As SD schools like Chamberlain look to renovate and rebuild, ‘the market has gone crazy’ from inflation
Inflation impacting school construction projects around the state
CHAMBERLAIN, S.D. — The Chamberlain School District had a roadmap to replace its aging elementary school and to improve athletic facilities. And then it ran into inflation.
Construction cost increases have led the district to seek a bond issue after it initially thought it could complete the full scope of the project without one. After years of study and financial planning, the district will ask voters to approve a bond issue for up to $5.5 million to help cover the increased costs. That vote is set for Tuesday, Sept. 13 and, like all bond issues of this type, it will require a 60% approval at the polls.
The need for the bond issue is a result of the unfortunate current economic climate, said Justin Zajic, superintendent of the Chamberlain School District.
“The market has gone crazy,” Zajic told the Mitchell Republic about projected construction costs. “Inflation has impacted our project and skyrocketed it by about 25%.”
Like many other school districts in the state, Chamberlain is dealing with aging infrastructure that needs to be replaced to maintain a quality educational environment for its students and staff. The district came up with a $28 million budget to replace its aging elementary school and other infrastructure with an eye on meeting student needs.
That was accomplished through district funds, federal COVID-19 relief dollars — known as ESSER II and ESSER III funds — that can also be used for construction projects and the issue of capital outlay certificates. The combination was expected to cover the entire project, which originally included both a new elementary school and a competition gymnasium, among other amenities.
Now, with construction inflation driving up costs on building projects, the district finds itself looking at a price tag closer to $34.9 million instead of the $28 million it had originally planned. The district tried scaling back its plans multiple times, but found building costs too high to overcome.
“We sat down with the architects and asked how we can value down the building. Since we did that once already, it was 10 times more difficult the second time around,” Zajic said.
The district opted to break out the plans and start the elementary school portion of the project, which will cost about $28.7 million on its own. That is expected to get underway this fall, with a groundbreaking set for 5 p.m. Wednesday, Sept. 7, but the gymnasium, locker rooms, coaches office, concession stand and a track and theater upgrade may have to wait unless the bond issue goes through.
Zajic said the district decided to move forward now since there is a time limit on when the COVID-19 relief money has to be spent and that contractors are lined up and ready to go. He also expects construction costs to level off, not drop in the upcoming months.
“We’re putting as much of this together as we can now because the (COVID-19 relief money) needs to be spent by a certain date, and if we don’t spend it we have to send it back,” Zajic said.
The elementary school is a priority, but the new gymnasium will be a significant upgrade as well. With an increased spectator capacity, it could help the district host more and larger tournaments and events.
“We’re hoping to be a host site for east versus west type tournaments as a meet-in-the-middle option, or to host AAU wrestling or basketball tournaments. Things to bring in people,” Zajic said. “(We’re looking at) how we can utilize this to be a great school and community asset.”
But without passage of the bond issue, those portions of the project will have to be postponed for the foreseeable future, perhaps as long as a decade or more.
“If it does not pass, we will be cutting the competition gymnasium and it will be tabled until we can afford it, probably 10 to 15 years down the road. And at that point costs are obviously going to increase, even next year it will be more. We will also have to cut some alternates in the theater stage area and postpone the track repairs until we can afford that as well,” Zajic said.
The Chamberlain Board of Education approved going for the bond issue on a 7-0 vote, Zajic said, and he hopes that is an indication of wider community support for a project that is expected to impact taxpayers to the tune of $3.33 per month per $100,000 assessed value for residential land and 40 cents per acre per year for $1,000 assessed value for ag land.
“I’m hopeful it will pass,” Zajic said.
Other districts seeing similar challenges
Chamberlain isn’t the only district dealing with new construction and the pitfalls of increasing costs.
Mitchell intentionally put away money for a decade to avoid the need for a bond issue, and then when federal COVID-19 money became available for the project, the district decided to move forward with the effort ahead of schedule. School officials have said that a bond issue to do the project all at once remains an option, though an unlikely one.
At the Tea Area School District, voters recently approved a $39 million bond issue that will build a new high school. That project would not be possible without the bond issue, said Jennifer Lowery, superintendent of the district.
