As you may have seen, it looks like D113 will be voting on Monday evening to place an $89M referendum which would be voted on by the public in April 2013. This is part of a $114M package that will partly ($25M) be paid from D113 reserves.
I am encouraged by the fact that D113 is willing to pay for $25M of the project from reserves. This will help to ensure, if the referendum passes, that D113 will do everything possible to keep costs down. There is an approximately $20M contingency factor built into the $114M package so if those contingency amounts are proven unnecessary then D113 will barely have to spend from its reserves.
I still have some significant concerns about this project:
1) HVAC/Air Conditioning. There is roughly $30M to $36M in the plan to pay for HVAC/Air Conditioning compared to $12M to $16M in the previous referendum. In 2010, District 113 estimated that it needed $6.5M for HVAC renovation/replacement. The current plan represents a huge increase over those previously stated amounts. What is the difference? What type of systems will be purchased? What is the time frame for those purchases? Has the district solicited indicative bids from HVAC engineers/contractors to substantiate the $30M to $36M amount? No one is opposed to good air quality and temperature in the classrooms but what are we getting for $36M?
2) I am glad that D113 has chosen to maintain the 1914 “B” classroom building. My son recently told me that his favorite classroom is in the B building. However, I still question the strategy that D113 is pursuing relative to the 1914 B and C Buildings. The basic idea is for a major renovation of the B building to include a smaller number of larger classrooms and new administrative offices. This will result in a net loss in the number of classrooms in the B Building. The plan calls for tearing down and rebuilding a new C building. The lost classrooms from B would be replaced by new classrooms in the new C Building.
The C building currently houses gyms for wrestling and gymnastics. Since C would be demolished it forces D113 to build a new gymnasium for the displaced gymnasts and wrestlers. As you can see, there is a domino effect from these decisions. This domino effect leads to an additional cost of $18.6M. This includes the additional cost to repurpose B ($1.4M), the additional cost to rebuild C ($4.7M) plus the additional cost of the new gym ($12.5M).
The stated reasons for this domino strategy for the B and C reasons are that the 1914 classrooms are too small (my kids all took classes in B and they were all some of their favorite and most beneficial classes) and that the current location of the C gym disrupts the flow of the school.
In my opinion this domino strategy is unnecessary. I believe that D113 should refurbish the B and C buildings in their current configurations. This would cost taxpayers $20M but would save taxpayers an additional $18.6M. I am not convinced that the small number of slightly undersized classrooms in B warrants this extra $18.6M investment especially, as I am convinced, we will see a sharp drop-off in enrollment in the coming years. While it would be nice to improve the flow of the Highland Park campus, I am also convinced that this change will have no impact on educational outcomes. Please keep in mind that we could save $18.6M but would still be spending $20M so under the scaled back plan we would end up with two beautifully restored historic buildings on the campus that add character and quality.
3) Soft Costs. D113 indicated that the “soft costs” in the plan are “20% to 25% for architects, managers and engineers to cover engineering, construction management, existing conditions documentation, testing & permitting.” This means we will be spending $19M to $23M on architects, engineers and construction managers. These soft costs look to be inflated for this type of project.
4) Operating Costs. District 113 has had two years to begin an analysis that would show the impact of these type of expenditures on operational costs. So far there has been none. Under the proposed plan, D113 will be adding much larger pools, a major increase in gymnasium square footage and a huge investment in air conditioning. Energy efficiency savings from new HVAC equipment and windows will surely not offset these additional costs due to the large expansion. In addition, new, high tech HVAC systems are more costly to maintain than older more traditional systems since their support costs are much greater. This expansion could easily add an additional $500K or more in annual energy and operational costs. What will D113 have to cut elsewhere in order to fund these new costs? Before launching forward with this strategy, D113 should conduct an independent analysis of expected energy and operational costs so that it can determine how it will cover these new costs.
5) Maintenance and Repair: D113 manages facilities with a replacement cost of over $250 Million. Professionals in the field indicate that public institutions should allocate a minimum of 2% to 4% of replacement cost towards maintenance and repair (M&R) on an annual basis. For D113, this translates into at least $5M per year in maintenance and repairs EXCLUDING operations, utilities and improvements. It is clear to all that D113 has significantly under-spent in this area. We need to see an significant increase in the real budget for M&R compared to previous years. It is unlikely that new facilities will lower the cost of M&R. New facilities, with new technologies can cost more to maintain than older facilities.
D113 is committing to invest $25M over 5 years towards the capital improvement plan. Pushing funds into capital improvements will take funds away from the necessary maintenance and repair budget. We would end up again under-spending on maintenance and repair. It is better to go forward with a less expensive plan that does not force D113 to divert funds into capital improvements when it is likely that those funds should be allocated towards maintenance and repair.
6) The plan put forward by D113 is positioned as Phase I of the long term plan. It would be helpful to know what future expenditures will be necessary and when D113 will need to implement Phase II of the plan.
7) Timing. As a community, we will have had a grand total of one week from the time D113 announced its final recommended plan to the time board members are expected to vote to send it forward for a referendum. As a community, we should have more time than that to weigh the pros and cons of the proposed plan, possibly send it back for some revisions and complete payback and operational cost analyses that should be part of the finished package. This would mean that a vote on the referendum would take place in March of 2014 rather than April of 2013. While interest rates could be higher at that time, that argument was used the last time. Interest rates are actually lower now. They could be lower again in the future. Regardless of the interest rate risk, the community should have the opportunity to weigh in on the proposed plan before forcing a vote by the D113 Board.
1. D113 should undertake the refurbish instead of the repurpose/rebuild strategy for Buildings B and C. The architects would not have recommended this if it was not a viable option. This would reduce the plan cost by $18.6M
2. D113 should delay the referendum until March of 2014. This would give the district sufficient time for the following:
a. A more detailed assessment of HVAC/Air Conditioning Needs and likely expenditures (potential savings of $10M +)
b. Time to develop an operational cost impact analysis of the plan
c. Time to get better soft cost estimates with potential savings (potential savings of $5M +)
d. Time to develop a robust maintenance plan and budget
e. Time to detail expected future expenditures in Phase II and beyond
3. Based on the recommendations above, it is quite possible for D113 to bring in the plan for at least $30M less than the currently proposed amount. That would result in a referendum of approximately $59M in March 2014.
4. District 113 currently has roughly $40M + in reserves. The district can easily cover the most pressing maintenance and capital needs from its reserves now in anticipation of a March 2014 referendum.