The Facts About LMSD's School Construction

Who's really responsible for saving taxpayers' money?

In response to the misleading campaign mailings, Op-Eds, and mass phone messages from the Republican candidates for Lower Merion School Board, here are the true facts regarding the District’s past construction projects:

• Only two of the 10 school board candidates have experience in school construction (Democrats Fair Pliskin and DiBonaventuro).  As part of the Democratic controlled Board of 2003-2007, both managed the three multi-year elementary school projects through the construction process to on time, 1 percent under budget completion.

• The current Republican slate is trying to take credit for the success of these three elementary school renovations when a different group of Republicans awarded bids on the three projects and then only managed the process for five months until the Democrats took control in December 2003 and managed the remaining two years of the construction process.

• Five school renovation projects were begun in 1997, 1998, and early 1999.  The Republican slate is trying to blame the Democratic slate for cost overruns that occurred on these five projects.  No one from the current Democratic slate was on the School Board that executed these projects a decade ago.

• In 2001, the Republican-majority School Board reversed course and delayed the high school construction projects.  After the Democrats won the majority in November 2003 on a platform of “New Schools Now,” the new Board quickly voted unanimously to proceed with the high schools.  (Harriton is now under construction and Lower Merion is out to bid.)  Members of the current Republican slate have criticized the recent unanimous decision to move forward with Harriton and are on the public record as saying we should “step back” from LMHS — the same policy of delay as their 2001 predecessors who squandered $40 million of taxpayer money when school construction costs in the region grew more than 25 percent since the date the high school projects would have been bid had they proceeded without the hiatus.

There are many important issues facing the upcoming Board besides the completion of LMHS.  The Democratic slate has the qualifications and the positive ideas to improve the schools and control costs. 

Click the links for the original Lower Merion School District construction cost records and timeline provided to the candidates.

Not-to-exceed budgets:
Fiscal discipline or irresponsibility?

The Republican candidates for school board have accused the current school board of fiscal irresponsibility because they voted unanimously, Republicans and Democrats alike, to proceed with Harriton high school even though the construction bid was over their “Not To Exceed” budget.  However, this is a sign of fiscal discipline, not out-of-control spending.  Here’s why: In a period of rampant construction cost inflation, hewing to an out-of-date estimate is futile.  By the time the project is redesigned, construction costs have grown so much that they eat up all the savings.

The last four years have been an era of almost-unprecedented construction cost inflation averaging more than 10 percent growth per year.  In such an environment, construction cost estimates – such as ‘not to exceed budgets’– are woefully out-of-date by the time bids come back.  This is not limited to school districts: Emerging Trends in Real Estate 2007 recently wrote of commercial real estate: “Construction costs have been sent through the roof, setting off the worst project overruns since the 1970s.”

What should a fiscally responsible school board do when faced with such an inflationary construction cost environment?  Do as our current board has done: Cut what you can quickly, then get the schools built before they become even more expensive.  If construction costs are rising at 10 percent per year, delaying a $100 million school by a year to redesign it costs $10 million plus the additional design fees.  The school district would have to save a lot of money from the redesign to make that $10 million of waste worthwhile.  Suppose a district could cut $10 million out of the budget by reducing the school size by 15 percent.  In the end, they would have saved no money on net, and ended up with a 15 percent smaller school.  And if they cut the school size by 25 percent, perhaps they would save $4 million overall, while losing one-quarter of the school.  It’s just not worth it.

In this construction environment, the Republican slate’s pledge not to exceed the current estimates for LMHS is fiscally reckless.  September’s industry projections are that construction cost growth will be around 8 to 10 percent for each of the next two years.  If the bids come in above estimates and the Republicans halt the process to “rethink” as they have pledged to do, a two-year delay would waste $20 million.  This is the same misguided policy promoted by the 2001 Republican-majority school board which cost taxpayers $40 million.

The true history of school construction costs

·        The costs to build Lower Merion and Harriton high schools have gone up because building construction costs have skyrocketed since 2003.

Throughout the U.S., and especially in our region, the cost of constructing all sorts of non-residential property has skyrocketed since 2003.  Over the last four years, the cost of key raw materials—steel, copper, and concrete, as well as skilled labor—has increased from 25 to 250 percent.¹  Rapidly escalating oil prices have also driven up the cost of transporting materials.  (In the October 16 School Board candidates’ debate, candidate Marine (R) said that school construction costs were falling based on her research into lumber costs.  While it is true that lumber prices have dropped significantly, lumber is not used much in high school construction.)

These rising materials costs have driven up the cost of constructing high schools.  Since mid-2003, the cost of constructing or renovating schools in our region has grown more than 10 percent per year on average.²  This means that a school that would have cost $160 million to build in 2003 would cost nearly $225 million at today’s labor and materials prices. 

Moreover, had the school board simply kept the projects on track in 2001, the taxpayers of the District could have saved about $40 million in subsequent cost inflation.  (Had the high school construction not been halted, the schools would have gone out to bid in 2005 rather than in 2007).  It is not surprising, given the cost growth, that our new Harriton and Lower Merion high schools will be more expensive than other recently built high schools in the mid-Atlantic and Northeast.  High schools completed just two years ago would have been 25 percent cheaper than our schools, even if they were exactly the same size.  And construction costs in our region are much higher than in most of the country.

·        Our high schools are neither “too big” nor “too expensive.”

The size of the high schools, by any objective measure, is reasonable for a district of our caliber: the new high schools are at the tenth percentile nationally in terms of square feet per student.  In addition, a significant portion of the difference in size between our new high schools and a high school that falls in the 25^th percentile for size is explained by three factors:  winter weather – we need enclosed hallways; small sites – building three-story schools takes more square feet per student than a sprawling one-story school because they require more corridors and stairways; and adjusting to an awkward site – we cannot build a simple rectangle, which would be more efficient.

Finally, construction costs per square foot for our two high schools have tracked the median of other schools built in our region.

1. Since 2003, steel has almost doubled in price, copper has increased two-and-a-half times, concrete is up 30 to 50 percent, and skilled labor costs 25 percent more.  Source: Engineering News-Record, various dates.