Some of us thought the City planned to sign a deal with a developer before issuing any bonds for the construction of the new high school. We were wrong. This recent blog post from a councilperson alerted us:
“Note a key dependency: the majority of the school construction bonds would not be issued until there is a master developer agreement for the 10 acres of economic development (ie, school construction wouldn’t proceed) to minimize the risk that we would be footing the entire bill ourselves.”
What was that? Majority?
The City is going to issue $120 million in 30 year bonds in three phases for the construction of the new high school:
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- FY 2018: $18M (15%) architecture/engineering bond
- FY 2019: $54M (45%) construction bond
- FY 2020: $48M (40%) construction bond
The City Manager has told us that no construction bonds will be issued until there is an agreement in place with a developer of the 10 acres. What some of us did not understand is that the City is only calling bonds issued in phase 2 and phase 3 “construction bonds”. However the city will issue a $18 million architecture/engineering bond in FY2018 if the referendum passes.
Why is this worrisome?
- The City plans to release $18 million of bonds before there is a deal with a developer. It will cost us about $1 million per year for 30 years even if a new high school is never built.
- Politically, once City Council has spent $ 18 million they are more likely to accept a marginal or poor deal from a developer than to tell the citizens their $18 million was wasted.
- The developers are not dumb and they will recognize that they are in a superior negotiating position once City Council issues bond debt for $ 18 million and they will drive a harder bargain.
It is possible that no deal can be made with a developer, but we will be obligated to repay a $18 million architectural and engineering bond for a $120 million new high school plan. What will be the next step for City Council at this point? Well, read the above blog post from the Councilperson again. It appears the plan is to go forward without the money from a developer, meaning we could be “footing the entire bill ourselves”. In such a case, our real estate taxes would need to be increased about 15.5 cents for 30 years* – and that is just for the bond – that does not include any increase for other services. Think about that…. This is risky business — an $18 million gamble.
*link to FCC Capital finance plan by CFO Bawa
So if the referendum passes, the city will issue bonds for $18 Million for architectural drawings and such? That seems really expensive and risky especially if the land doesn’t sell for the price they anticipate – $40 million. I cannot afford 15.5 cent increase! Are they trying to get all the old people to move out of the city?
It seems that the City Council and School Board are set on building this $120 Million school despite the risks involved. If the bond passes, that is their green light to move forward even if the land does not sell or it sells for less than the City’s target amount of $40 million. We will be “footing this bill” ourselves which means a huge tax increase to pay the bond with no offset from land sales.
The city should have made any school build contingent on the sale of the land in order to mitigate risk.
Seems like we should vote NO until they decrease the risks and unknowns.
Why isn’t the bond tied to selling the land? Since it is decoupled, it means that City Council and the School Board can move forward on a huge debt project without selling the land.
This appears to be Mount Daniel all over again! We should have learned our lesson.
These unmentioned facts, ambiguous or misleading statements, lack of easily accessible detailed data and information have been a hallmark of this so-called “transparent” process and unfortunately are characteristic of normal conduct of City leaders. Then we hear complaints about “uncivil behavior” when these issues are uncovered and the persons responsible for such behavior are called to account.
We simply cannot afford “to foot this bill ourselves.” We need to vote NO for a better solution.
I don’t have much confidence that anyone really knows for sure what is going on or what to expect or what to do. It is hard to have much confidence in current city officials. They don’t have a great track record given what happened on other projects such as Mount Daniel where bonds were sold and interest started to accrue before having a formal agreement with Fairfax County, etc.
In the case of the pending referendum, I have heard that if the referendum passes, as part of next year’s budget there will be at least a 4 cent increase in the tax rate to cover debt service. Does that planned 4 cent increase represent for the debt service for the $18 million architectural/engineering bond in FY 18?
Am I correct that further increases in the tax rate are likely due to even higher debt service without any offsetting revenue?
The bond referendum is put before the voters to ensure we are willing to foot the entire bill—in the event the City issues them in order to get to a new school in least amount of time (we are hearing costs will rise if they wait…we are hearing other repairs will cost money that could be avoided(?) I’d we replace “now”, with or without development. I think developers will have us over a barrel if we vote for the referendum bc Council will take that as marching orders to get the new school built come h— or high water. I hope I’m wrong but I can’t believe the City used the words “construction bonds” to mask the $18M planned for 2018. I’m still wondering where the funds to repair the most pressing needs are…more reason to rush to full construction. There will be no incentive to act prudently once the bond passes. Just pressure to sell and get demolition underway to generate pennies.
I saw a document that said a new roof was $1.2 Million (but it doesn’t leak anymore according to someone that went on the tour). HVAC replacement was $6-12 Million but they only had one quote. Both will most likely need to be done if the referendum passes because students will be in there for 4 years. That could add another 3.3 cents on the tax rate.
Thanks. So with your numbers we are possibly looking at a total of 7.3 cents for a tax rate increase when budget season rolls around next spring when the dust settles after the November referendum and election….and guess what…. it could be more once you add additional school and non-school operating expenses that will start to bubble up, and with not much additional revenue. …at least not enough to amount to much.
I am not sure how and if they intend to replace the HVAC if the referendum passes. The tweets from Dr. Noonan said that the kids have to bring their jackets and that was his sales pitch for a new school – four years away, if that. So, I would imagine the heat needs to be fixed if not replaced. The heater is passed it’s lifetime but I guess they have continually decided not to replace major expenses on a regular interval. I would like to know why HVAC and elevators were not upgraded when it was time – was it a funding issue or did someone say don’t fix it because we want/need a new school and this may quicken the process?
The School Board needs to answer the question as to why maintenance was not done promptly and regularly. We are now paying for it dearly.
How about settling for a $75 or $80 million new school to free up what you need for the existing school since it will be needed for another 3 or 4 years…..and to ease the tax burden and financial risk. The process and lack of options to vote on should make voters angry.
And unless I am mistaken don’t forget the City Council did this since the City Manager and Planning Commission both favored a lesser referendum amount.
Falls Church homeowners, especially those who have large mortgages on properties with equally large tax assessment, are slated to take a potentially huge hit by a House Republican proposal that could eliminate the federal tax deduction for state and local taxes. The proposal would also cut in half the top mortgage interest deduction. The proposal says homeowners would be able to deduct interest payments made on only their first $500,000 worth of home loans. (Under the current law, homeowners can deduct interest on mortgages of up to $1 million.). Now, add to that the tax rate increase of 18 cents or more that will be extracted from taxpayers to support the construction of a $120 million high school. Look at your most recent tax returns and see what that means to you in dollars and cents. Are you feeling house poor yet? The only one of these scary-big tax hits we can control is the one attributable to school construction, and we should control it. We – city taxpayets and the city government – cannot reasonably afford $120 million, particularly when less costly, fully functional alternatives have not been fully vetted and presented to city residents for consideration.
Linda is correct. The people of Falls Church City may not be able to take the deduction of our high real estate taxes so it will cost us even more to live here. It’s time for Falls Church City to cut expenses.