Johnson County expects about $3.7 million in project shortfalls due to inflation
Johnson County could face over $3.7 million in shortfalls for capital projects due to rising inflation and construction costs.
Assistant County Manager Joe Waters presented three projects to the Johnson County Board of County Commissioners at their regular Thursday meeting to inform them of the anticipated costs for the Shawnee Med-Act Station, the Household Hazardous Waste Facility and the Lenexa Med-Act Station.
The projects were approved by the board in 2020 and 2021, so the estimates for construction costs were created with the expectation that escalation costs would be about 4-5%, Waters said.
“What we have seen is somewhere between a 33-40% increase in construction costs, and climbing,” Waters said.
The Board of County Commissioners approved over $3 million for the Shawnee Med-Act Station in 2020 as part of the 2021 budget, but Waters said it is expected to cost about $4.6 million in total.
Construction plans are about 50% complete, so the total cost will become more refined the closer they get to completion, Water said.
A communal bunk bed style sleeping area in the building is also no longer compatible with COVID-19 recommendations and the building needs to be larger to accommodate individual sleeping areas, Waters said.
The Household Hazardous Waste Facility at 112th and Mastin Street in Overland Park was awarded $3 million in 2021 as part of the 2022 budget, but is expected to cost about $1 million more than anticipated.
Waters said the facility and the Lenexa Med-Act Station have larger buildings than necessary because there is a limited market for these kinds of facilities and they were what was available.
The Lenexa Med-Act Station was awarded just under $3.9 million in 2021 as part of the 2022 budget, but Waters said it could have a $1.2 million to $1.5 million shortfall. The project is still in the early stages compared to the other two, so the total price could change depending on the market.
Waters said that for all three projects, the property was acquired by the board with general fund reserves before the Johnson County Public Building Commission lease-purchase bonds were sold. The board anticipated that the advance they gave to the public building commission would be reimbursed by the commission when they sold the bonds.
However, Waters said their proposed strategy would not reimburse the board, but instead use that money to further fund the project, effectively using general revenue dollars.
“We could increase the bonding amount, but given the county’s cash position, it seems more wise to resolve these shortfalls with cash rather than sell more bonds, particularly as bond rates go up,” Waters said.
Waters said they recommend continuing with the completion of the construction paperwork, then bidding out the projects to construction companies. Once they have the bids, they will come back to the board with award recommendations.
Commissioner Michael Ashcraft asked if they could consider delaying the projects until the market is less volatile, but Waters said in his experience and discussion with construction companies, they do not anticipate costs going down.
Commissioner Charlotte O’Hara said the presentation was a reality check and the board is going to have to make hard decisions.
Chairman Ed Eilert said this was not the first time they have had to make tough decisions and cited the 2008 recession as precedent for how to navigate these issues.
“Challenging decisions were made. Correct decisions were made. There were no tax increases when values went down,” Eilert said. “We made adjustments in workforce and we used our reserves so that we did not have a negative impact on county services.”
No action was taken at the Thursday meeting and any new award allocation would have to be approved by the board. County documents state that the waste facility project is expected to come before the board again in August while the Shawnee and Lenexa Med-Act stations will be considered in October.
