$11.2 million deficit found in school-renovation fund

By Sanjay Bhatt
Seattle Times staff reporter

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The Building Excellence I (BEX I) program, which voters approved in 1995, is running an $11.2 million deficit because of $23.6 million in unforeseen expenses, officials say. Four years ago, staff had forecast a "pessimistic" scenario of a $2 million surplus.

The shortfalls from BEX I could hamper several major renovation projects not yet started: Dearborn Park and Maple elementary schools; Garfield High and Hamilton middle schools; the South Shore building; and the proposed World School, a new bilingual-orientation center for secondary-school students.

Next month, district staffers plan to present the Seattle School Board a capital budget that would cover this year's construction projects and a water-quality program. About $1.7 million was spent in the past school year to test water for lead and to replace pipes, and the staff proposes to spend $1.3 million on lead abatement this year. A public hearing on the capital budget is scheduled at 6 p.m. today at district headquarters.

"We should be deeply concerned about where we are now," School Board member Dick Lilly, chairman of the audit and finance committee, said during a work session last week on the capital fund. Lilly fears fixing the district's lead problems could cost up to $10 million.

Earthquake damage at West Seattle High School and a fire at Coe Elementary, both in 2001, accounted for about $3.5 million of BEX I's unforeseen costs, but the rest was because of human errors or board decisions, district records show.

For example, errors in the structural design of Stevens Elementary put that project about $4.4 million over budget. A decision in 1997 to use the former Lincoln High School building as an interim site while Ballard High School was being renovated cost about $8.5 million. Land acquisitions for Ballard High and the African American Academy added $2 million. About $1.5 million in tax revenue remains uncollected. And the district tapped $4.1 million in interest from the fund to balance its operating budget in 2001-02.

Though BEX I's original budget was about $356 million, it later grew to $384.7 million. The deficit would have been far worse had the district not recouped $29 million in investment income.

District officials say BEX I has been better managed than the previous Capital Improvement Program I, approved by voters in 1984. CIP I was slated to rebuild 16 schools, including Ballard High, for $88 million, but costs ballooned to $143 million and the Ballard High project could not be included.

"I just want to tell you that this is one of the best-run capital-program systems, public or private, and I can say that honestly," Superintendent Raj Manhas said in January, weeks before voters overwhelmingly passed a new capital-improvement levy.

Board member Darlene Flynn, who asked in June for an accounting of the large BEX I deficit, told facilities director John Vacchiery last week that the district could no longer afford to exceed its capital budget.
 
"We need to look for opportunities to create a cushion, not spend every dime," Flynn said. She compared the district's capital-spending habits to a household's need to stay within its budget. "If this were my home budget, we'd be eating beans and rice," she said.

Officials may have erred in being too focused on individual school projects and not enough on the entire program, Vacchiery said.

"Unfortunately, as we get into BEX II (Building Excellence II) you're going to see the same pattern," Vacchiery said. BEX II, approved by voters in 2001, already is projected to be $2.4 million over budget by 2011.

The Nathan Hale High School and Beacon Hill Elementary renovations each will cost roughly $700,000 more than initially estimated. The South Shore remodel is expected to cost $1 million more than budgeted. And creating the Center School, budgeted at about $1.5 million, ended up costing about $6 million because the cost of bringing the Seattle Center space into code compliance was underestimated, Vacchiery said.

Meanwhile, the board must decide whether to retire $21 million in bonds in December that were used to finance the new John Stanford Center, the district headquarters. The district received $31.3 million from selling properties over the past two years and will use that money to pay back the bonds. An additional $33.5 million in bonds for financing the Stanford Center will be repaid over 25 years.

Sanjay Bhatt: 206-464-3103 or sbhatt@seattletimes.com