East Greenwich Council reviews rising school construction costs, weighs using bond premium to close gap

East Greenwich — Town officials, bond counsel and financial advisers met Oct. 21 to walk the Town Council through revised cost estimates for the school construction program and the financing choices they will need to make before submitting stage 3 documents to the Rhode Island Department of Education (RIDE).

The meeting centered on reconciling the $150 million bond voters approved in 2023 with new estimates that place total project costs in the roughly $169 million–$172 million range if the town preserves the full program. The consultant team presented three broad options: (1) use bond-premium proceeds generated at sale to reduce borrowing shortfalls or fund additional project costs; (2) tap older authorized-but-unissued bonds the town still holds; or (3) seek a new referendum to increase the bond amount. Town Manager Andrew Nada said the school construction committee would deliver a recommendation that will determine which path the council follows.

Bond counsel Karen Grandy explained how premium works in plain terms: "Bond premium is basically additional money that an investor pays when they purchase a bond," she told the council, noting that while premium raises upfront proceeds it is folded into long-term debt service. Financial adviser Steve Massaroni said market experience in New England has recently shown premiums in the 8%–12% range, and that a 10% premium on a $150 million issue could add roughly $15 million in proceeds.

That extra cash, however, is not costless. Trish Sunderland, the town finance director, presented amortization scenarios showing how the town’s net debt service and tax impacts would change under a no-premium and a with-premium scenario. "If we take the premium, the net debt service will be a hundred and $17,000,000," she said in describing one modeled outcome; under the no-premium model she showed a different amortization and lower long‑term debt service but smaller upfront proceeds for the construction fund.

A key factor in the council’s calculations is how RIDE treats premium for reimbursement. Consultants reported that RIDE practice — as discussed in prior exchanges with the department — permits reimbursement of premium tied to the $150 million approved construction amount at the higher 55% share for principal and interest on that approved face amount; amounts beyond the stage‑2 authorization would be subject to lower reimbursement shares (commonly 35% on principal for other funding sources). The consultants stressed that RIDE’s written rules are not always precise on every detail and that some of the guidance they rely upon reflects customary practice and prior approvals.

Scope and schedule decisions also drove the discussion. Left Field senior project manager Kate Turner and the OPM/architect team asked the school construction committee to make one near-term decision by Nov. 7: whether Hannaford will be renovated and added to or replaced with a new build — a change the team estimated could alter the program cost by roughly $3 million–$4 million. The consultants said schematic design and independent estimating require that direction to produce accurate stage‑3 submission documents for RIDE in December.

Public comments reflected both technical questions and local concerns. Several residents asked for clarification about why some previously authorized capital funds were reimbursed only for principal (not interest), and staff explained that difference depends on how those earlier amounts were approved (bonded construction versus PAYGO/capital reserve approvals). During public comment, resident Chris Lamendola charged that a prior construction effort had damaged his house and urged the council to prioritize compensation to affected families from existing bond authorizations before allocating funds to new work. The council and staff said they would document concerns, perform pre‑construction surveys, and pursue insurance/contractor protections for abutters.

Councilors and consultants outlined next steps: the school construction committee will meet Nov. 7 to vote on the Hannaford decision and produce a recommendation; the council will then consider that recommendation at a subsequent meeting with the aim of finalizing scope and submitting stage 3 to RIDE before the end of the year. The council adjourned after a motion carried 5–0.

What’s next: the school construction committee’s Nov. 7 recommendation on Hannaford (renovation vs. new build) and the consultants’ updated schematic estimates will determine whether the town uses premium proceeds, reallocated unissued bond authorizations, or seeks other options to address the funding gap.