(Photo courtesy of Etkin Skanska)
Public school construction in the U.S. has long been a juggernaut that almost couldn't be stopped. Fast-growing regions have rushed to keep up with the needs of their bulging school-age populations, older communities pressed to expand and modernize aging educational infrastructure, and many in between have been targeted by courts and legislatures for disparities between rich and poor. In recent years, billions were earmarked by well-heeled states or approved by generous voters to jump start the largest school construction effort since the 1950s Baby Boomer days.
Today, school-related capital programs in many towns, cities and regions are still flush with cash and generating a boom market for engineers, architects and contractors. But, increasingly, those purse strings are being pulled tighter as states face budget pressures from dwindling post dot-com and Sept. 11 revenue, and as suddenly poorer taxpayers are less willing to underwrite the bill for new school space or expensive makeovers. As a result, educational owners are pushing hard for new efficiencies�shrinking or stretching out construction programs and demanding better economies. Others are seeking new financial partners and nontraditional funding methods, or deciding that creating new school space doesn't always mean building it.
(Source: School Planning and Management Magzine)
Even so, the public school construction market continues to thrive across the U.S., with more than $20.3 billion worth of projects completed last year and $20.4 billion projected for completion in 2002, according to an annual survey of construction spending by School Planning & Management (SPM) magazine, an education industry publication (see table). Another $20.3 billion of projects are set to begin construction this year. While those figures are below the record $21.2 billion spent in 2000 and hint that school construction "may be on something of a plateau," the magazine points out, "it is a very high plateau in terms of spending."
ON A ROLL. In a number of states, well-financed construction programs are moving like gangbusters. A three-state region that includes Ohio was the third highest-spending region of the 12 on SPM magazine's list, completing $2.2 billion of projects in 2001, half of them involving new construction. The current plan calls for the Ohio state government to commit $10.2 billion by 2012, which is set to be more than matched by $12 billion in local funds, says Randall Fischer, executive director of the Ohio State Facilities Commission.
Public support for local bond measures is widespread. Since 1997, 95% of the 130 districts eligible for state matching funds have passed local bond measures, most by an overwhelming majority on the first try, Fischer says. And, Georgia's adoption of a "special purpose local option sales tax" that has allowed fast-growing counties to raise sales taxes instead of property taxes over the last five years to fund school construction has generated billions. "A second round is now going through, and it's being approved overwhelmingly," says Don Gardner, vice president of planning and development at DWB Architects, Marietta. But he hints that SPLOST revenue has been negatively affected by downturns in the economy.
Elsewhere, the ramifications of our downsizing economy and new realities facing states and their residents are also starting to show up in the statistics. SPM magazine's $20.3 billion in anticipated construction project startups this year is $2 billion less than was predicted a year ago "and may be the first real sign that school construction is being affected by economics and events," says Paul Abramson, president of Stanton Leggett and Associates Inc., a Larchmont, N.Y., education consulting firm.
|(Photo by Joann Gonchar for ENR)|
VULNERABLE. Others note that capital spending is often most vulnerable as states or other localities face budget shortfalls and competing priorities. "These dollars won't come roaring back even if the economy comes back," says education consultant Philip E. Geiger, former executive director of the Arizona School Facilities Board. "More dollars are being siphoned off for health care and other issues. There are some serious droughts in dollars for public schools, and continuing to tax the public won't always fly."
In Idaho, even as a state court ruled that the state's school funding method was unconstitutional, a softening economy last summer prompted officials to trim $23 million from public school spending, according to The Bond Buyer. Idaho is still scrambling to close a $20-million state budget deficit before its fiscal year ends June 30. Under pressure to comply with the ruling that requires the state to correct school safety inequities between Idaho's richer and poorer areas, Gov. Dirk Kempthorne (R) signed a bill in March that would provide economically depressed areas with more state-funded interest coverage if two-thirds of a district's voters approve a construction bond after Sept. 15. But the bill also gives the state more control to enforce action from districts with building safety problems. The state must raise "whatever funds are necessary to make sure you have safe schools," says Mike Gilmore, deputy attorney general.
