Questions & Answers - Financial
1. What is the borrowing cap?
RESPONSE: According to the report issued by Public Financial Management (the Methacton School District’s financial advisor), the remaining borrowing capacity as of the date of the presentation (January 23, 2024) is $201M. Assuming that the borrowing for renovation/new construction takes place over a 3-4 year period and during that same 3-4 year period the district continues to experience moderate increases in assessed property value while paying down existing debt, that available limit will increase.
2. Is scenario 1 in the PFM borrowing scenarios above the Act 1 index?
RESPONSE: No. The Act 1 index limits the school district’s real estate tax increases each fiscal year unless the proposed tax rate increase is approved by voters through a referendum or the school district qualifies for an Act 1 exception approved by PDE. No borrowing scenario is estimated to require the district to go above the Act 1 Index.
3. Are we starting from 0 to fund the minimum $70M investment?
RESPONSE: The determination on how a renovation or new construction project is funded has not be determined. The obvious choice is through borrowing the funds needed to address a project. The district has some capital project funds to potentially use to offset borrowing.
4. Is the referendum threshold dependent on the amount of debt?
RESPONSE: The threshold is dependent on a number of factors including debt and revenue. By law the threshold is based on a formula that considers 225% of the average of the last three years of revenue less any existing debt.
5. Is the $54.29 over and above the normal tax increase to cover salaries, benefits, operating costs etc.?
RESPONSE: The scenarios listed below represent the estimated tax impact on borrowing for these listed amounts ONLY for average district property valued at $444,824.60. This does not take into consideration other cost increases in annual operating budget.
Scenario 1 - $100M Borrowing tax increase is $54.29
Scenario 2 - $140M Borrowing tax increase is $144.06
Scenario 3 - $180M Borrowing tax increase is $278.52
6. How many years will the tax increase in the PFM scenarios be in effect?
RESPONSE: We estimate borrowing over the next 25-30 years and that the tax impact will continue forward.
7. Did we prepare a lifetime cost analysis for the borrowing?
RESPONSE: The cost analysis was presented to the Board on January 23, 2024. That presentation can be found here. The cost of borrowing is estimated given the current market conditions.
8. What is the interest cost on $210M?
RESPONSE: The interest cost on $210M has not been factored into any scenario presented to date.
9. Would like a full financial (detailed) plan on the cost of ownership of the school with option 4.
RESPONSE: A financial analysis of an actual approved plan will be provided. We are currently working with preconceptual ideas that have comparative costs (here) and a financial analysis that estimates borrowing scenarios (see here).
10. What is the interest cost of borrowing $210,000,000?
RESPONSE: We have not estimated the interest of borrowing this amount. It is not an amount that is associated with any of the borrowing scenarios or preconceptual options.
11. What is the lifetime cost paid by a taxpayer on a $210,000,000 new high school?
RESPONSE: We have not estimated the interest of borrowing this amount. It is not an amount that is associated with any of the borrowing scenarios or preconceptual options.
12. Why does tax rate jump so much between scenario 1 and scenario 2 for only 40M more?
RESPONSE: Below you will find the image depicting the wrap around debt and the impact or peak of the debt based on the borrowing amounts. The amount and peak point drive the jump between scenarios.
13. Possibility to use grants to pay for some upgrades?
RESPONSE: The district will be seeking grants and other financial options to limit the tax burden before, during, and after renovation/construction.
14. What is the current annual cost to operate the sewer plant? Compared to effluent charges by LP?
RESPONSE: The sewer plant is not separately metered for electric. The below is the estimated electrical with other known annual planned expenses:
$30,000 was spent at the end of 2022 for maintenance to the sand beds. We also must renew the NPDES permit every 3 years at a cost of $3,000. The above costs do not include other labor and expenses for general maintenance and upkeep.
Using the Arcola/Skyview campus as a benchmark (same # of grades as HS) and upsizing for Farina and Transportation, it is estimated that the annual effluent charges to LP would be approximately $28,705 for collection and $22,440 for treatment for an annual total of $51,145.
Annual Fee
M&B Environmental (Operator)
$17,000
Lab Testing/Sludge Hauling/Supplies & Chemicals/Repairs
$28,000
$19,500
Pollution Insurance
Electricity (estimate - 5% of $300K)
$15,000
Total
$79,500
15. Renovation costs, what data did you use to calculate those?
RESPONSE: The owner’s representative used recent projects of similar type projects.
16. Impact on homeowners, what is the interest cost on 200M over the payback period?Effect on taxes?
RESPONSE: We have not calculated the interest cost of $200M. This was not part of the fiscal scenarios presented on January 23, 2024. If the Board approves the district to explore options 4A/B further, the district will present fiscal analyses on each of the developed concepts.
