Costs

What we know today about costs...and what we don't

January 2023 update

At its December 21st board meeting, the MSBA voted unanimously to raise the construction cost cap for a number of Core Replacement Program projects-- including the New Lynch Elementary School. Although the reimbursement rate is unchanged from Fall Town Meeting, the higher cap yields a greater Total Maximum Facilities Grant of $20.3M-- an increase of nearly $2.9M. This welcome news means that Winchester can expect to borrow nearly $3M less to construct the New Lynch!

With the fall's Schematic Design submission and subsequent reviews with MSBA senior staff, the many elements of Construction Cost, Project Budget, and Reimbursement have been established as the basis for the Project Scope & Budget Agreement. Based on the December 21 Board vote, the following summary estimates the expected final not-to-exceed direct cost to Winchester taxpayers. Revised figures are highlighted to note increased reimbursement:

  • Construction Cost $65.4M plus other costs (see below)

  • Total Project Budget $94.5M approx (per MSBA vote)

  • MSBA Project Grant $19.9-20.3M - Facilities Grant

  • Net Project Cost $74-74.5M estimated (Not-to-Exceed)

  • Est Residential Tax Impact * approximately $54.00 per $100K of assessed value

Note - Tax impact being developed. $54.23 based on 30-year bond, 5% interest rate was estimated. See Property Tax, below

Construction Cost

is primarily the cost of hiring a contractor, including materials, labor, general conditions and the contractor’s overhead and profit. Most often we think of this as including key building elements, such as:

  • Excavation, Foundations and Structure (steel, concrete or timber)

  • Envelope enclosure (exterior walls, windows, doors and a roof above)

  • HVAC, Plumbing & Electrical scope

  • Walls, Painting, & Hardware

  • Sitework: paving, pathways & landscaping

Construction Costs - for the New Lynch

Because the New Lynch requires the abatement and demolition of the existing 1960 school building as well as improvements to the Parkhurst School with modular classrooms for swing space, a number of other items contribute to overall construction cost and are estimated below:

  • Abatement & Demo of existing school $ 2.3M

  • Parkhurst upgrades for Lynch K-5 usage $ 500K

  • New Lynch Construction $65.4M

Total Construction Cost (estimated) $68.2 M

Project Costs

Construction costs do not include all items and expenses needed to build a project. Architecture & engineering fees, contingencies for unforeseen issues, legal fees, owner-provided items (such as furniture, fixtures and equipment or "FF&E"), testing/inspectional services, , project management costs and moving costs-- to name a few-- are considered Project Costs and can add significantly to the bottom line.

In addition to the typical items above, swing space-- temporary space to accommodate construction-- is considered a project cost as it is not part of the permanent project. For the New Lynch, swing space is required at the Parkhurst School to permit the demolition of the 1960 school building. Costs for modular classroom buildings to supplement existing space at Parkhurst as well as required sitework are estimated at $4.9M and are not eligible for reimbursement by the MSBA. More information on the swing space plan for Lynch/Parkhurst will be posted this fall on the Swing Space page.

In acknowledgement of today's inflationary economy and bidding climate, the project team is carrying a conservative cost escalation factor. Design and construction contingencies are also carried to mitigate risks of cost overruns, product unavailability and/or supply chain disruptions.

Project Budget

The New Lynch project budget includes the construction costs (above), numerous project costs (left) as well as allowances or contingencies for a number of important considerations:

  • New Lynch Construction Cost $65.4M

  • Lynch Abatement & Demolition $ 2.3M

  • Parkhurst School upgrades $ 500K

  • Modular Classrooms & Sitework $ 5.0M

  • Construction & Owner's Contingencies $ 7.5M

  • Design & Management Fees $ 9.5M

  • FF&E + Educational Technology $ 2.9M

  • Testing, Utility Fees, other costs $ 500K

  • Feasibility Study * $ 980K

Total Project Budget $94.5M

Less MSBA reimbursement (max grant) ($20.3M)

Net Not-to-Exceed Project Cost $74.2M

* Feasibility Study previously funded by Town Meeting, but included in overall Project Cost accounting, per Massachusetts School Building Authority

Net Project Cost

Participation with the Massachusetts School Building Authority's Core Replacement Program yields significant reimbursement on eligible project costs. The distinction between eligible and ineligible expenses-- along with the basis for a calculated reimbursement rate-- was included in a detailed Project Funding Agreement (PFA) approved at 2022 Fall Town Meeting. In October the MSBA Board voted a reimbursement rate of 36.21% (on eligible expense). This rate is not applied across the entire project as some costs are capped (sitework at 8%, for example) and others are not eligible for reimbursement (such as swing space). In December the MSBA Board adjusted upward the construction cost cap to account for market conditions, yielding a revised MSBA Maximum Facilities Grant of approximately $20.3M, or 21.4% of the overall project cost. This drives a projected overall Net Maximum Project Cost of $74.2M (see detail, above). MSBA reimbursements are issued to Winchester within 15 days of each approved project invoice submitted to the agency (similar to our experience with the Vinson-Owen school and Winchester High School projects) . In this process, Winchester never borrows the full amount of the projected Project Budget, as the MSBA shoulders a portion of the overall project costs.

Paying for the New Lynch with Debt Exclusion

Massachusetts law (so-called Prop 2-1/2) allows communities to raise funds for certain purposes above the amount of the levy ceiling. Unlike an operating override-- which results in a permanent increase in a town's tax levy limit-- Winchester's recent major school building/expansion projects have been funded via a debt exclusion, which increases the levy limit only for the term of the municipal bond. Unlike operating overrides, debt-exclusions do not become part of the tax base upon which the levy limit is calculated in future years.

Just as was the case with Vinson-Owen Elementary (2012-13), Winchester High School (2015-18) and Phase II of the McCall Middle School Expansion (2018-19), Winchester's share of the New Lynch project costs will be financed with long-term municipal bonds.

It is the annual debt service on these bonds that can be paid via a debt-exclusion, which requires a 2/3 majority vote of Fall Town Meeting followed by a majority vote of the Town in a special election on Saturday, January 7th at Winchester High School.

Property Tax and the estimated debt service...

A number of factors drive the actual annual debt service for the New Lynch project including:

  • Short Term Interest Rates for bond anticipation notes

  • Bonding Term 20, 25 or 30 years, TBD

  • Long Term Interest Rates for substantial debt

  • Winchester credit rating currently AAA (Moody's)

  • Actual or final net cost total borrowed/financed

With advice of management and municipal bond specialists, it is the Select Board which ultimately decides on the term for bonding.

For the purposes of estimating tax impact on residential properties, Town Management modeled the impact of borrowing the new net cost ($74.5M) over 30 years at market rates (including some early bond anticipation notes) with our current AAA Moody's bond rating. The model increases property taxes at $54.23 per $100K of assessed value-- or $685.47/year for an average home value of $1,264,001.