Read Consultant’s Report Citing GMHS Development and Financial Risks: Council Does No Analysis but Authorizes Referendum

Subjecting Legislative Action to Independent Scrutiny Before Implementation is Good Policy

Referendum Asks Citizens to Intrust GMHS Project to Those Producing Mt. Daniel Debacle

Council Rejects Voter Option to Chose Lesser Financial Threat to Classrooms and Taxpayers

By Sam Mabry

Mabry served as the City’s Vice Mayor

Second in a Series

Identifying Risks Has Been Done.  What Has Not, Is Analyzing Those Risks

Unlike investors and developers, public officials are entrusted to manage public dollars–your tax dollars.  Their charge as stewards of the public purse is to be as risk adverse as possible to ensure uninterrupted public services at a reasonable cost to the taxpayer.

Two Council Members, Dan Sze and Karen Oliver, for substantively prudent reasons voted against asking the citizens to lash themselves to $120 Million of indebtedness for 30 years.

Councilman Dan Sze said that enough planning had not been done.

Five Council Members were not bothered–they plowed ahead without a risk analysis road map and offering the citizens of Falls Church the opportunity to vote the highest debt per capita in our area–some $15,000 for every man, woman and child in the City for up to 30 years.

The “Council Five” Chose the Most Perilous Financial Path for Taxpayers and Students

The “Council Five” were in possession of financial alternatives–much below $120 Million–to improve and expand GMHS.

The Council could have ordered a scaled analysis of the various options between $60 Million and $120 Million to quantify the risks and benefits of a GMHS development and rehabilitation/rebuilding project under different scenarios.

The “Council Five”–Dave Tarter, Dave Snyder, Mary Beth Connolly, Phil Duncan and Letty Hardi–would not.

Mt. Daniel Redux

Instead, Tarter, Snyder, Connolly, Duncan and Hardi are laying down a bet that they can manage favorably the financial and real estate dynamics over the next decade to develop a 10 acres without any disruptions as well as build a new school.

There is no indication or history which would demonstrate that this Council has the talents or experience to pull it off.

Mt. Daniel is a perfect precursor evidencing the botched management that could befall the GMHS project–but at 10 times the size and with an immeasurable increase in complexity involving legal, market and contractural timing risks.

Chrystal Ball Financial Projections: Even the Congress Seeks Congressional Budget Office Analysis 

Included in this magical Council financial construct is the projection that after 10 years, the commercial component will be tax revenue positive.  Its unimaginable that any project would be pitched to the voters–especially the size of this one–on nothing more than “Future Fortune Telling.”  How can any one, or any group, no matter how prescient, foretell the Nation’s economic future, especially since the world economies are so intertwined–10+ years from now?

Professional economists and investment managers, despite highly developed models, have consistently failed forecasting the timing of the end of business and financial cycles which can occur very abruptly.

This is the reason why most legislative bodies before voting on an financial issue, will tests its fiscal assumptions by sending the matter to an independent agency, such at the Congressional Budget Office at the Federal level, to scrutinize before the legislative body completes action on a bill.

The results are never perfect predictors, but the majority of this Council, obviously by its actions, does not share even such a cautious approach to financial policy making.

An Acting Superintendent Offered a Much Reduced Alternative to Create a Viable GMHS Campus 

Contradicting the propaganda that there is only one viable GMHS choice, there are multiple less costly alternatives. These alternative were prepared by consultants and debated by school personnel.  Accordingly, they possess validity and are alternatives on which you are being denied a choice at the ballot box.

In addition the experienced and seasoned Acting Superintendent stated that the campus could be functionally updated, repaired and added to for approximately $60 Million.

In our next series, we will review those options for renewing GMHS

What the Consultants Reported and City’s “Fortune Telling” Financial Projections

I have attached to the end of this article the full set of risks identified by the city’s consultants, which have not been subjected to risk analysis, following this article.

However, presented here are several of the principal findings by the consultants:

  • City’s desire for dense commercial development may be challenged given finite demand for office and retail uses at the GM site

  • Experts believe that the end of current growth cycle is approaching with attendant difficulty financing and securing tenants for projects

  • Development risks are not easily transferred to the private sector 

  • There may be limited demand for dense mixed use of the site

  • Interest rates will rise by groundbreaking

  • City has not conducted due diligence regarding site to test for environmental issues that may increase the cost of onsite development and reduce the financial return to the city

 

The Development and Financial Risk Documents

 

 

 

1 Comment on "Read Consultant’s Report Citing GMHS Development and Financial Risks: Council Does No Analysis but Authorizes Referendum"

  1. Sam your logic is impeccable.

    The willing suspension of any interest in doing proper due diligence regarding financial risks is actually mirrored in the utter lack of due diligence in the justification for a new school.

    The difficulty that the opponents of the Bond have faced is that it is an argument between factual information provided by the “vote no” group vs. the “belief system” of the vote yes group that a new school is essential to: a) improve educational performance, b) enhance teacher recruitment and c) facilitate teacher retention.

    No one doubts that a significant rehabilitation of the GMHS facility is required; however, it appears that the need and justification for the last $60 million for the new school is made out of whole cloth.

    The last two components, b) and c), are difficult to evaluate; the first assertion can be evaluated.

    According to CATO Institute reports (https://www.cato.org/blog/public-school-spending-theres-chart) based on DOE provided information, over the last 40 years for test results, for reading, math and science scores have remained flat while total cost for education has increased almost 200%. A more conservative analysis by “Politifacts” (http://www.politifact.com/virginia/statements/2015/mar/02/dave-brat/brat-us-school-spending-375-percent-over-30-years-/) found the total cost increase for education to be 117%, but the conclusion is the same. It appears that the School Board never did the due diligence to support its claims.

    Cato chart can be found here: https://www.cato.org/sites/cato.org/files/wp-content/uploads/Cato-pct-cost-scores-Coulson-Sept-2012.gif

    Mt. Daniel Redux,

    Sam you are entirely correct to raise the spectre of Mt. Daniel. The School Board has blandly asserted that the GMHS School will not repeat the mistakes of Mt. Daniel. In another example of the complete failure of School Board transparency the School Board never produced a “root cause analysis” of what went wrong at Mt. Daniel. If they don’t know what caused the problem, (have not identified them) how can they know that these “root cause issues will be addressed let alone fixed.

    This is one of the many “belief system” issues that should have been part of the financial risks.

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