... Discretionary revenue, not taxes, is supposed to provide all the money to pay
off the $5.5 million bond required to fund this project.
Mount Hood golfers will foot the bill for the $5.5 million
There is no question that there is a critical need to provide more space for the expanding youth sports programs. Soccer, field hockey, and lacrosse, are sports programs that are increasing in popularity involving more and more school kids.
In early October Mayor Rob Dolan presented a plan for an extensive renovation project for the High School football and baseball fields and the addition of an athletic field and softball field at Pine Banks. The latter two will be shared with Malden.
The anticipated $4.5 to $5 million cost for these projects is to be financed with a 25-year bond which is to be paid off in it’s entirety by revenues from the Mount Hood golf course.
The projects means that there is something the city now needs even more than the athletic fields, a Mount Hood golf course that will continue to produce a revenue stream adequate to cover the cost of the athletic field complex.
How does the city plan to maintain Mount Hood's high revenue flow?
Although maintaining the golf course’s high revenue stream is vital to financing the athletic fields, nobody has asked what steps the city intends to take to maintain the high level of play that now occurs at Mount Hood.
New legislation was necessary to access the $5 million from Mount Hood’s
Enterprise Fund. Both the city and state legislatures and the governor were obliged to approve an exception to a limitation of the Enterprise Fund that is used to run Mount Hood.
The limitation did not allow money generated at Mount Hood to be used for
projects that were not directly associated with Mount Hood. Money generated at Mount Hood, for example, could not be used to cover the cost of a new press box at the high school field. This limitation was eliminated when the new legislation was passed at both the city and state levels and when Mayor Dolan got the governor’s signature in January.
Who approves projects and what is the process?
The language of this legislation is very general. It talks about acquiring land for open space and recreational purposes for outdoor facilities, it does not specify particular projects like athletic fields. This means that somebody or some group must determine which projects qualify under the boundaries set out by the legislation. Who does this? How? Will there be a special process for qualifying a project before money goes in to it? Can some city official start taking Mount Hood money for a project because he alone feels that it qualifies?
When Park Superintendent Joan Bell was asked these questions she said that no money can be spent on a park in Melrose without the approval of the Park Commissioners. Well, maybe not for everything.
After-the-fact approval of money already spent.
According to the minutes of the Park Commission’s October 12, 2010 meeting a group that included Denise Gaffey, Rob Van Campen, and City Auditor Patrick Dello Russo made a presentation to the commissioners about a Feasibility Study that had been done for the athletic field complex. The presenters were there to get the commissioners approval for the feasibility study and for the $51,500 that the study cost. The money was expected to come out of the Mount Hood Enterprise Fund.
The Board of Aldermen approved payment for the study on September 30. When Park Commission Chairman Mike Interbartolo pointed out that the presenters were asking for approval of an expenditure that had already been paid Auditor Dello Russo said that it had been the city’s expectation all along that it would go before the Commission to ask for reimbursement.
The motion for approval passed with Chairman Interbartolo opposing.
Will the city have other expectations for the Park Commission in the future? Will the city continue to pay for projects out of Mount Hood money before the Park Commission approves it?
Mount Hood revenues for 2011 over $2 million but not enough to cover cost of new bond.
Mount Hood’s golf operation generates a sizable revenue. According to current city records Mount Hood’s total revenue for 2010 was $2,167,435. Even so, the course cannot afford the annual cost of the 25-year bond necessary to pay for the athletic field complex. The reason is because of a yearly payment of $165,000 that must be paid to cover the cost of the damage bond which was issued to pay for the costs of the big dig dumping debacle. This bond wont be paid off until 2015.
After the damage bond is paid off, the $165,000 annual payment will be
available to help cover the cost of the 25-year bond for the athletic field complex. The $165,000 will be combined with the money that the golf course has left after its annual expenses. This money is referred to as an excess. It can be a lot of money. For 2009 the excess was over $240,000 which was added to the Mount Hood reserve fund.
With no regulation will money from Mount Hood be easy to take?
The damage bond wont be paid off until 2015. This presents an interesting
situation. During this interim period the golf course will be producing excess revenues for the next five years. Combine this with the undefined limits of the special legislation that doesn’t say who and for what specific projects that money can be taken from Mount Hood, will this accumulating excess remain untouched by the city until 2016?
Now that the special legislation allows the city to go after Mount Hood money will this accumulating excess money be nickle and dimed to death by the city with “qualifying” projects, like repairing existing soccer fields?
When 2016 comes around will Mount Hood’s excess money be reduced to the point where, even when it’s combined with the freed-up $165,000 bond payment, it won’t be adequate to cover the costs of the 25-year bond for the athletic field complex.
Is there any regulation now in place that will keep this from happening? Does the Park Commission’s after-the-fact approval of the previously mentioned $51,500 Feasibility Study make this a reasonable question?
The high school field renovation is scheduled to start immediately and be
finished by October 2012. The money that will make the bond payments won’t be available until 2016. The golf course is not producing enough revenue in the meantime to pay the costs of the bond. How will the athletic field complex be financed in the interim? Who pays?
When this question was asked at the February Park Commission meeting Chairman Interbartolo recalled some of the methods that were used in the past to cover short-term expenditures. But these were speculations. Nobody else on the Park Commission had an answer.
The athletic field complex will be completed by 2012. The bond that pays for it does not start until 2016. Won’t payments for the completed complex have to be made in this interim period? Who pays for them and how?
