Reversal of fortune

School building boom is going bust

By Sean Ryan

Greg Maass can see it coming.

“There was a time when some belt-tightening was done by everyone, but we’ve really come down to the point where there are no notches left.” Tom Helgestad

In about five years, the Fond du Lac School District superintendent will ask area residents for money to build a new school building. Or he'll ask for more than $10 million to repair existing facilities. Or he'll ask for both. Then, he said, he's going to listen to a throng of angry voters.

They'll ask why the School District delayed for so long so much maintenance work that could've been done years ago for less money. Then, Maass said, voters will blame him for financial mismanagement and, most likely, reject the funding request.

But before they do all that, he said, those same voters are going to forget that in April, they rejected an $8.8 million referendum that would've paid for the maintenance work. The 3,940 opposition voters in April outpolled supporters by only 37 people, which was almost five times the attendance at the School District's most crowded information session for the referendum.

"When we come back for a vote on a new facility, they will hold us highly responsible even though they have voted no," Maass said. "It will be nearly impossible to build a new school in that situation."

Maass isn't the only superintendent with construction needs and money problems. As school officials across the state watch their lists of projects grow, they're seeing their ability to fund those jobs grow weaker.

The Wilmot Union High School District is working with Bray Associates Architects Inc., Sheboygan and Madison, and Scherrer Construction Co. Inc., Burlington, on a $39 million addition and renovation at Wilmot Union High School. The project, which includes a 212,000-square-foot addition, kicked off in May and should reach completion by October 2007. Rendering courtesy of Bray Associates Architects Inc.

It hasn't exactly been a bed of roses for those in the construction industry trying to make a living off school construction.

"You've seen a number of area firms that specialized in schools literally vaporize or merge with other firms," said John Rodell, vice president of J.H. Findorff & Son Inc.'s Milwaukee operations.

The skid started in 1993 when Wisconsin first required that school districts keep annual budgets within state-imposed limits, said Jack Norman, research director for the Institute for Wisconsin's Future and Wisconsin Education Association Council.

As a general rule, school boards met the limits by cutting capital budgets first, he said. Then they kept cutting capital budgets until they were forced to look at money for operations.

But cuts to operations, which pay for teachers and classes, don't go over too well with the voters. On the other hand, a decade's worth of annual cuts to maintenance budgets didn't cause much public outcry.

"It's been building, as has every financial problem after more than a decade of revenue limits on schools," Norman said. "Administrators are very up front about it — the last thing they want to cut is core academic programming. So they cut everything else first."

Plunkett Raysich Architects LLP, Madison, and Vogel Bros. Building Co., Madison, are targeting an early summer construction start for a new $10.7 million elementary school for the Verona Area School District. The 82,000-square-foot school should reach completion by August 2006. Rendering courtesy of Plunkett Raysich Architects LLP

The result is a state full of school districts with very little debt but very large maintenance backlogs. Combine that with a roughly 50 percent approval rate for school referendums since 1993, and it adds up to a stagnant school construction market.

The dip left some larger general contractors sighing with relief that they had other markets to turn to when school construction softened. Tom Kraemer, president of Kraemer Brothers LLC, Plain, said schools account for about 10 percent of his company's work these days compared to 35 percent a decade ago.

"It can be devastating," he said. "It would have been devastating for us as well if we didn't have the good fortune of our other clients doing well in other industries. It didn't have to go that way for us. Maybe we were lucky."

SDS Architects Inc., Eau Claire, saw the drop coming and did its homework in the late 1990s, said Dennis Ferstenou, com-pany president and architect. He said there was a school building boom between 1994 and 1998 as districts pushed projects in the early years of the revenue limits. Anticipating a school construction decline amplified by revenue caps, SDS started expanding into other markets to absorb the hit.

He said school construction accounts for about a quarter of the firm's business compared to about 50 percent in the mid-1990s.

"During that boom of school buildings, a lot of demand that was pent up since the '70s and '80s was satisfied," Ferstenou said. "When the boom from the 1990s started to decline, we positioned ourselves to look at other markets to compensate for that."

The Waunakee Community School District is hoping for an August completion of a $22 million addition and renovation project at Waunakee High School. Bray Associates Architects Inc., Sheboygan and Madison, and Miron Construction Co. Inc., Neenah, teamed up to work on the 190,000-square-foot job. Rendering courtesy of Bray Associates Architects Inc.

It doesn't look like there's a whole lot of relief in sight. In fact, school administrators around the state warn that the problem will only grow.

Tom Helgestad, director of buildings and grounds for the Wisconsin Rapids Public School District, lost about $70,000 a year from his maintenance budget since the late 1990s, and he now has a $12 million work backlog. At this point, he said he'll need voters to approve a referendum for the projects, or they won't get funded.

And that's a problem, Helgestad said, because as maintenance backlogs grow, voters become less likely to grant approval.

"It's like trying to swim with your hands tied," he said. "It escalates, and now school districts are in the position of having to go out and do these referenda for maintenance. The public wants their facilities maintained, but they don't want to do it by referendum."

As maintenance needs pile up, the odds of getting funding for new schools shrink, said Annette Talis, information services coordinator for the Wisconsin Association of School Districts.

"For every referendum that you see, there's probably several that didn't make it," Talis said. "They are not going to put a new facility on that ballot unless it's proved that it's needed, and … it's proved they have maintained existing schools."

The uncertainty surrounding construction funding has left schools wondering if they should even choose contractors before the vote. With a 50-50 chance of approval, schools don't want to do anything to push voters away, Kraemer said. It would be hard to swallow a lost vote over union vs. nonunion issues or voter suspicions of secret deals.

"The passage of referenda right now is so frail and so fragile that districts can't continue to give the taxpayers all these reasons to say no," Kraemer said. "If a certain contractor is selected, there will be voters in the district who are upset. They don't want that contractor, or they work for a different contractor."

The increasing inability of school districts to get construction money from voters is leading many to question the referendum system.

Voters want the services but don't want to pay for them, Helgestad said. It also doesn't help that referendums are the only direct opportunity for voters to reject a tax increase.

"You can't say 'no new taxes' unless you are willing to do without something," Helgestad said. "Right now, the political will in Wisconsin is 'no new taxes,' and that is not what a reasonable person can expect.

"There was a time when some belt-tightening was done by everyone, but we've really come down to the point where there are no notches left."

The referendum system becomes less practical as more voters distrust school districts, Rodell said. It's become hard to convince voters that a project is necessary, even if it is, he said.

"The referenda process right now, you can really question whether it's working," he said. "Schools are having a tough time getting the point across of a basic need."

Ferstenou predicted that unless the referendum system changes, school districts will be forced to rent out church basements or teach classes in trailers because they can't build anything. He also predicted that attitudes would start changing once school officials began voicing those prospects in public.

"Unless there are some changes made in funding, districts are probably going to be forced into those kinds of facilities," he said. "I'm guessing the state Legislature and school districts will not let that happen."

The Institute for Wisconsin's Future and WEAC are already calling for the abolition of referendums, Norman said. The groups are proposing an alternate system where new projects would first require approval from two-thirds of a district's school board and then approval from a state school building commission in Madison that would authorize the bonding and state aid.

"It's not that easy, but we think we ought to do that rather than this crazy referendum system," Norman said. "The notion that this is going to be dealt with by referenda is a mistake."