17. How do you make a decision to explore the most expensive option, Option 4, without evaluating the less expensive options (Option 1, Option 2 and Option 3)?
RESPONSE: This provides direction in an exploratory process to develop concepts to provide greater specificity on a potential comprehensive plan; provides the greatest potential in addressing challenges, future programming, and optimal experience; is likely the least disruptive to the current and future educational operation/program/experience; and establishes a ceiling of outcomes with which future modifications can be derived/scaled back/consider alternates. All other options are simply estimated to cost less and address less priorities.
18. Tax Increase for this year it is projected to be 5%. You’re going to add that to our current increase?
RESPONSE: The tax impact of borrowing for facilities will be included along with any other tax impact for operation of the district.
19.What is the projected fee or cost for an engineer/architect to develop Option 1?
RESPONSE: District is in process of seeking an architect for the high school matter. We estimate that fees can range from 4%-6% of a given project.
20. What is the projected fee or cost for an engineer/architect to develop Option 3?
RESPONSE: District is in process of seeking an architect for the high school matter. We estimate that fees can range from 4%-6% of a given project.
21. What is the projected fee or cost for an engineer/architect to develop Option 4?
RESPONSE: District is in process of seeking an architect for the high school matter. We estimate that fees can range from 4%-6% of a given project.
22. Is there any analysis of the cost to develop each option (Options 1, 2, 3 and 4) vs. just the New School Option (Option 4)? Could you provide that to the public?
RESPONSE: The six-month exploratory process for option 4 is estimated to cost between $125K - $200K. All other options will increase in time and costs.
23. Has the District and/or its consultants performed a detailed analysis of cost and impact to the taxpayer for each of the Options, by year, and over the life of the loans?
RESPONSE: The District’s financial advisors have provided a detailed analysis on three borrowing scenarios of $100M, $140M, and $180M. These can be found here
24. How much would each Option cost the average taxpayer per year and over the life of the loans?
RESPONSE: Based on the below listed borrowing scenarios:
• Scenario 1 - $100M Borrowing results in a tax increase of $54.29
• Scenario 2 - $140M Borrowing results in a tax increase is $144.06
• Scenario 3 - $180M Borrowing results in a tax increase is $278.52
On an average home value is $444,824.60
25. Why is moving forward with Option 4 the most “Cost-effective solution”?
RESPONSE: This provides direction in an exploratory process to develop concepts to provide greater specificity on a potential comprehensive plan; provides the greatest potential in addressing challenges, future programming, and optimal experience; is likely the least disruptive to the current and future educational operation/program/experience; and establishes a ceiling of outcomes with which future modifications can be derived/scaled back/consider alternates. All other options are simply estimated to cost less and address less priorities.
26. We were told at the forum that the projected costs referred to in the presentation are mere estimates and do not reflect what the actual costs may be. Is this true and if so, why isn’t the District pursuing the “actual” costs for each and all of the individual options?
RESPONSE: The costs listed in the February 20, 2024 presentation of preconceptual options are estimates based on recent similar projects. With the approval of the Board on March 26, 2024, the district will proceed with development of concepts with more detailed costs. Actual costs do not become available until the district has determined a project on which they would go out to competitively bid. Only then will actual costs be realized.
27. What is the total interest cost associated with a $205,000,000 borrowing for a New High School? Option 4B. Please provide me with the dollar figure and not a reference to a technical document.
RESPONSE: We have not made the calculation on the borrowing of $205,000,000.
28. What is the total interest cost associated with a $183,000,000 borrowing for a New High School? Option 4A. Please provide me with the dollar figure and not a reference to a technical document.
RESPONSE: We have not made the calculation on the borrowing of $183,000,000.
29. Dr. Zerbe told our forum that the total cost for Option 4B was projected to be $440,000,000 dollars. Is this accurate? If not, what is the total projected cost for Option 4B.
RESPONSE: The District presented the costs associated with borrowing scenarios:
• Scenario 1 - $100M Borrowing.
• Scenario 2 - $140M Borrowing.
• Scenario 3 - $180M Borrowing.
The total costs for each borrowing can be found here. Each preconceptual option has not been calculated for total costs at this time.
30. Dr. Zerbe confirmed that the total interest cost over the life of the loan for Option 4B was $240,000,000 dollars. Is this accurate? If not, what is the total projected interest cost for Option 4B over the life of the loan(s).
RESPONSE: Dr. Zerbe shared the estimated costs of borrowing scenarios which can be found here.