New additions under construction at McNary High School on Aug. 23, 2019 (Rachel Alexander/Salem Reporter)

Seven local schools will get more hefty remodeling projects than planned as Salem-Keizer School District executives spend an unexpected infusion of $65 million.

The money is flowing because investors have been paying more for the district’s bonds than expected, putting additional cash in the district’s hands. Last year, voters approved selling $620 million in bonds to pay for school remodeling and expansion across the district.

District executives elected to put half the unexpected money into additional school projects and half into reserve instead of cutting the overall debt taken on. The bonds will be repaid by property taxes.

District executives now plan to spend $668 million on school construction after adding the unexpected money and some state grants. That spending won't increase the amount taxpayers pay.

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McKay and South Salem high schools, Mary Eyre Elementary School and Houck Middle School will see larger construction projects than originally planned.

McKay is the most overcrowded in the district, with about 2,400 students in a building designed for 1,800. District officials who already planned to spend $48 million to remodel the school now plan to add another $6 million for a black box theater, music storage space and relocation of portable buildings.

READ: McKay would get more space for arts, science, career education under new design

At South, district officials plan to spend an extra $7 million on an auxiliary gym because the school’s existing gym is small compared to other local high schools, according to district construction program manager Joel Smallwood. The school also will get a larger auditorium because of the number of community events it hosts.

Construction at South will begin in the spring, and at McKay in June.

Kennedy and Miller elementary schools will get additions because of recommendations from a district boundary review task force. The boundary adjustments were approved by the school board in February.

That process left Miller with a projected enrollment slightly above capacity, so the task force recommended expansions to accommodate the students. Miller will get five new classrooms, with construction beginning at the end of the school year. The school would then hold 517 students.

Kennedy’s aging portables would be replaced with seven classrooms, giving the school space for 535 students. Construction will start in June 2021.

READ: After listening to a divided public, Salem-Keizer school board approves boundary changes

Grant Elementary School will receive interior remodeling to move special education programs into the school. Houck Middle School will also have additional space added, bringing its capacity to 1,017 students.

Choices about where to spend the additional money followed recommendations from teachers, aides and administrators at each school. As school leaders made requests to the district, chief operations officer Mike Wolfe and a district bond team decided whether to approve additional spending.

Superintendent Christy Perry ultimately signed off on the additions.

DOCUMENT: April presentation from Mike Wolfe outlining additional spending decisions

Such changes aren’t approved by the school board, though it is usually informed.

The school construction is monitored by a citizen committee which is updated quarterly. The committee provides only advice to school officials and has no authority to decide projects.

Lisa Harnisch, committee co-chair, said she supported spending some of the extra money on additional school projects. She led a citizen committee that in 2017 recommended school projects and led the campaign group that promoted the bond measure to voters.

Project coordinator Joe Bonanno shows a new career and technical education addition under construction on the south side of North Salem High School (Rachel Alexander/Salem Reporter)

District officials learned about the $65 million following the bond sale in July 2018. Wolfe and the bond management team decided in April to allocate $34 million for additional projects.

The school board’s only involvement was to approve new school boundaries, along with recommendations to add space at several schools. There was no vote on the additional spending. The board delegated to Perry and her staff administration of the construction program, including the bond.

Wolfe and the bond team also decided to store another $31 million in reserves to cover construction cost overruns or save for even more projects. The move more than doubles how much is being held in contingency. The district originally judged $24 million was adequate.

District officials said they didn’t budget extra money from bond sales into the original project on advice of their bond advisors, because there was no guarantee they’d get them.

“We were aware that was a possibility,” Smallwood said.

The district has so far sold $385 million of bonds and plans to issue the rest in 2021.

Wolfe and other district leaders haven’t considered using the extra money to reduce the amount of debt taxpayers face to pay the bonds, said Karma Krause, district spokeswoman for the school construction projects.

 “We have no idea if the next bond issue will be as successful, or if there will be additional earnings in the future. It wouldn’t be prudent to make assumptions about performance in the bond market,” Krause said. “The return from the next issue is totally unknown.”

Salem-Keizer taxpayers will be paying off the bonds for the next 20 years, spending about $310 per year for a home valued at $250,000.

It’s possible the district could earn even more unexpected money after the next bond sale. Krause said if that happens, the money would be put in reserve. If that money isn’t spent on construction overruns, it could be used to add additional construction.

Reporter Rachel Alexander: rachel@salemreporter.com or 503-575-1241.