Much has been made about comparing the $5.5 million costs for the athletic
fields complex with the $4.2 million cost of building an athletic field at Mount Hood. The comparison is being represented as five fields for the price of one.
What should be noticed about the above claim is the $4.2 million cost of the 2009 proposal to build an athletic at Mount Hood. This proposed field was one of three options presented to the Park Commission by Beals and Thomas Consulting group. The Commissioners were to select one of the options for a more thorough development of its costs.
First estimate of proposed athletic field at Mount Hood was around $1 million.
Original estimate for proposed Mount Hood athletic field much lower than final number.
The Commissioners selected the option that was obviously the cheapest and would have the least affect on the Mount Hood environment. In earlier discussions its estimated cost was anticipated to be about $1 million. The consultant returned with a fully developed cost that had escalated to $4.2 million.
The City does not yet have a fully developed cost for the athletic field
complex. Does it make sense to conclude that you can get five athletic fields for $5.5 million when you already know the cost for one field is $4.2?
In January the Board of Aldermen approved the funding of a $220,000 bond to pay for the engineering and design costs for the complex. What happens if this work shows that the costs of the complex will be significantly higher than $5.5 million? Will some of the other features of the renovation like the new football stands, the new lights, new press box be jettisoned to get the cost down to the $5.5 level?
Is it possible, after all the eliminations, that what we end up with at Melrose High is exactly what we have now except that the football field has an artificial turf surface?
What is the interest rate for the proposed $5 million bond?
At the Park Commission meeting in December 2010 the Commissioners were asked what would the interest rate be on the $5 million, 25 year bond? The answer was the expected rate would be 4%. Using these numbers the first payment would be $200,000 for the principal ($5 million divided by 25) and $200,000 for interest($5 million times 4%)or a total payment of $400,000.
Mount Hood is no stranger to debt but its previous bonds had interest rates of 5% not 4%. If Mount Hood carries a bond with its historical rate of 5% the first annual payment will be $450,000 not $400,000.
Even hedge fund managers don't know what interest rates will be in 2016.
No one knows what interest rates are going to be in 2016. No one knows either the amount of the bond itself. That’s because there should be some payments made between 2012 when the High School complex is finished and when the first bond payment is due. That doesn’t necessarily mean that $5 million more won’t be needed to pay for it.
With that in mind shouldn’t the city say what Mount Hood’s first annual payment will be if interest rates in 2016 are 4%, ($400,000), or 5%, ($450,000), or even 6%. ($500,000)? Shouldn’t these alternative costs be measured against what Mount Hood revenue is able provide? Shouldn’t we know the risk that the city will be taking if we move ahead with the athletic field projects?
What the athletic field complex plan has been lacking is a public venue. There has been plenty of publicity but no opportunity for the plan to be reviewed in a public forum. Is it a coincidence that subjects that affect the golf course are brought up during the winter when the only thing on the ground at Mount Hood is snow and ice?
Boston Globe editorial called the Big Dig calamity "The Mess in Melrose."
The Big Dig calamity that occurred in 2000 might never have happened if some very basic questions had been asked. Questions like, why is Melrose being paid 70 cents per ton to take Big Dig land fill when Quincy was paid $7 per ton? That question didn't appear in public until it appeared in the January 15, 2002 issue of the Boston Globe’s lead editorial titled, “The Mess in Melrose”.
A bigger, simpler and more critical question was also not asked. Namely, how did the city know that the area at Mount Hood that was prepared to receive the fill was big enough to accommodate the 700,000 tons that the city had signed a contract to accept? Secondly, if the prepared area wasn’t big enough where would the remainder be dumped?
Neither question was asked and if that had been done it was unlikely that the dumping would have ever taken place. The situation could be no better summarized than the situation which occurred when the dumping was in progress. With the eventuality of a calamity becoming more and more obvious the Park Commissioners voted to stop the dumping. They were subsequently advised by the City Solicitor that because of the city’s contract obligations the dumping had to continue until the contract was fulfilled.
The dumping resumed and the fill was dumped on the only place available, the golf course itself. The city had put itself in a position that it could not get out of and it would keep getting worse until the contract was completed. The situation’s gravity was compounded because revenues from the golf course were being used to pay for a $1 million bond that been established to fund course improvements, improvements that had increased both play and revenue dramatically.
The city was obliged to repair the park and the course because of the
environmental damage the fill was causing to the wetlands. The cost was $1.7 million which was funded by a bond.
Golfer's money bailed out city from its Big Dig Mess.
In 2009 Henry Paulson, U.S. Secretary of the Treasury, established the Troubled Asset Relief Program which became known as TARP. Pure and simple it was a taxpayer bailout of the giant banks whose risks had resulted in the financial calamity that resulted in a credit squeeze that was crippling the economy.
Melrose had its own TARP program in 2003 when it designated the golfers to bail out the city of the cost of the $1.7 million bond necessary to restore Mount Hood park and its golf course. The cost to play a round of golf went up 32%. The golfers were to pay for the bond.
The increase itself did not produce the revenue necessary to meet the course obligations. That didn’t happen until the 12th fairway was repaired which made Mount Hood a legitimate 18-hole golf course again.
There are plenty of tough questions that need to be asked before the athletic field complex goes forward. It would be terrible if the city again puts itself in a big-dig like situation that it found itself in before.
This time the crisis will be if the basic premise of this athletic field complex is not true. The premise is, of course, that Mount Hood golf revenues will be sufficient to cover the entire cost of the new athletic field complex for the next twenty five years.
March 4, 2011