School construction funding in Michigan is starting to face some serious competition from other needs that require state attention. Michigan is curtailing its School Bond Loan Fund program, a line of credit it has extended to school districts since the 1960s to repay school construction bonds, says Tom Chen, senior vice president of Etkin Skanska, Farmington Hills, Mich.
This fall, the state ballot will include a $1-billion bond issue to fund sewer and water infrastructure, and officials are concerned about the state becoming financially overextended and hurting its own credit worthiness. "The less credit school districts can get, the harder it is for them to justify bond issues," adds Etkin Skanska President Tom Landry. "This has curtailed the number and size of bond issues." Chen says that a bill in the legislature that would provide up to $1 billion to help districts defray construction interest costs "is dead on arrival," because it is opposed by Gov. John Engler (R). The resulting funding slowdown comes as Michigan schools are in dire need of repair. "The median age of a school is now 25 years," says Chen. "How many office buildings would go that long without being fixed up?"
BACKLOG. In California, a chronic shortage of funds is "still holding up school construction and modernization throughout the state," says Rich Henry, vice president of the Sacramento-based education services group for contractor McCarthy. Billions of dollars in projects are "just simply sitting there waiting for the money to flow," he says. The Coalition for Adequate School Housing (CASH), a state organization representing school districts and construction interests, puts the building and renovation backlog at more than 2,200 projects.
Despite economic crises affecting the state, proponents are optimistic that voters will approve over the next two years a proposed two-part bond package that would provide $25 billion for school construction�"the biggest bond in the history of the world," says Thomas G. Duffy, a lobbyist for CASH. The first $13-billion bond measure, scheduled for November, would provide $11.4 billion for new construction and modernization and an additional $1.65 billion for public universities and community colleges. The second measure, set for a vote in 2004, would provide $12.3 billion for public schools and colleges.
"If some of these projects sit on the shelf for a few years, you may have to go back and redesign" because of future code changes, says Henry. But he also worries that the anticipated flood of funding will strain construction capacity and "drive costs off the chart." Complicating the picture is a current statewide hiring freeze that is preventing the state architect's office from staffing up, a potential bottleneck because the department must sign off on all school projects. "At a time when there's a lot of money to spend and plans to check, a key state agency can't hire," says Duffy.
New Jersey is also making major overtures to the private sector, particularly state-based engineers and contractors, to help its Economic Development Authority execute an anticipated $12-billion school construction program, of which $8.6 billion will be managed by the state. The program began to ramp up soon after its 2000 enactment but has since come under the watchful eye of new Gov. James McGreevey (D), elected a year later. McGreevey also now must deal with a big budget gap that is forcing significant cuts in state funding and operations.
The state initially signed five contracts for program management services on school projects in five of its biggest cities. They cover "health and safety" related repairs in schools and would also include additional "task orders" as necessary, possibly adding as much as $500 million to each contract. But a second round of PM contracts procured during the McGreevey administration will not be as lucrative, contractor sources say. The state has decided instead to remove the task order language from PM contracts, requiring PM firms and others to bid on tasks competitively. Caren Franzini, executive director of the state EDA, says the changes will spur project efficiency and improved management, but contractor executives hint that they are politically motivated. Franzini adds that there will be "programmatic enhancements" in the school construction effort enacted over the next month. "We are working with the governor on new initiatives that will streamline the process," she says. "He has asked us to look at the program in detail and make it more efficient."
"We have stopped using old design rules and we're making headway in driving down construction costs."
"There are some serious droughts in dollars for schools. More dollars are being siphoned off."
� Philip Geiger
"We are working with the governor to streamline the school construction process and make it more efficient."
� Caren Franzini
N.J. School Construction Chief
TROPHIES. Across the Hudson River, New York City is also struggling to keep school construction costs in check, particular with a mandated 17% cut in its five-year, $7-billion capital plan through 2004. On May 2, the city's Board of Education released a report detailing practices and policies that ratchet up costs for desperately needed new schools and repairs. The report claims school space now costs between $425 and $450 per sq ft. "Schools in New York City cost more than class A office buildings and condominiums," says Peter Lehrer, author of the report and chairman of locally based consulting firm Opus Three Ltd. Costs could be reduced by 25 to 30%, he contends.
