02, 2008 9:11 PM  
Anonymous Anonymous said...

Now if Mr. Cannon and Mr. Reich stand up to the podium, state their name and Mt. Lebanon address, and explain their position like I do, we could have a fair debate.

December 03, 2008 9:16 AM  
Anonymous Anonymous said...

Much like the pool project, traffic calming and every other contested decision that has faced our community in the past 10 years, I fear that the school project will fall victim to paralysis by analysis. In other words, by hosting public meeting after public meeting it will become virtually impossible to arrive at any sort of community-wide consensus. Unfortunately, when it comes to spending hundreds of millions of dollars, consensus isn't possible or even probable. However, that shouldn't mean that the world stops. If the upfront decisions take months or years, the project loses steam....people lose interest......new board members are elected...... and everything shuts down. For heavens sake, it took how many meetings over how many weeks just to choose between 2 highly qualified construction managers. That preliminary decision alone extended the original schedule by more than 2 months. Why?

Look, like it or not, the School Board is tasked with collecting our tax dollars and determining how to spend them - whether it be on books or buildings. I'm not pointing fingers, but let's get on with it. Pick one option or no option, but let's go. Please. The process formally started in the Summer of 2006, and with the exception of hiring an architect, a construction manager and identifying 4 significantly different alternatives, there has been little accomplished in over 2 years. I'd just like to see fewer meetings and more progress.

December 03, 2008 10:17 AM  
Blogger Mike Madison said...

Given the scale of the financial commitment involved with a possible renovation/reconstruction of the high school, and given the scale of the school district's existing financial commitments, I'm not worried that this issue is getting analyzed excessively. (Traffic calming . . . yes! I do wish that a decision would be made and that issue put to bed.)

I'm delighted that James has put this proposal on the table. Whether or not you agree with the details of his analysis, his willingness to talk publicly about the *limits* of what Mt. Lebanon can afford to do is . . . refreshing. I wish that more of this thinking had been part of the discussion *before* the District invested time in selecting a manager for the project.

Generally, and not as a response to Dave:

There is much to be grateful for and proud of in Mt. Lebanon, including its schools. Let us not delude ourselves, however, into thinking that all is well or right with the town or with its schools. Let us not compete with Upper St. Clair simply for the sake of maintaining our property values; let us not pretend that high SAT scores substitute for quality teaching and learning.

December 03, 2008 11:16 AM  
Anonymous Anonymous said...

Mike, I'll buy you dinner (stem fees included) if we are any closer to a decision (rebuild, remodel or do nothing) on the high school by August. Not dirt being moved or anything that monumental, just a decision. That will mark the 3 year point in the process.

December 03, 2008 11:25 AM  
Anonymous Anonymous said...

I agree with Mr. Reich's opinion that folks will leave Mt. Lebanon, but for a different reason. I sent this to the entire board on 09-OCT-2008, but only got a reply from Ms. Posti. Surely there are other directors who disagree with me, but I have yet to hear from them.

This CNN article, attached, says school districts should be cutting spending instead of embarking on the largest capital project in South Hills history:
http://money.cnn.com/2008/10/09/news/economy/states_feel_the_pain/

State reimbursement is based on Market Value/Personal Income Aid Ratio (MV/PI AR)
Mt. Lebanon ranks eighth lowest out of 100 school districts in the region.

http://www.swingingsammy.com/schools/20072008_MV-PI_AR.html
http://www.swingingsammy.com/schools/20082009_MV-PI_AR.html

What this shows from one year to the next is:
1) Mt. Lebanon taxpayer income is decreasing
2) Neighboring school district taxpayers are becoming wealthier
[Please note Fox Chapel and Sewickley are retaining their high income taxpayers]
If this trend continues, people with higher incomes will leave Mt. Lebanon and the remaining lower income taxpayers will be forced to pay a much higher tax bill than taxpayers of neighboring school districts. The decisions this school board makes now will affect the taxpayers many years after the board is replaced with new members. Who will the [remaining lower income] taxpayers complain to then? One more thing according to the attached policy

http://www.mtlsd.org/district/stuff/policy/kba%20%20public%20participation.pdf
"The support of the people must be based upon their... participation in the aims and efforts of the public schools."
I welcomed all replies. It's a shame some elected representatives do not share their opinions with their constituents.

