Debt Affordability Committee Considers School Construction

The State’s Capital Debt Affordability Committee heard a presentation today from the Public School Construction Program Director, David Lever. The agenda for the meeting included a review of several capital programs including school construction. During his time before the Committee, Dr. Lever provided an overview of the challenges of keeping school construction and renovation at pace with needed improvements during the recession, and going forward.

Dr. Lever described how the economic recession had impacted requests for school construction funding due to the inability of local jurisdictions to meet the required match for the funding.  From his report,

Anecdotally, we believe that the most important reason for the decrease in requests between FY 2008 and FY 2013 was the constraint on local governmental ability to provide the required local matching funds.  The decrease in work that was funded in this period implies that there is a growing backlog of projects that will need to be funded in the future.  As local fiscal outlooks improve, it is reasonable to expect that this backlog will be reflected in increased CIP requests.

There also seems to be a correlation between the recession and enrollment increases in public schools, which put additional pressure on school facilities.  For example,

The economic recession also appears to be responsible for the large student enrollment growth in Montgomery County.  MCPS officials tell us that the economy has led families to choose the public school system over private and parochial schools, and the lack of jobs elsewhere has forced households to stay in place rather than leave the county.

Dr. Lever also described how current economic factors could increase costs of construction in 2014 and subsequent years due to an increase in demand for construction, a decrease in the labor force, and a decrease of plant capacity.  There are more details on this topic, including analysis by The Gilbane Corporation in Dr. Lever’s complete report. One Maryland-based example of current conditions follows,

Increased construction costs. A noticeable decrease in bidding competition has been reported by the LEAs [Local Education Agencies] in the past 12 months, and this is also apparent from examination of the bid tabs that accompany most requests for IAC approval of contract award.  Whereas in the period from 2008 through 2010 it was usual to see as many as 14 contractors bidding for a major project like Calvert High School in Prince Frederick, with bid costs that had a very narrow spread, today we would expect to see as few as six to eight bidders, with a far wider bid spread.

On September 25, the Capital Debt Affordability Committee will vote on a recommended debt authorization level to support the fiscal year 2015 capital program.  Dr. Lever estimates funding needs for school construction at $15 billion based on facility assessments across the state.

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