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SPECIAL TOWN MEETING / February 4, 2019
Index - Warrant & Explanation Report
Special Town Meeting - February 4, 2019
No. Title Page 1 State Public Works Grant 1 2 Ivan G. Smith Elementary School 1
Smith Project Exhibits
Exhibit Title Page A Project Timeline 7 B Proposed Site Plan Layout 8 C Proposed Building Layout 9 D Project Budget & Ineligible Costs 10 E Debt Modeling Comparison 11 F Tax Impact Analysis 12
SPECIAL TOWN MEETING / February 4, 2019 Page 1
Warrant & Explanation Report Special Town Meeting
February 4, 2019
Article 1: State Public Works Grant. To see what sum the Town will vote to appropriate for public works projects, such sum to be reimbursed by the State Transportation Bond Bill, or take any other action thereon.
In October 2018, the Baker administration proposed additional Chapter 90 funding in the FY 2019 supplemental budget, which was approved by the Legislature through the State Transportation Bond Bill. The Town’s portion of these funds, based on the Chapter 90 formula, is $181,028. Approval at Special Town Meeting will allow for these funds to be added to existing Chapter 90 this spring for roadway-related improvements as part of the Town’s ongoing pavement management program. The Board recommends that the full amount of the Town’s supplemental apportionment of $181,028 be authorized by Town Meeting.
Article 2: Ivan G. Smith Elementary School. To see if the Town will vote to appropriate, borrow or transfer from available funds, an amount of money to be expended under the direction of the Town Manager and School Building Committee for construction, renovation, additions, demolition, equipment, furnishings, site work, testing, professional services, including design and engineering, and relocation costs at the Ivan G. Smith Elementary School, located at 15 Lobao Drive in Danvers, MA, which school facility shall have an anticipated useful life as an educational facility for the in-struction of school children of at least fifty (50) years, and for which the Town may be eligible for a school construction grant from the Massachusetts School Building Authority (“MSBA”). The Town acknowledges that the MSBA’s grant program is a non-entitlement, discretionary program based on need, as determined by the MSBA, and any project costs the Town incurs in excess of any grant approved by and received from the MSBA shall be the sole responsibility of the Town. Any grant that the Town may receive from the MSBA for the Project shall not exceed the lesser of (1) 55.46 percent (%) of eligible, approved project costs, as determined by the MSBA, or (2) the total maximum grant amount determined by the MSBA, or take any other action thereon.
Planning Process The Ivan G. Smith Elementary School was constructed in 1973 as an open classroom concept school. By 2011, the exterior walls, roof, and major mechanical systems all reached the end of their useful lives, and the building itself no longer supported 21st century learning. In 2013, the Town submitted its first funding application for the Smith project, called a Statement of Interest (SOI), to the Massa-chusetts School Building Authority (MSBA).
SPECIAL TOWN MEETING / February 4, 2019 Page 2
The goals for the new school articulated in the SOI were to provide: an equitable facility compared to the other four elementary schools; appropriate technology; an effective assessment environ-ment; standard classroom sizes; dedicated areas for performing arts; and modern design standards for school safety/security. In March 2016, the MSBA accepted the Smith project to participate in their feasibility process, an important step toward obtaining a State grant to reduce the Town’s cost for the Smith project. MSBA project funding is generated through a portion of the State’s sales tax, and the funding pro-gram is highly competitive. The May 2016 Annual Town Meeting appropriated $1.8 million to begin feasibility and design work for the project. Shortly after Town Meeting, the Town was invited by the MSBA to prepare and submit a feasibility study of the various options to modernize and improve the Smith School. As