Now you see it

The Washoe County School District has announced cost figures for new elementary and middle schools that are sharply higher than figures used during the 2016 campaign for WC-1, the ballot measure that hiked the sales tax for school construction. The district is asking the Capital Funding Protection Committee to sign off on a $200 million bond from the new money, with three constructions—two middle schools and one elementary school—to be financed by the bond. An elementary school in south Reno is funded at $34 million, 47.82 percent higher than the $23 million cited per elementary school in last year’s campaign. A Sun Valley middle school is funded at $85 million, 54.54 percent higher than the $55 million figure per middle school used in last year’s campaign. A middle school in Spanish Springs is expected to cost $50 million, 45.45 percent higher than ten months ago.

Nevada education reformer Stephen Lafer quickly pointed out the changed figures.

“As I recollect, the main proponents of WC-1 were representatives of the kind of big construction companies that will have to be hired to build the schools,” Lafer wrote in his blog. “Who now is projecting cost increases amounting to 40 percent more than projected during the campaign to pass the measure? I have to believe it is these very companies.”

He noted that those who support school construction do not support education in other ways and tend to be the “same people, over the years, [who] were more likely than not to be opponents of measures intended to raise teacher salaries or cut student-to-teacher ratios, measures critical to attracting the best and brightest, and insure that the conditions of work were reasonable in respect to legitimate goals for education in a democratic society. I asked repeatedly if it could be true that WC-1’s main supporters might be acting selfishly, whether their claims of wanting what was good for the community was outweighed by their desires to increase corporate profits. So, being of this frame of mind, I wonder how it could be that the cost of building the buildings that are to be paid for with WC-1 funds has risen so in such a short period of time.”

Lafer also faulted the Reno Gazette-Journal for burying the news of the increased building costs. It appeared on the RG-J’s jump page near the end of a front page story that was basically about the WC-1 tax hike producing more revenue than had been projected—even though the higher costs are eating up much or all of that increase. Lafer noted that the headline on the story was “WCSD: WC-1 may generate $955M” and not “Cost of Building Schools Rises Precipitously.”

Economists say the inflation rate has been unusually low this year, and job wage gains have been relatively minor. Indeed, the low inflation rate has generated wide debate on how the Federal Reserve Board should react.

But school district needs specialist Riley Sutton said, “If you’re looking at broad numbers, yes, inflation is low. But if you’re looking at the construction industry, absolutely not. The numbers are very high, up to highest in the state and one of the highest in the nation.”

Labor and materials costs are driving the price rises in the construction field, he said: “The factors driving it are,, obviously the labor shortage locally. Everybody is fighting each other for workers. Everybody that wants to is working 60 to 80 hours a week.”

As for materials, he said both expected and unforeseen factors are at work: “Materials are being impacted by everything—China, Houston, Puerto Rico.”

Briefing materials prepared for a Sept. 28 meeting of the Washoe capital funding panel said China alone is buying up half of the world’s cement and more than a third of the world’s steel. Meanwhile, the challenges of rebuilding that are rapidly coming into play in the disaster areas are further straining availability of materials. He said when negotiating with suppliers, it is common to ask something like—on, say, a purchase of PVC pipe—“How long will you hold that price for me?” In normal times, Sutton said, the answer would be something like 30 days. But in today’s economy, he said, it is likely to be 30 minutes.

“It’s crazy,” he said.

Sutton said the school district is not the only entity experiencing these trends, that they afflict everyone, public and private. He pointed to a briefing paper given to the Nevada Board of Regents at the board’s last meeting: “Following completion of the construction documents the University Arts Center project was competitively bid in May 2017. The winning bid was $35.6M, $10.8M or 44 percent percent higher than previously estimated. … This dramatic cost increase primarily reflects the current high-cost construction environment in Northern Nevada involving materials and especially labor.”

School board member Scott Kelley says questions about the differences in costs from last year to this are legitimate for citizens like Lafer to raise and that school board members have an obligation to get answers for them. At the same time, he said he has considerable respect for the skills of school district officials like Sutton and district chief operations officer Pete Etchart.

“They’re the experts,” Kelley said. “They have a committee dealing with these things, and I’d have to go along with what they say. However, that is a pretty significant jump, and I think we owe it to the citizens to say, ’Why are there differences?’ and delve into it to get accurate information. It’s the job of a school district trustee to scrutinize the data, scrutinize the dollar amounts and keep asking questions until we have as accurate information as possible that we can report to the public.”

The district said on Sept. 22 that the increased sales tax, which gave Washoe County the highest sales tax in the state and one of the highest in the nation, is generating more revenue than expected, which offers the prospect of bonding for $955 million instead of the expected $780 million.

That, however, involved betting on the come. When asked how much of the increased revenue is being consumed by the increased cost, Sutton said it is difficult to keep a handle on it, but he suspects that “right now we’re about even.”

There is an assumption in the school district that workers who departed Nevada during the recession are slowly returning, and that materials suppliers will adjust to conditions, eventually returning the economy to something resembling normality in costs. At that future point, they hope, the incoming revenues will overtake the costs.

“Not yet,” Sutton said. “We’re absolutely hopeful that later it will bring in more revenue than inflation” can cancel out.