A+ Architecture: The American Recovery and Reinvestment Act Helps Education Projects Make the Grade

by Curtis J. Moody, FAIA

Summary: Although no industry or market sector is immune to the economy’s sweeping strikes, there is one that is faring better than the rest, helping architecture businesses survive: education.

The commercial architecture business has stayed seemingly more resistant to the economic crisis than the residential market—but it has still felt a strong blow. Numerous existing projects are postponed, called off, or are shrinking in size and financial scope. Many more projects planned for the near future have been halted before they could even get off the ground. Education is faring better than the rest. A few factors can be credit for this that will help school construction maintain a healthy level, including significant funds being promised from President Obama’s American Recovery and Reinvestment Act (ARRA) of 2009.

Staying ahead of the curve
Perhaps more then ever, the cost of education could be considered a major deterrent for seeking advanced learning. Yet, research is showing that people who have been handed pink slips are returning to the classrooms in search of higher education opportunities—and, hopefully, a more rewarding career once the job market turns the corner. This creates a need for facility expansions and renovations, despite otherwise tightening budgets. In addition, the continuance of education projects is also somewhat dependent on whether the institution is privately or publicly funded. Public education projects have the benefit of falling under capital funding grants, which are given in two- to three-year cycles, protecting projects with funds that were granted before the economic decline in fall 2008. Although privately funded projects face more of a challenge as fundraising efforts can be increasingly unrewarding, loans for projects can be received at interest rates lower than ever.

More significantly, the ARRA is providing $100 billion to boost the education system. Of that, $53.6 billion is allocated to a state stabilization fund to help states and localities fund education. This money is slated to be distributed as follows.

• $5 billion stays at the Education Department for a “Race to the Top” grant program for schools that are improving test scores, teacher training, etc.—it is not likely these funds will be used for enhancing or developing education facilities.
• $48.6 billion goes to state education agencies, generally under the Title I formula.
• States must send 81.8 percent to local school districts for public elementary, secondary and higher education, and early childhood education programs and services. The money may be used for repairs, renovations, and modernization of schools, including changes consistent with nationally recognized green ratings systems.
• The remaining 18.2 percent stays at the state level and can be used for other education activities, public safety, and for modernization, repairs, and renovations to both K-12 and higher education facilities.
• There is an additional $22 billion available through the Qualified School Construction Bonds program, which is to be divided among the states and 100 largest school districts based on levels of federal school funding.
• These funds can be used to finance authorized public school construction projects and other eligible costs for public schools with interest-free borrowing.

As a result of these funds, clients are eligible for consideration for grants, allowing them to pursue and/or continue projects. Although some of these projects are for new facilities, existing structures are already a part of an institution’s operational costs, making maintenance and upgrades necessary. These renovations are the priority consideration for funds from most boards of regents, while new buildings—unless essential—are being put on hold until “better times” prevail.

The competitive edge or a course in competition
The strength of the education sector in these economically distressed times is also driving an increased level of competition among firms for projects. As the number of projects in retail, office, and other commercial markets subside, firms that previously did not pursue education projects are now forced to do so. Further, although the number of projects has stayed buoyant, the size of projects is decreasing. Firms are pursuing smaller projects than they might have considered before the economic downturn. RFPs for $3 million projects before the recession may have received 12-13 proposals, whereas they are now receiving upwards of 40.

In my last column, “The Changing Face of Diversity in the Architecture Industry,” I wrote about how strong business partnerships are fundamental for helping start-up and minority firms establish roots. But in this unstable time, partnerships are paramount for everyone—it’s better to have a piece of the pie than no pie at all. Measures like the ARRA are helping us all stay relevant and in the game.