Soaring
construction costs jeopardize school
program
Tuesday, November 23, 2004 • BY DUNSTAN
McNICHOL • Star-Ledger Staff
Lawmakers yesterday demanded an accounting of expenses
for New Jersey's expansive $8.6 billion school construction
program, and proposed a committee to consider "innovative"
ways to keep paying for the initiative.
Jack Spencer, chief executive officer of the Schools
Construction Corp., told lawmakers that $5.7 billion of $8.6
billion initially promised by the state is already been
spoken for and that by January 2006, the program will no
longer have the funds to approve construction of any new
schools.
Meeting the continued need, he said, will cost billions
more -- including $2 billion just to cover one additional
year of court-ordered construction work in 31 of the state's
neediest communities.
"We have made every effort to use our resources wisely,"
Spencer said during his first formal report to lawmakers on
the status of the program.
Spencer said construction costs of new school buildings
in northern New Jersey is running at about $209 per square
foot, $84 more per square foot than lawmakers had projected
when they set up the school building program. In addition,
he said, that figure does not include about $1 billion that
has been spent for land acquisition, design and project
management.
Spencer said administrative costs have amounted to 8.7
percent of the funds spent so far. But in an interview
later, Spencer acknowledged that statistic understates the
overhead rate for work in the 31 communities covered by the
state Supreme Court's Abbott vs. Burke school financing
order, where New Jersey must bankroll and manage the
construction.
In these needy districts, Spencer said, New Jersey has
so far approved $3.5 billion worth of schools or school
repairs, including $433 million in design costs, or about 12
percent of the project totals, and most of the $479 million
approved in project management fees so far.
"I think this is an issue all of us support," said
Assemblyman David Wolfe (R-Ocean). "But we need to know
where the money is going."
Lawmakers endorsed plans yesterday to extend funding for
the program beyond the $8.6 billion already earmarked for
the initiative. But they were unsuccessful in getting a firm
estimate from Spencer as to how much the program might
ultimately cost.
"I believe the figure to be in the billions," Spencer
told the Assembly Education Committee. He said he will not
have a more precise estimate until late next year, after
school districts across the state have submitted five-year
projections of the school building needs.
Assemblyman Joseph Malone (R-Burlington), ranking
Republican on the Assembly Budget Committee, implored
Spencer for an estimate in anticipation of a campaign to win
voter approval for more borrowing on behalf of the school
program. "People are going to have sticker shock when they
get the bill," Malone said.
The Assembly panel yesterday endorsed legislation to set
up a committee to review the school program's needs and to
suggest alternative financing methods. In addition, Sen.
Ronald Rice (D-Newark) said he is sponsoring a bill that
would authorize the state to borrow another $2 billion for
the program in 2006 -- enough to keep it running for one
extra year, Spencer said.
So far the state has borrowed $3.4 billion for the
program, which will cost about $250 million a year to repay
over the next 20 years.
© 2004 The Star-Ledger. Used by NJ.com with
permission.
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