ROCKPORT — The Rockport Select Board will convene June 5 at 10 a.m. in the Geoffrey C. Parker Community Meeting Room at the Rockport Opera House for an emergency meeting to talk about the Camden-Rockport middle school construction project, and the associated $25.2 million bond.
The meeting will be streamed at http://livestream.com/Rockportmaine.
The agenda is as follows:
1) Discuss whether or not to issue a statement on the MSAD 28 Middle School Project in time for publication in this week's newspapers
2) Determine the content of any statement on the MSAD 28 Middle School Project
The meeting results from a request from Select Board member Owen Casas, who has proposed issuing a statement concerning the “school situation,” according to an email from Board Chairman Ken McKinley, sent Monday evening to board members and the town manager.
“To get any statement in the print media, we will need to have something by midday tomorrow,” he wrote. “Doug [Cole] has also expressed a desire to have a meeting to discuss the issue.”
Last week, School Administrative District 28 School Board member Carole Gartley and SAD 28 Financial Director Cathy Murphy attended a Rockport Select Board meeting to present the SAD 28 plan to address the unanticipated 26 percent increase in construction costs associated with building a new voter-approved $26 million middle school.
SAD 28 Superintendent Maria Libby is on the June 5 Camden Select Board agenda to discuss the school bond issue and financial plan, as well.
Last spring, voters in Camden and Rockport approved issuing a 25.2 million bond to pay for the $26 million project.
The two construction bids that arrived in mid-May, however, were at least $5.8 million over the $22 million budgeted for actually constructing the 85,000 square foot school on Knowlton Street in Camden.
At the May 29 Rockport Select Board meeting, Gartley and Murphy outlined the school district’s financial remedy. The formula includes cutting $2.8 million from the school’s construction budget through “value engineering,” borrowing $25.2 million at a premium (up to $3 million with extended interest payments), and moving money from the SAD 28 fund balance to capital improvement.
The district anticipates putting a $25.2 million bond out to bid at a premium, on June 14, at which time the actual interest rate will be established by the market. The district has estimated the interest rates to be somewhere between 3.05 and 3.50 percent, but the actual rate for a 21-year bond will not be known until June 14. That will ultimately determine what the taxpayer can anticipate spending in interest payments over the next 21 years on the new school.
The district is holding a June 11 meeting to ask Camden and Rockport voters to approve a warrant article outlining the financial maneuvers. The June 11 vote precedes annual town meeting and election polls scheduled for June 12. (See image for the warrant article)
If a bond premium is not available, the board will secure additional bonds, instead, as allowed by law, according to an update from SAD 28.
At a May 30 special SAD 28 School Board meeting, the board voted, according to meeting minutes, to:
- Use the first year principal payment for construction
- Increase the use of the capital reserve fund
- Use insurance money from the gym floor
- Use interest income for construction
- Use some unassigned fund balance
- Accept a bond premium (or securing additional bonds if premiums are unavailable)
- The district will balance these additional sources of funds with cuts made through Value Engineering and has committed to doing its due diligence therein.
The Building Committee is to review value engineering options (design cuts and adjustments; e.g., no new playing fields, perhaps no new auditorium, flat roof, etc.) on June 19 at 4:30 p.m. in the Washington Street Conference Room.
The SAD 28 board, “will ultimately make value engineering decisions at its June 20 meeting that will begin at 7:30 p.m., likely in the Bus Barn,” said Superintendent Maria Libby. “There are three board meetings that night. An SAD meeting at 7 p.m. to elect a chairman and vice chairman and a few other reorganization items, a CSD meeting at 7:15 p.m. to do the same, and then the SAD meeting at 7:30 to consider the value engineering options.”
The SAD 28 board issued the following “Camden Rockport Middle School Information Sheet and Talking Points” last week.
Camden Rockport Middle School Information Sheet and Talking Points
Given the situation, to intelligently and rationally accomplish the objective passed by voters — to build the new school — within reasonable financial parameters.
- The original expected cost was $26.3 million. That was going to be paid with a $25.2 million bond and $1.1 million from the district’s Capital Reserve Fund.
- The maximum amount estimated for construction costs was $22,321,850, which includes a $1,069,850 bid contingency. The additional amount in the bond is for “soft costs” such as architectural, legal, and a 5 percent construction contingency.
