Financial impact of renovation project hinges on many variables
NAUGATUCK — No matter which way one cuts it, renovating Naugatuck High School is going to cost taxpayers a pretty penny. But, proponents of the plan say doing necessary repairs now will cost a lot fewer pennies than waiting another five years while the school continues to deteriorate or doing basic maintenance piecemeal.
Although the total price tag for the project is nearly $81 million, the borough’s cost is an estimated $24.9 million to $37.4 million, depending on how much the state is willing to reimburse the town.
Naugatuck’s reimbursement rate is currently 75 percent, but not everything on the proposed renovations would qualify.
Most notably, the upgrades to the school’s athletic fields, including switching the location of the soccer field with the baseball and softball fields and adding an eight-lane track around the football field would only be reimbursed at 37.5 percent. The pool natatorium, including an upper level observation deck for fans, would also receive the 37.5 percent reimbursement rate.
After state reimbursement, the borough would pay about $2 million for the fields and $2 million for the natatorium.
Additionally, plans to install a synthetic surface on the football/soccer field at a cost of about $780,000 would receive no reimbursement. Nor would about $1.4 million of indirect costs, including bond expenses, legal fees, new furniture, and various inspections.
Most of the uncertainty about the borough’s final obligation has to do with the size of the school, which is currently too large in proportion to its expected population over the next eight years, according to state guidelines. In the worse-case scenario, the state would only reimburse Naugatuck for renovations on 237,000 square feet of the school’s current 304,000 square feet.
Officials plan to apply for exemptions to this rule, but they won’t know for sure how much the state will kick in until the project passes in referendum.
“I wish there was a way to do that prior to the referendum, but that’s not how the process works,” Mayor Robert Mezzo said.
Burgess Ron San Angelo, the only member of the Board of Mayor and Burgesses, Board of Education, or joint boards who has doubted the project, said voters should know exactly how much the project will cost before they have to vote on it.
“I don’t feel that they’ve really studied the issue as thoroughly as they should have,” San Angelo said.
Even if the borough does not renovate the high school as new, it will need structural repairs and basic maintenance in the coming years, officials say.
“You’re going to need to do something there in the next five years. You can’t simply allow buildings and grounds to deteriorate,” Mezzo said.
San Angelo argued the structure of the building is sound, so there’s no immediate need to fix it.
“I don’t know why we need to act now,” San Angelo said. “Really, they’re talking about a building that doesn’t look as pretty as it should.”
The school is also in violation of a number of health, safety, building and Americans with Disabilities Act codes, which it will have to rectify in order to qualify for state aid.
Some, particularly San Angelo, have argued that the school has not been in compliance with those codes for years. So theoretically, San Angelo said, the borough could get away with doing repairs to cracks in the walls without worrying about widening doors for people in wheelchairs.
This would, however, leave the borough open to litigation, others have pointed out.
According to estimates from Kaestle Boos Associates, the cost to simply bring the school up to code compliance would be about $46 million, with the borough contributing about $22 million of that amount.
“If the costs are in the same ballpark to do a complete renovation project, then you’re going to get that much more value,” Mezzo said.
The borough can also complete the renovate-to-new project without all the pieces currently included in the plan. However, if the borough doesn’t complete renovations to areas such as the athletic fields, auditorium, locker rooms, or pool, those pieces would not be eligible for state reimbursement for another 20 years.
“There are some things that don’t really have to be done,” San Angelo said. He said the borough should take a closer look at which components of the plan are absolutely necessary and which ones it could skip.
All of these options would be cheaper than building a new school, according to the firm that did the study. Kaestle Boos’ estimates building a new school on the same site would be $105.5 million with the borough paying $43 million of that and $103 million on a new site, with the borough paying $45 million. In both cases, the school would be smaller than the current facility as per state guidelines.
The borough plans to pay for the renovations through a series of bonds. The majority of the payments would not begin until 2015, once construction is completed. The total debt obligations of the borough will fluctuate as it pays off some of its older bonds.
According to projections prepared by borough Controller Wayne McAllister, payments towards the high school will average a little over $2 million per year over a 20-year period including interest. The projection assumes the renovations will cost the town $30 million.
The greatest impact of the school bond will be in 2017, when it will add about $430,000 to the town’s total debt payments. After that fiscal year, the town’s debt obligations will continue to decline, assuming the borough doesn’t take on any other bonds.
It is hard to say what the impact of the project will be on taxes, since the mill rate depends on the value of the Grand List, other revenues and expenditures. This year, one mill equaled about $1.9 million in revenue for the borough, but that number varies from year to year.
“No one in the finance office is comfortable putting a figure out there,” Mezzo said. “If people want to make their own conclusions based on today’s numbers, they’re free to do that. … I think our job is to be credible and to present the facts.”
San Angelo said his biggest issue of concern is what the project will cost in terms of a mill rate increase.
“Citizens before they vote should at least have a good range of how they’re going to go up,” he said.
Mezzo has argued that now is the best time to begin this project because the borough’s bond rating recently went up to AA-, meaning the borough can snare a cheaper bond. The interest rate on municipal bonds is currently about 3.5 percent.
State reimbursement levels are also very high, but may go down in the future if the project is put on hold, Mezzo said. He also noted that construction costs are also cheaper than usual in this poor economy.
“There’s a strong economic argument. … If I was a CEO of a corporation and I didn’t bring this plan forward for discussion with my board, I wouldn’t be around for very long,” Mezzo said. “It’s a sound business decision in my opinion.”
Despite the economic benefits of renovating the school now, some have doubts about whether Naugatuck tax payers can afford it.
San Angelo said the citizens he’s talked to are concerned about how they are going to pay for the project. With an unemployment rate of 11 percent, he said now is not the time to add to their burden.
“It’s putting a lot of pressure on homeowners who are having a lot of difficulty now paying for their homes,” San Angelo said.
Mezzo said the argument that this is a bad economic time sounds good, but he doesn’t agree with it.
“In reality, given the way the repayments are structured, the full impact doesn’t take effect until a couple years down the road,” Mezzo said. “Quite frankly, if the economy has not improved in three to four years from the significant depths to which it’s sunk, we’re going to have a lot more problems throughout this country.”
Mezzo pointed out that Naugatuck taxpayers have been contributing their state tax dollars towards building schools in other towns, such as Beacon Falls, Oxford, Ansonia, and New Haven for years.
“If you look at the communities in the Naugatuck valley, almost all of them have built some school facility in the past 20 years. We have not,” Mezzo said. “We need to be making decisions that have long-term benefits and consequences considered.”
The borough is holding a public hearing Oct. 26 at 6:30 p.m. in the Naugatuck High School auditorium on the project, which will include a tour of the school.