Wednesday, February 8, 2023

Inflation impacts city’s ‘critical’ projects, five over 100% of original budget

Wilmington City Council member Luke Waddell addresses the city’s rising project costs at a Congressional Transportation and Infrastructure committee meeting Thursday. (Courtesy/T&E Committee)

WILMINGTON — With the U.S. inflation rate over 9%, many needed city projects have either been put on hold or scrapped due to the rising cost of construction materials and labor. City Council member Luke Waddell spoke about the nationwide economic crisis and its effects on the local municipality at a Congressional roundtable Thursday.

“Inflation is hitting the pocketbook of every American and hitting transportation industries even harder,” Missouri Congressman Sam Graves (R) said in his opening remarks.

The Republican members of the committee on Transportation and Infrastructure hosted industry leaders and stakeholders from around the country to share their insights on how inflation is impacting projects and funding.

Waddell, also a Republican, who sits on the Wilmington Urban Area Metropolitan Planning Organization and Cape Fear Public Utility Authority boards, announced there are five local projects between 100% and 250% of initial budget estimates. He said the city is working to figure out how to mitigate the burden on taxpayers for these overages, while still offering “critical” core services.

“Wilmington is like other cities in the Southeast, or across the nation, experiencing unprecedented growth,” he said during the roundtable, “spotlighting the challenges inflation is causing with local municipalities having to make a decision on whether to raise taxes on citizens already stretched as thin as they can be or look into a bond on upcoming ballots.” 

Waddell was invited by Rep. David Rouzer (R-District 7) to join six nationwide transportation and infrastructure professionals at the conference.

“Unfortunately, families and communities across NC-07 and America are being hit hard by the same inflationary pressure further delaying or scaling back critical projects,” Rep. Rouzer said in a statement. “Congress must put the brakes on runaway federal spending and enact policies that incentivize work, investment and production.”

Examples of how Congress can assist, according to Rouzer’s communications team, is to not implement a tax and spend reconciliation deal, currently being discussed in the Senate. The proposed package is a scaled-down version of the $3.5-trillion “Build Back Better Act” tabled last fall.

While details are still being finalized, the legislation reduces budget deficits by cutting projected spending and raising revenues, while also imposing tax cuts. The renegotiated bill will offer less money (by how much is still unclear) and would still include provisions for lower prescription prices, affordable housing and raising taxes for high-income individuals. It’s not likely to keep any on opportunities for clean energy credits at this time, according to a CBNC report from Friday. It should be brought to the Senate before its summer recess Aug. 5.

Rouzer also recommended during Thursday’s roundtable that the state’s $5.2 billion — which he said “goes a long way in a state like North Carolina” — in unspent Covid money should be allowed to transition to needed infrastructure projects to help “fill the gap.”

Prior to attending the conference, Waddell said he asked city staff to provide him with examples of capital improvement plans that have been impacted by material availability, as well as cost — anticipating one or two.

“Within a matter of hours, they sent me five, all of which have been planned and budgeted, with the actual cost for each one well over 100% of the original project budget,” he said.

City spokesperson Jennifer Dandron clarified that, by “100% over budget,” Waddell meant 100% of the initial budget had already been spent and now there are overages.

Specifically, Waddell was referring to the $1.6-million difference incurred to build the nCino sports complex (up 14%), the $39,000 increase of Racine Drive intersection improvements (up 26%) and the $2 million more (a 5% increase) currently being spent to complete North Front Street Improvements, now underway.

Repairs on the Riverwalk Visitors Center, closed down for the last two years for safety issues, are over budgeted by 13%. It’s on track to begin construction this summer, with completion set before the end of the year, Dandron confirmed.

The most significant hike in cost applies to the Holly Tree pedestrian improvements, currently 54% over budget. Originally estimated at $125,000, the project will now run the city more than $550,000.

The plan would construct 87 linear feet of 5-foot-wide sidewalk and 175 linear feet of 8-foot-wide multi-use path along Holly Tree Road, east of College. Contract work includes excavation, grading, asphalt paving, drainage, curb ramps and erosion control.

The city rejected the first round of bids in May due to exorbitant pricing. The plan now is for city officials to “get creative” and combine the work with another project to ensure construction is still done.

“Hopefully, we’ll get greater value by doing that,” Dandron explained. “If we’re bidding for more work, it’s like bulk supply: You get a better deal.”

In general, the city is moving forward with projects as planned, finding ways to be as “fiscally responsible” as possible, given the circumstances.

Wilmington is not alone in the crisis. Dr. Shawn Wilson, secretary of the Louisiana Department of Transportation and Development and president of the American Association of State Highway and Transportation Officials, said at Thursday’s meeting on average, he’s seeing a 40% to 50% increase year over year on project costs.

He added multi-year projects are creating the most uncertainty, as they are typically tied to pricing instability.

“The biggest increases I see are coming from transportation costs, not material,” Wilson said. “Are you close to rail? Are you close to water? What’s the cost of shipping? Those are factors that are going to vary state by state but as a whole you are going to see some prices spike more than others.”


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