Council’s 5-2 Referendum Vote Underscores Serious Financial Issues that Can Adversely Impact Our Students and Homeowners

Two Council Members Cast Votes Against for All the Right Reasons

Vice Mayor Connolly: Citizens Should Take a “Leap of (Financial) Faith” 

By Ira Kaylin

Kaylin is a former member of the City Council and co-chair of its Finance and Budget Committee

Dereliction of Duty

The City Council majority recently approved the Referendum language by a 5-2 vote and in doing so demonstrated a gross disservice to the citizens and our students.

The Minority Placed Good Policy Ahead of Political Expediency

Council members Oliver and Sze: voted against the Referendum language for all the right reasons: Council member Oliver for failure to submit Requests for Proposal (RFP) for an INDEPENDENT evaluation of a GMHS renovation within a specific dollar limit; Council member Sze, to summarize his comments, believed due diligence had been wholly inadequate in terms of project design, that we are operating in the decision making zone of “not knowing what we don’t know”. He stated that our strategy has been based on the hope that everything will work out. He also stated “hope is not a strategy”.

The issues raised by the Council members above are eminently logical and reasonable. It is frankly, beyond comprehension, that in the extended period of discussion that Council, especially its leadership, would not have required an independent request for a proposal (RFP) for a renovation/modular expansion of GMHS, especially following the estimation of the previous Acting Superintendent that a renovation could be done for $60-$70 Million to meet the needs of the school.

The reason that the views of Oliver and Sze were ignored in their entirety is simply that the decision to move the Referendum forward was made months ago. The lengthy discussion was a charade intended to give the impression that all citizen concerns were being taken into account—they were not, not even close.

The five members of Council who voted in favor of the Referendum–Tarter, Connelly, Duncan, Hardi and Snyder have accepted the logic put forward by Vice Mayor Connolly that the citizens should just make a “leap of faith” and not be concerned with financial details.  I believe her assessment in this regard is correct.

Vice Mayor Connolly is suggesting that the parents of our youngest children also take a “Leap of Faith:” That after paying for GMHS, there will be ample funds for classroom needs when the children reach the higher grades.

The City Council Has Let the Citizens and School Children Down at Every Turn

As will be described in the following, City Council has no specific idea or plan on how we will pay for both Capital Costs and the much larger funding needs for both teacher salary increases and new hires for expanded student enrollment. It is essential to understand that it is the younger students, those in Thackeray, Mt. Daniel and TJ, who will bear the brunt of the budget pressures.

  • It has never required the City Manager to request an INDEPENDENT Request for Proposal (RFP) for a renovation of GMHS within a specified cost limit.
  • It is possible that with a lower cost renovation it may make more sense not to sell/lease land and keep the 8-10 acres for sports fields and other community activities. This option has never been analyzed by the City Council since the Council, as mentioned above, had already decided to move forward with the Referendum months before the actual vote was taken.
  • It has never demanded that the City Manager’s tax rate projections include School and City expenditure growth for all costs not just Capital costs. After all in less than 5 years the growth (as projected by the new Superintendent) in School Operating Costs, alone, will be greater than the yearly cost of GMHS debt service.
  • The Council has accepted without dissent that the remaining $10 Million of Water Sale proceeds that were PROMISED by the Council to be used for capital projects by which all citizens could benefit, has now been allocated to buy down yearly School debt service in order to hide the actual cost of school costs.
  • By proposing a 30 year, level payment bond to fund the new high school the total cost of the proposed GMHS project increases to around $206 Million–including interest on the $120 Million bond issue.  On the other hand a 20 year level principal payment  bond would cost a total of around $170 Million including interest or $36 Million cheaper.
  • Other than Ms. Oliver and Mr. Sze no one on the Council will even discuss the wisdom of spending an additional $36 million in debt service by stretching out the term of the bond to 30 years. The City Manager has all but admitted that the 30 year debt is desirable because it hides the real tax rate impact of less costly debt.
  • In his view spending an additional $36 Million more than necessary somehow makes it more affordable. The City Manager seems to have forgotten that the City cannot deduct mortgage interest charges that are available to home owners and businesses.

The Council has violated its Fiduciary responsibility to treat all citizens equally rather it has explicitly decided to favor one group of taxpayers at the expense of other citizens.

Economic Development: A Strategy Built on Aspirations and Dreams

The costs facing the citizens are numbingly large. Given that we cannot deduct interest charges the actual cost of the borrowing is not $120 million it is around $200 million. Covering upcoming capital and operating costs through real estate taxes alone is not politically acceptable.

The rhetoric delivered by the Council that the City can successfully bridge the gap between upcoming expenditures and projected revenue is an old myth has been strengthened and buffed up: That is, we can cover much of the impending budget shortfalls through aggressive economic development.

According to the breathless commentary spewed forth by the Falls Church News Press, the 8-10 acres available for economic development is one of the best locations in NOVA for economic development; it will produce copious amounts of revenue, the land sale/lease and the increase in tax yields will be enough to make the cost of the new school manageable and bearable.

Stepping Back and Deconstructing These Claims

  • The land is appraised at $40-$43 Million. The actual market value, that is the value at the time of sale/lease, is unknown. The Mayor assumes that the Developer will cover costs of roads, storm water and sewer infrastructure etc.
  • Since the public has NOT seen any estimates of the infrastructure costs that will be associated with the development of the 8-10 acres how does the Mayor know what the value of the land will be?

