Vote yes on high school propositions

Historic high inflation for materials combined with construction market means project needs more money

Posted: Thursday, June 07, 2007

Thunder Mountain High School is going to open in August 2008. On Tuesday, Juneau needs to vote yes on all three propositions so the school can be completed.

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There are at least 4.6 million reasons to vote yes on Proposition 1. A couple of years ago, when the city opened bids to contractors, it got a huge shock. We all know it well now. Thunder Mountain was going to cost a lot more than originally thought.

I'm not writing to discuss why the cost was more. But I do want to tell you that the engineers who did the cost estimation are a dedicated and skilled group that did the best they could in the circumstances. If you are interested in finding out exactly why the school cost more, call them. The short answer is historic high inflation for materials combined with a big load of large jobs in the Juneau construction market.

The Juneau Assembly's response to the higher construction bids was two-fold. First, it eliminated what it could from the project (such as finishing the entire inside of the auditorium, the track and some equipment). Second, it supplemented the project's budget ($4.6 million) from the originally approved voter bonds with money from the city's cash reserves, which is commonly referred to as the rainy day fund. The rainy day fund is Juneau's nest egg. It is money we have generated through property and sales tax that we are saving for the future. The rainy day fund is real, hard cash. It is ours, and we need to hang onto it.

So with these two responses, the reduced project moved forward.

Enter the state of Alaska. The state will reimburse communities 70 percent of the payments for voter-approved bonds on school projects. It's kind of like someone paying for 70 percent of the mortgage on your house. They will pay for 70 percent of the mortgage payments (bonds are repaid over several years like a mortgage). But if you take the money out of savings (in this case the rainy day fund) to pay for a school, the state won't pay for any of it. One other very important point is that the state law that provides for the 70 percent reimbursement expires in 2008. Because of that, the time to take advantage of the reimbursement is now.

What Proposition 1 does is convert the money the Assembly took from savings (the rainy day fund), which the state won't reimburse, into bonds that the state will reimburse at 70 percent. What's especially neat about this is the money coming in from the proposition will complete the auditorium. In the process, the local cost, our cost, of the high school goes down by $4.3 million and we end up putting $4.6 million back into the rainy day fund. Juneau needs this money. Just look in the paper at the upcoming effort to have a special legislative session in Anchorage. That rainy day fund money will be a good thing for us to have back.

So vote yes on Proposition 1.

And while you are at it, vote yes on Proposition 2 and Proposition 3. The kids need the track to be completed and they need the equipment in the school. The grand total of the local cost of the propositions (after the 70 percent state of Alaska reimbursement) is about $1.5 million. Pretty cheap.

If the three propositions aren't approved, we'll have a new high school with no auditorium, no track and with insufficient equipment. You can count on the fact that these things will get finished at some point down the road, at a much higher cost, and with possibly 100 percent of that cost coming out of Juneau taxpayers' pockets.

We might as well fund these items now while the cost is less and while the state will pay for 70 percent.

• Max Mertz is a partner in a Juneau CPA firm.

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