Bear Lake School District

The Bear Lake School District has engaged the services of the Intermountain West's premier school builder, Hogan & Associates Construction, to assist with understanding the cost of each of the projects for this proposed bond. Hogan has built almost 500 schools since 1945 and has been the Construction Manager / General Contractor of 322 school projects since 1988. The last bond for the Bear Lake School District was paid off in 1999. For a local comparison, Hogan Construction built the new Cokeville High School that same year. Nineteen years ago, CHS was completed for a cost per square foot of $82. From the graph below, we can see the cost increases Hogan has experienced from then to now. Long term construction cost inflation has normally been double the consumer price inflation. Since 1993, the 25-year long-term annual construction inflation for buildings like schools has averaged 3.5%, even during the Great Recession. During the building boom period from 2004-2008, construction inflation averaged 8% per year for five years. The Great Recession (which lasted from 2007-2011) significantly slowed the cost increases, but only to what had been normal levels (3.5%). Since 2014, however, the cost increases for commercial buildings (which includes schools) has been over 4% per year. In the rapid, economic growth period we recently experienced (2017 and 2018), new projects were in competition with the many buildings that were postponed during the Great Recession (and the slow recovery). During these two years, the construction cost inflation averaged more than 8% per year. The same percentage is predicted for 2019. Even with the predicted economic slowdown that may happen in the next few years, it's predicted not to have a great effect on construction costs. As shown on the graph of Hogan's 14 regional high school projects, costs do fluctuate-but the general direction of costs is up. What keeps construction costs rising? At the start of this year, the nationwide demand for both commercial and residential buildings will continue to drive up the price of materials. Construction projects in the United States are also in competition for materials in emerging countries. Most notably, the price of steel-made products has jumped as high 3.8 percent this year. Lumber prices are rising as well. Also, there is a labor shortage in construction which has led to increased labor costs for both subcontractors and construction companies. The Great Recession led many skilled laborers to pursue careers in other industries. Although the demand for residential and commercial construction has reached pre-recession levels, there's been a shift in how blue-collar work is perceived. The current generation of young workers is mostly disinterested in construction work. This has left us with an industry where skilled labor comes at a higher price. The goal of these four projects is to use the funds of the bond in a wise, cost-effective manner. Aside from a new middle school, which is needed to replace the current 81-year building, the District is looking to repair and enhance Bear Lake High School and Georgetown Elementary with new additions that will be designed and constructed to last several decades-well past the 30-year life of this bond. Although cost is the number one concern, the benefit of building now is that the latest advancements in construction materials and methods will provide Bear Lake County residents new facilities that will last longer and perform better than in previous District buildings. With the ability to use the Construction Manager / General Contractor method of construction, which wasn't available for our past projects, the Bear Lake School District has more contractual protections for budget oversight, schedule deadlines, quality work, and warranties for labor and materials than with the "low-bid" method used previously.