Magical Thinking

  • City-hired consultants believe that the proximity to a Metro stop is an ambiguous advantage and in fact, the Metro stop may not be that beneficial.
  • Betting on receiving a $40 Million cash infusion suggests a City risk bearing profile more like a gambler than guardians of taxpayer’s resources.
  • The projected tax yield of $3.2 Million is proportionately (in terms of yield per acre) no better than what we have already achieved.
  • To achieve, given all of the hype, what appears to be a rather mediocre tax yield it assumed that the project would build almost 1000 new apartment units.
  • The project tax yield estimate assumes completion 10 years after the new GMHS is complete or around 2030 the time when the School estimate assumes an Operating Cost increase of $30 Million over the current level.

For Illustrative Purposes

For economic development to generate net income sufficient to cover the full $30 million a year we would need 10 more projects of similar size as the one currently envisioned.

  • 80 to 100 acres of developable land would be required; i.e. acreage that can be developed without trying to consolidate individual parcels.
  • We would be adding 10,000 new apartments which in turn would imply a population increase of 20,000 new residents.
  • The City budget would have been increased, probably double, especially for security and safety requirements.

This information is provided for the purpose of forming a context from which the citizens can decide to believe or not to believe claims that we can “grow” our way out of a looming budget crisis that would result, in large part, if the Referendum is approved.

We Have to Face the Facts

School Division cost increases will be, in the end, borne largely by individual Homeowners in the form of tax rate increases. There is simply no way around it. No wonder that the City Manager is so reluctant to provide multi-year projections. Citizens have a right to know what their financial future will look like if we go forward with a $120/200 million GMHS and all the attendant administrative (Teacher) salary costs.

At today’s tax rates it would take an additional 62 cents to cover costs.

Make no Mistake

The real victims of the extravagant spending plans of the School Board/Superintendent will be at the expense of the youngest students. As they approach their Middle School and High School years’ budget pressures around the City/School budget will tighten like a hydraulic vice.  These students will be the most vulnerable to budget adjustments that will have to be made. They will be the real victims of spending $120 million plus another $100 Million for bond costs for a new High School.

Prudent Next Steps

We must go back and analyze, with fresh eyes, and with complete and credible information, how to best proceed to protect our children’s education and the taxpayers .

That requires that the November Referendum NOT be approved.

4 Comments on "Council’s 5-2 Referendum Vote Underscores Serious Financial Issues that Can Adversely Impact Our Students and Homeowners"

  1. Curtis Schaeffer | September 14, 2017 at 7:54 pm | Reply

    Thank you for your many strong arguments supporting a NO vote on the upcoming referendum. I am charged with debating the NO side of the issue at this Sunday’s Oxford style debate. In doing some simple research, I found that both recent high school renovations and projected high school construction is considerably less than the projected $120 million GMHS. A useful way to look at this is cost per student. The recent $52 million renovation (2015) of George Marshall HS cost $26,000 per student. A planned high school for Western Prince William County for 2557 students at $133 million is $52,017 per student. The $120 million GMHS plan based on a feasibility study for approximately 1,000 students (this is probably a high estimate) when completed in 2020 comes out to $120,000 per student. Too expensive, too much debt and fiscally irresponsible with a burden placed on taxpayers and leaving the younger students hamstrung in the future (as Ira pointed out) make the referendum a clear NO vote. Then the City Council goes back to work to rethink and re-plan.

  2. Great reporting. There are far too many unknowns and too much missing information to vote for such a huge referendum. It is far above what is affordable given a very uncertain picture of revenues and little, if any, on costs…imagine the result if there is a downturn in the economy which many are predicting. Keep in mind as stated before, the Vice Mayor who seems to be the principle cheerleader is an employee of the school superintendent. I view her as little more than a community organizer for the schools who sits on the City Council, who probably knows no boundary on the amount of the school referendum, who cares little about what is affordable or keeping folks living here who are on fixed or stagnant incomes, and who would probably support a $200 million dollar referendum.

    City officials need get all of the information, on both the revenue and cost side, in front of taxpayers/voters, and spell it all out in a complete financial model and not think taxpayers are not paying attention or too naive to see the complete picture.

  3. Ira, you have done a great job in spelling out the key issues, backed by hard data, that citizens should take into account when voting on this rushed referendum. It is disheartening that our City leaders have taken this decision, which poses an existential threat to the City’s longer term political & financial independence, without providing citizens adequate information and time to digest and debate its implications. Although we have had several town halls, the information has been manipulated and skewed to focus on primarily on architectural design and the promise of ephemeral economic development to offset the estimated costs. I would only add that no one has addressed the reliability of the methodology and assumptions underlying the Weldon Cooper projections of student growth (and implicitly population growth) the underlie the decision to propose building a facility that assumes a near doubling of the high school student body in outer years.

    • Curtis Schaeffer | September 14, 2017 at 8:16 pm | Reply

      I agree with you John on the student growth projections but the 1200-1500 student population could be possible in the future if the City of Falls Church continues to enable developers to demolish older homes and build considerably larger homes and if the City continues to build multifamily residences. For example, 70% of the proposed commercial development for the 10 acre parcel where Mason currently sits is for multifamily residences. More residences, more students! It becomes a self fulfilling prophecy-if we build them, the students will come…

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