[speedgibson] Speed Gibson: Expected vs Actual Costs

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Posted by Speed Gibson:
Expected vs Actual Costs
http://speedgibson.powerblogs.com/posts/1212981996.shtml


   In reading the accounts of the closings of Osseo and Edgewood Schools
   in District 279, the higher operating costs and pending maintenance
   capital were given as reasons for picking these 2 out of the 19
   elementary schools. The same logic was given in 281, though no schools
   have been closed yet.
   This seems logical at first blush. Close the fiscally most inefficient
   schools first, to minimize other cuts. Which schools are these? The
   oldest, of course. The don't have modern insulation or heating plants.
   Their age means, yes, maintenance is increasingly required. It's just
   like an old car, that got less than 20 mile per gallon and needs ever
   more repairs.
   There's another way to look at this. Were not these higher costs in
   the out years expected when the building was built? We expect this
   when buying a car. In a portfolio of buildings constructed at
   different times, you can't truly compare building with building dollar
   for dollar if built in different eras.
   If we're downsizing primarily because of declining enrollment, ranking
   by current and future costs makes sense assuming we can live with the
   concomitant demographic and geographic changes.
   If we're downsizing primarily because of budget pressures, however, we
   need to rethink this. Remember that closing a school seems to provide
   only 5-10% of the needed reductions. The operating and maintenance
   costs differences are small fractions of that. Financially, there
   really isn't much difference.
   But Speed, we also get another 10 years out of a building built in
   1964 instead of 1954! That's a big chunk of money, right? Money we
   don't have when budgets are tight? That's true when you only build in
   a crisis, like when Forest was rebuilt because of mold problems. A
   truly financially stable district will manage the portfolio every
   year, not school by school and only when needed.
   A stable portfolio would build a new elementary school about every N
   years where N is the expected life divided by the number of schools
   needed. The average age of an elementary school would be about N/2 at
   any one time. But Forest (2005) excepted, and with Olson (1971) no
   longer used, the rest of our elementary schools are 40-50+ years old,
   largely built in a 10 year window (1954-1964). When these come due,
   they're coming in a hundred-plus million dollar wave. I wonder if our
   current budgeting truly reflects this coming tsunami.
   Maybe the Citizens Financial Advisory Committee should look at this,
   to determine if there is an "unfunded liability" here and/or help
   develop a building plan that will space these projects into a
   manageable portfolio.