One potential upside to a weakening real estate market.
Since the Houston Independent School District passed a historic $1.9 billion bond issue in 2012, the construction market has boomed, driving up costs and drying up labor. But now, with the recent drop in crude oil prices, district leaders say they may be able to ease the strain on their budget by delaying projects several months in hopes of soliciting better bids.
Still, the picture isn’t all rosy as HISD officials review design plans in search of savings – weeding out pricier materials, considering reduced square footage, and weighing tradeoffs such as excluding a swimming pool, auditorium or separate dance room on high school campuses.
Other local districts, which held bond elections after HISD’s, report similar uncertainty about pricing, though their tactics for gaming the construction market vary thanks to their later timeline.
HISD officials, when estimating prices in 2012, budgeted the cost of building new schools at an average of $160 per square foot. The average now is closer to $210 per square foot, based on recent bids and estimates.
As an example of sticker shock, Derrick Sanders, HISD’s general manager of construction, said bids to build the new Mandarin immersion school came in around $246 per square foot. A bond spokeswoman said staff is working to negotiate the price closer to $200 per square foot.
To have more money available for construction, HISD officials said they dipped into half of the contingency funds reserved for potential problems and added in money meant to cover inflation.
But the total pot of money, $1.9 billion, remains the same to build or renovate about 40 schools and athletic facilities, plus upgrade technology, security and middle school restrooms.
In an email to HISD school board members Wednesday, Robert Sands, the district’s officer over construction, said nine of the 25 projects in the first half of the bond program were “on target to proceed as scheduled.” For the other 16, he said, staff were reviewing budgets and may wait to solicit bids or rebid contracts to try for lower prices.
“We will not cut corners, and we are committed to treating each and every school community equitably,” Sands wrote.
HISD isn’t the only district facing this. It’s a challenge, since they have commitments to various construction projects resulting from the 2012 bond referendum, as well as to other capital spending, but need to stick to the amount they were authorized to borrow. They should be in a better position to negotiate now, and hopefully things will move forward a little faster now that construction-related firms have some slack in their business.