BG building costs a balloon: New $11.5m facility could now cost $14.5m
City Administrator Lori Tretter updated the Bowling Green Council Finance Committee on the status of the New Town construction project costs at last week’s meeting.
She noted that in October 2020, Poggemeyer Design Group presented a financial projection for the project, with initial estimates in the range of $11 million, and that at least $11.5 million was budgeted at that time. that time.
It was then recognized, she said, that these prices would increase, and as part of the 2022 budget, additional funding was included, and a plan is proposed for increases in the 2023 budget.
A bond was issued in 2021 to pay for the project, when interest rates were still very low, Tretter said. She said cash reserves from some funds and then budget appropriations were also used.
“A lot has happened since 2020 and now,” Tretter said, including the pandemic, supply chain issues, inflation and a significant increase in construction costs.
“It’s been a challenge for the whole construction industry and for everyone who builds buildings,” she said.
Tretter said the city has taken steps to mitigate the building’s costs, including undertaking a “risky construction manager,” which encourages a cooperative environment between the architect and engineering team and the owner, in which costs and impacts are considered as construction takes place. She said their team worked steadily to keep balance in mind and make adjustments as needed.
The project encountered challenges, Tretter said, including structural support issues at the old post office building that resulted in more than 300 “geopers” being installed. Bedrock was also encountered, as were underground infrastructure issues. Also, the concrete slab under the building was 4 feet thick.
She said that while the cost of the building itself remains in the $11 million range, soft costs have increased to just over $14.5 million. These costs include architectural design, engineering, construction risk manager, surveying, permits, contingencies, and furniture, fixtures, and equipment.
There remains a gap between the initial estimate of $11.5 million, including $1 million for contingencies, and the current estimate of $14.5 million.
Tretter said funding for the project will remain at predetermined levels in various city funds and the 2023 budget will include appropriations from certain fund balances.
However, the city’s Capital Improvement Fund, she said, cannot absorb the additional amount of the discrepancy, and so in the 2023 budget it will be recommended that an advance of $1 million dollars be made from the Water and Sewer Capital Improvement Fund into the Capital Improvement Fund.
Essentially, Tretter said, the city will borrow money from itself. Such advances have been made in the city before, but not regularly, she said. The action would require legislative approval. Tretter said they would recommend a 10-year repayment schedule, with a clause allowing early repayment.
She said that looking at the Water and Sewer Capital Improvement Fund, they don’t believe the move will impact the scope of that fund’s projects or infrastructure investments.
“Of course, we will continue to monitor this through our financial updates” and annual budgets, Tretter said.