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School Construction Costs An Update on the Current Market June 12, 2007

School Construction Costs An Update on the Current Market June 12, 2007. Pat Kiley Kiley Advisors LLC. School Construction Costs An Update on the Current Market. Agenda Putting Things in Perspective – Volume of Construction The K-12 Market

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School Construction Costs An Update on the Current Market June 12, 2007

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  1. School Construction CostsAn Update on the Current MarketJune 12, 2007 Pat Kiley Kiley Advisors LLC

  2. School Construction CostsAn Update on the Current Market • Agenda • Putting Things in Perspective – Volume of Construction • The K-12 Market • Construction Inflation and its effect on school construction • Why do schools cost more today? • Projected School Construction Costs

  3. The Current Construction Market Putting Things in Perspective… • Texas Population grew 570,000 in 2006 • Overall construction employment grew 18.3% in 2006 • Residential Construction grew 16% in 2006 to $65.8 billion

  4. The Current Construction Market Putting Things in Perspective… • 473 new industrial projects in Texas in 2006 totaling $27 billion (Power Plants, Petrochemical and Refineries) • Project 46 additional projects in 2007, for an additional $9 billion

  5. The Current Construction Market Putting Things in Perspective… • The Texas Medical Center in Houston, the largest in the world, will add about $2 billion in construction in the next 5 years • Healthcare in the remainder of Texas is expected to build an additional $1.5 billion in the next 3 years

  6. The Current Construction Market The K-12 Market SOURCE: SCHOOL PLANNING AND CONSTRUCTION

  7. The Current Construction Market The K-12 Market School Bonds that have passed in Texas 1993 = $653,590,000 1996 = $2,455,472,855 2005 = $4,168,207,260 2006 = $5,944,374,769 May 2007 = $5,399,480,000

  8. The Current Construction Market AGC’s Construction Inflation Alert March 2007 • The Calm between the Storms • Construction material cost increases slowed or even reversed course in recent months • However, by the end of 2007, material prices are expected to rise again 6%-8%, with wages rising at 5% rate

  9. The Current Construction Market AGC’s Construction Inflation Alert March 2007 • Outlook • Construction materials are in large demand worldwide • Many come from countries that are very busy industrializing – China & India • Copper, which experienced over 300% increase in 2006, comes from very few tumultuous sources • Chile- Labor strikes; Mexico – Labor unrest; Congo – Political strife Price spikes are likely to be chronic, and will occur with little warning.

  10. The Current Construction Market AGC’s Construction Inflation Alert March 2007 • Outlook • Delivery of materials will continue to be a problem • Shipping Rates are up • Trucking Rates are up • Fuel surcharges are adding significant costs to projects • Cement, a key component of many construction projects, will be a hot commodity by the end of the year

  11. The Current Construction Market Construction Inflation in Houston

  12. Historic Houston Area ConstructionCost Inflation PROJECTED Inflation shown is from AGC (The Associated General Contractors of America)

  13. The Current Construction Market K-12 Market In 1997 the Texas median school cost was: Elementary School $69.80 per s.f. Middle School $73.60 per s.f. High School $77.20 per s.f. In 2001 the Texas median school had yet to break the $100.00 per s.f. barrier. As of January 2007 the median price of a Texas school cost is: Elementary School $141.00 per s.f. Middle School $152.00 per s.f. High School $158.00 per s.f. Cypress-Fairbanks ISD Schools are well under the median

  14. How much do schools cost? • ELEMENTARY SCHOOLS • The Texas median cost of an Elementary School in 2004 was $99.61. That same school will cost $141.00 today: • Assuming a Bid Date in February 2004: • Inflation from 2004 to 2005 @ 9.64% = $110.23 • Inflation from 2005 to 2006 @ 11.16%= $124.08 • Inflation from 2006 to 2007 @ 12% = $141.00 Costs of other area Elementary Schools: Spring ISD Bid June 2007 $132.00 Katy ISD Bid April 2007 $120.00 Wharton ISD Bid June 2007 $129.65 Costs of Cypress-Fairbanks ISD Elementary Schools: Robinson ES Bid Feb 2007 $115.95 Hemmenway ES Bid Feb 2007 $116.26

  15. How much do schools cost? • HIGH SCHOOLS • The Texas median cost of a High School in 2004 was $111.60. That same school will cost $158.00 today: • Assuming a Bid Date in February 2004: • Inflation from 2004 to 2005 @ 9.64% = $123.52 • Inflation from 2005 to 2006 @ 11.16%= $139.04 • Inflation from 2006 to 2007 @ 12% = $158.00 Costs of other area High Schools: Pearland ISD Bid February 2007 $150.32 Humble ISD Bid December 2006 $145.91 Costs of Cypress-Fairbanks ISD High Schools: Cypress Ranch HS Bid Feb 2006 $123.23

  16. The Current Construction Market Why do schools cost more? • 1. Codes and Ordinances Change • A. Energy Code. • B. International Building Code. • C. Indoor Air Quality. • 2. Unfunded State Mandates • A. Larger Science Labs. • B. Minimum Size Rooms. • C. Programs Requirements. • 3. School Sites • Property Escalates Drastically in “Fast Growth” School Districts. • Offsite Improvements • 4. Technology • A. Computers. • B. Cabling and Electrical Infrastructure. • 5. Inflation • A. Material Shortages. • B. Labor Shortages.

  17. The Current Construction Market QUESTIONS?

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