In a recent blog posting to parents of Falls Church school children, a portion of which follows, Ms. Hardi addressed the issue of risk regarding the referendum. Either she is not willing to be forthcoming or she is simply unaware of the difference between identifying risk and analyzing risk. Analysis of risk means quantifying the depth and breadth of the financial, environmental, and development risks–and more–that could accrue and jeopardize the city and its schools–and sharing that information with the citizens. The City Council ordered no risk analysis prior to asking the citizens to vote for a huge, unprecedented $120 Million of debt for the next 30 years–when other less costly alternatives are available. The lack of caution by Ms. Hardi and her colleagues regarding the impact of this huge debt on the classroom operating costs of the schools–maintaining competitive teacher and staff salaries–is astounding.
In announcing the commercial value for the GMHS site, Ms. Hardi wildly over estimated the market value of the property. A more accurate value is based on the City assessed market sales prices for other similar acreage in the community–as The Post reported.
Council Member Hardi has either purposely or, lacking sufficient knowledge, inaccurately portrayed risk identification and “mitigation mechanisms” as some kind of functional parallel with risk analysis. Either way, her representations on this matter to the school parents falls far short.
In our next issue, Mark Kaye, MBA, JD will identify the areas that require risk analysis and will draw a contrast as to what the city should have done in this regard and what it has not.
“Regardless of your position for the referendum or if you’re still undecided, this is an important part of your decision-making. While we’ll never be able to plan for *every* possible risk or scenario, I hope you’ll read on and see that we’re not going into this blindly – risks have been identified by us and by experts, and several key mechanisms for risk mitigation, some inherent in the way we’re structuring the project, are in place.”
Falls Church City Council Member Letty Hardi
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 insure 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
Development and Financial Documents