Bids for a new Jasper Middle School have come in almost $9 million higher than expected and higher than the amount already secured for the project, leaving Marion County, Tennessee, leaders searching for ways to fund the essentials.
Early this year, the county sold $25 million in bonds to fund the new school when interest rates were much lower and school system leaders estimated the cost to be that amount or less, Marion County Mayor David Jackson said Tuesday in a phone interview. The interest rate on that portion was 1.73%, he said.
The economy and inflation can be blamed for driving up bid prices and forcing the current review for savings, Jackson said. Fortunately, the county's bond rating is good enough to get another loan to cover additional costs without increasing property taxes, he said.
"I think we can avoid that. We do have the ability to borrow some more money through rural debt service," he said, referring to U.S. Department of Agriculture funding available through the state. "The reason we're able to borrow extra money is because we're financially strong and we've got a double-A bond rating," he said.
Interest rates, however, are now 3.5-4%, according to Jackson, so the cost of borrowing has also increased.
A new Tennessee comptroller of the treasury report on capital spending for local school districts shows signs of the financial struggles that districts face.
"As building costs continue to rise, districts recognize that delays in obtaining financing and construction approval can increase the final cost," the report released in May states.
In the most recent inventory of the state's public school needs, the Tennessee Advisory Commission on Intergovernmental Relations reported that local officials across the state projected a need for 69 new schools in the next five years at an average cost of $39 million each.
According to the report, some school districts foresee rising prices and supply chain problems dramatically affecting some projects.
In fiscal year 2017-18, one district built a school for 900 students that cost $20 million.
"In 2021, the same size school might cost $30 million," the report states.
Marion County Director of Schools Mark Griffith said the low bid from Tricon Inc. in Cleveland, Tennessee, was $33.95 million, with Chattanooga's T.U. Parks next at $35.75 million and P&C Construction, also of Chattanooga, coming in last at $38.15 million - all of them significantly higher than the original $25 million estimate.
School system officials asked bidders to return to the drawing board for a cost-trimming effort.
"We're in the process currently of having conversations with the contractors that wanted to come to the table to talk about what we could value-engineer," Griffith said Tuesday in a phone interview. "We want to be able to keep the same quality for a little lesser price."
Griffith said T.U. Parks and Tricon were willing to work on their prices based on specifications for cost-trimming from the school system's project manager and architect. P&C Construction did not want to participate in the effort, he said.
The current Jasper Middle School dates back more than six decades when it was built as a high school, and it's long overdue for replacement, according to Jackson. Jasper Middle is the oldest school in the county, he said.
"I was in the last class to walk across that stage when it was the high school in 1979," Jackson said with a laugh. "Actually, my mom, she graduated in '59, and they were the first class to use that stage for graduation."
Griffith said ground needs to be broken for the replacement school this fall to use the $25 million in funds already secured by January 2025, the deadline for the funds to be spent.
Plans call for a 98,000-square foot school on more than 18 county-owned acres at the intersection of State Route 28 and State Route 150 Extension, he said. The site is not far from Jasper Elementary School and Marion County High School.
Griffith said school system officials hope to complete negotiations with the two contractors by the end of the week so the new proposals and prices can be reviewed by the school board Monday night. If a proposal is approved by board members, it will then go before the County Commission for funding.
"We are pushing ahead to build the school, and we're hoping the County Commission sees fit to give us that funding," he said.