Does the state’s school building reimbursement formula hurt poor cities and towns?

Updated Mar 1; Posted Mar 3

 

By Shira Schoenberg | sschoenberg@repub.com

A formula created in 2004 to ensure the state was giving poor cities and towns enough help building new schools includes a quirk that some say is now hurting the same communities it was meant to help.

“It perpetuates inequity,” said state Sen. Jo Comerford, D-Northampton, who introduced a bill to change the formula.

The Massachusetts School Building Authority provides state funding for school building projects that is matched with money from cities and towns.

The state covers between 40 percent and 80 percent of eligible construction costs. The size of the state match is calculated based on a formula that reflects how poor the community is — so poorer communities get more money.

The state funding does not cover the full percentage of construction costs because certain expenses are ineligible for reimbursement, like legal fees or asbestos removal. There is also a cap on the total amount the state is willing to pay per square foot, which is virtually always lower than the actual cost.

So, an 80 percent reimbursement rate generally means that around 62 percent of costs are actually covered.

The program also allows communities to apply for “incentive points,” which raise the size of the state match. Districts get points for things like building energy efficient facilities, regionalizing a school district, renovating existing buildings or adopting best practices for maintenance.

But, because the total amount a community gets is capped at 80 percent, the poorest districts are ineligible for incentive points.

“If you’re a community of high need, and you compare to a community that has more means and can go after incentive points, it becomes a little bit of an economic justice issue,” said John Nunnari, executive director of the Massachusetts chapter of the American Institute of Architects.

Nunnari said the incentive points are designed to help communities adopt building practices that are advantageous to the community or the state, but which might be more expensive up front — like building an energy efficient school. The problem for poorer communities is they are the least likely to be able to raise additional money for these types of features, because they do not have the property tax base.

“Because they’re at 80 percent, if they want to do those things, they have to now do it on their own dime,” Nunnari said.

Margaret Minor Wood, a senior associate with Pinck and Company, is an owner’s project manager, which means she represents the owner in large public construction projects. Minor Wood compiled information showing that the difference between the base reimbursement rate and the percent of a project’s costs that were actually covered was around 15 percent for all communities’ high school building projects — but 20 percent for the poorest communities. There were similar disparities for middle and elementary school projects.

For example, the new South High Community School in Worcester was supposed to be reimbursed at 80 percent, but the state actually covered 55 percent of the costs — a difference of 25 percentage points. While South High’s total price tag was about $210 million, the 80 percent was calculated on $144 million in costs that were eligible for reimbursement. 

A new regional technical high school on Cape Cod was eligible for 45 percent reimbursement and got 33 percent, a difference of 12 percentage points. In that case, the total project budget was $128 million, and the reimbursement rate was applied to $93.7 million in eligible costs.

The chart below shows the difference between the officially listed reimbursement rates (Base Rate) and the actual percent of costs covered (Effective Rate) for a number of recent school building projects. While schools in poor communities receive higher base reimbursement rates, they are not eligible for incentive points to help pay for best practices such as energy efficient buildings, which can increase a project's cost.

Narragansett Elementary School:

 

 Those involved with school building projects say the formula was meant to help poorer districts while protecting taxpayers. But no one envisioned how much the cost of construction would rise, and the extent to which communities would need the extra money from the incentive points.

“It made sense when the legislation was written that no one would go above 80 percent,” Minor Wood said. But she said the current situation has resulted in “inequity” and “inequality” that needs a legislative fix.

Comerford introduced a bill that would let any school district get additional incentive points, even if the district already reached the 80 percent level, based on poverty. She said the current system disadvantages poor communities and communities with small tax bases that cannot raise more money locally. That perpetuates inequity, if these communities cannot afford to build the same quality school buildings as wealthier districts.

“The bill ensures that schools, no matter what percentage of aid they’re getting, are eligible for getting incentive points for those better buildings,” Comerford said.

A spokeswoman for the treasurer’s office, which oversees the Massachusetts School Building Authority, did not respond to a request for comment.

Holyoke is one of the communities at the 80 percent reimbursement level. The city, which is currently designing a $130 million project to build two new middle schools, anticipates getting around $78 million from the state, according to maintenance administrator Whitney Anderson.

Anderson said if the community had been eligible for incentive points, that could have brought in additional state money. “Every percentage point on a $100 million project is $1 million, so it means a lot,” Anderson said.

Anderson said some project improvements will be made anyway, if they are easy to do. But designers “might have to make some decisions” if the district can afford to make other improvements that cost money and are not eligible for state reimbursement.

Anderson said he thinks Holyoke should be allowed to get the same incentive points as other communities, even though it is already getting the larger base amount. “It’s not so much our fault that we are a poor community,” he said.

Dorrie Brooks, an architect at Jones Whitsett Architects in Greenfield, said the poorer communities are most in need of additional money from incentive points.

“There’s no reason every school in the state shouldn’t have the same encouragement to be highly sustainable,” Brooks said. “Communities like Orange, which are at the 80 percent reimbursement rate, won’t be able to put in place those best practices without it. ... They’ll be able to do it only if they pay for it themselves.”

Brooks said she worked on a project in North Adams, which got a 80 percent reimbursement rate, but could have been eligible for more money if it were allowed to get incentive points for building an energy efficient building and renovating an existing building. “Every percentage ends up being something the community will struggle with when it comes to coming up with local support for a project,” she said.

Brooks noted that school building projects must be approved by town taxpayers, and cost can be a deciding factor, particularly for towns with a small tax base. “That’s when these projects die, when a community can’t see paying for that debt,” she said.