part of this process, the Town formed the School Building Committee (SBC), with representatives from the Board of Selectmen (BOS), School Committee (SC), Finance Committee (FinCom), neighborhood, and staff. One of the first tasks of the SBC was to hire an Owners Project Manager (OPM), PMA Consultants (June 2017). The OPM then assisted the SBC in selecting a firm to design the project, Tappe Architects (November 2017). In February 2018, the Town submitted a Preliminary Design Program (PDP) to the MSBA, and in June of the same year the Town submitted the final piece of the Feasibility Study, the Preferred Schematic Report, to the MSBA. As no alternative sites for the school existed, the SBC evaluated three options: renovating the existing building, adding to and renovating the existing building, or constructing a new building. After careful consideration of all project options, the SBC concluded that constructing a new building next to the existing building, as recommended by the design team after the Feasibility Study, was the most cost-effective, long-term alternative to meet educational requirements and cost considerations, with the least disruption to student learning. The MSBA’s Board of Directors con-curred with this recommendation and voted to formally approve the project’s scope and budget in December 2018. Most recently, the SBC selected W.T. Rich Company to serve as the project’s Con-struction Manager at Risk (also in December 2018). Between the May 2016 Annual Town Meeting and the February 2019 Special Town Meeting, the SBC hosted, coordinated, or scheduled roughly twenty project-related meetings, public forums, and workshops, all of which were open to the public and several of which included invitations to neigh-bors and the broader community. A project timeline is included as Exhibit A. Recommended Plan As part of the planning process, the Town received enrollment projections from the MSBA (con-ducted by the University of Massachusetts) looking ahead to 2025. This analysis projected K-12 population growth of almost 17% and K-5 growth of nearly 23%. The Town initially proposed to replace the existing school with a similarly sized school, but the MSBA strongly recommended that the Town design the school to accommodate this projected growth. Although the SBC was initially skeptical of the growth projections, it is worth noting a similar analysis in 2005 projected the 2015 kindergarten class to within 1% of actual, and the current kindergarten class is the largest in the Town’s history. As such, the proposed school is significantly larger than the existing school. The
SPECIAL TOWN MEETING / February 4, 2019 Page 3
expanded Smith School will allow the School Committee to use flex-zones to accommodate student population growth in the coming years evenly across the five Danvers elementary schools. Additionally, the project was designed to mitigate some of the most pressing concerns shared by the SBC and neighbors: namely, traffic congestion spilling into the neighborhood during morning and afternoon “rush hour” and lack of onsite parking for staff, parents, and visitors during and after school hours. The table below compares the current Smith School to the proposed.
Current Proposed
Square Footage 43,200 SF 82,728 SF
Student Capacity 280 students 465 students
Onsite Parking 45 spaces 123 spaces
Parent Queueing 14 cars at pick-up/drop-off 28 cars at pick-up/drop-off
Dedicated Bus Loop No Yes
The split-level design, which minimizes the school’s footprint, is key to addressing the traffic and parking concerns and optimizes the use of a site constrained on three sides by wetlands. A concep-tual site plan (Exhibit B) and floor plan (Exhibit C) are included in the Exhibit section. If Town Meet-ing votes to approve the project in February, final design and bidding should be complete by the end of 2019. Construction of the new school is anticipated to be complete in June 2021, followed by demolition of the existing school and site restoration through October 2021. Project Costs The total estimated cost of the project is $52.0 million, which includes feasibility, sitework, construc-tion costs, and soft