WARWICK - A longtime government watchdog is questioning whether city officials should go back to voters who last year approved borrowing $350 million to build two new high schools, saying the cost and the scope of the projects has changed significantly without their assent.
Rob Cote, a familiar face at City Council and School Committee meetings, said the city presented voters a package that no longer exists: costs have increased by millions and the city is considering extending by a decade the payback period for its bond that will increase borrowing costs by tens of millions.
To try stay at the $350 million price tag, amenities at the two schools have been cut back using a term that planners call “value engineering.”
“That’s not what you sold the general public and that’s not what you put on the bond referendum and what was in the voter referendum handbook,” said Cote, who has been a structural inspector of record for more than three dozen school construction projects in New England. “You’re making a portrayal to the public that’s inaccurate.”
He added: “I want to know if after the voters vote on a certain referendum with very specific language, if that can be changed, without the voters getting a second bite at the apple. And if they get a second bite of the apple, and they approve it, so be it. I want new schools, but let’s be straight with the taxpayers.”
The building scheduled for replacement are Pilgrim High School, built in 1963, and Tollgate High School, built in 1972.
It’s a dilemma other districts - eager to take advantage of expiring reimbursement incentives from the state - are facing. All communities pursuing school construction projects are facing unexpectedly higher interest rates now that the proposals have moved from the planning to construction phase. Cranston, Cumberland and Barrington have pushed back their bond payback period to 30 years, according to a spokesman for the Rhode Island Department of Education.
Cote has a been a vocal critic of city officials for years, especially during budget season. In July, City Councilwoman Donna Travis prevented him from speaking at a council meeting, ordering the police to escort him out. The American Civil Liberties Union intervened, forcing the city into a consent order last month that allows him to speak.
Cote says he does not oppose building new schools. In fact, he approached school officials six years ago, after they proposed investing $8 million in the aging Warwick Veterans High School. Cote said the school should be bulldozed and offered a plan to rebuild when interest rates were much lower. It went nowhere.
Now communities like Warwick are facing the double challenge of increased interest rates and dramatically increased building costs. A consultant the city hired to review the projected school costs submitted to the Department of Education confirmed what Cote had said for more than a year: the total cost would be north of $380 million, including an $11.7 million “underwriting fee” for the bonds that planners originally omitted.
“We just paid $85,000 to a company to get the same number I gave them with a five-minute, 3rd grade math equation a year ago,” Cote said.
Part of the discrepancy comes from what the state will reimburse the city. At a public hearing three weeks before voters were asked to approve the bond, Warwick School Committee Chairman David Testa said the state would reimburse the city $165 million, or 52.5%. “That is guaranteed,” he told the audience.
At the same meeting, the city’s finance director, Peder Schaefer said: “If clearly you can’t modify the specifics to get (the project) below $350 million, you would have to go back to the voters for more money.”
Schaefer, in a Sept. 14 fiscal note to Mayor Frank Picozzi obtained by The Hummel Report, outlined some of the budgetary challenges.
“The (consultant’s) report projects additional construction costs of $22.1 million (after making a technical adjustment for demolition costs),” Schaefer wrote. “These costs exceed state approval so there would be no state reimbursement.”
Mayor Frank Picozzi acknowledged in a series of questions from The Hummel Report that the often-used pitch used during public hearings that - with the state reimbursement - one of the two schools would be paid for, is not correct. In a best-case scenario, the reimbursement would be 45%. (The state does not reimburse for furniture, technical equipment or computers). But Schaefer said in his memo that it was more like to be just under 39%.
Cote said taxpayers should also know that the high schools will look different than the proposal made in forums last year. To meet the $350 million cap, the square footage of each school will be reduced, an indoor walking track has been eliminated and air conditioning canceled. Cote said the industry term for the downsizing is called value engineering.
Asked about that, Picozzi responded: “The initial plans and size of the school were conceptual. The School Department has stated that any reduction in size will be to common areas, not classrooms. Air conditioning has not been eliminated, there has been discussion of going with a tempered air system (versus air conditioning) for ongoing operating costs.”
Cote said a “tempered air system” is a euphemism for dehumidification, and that it’s happening at a school he’s working on now in Massachusetts, to save money.
Then there’s the issue of how long it will take taxpayers to pay back the $350 million bond. The literature and narrative leading up to the vote said it would be 20 years. But Warwick secured enabling legislation from the General Assembly to stretch it to 30 years, which would lower the annual payment, but tack on an estimated extra $50 million of interest over the life of the bond.
Picozzi, and the state Department of Education, sidestepped our question of whether voters should be consulted - and potentially asked to agree to the proposed changes that have happened since they approved the bond with nearly 59% of the vote last November.
“The voters passed the referendum to build two high schools for $350 million,” the mayor said through a spokesman in an email to The Hummel Report. “It will be more than a year before the city goes to bond; no decision has been made as to the length of the amortization.”
Picozzi added: “While the fiscal note assumed true interest costs of 4.32%, which is still in the ballpark of where we would be today, I am concerned about the recent increase in interest rates and its effect on annual debt service costs. My administration will continue to monitor the interest rate environment over the next year or more. “
State law requires that the bonds have to be issued by the end of 2024, but the entire process in Warwick will play out over the next several years.
The Hummel Report is a 501(c)(3) nonprofit organization that relies, in part, on donations. For more information, go to HummelReport.org. Reach Jim at Jim@HummelReport.org.