Now is the time to address DL school building needs
Detroit Lakes Public Schools is facing significant space and facilities-related needs with its buildings and infrastructure that require a large amount of capital to “fix.” These needs must be addressed sooner rather than later. With interest rates at nearly historic lows and construction costs likely to increase, there is no time like the present to move these projects ahead now. If the referendum is approved, then we can save our taxpayers millions of dollars by taking advantage of lower interest rates and lower construction costs, as both are projected to increase.
Interest rates on municipal bonds have increased since last spring but they are still low by historical standards. For example, the district’s financial advisors at Ehlers report that the current average rate on a bond maturing in 20 years is about .75 percent lower than the average over the last 25 years. Furthermore, many economists are predicting that interest rates are likely to rise, especially after the Federal Reserve discontinues its current bond repurchasing program. An increase of .5 percent in the average interest rate on the bonds would increase the cost of the bond issue to district taxpayers by almost 5 percent.
In terms of construction costs, from 1993 to 2008, construction costs rose each year by an average of 3.8 percent. This increase was a combination of increases in material and labor prices.
From 2009 to 2013, construction costs slowed but still rose by an annual average of 1.8 percent (the only year prices decreased was 2009). During this time period, material prices were reported to continually show higher increases but reduced labor costs helped balance the total average gain to 1.8 percent.
Projections for the balance of 2013 and into 2014 indicate annual construction cost increases returning to the same levels as those prior to the economic downturn in 2008. This market projection is a factor of continuing increases in material prices and a correction in labor prices, especially in the markets in manageable proximity to the increases construction activity in North Dakota. Costs are likely to continue to increase over the upcoming years, increasing construction costs each year.
A potential result of not addressing the district’s capital needs at the present time and instead, waiting even one year, could cost the taxpayers millions of dollars more for the same project due to a likely rise in interest rates and construction costs. Why should we pay more and get less? Now is the time to address the school district’s building needs. — Natalie Bly, Waubun (Bly is the co-chair of the Laker Vote Yes Committee.)