The Tyrone Area School Board approved the latest state-required step in a process leading up to the district’s planned middle school/high school expansion and renovation project.
The vote Tuesday night came after the Board heard from Dwight Knouse of Hayes Large Architects about increased costs associated with the project. Board members also heard from school superintendent Dr. William N. Miller who explained some options regarding funding for the project which the district will need to make a decision on in the next few weeks.
Knouse explained costs have risen for metals and structural steel as well as cost for cement. He attributed the increase to the demand for construction materials in China. He indicated prices might soon moderate but said they would not return to previous levels.
Price estimates on the project were previously given in what is known as “Plan Con D.”
Plan Con D was just one in a series of several required Plan Con reports which must be prepared and submitted to the Pennsylvania Department of Education for approval. The planning and construction reports are required by the state for a school district seeking reimbursement for a construction project.
Since the submittal of Plan Con D, Knouse reported costs could exceed the high-end estimate of $10.3 million for the project by 3.3 percent or about $300,000. Dr. Miller said he didn’t expect the increased cost to affect the state’s approval of the project.
Knouse told The Daily Herald yesterday he expected the project to be advertised for bid on Aug. 2 with bids being opened by Sept. 2. He explained the school board could approve the latest step (Plan Con F) required by the state and the education department could review it even while the bidding process was being conducted.
Plan F contains architectural construction details and gives the district authority to receive bids for the project. He said the ability for the district to start the bid process prior to the state review and approval is a recent change in the education department’s policy.
Construction is to begin by the end of October. The plans call for the project’s completion in late February of 2006.
Dr. Miller alerted the board to possible funding options the district is still considering regarding the project. One option would be for the district to use what is know as wrap-around funding rather than paying for the project with cash.
The district has the cash on hand in its reserves and had previously planned to use cash for the project before being made aware of the possible benefit of the wrap-around option several months ago.
“It (the wrap-around funding) would allow us to pay the existing debt off (on a previous building project) and then address the new project,” said Miller. “It allows us to keep the $10 million invested.
“It can be invested for whatever length of time the board wants to invest it,” explained Miller. “You have the option of paying the whole thing off within 45 days if interest rates go south, you can pay the whole thing off, you can pay a portion of it. That’s the luxury of having the cash is you can make a decision of whether or not you want to extend this and wait for the wrap-around if you would make more money investing it than what you would paying on the interest of the loan.
“The existing loan will be paid off in 2013, so the idea of the wrap-around financing for the (new) debt is (in 2013) you would start paying the principal, in the meantime you are just paying the interest.
“The idea is to keep the money invested so you can make money with the investment,” concluded Miller.
The district will hear from its financial advisor at its Aug. 3 work session. Then the board would have to decide if it wanted to direct the school district to put out for bid the sale of bonds associated with the wrap-around idea, according to business administrator Cathy Peachey.
The board could potentially hear from its financial advisor again at its Aug. 10 meeting and then make a decision. The board would then need to give final approval to the financing plan at a possible special meeting on Aug. 31.
Miller indicated for the financing to be advantageous for the district, it must make certain decisions prior to Sept. 4 due to language concerning debt and taxes in recent state Senate legislation.
The board approved Plan Con F after Knouse’s and Miller’s presentation. It was also noted the district could pursue financing options even while the project was going out to bid.