costs (design, administration, furniture and equipment, and project contingen-cies). To date, seven construction cost estimates have been performed by two independent cost estimators (per MSBA requirements) and by W.T. Rich. This total project budget is the result of a comprehensive review process by the SBC, staff, and the design team. The DPW Engineering and Buildings Divisions also participated in the review process to ensure that proposed building systems meet Town standards. Project costs are described in detail in Exhibit D, and work to refine the project costs will continue through final design, bidding, and even during construction to identify and, if practical, incorporate further savings into the project budget. Although the Town qualifies for a maximum MSBA grant of $28.84 million, or 55.46% of eligible project costs, the effec-tive maximum grant amount that the Town qualifies for is $20.49 million, or 39.4% of total project costs. The table to the right identifies how the Town’s 55.46% reimbursement rate on eligible project costs was established (demographics, best practices, key design elements, and project delivery methodology). The $8.35 million difference between the maximum and effective MSBA grant amounts is explained by several factors. First, and most significant, the current MSBA cap on reimbursement per square foot for construction costs is $333/sf, but the average cost per square foot to construct schools in Massachusetts is currently between $490/sf and $540/sf (source: MSBA website); the Smith project
MSBA Reimbursement Rate
50.58% Base Reimbursement
2.00% Energy Efficiency Credit
1.88% Capital Maintenance Credit
1.00% CM at Risk Credit
55.46% Max. Rate on Eligible Costs
SPECIAL TOWN MEETING / February 4, 2019 Page 4
is $509/sf, which accounts for $6.25 million of the difference. The table below shows how the cap and average have diverged since the recession, as the economic recovery has outpaced cap adjust-ments. Second, the MSBA caps sitework at 8% of direct building construction costs, which our pro-ject exceeds, given the challenges posed by the site (grade change, wetlands, etc.). This accounts for an additional $1.32 million of the difference. Exhibit D provides a breakout of ineligible project costs, in-cluding a portion of the contingency funds, which will eventually be either released or absorbed into construction line-items. The SBC and design team worked hard to maximize eligible cost reimbursements, but no amount of value engineering would allow the Town to reverse the categorical reimbursement caps referenced above. For example, only 188 SF of teacher planning space (out of 82,728 SF) was deemed ineligible by the MSBA. This represents less than 0.2% of the total project square footage. In the end, if all construction contingency and allowances are spent, the net project cost to the Town is estimated to be $31.51 million, or 60.6%. MSBA regulations require that the Town authorize bor-rowing for the full cost of the project ($52.0 million), even though the actual long-term bonds will be reduced by the MSBA grant. Financing Plan As noted above, the maximum long-term debt (principal) associated with the Smith project is $31.51 million. Financial planning for this project began more than five years ago with the completion of the Danvers High School project. For many years, the Town has utilized a School Stabilization Fund (SSF) to offset peak debt years associated with school project financing. The table to the right shows how that fund has fluctuated over time, in rhythm with annual debt service. Annual Town Meeting appropriates funds into the SSF each year, if positive revenue and/or expenditure results from the prior year allow for such transfers. Once the total estimated Smith project cost was known in November 2018, the Town’s financial management team and financial advisors met to begin modeling debt service for the project. At present, the BOS is using this analysis to evaluate how best to finance the Smith School project. The table below depicts how the $31.51 million Town share can be financed using two common debt structures.
MSBA cap/sf vs. market AVG Analysis
