Why doesn’t the district pay for these repairs within the existing school budgets?
Like most school districts, HVRSD struggles to fit large dollar maintenance projects into their annual operating budgets. Hopewell Valley has followed the rules of a 2010 state law that caps general fund increases at 2% each year, without voter approval. In fact, last year and this year our district’s annual increases were well below the cap – 0.9% and 0.8% respectively. Within that amount, the district has had to accommodate the typical rising costs of payroll, benefits, educational materials, contracted services, utilities and more.
Regular maintenance is constantly being done on all the buildings in the Hopewell Valley Regional School District. In fact, HVRSD spent more than $6 million on roofs and HVAC upgrades in the past few years. The roof, HVAC and window projects exceed what can be done through an annual budget.
The $35 million in project costs would not fit in the current budget within cap (even over time) without significantly cutting academic staff and programs. Further, projects paid as part of our regular budget are ineligible for debt service aid which provides up to a 40% rebate on most maintenance projects. If voters approve the Bond Referendum, the state will give Hopewell Valley an estimated $12.3 million toward the costs. This will not occur if the projects are placed in our annual budget.
What if costs end up lower than the estimates?
State rules impose strict oversight. There are only two ways a district can use proceeds from a Bond Referendum: the money can be used to overcome cost increases for projects that were approved as part of the Bond Referendum, or it can be used to pay down the bond debt. The Board of Education intends to pay down debt when practical in order to reduce the impact to taxpayers.
What if costs end up higher than the estimates?
The district is working with a team of construction and financial experts who pay close attention to trends in bond rates and construction costs. Unless a significant issue arises, it is unlikely costs will exceed estimates. The estimates reflect careful planning and analysis which reflect the board’s desire to be realistic in our planning. The construction estimates are designed to err on the side of being conservative. Low estimates could be harmful and shortsighted. If estimates are lower than actual costs, the school board is still obligated to complete the projects within the Bond Referendum approved revenue. The school board does not want to be forced in a position of downgrading roofing material, HVAC components, window quality or interior finishes to be able to complete everything within an artificially low estimate.
What are the “soft costs” and why is the percentage set at 25 percent?
Soft costs include construction contingencies, architect, engineers and consultant fees, construction administration, bonding, and legal fees, inspections and utility fees and application, submission and permit. The age of Hopewell Valley’s buildings increases the chances that there will be unforeseen costs and complications. For that reason, the state’s Department of Education requires that a 25 percent cushion be built into the project estimates. Private entities might be able to provide lower numbers, but school boards seeking state approval have no choice but to estimate soft costs at 25 percent. In addition, the soft costs in Hopewell Valley’s estimates also include bond and election fees – costs that private entities don’t face. Please note that if “soft costs” are estimated and not incurred, actual costs may come in below estimates (see above).