December 03, 2008 11:58 AM  
Blogger Mike Madison said...

In response to James Cannon's comment that questions the assumption that a significant tax increase would be called for if the School Board goes ahead with a $100-million-plus construction/renovation project, James Fraasch sent me this note:

"According to the Costs slide at the July forum (which I had nothing to do with).
[http://www.mtlsd.org/highschoolrenovation/stuff/july22hspresentation-07-costs.pdf]

$225,000 house pays $65 more per month for $130,000,000 school

$65 more per month = $780 per year

$225,000 * x = $780

$780/$225,0000= .0035 or 3.5 mills

2007-2008 Millage of 23.56 plus increase of 3.5 mills equals 27.06 mills.

That is equal to a 14.9 % tax increase.

When you consider that we have been told that soft costs are not included in the $130,000,000 project and Bethel Park added 12% for cost escalations alone, the project cost for a new high school according to the July estimates would far exceed the $130,000,000 construction only cost estimate. I think in most of my presentation I state that there will be a 15-20% tax increase. In fact, the minimum tax increase for a new school according to the numbers presented at the forum would be 15%. A new school would easily fit into the 15-20% range after furniture, fixtures, equipment, and escalation costs. Mind you, this millage increase calculation is ONLY for a school project and does not take into consideration any other possible budget concerns."

December 03, 2008 12:27 PM  
Anonymous Anonymous said...

Mr. Fraasch must have been a a Y2K proponent as well. When you begin a discussion with "the sky is falling, the sky is falling", it is difficult to take anything that follows very seriously. His supposed 20% tax increase assumes that nothing will change in our current budget if the high school is renovated. Does he think that we will continue to spend the same amount of money every year reparing and patching what we have, including the stratigically placed buckets when it rains? Or, perhaps he feels that we will save money by doing nothing, because by doing nothing, certainly all of the present costs will remain exactly the same for the next ten years. Mr. Fraasch is obviously of the King Canute school of economics that believes by commanding the tides (costs) to stop, they will, by magic perhaps. We need to look at what has to be done in a thoughtful manner, not from hysteria.

December 03, 2008 3:55 PM  
Blogger Mike Madison said...

Long-time readers of this blog know that Joe Polk and I have wrestled with and finally made peace with a policy designed to encourage civil discussion here. Anonymous and pseudonymous comments are not permitted.

On the whole, this has made the blog a better place, but occasionally even the discipline of signing one's own name doesn't stop the abuse. Joe and I reserve the right to delete signed comments, if they are uncivil.

James Cannon's comment above, which wraps a meaningful question -- on what does James Fraasch find his assumption that a school renovation project would lead to a 15% school tax increase? -- in a steaming pile of tripe. Those same long-time readers may wonder: Why is this comment on the blog?

I let the comment stay up precisely because it is the exception that proves the rule: I want to publicly identify the kind of verbal abuse that discourages citizens from participating in local politics.

To his enormous credit, James Fraasch invests his energy in the nitty-gritty of making this town and its schools better than they are (unencumbered, I am happy to say, by the baggage that sometimes accompanies having grown up surrounded by the mythology of Mt. Lebanon). To his enormous credit, James has gone above and beyond the call of his duty as a School Board Director, investigating and offering to the public a thoroughly creative proposal in connection with the most significant financial decision tha the School District is likely to make for many, many years.

For this, James Cannon heaps abuse on him. That is shameful.

To his enormous credit, James has not replied in kind.

Whether or not you agree with James on the merits of his proposal, his work and his enthusiasm for the task should be praised. I am sure that many readers have emailed him privately to say so. I hope that many readers will also confirm those sentiments here, under their own names.

December 03, 2008 4:08 PM  
Anonymous Anonymous said...