Year Cap $/sf AVG $/sf Difference
2010 $275 $275 $0
2013 $275 $313 $38
2015 $287 $374 $87
2018 $333 $509 $176
School Stabilization Fund History
FY 2009 $6.9 m Peak for DHS project
FY 2016 $3.6 m Bottom to offset DHS debt
FY 2019 $5.8 m Growth for Smith project
Facts & Figures 30-year level debt 20-year equal principal
Total Project Cost $60.5 million $46.2 million
Total Interest Cost $28.5 million $14.2 million
Cost Avoidance $0 ($14.3 million)
Avg. Tax Bill Increase $157/year, 30 years $179/year, 20 years
Req’d SSF to stay @ 6% $8.3 m (FY 20-26) $13.0 m (FY 20-26)
Budget Impact Reduces Service Solvency Requires Debt Exclusion
SPECIAL TOWN MEETING / February 4, 2019 Page 5
The first option is to use conventional financing, as was done on the Danvers High School project, which would spread the annual debt service payments evenly over thirty years (like a conventional mortgage). This would reduce debt service payments in the early years but would result in an addi-tional $14.3 million in interest payments over the life of the bonds and would limit the budgetary flexibility of future Town Meetings. As noted above, the balance in the SSF account (as of 7/1/18) is $5.8 million, and current projections and assumptions put the total amount needed to get through peak debt (FY 20-26) under this model at $8.3 million, or $2.5 million more than what has been appropriated to date by Town Meeting. Recent trends and budgetary performance suggest that this is achievable. The second option is to finance the project over 20 years with higher annual payments up front and rapidly declining payments in the later years. This option would require a debt exclusion, as the total SSF required to avoid an exclusion during the peak debt years under this model is roughly $13.0 million, which is not achievable. This debt model would save the Town $14.3 million in interest payments over the life of the bonds and ensure future budgetary flexibility. By year 15, this option would be less expensive annually than the 30-year model and would be paid off a full 10 years sooner. Exhibit E provides further detail on the debt modeling options being considered by the BOS. Tax Bill Impact The average home value in Danvers is $468,000 (FY 2019) and the current residential tax rate is $13.28 mills. Based on this, the estimated annual cost attributable to the Smith project for the av-erage homeowner is between $157 and $179 per year, depending on the financing model. The 20-year model would cost an average of $22 per year more during the life of the bond but would save the average taxpayer $1,143 in interest payments as compared to the 30-year model (by being re-paid 10 years sooner). The BOS is also evaluating available policy tools to mitigate the full impact of either model on tax-payers with fixed-incomes (e.g. expanded senior tax work off or elderly exemption benefits). Exhibit F compares the impact of either financing option on the average tax bill over the respective terms of the bonds. Summary The Smith School Project marks the end of a 25-year capital program to modernize the Danvers school facilities, beginning with three elementary school renovations (1994-1999), followed by the Holten Richmond Middle School (2003-2005), and finally Danvers High School (2011-2013). The pro-cess to replace Smith began eight years ago, when the exterior walls, roof, and building systems began to show signs of failure. In 2016, a School Building Committee was formed, and its members have worked diligently with staff, the design team, and neighbors to develop the project being con-sidered. As with previous school projects, the Town has partnered with the MSBA to reduce the cost of the project to Danvers taxpayers; in this case, by $20.49 million. If the project is approved by Special Town Meeting on February 4, 2019, the next question is how best to finance the project, which is a question that the Selectmen are currently considering. More information on the Smith project can be found on the Town’s website: www.danversma.gov/smithschool.
SPECIAL TOWN MEETING / February 4, 2019 Page 6
Board of Selectmen __________________________________ __________________________________
