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Slow sales could hinder new school projects

Mass. panel braces for cash shortfall

By Glen Johnson
Associated Press / August 14, 2008
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Slowing sales tax collections are threatening to sharply undercut the pace of school construction and repairs in Massachusetts.

The Massachusetts School Building Authority, funded with a share of the state's 5 percent sales tax, was created when collections were conservatively expected to grow more than 4.5 percent annually. Instead, they have averaged closer to 2 percent in recent years.

Now, the nation's sagging economy has authority leaders girding for zero percent growth, or worse, which would leave the authority with billions less for future school projects.

"It is a trend that is not favorable to us," Andy Cherullo, the authority's chief financial officer, told board members last week.

If growth averages 4.5 percent, it would leave the authority with $25 billion to spend on schools during the next 30 years. If it averages zero percent, the authority will be able to dispense just $6 billion to the state's 351 cities and town during that span. It reimburses communities 40 to 80 percent of their eligible project costs.

Treasurer Timothy Cahill, who has served as board chairman since the authority was created in July 2004, said the drop in collections should lower expectations among parents and school leaders.

"The possibility of a continued decline in sales tax revenue should serve as a reminder, that while we want to get each district the best possible facility, some extras might have to be scaled back," Cahill said in a statement.

The concern comes during what should otherwise be red-letter days at the authority, which has made major progress since assuming oversight of school construction matters from the former School Building Assistance Program run by the Department of Education.

The MSBA inherited a backlog of 1,156 projects, 728 of which cities and towns had completed but were awaiting payment for, plus 428 projects still being built. Today, only about 15 projects in that backlog remain.

A moratorium on new projects was lifted July 1, 2007, and during a one-month application period that followed, 162 school districts submitted 423 statements requesting consideration of additional projects.

That was whittled to the 162 most important projects - one from each district - and authority board members voted in November to move 83 of them into the funding pipeline.

Since then, over a dozen more have also been approved.

The authority has budgeted to spend $2.5 billion from 2007 to 2011. But the decline in sales tax revenues and its effect on future construction is something that must be faced by the authority and communities that rely on it.

When it was created, the authority was given a guaranteed revenue stream of one penny from the nickel in tax levied on each $1 in sales. That funding stream was phased in, with the authority receiving 70 percent of its one-penny share in the 2006 fiscal year, 78 percent the following year, and the full amount in fiscal 2011.

Lawmakers also provided a guaranteed minimum of funds to help the authority erase the project backlog, starting at $489 million in 2006 and increasing to $702 million in the current fiscal year, which began July 1. The state has stepped in to fill the gap when tax collections have not reached the minimum, including an expected appropriation of about $47 million for the fiscal year that ended June 30.

Starting next year, though, there is no guaranteed minimum, leaving the authority completely reliant on sales tax collections for its operations. Governor Deval Patrick has also warned of a $1 billion budget deficit, putting any state bailout in doubt.

Flat growth or even a drop-off in collections would curtail the authority's ability to support construction projects.

That concern has prompted the MSBA to review all pending projects, and to lean on communities such as Norwood and Wellesley to reexamine big-ticket requests, such as their new high schools. Other school districts are being asked to reevaluate their enrollment projections, to ensure one school is not overbuilt at the expense of another.

Last week, the authority board also voted to forge ahead with a "model school" pilot program aimed at using prototype designs for new projects.

The new high school approved for Norwood, for example, will most likely be based on the design of the Whitman-Hanson Regional High School, which was completed in 2005 and has been hailed for its use of environmentally friendly technology.

Reusing the plans could save up to 25 percent in project costs.

Meanwhile, the authority is giving priority to repairs that could stave off larger future expenses.

"If we can save a roof today, more than likely we will not have to rebuild a building in five years," Cahill said during last week's board meeting.

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