Portland's $100 million question - why are its new schools so expensive?
Before Portland Public Schools asked voters' permission to sell $790 million in bonds to rebuild four schools and patch up a few others, construction consultants told administrators that it would not be nearly enough money.
It is unclear what resulted from those warnings. What is clear is that their predictions are slowly coming true. The district's Office of School Modernization is predicting cost overruns of about $100 million on the 2017 bond projects.
Months before the May 2017 vote added about $300 per year to the average household's tax burden, Ken Fisher, a construction management consultant from CBRE Heery, voluntarily composed an email. Fisher was working on the 2012 bond, but was worried enough about the 2017 figures being too tight that he flagged several concerns to Dan Jung, who still leads the PPS bond office, and his boss, former Chief Operating Officer Jerry Vincent.
"I understand what was done and why, but I am concerned that the four options on the one-pager are too lean ..." Fisher wrote Jan. 24, 2017. He recommended the district go back to the professional cost estimator they used — the firm of Rider Levett Bucknall (RLB) — to get their input.
As far as the district can tell, Vincent didn't do that and neither did he share the estimates that RLB had already put together.
"What I know from (Superintendent Guadalupe Guerrero) thus far is that there's no clear explanation," said school board member Amy Kohnstamm. "Those estimates were not publicly transmitted to anybody."
RLB had given estimates that the bond projects — Madison, Lincoln, Benson and Kellogg schools, plus $150 million of "health and safety" improvements — would cost at least $894.7 million and as much as $1.06 billion.
So why did the district end up telling voters it would cost only $790 million?
"Join the club," said school board chair Rita Moore. "I have no insight."
"That's a good question," said Kevin Spellman, chair of the bond accountability committee. "I don't have the answer."
It's a question that risks hundreds of millions — maybe even billions — of dollars. The 2012 and 2017 bonds are part of a 30-year plan to ask for back-to-back bonds that would upgrade all of the dilapidated schools in the district. If voters lose faith in the bond project management, they may not agree to give the district the money.
School board member Julia Brim-Edwards said that as a taxpayer herself, she wants to know the answer.
"For the district to have credibility the next time out it has to be: 'This is what happened and this is what we're going to do to make sure it doesn't happen again,' " Brim-Edwards said.
District continues to investigate
"I don't know how all of those decisions were made pre-bond," said Jung, the man in charge of the school bond office. "We've been trying to get to the bottom of it ourselves."
Documents provided by the district show multiple times Jung, an eight-year PPS employee, brought up concerns over cost to Vincent. It is unclear what Vincent did with those concerns and he is no longer around to ask. He suddenly resigned in April for reasons that are a mystery to the public. His district cell phone has been shut off and his LinkedIn page has not been updated.
But the district has heard from him. On May 10, Vincent sent a memo to Superintendent Guadalupe Guerrero explaining what he remembered about the bond process.
In it, Vincent recalled the huge number of players involved — community members, outside consultants, the school board, district staff and even town hall meetings — and a large amount of back and forth.
"So, the notion that any one or two people are responsible for anything, success or failure, is absurd," Vincent wrote.
Rob Johns, a Benson Tech booster and critic of the 2017 bond process, said assuming Vincent decided the numbers on his own would be a mistake.
"He didn't make the decision in isolation. How would one person be given that responsibility? It's too easy to use him as a scapegoat here," Johns said. "This is crazy. This is the largest bond (in Oregon schools' history) and this is what's happening? Where's the oversight?"
The road to $790M
The process to get to the 2017 bond was a little convoluted. The bond was originally planned for the November 2016 ballot, but the public fury that summer over lead and other hazards in schools made it clear that the district needed to do more than just remodel a few high schools.
After a thorough assessment of the district's numerous health and safety hazards, a risk assessment team gave an eye-popping figure of $1.6 billion to fix all the old schools.
Even if voters agreed to it, that amount of work would have been physically impossible to do, so district staff gave the Bond Stakeholder Advisory Group the choice between packages of $150 million or $200 million for health and safety improvements.
At the same time, in January 2017, the school board also commissioned a poll of Portland voters that found the sweet spot for 50 percent support of a bond measure would probably be between $750 million and $850 million.
Brim-Edwards was on the stakeholder group, along with 36 other people — mostly educators, parents and schools' activists. The group was asked to weigh questions such as how big the health and safety package should be and whether or not Kellogg Middle School should be on the list. District staff provided single amounts for each project — not a range.
Verifying the amounts given "... wasn't the charge of the stakeholder group. That was the board and the interim superintendent's responsibility," said Brim-Edwards, who at that time was not on the school board. The interim superintendent at that time was retiree Bob McKean.
Amy Kohnstamm, who was on the school board at that time but not on the stakeholder group, does believe that was the responsibility of the stakeholder group: "That was the venue that staff brought all of the information to."
Was it on Awwad?
Graham Roy, executive vice president at RLB, declined to speculate what happened to his firm's estimates, noting a large amount of turnover in the district office.
"I'm not sure why there was any difference in the numbers," Roy said.
Another theory is that former interim Superintendent Yousef Awwad had something to do with the too-small budget. He was, after all, the district's main finance person.
Awwad, who is in a legal battle with the district over his firing last fall, said in a statement to the Tribune that the cost estimates from RLB that the district is now showing around are just a snapshot in time of a process that was moving back and forth.
"There were many permutations," Awwad said. "Early iterations had many different estimates using different assumptions, and as assumptions changed Jerry Vincent and his team would come back with different numbers, and the board committee and the bond project team would react and ask questions."
The former district finance chief said the district needs to produce the detailed spreadsheet he says Vincent's team put together of all the different cost variables and how they arrived at $790 million. District spokesman Harry Esteve said that's conceivable.
"I haven't seen that, so I don't know if that exists or not," Esteve said. "But it's possible that it's out there. We are still combing through to get more records."
No 'I told you so'
Fisher — the consultant who in 2017 brought forward pages of concerns about the options being presented to the school board — said despite his earlier concerns on cost, he has full faith in the school bond office.
"When you're dealing with numbers at this magnitude and the diversity of a program like that: They're estimates," Fisher said. "I regret, like all of us, that we're in the situation we're in right now, but there's no 'I told you so.'"
He added that there are many checks and balances to ensure the bond funds are well-spent.
"I know that the district has done an excellent job of managing the funds that we have," he said. "It's not being siphoned off for this, that and the other things."
Spellman, who chairs the oversight committee, said his focus is on how to move forward.
"However, we got to $790 million, $790 million is it," he said. "The big issue for me, frankly, is $790 million is what we got and what's the best we can do with that?"
Brim-Edwards echoed his sentiments. The central question to her now, is: "Do we deliver the schools that were promised voters? Or do we deliver it in the budget and maybe it's less of a school?" She added that another consideration is whether the school promised to voters takes a little longer to build.
Kohnstamm said it's true that the cost estimates from the district's cost estimators were not shared with the board. But even so, costs are changing faster than anyone expected.
"That's not the whole story," Kohnstamm said. "The climate that we're trying to build in is really the bigger story."
Look for Part 2 of 'Portland's $100 million Question' in the Thursday edition of the Portland Tribune.
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