NEWARK, NJ - Over the past decade, the state agency responsible for building schools in 31 former Abbott districts has spent more than $263 million to build five schools in Newark at a cost that far exceeded the limits set by the Legislature.

The Educational Facilities Construction and Financing Act, which was enacted in 2000, set a limit of $143 per square foot, which was to include the costs of construction, site development, land acquisition and professional service fees.

But the New Jersey Schools Development Authority (SDA) has spent an average $424 per square foot to build the five schools in Newark, nearly three times the limit set by the Legislature.

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The last three schools to open in Newark since 2016 -- South Street School, Oliver Street School and Elliot Street School -- cost an average of $515 per square foot. South Street, which was completed in 2018, cost $69 million or $669 per square foot, nearly 5 times the limits set by the Legislature.

To look at the cost another way: The SDA spent more than a quarter of a billion dollars to build schools for only 3,733 Newark children -- an average of more than $70,000 per student.

The cost of the SDA’s construction program has limited the number of new schools the state agency has been able to build in Newark and the other districts. Since its creation in 2000, the SDA and its predecessors have issued more than $11 billion in debt and constructed just 83 new schools across the state, though some of the money has been used to rehabilitate existing schools and pay a portion of school construction in suburban districts.

Both Republicans and Democrats, including Senate President Steve Sweeney, have called for the abolishment of the SDA.

Assemblywoman BettyLou DeCroce, a Republican from Morris County who favors moving the functions of the SDA into the state Treasury, told TAPinto Newark in an interview that the SDA’s school construction costs in Newark were “shocking,” “obscene and should be investigated.”

“The inflated construction costs in Newark may not only be criminal acts themselves, but they are criminal in that they undermine taxpayers’ support for education spending where it is truly needed,” DeCroce said. “The SDA must be compelled to explain the construction numbers in Newark.”

Many students in Newark attend schools in facilities that are old and outdated, some without air conditioning and others with leaking roofs. One school is so old, it dates to the post-Civil War era. Harriet Tubman School, a Blue Ribbon school in Newark’s Central Ward, was built in 1875, when Ulysses S. Grant was president.

Despite the pressing need for new facilities in Newark, the SDA does not have any schools in Newark under construction nor any in the pipeline, according to its June 2019 bi-annual report. The SDA has no money left for new projects and the Legislature has been reluctant to replenish its coffers.

The SDA has been embroiled in controversy since Gov. Phil Murphy took office in 2018. Al Alvarez, its first chief of staff under the Murphy administration, was accused of sexually assaulting Katie Brennan while they both worked for the Murphy campaign. After hours of legislative hearings, no one from the Murphy administration could say who hired Alvarez to the $170,000 a year job.

The scandal-plagued agency became the focus of negative attention again when CEO Lizette Delgado-Polanco came under fire for letting go long-time employees and appointing relatives and friends to high-paying jobs, then made up job descriptions after they were already hired. Delgado-Polanco, who was appointed by Gov. Murphy, has since resigned.

While those scandals have grabbed legislative and media attention, the SDA’s failure to rein in costs has not attracted the same scrutiny or calls for oversight of its core function -- building schools.

School Construction Woes

The need for a statewide fund to build schools in what were previously called Abbott districts grew out of a 1997 state Supreme Court ruling that found the 31 special-needs districts in need of new facilities. The high court put the state on the hook for building them.

In 2000, the Educational Facilities Construction and Financing Act (EFCFA) was enacted into law, creating an $8.5 billion fund for school construction -- $6 billion for the Abbott districts and a $2.5 billion matching fund for other school districts in the state.

While the program was initially run under the state Economic Development Authority, a new agency was created during the administration of Gov. Jim McGreevey. But it wasn’t long before the New Jersey Schools Construction Corporation (SCC) was accused of fiscal mismanagement.

In 2005, Inspector General Mary Jane Cooper issued a scathing report that concluded that “the SCC as currently structured and constituted suffers from a wide range of internal weaknesses that not only threaten to defeat its core mission, but also make the agency vulnerable to mismanagement, fiscal malfeasance, conflicts of interest and waste, fraud and abuse of taxpayer dollars.”

The following year, State Auditor Richard Fair released an audit that found more problems. The audit found that the SCC established its own construction cost allowance of between $161 and $218 per square foot, based on the school type and geographical area, and only included construction costs.

The 2006 audit found that by setting its own construction cost target the “SCC failed to make an adequate attempt to meet this statutory objective" to hold costs at $143 per square foot.

Yet since the 2005 report and the 2006 audit, little has been done to address the runaway costs of school construction. The SCC was abolished and reconstituted as the Schools Development Authority in 2007.

TAPinto Newark found numerous instances where the SDA failed to follow up on the auditor's recommendations, allowing school construction costs to soar unchecked.

In 2006, the state auditor pointed out that the organization had failed to adopt a Design Standards Manual that would establish both “minimum and maximum standards, ensuring that quality levels for the long life of a building can be achieved, while still controlling maximum costs relative to design approaches and material selections.”

Today, more than 13 years after the audit, the SDA’s “Material and Systems Design Manual” remains a work in progress, with barely half the standards completed. The manual was last revised in May 2012, when all work on updating the remaining standards apparently ceased.

“There are sections of the SDA Design Manual that remain under development,” the SDA said in a written response to questions from TAPinto Newark. “The SDA has implemented adjustments to the Design Standards since 2012 in general ways and continues to develop supplemental design standards, as necessary, to provide for the continued improvement in the quality of the school facilities we deliver.”