Some recommendations include revamping design and materials standards that the report terms "outmoded and not cost-effective." The report notes that that partitions between classrooms must now be constructed of concrete masonry. Substitution of drywall partitions could result in significant savings since they cost less to install, require a less expensive structural system and allow more flexibility.
The report also says that the use of space in New York City schools is inefficient and that less restrictive pre-qualification standards should be used to increase the pool of bidders and create a more competitive environment. The report also points to political issues between the city's Board of Education and its School Construction Authority that add to higher school building costs. But Ronald Gottlieb, SCA president since last fall and a former contractor, says his agency has already stopped using the old design standards and is requiring more performance and cost-efficiency from its architects. "We are making big headway in driving down construction costs," he claims.
NEW PATHS. To get a handle on costs, states are looking to new ways of project delivery. Last fall, California Gov. Gray Davis (D) signed a bill allowing school districts to use design-build for new construction projects valued at $10 million and up. "I see that legislation having a major impact on the way school districts do business," says Yehudi Gaffen, principal in San Diego-based Gafcon, a school construction consultant. By June, the state Dept. of Education is expected to complete the final draft of guidelines for design-build delivery. But McCarthy's Henry says, "I don't think the floodgates are going to open and everybody's going to abandon" traditional design-bid-build delivery.
New Mexico, also under a federal mandate to equalize state schools, hopes to stretch its dollars further by developing a standard unified specification. Officials also began a pilot program to use Web-based integrated technology from Constructware, Alpharetta, Ga., to create more efficient tracking and a single-point of accountability for multiple entities. "New school construction is off because revenue sources are off," says Robert A. Gorrell, a state official."It will affect us next year more than this year."
School districts are also considering even more nontraditional methods such as reuse of old commercial and industrial buildings and partnerships with communities. Leasing space may also be a way to plan for the vagaries of shifting populations and budgets. Geiger says Arizona is considering a bill that would allow use of capital dollars for leasing instead of operating funds, as now required. "Other states are also looking at this," he says.
School System and Town Share Investment
The architect for a $77-million high school expansion in Medina, Ohio, calls the project a paradigm shift�a new trend toward integrating educational and community environments through shared spaces in a school. The project will not only provide a state-of-the-art facility that both students and residents might not have had otherwise, it will also spread the cost more painlessly between them.
"It's not more expensive than a comprehensive high school and there are a lot more advantages to the community," says John G. Willi, principal in charge of the project in the Dublin, Ohio, office of architect Fanning/Howey Associates Inc. "We believe the city has benefitted," agrees Charles N. Irish, superintendent of Medina City schools. "This approach represents community value."
Irish says the project represents a new process for school development that also seeks out community needs up front. The 520,000-sq-ft project includes 380,000 sq ft of new space, which is set to open this fall. A yearlong renovation of 166,000 sq ft of existing space will then follow. The partners contribute funds and equipment, and will operate the spaces or lease the facility from the school.
Shared facilities currently include an 84,000-sq-ft recreation center attached to the school's physical education facilities, which will be leased by Medina General Hospital for health and wellness education and physical rehabilitation. The school also has a partnership with the Medina County Performing Arts Foundation, which donated $200,000 and equipment for a 1,200-seat auditorium with an orchestra pit and a theater fly and will operate the theater. The University of Akron is another partner, funding a distance learning lab that will enable Medina high school students and residents to take college courses. There also is anticipated community interest in a new media center and space for a future cybercafe and copy center, says Willi.
The city contributed half of the recreational center's $15- million cost. "They're saving a chunk of money," says Jeff Eble, Medina City schools' business manager. "And we're getting an enhancement." Although Eble can't pinpoint how much money the school system saved, there are definite "economies of scale," he adds.
While the main shared facilities have independent entrances for residents and internal entrances for students, there will be times of joint usage. "We spent a lot of time analyzing security within the building and also site security," says Willi.
Eble says there have been at least a dozen inquiries about the school from other districts, and two site visits to date. "There is a tremendous amount of interest," he says, calling the project a success, even though it is still under construction. "It's a huge change."