After bids for putting new HVAC (heating, ventilation and air conditioning) systems in place came in millions over budget, Winona Area Public Schools (WAPS) Board members now face the question of how to finance the projects.
Bids for installing new geothermal HVAC systems at Washington-Kosciusko (W-K) and Jefferson elementary schools came in $5 million over the estimate. School Board members rejected those bids at their September 15 meeting.
Earlier this year, WAPS issued about $16 million in bonds — or school district debt — for the geothermal systems. Because they were considered health and safety projects, voter approval for the bonds wasn’t required, as it is for most debt. The bids the School Board received were about $21.7 million, $21.5 million and $23.5 million.
Ben Beery of Wold, the district’s architecture consultant, said that he heard from contractors that price increases for materials played a role. “I think that’s where we see the most impact in numbers,” he said.
Superintendent Annette Freiheit said in an interview that the bids were a “little shocking.” “We didn’t anticipate the market changing as much as it has,” she said. “It was a little bit of an eye-opener, in regard to that. But it is what it is, and I think we’re seeing it across every type of market there is out there. The pandemic has had some very interesting impacts on things.”
School Board member Michael Hanratty said in an interview that it was disappointing that the bids were over budget. “And it made sense to me to not proceed with a project that was so over budget, and it was necessary to reject the bids at this point,” he said.
The School Board is expected to discuss how to move forward with the geothermal systems at its next meeting. Freiheit said in an interview that she did not know yet if the district could fund the geothermal systems in another way. Hanratty said in an interview that the board needs more information about what its options are. It is not necessarily about going back to the drawing board, he said, but finding a solution that completes the HVAC work in a financially healthy way.
Selling more bonds could be an option, Freiheit said in an interview. The benefit would be finishing the projects, she said, while the downside would be potentially impacting the taxes community members pay.
Getting more information on selling additional bonds would be helpful, Hanratty said in an interview. If the board learns that it could, Hanratty said he would also want to learn how it would affect taxpayers.
School Board member Steve Schild said in an interview that he did not feel the district could move forward with selling more bonds. “I never liked putting that much money on the tax rolls without asking the voters, especially because I knew we’d have to ask for more money in a referendum,” he said. “And I think if we want to be transparent and walk our talk, I think we should— I’d be — very reluctant, even if it’s possible.”
When asked whether the School Board could include the geothermal systems in the April referendum, Hanratty said in an interview, “I would say at this point all options could be on the table. As far as how we proceed with the project, my perspective is that updating the HVAC system is a student safety issue, and we need to prioritize that.” He added that he would also want to be financially responsible to the district’s taxpayers. Freiheit said in an interview that district leaders have been exploring WAPS’ options, and they had not discussed adding the geothermal systems to the spring referendum.
Before making changes to the projects in the referendum, Hanratty said in an interview, he would want to consult with the task force that made the recommendation to the School Board that serves as the foundation of the referendum.
District leaders also have not discussed the possibility of installing a less expensive HVAC system than the geothermal systems, Freiheit said in an interview. The School Board considered less expensive HVAC systems, but selected the geothermal option for its expected cost savings over time. “I believe the board really feels that geothermal is the best route to go, so it’s just a matter of how can we make that work,” she said.
Hanratty said in an interview that switching to a different HVAC system was an option, while noting that it would be important to consider utility costs of different systems. He continued, “One of the reasons why geothermal was preferred was due to the cost savings in the future, and I think that’s something we still need to keep in consideration… It’s not just about solving the air quality problem right now, but that we’re thinking about how we can save taxpayers and the district some money in the future, as well.”
Schild brought up completing the project at one building. There was also a bid for completing the project at just one building for about $12 million, which is within the bonds the district sold. “I’d have a very difficult time with determining which school would be able to get the HVAC project first,” Hanratty said in an interview. “I think that there are other solutions to examine way before we even determine that only one school should get the upgrades.”
The School Board also faces the question of how to approach the $86 million facilities referendum it has slated for next April, given that construction costs seem to be rising substantially. School Board member Steve Schild said in an interview that it appeared the cost of the referendum could increase significantly. “So I think we better have an honest, candid conversation with ourselves about what impact this kind of price increase would have on the referendum, if indeed this price increase would be seen in the referendum projects as well,” he said.
In an interview, Schild said he felt the bids supported his stance from the past year that it would not be wise for the district to invest millions in the buildings while facing enrollment decline, as the district may not ultimately need the buildings. He added that along with the geothermal systems, the district has scheduled a facilities referendum for April 2023, so WAPS may put millions more into the schools. The combined facilities project expense may not translate to much educational benefit, he said. It would be more valuable to prioritize funding programming such as social work instead of spending on facilities, he continued. While he wishes the district had enough students and revenue to accomplish all its goals, he said, he thinks it does not. “I don’t take any joy in any of this,” he said.
The School Board will meet on October 6 at 6 p.m. at Winona Senior High School.