Referendum: A Moving Target
How Construction Inflation and Interest Rates Affect Project Scope
Costs of School Construction and Renovation Rising
School construction and renovation are becoming more expensive and challenging, with costs rising 25% since 2020¹. Meanwhile, borrowing money is becoming more expensive due to a 260% increase² in the municipal bond rates since January 2021. This leads to higher interest rates and the cost of issuing bonds and limits the amount we can borrow.
Bond and Interest Levy Limitation
To avoid a property tax increase, the referendum proposes to keep the bond and interest levy level at $9.1 million. This limits the annual payment, with interest determined by bond market rates, and leaves principal (amount borrowed) being the only variable within our control.
Influence of Construction Inflation and Interest Rates
As a result, we have a “moving target,” adjusting the scope of capital projects to fit our means as conditions change. Construction inflation and interest rates have a direct impact on the school improvements we can afford.
1 U.S. Bureau of Labor Statistics, Producer Price Index by Industry: New School Building Construction
2 S&P Municipal Bond 20-Year High-Grade Rate Index