AGENDA DATE: 9/6/2017
TITLE:
Title
School Division’s Capital Projects Funding Needs
BODY
SUBJECT/PROPOSAL/REQUEST: Additional funding required for School Division’s Bond Referendum capital projects based on updated cost estimates
ITEM TYPE: Regular Action Item
STAFF CONTACT(S): Walker, Letteri, Allshouse, L., Kamptner, Burrell, Harris, Tisdadt, Schmitt
PRESENTER (S): Lori Allshouse
LEGAL REVIEW: Yes
REVIEWED BY: Douglas C. Walker
BACKGROUND: On November 8, 2016, County residents approved up to $35 million in General Obligation Bond funding to finance improvements to Albemarle County public schools. Projects identified that would be supported by the General Obligation Bond funding included:
•School security improvements at four schools: Baker-Butler Elementary School, Scottsville Elementary School, Henley Middle School, and Murray High School.
•Woodbrook Elementary School Addition-Modernization project to alleviate overcrowding, modernize the schools’ existing classrooms, and add a full-size gymnasium.
•Learning Space Modernization project to update approximately 100 of the School Division’s 850 classrooms, affecting approximately 25 of the County’s 26 schools.
•New Science laboratories and modernization of existing labs at Western Albemarle High School.
The sale of General Obligation bonds occurred on February 22, 2017 with an interest rate of 2.88%.
On April 5, 2017, the Board of Supervisors approved an FY 17 appropriation of funding for the General Obligation Bond funded School Division’s capital projects to enable the School Division to begin design and to enter into construction agreements for those projects scheduled to begin in spring 2017.
On May 9, 2017, bids were opened for the Woodbrook Elementary School Addition-Modernization Capital project and the costs associated with the lowest responsible bid amount exceeded the project appropriation amount made in April to complete the project as initially scoped. An unanticipated change in the local construction market has resulted in higher than expected costs.
On May 10, 2017, the Board of Supervisors approved increasing the FY 17 appropriated amount for the Woodbrook Elementary School Addition-Modernization Capital project by $1.5 million in order for the construction to proceed during the 2017 summer break. Due to timing constraints, the source of the funds was a transfer from the Learning Space Modernization Capital project budget that was also supported by the General Obligation Bond funding. The School Board requested that, at a later date, the Board of Supervisors consider increasing the total appropriation of any of the Bond Referendum projects to cover the construction costs for those General Obligation Bond-funded projects that may exceed the original budgeted amounts.
STRATEGIC PLAN: Infrastructure Investment: Prioritize, plan, and invest in critical infrastructure that responds to past and future changes and improves the capacity to serve community needs
DISCUSSION: Although the construction associated with the Learning Space Modernization project will primarily occur in the summer of 2018, design for this work is underway. Therefore, it is imperative for the Board to provide direction to the School Division regarding the level of funding that will be available for the Learning Space Modernization project. That is, will funding support the original project scope or will available funding for this project be only the residual/available budgeted authority. .
In addition to the funding required to make the Learning Space Modernization project funding whole, the School Division believes it is likely that other General Obligation Bond-funded capital project bids will exceed the currently appropriated amounts based on projected increased construction costs, as previously mentioned in this summary. According to School Division staff’s updated cost estimates, an additional $1.2 million likely will be required to fully fund the remaining Bond Referendum-supported capital projects. These estimates are based on projected increases for projects that will be bid between now and April 2018. The projects include: the School Security Improvements Program for security projects at Scottsville, Henley and Murray; the second phase of Learning Space modernization work which includes work at Albemarle, Burley, Henley, and Sutherland; and the Western Environmental Studies Academy Phase II project. These estimates, when included with the initial amount of funding for Learning Space Modernization, would require a total appropriation increase of $2.7 million for these projects.
The Bond referendum, approved on November 8, 2016, authorized up to $35 million in principal be issued for School projects. The amount issued to date is $30.4 million. Therefore, there is a remaining capacity of $4.6 million as a source of funding.
BUDGET IMPACT: The total budget impact for FY 18 is estimated at $3 million. This amount includes construction costs and the cost to issue the debt. The County may issue the debt in the spring of 2018; timing of the borrowing will be based on the projects’ spend plans. An estimated 94% of project costs would be borrowed for 20 years and the remainder would be cash funded. The estimated funding required to support both the debt service and the pay-as-you-go funding for the projects is expected to be available in the CIP due to savings resulting from the lower than budgeted interest rate costs achieved from Series 2017 bond issuances.
RECOMMENDATION:
Recommendation
Staff recommends the Board approve the School Division’s request for additional funding for Bond Referendum-supported School Division capital projects that have either already come in higher than the budgeted amount, or are estimated by the School Division to do so. If the Board of Supervisors approves this request, an appropriation request will be provided to the Board at its October 4, 2017 Board meeting.