From: Jeff RaabDate: Thu, May 7, 2015 at 1:31 PM Subject: More detailed cost comparisons Dear School Board Members, At your last meeting Mr. Zink mentioned that residents may be interested in Dover tuitioning if it is the lowest cost option. People may think this is true because the Findings section of the JAC Executive Summary says the Dover option averages $280/year tax increase for a $250,000 home, add/reno is $303/year, and a new facility is $494/year. It's important for residents to know these represent just one possible outcome based on very specific assumptions. When you consider other numbers from the JAC report you get a range for each option, and things change. First, the JAC report includes a higher add/reno cost estimate of $18.1 million on page 34, and a lower new facility estimate of $20.8 million on page 36. If you plug those into the spreadsheet, the add/reno goes up to $368/year and the new facility goes down to $423/year. Here is a link to a Google spreadsheet with these numbers: The report uses the 2014-15 NESDEC enrollment projections but does not apply those projections equally to the three options. The $280/year tuition cost is based on the projected peak of 516 students in grades 6-12, with a peak of 274 High School students that would attend Dover. On the other hand the cost of a new facility is based on 550 students in a 103,529 square foot building. The add/reno cost is based on a similar 104,000 square feet. If you use 516 students instead of 550 that leads to a smaller 97,129 square foot new facility that would cost $22.8M. If you subtract 6,800 square feet of classroom addition from the JAC example budget spreadsheet, the add/reno bond amount drops to $13.3M. Then add/reno is only $270/year, and the new facility is $463/year. Here is another spreadsheet with those numbers: https://docs.google.com/spreadsheets/d/1tqsTvpEREZUgPNk0DED7NUcv1kk5A2urdnUYBrlx11w/edit?usp=sharing The NESDEC projections have a margin of error. In the Reliability of Enrollment Projections section of their report they say in 90% of the cases the variance is within 1% per year up to 10% over 10 years. If you add 1% more students in 2015-16, 2% more in 2016-17, and so on, that leads to a peak of 547 students in grades 6-12, with a peak of 298 High School students that would attend Dover. Then Dover tuitioning would cost $430/year. The ranges from above for the other options to support 550 students are $303-368/year for add/reno and $463-494/year for a new facility. Here is a sheet with this: https://docs.google.com/spreadsheets/d/1t4xp_fqvnznfkjmdJDHZu-bf0GkbflcPuFIRfdx6qB0/edit?usp=sharing I don't recommend reducing the NESDEC projection by their margin of error for a few reasons: 1. Randy Bell has said NESDEC was the most conservative projection. 2. The actual 2013-14 enrollment was higher than the 2013-14 NESDEC projections at all grade levels. 3. The Projection Methodology section of the NESDEC report says they use historical grade-to-grade "survival" ratios, but we can expect higher future ratios once we implement facility solutions. 4. The sample tuition contracts provided by the JAC have minimums that apply even if the actual number of attendees is lower. Last meeting the Board also discussed the 120 students in alternative settings. These are students already living in Newmarket that can push us beyond the margin of error in the NESDEC projections once facility issues are solved. It works out to 8 or 9 students per grade K-12, not counting the 8 students in special education outside placements. If you add these students to the NESDEC projected enrollment you get a peak of 576 students in grades 6-12, with a peak of 308 High School students that would attend Dover. Then Dover tuitioning would cost $487/year. The range for a proportionally larger add/reno for that number of students is $318-386/year. A proportionally larger new facility is $473-517/year. Here is a sheet with those numbers: https://docs.google.com/spreadsheets/d/1QWds5AE8MkuZLkdiBlIn9Oa_3VstQg7WbtqojGD8Xe0/edit?usp=sharing Overall the range of the above possibilities is $280-$487 for the Dover tuition option, $270-386 for add/reno, and $423-517 for a new facility. The JAC report and cost model spreadsheet use the Barrington contract with Dover to estimate the Dover tuition option cost. After applying the 8% administrative fee, and adding transportation and special education paraprofessionals, the above spreadsheets estimate it to cost $24 to 41.7 million more than current operating costs over 30 years. In contrast, the principal + interest totals on the example bonds in the JAC report come to about $26 million for add/reno and $42.2 million for a new facility. It's important for residents to understand that for the tuitioning option, the cost really only covers students in grades 9-12. The JAC spreadsheet compares this to add/reno and new facility options that include the cost of facilities for grades 6-12, not just 9-12. Since Dover can't take all of our students from grades 6-12 you have to adjust the bond totals if you want to compare apples to apples. Depending on if you go by projected enrollment in the next 10 years (2597/4950 or 52.5%), number of grades (4/7 or 57%), or the 60/40 allocation Newmarket uses to determine the High School portion of shared costs, the part of the JAC example bonds principal + interest just for grades 9-12 is only $13.6-15.6 million for add/reno and $22.1-25.3 million for a new facility. Remember, the JAC example bonds are to support 550 students. If you use the $39.6 million new facility principal + interest for only 516 students, the grades 9-12 part is just $20.8-23.8 million. The grades 9-12 part of the smaller add/reno for 516 students is $12.1-13.8 million. To be clear, this means the best case cost to tuition grades 9-12 to Dover over 30 years is expected to be higher than the cost of a new facility for the same number of students in grades 9-12, and much higher than the cost of add/reno for those students. In the worst case, the cost to tuition grades 9-12 to Dover over 30 years would be higher than the entire cost of a new facility for all of the students in grades 6-12. Since the add/reno and new facility options involve bonds, their tax rate impact is predictable over the 30 year period, while the tax rate impact of the Dover tuition option will vary year to year. If we negotiated a tuition contract we may know its minimum tax impact, but the above examples show the maximum impact can be much more. It is important that residents, especially those on fixed incomes, understand that tuitioning students out of Newmarket has inherent risk and variability not applicable to the other options. Without saying so, it seemed like the Board was discussing eliminating tuition as an option in your last meeting. Please don't make decisions just because of statements made at public comment, in focus groups, or the Newmarket Common Ground community conversation. Whatever decisions you do make, you have to demonstrate to parents, residents, and taxpayers the solid financial reasons for those decisions. The JAC report represents many months of due diligence. It has plenty of information to justify a course of action expected to maximize value and provide cost certainty for Newmarket in the long term. As always, please reach out if there is anything I can do to help. I understand this is a very long message with a lot of numbers to digest. I don't expect a reply, and I don't expect you to address these numbers at your meeting tonight. I just wanted to let you know some things I realized having worked on the spreadsheet for Randy Bell. Best, Jeff Raab Hilton Drive |

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