Escalating construction costs blamed for cost overruns
Without an infusion of additional funding that Alamance Community College officials intend to ask Alamance County’s commissioners to approve Monday night, the college’s third bond-financed project, construction of a public safety training center in Green Level, will be its last, according to college president Dr. Algie Gatewood.
ACC officials have warned in recent weeks that rising construction costs may force the college to scale back – or even eliminate – some of the projects that voters approved in November 2018 as part of the $39.6 million bond package for the local community college.
ACC chief finance officer C.D. Crepps outlined three possible scenarios that ACC is facing due to cost overruns for the college’s trustees during their latest meeting Tuesday night.
Under the first scenario, Crepps said all of the construction projects could move forward as planned – provided that Alamance County’s commissioners agree to issue the remaining bonds for ACC at a premium, an approach the commissioners previously rejected in the spring of 2021.
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ACC is renewing its request for the county to issue the bonds at $18.9 million, rather than at the current face value of $15.8 million, Crepps told the trustees this week.
ACC will also ask the commissioners to release $2.4 million in existing capital reserve funding that the county has designated for construction and repairs at ACC, Crepps told the trustees. The bond premium and capital reserve funding would generate an additional $5.5 million on top of the $15.8 million (or a total of $21.3 million) in bonds that are currently scheduled to be sold this fall, based on information that ACC’s finance officer presented to the trustees Tuesday night.
As a second possible scenario, Alamance County’s commissioners could release $2.5 million in existing capital reserve funding for ACC, which would fully fund the construction of the Biotechnology Center of Excellence and Student Services Center, as well as a forthcoming Public Safety Training Center, which was originally estimated to cost $10.4 million to build.
The additional infusion of $2.5 million would provide $12.9 million for construction of the public safety training center that ACC plans to build on 96 acres of leased land in Green Level.
The original plans called for construction of: 15,000 square feet of building space with six classrooms; an adjoining indoor firing range; a fire tower; a shooting simulator space; and driving pad, as well as room for future expansion of ACC’s emergency medical services program.
“We have already downsized the public safety training center,” Gatewood told the trustees Tuesday night. “The $12.9 million is the downsized cost. We had originally planned two firing ranges [and] we’re down to one. We had planned more classrooms.”
Under the third scenario, the biotech, student services, and public safety training centers would be built (at the current estimated budgets), leaving $536,570 for the remaining projects that were included in the bond package that voters approved for ACC in 2018.
The $39.6 million bond package that voters approved for ACC in 2018 also envisioned sufficient funding for: Renovations throughout the main campus in Graham and an expansion of the Powell/Allied Health building (originally estimated at $4.4 million and currently at $5 million); and development of two satellite campuses in the eastern and western parts of the county, the budget for which remains unchanged at $1 million.
“Scenario one is what we would like to have,” Gatewood told the trustees Tuesday night.
“Scenario three is absolutely the worst case. We will meet with the commissioners on Monday, and they will render a decision. There [are] just a lot of variables impacting these prices.”
“What concerns me is the longer we wait to fund these projects, the more they will cost.”
– ACC president Dr. Algie Gatewood
Earlier in the day, Gatewood gave a dire forecast about the possibilities facing ACC during a discussion with the trustees’ budget and finance committee. “If we were to put all our eggs into the training center, we’re done – we’re finished,” he told the committee Tuesday afternoon.
“What concerns me is,” Gatewood told the budget and finance committee, “the longer we wait to fund these projects, the more they will cost.”
Gatewood and other ACC officials have said in recent months that rising costs for raw materials, supply chain disruptions, and labor shortages have driven the projects over budget, prompting the college to reduce the scope of work.
Inflation in construction costs has already driven the biotech center and student services center – which are underway on ACC’s main campus in Graham – over their original budgets.
The construction budget for the biotech center, originally estimated at $17.6 million, was increased last year to $19.5 million (see accompanying chart).
ACC’s trustees agreed last year to eliminate an $8.5 million freestanding parking deck, instead merging that project with the Biotechnology Center of Excellence, which was originally budgeted at $9.1 million when it was presented to the county’s voters in November 2018. As part of the merged projects, 400 traditional surface parking spaces will be built adjacent to the biotech center, based on the revisions that ACC’s trustees approved last year.
The construction budget for the student services center, originally estimated at $6.2 million, also was increased last year to $6.7 million.
While ACC officials had asked the county’s commissioners last fall to provide an additional $3.1 million to cover the cost overruns for the biotech center and student services center, the commissioners subsequently agreed to provide $2.4 million as an advance. Commissioner chairman John Paisley said at the time that the advance for ACC would be deducted from future bond issues.
Meanwhile, construction has started on the $19.5 million biotechnology center/parking expansion at ACC’s main campus in Graham, near the intersection of Jimmie Kerr Road and I-85/40, and is targeted for completion later this year.
Site work on the student services center began late last year. Steel is scheduled to be erected this month, and construction targeted for completion by the end of this year.
See other ACC news coverage from this week’s edition:
ACC will grant bonuses to all staff: https://alamancenews.com/acc-to-use-covid-19-stimulus-funding-to-award-retention-bonuses-to-508-employees/
ACC trustees to consider higher student fees: https://alamancenews.com/acc-students-could-pay-higher-fees-starting-this-fall/
And read our editorial comment on these ACC issues: “ACC math” https://alamancenews.com/acc-math/