EAGLE POINT — A new elementary school will be built at the former site of Eagle Point Junior High, which was largely destroyed by a fire nearly six years ago.

EAGLE POINT — A new elementary school could be built at the former site of Eagle Point Junior High, which was largely destroyed by a fire nearly six years ago. Correction: See below.

The Eagle Point School District settled a lawsuit in June against Great American Insurance Company of New York in which the insurer agreed to pay $12 million for the fire losses, significantly less than the cost of building a new school. The agreement allowed both parties to avoid a jury trial that had been scheduled for early July.

A replacement junior high school was built in 2004 on Reese Creek Road. District officials had planned to use the insurance settlement to build a new elementary school to replace Little Butte School on North Shasta Avenue. That school is near capacity, with about 500 pupils in grades kindergarten through 5. The new school would make space for another 100 pupils.

The portion of the old school that survived the August 2002 fire contains about 20,000 square feet, including a wing of classrooms and a gymnasium.

School Board Chairman Jonathan Bilden said the $12 million isn't enough to pay for construction of a school for 600 students. By adding on to the surviving elements of the junior high, district officials expect to be able to open a new elementary school of that size, Bilden said.

"With the money we have this is the best solution for our community," Bilden said.

The School Board last week authorized an engineering study to see how much the project would cost. Officials hope to commission the study this summer and break ground on a new school as early as May 2009.

"We have the ability to build a bigger school, and we want to move on that," Bilden said. "With the rising cost of construction we need to act quickly."

A committee formed about four years ago had recommended building the new school at the site of the old Glenn D. Hale Elementary School on East Main Street, because the land was already zoned for a school and has a central location. The site is just across the street from the junior high.

"The goal was to have walking schools and enough acreage," said Lynn Corwin, who was part of the school committee. "It came full circle back to the Glenn D. Hale site."

But the dispute between the school district and Great American put a halt to the plans, delaying construction as building materials and labor costs rose.

Corwin said considering the increase in costs since then and the amount of money available, adding to the existing junior high seemed prudent.

"That has a wing of classrooms and a gym," Corwin said. "They could piggyback the money on that, and that would be that much more toward the new school."

Reach reporter Paris Achen at 541-776-4459 or pachen@mailtribune.com.

Correction: The school board won't decided where to rebuild Little Butte Elementary until the engineering study on costs is completed. This version of the story has been corrected to more accurately reflect the ongoing process.