INDIANAPOLIS (May 18, 2005) ? Indiana school districts build or add on to facilities that are 27 percent larger, cost 15 percent more per square foot and result in construction costs that are 46 percent higher than the national average. If K-12 school construction projects had been built in line with what other states spend on new facilities and additions, Indiana would have spent $233 million less in each of the past two years.
Those are among findings of the Department of Local Government Finance (DLGF) following its review of school building projects during a 120-day moratorium ordered by Governor Mitch Daniels. The result is new guidance issued today that will assist how DLGF reviews new school construction projects. The new guidance will:
- Set threshold for more intense scrutiny at the national average plus 10 percent.
- Focus on spending for academic space versus non-academic space.
- Require school districts to provide information about their long-term ability to support new projects.
?If we were as careful about construction spending as the average state, we would free up millions of dollars for other projects,? said the governor. ?Today, we are initiating the start of school construction savings for taxpayers across Indiana.?
According to DLGF?s analysis of Indiana and national data for 2003 and 2004 for new construction:
- Indiana?s average construction cost per new building was 48 percent higher than the national average. Indiana?s average is $13.6 million; the national average is $9.2 million.
- Indiana?s average size of square feet per new building was 43.1 percent more than the national average. Indiana?s average is 107,431 square feet; the national average is 75,055 square feet.
- Indiana spent 3.4 percent more per square foot than the national average for new construction. Indiana spent $126 per square foot; the national average is $122.
Analysis of additions to existing buildings found:
- Indiana?s average construction cost per addition was 60.4 percent higher than the national average. Indiana?s average is $7 million; the national average is $4.3 million.
- Indiana?s average size of square feet per addition was 27.4 percent larger than the national average. Indiana?s average is 32,407 square feet; the national average is 25,430.
- Indiana spent 25.9 percent more per square foot than the national average. Indiana spent $216; the national average is $172.
According to the DLGF report, school construction debt has a big impact on property taxes. Indiana raised more than $749 million in property taxes in 2004 to pay for outstanding school construction debt. That amount is greater than the certified levy for the state, all libraries and all townships combined. The median amount of school building debt service per student is $675.57.
When seeking DLGF approval for bond indebtedness or to enter into a lease agreement to finance a school building project under the new guidance, a school district will be required to submit such information as the impact of the project on the school corporation?s long-term educational plan, long-term enrollment projections, an annual financial report of the district, and written materials expressing support or opposition to the project.
DLGF and the School Property Tax Control Board will evaluate factors including age and condition of existing facilities, construction cost per square foot, impact of the project on the school corporation tax rate, and the progress of the school corporation in meeting academic goals.
?With the large sum of money spent for school construction each year, we have a responsibility to ensure that tax dollars are spent wisely. We will be in a better position to assess projects with the additional information we receive from school districts,? said Melissa Henson, DLGF commissioner.
Henson said the DLGF authorizing statute, in place since 1995, has called for reviews of projects based on the same factors as the new guidance but the focus of the tax control board in the past was procedural compliance and taxpayer response. Now the focus is on procedural compliance and taxpayer support/opposition and substantive issues, including efficient and effective relationship of cost to purpose, the relationship to national norms and more emphasis on academic space use.
?We do not want to slow the school construction process. The purpose of the guidance is preventive, not punitive,? said Henson.
DLGF has established thresholds to provide guidance for project costs based on the national average plus 10 percent. For elementary schools, the 2005 construction cost for square foot threshold is $131 for new facilities and $182 for additions; for middle schools, $131 for new facilities and $191 for additions, and for high schools, $141 for new construction and $193 for additions.
The thresholds do not include financing costs, land, building and equipment acquisitions, and professional fees, which will be considered independently. The amounts will be modified annually.
Henson said projects heavily focused on administrative or non-instructional facilities also will be subject to greater scrutiny.
DLGF will provide each school district in Indiana with a complete package of information about the new guidance.
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