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| Jones Library, Amherst MA August 13, 2010 Photo Credit: John Phelan |
A perfect storm of rising construction costs, soaring interest rates, and high inflation has forced neighboring Amherst to rethink its ambitious construction agenda as cost estimates on four projects head skyward.
As media outlets Amherst Indy and the Amherst Bulletin have reported, a whopping $40 million has been added to the bottom-line number for four construction projects: the Fort River Elementary School, a new Department of Public Works, a new Fire Station, and the renovation of the Jones Library.
$40 million represents a 44% increase over the original four-project total of $90.8 million.
Shutesbury has its own roster of construction projects: installing a new 30,000+ square foot asphalt roof on the Shutesbury Elementary School (SES); replacing the Locks Pond Road culvert; building a new library; and the as-yet-unknown costs of remediating contamination on Lot O-32, the site of the proposed library.
Estimates vs. Actual Costs
There is little doubt that Shutesbury will have to deal with the same problems as Amherst since construction costs are still trending upwards.
Applying an increase of 44% to the culvert, school roof, and library project estimates (there are no estimates yet on Lot O-32 remediation costs), may supply a more realistic approximation of costs once the design is complete on the roof and library projects as well as suggest cost increases on the culvert project.
New Library: 5,490 Square Feet
Using information provided by the Small Library Pilot Project page on Shutesbury’s MN Spear Memorial Library website, the last estimate procured by the Trustees came to $6.3 million. Shutesbury’s portion of that amount is $2,063,571 or 38%. We have saved $890,700 in cash and voted to borrow $1.17 million.
$6,300,000 ✕ 1.44 = $9,072,000
$9,072,000 ✕ 0.38 (our portion of library costs) = $3,447,360
Subtracting town investments and the amount we will borrow for this project, the increase is quite hefty:
$3,447,360 - ($890,700 + $1,172,871) = $1,383,789
In this scenario, the town will have to come up with another $1.4 million to keep the library project on course. As with Amherst, S. Deerfield, and other communities, cutting the construction budget will be difficult since the grant from the Massachusetts Board of Library Commissioners does not allow the flexibility of adjusting the scope of work–such as reducing the square footage or trimming library programs–to meet municipalities’ budget requirements.
For Shutesbury, transferring more money from savings is unlikely since cash reserves were reduced by 58% by 2022 Annual Town Meeting votes and a promised set-aside of funds to replace the SES roof.
Amherst has not yet voted on its own debt exclusion for its slate of projects and so may still adjust its borrowing needs. Because Shutesbury voted for a debt-excluded amount of nearly $1.2 million at the end of June, a big jump in costs will be a problem.
According to the MA Department of Revenue’s Division of Local Services, the ability of municipalities to add to a voter-authorized debt exclusion in order to cover cost increases is limited. Unless it is a “modest amount attributable to inflation, new regulatory requirements or minor project changes”, municipalities must apply to the Division of Local Services Director of Accounts to obtain permission to increase the original borrowing amount. Otherwise, another debt exclusion override vote will be required.
Locks Pond Road Culvert Project
Shutesbury’s 2021 Annual Town Meeting voted to approve a total of $1.3 million in funding to replace the culvert on Locks Pond Road, near Lake Wyola:
Article 5. A motion was made and seconded for the Town to vote to fund the construction of a replacement culvert at Locks Pond Rd and Lake Dr, near the dam by borrowing up to $201,007, transferring $250,000 from capital stabilization and using the remaining funds of the Municipal Small Bridge grant for a total of up to $801,007.
Applying a 44% increase to this job, which is likely not going to begin until the fall of 2023, yields an increase of $550,886 the town may need to raise or borrow to complete this project next year.
$1,252,014 ✕ 1.44 = $1,802,900
But wait, there’s more! In addition, taxpayers may have to pay moving and/or storage fees to overwinter the yet-to-be-installed culverts unless appropriate town-owned space is found for this purpose.
SES Roof Replacement: 30,304 Square Feet
Voters approved $60,000 to pay for a design for the SES roof replacement at Annual Town Meeting this year, though there is no evidence this study is underway. The plan, as described by the Town Administrator on the floor of town meeting, was to obtain a more precise cost for the roof replacement project before calling a Special Town Meeting in the fall to transfer funds to do the job.
In the absence of a design, I will use the amount the Finance Committee estimated in their pre-Town Meeting Budget Report to perform the calculations.
$750,000 (Finance Committee estimate) ✕ 1.44 = $1,080,000
This would require Shutesbury to raise or borrow an additional $330,000.
This estimate may be low since there was no official cost estimate performed on the school roof. The gymnasium roof, at 4582 square feet, represents only 15% of the much larger asphalt area and cost $254,100 to replace.
The asphalt roof project has been postponed since at least 2014, and the roof has continued to leak despite yearly patches administered by the former Town Buildings Committee. No doubt the passage of time and continual water damage will present added challenges to the replacement job, driving costs higher still.
The town has applied, for the sixth time, to the Massachusetts School Building Authority (MSBA), for a grant to replace the SES roof. At Town Meeting this year, the Town Administrator inferred that Shutesbury’s chances of procuring a grant were better than ever this year, presumably due to the involvement of state Representative Natalie Blais.
In perusing the town’s 2022 Statement of Interest to the MSBA (available from the Town Clerk), I noticed that despite a line in the asphalt shingle section of the form stating, “We are no longer seeking repair of the gym section of the elementary school roof”, the town goes on to apply for a grant for the gym section in addition to the asphalt section of the roof anyway. This is no doubt a mistake made by town officials–hopefully, not a fatal one.
If the grant process fails again, the town will have to come up with funds to fix the roof. This might mean another round of borrowing. The alternative is to delay the roof project for another year. Unless the town moves quickly to obtain the design, that may happen anyway.
Although this is just an exercise based on the experiences of Amherst, it is worth thinking about since we might find ourselves in a similar situation.
What do you think Shutesbury will do if large increases in its construction project estimates occur?
The town will again postpone the SES roof project in the event we once again fail to secure a grant from the MSBA;
The town will postpone the culvert job another year;
Voters will decide cost overruns outweigh the desire and need for a new library;
Taxpayers will vote to borrow approximately $2,264,675, to complete all these projects.
Weigh in here: https://nextdoor.com/p/PsDGf6_YfDTt?utm_source=share&extras=NzAyNTE2Ng%3D%3D
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