Conroe ISD sets $18.8M fund for inflation, supply issues

In response to inflation and supply chain issues, the Conroe Independent School District has created an $18.8 million contingency fund to use for construction costs outside original budget allocations for projects.

“Going back to last summer, at Conroe High School we had a concrete shortage,” Easy Foster, director of planning and construction for CISD, said at the Nov. 15 board of trustees meeting. “Leading up to the summer we had plenty of allocation, we knew the war in Ukraine was starting to impact the supply chain.

“What we learned was that it was impacting the supply chain for pouring cement to the United States.”

The district’s concrete suppliers cut the allocation to the CHS project to less than half of the original order.

This meant the project didn’t have enough concrete to finish that stage of construction before the school year started.

“We were forced, at that time, to find a new concrete supplier who can supplement the original concrete supplier,” Foster said.

“That cost was not the result of the subcontractor or even the general contractor’s error or negligence, that was something nobody could control.”

The district had to spend contingency funds to pay for the new supplier. While this is just one example, Foster told the board that almost all supplies ordered from abroad are delayed, and shipping from abroad is still cheaper in many instances than it is to order from the United States.

“In shipping lanes, for example, it’s currently cheaper to ship through the Panama Canal than it is to drive a truck from California to Texas,” Foster said. “I’m wearing my crystal ball down to a marble trying to figure (solutions) out.”

At the Nov. 15 meeting, the board unanimously approved a new contingency fund of $18.8 million, taken from the general fund, to pay for project cost increases that go beyond the original project budget due to current market conditions. Bond projects take into account increases in market cost, but recent inflation has increased costs beyond what was originally anticipated.

Before money can be taken from the contingency fund,

“I’m wearing my crystal ball down to a marble trying to figure (solutions) out.” Easy Foster, CISD planning director

“contractors must establish to the district’s satisfaction that every effort has been made to secure the service(s) or product (s) for an amount within the original scope of the project,” according to the resolution that was passed.

The district chose to propose a contingency fund instead of bringing each request for funds to the board individually because of timing,

Superintendent Curtis Null told the trustees. Bids from contractors are now being submitted with a deadline, Foster explained.

“If we have to wait for another board cycle or call a special meeting, sometimes that 72-hour notice period, or even a month notice period, may be detrimental,” Foster said.

Darrin Rice, district CFO, and Null told the board that in response to project cost increases, other districts have passed the cost onto the next bond referendum, or scrapped projects completely.

“They can’t complete all their promised projects,” Null said. “Bartlett Elementary is our last elementary in the program. We are going to finish Bartlett Elementary, but other school districts might get to that point and say ‘We can’t build the final school.’”

The board and administration agreed that CISD cannot afford to not build Bartlett Elementary as the district prepared for tremendous growth within the next several years.

Any funds left in the contingency fund after 2025 will be returned to the general fund.