- Ledgewood was the low bid (construction only) at $28,147,700.
- The bid was over budget by $5,825,850.
- The district budgeted $2,107,748 as the first estimated bond payment on the $25.2m bond for the 2018-19 school year.
- Of that bond payment, $1,323,748 is the amount of principal, and $784,000 is the amount of interest based on a 3.5% interest on a 20-year bond
- $25.2m was the amount in the warrant article for the bond
- Bond sale changed from May 30 to June 14.
- The district has spent over $1.1m on this project to date.
Likely Reasons why bids came in high:
- Contractors are less interested in competitive bids right now – it is more profitable to do Construction Management (CM) jobs. We would normally expect 5-6 bids on a project like ours and only had 2. A week before us, the $50m Caribou school project came in at $10-$12m over budget.
- Development is booming in Maine, especially around the Portland area. There are not enough skilled workers to meet the need.
- Costs of materials have risen.
- Two years passed since the budget projection and the bid opening. Time between was spent informing the community, then waiting for the regular 2017 June vote.
Pathway forward that the School Board is pursuing:
The following represents the various ideas that will work together to enable the district and communities to move forward with a new middle school.
- Value Engineering. The contractor estimates the district can cut up to 10 percent of the cost, but will require some painful cuts. This could account for $2.8m of the shortfall. These cuts will be weighed and balanced with the bond premium.
Bond Premium – The board expects to take a bond premium, which is a common financial tool to procure additional funds. The board could consider up to a $3m premium, but will balance that with cuts.
*Update: If a bond premium is not available, the board will secure add'l bonds instead as allowed by law. The totality of cuts and premium needs to yield a net gain of $3.8m.
- Extend the loan period by 1 year and delay the first principal payment. Use the $1.3 principal payment budgeted for 2018-19 toward construction costs. It is common to pay interest only during a construction loan.
- Capital Reserve Fund – The board plans to use an additional $400,000 from the Capital Reserve Fund. That is money that the district already has but would need voter approval to spend.
- Fund Balance – The board plans to use at least $67,000 (*Update: $100,000) from the district’s Fund Balance.
- Gym Floor – The district will use the $60,500 from the insurance payout due to gym floor damage a couple of years ago.
- *Update: Interest Income – The board will use $450,000 in interest income earned during construction.
A combination of these options will cover the $5.8m shortfall. There will be minimal impact to taxpayers, other than extending the loan payments by one year. The additional cost could be up to $4.75m, but that cost come in the form of an additional loan payment and slightly higher annual costs ($5-$7/$100,000 value). Until we get the bond bids, we don’t know the interest rates. The cost increase could be lower as we budgeted for a 3.5% interest rate. Next year’s tax impact would not change at all. Other years may not change from what we projected. We know there would be an additional year of loan repayment. None of these actions will change our overall budget for next year, being voted on June 12 at the polls.
Process to make this happen:
- We need to move the $1.3m principal payment from the debt service line to the Capital Reserve Fund, and we need voter approval to enable that to happen. It takes two steps.The board will work to balance value engineering with a bond premium. Neither of those two things require voter approval. *Update: The board decided to get voter approval for the bond premium (or add'l bond if a premium is not available to us) in an effort to be as transparent as possible.
- At the May 22 town meeting vote, voters approved moving the $1.3m amount from our debt service line to another warrant article.
- We will have another district meeting on June 11 seeking voter approval to move the $1.3m from that warrant article into the Capital Reserve Fund with approval to spend it on construction.
- Also at that June 11 meeting, we will seek approval to “move” the gym floor money and the money from the fund balance into the Capital Reserve Fund with approval to spend that money, plus another $400,000 that is already in there, on construction.
The MSAD 28 School Board has/had 2 additional Board meetings that are needed steps to carry out their solution to the high bids for the CRMS building project
Special Board Meeting
May 30, 2018
Bus Barn Conference Room
Board Approval of warrant to call a district meeting for June 11
Special District Meeting
June 11, 2018
Town meeting vote on addressing ways to finance the building project
Please note the regular board meeting previously scheduled for June13 has been changed to June 11, 2018. It will begin at 7 p.m.., following the special district meeting, and will be held in the CRMS cafeteria.