/s/ Gardner S. Trask III /s/ Diane M. Langlais Gardner S. Trask III, Chairman Diane M. Langlais
__________________________________ ___________________________________
/s/ Daniel C. Bennett /s/ David A. Mills Daniel C. Bennett David A. Mills
____________________________________
/s/ William H. Clark, Jr. William H. Clark, Jr.
SPECIAL TOWN MEETING / February 4, 2019 Page 7
Smith School Exhibits
SPECIAL TOWN MEETING / February 4, 2019 Page 8
Exhibit A
SPECIAL TOWN MEETING / February 4, 2019 Page 9
Exhibit B
SPECIAL TOWN MEETING / February 4, 2019 Page 10
Exhibit C
SPECIAL TOWN MEETING / February 4, 2019 Page 11
Exhibit D
OPM $ 230,610
Architect & Engineering $ 410,000
Environmental & Site $ 145,485
OPM $ 1,397,600
Architect & Engineering $ 3,898,500
CMR Pre-Construction Fee $ 150,000
Legal Fees $ 25,000
Utility Company Fees $ 45,000
Testing Services $ 5,000
Mailing & Moving Costs $ 75,000
Furniture, Fixtures & Equipment $ 558,000
Technology $ 558,000
Owner's Construction Contingency $ 2,427,532
$ 9,925,727
Foundations $ 2,372,076 Superstructure $ 3,318,151
Exterior Walls, Windows, Doors $ 4,265,909 Roofing $ 1,334,022
Interior Construction $ 3,191,802 Interior Finishes $ 2,017,430
Staircases & Elevators $ 364,066 Fire Protection $ 370,275
HVAC, Plumbing, & Electrical $ 7,739,036 Fixed Furnishings & Equipment $ 1,646,509
Existing Building Demolition $ 273,000 Existing Building Abatement $ 424,500
Site Preparation $ 748,429 Site Improvements $ 1,860,369
Site Civil/Mechanical Utilities $ 979,680 Site Electrical Utilities $ 303,960
CMR General Conditions $ 3,765,387 CMR Insurance $ 952,693
CMR Fee $ 1,008,819 Design & Pricing Contingencies $ 3,239,516
CMR GMP Contingency $ 712,694 Escalation to Mid-Point of Construction $ 1,185,950
$ 42,074,273
$ 52,000,000
$ 7,565,692
Construction Contingency above 1% cap (700,032)$
Misc. Ineligible (legal, moving, haz mat) (74,594)$
Effective MSBA funding grant 20,488,663$
Town of Danvers share (of $52.0 million) 31,511,337$
SMITH SCHOOL PROJECT BUDGET SUMMARY
SOFT
CO
STS
DEMOLITION & ABATEMENT
SITE COSTS
FEASIBILITY PHASE
PROJECT TEAM
CONSTRUCTION RELATED
GRAND TOTAL
CONSTRUCTION-RELATED
CONTINGENCIES
INCLUDED CONTINGENCIES
Subtotal
CMR COSTS
CO
NST
RU
CT
ION
CO
STS
Subtotal
NEW BUILDING CONSTRUCTION
INEL
IGIB
LE C
OST
AN
ALY
SIS
Total Project Budget with Contingencies
Max. MSBA grant if 100% eligible
Ineligible $/SF (above $333/SF cap)
Sitework above 8% hard cost cap
52,000,000$
28,839,200$
(6,251,176)$
(1,324,735)$
SPECIAL TOWN MEETING / February 4, 2019 Page 12
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SPECIAL TOWN MEETING / February 4, 2019 Page 13
20 Year Equal
Principal
Avg SF Impact
($468k home)
30 Year Level
Debt
Avg SF Impact
($468k home)
Annual Cost
Differential
FY19 -$ -$
FY20 2,250,000$ 179$ 1,535,000$ 122$ 57$
FY21 2,200,000$ 175$ 1,536,550$ 122$ 53$
FY22 2,325,000$ 185$ 1,724,700$ 137$ 48$
FY23 2,791,250$ 222$ 2,009,563$ 160$ 62$
FY24 2,723,750$ 217$ 2,013,275$ 160$ 57$
FY25 2,656,250$ 211$ 2,010,588$ 160$ 51$
FY26 2,588,750$ 206$ 2,011,725$ 160$ 46$
FY27 2,521,250$ 201$ 2,006,463$ 160$ 41$
FY28 2,453,750$ 195$ 2,009,888$ 160$ 35$
FY29 2,386,250$ 190$ 2,011,775$ 160$ 30$
FY30 2,318,750$ 184$ 2,011,900$ 160$ 24$
FY31 2,251,250$ 179$ 2,010,488$ 160$ 19$
FY32 2,183,750$ 174$ 2,012,313$ 160$ 14$
FY33 2,116,250$ 168$ 2,012,238$ 160$ 8$
FY34 2,048,750$ 163$ 2,010,400$ 160$ 3$
FY35 1,981,250$ 158$ 2,011,575$ 160$ (2)$
FY36 1,913,750$ 152$ 2,010,625$ 160$ (8)$
FY37 1,846,250$ 147$ 2,012,413$ 160$ (13)$
FY38 1,778,750$ 142$ 2,011,938$ 160$ (19)$
FY39 1,711,250$ 136$ 2,009,113$ 160$ (24)$
FY40 393,750$ 31$ 2,013,800$ 160$ (129)$
FY41 376,250$ 30$ 2,015,638$ 160$ (130)$
FY42 358,750$ 29$ 2,009,763$ 160$ (131)$
FY43 -$ 2,016,038$ 160$ (160)$
FY44 -$ 2,014,100$ 160$ (160)$
FY45 -$ 2,009,088$ 160$ (160)$
FY46 -$ 2,010,863$ 160$ (160)$
FY47 -$ 2,009,200$ 160$ (160)$
FY48 -$ 2,008,875$ 160$ (160)$
FY49 -$ 2,014,613$ 160$ (160)$
FY50 -$ 476,188$ 38$ (38)$
FY51 -$ 477,675$ 38$ (38)$
FY52 -$ 477,788$ 38$ (38)$
TOTAL 46,175,000$ 3,674$ 60,536,150$ 4,817$ (1,143)$
20 yr avg = 179$ 30 yr avg = 157$
Exhibit F
Tax Impact Analysis for AVG SF Home
