Construction costs are eating away at Alabama school officials’ plans to use $900 million from a 2020 state bond issue to make needed improvements to aging school facilities.

All over the state, it costs more to build school facilities, in each part of the process, than it used to, officials say. And costs are still rising.

Auburn’s newest high school, expected to be completed in 2027, seems to be the most expensive project in the state – $139 million for 348,000 square feet. A high school of similar size, finished in 2017, cost $72 million.

“The construction costs are just astronomical,” said Richard Dennis, superintendent of Elmore County Schools.

In 2019, the county issued $50 million in bonds, to allow construction of several projects. The $23.5 million Redland Middle School, built with those local bond proceeds, was completed in 2022. It has 111,000 square feet.

The school is in the same county as a state prison project that is now expected to cost far more than originally planned.

Dennis said his contractors stuck to their original bids, even while materials costs soared.

“Some of the construction groups that were working for us,” he said, “took a hit on certain things. I know plywood jumped really high.”

But everyone can only be flexible on so many things, he says. And some projects will simply remain on delay until materials arrive.

Soaring construction costs aren’t just an Alabama problem. Headlines show school districts across the country are grappling with soaring construction costs, with some shelving projects planned years earlier.

A number of Alabama school districts have been forced to shelve projects after bids came in anywhere from two to five times higher than originally budgeted, according to documents reviewed by AL.com.

“Everybody’s facing the same thing,” Dennis said.

State bonds

The state bond issue was approved in May 2020, just after the pandemic closed schools, and proceeds from the $1.5 billion bond sale were distributed in October of that same year. It was the first bond issue for schools since 2007. K-12 schools received $912 million and higher ed received the remainder.

But a billion dollars just doesn’t go as far as it used to, school officials told AL.com.

That’s why school officials hope Gov. Kay Ivey’s proposal to send $360 million to K-12 schools to “help offset inflationary increases” for projects initiated with the 2020 bond funds gains approval from lawmakers.

The forecast for construction costs shows some leveling off, but prices aren’t expected to drop back to pre-pandemic levels, according to Jeff Rodgers, President of the Construction Industry Services arm of the Alabama Associated General Contractors organization.

Rodgers said three major factors are at play: increased material costs, not enough construction workers, and continuing problems with supply chains.

A global problem

It’s a global problem, Rodgers added, with everything from the war in Ukraine to China’s long COVID lockdown to the cost of oil impacting the price of materials used to build schools.

With growing uncertainty around economic conditions, he said, suppliers are choosing to pull back on producing more supplies, raising prices further.

The Associated General Contractors of America tracks the price of materials and found costs for building materials up by double-digit percentages from October 2021 to October 2022:

• Concrete products – up by 14.1%
• Asphalt – up by 20.7%,
• Architectural coatings (paint for example) – up by 27.5%, and
• #2 diesel fuel – up by 61.5%

Subcontractor prices have also risen, the AGC analysis showed:

• Roofing contractors – up by 21.5%,
• Electrical contractors – up by 18.8%,
• Plumbing contractors – up by 15.7%, and
• Concrete contractors – up by 10.9%

The time it takes a school district to go through all of the steps of community and board approval, hiring architects and contractors, can put school construction at a disadvantage, Rodgers said. That’s because the unusual volatility in the price for materials means contractors’ costs can change rapidly.

And that’s showing up in the guarantees connected to school bids.

Where bidders used to guarantee prices for six or even 12 months, Rodgers said, most suppliers only guarantee the price for the day they provide the bid.

Districts that started construction projects before or during the early months of the pandemic were able to get projects done for expected costs for the most part.

But as time moved on, and districts – working through the fog of school during COVID – got back to their plans for using state bond money, higher prices are making for tough decisions.

Difficult decisions

Geneva County Superintendent Becky Birdsong was excited when the 2020 bond proceeds were distributed. It was the first state bond issue since she was elected superintendent in 2012. As a rural county district, tax collections don’t produce enough to do many capital projects.

But the $3.6 million her district received in bond proceeds hasn’t gone as far as she hoped. She delayed getting bids during the pandemic and bids are now higher than she anticipated.

“I kept thinking the prices would fall,” she said, “but they haven’t fallen much.”

Baldwin County Schools Chief Finance Officer John Wilson has overseen a $340 million school building campaign that started in 2015 and isn’t finished yet. As the state’s fastest-growing county, Wilson and his team have worked to keep pace with that growth.

Faced with those rising construction costs, school officials have to make tough decisions.

Baldwin County’s Wilson said school officials are often caught in the middle, wanting to keep promises they’ve made to their community while being prudent with taxpayers’ funds.

Wilson has seen construction prices creep up since their campaign started.

“Between 2014 and 2016,” he said, “we were able to build schools at an average cost of about $140 per square foot which was pretty incredible at the time.”

Right now, Baldwin County schools are seeing costs of around $180 per square foot, he said, but as they plan for the next round of construction, they’re planning on $230 to $250 per square foot. Wilson considers his district fortunate because what they’re paying is much less than he’s seeing in other parts of the state.

“A lot of the numbers that I’ve seen throughout the state have projects coming in over $300 per square foot.”

Mountain Brook City Schools have seen prices rise, too. The district began a building campaign in 2019 after voters approved a 10-mill property tax increase.

“We had three big projects bid all in a row in early 2020,” facilities manager Tommy Prewitt said. “They all came in under what we had budgeted. We were like, this is fantastic.” Construction started in 2021.

“We’re now starting to bid some other work,” he added, “and we’re starting to see pricing coming in over budget.” Prewitt said one was 10% over budget and the other was 20% to 30% over.

“We’re able to stay on track with our overall capital plan because we had some initial savings up front,” Prewitt said. “Had we bid those projects now, we wouldn’t be able to do a lot down the road that we had planned on.”

Rodgers said what’s happening with construction costs now is cyclical. He encouraged school officials to move forward with their building projects and develop relationships with contractors so they are in a position to negotiate wherever possible.

“If they can come across funding with terms beneficial to them, they need to take advantage of that funding and use that funding while it’s there to build what they need.”