John Leimone, long time Falls Church resident and PhD economist with extensive experience in macroeconomics, budgets, financial markets and financial risks, has studied the $ 120 MM bond referendum plan and identified the following issues:

Problem: Justification of huge cost and 65 % increase in student capacity of proposed “community school” has not been clearly demonstrated.

a.  Demonstrable unreliability of  longer term projections of school enrollment & failure to address recent negative demographic trends.

b.  No independent Request for Proposal (RFP) to pin down costs & to separate basic needs from merely desirable features (e.g, a “competitive” gym already available in MEHMS.)

c. No comparisons of cost components between “community school” and existing school other than number of square feet & no available item-by-item justification for differences in individual cost components by function.

Problem: Extremely complicated and incomplete financing scheme, significant underestimates of true financing costs and flaws in assumptions.

a.  Assumption of money to be derived from economic development is highly speculative both in respect to actual realization and amounts that might be realized. Current estimates of $40-45 MM are nearly double recent market transactions for raw land.

b.  No estimates of infrastructure costs not covered by $120 MM school construction or netted from proceeds from economic development such as internal streets, improved access to Route 7 and Haycock, storm water, parking, etc.

c.  Nature of bond financing is complicated and increases total financing costs, thereby reducing resources for covering future school and City operating costs and infrastructure. (30 years vs. 20 years & fixed annual debt service of interest and principal instead of fixed annual principal payments)

d.  Financial strategem (e.g, use of capital reserves and drawdown of fund balance) and violation of approved financial policies to disguise true impact of debt and debt service on potential future tax rate increases

Problem: Avoidance of analysis of longer term budgetary impact and implications.

a.  The City Manager’s 10 year projection of 2 ½ annual growth in total city revenues & School Superintendent’s 30 projection of 4% annual growth in school operating costs, together with a doubling of debt service implies a financial crisis within 10 years.

b.  No strategy for bringing down school operating costs without major cuts in City’s non-school operating expenses

c.  What gets delayed or crowded out in 10 years? e.g, items in current 5 year CIP like library, City Hall, TJ expansion in the 5-10 framework, or other needed infrastructure?

d.  Lack of funds for adequate maintenance of existing City facilities and infrastructure (city buildings, streets, sidewalks,  storm water system, etc)

Problem: No serious analysis or quantification of potential risks to whole scheme underlying referendum approval.

a.  What happens if the City is unable to obtain a developer for the GMHS site on favorable terms or developer backs out if recession hits (a la City Center plan)?

b.  What are the consequences and costs if lags in building new school & teardown of existing school in time to meet contractual availability of land for potential developer or failure to meet other City contractual obligations to developer?

c.  How large are the infrastructure costs that the City will bear through additional bonding that are not covered in the $120 MM or the net funds from a developer?  

d.  What will be the impact of a recession (highly likely in the next 3-4 years) on City tax revenues & ability to meet debt service as well as school and non-school operating costs?

e.  How would the City cover almost inevitable cost overruns of school construction ( a la Duke Ellington School of the Arts in D.C)?  Note: An accurate & truthful accounting shows that cost overruns have been a feature of last several school construction or expansions.

f.  Problems/delays in obtaining approvals/agreements with VDOT, Fairfax County and possibly WMATA, VA Tech/UVA

g.  Downgrading of City’s credit rating because of the high debt to expenditure ratio and sluggish revenue growth in the context of already rising interest rates.

Problem: The total scheme underlying the referendum involves extremely complicated timing and coordination among multiple parties within a very short time period and lacks qualified City capacity (legal, financial, marketing, negotiating & risk analysis skills) to carry this scheme out as currently envisioned.

Problem:  Selective and misleading presentation of key information and rush to a decision before public has opportunity to absorb and process information adequately.

a.  No readily accessible and clear identification of cost components of new school vs. existing school

b.  Deceptive information on reliability of long term student enrollment projections

c.  No exploration of modular or less costly construction via independent RFP.

Problem: long term impact on nature of the City

a.  What is impact of huge expansion of planned apartments on nature of City (e,g. traffic congestion, parking, loss of village atmosphere, lower average net revenues per new housing unit, etc.)?

b. The impact of apartments on increased transient population and decreased citizen commitment to the long run quality of City life?

c.  How to deal with significant intensification of already difficult traffic congestion and lack of parking facilities?

d. Removal of 8-10 acres at GMHS that could be used for community uses: park land, swimming facilities, etc