The Words They Dare Not Speak; The Costs They Dare Not Calculate

Refusal to Acknowledge the Annual Escalating Operating Costs to Teach Your Children…

While Embedding the Cost of a $100 Million 30-Year Bond Payments for Facilities…  

Is a Direct Threat to the Education of Our Children…

By Ira Kaylin

Kaylin is a former Member of the City Council and Co-Chair of its Budget and Audit Committee

Though there has been a relative lull in the discussion of the upcoming GMHS School construction Referendum the deadline for submission to the State is not far off. The City must submit its request for a Referendum by the end of June so that it can be placed on the November election schedule.

However, there is one topic that remains stubbornly outside the bounds of discussion, almost a taboo: Operating Costs. The affordability analyses that have been attempted regarding the new GMHS focus exclusively on how large debt service expenditure the City can bear. The once 800 pound gorilla in the room is now at least a 1000 pound gorilla and growing quickly—that is Operating Costs.

These operating cost increase are capable of ending the financial sustainability and jurisdictional independence of Falls Church.

Line of Reasoning

If we assume that a 1,200 student new GMHS will be built and that it will be at capacity in 15 years suggests a 50% increase in school population at the end of the projection period (1,200 less current enrollment of around 800). A key component of the calculation is that the “feeder” schools will also grow at a corresponding rate. As it is there is already an effort to fund an expansion of TJ not to mention the (additional costs) of restarting the stalled Mt. Daniel project.

The current City budget is around $90 million of which around 50% or $45 million goes to the School Division expenses

These costs have been recently expanded to cover short term borrowings for such expenses as school buses, athletic fields etc. The net effect, even at 50%, is that actual costs, as expressed in the City’s budget, overstates that amount of funding that goes toward all residents (the so called City side). Importantly the School Division claims that 80% of its budget goes to teacher salaries.

By assuming a straight line extrapolation the current $45 million used to cover School Division expenditures would grow by 50% (actually 150%) to around $68 million or a $23 million increase in today’s dollars. It would be a lot larger if pension cost, health insurance and salary, maintenance of larger schools, and most importantly debt service on future capital costs were included. Conversely there is little chance that the costs would be below $23 million.

This Begs Three Questions

1. Can the City generate enough revenue to cover what appears to be virtually unmanageable increase in expenditures.
2. Can economic development cover the School Division’s exploding costs
3. What does the cost of the new GMHS have to do with the above two questions.

My View

To Question One:

It is unknown. This issue and question was directly presented to the City Manager at a Town Hall meeting regarding the new GMHS. The City Manager’s response was he didn’t know and that it is really a budget issue that would be addressed in due course.

I couldn’t disagree more.

To Question Two:

The thought that economic development will be the “silver bullet” that will “save” the City is pure magical thinking. Economic development projects including the last eight projects generate or are expected to generate an additional $6.5 million in net income, while consuming 18 acres of land.

At that rate we would need an additional 28 projects to generate $23 million ($23million divided by $6.5 million multiplied by 8 projects). To phrase it more concretely it would take 15 Harris Teeter projects and around 40 acres of developable land to generate sufficient net income to cover projected operating costs. As has been stated previously the only way the City could hope to achieve that level of project increase would be to annex developable land which we can’t under state law.

This writer is unaware of a public document that projects possible revenue stream generated by the development of the 10 acres at the GMHS. The Urban Land Institute projected that after 10 years 80% of Capital Costs might be covered.

To believe that we will “grow” our way out of out budget imbalances is, frankly, delusional. Other solutions must be sought—now.

To Question Three:

If the City were to decide to renovate GMHS at a cost of $50 million instead of $100 million funds the City would save the debt service costs of $50 million now. Over 30 years the cost savings would amount to around $86 million. In other words the cost of GMHS could materially affect our ability to pay for future teacher salaries.

There is a great deal of contradictory information regarding the value of high school rankings. All that can be said with some degree of certainty is that the GMHS rankings have declined over the past 10 to 15 years.

It is unclear how spending $100 million or more on a new High School will enhance our ability to attract and retain high quality teachers. Just the opposite, we may be harming our ability to secure the best teachers by directing so much of the City’s increasingly limited resource base to capital expenditures. Of course it is the youngest of our student population who will pay the greatest price. Specifically the cynical claim by some that they will simply move out of Falls Church pertains only to the older students not to the parents of young children.

Conclusion

It is well recognized that the normal human tendency is to respond to an immediate crisis, that is, to something we can touch. Taking actions today for a future benefit is exceedingly difficult. Take Metro, for example, the under funding of the maintenance program had to have well known for years. The political will to address the problem required multiple and highly reported accidents and deaths to sensitize the public to the dangers of an unsafe system.