“Passage of the bond was critical. Our high school was built 20 years ago — just like the district, it is on its 20th birthday — and we have about 550 high school students. That will be up to 800 students in the next few years because of our lower grade levels being larger than the ones we are graduating,” Lowery said.
Voters approved the bond issue with an 85% vote in June. That is a good mandate, but Lowery said no bond issue is guaranteed and it is hard to tell when the support for such a move will be there.
Being a fast-growing, but small, district, Tea Area can have a difficult time drumming up funds for building projects. It also didn’t receive as much in federal COVID-19 relief as larger districts, making the bond issue necessary from the start.
“Tea Area does not have the capital base to do that (on its own),” Lowery said. “When you’re asking the public for $39 million, you don’t take that continued support for granted. The amount of support that was provided toward this was just phenomenal. It was right above 85%. As a superintendent I would never say that I expected that. “
Now Tea Area will have to take a close look at final construction cost numbers as they come in. Lowery said she’s very aware of the challenges taking place in other districts around the state.
“We’re watching those pretty closely, much like our counterparts in Chamberlain and Mitchell and elsewhere. What will the cost per square foot be? We built Venture Elementary in 2019 and we know that we have an inflation of over 30% since we built that building. We are watching those numbers very closely,” Lowery said.
Over at the Tri-Valley School District, which covers Crooks, Colton, Lyons and northwestern Sioux Falls, voters passed a $52 million bond issue for two schools a year ago.
It’s a boost for the district, said Mike Lodmel, superintendent for the district, but like other districts in a similar position, Tri-Valley will be watching construction costs closely as it gets ready to advance on the new high school portion of that project.
“It’s very exciting for the growth of our district, but we’re looking at pretty similar things in this area,” Lodmel said.
Like Tea Area, Tri-Valley did not apply COVID-19 relief dollars to the work because it simply didn’t have enough to do so. It issued capital outlay certificates to help with the cost but did not initially consider a bond issue based on the difficulty the district had in passing previous ones.
A project task force, made up of community members, recommended that the district attempt a bond issue in order to complete the full scope of the plans, which features a new high school. That includes 29 classrooms, a 500-seat auditorium, a 5,000 square-foot shop and about 500 more parking spaces. About $9 million was also earmarked to help build an early learning center in Crooks.
The bond issue itself barely passed, just clearing the 60% threshold, Lodmel said.
If this had been three or four years ago, with the bond proceeds we received, we would have gotten everything done.
But now the district is looking at the high school portion of its plans and eyeing the same construction cost hikes as other districts. Should cost increases prevent going forward as initially planned, the district would look at alternates with the intention of eventually completing the work as originally designed.
“All our designs are going forward as if we were going to do everything like we stated. If we can’t do it due to an increase in prices, it will still be as designed but we might have to take some things off,” Lodmel said. “If this had been three or four years ago, with the bond proceeds we received, we would have gotten everything done. Now we have to make some decisions going forward, and I doubt (the public) will have an appetite for another bond issue.”
Tri-Valley officials are hopeful to have the new high school ready by the fall of 2024 or early 2025.
Chamberlain awaits vote
For the Chamberlain School District, the next steps will be determined by the bond issue vote on Sept. 13. Zajic said school officials have been encouraging district patrons to support the measure, establishing the website bondissue.org/chamberlain, which outlines the district’s plans and reasoning behind the move and even includes features like a tax impact calculator.
He believes in the community support for the project. That comes from his own conversations with patrons as well as gestures from a number of businesses and other entities.
The city of Oacoma is donating $100,000 to the work and the city of Chamberlain has pledged $100,000 in in-kind support toward work like utilities and parking lots. St. Joseph’s Indian School is on board for $250,000 pending approval of the bond, he said.
Other donations also came in from Jeff Tveit of Thrivent for $500 toward the theater, Jeremy Thomas Construction for $75,200 and Bob Burke of Burke Oil has pledged $5,000 this year and $5,000 next year. Puetz Design and Build has also donated toward the elementary school project.
It’s a good sign, but a lot is at stake with the bond vote, Zajic said.
“The community knows we need this and are saying let’s get it done,” Zajic said. “There’s a lot riding on it, and we have the community support behind it. It’s great, but we won’t know until Sept. 13.”