Construction costs influence school construction plan
Is now the right time for the Aspen School District to embark on an ambitious building plan for a new middle school and other improvements?District officials say they are concerned about increases in the price for such commodities as concrete, lumber and steel in the wake of the Hurricane Katrina catastrophe. Construction costs nationwide have risen at least partly because of the demand for basic building materials in the Gulf Coast region, and at the same time there is a shortage of those materials for a variety of reasons.Locally, at least one city official has postponed “a couple of small projects” until next spring because of concerns about the availability of concrete and steel.”I’m expecting it to calm down by next summer,” said the city’s assets manager, Ed Sadler. And the Aspen Skiing Co. is reportedly scrambling to complete lift station improvements at Snowmass Ski Area because of difficulties obtaining supplies.Aspen School District board member Fred Peirce, who is about to step down from his position because of term limits, said district officials also are worried about the possible effects of rising prices and reduced availability of construction materials.But, he said, “We’ve noted that construction in the valley was escalating dramatically even before Katrina.”He said the district has built a couple of financial cushions into the Nov. 1 ballot question, asking voters for permission to borrow $33 million to replace the aging Aspen Middle School and makeimprovements to Aspen Elementary School.First, he said, the budget has taken into account an average inflation rate of 1 percent per month in construction costs. In addition, he said, there is a 10 percent contingency amount incorporated into the figures.The district’s bond counsel, Terry Casey of RBC Dain Rauscher in Denver, said there is an added financial cushion the district can count on, assuming the bond issue is approved by the voters and the bonds are sold to investors. He said the district will reinvest the bond proceeds and can expect to earn “about $1 million in interest” between the time the money is invested and the time it is paid out to contractors.And, Peirce said, “If there is not enough money to build everything because prices have escalated … you would start to look at the priorities. The highest priority is the middle school.”Budgeted to cost $22.5 million, the middle school project would claim the lion’s share of the overall sale of $33 million in general obligation bonds.If money is left over after the middle school project, Peirce said, the district would then repair the Aspen Elementary School roof ($700,000), then construct five new elementary school classrooms ($2.6 million). The third priority, he said, is several internal changes to the District Theatre facility, including better backstage facilities and expanded bathrooms.The fourth and lowest priority, Peirce said, is a new entrance and lobby area for the District Theatre ($1.7 million).But first and foremost, he said, “If there is not enough money to do the middle school, then you don’t even start.”He said the district would then have the option of delaying the sale of the bonds, or if the bonds were already sold when it became clear the middle school could not be built, the bonds could be invested for later use, when economic conditions improved.Or, he said, the bonds could simply be repaid ahead of schedule. If the bonds were sold and repaid according to schedule over 20 years, the maximum payback would be $58.8 million including interest.If the bonds are repaid ahead of schedule, Casey said, the repayment could not start until 10 years elapse, because of provisions in the contract that protect investors’ ability to make a return on their investments.But Casey said such a turn of events “has never happened in my experience,” where a district could not spend the proceeds of a bond issue and had to repay them early.John Colson’s e-mail address is firstname.lastname@example.org
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