The manual introduction notes that the “use of standardized design elements has the potential to afford efficiencies in the design and construction of school facilities. Standardized design will facilitate expedited design reviews and code inspections for faster delivery of school projects.”

In its written response, the SDA said the $143 per square foot cost were not “realistic then, and are even less realistic now when we take into consideration inflation and other market factors.”

Yet the SDA admitted that it never requested an adjustment to the square foot cost from the state Legislature, which would have forced lawmakers to more closely scrutinize the SDA’s spending.

“Although we have not requested an adjustment, the SDA reports per square foot cost data to the Governor’s Office, Joint Budget Oversight Committee, President of the Senate and Speaker of the General Assembly through its biannual reports filed in June and December of each year,” the SDA said.

But the reports do not make any effort to identify when construction costs on specific projects are exceeding the state cap or even when they are exceeding averages determined by McGraw Hill. 

For example, for the period between Oct. 1, 2017 and March 31, 2018, the SDA reported the average cost of building an elementary school was $292 per square foot, far below the $669 per square foot cost of building South Street School in Newark, which opened in September 2018.

While the cost of South Street School is mentioned in the report, there is no mention of its per square foot cost, or the fact that it is in excees of the state average for elementary schools.

Assemblywoman DeCroce said the Legislature needs far more oversight of state-funded school construction.

“The Legislature has an obligation to look into not only school construction spending but all education spending,” Assemblywoman DeCroce said. “Bodies such as the SDA should never be given a free pass to spend as they please – there must be legislative oversight.”

Cooper, the former Inspector General, has called for a complete and detailed accounting of the SDA’s spending.

“Waste and corruption abound where there are large amounts of public construction funds and weak or no oversight,” Cooper wrote in an op-ed piece that ran June 15 on nj.com. “The review that I am calling for will expose any waste or worse, reveal private and public individuals responsible, provide the ammunition to hold them accountable, and correct any lapses in SDA controls and structure to prevent future waste and mismanagement.”

Can schools be built cheaper in Newark?

In its response to questions from TAPinto Newark, the SDA said school construction costs are impacted by numerous factors during planning and construction that cause the price to escalate beyond the cap set by the Legislature, from LEED, security requirements, energy code and building code changes.

In addition, the SDA wrote, “site conditions at the property sometimes require specialized foundation, drainage and/or soil improvement measures that were not foreseeable until investigation and design commence, and have the potential to increase costs.”

At the same time the SDA was building schools in Newark, several charter schools were also constructing buildings at a cost far less than the state. Charter schools do not receive any funding from the state and must raise their own money for construction.

KIPPNJ, which operates 11 schools in Newark, completed a new high school in Newark’s West Ward in August 2016 at a cost of $37.5 million, or $340 per square foot. KIPP Newark Collegiate Academy has the capacity to serve 800 students at an average cost of $46,900 per student.

In comparison, the SDA’s Oliver Street School and South Street School, both built in Newark’s Ironbound around the same time as KIPP’s school, cost far more to build on a per square foot basis and a per pupil basis.

Oliver Street, which opened in six months earlier, serves 848 students. The SDA spent $86.7 million, or $536 per square foot, to build the school. Oliver Street is 30,000 square feet larger than KIPP’s school, even though it is designed for only 48 more students.

South Street School, which opened in September 2018, is almost identical in size to KIPP’s school at 103,000 square feet. The SDA spent almost twice as much per square foot to build the school - $669 per square foot - as KIPP.

All SDA projects over $5 million are bound by a Project Labor Agreement, which requires, among other things, that 88 percent of the workforce in each of the construction trades to be union labor. While non-union contractors and subcontractors can bid on projects, they can only retain 12% of their own staff.

However, the PLA requirement does not appear to be a factor in the costs of the school projects in Newark.

Jessica Shearer, a spokeswoman for KIPP NJ, said the charter school network uses union labor and pays prevailing wages on all large facility projects, including new construction and gut renovations.

Shearer said because charter schools like KIPP do not receive any funding from the state, they are “compelled to engage with partners to get the best buildings for the lowest possible prices.”

“We spend far less money on our world-class facilities than typically spent by both the state of New Jersey and public school districts,” Shearer said. 

Shearer said KIPP’s teachers pay scale is one of the highest in the state and its students’ academic results far outpace all public school districts of similar size and demographics.

“Not only do we get outstanding results, we do it at a far lower overall cost to the taxpayer compared to other public schools in New Jersey while simultaneously providing teachers, students, and the community the outstanding facilities they deserve,” Shearer said.

School Cost  Students  Per Pupil Sq. Ft. Per Sq. Ft Date Completed
South Street School $69,000,000              657 $105,022.83 103,000 $669.90 Sep-18
Oliver Street School $73,500,000              848 $86,674.53 137,000 $536.50 Feb-16
Elliot Street School $46,700,000              848 $55,070.75 138,000 $338.41 Jan-16
Speedway School $36,471,535              690 $52,857.30 121,373 $300.49 Sep-10
Park School $36,468,535              690 $52,852.95 118,638 $307.39 Sep-09
Total or Average* $262,140,070           3,733 $70,222.36* 618,011 $424.17*  
KIPP Newark Collegiate Academy $37,500,000              800 $46,875.00 107,000 $350.47 Aug-16