Holyoke Releases Updated Financial Projections for Middle Schools Project Text Size
Holyoke Releases Updated Financial Projections for Middle Schools Project
The City of Holyoke, in partnership with Hilltop Securities, the City’s financial advisor, is pleased to release the following updated financial projections for the proposed “Middle Schools Project.” The projections show a significant decrease in the expected annual cost to Holyoke taxpayers from previous presentations to City Council.
The proposed project, which provides for the construction of two new middle schools on and adjacent to Peck and Lawrence schools, was recently approved for up to $75.8m in funds from the Massachusetts School Building Authority. In order to accept the funds from the MSBA, voters will need to approve a debt exclusion override which will be on their November 5th election ballot. The debt exclusion is a common tool in Massachusetts to guarantee school project funding by exempting the project from the state’s Proposition 2 ½ law.
Information relating to the project has been continuously updated by Project Manager, Margaret Wood of Pinck & Co., but projections related to the impact on Holyoke taxpayers have not been updated since April of 2019. Now that the project costs have been finalized and the MSBA funds have been approved, the City has been able to work with its financial team to produce updated numbers.
The chart labeled “Conservative Estimates” shows the cost of borrowing to the city if issuing debt over a 20, 25, or 30 year time period. “Avg. Annual Cost” is the total annual cost to the city, while “Avg. Annual Payment” is the expected annual cost to the taxpayer after a $1m financing commitment from Holyoke Public Schools has been factored in. The subsequent rows show the tax impact per $1000 valuation of residential and commercial properties if the council decides on an even split among residential and commercial taxes. The starred note at the bottom highlights that these figures do not take into account any future economic growth to the city or changes in interest rate, and are estimated as a baseline scenario.
The newly released estimate of 68 cents per $1000 on a 30-year bond is well below the initial estimate of $1.16 despite a slight increase in project costs. The change in cost can be attributed to two significant factors; the $1m commitment from Holyoke Public Schools, and updated interest rates that reflect current market conditions.
These updated figures also allow for the calculation of the tax impact on the average single-family home in Holyoke which is currently valued at $190,637. For a home at average valuation a resident could expect to pay $129.60 annually on a 30-year bond toward the middle schools, should the project move forward. This number is significantly below original estimates that were approximated to be around $250.
The annual cost of $129.60 could be higher if the city opted to go for a shorter duration bond, but would save money in the long run. The increase would not take effect until the first payment is due (estimated 2-3 years out), which would provide the city with additional time to decrease expenditures.
“I want to thank the city’s financial team and project manager for working through the details to put these numbers together for the people of Holyoke. Projects of this magnitude are incredibly complex, but I believe that people really need to know what they are or aren’t voting for in November. My office will be sharing this information with any individual or organization who is interested in learning more about the project, and is available to answer any questions about the proposed project,” said Holyoke Mayor Morse.
Project Manager Margaret Wood has also confirmed that the city’s allocation from the MSBA is at the maximum rate of 80% reimbursement for eligible costs, and that the discrepancy between the final numbers is due in large part to the MSBA’s cap on construction costs which are capped to distribute available school funding more broadly and are not tied to current regional averages.
She explained, “The 80% ‘base’ reimbursement rate is easily misunderstood because of the complexity of the funding formula: that said, when we do the math, Holyoke’s effective reimbursement from the MSBA is among the highest in the state. This really is the best-case scenario the MSBA can provide under the current enabling legislation and represents a once in a lifetime opportunity.”
Holyoke voters will have the opportunity to weigh in on the project on November 5th; A “Yes vote” would send the project to City Council for a vote on issuing the bond, a “No vote” would mean that the City would pass on MSBA funding for the foreseeable future.
An informational session, with Q&A, will be hosted by The Mayor’s Office, in partnership with Holyoke Public Schools and Representative Vega. The event will take place on October 7th, 6pm, at Holyoke High School on 500 Beech St.
Posted on September 18, 2019 by Mayor's Admin