Funding at all public sector levels is basically the same. Problems are not addressed until they are too big to ignore.

It is essential that Falls Church, with its highly educated and articulate citizens, get in front of the impending revenue/expenditure mismatch as soon as possible. By the time the problem becomes undeniable it will be too late.

The place to start is the GMHS Referendum. The cost of the school needs to be dramatically reduced; not solely related to tax rate issues but the quality of education desired especially the youngest of our students who will bear the brunt of any financial shortsightedness.

6 Comments on "The Words They Dare Not Speak; The Costs They Dare Not Calculate"

  1. Jim Bledsoe | June 9, 2017 at 2:07 am | Reply

    So we have gone from proposal requests to consultants. We have been told about renovation options as low as $50M. We have Vice Mayor Connelly saying previous estimates to renovate were back of the envelope estimates while she scapegoats Dr. Schiller. What in the heck is going on in this city! This whole mess wreaks of incompetence that transcends what I thought these ‘leaders’ were capable of on their worst day. If a 100M+ referendum reaches the voters in November, I sure as heck hope the idiots elected to represent all of us will have thought out the long term damage this will cause the taxpayers. If you really like spending our tax dollars on the n+10 consultant, hire one to tell us when the tax rate will start depreciating the value of our homes. You cannot build yourself out of this mess. Some people move here for the schools, the rest of us call it home.

  2. Johannah Barry | May 23, 2017 at 2:10 pm | Reply

    Ira, thanks as always for your analysis. I hope readers see the irony in the fact that you who have often been labeled “anti-school” during budget discussions appear to be one of the few who has publicly come forward to defend the future of the School Division. By highlighting the need to act now, you are especially championing the needs of the younger students and those who have not yet entered the school system. This analysis serves to protect the future for all students in Falls Church, and I hope the community listens.

  3. Thank you Ira, as always, for continuing to raise this and for quantifying the issue. Many of us have stated over and over that a $100 million school project is simply not affordable no matter what happens with the WFC parcel and other economic development. It does not take a financial wizard to see the obvious. And yet, we still talk about this, continue to raise taxes, etc. Isn’t there one brave city official, just one, who is bold enough to speak out on this. I guess there was one, the interim school superintendent, who seemed to have a practical and common sense approach who questioned the need for $100 million school rebuild. I think he shocked everyone when we at least had the strength to propose something in the vicinity of $60 million or so, which is still a stretch and still poses financial challenges but he seemed to take a $100 million price tag off the table. But, I hear no other city representative who supported what he said. I would like to see some city representative challenge what Ira has put forth.

  4. Ira,
    Thanks for making this complicated subject easier for me to understand. I do not share your expertise in finance and municipal government operations but my sense is that you are identifying a very real concern, and one that is not being fully addressed by our City leaders. You’ve made this point before in your articles, that expanding school enrollment means commensurate increases in school operating costs, and you have pointedly warned that we may not have a good way to meet these extra operating costs if we burden ourselves with too much debt service. You’ve given us some good tools to use in judging the merits of the coming bond referendum, and for that, thanks again.

  5. Parents of young children at Mt. Daniel or TJ should be especially demanding of financial answers and reassurance before agreeing to foot a 20-30 year costly bond funded building program—and recall the project debacle at Mt. Daniel. Making the decision on a future school building projects and providing financial “assurances” that all will be well, is much the same cast now as then and you know how that went.

  6. John Leimone | May 19, 2017 at 9:41 pm | Reply

    Ira,
    You have spelled out with impecable logic, backed up with hard numbers, issues that our City & School officials do not seem to want to face. Although I agree with you that further economic development cannot resolve the problem of exploding school costs, I am more pessimistic than you are.

    The estimates of net revenue for recent developments in the City are based on a one time snapshot of revenues and expenditures. As such, these projected net revenues are overly optimistic because do not take into account the inevitable future growth in nonschool demands on the City’s budget, both on the operating side as well as the capital side (CIP), from the rapid increase in residents that these projects have generated. Already, we have seen a steady decline in nonschool outlays per resident for a number of years, but there is a limit to which these outlays can be squeezed.

    Additional developments that include large numbers of new housing units add to population growth will consequently excacerbate the stresses on the budget, even if they do not add significantly to school enrollment. This is especially likely because of the fact that apartment units generate so much less real estate revenue per unit than other types of housing, particularly single family homes and town houses, while concentrating a much higher population density per acre of land. This results in apartment dwellers (indirectly) generating much less revenue per resident to cover their demands for city nonschool (as well as school) services from the city than is the case for residents of other types of housing units.

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