Burying Lakeside Avenue utilities price estimate increases by $474,684
By MICHAEL KITCH, LACONIA DAILY SUN
LACONIA — With work already underway, city officials learned last month that the cost of burying the overhead utilities along Lakeside Avenue, the centerpiece of $2.6 million project to improve and enhance The Weirs, could be more than twice what was estimated when the City Council approved and funded the project.
City Manager Scott Myers assured the council this week that Director of Public Works Wes Anderson is making every effort to reduce the amount of the projected overrun. Likewise, Mayor Ed Engler said that "We're not accepting this an inevitability." But, since the financing is in place and the work is well underway, any significant increase in the costs will pose questions about the funding and perhaps the scope of the project.
Originally, Eversource estimated the cost of designing and constructing the project at $311,316. However, after putting the work out to bid to subcontractors, Eversource informed the city that the cost would not exceed $786,000, a difference of $474,684.
"We're shocked that Eversource could give us an estimate well over 100 percent of their estimate on which we based our decision to proceed with the project," said Engler. Moreover, he noted that on the strength of the original estimate the council first approved burying the utilities from Endicott Street to Tower Street and subsequently to extend the project another block from Tower Street to Foster Avenue. Furthermore, Engler said that work is already well underway. The conduit was laid last year and Eversource has pulled 75 percent of its cable while Metrocast and Fairmont began pulling their cables in February.
Likewise, financing for the project is in place. The city borrowed $1 million for 20 years to fund the so-called "base project," which consists of reconstructing Lakeside Avenue, including its drainage system. The principal and interest payments on this borrowing will be drawn from the general fund.
Another $1.6 million was borrowed for 20 years to fund the cost of burying the overhead utilities, installing new street lighting, and building new sidewalks and crosswalks. The Weirs Tax Increment Financing (TIF) District will service this debt. Tax increment financing allows municipalities to define TIF districts, then apply a portion of the future tax revenues accruing from the increase in assessed value generated by the construction, expansion or renovation of property in the district to either provide funds or service borrowings for public improvements within it.
The financing arrangement provides for the Weirs TIF to apply 80 percent of its annual revenue to servicing the debt, which in 2018 will amount to about $108,000. However, since the TIF was recently established and has a current balance of only $30,000, the city will fund the difference for four for five years or until the TIF has sufficient funds not only to service the debt but also to begin reimbursing the city.
Engler suggested the city could meet the cost of an overrun by either drawing from its undesignated fund balance or borrowing. In either case, the city would expect to recover its funds from Weirs TIF, which could affect its operations in the long-term. Although the TIF advisory board was reluctant to apply more than 80 percent of its revenue to this project, the mayor said that in the circumstances "the 80 percent may be on the table."
Alternatively, Engler said that a cost overrun could be offset by reducing the cost of other elements of the project. For example, the concrete sidewalks could be replaced with asphalt sidewalks or less expensive street lights could be installed. "Should we cut corners to pay for burying the utilities?" he asked.
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