Inflation plays role in pushing Mitchell's $16M water storage project six times above initial cost

Nov. 2—MITCHELL — Inflation has reared its head into the city's water storage tank project that is now estimated to cost around $16 million, roughly $13 million more than initial cost estimates.

When the water storage project first emerged roughly two years ago, former Public Works Director Kyle Croce anticipated it would cost around $2.5 million. As inflation spiked to a historic high in 2021, jumping to 7%, and new elements to the project were added, it sent the costs of building the water storage tank on the south side of Mitchell to roughly $16 million.

Despite the increase, Public Works Director Joe Schroeder echoed the importance of building the water storage tank that will boost Mitchell's water storage capacity up to 5 million gallons. As of now, Mitchell has managed to get by with a one-day backup supply of water. City officials have pointed out that most like-sized cities have at least a three-day backup water supply.

"It will give us about three days of water storage in the city if our water were to be shut off," he said during a city council meeting.

When the project was presented to the Mitchell City Council in 2020, the U.S. inflation rate was at 1.4%, according to data from the U.S. Labor Department. It jumped to 7% in 2021, marking the largest annual increase in the past two decades. As of September, the U.S. inflation rate was hovering around 8.3%.

Inflation isn't the only factor leading to the project cost increase. Adding a chemical feed and pump facility into the mix also played a large role.

"This would bring our piping above ground instead of below ground vaults, which is easier for crews to work on. The building would be fairly large," Schroeder said. "As the project evolved, it only made sense to incorporate these items now."

In September, the first bids came in above the $11.3 million engineer's estimates, which wasn't a surprise to Schroeder. Two bids were submitted, with one amounting to $11.5 million and the other $12.9 million.

The realities of dealing with inflation could be seen in Schroeder's reaction to the bids, as he said "they were better than what I expected."

The council approved the low bid of $11.5 million submitted by Stanek Constructors Inc. The company will lead the construction of the water storage facility. Schroeder said water main improvements that are integrated with the project is estimated at $2.3 million. Administrative fees and land acquisitions add on another roughly $2 million to the total project cost, bringing it to the estimated $16 million.