Rising construction costs force WSD to rethink bond goals
Two years after voters passed the Woodburn School District's $65 million capital improvement bond the district is having to reevaluate how much can be done with the bond money in the face of continually rising construction costs.
With an improving economy, the number of construction projects across Oregon has swelled drastically. The problem, Superintendent Chuck Ransom said, is that the construction boom is stressing the supply of construction workers in Oregon.
"It's supply and demand, basic economics," Ransom said. "When supply gets tight with labor, costs rise in ways that don't correlate with cost of living."
While inflation increases U.S. prices by about 2 percent each year, construction costs in Oregon have been increasing by about 8 percent each year for the last few years, according to representatives from construction firm J.J. Henri, who presented at the Aug. 30 Bond Advisory Accountability Committee meeting.
"We did not see — and nobody did — the acceleration in the construction industry," Ransom said. "Normal inflation, normal cost of living, is not what we're talking about here."
Increased construction costs mean that in current economic conditions, all of the bond projects the district set out to complete in 2014 — which were estimated to cost slightly less than $65 million in 2014 — are now estimated to cost $78,248,194.
Although the bond has earned a premium of $8,032,524, that still means the district has to cut, or reallocate, about $5 million in projects from the list of bond projects.
Some of the projects might be reduced rather than eliminated. For example, instead of redoing all of the windows at a school, the district might only work on a portion of the windows.
Some projects could be taken off the list of bond-funded work and transferred to another funding source. "So we might say, we're not going to do this with bond dollars, we're going to go to the general fund and use major maintenance (funding)," Ransom said.
However, the economic reality means the district will have to reevaluate priorities and decide which projects are absolutely necessary to be done with bond dollars — and which ones aren't.
It's not a process unfamiliar to the school district. The original list of bond projects created in 2014 listed $130 million in projects.
That list, created with the help of construction consulting firm Heery International, included a much longer list of projects than the current list.
"We said, OK, what's it going to take to bring the facilities of the district up to our expectations," Ransom said. That included increasing the capacity of the buildings to make room for more students; major maintenance projects like roofing, siding, windows, and heat; technology upgrades; security improvements; and compliance with modern codes like the Americans with Disabilities Act and updated fire safety standards.
The district decided it wasn't realistic to ask the community to pay that much for the improvements. So, in 2014, the district prioritized the original projects to bring the estimate down to an amount the voters could support.
"We took that list and said, OK, what can we wait on, what can we somehow figure out to do later with other funds," Ransom said. "We got that package down to $65 million."
Back then, the district prioritized the projects that were especially needed to get done at the schools. It's doing the same thing now. "We did, essentially, what we're going to again. We took that list and said, OK, what can we wait on, what can we somehow figure out to do later with other funds," Ransom said.
Ransom said it's important for Woodburn residents to remember that the original $65 million was never intended to cover every improvement needed in the district. "It wasn't like, 'Hey, for $65 million we can make the district the best it can be,'" Ransom said. "We know we're already doing much less, half of what we needed to do."
At the Aug. 30 Bond Advisory Accountability Committee meeting, the committee began identifying types of projects that were a priority. Projects related to capacity were named high-priority, as were projects related to increasing security and improving structural problems.
No final decisions have been made — the Woodburn School Board will approve any final changes to the bond budget.
At the Bond Advisory Accountability Committee meeting, district staff said the suggested changes to the budget would be presented to the committee in about two months.
Ransom said he knows the community won't be happy about the changes to the project list — he isn't either.
"Everything has an explanation, but it doesn't feel very good to people when they hear it," Ransom said.
"It's an unfortunate situation. It keeps me awake at night, it gives me heartburn, it drives me crazy. It makes me very unhappy," Ransom said. "But I have to keep leading the program forward and try to help people understand and try to get things back on track and continue to work really hard, and do my best at explaining."