2012-10-23-AC-min - Laserfiche WebLink

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October 23, 2012 In response to questions, it was explained that the School Committee's anticipated appropriation request will include not only funds necessary to close the current estimated gap in hard construction costs of $1,252,674, but also a buffer to cover potential additional cost increases that may surface because: • The Town has two estimates of construction costs for the project, one of which is $800,000 higher than that used to determine the current gap; and • The cost of materials continues to increase. David Kanter added that one element of the project budget, the cost to demolish the existing building, is particularly difficult to predict and may trigger higher bids than are currently proj ected. Pat Goddard explained that the Town is utilizing a special bidding process under Chapter 149A that allows it to enter into a Guaranteed Maximum Price (GMP) project funding agreement with a general contractor who provides construction management -at -risk services prior to going out to bid. The sub - contractors must pre - qualify. This may result in a higher cost than taking the lowest bidder, but the Town expects higher quality work that will better serve the Town and avoid problems over the long term. Trade contractor bids will be due December 20, and Shawmut will submit the GMP on December 30. It is known that other state and community projects will be going out to bid in the winter, and going out to bid in December should result in better bid prices than if the town were to wait until later. Committee members recommended that the School Committee develop a clear and concise explanation for the Special Town Meeting of the factors underlying the project cost overruns and supplemental appropriation request. 3. Unfunded Pension Liability: Rob Addelson shared a spreadsheet developed by the Town Retirement Board's actuary showing several options for reaching 100% funding of the Retirement Fund prior to 2040, as currently required by state law. If the Town retains its current goal of 100% funding by 2020, the total pension contribution required for FY14 would increase from $4.2 million to $7.3 million. That extraordinary increase results from two factors: (1) the fact that the valuation of pension assets, which is done as a rolling average over several years to smooth short-term market fluctuations, is now picking up the full impact of the post -2008 recession; and (2) the use of new actuarial tables reflecting longer life spans. Rob Addelson commented that the actuary's calculations assume an 8% return on assets, which is now generally considered to be optimistic. He would be more comfortable reducing that assumption and hopes the Town can eventually move in that direction. The options on the spreadsheet include plans that would achieve 100% funding in 2025 and 2030 without burdening the Town with an increase of more than about $600K in any given year. The spreadsheet also shows how the future funding schedules would change if either an extra $1 million, or an extra $1.7 million, were appropriated at the upcoming special town meeting as one -time additions to the pension fund in FYI 3. 2