By Roland Murphy for AZBEX
As we noted in our front-page article on public works projects, rising construction costs are impacting the ability of cities around Arizona and the nation to deliver projects, particularly those funded under voter-approved bond requests.
Two news stories this week highlighted the challenges Chandler and Scottsdale are experiencing.
Chandler
An April 16 article from the Chandler Arizonan showcased several projects jeopardized by construction cost increases referred to as “soaring.”
Estimates for a new police department forensics facility have jumped from an initial projection of $30M to a current estimate of $50M. A multigenerational facility at Tumbleweed Park has grown from $13.9M up to $28M.
Chandler Deputy City Manager and CFO Dawn Lang was quoted as saying virtually every capital project on the City’s list could go over budget.
Chandler voters approved a $272.7M bond request in 2021. The funding was segmented as:
- $73M for parks and recreation,
- $25M for public safety, fire,
- $55M for public safety, police,
- $85M for roads and transit, and
- $33M for facilities.
Officials estimate the total project list included in the 2023-2032 Capital Improvement Plan would cost nearly $2B to fully fund, which is an increase of $314.2M over initial cost projections.
Officials are faced with the possibility of scaling back projects, delaying them, asking for authorization to sell more bonds or dipping into the City’s contingency fund.
Chandler maintains 15% of its yearly budget in a contingency fund for emergencies and unexpected expenses. However, going too deeply into its reserve coffers could negatively affect the City’s current AAA bond rating, which would lead to higher interest rates for loans.
Lang said departments have been working to reallocate and delay projects where possible and use the allocations to pay for overages. The article quoted her as saying, “They’ve maximized that trick at this point.”
Scottsdale
Cost overruns for municipal projects in Scottsdale have gotten extensive coverage in recent months.
In 2019, voters approved a $318.9M bond request covering 58 projects. An April 17 article from Independent Newsmedia reported 11 of the projects have been completed and another 20 are underway. Another nine are in design and currently projected at $41M over budget.
Among the projects expecting overruns are:
- Repair Lakes & Irrigation, Vista del Camino Park in the Indian Bend Wash, which was budgeted for $23.5M and is now estimated at $34.3M,
- Modernizing and expanding the police side of the Police and Fire Training Facility, which has grown from $4.2M to $12.2M, and
- Renovating and expanding the Civic Center Jail and downtown policy facility, which has gone from $13.1M to $19.8M.
That leaves 18 projects that have not entered the design phase yet and for which there is not sufficient funding. The City Council will have to decide whether to cancel or delay projects until there is money for them in the CIP fund.
City Council members and Mayor David Ortega met recently in a retreat to discuss the cost overruns.
Member Solange Whitehead suggested holding off on some projects and components to save money.
Member Tammy Caputi cautioned against scaling back the scope and features of projects in design, reminding her colleagues that Scottsdale has a reputation for top quality and that focusing too heavily on value engineering could diminish both the quality of the projects and Scottsdale’s brand as “the gold standard in the Valley.”
Caputi reminded the members that Scottsdale has a large volume of one-time funds available that could be used for projects as designed rather than revising them for cost savings.
Member Barry Graham disagreed saying, “We can’t buy everything.”