Cost Concerns, Economic Anxieties Put Construction on Shaky Ground. By: Ash, Katie,
Education Week, 02774232, 1/21/2009, Vol. 28, Issue 18
Academic Search Complete
HTML Full Text
Cost Concerns, Economic Anxieties Put Construction on
. Bond Questions
. Impact of Inflation
. Good Time to Build?
Economic Woes Hit School Construction
Years of rising fuel and materials costs, compounded by current budget
shortfalls and uncertainty about the marketability of construction bonds,
have made school facilities directors eager to reap the benefits of
President Barack Obama's economic-recovery initiative, which is slated to
include federal money for building and modernizing schools.
"Most school districts feel a tremendous need [for construction funds],"
said Gordon Beck, the director of school facilities and organization for
Washington state. "Whatever funding can come from the federal stimulus
is like a godsend, and would certainly do great things."
The Democrats in the U.S. House of Representatives released their version
of the bill on Jan. 15. It would set aside $14 billion for local school districts
for a school modernization and repair program, which includes technology
upgrades and energy-efficiency improvements. (See related story, Page 1.)
Although no official date has been set for final action on economic-
recovery plan — the Senate will also offer its own version of such
legislation — Speaker of the House Nancy Pelosi has proposed a mid-
February deadline for Congress.
The incoming administration is working with lawmakers to adopt the
stimulus package, which includes school construction funding.
"Well put people to work repairing crumbling roads, bridges, and schools
by eliminating the backlog of well-planned, worthy, and needed
infrastructure projects," Mr. Obama said in a Jan. 8 speech at George
Mason University in Fairfax, Va. "To give our children the chance to live
out their dreams in a world that's never been more competitive, we will
equip tens of thousands of schools, community colleges, and public
universities with 21st-century classrooms, labs, and libraries."
Sue Robertson, the president of the Scottsdale, Ariz.-based Council of
Educational Facility Planners International, or CEFPI, estimates that the
amount of money needed for those projects is between $30 billion and $45
billion, out of an overall federal stimulus plan that could total more than
"That would be huge in terms of making America's schools into good,
operable, safe, secure, and educationally appropriate environments," Ms.
Robertson said. "With less than that, it's going to be hard for some
districts to get enough money to make a difference."
Although funding systems vary from place to place, most school districts
do not receive state aid for construction projects, Ms. Robertson said.
Most construction is financed through bond referendums put before
The amount of money that districts can receive from issuing bonds is
affected by the interest rates they are able to. secure in the market. But
given the economic recession, districts are "questioning whether to sell
them or wait" to get a better interest rate, Ms. Robertson said.
What is yet to be determined, said Ms. Robertson, is when school districts
will sell their bonds, and what kind of costs they will see.
However, Nick Johnson, the director of the state fiscal project for the
Washington-based Center on Budget and Policy Priorities, believes that
school bonds may be a safe choice for investors in a somewhat unstable
"A lot of the concern about the bond market is easing," he said. "The
reality is that investors realize that you need bonds, and school districts
are a pretty good bet," for investors.
But as unemployment rates rise and the economy worsens, it may become
harder to convince voters 'of the importance of such projects, said Melanie
E. Drerup, the deputy chief of planning for the Ohio School Faculties
Even districts that receive state funding for school construction projects
are now struggling to meet funding needs as state budgets begin to
For example, in California — where the state matches a portion of local
funds for school construction projects — districts are now trying to make
ends meet after a statewide freeze on public-works projects because of
drastic budget shortfalls. (See related story, Page 16.)
"With this state funding stoppage, we could literally end up in a position
where we had to stop those schools that are already under
construction," said Guy Mehula, the chief facilities director for the
680,000-student Los Angeles Unified School District, which was expecting
$833 million from the state for projects that are already under way. For
now, the district has decided to sell some, local bonds earlier than
expected to offset the shortfall.
Stopping construction on existing projects is a scenario the district is
"If you stop the project, it's going to be longer before those kids get
relieved and get back into a school into their neighborhood," Mr. Mehula
said. "From a pure construction standpoint, if you stop a project, you're
going to have to suspend a lot of money to pay the contractor extra to
stop the contract. You would have to terminate those contracts, or pay the
late charges, then pay the contractors to remobilize."
In South Carolina, districts are struggling to adapt to a change in the
school construction funding law that links those funds with sales taxes
instead of property taxes, said Alex James, the director of the office of
school facilities for the South Carolina Department of Education.
Because of the law, which was passed in 2006, the amount of money
available for facilities construction and maintenance is directly affected
by the condition of the economy. As people cut back on spending, sales-
tax proceeds for schools decline.
"When the law was passed,… everybody was thinking we were invincible,"
said Mr. James. "Nobody has that crystal ball."
To offset the shortfall, districts have begun to depend heavily on local
funds, including the proceeds from bond referendums.
Impact of Inflation
Despite fluctuating interest rates for bonds, those districts whose voters
have already set aside money for school construction projects shouldn't
be greatly affected by the current economic climate, said Paul Abramson,
the president of Stanton Leggett and Associates, an education space-
planning consulting company based in Harrison, N.Y
"School districts that are hard pressed for current dollars may very well
have existing funds for construction," he said. "But you can't take dollars
that have been set aside … for capital projects and legally use that money
for current expenses."
Mr. Abramson, who also tracks school facility and construction trends,
did not anticipate seeing a significant decrease in the number of projects
finished in 2008 once those statistics have been released.
"There may be some hold-back on [projects starting in 2009]," he said,
"but I think it's going to be relatively modest."
A bigger issue, he said, is the effect of inflation in recent years. "There's
no question that over the last two to three years, the cost of inflation [of
building materials and fuel] has taken a bite out of schools and out of
school construction," Mr. Abramson said.
Over the past year, "the cost per square foot increased somewhere
between 10 and 13 percent," he added. "That's a problem."
However, Ms. Robertson, from the CEFPI, warned against blanket
statements about inflation in school building costs. Although such inflation
is a concern for most districts, the cost of construction varies
dramatically from place to place, she said.
Good Time to Build?
What's more, many school construction companies and district facilities
directors have "noticed inflation rates tapering off since the start of the
recession, which experts officially date to December 2007.
"The bad news is the economy stinks," said Tom Roger, the vice president
of the Providence, R.I. based Gilbane Building Co., and the project
manager of school construction for the 20,800-student New Haven
public schools in Connecticut. "The good news is the cost of
construction has stopped escalating."
For the districts that can afford to, "now is when they should be building,"
since the cost of materials have stabilized, he said.
Mr. Roger, along with Susan E. Weisselberg, the school construction
coordinator for the school district, is nearing the end of a major
construction project in the district.
"We've done so much of our effort before a lot of this hit," said Ms.
Weisselberg, referring to the economic downturn, but the district didn't
totally escape the crisis. Officials have decided to hold off starting
construction for some schools until this summer, instead of beginning
"That's a reflection of the uncertainty of the economy," Ms. Weisselberg
said, "of wanting to see how things went in terms of city, state, and
Mr. Beck, from Washington state, is also anxious to see what will happen.
"Everybody's reading the newspaper, keeping up with the national news,
and trying to get prepared," he said.
By Katie Ash
Copyright of Education Week is the property of Editorial Projects in Education Inc. and
its content may not be copied or emailed to multiple sites or posted to a listserv without
the copyright holder's express written permission. However, users may print, download,
or email articles for individual use.