News

Aug 18, 2023

Enrollment, funding, supply chain issues throw wrench into school construction projects

Schools are having to delay or alter facility projects as market forces balloon total project costs beyond what was initially budgeted or agreed upon. In addition to demolishing withered facilities,

Schools are having to delay or alter facility projects as market forces balloon total project costs beyond what was initially budgeted or agreed upon.

In addition to demolishing withered facilities, schools are finding themselves taking a sledgehammer to something else in light of the pandemic: building improvement plans themselves.

"They've had to revisit the size of their portfolio and facilities" for school construction projects, said Tracy Richter, a former educator and current vice president of planning services for HPM, a management firm that oversees district construction projects.

Supply chain issues, labor shortages, changing enrollment patterns and funding sources are throwing a wrench in districts’ efforts to revamp buildings, said Richter and school district business experts.

These challenges are impacting projects old and new. Districts that undertook building new facilities pre-pandemic are reconsidering their paths forward in the later years of these projects. And those that started during or after the pandemic — usually on improvements related to indoor air quality and student health — are trimming larger projects into bite-sized pieces.

“Some of the reasons why many districts are having to reconsider, alter or scale back facilities projects are because of persistent labor challenges, supply chain issues and high inflation,” said Elleka Yost, director of advocacy for the Association of School Business Officials International. Yost added those factors “have significantly increased the total project cost than what was initially budgeted for or agreed upon with contractors.”

Not only are districts competing with one another to complete similar pandemic construction projects nationwide — driving up costs of contracting services — but contractors are also having to increase wages for their employees.

"If contractors have to increase wages to hire sufficient professionals to do the work, those increased costs get transferred to districts, too," said Yost.

Supply chain issues, which have affected everything from school meals to computer deliveries, also continue to delay school facility projects.

Anthony Dragona, interim board secretary and school business administrator for the Union City Board of Education in New Jersey, ordered two rooftop air conditioning units in May 2022. The district just completed installation on one that arrived this February, or 40 weeks after purchase, said Dragona. It is still waiting on the second that is expected to be delivered this week, or 63 weeks after purchase.

"So when you have a 12-month lead time or 16-month lead time from the time that you order things, then you start looking at your funding and when these funds expire," said Dragona.

Districts like Dragona's that are relying at least partly on funding from the Elementary and Secondary School Emergency Relief fund for their facility upgrades are reconsidering their projects due to supply chain delays running into federal obligation deadlines. Those looming deadlines are September 2023 for ESSER II and September 2024 for ESSER III.

"Projects may end up being revised to being completed in smaller phases, according to a district’s ability to finance the projects via ESSER or other local funds once ESSER expires," Yost said, adding that districts may have to prioritize projects based on immediate need.

In the meantime, longer-term or more ambitious building projects may fall by the wayside.

"If they don't need a building, or there's a better solution than new bricks and mortar that's going to add operating costs, it is the right decision to take a second look at it," said Richter. "Districts have a more vested interest in investing into students and programs than they do square footage for buildings."

Districts are also looking into other more competitive sources of funding, such as grants and local sources.

However, Dragona said, upfront investments like feasibility studies and cost analyses could deter districts from pursuing those avenues.

"So the preliminary cost for a district to be able to submit the application could be cost-prohibitive for some districts," he added. "It's a sort of a catch-22 in some ways: Does the district make the investment?"

Districts’ decisions to pursue major facility investments are also coming down to enrollment. Nationwide, public school enrollment declined in the wake of the pandemic. Birth rates are also down, a trend predating the pandemic.

"And so what you have is this kind of this changing dynamic, where now the buildings have to align to changing enrollment needs, and buildings don't kind of increase or shrink because enrollments do," Richter said.

Earlier this year, for example, enrollment declines triggered districts nationwide to consider school consolidation and closures. Enrollment declines are also tied to revenue decreases.

However, the impact of enrollment declines on school construction projects varies locally.

For example, while Ohio's Worthington City Schools experienced a slight decline in enrollment due to the pandemic, the district's director of business, Jeff Eble, believes it'll eventually rebound despite current projections. Worthington's enrollment is currently around 10,500 compared to the expected 11,000 students.

However, anticipated job growth in nearby urban areas may bleed into increased school enrollment down the line, Eble predicts. This is something that could impact later phases of school building projects.

"The unpredictability of student enrollment moving forward, especially in the public school sector, is going to be — at best — a pretty good guesstimate," said Richter. "And so the impact of trying to manage your long-term portfolio space has become a real challenge."

Fluctuations in school building planning not only impact district's long-term portfolios, but their relationships with the local community.

"It all goes back to the relationship and trust that the community has in the school district," said Dragona. "If you have buildings that have been neglected, then I think that comes along with maybe lack of trust, or [could be] interpreted maybe as a lack of desire."

Dragona added that even smaller, bite-sized projects like window replacements or rooftop air conditioning units could help build trust within the community. "I would say maybe the more that they're involved, maybe there's less disappointment when you're not able to do the large scope of projects," he added.

On the other hand, falling through on promises of larger projects could take a toll on stakeholder relationships, especially if those larger projects were the result of bonds passed by voters.

"Districts that were well-intended to make promises to their voters to get these projects done found themselves in a position where they're rethinking, kind of, year four and five of their program," said Richter. "There's obviously an inherent risk and the trust factor from the community."

Richter added that school boards should be transparent about how, where and why they're spending their funds.

And short-term changes in course don't mean districts are throwing in the towel when it comes to expanding or improving buildings.

"But that doesn't mean that you stop," said Dragona. "You always have your eye on the bigger picture."