James,
Cheers for a job very well done. The sources you have cited and the report presented must have well over 150 hours of your hard work.
Your clear writing and concise presentation deserves consideration by all parties who are willing to work in a collaborative manner to explore interests and options that serve our children, teachers, administrators, taxpayers, and residents.
Thank you for serving on the Mt. Lebanon School Board.
John Ewing

December 03, 2008 6:05 PM  
Blogger Bill Matthews said...

One of the things James' presentation brought to my attention was the cost of "wrapping" bonds. This is a financial tool recent MTL School Directors used to minimize the early millage impact of a bond issue and maximize the total cost to the taxpayer. (The Municipality has done the same thing.)

It is essentially the equivalent of an "interest only" mortgage that is so much in the news today.

For example - - In 2003 MTLSD (we) borrowed $50,000,000.

In 2004, we paid the required interest and $5,000 in principal (0.01% of the outstanding balance).

In 2005, we paid the required interest and $5,000 in principal (0.01% of the outstanding balance).

In 2006 we refinanced the 2003 issue.

In 2007, we paid the required interest and $5,000 in principal (0.01% of the outstanding balance).

I have not seen what we paid in 2008 - but I bet it was the required interest and $5,000 in principal (0.01% of the outstanding balance).

We will not begin paying principal in earnest until other bond issues are retired, several years from now. You can see that in James’ presentation.

My estimate is that financing these issues by “wrapping” will cost taxpayers an additional $10,000,000 in interest expense over the life of the bonds.

I am very glad somebody is looking at these things and not staying with business as usual. No telling what that would cost.

December 03, 2008 6:44 PM  
Anonymous Anonymous said...

Mr. Fraasch: Thank you for introducing some alternative thinking, and providing data to back up your points.

While I must confess that I don't understand the full details of the concerns necessitating razing and building a new building, I have wondered if it really is more cost effective to remediate or demolish.

Mr. Fraasch has added another layer to the discussion which is the reality of floating more debt in this current economic environment. I think this is a responsible question to ask, and I think it takes guts to ask it knowing the criticism he would get for doing so.

When we are looking at going at least $130 million more in debt, we darned well better have discussion and being willing to ask questions. Simply leaping forward for the sake of wanting to "see some action" is a really good way to waste our money.

So Mr. Fraasch, thanks for raising the questions and laying out a thoughtful point of view. While we may still end up deciding to go down the path of building a new structure, we need to fully weigh the consequences.

December 03, 2008 8:16 PM  
Anonymous Anonymous said...

Perhaps if Mr. Cannon feels so strongly about these issues, he will take the plunge and run for the school board in 2009. I believe 4 seats are open...no time like the present to really step into the fire Mr. Cannon...you might find you make a bigger splash and can actually impact policy in a more pervasive manner than posting comments.

December 03, 2008 10:40 PM  
Anonymous Anonymous said...

Although there are many flaws in Mr. Fraasch's plan, I think one only has to look at the most glaring one. Mr. Fraasch takes the proposed debt service of renovating the high school and adds that number to the present budget. This is how he comes up with his tax increase number. For many years each school budget has contained a large amount of money dedicated to maintaining and fixing an infrastructure that is falling apart. Presumably, if the building is renovated, these ongoing repair costs will stop. If my old, clunker, automobile is costing me $500 a month in repair bills, and I replace it with a new car, with $500 a month car payments, I do not add the two figures together as a proposed monthly auto budget. Whether Mr. Fraasch spent 150 hours or 1500 hours on his plan, 2 plus 2 does not equal 5.

December 04, 2008 11:11 AM  
Blogger Mike Madison said...

With due respect, I think that the assumption that a new or renovated high school would put an end to today's maintenance and repair bills is a myth.

Last time I checked, I spend a lot of time maintaining my (newer) vehicles. And the older they get, the more I spend.

December 04, 2008 11:59 AM  
Blogger Mike Madison said...

Posted with permission:

Whether or not the community at large or school directors agree with Mr. Fraasch, he seems to take his role as a steward of the taxpayer and the community very seriously. The community of Mt. Lebanon is lucky to have an independent thinker who isn't afraid of hard work on the school board.

Gracelyn Donoghue Ratay
Former Mt. Lebanon School Director

December 04, 2008 11:59 AM  

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