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Uncertainty about PlanCon reimbursement continues

PDE recommends additional year on school project moratorium

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While the future remains murky, the near-term message over the state Department of Education's so-called PlanCon reimbursement is clear: Don't expect to submit new public school construction or renovation projects for at least another fiscal year.

With a backlog of projects and limited funding to meet requests, PDE is recommending a one-year moratorium extension of PlanCon — which stands for Planning and Construction Workbook — as it further studies long-term facility needs of school districts across Pennsylvania.

"It definitely doesn't provide clarity to the situation," said Chad Harvey, executive director of the Mid Atlantic BX, a Harrisburg-based trade group that tracks construction projects.

The moratorium, which took effect in October, prevents new plan submissions from entering the pipeline of the $300-million-a-year state program.

That limits opportunities for construction and design firms. MABX reported an average of 1,511 primary and secondary educational construction projects each year in Pennsylvania between 2010 and 2012, totaling about $5.6 billion each year.

"I think folks who are engaged in this aspect of construction recognize this is going to bring a high degree of uncertainty at the local and regional level," Harvey said. "This program has put forth about $8 billion over the last 30 years. That is not an insignificant amount of money."

Another problem: There already are 354 projects in the PlanCon pipeline, including 166 that have made it through Part G of the process, according to PDE. The department does not commit to reimbursing a project until it has been approved at Part H of the 11-step program.

"I think it has raised a lot more concern for districts that are seeking to begin the planning process for future facility improvement or even new school buildings," said Jay Himes, executive director for the Pennsylvania Association of School Business Officials.

The review has presented multiple possibilities, which include outright elimination of the aid, a more streamlined process with lump sum payments compared to mortgage-style reimbursements or some other modified structure.

"It all comes down to additional funding into the line item," said Tim Eller, a PDE spokesman.

But with state revenue slumping and other financial obligations on the rise, including pension debt, that's not likely to happen. The governor is proposing flat funding for current projects, he said.

Going solo

The unknown could be especially hard on districts that rely heavily on state aid for building upgrades. But some might not have a choice except to tackle necessary maintenance projects on their own, Himes said.

"On larger-scale projects where they are looking at an entirely new school, it may be more of a situation to think about timing," he said. "They begin the process hoping this gets resolved by the time the project gets to design and implementation."

The Act 1 index, which is used to determine the maximum tax increases for each tax the school district levies, is another hurdle, he said: "Without state assistance, even wealthier districts are going to run into a referendum-driven process. When local taxpayers say 'no,' it puts more pressure on the state to be a contributing partner."

A PDE report to the General Assembly indicated an additional $20 million or more might be necessary to fund the projects already in Part H. Also, an additional $160 million would need to be added to the appropriation to deal with the 166 projects approved through Part G, according to the report.

The current backlog would require about $1.2 billion for projects approved through Part G, according to PDE.

Diversifying

Vern McKissick, president of Harrisburg-based McKissick Associates Architects PC, said he believes the moratorium is part of a push by the state to get out of aid for public school projects.

"Confront it directly. Don't play the sham game of studying this," he said, arguing the department should have most of the facilities data it needs from required PlanCon feasibility studies. "The governor has unintentionally or intentionally hurt the poorest districts."

Eller said the recommended analysis would go further and include long-term plans for all school districts. He said he believes it could start in late summer and be done by next spring, which would be in time for 2014-15 budgeting.

The indecisiveness of the situation is the biggest problem, said McKissick, who routinely works with school districts to study assets and changes in study enrollment.

"They don't want to move (on projects) in case aid comes back," he said of districts and the PlanCon reimbursement.

In districts where enrollments have steadily declined and budgets are tight, officials have had no choice but to look at building consolidations and staff reductions to control operating expenses, he said.

"We've done these a lot, but never to the degree or haste for implementation (as we're seeing now)," said Kristen McKissick, who heads sister company McKissick Associates InSights, which is based in North Carolina and serves as the primary interior designer and data presentation creator for the firm's optimization studies.

In addition to the study work, the McKissicks have been looking at other market sectors to diversify, including health care and hospitality.

"The problem with the economy still being slow and market sectors already well represented is that you're dumping more competition in an already depressed market," Vern McKissick said. "It makes it tough for all markets then. It's unfortunate."

They also have started a development company called McKissick Properties LLC.

PlanCon by the numbers

$7.8 billion: The level of funding the program has provided for school construction projects since 1979-80.

$296 million: The current PlanCon appropriation.

354: Total projects in the review pipeline that have not reached the reimbursement approval phase.

 

Source: PDE

Click here to download the PDF file of "Planning and Construction Workbook: A Report to the General Assembly."

Jason Scott

Jason Scott

Jason Scott covers state government, real estate and construction, media and marketing, and Dauphin County. Have a tip or question for him? Email him at jasons@cpbj.com. Follow him on Twitter, @JScottJournal. Circle Jason Scott on .

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