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$80 million increase won't raise tax rate or cut school programs

TIMES PHOTO: MILES VANCE - Site work continues at full speed at the location of the Beaverton School Districts next large comprehensive high school, located just off Southwest 175th Avenue and Scholls Ferry Road in the South Cooper Mountain area. Remember that $680 million construction bond measure that Beaverton School District’s voters approved two years ago? The biggest school district capital request in Oregon history? The one that was supposed to cover the cost of building new schools and updating the rest of them?

Shred it.

The Beaverton School Board this week agreed it will now take $760 million to deliver what they promised to voters in 2014, including built-in wiggle room in case there are more budgetary surprises.

But there’s a big, shiny silver lining: District patrons won’t see higher than approved tax hikes or endure cuts to school programs in order to pay for the additional $80 million dumped into the construction budget this week because district officials have patched together ways to bridge the difference.

The major force driving costs to those unexpected heights is the region’s booming construction industry, which is pushing up the bids to do the work at a much faster clip than experts imagined back in late 2013 when they were crunching numbers.

Nowhere is that impact greater than at the new high school under construction on the southern foot of Cooper Mountain.

The initial estimate for the district’s single-largest construction site was originally $109 million, but just that school’s budget has risen to nearly $185 million, which includes $9.9 million in contingency money.

Dick Steinbrugge, the district’s executive administrator overseeing facilities, said the latest increase to the high school budget should be the last one, in large part because district officials have set a guaranteed maximum with Hoffman Construction for its share of the cost at just under $162 million. Hoffman’s budget doesn’t include account design fees, furniture, equipment and similar costs, and the company’s officials also knocked $500,000 off their fee.

District officials also acknowledged this week that the construction costs they estimated (with the help of outside professionals) before the bond measure went to voters “have proven to have been too low even at that time,” according to a report to the board.

About that bright side: While economic forces have helped drive up construction costs, other economic conditions are helping repair the damage.

Officials said they can pay most of the recent increase with premiums they collected on the sale of the voter-approved bonds. With the sale of the first $380 million in bonds, the district raked in an unexpectedly high $63 million in premiums that buyers were willing to pay over face value because they found the investment attractive. (It is unknown how much the district could receive in bond premiums when they are allowed to issue the remaining bonds, which could push into next year, but the windfall isn’t expected to be so large.)

“We were stunned, frankly,” Steinbrugge said.

The remaining gap is expected to be filled with interest earned on collected taxes, excise taxes charged to new construction, several grants available school projects, state reimbursements and smaller sources.

While the upcoming bond sale premiums and other potential income sources may further ease the budget, Steinbrugge said district officials are being conservative with their estimates on both sides of the ledger.

Other new schools and improvement projects also are coming in higher than original estimates due to inflation in the construction industry, but that level of inflation would have been largely covered by nearly $100 million in contingency funding built into the overall capital budget, Steinbrugge said.

“And it wasn’t enough,” he said.

However, the high school is a different beast altogether because the process chosen for that project allowed for a compressed construction schedule to get the school opened by 2017 to relieve overcrowding in the district’s other high schools. Hoffman started preparing the site even before the final designs were approved to expedite the work.

On the flip side, the contract opened the budget up to the whims of the market, which have proved expensive as bids have come in far higher than expected.

As examples, Steinbrugge said the cost of the building’s roof is $1.7 million above original projections, the masonry work on the brick-covered building is $3.2 million higher, the drywall is $4.6 million higher and concrete work is $2.3 million higher.

“Firms are so busy, it’s hard to get lots of competition,” Steinbrugge said.

The high school’s total cost also was driven up, to a lesser degree, by project add-ons made by the district, additional requirements from local governments and other smaller factors.

“They basically all conspired together to make the high school more expensive,” Steinbrugge said.

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