In any solid business, projects are generally planned, scoped, and given a budget before they begin. As a part of the scoping and planning, a list of returns for the investment are determined. Based on this information a project can proceed, be tabled, or be modified and rescoped to make sure the return is justification for the time and money to be spent. In any solid business, it is rare that a multi-million-dollar project would be approved, let alone be allowed to begin without such a plan and budget in place.
Once a project begins, the scope is monitored to make sure that the costs are maintained, and deliverables are met. Budgets on projects are expected to be close to the final cost. If you don’t have an official budget – such as appears to be the case with the Nickel Plate Trail – then there could be no end to the spending. What could have started as a $4.4 million dollar project could skyrocket to $7 to 12 million within the first year of construction and then continue to go up from there.
Is this something we need to worry about in Fishers beyond just the Nickel Plate Trail? Is the Fishers leadership able to plan, budget, and then manage to the budgets?
Burning Money at the Fire Station
You might recall that not too long ago, the city did a tax increase of roughly 4 cents per hundred to cover the cost of rebuilding several fire stations and the initial phase of the Nickel Plate Trail.
With the construction under way for the fire stations, it appears there were incidental and improvement costs that required funds of up to $2,500,000 be added to a bond for the project bringing the total to $12,400,000. This is a roughly 25% increase based on these numbers on a project that was started and executed in less than 2 years.
Imagine building a new home for $400,000 and being three fourths of the way toward completion and having the contractor indicate that the cost is $100,000 to cover “improvements” and “incidentals”. Better yet, consider this in a time when you know there is a chance you could be out of work in the near future. What would your reaction be?
With the State of Indiana already indicating budget cuts are coming, and with economists talking about a recession, it seems like an odd time to be adding improvements and incidentals to tax-financed projects, especially to the tune of $2.5 million. There was a comment with in the City Council meeting that these funds were going to be spent from the general fund, but those funds were redirected to the new health department that was created. They also indicted this would be a tax neutral change; however, that statement is often made to alleviate concerns when phrases like “additional costs” have been used. If more is being spent, then tax dollars are generally being used.
Detouring Road Projects
Fire stations aren’t the only talk of the city. One topic that didn’t come up in this week’s City Council meeting was the cost overruns of another project – the interstate 37 construction project.
Interstate 37 is being rebuilt to remove stop lights so that traffic can flow north/south without interruption. The plans include rebuilding five intersections including four that would be turned into roundabouts for a budgeted cost of $124 million. Federal funds of $100 million covered most of the cost with the remainder being split between the City of Fishers and Hamilton County paying $12 million each. The important thing about the budget was that any cost overruns are to be covered 50/50 by Fishers and Hamilton County.
The current status of the 37 project is that the first of the five intersections is being built, thus less than 20% of the project is complete. With it being this early into the project, it is too soon to know what the total bill will be. For that reason, it is extremely concerning that Fiscal Conservatives of Hamilton County is reported that the projected cost are currently looking to be $42 million more than planned – that’s about 33% over. That $42 would mean an additional $21 million from both the city and county, which nearly triples the original cost for each of them.
It is worth noting that the cost of the 37 project could be reduced by making adjustments to the plans and changing some of the roads to right-on-only intersections instead of full exchanges that allow for both north/south and east/west traffic. The City of Fishers, however, has stated that this is not the plan and that 141st will be a roundabout.
As to the cost overruns, Kari Adriano from the city stated, “The County shared an update on the SR37 project during their last joint Commissioner-Council meeting. During that meeting, the Highway Director provided an in-project update that outlined current costs and projected costs for phases of the project yet to be bid.”
She went on to say that, “Roughly half of the project still remains to be bid, in addition we are currently enacting cost savings measures that we anticipate will reduce the overall project cost. The city is proceeding as planned and will wait to make any additional cost estimates until the next bid package is released.”
She also confirmed that all original intersections will be completed as proposed, and that 141st would not be changed to a right-in, right-out.
Jumping the Rails
The fire station and interstate 37 are two projects other than the Nickel Plate Trail that seem to be off the tracks regarding their original budgets. As you might recall, the Nickel Plate Trail project was originally presented to the public with numbers around $9 million for both the Fishers and Noblesville sections. This included a roughly $4.4 million cost for the Fishers portion. This $4.4 million number was later adjusted to indicate it was only for asphalt.
Since that time, taxes have been raised to fund between $7 and $12 million of which the first phase is expected to cost between $7 and $9 million, but again solely for asphalt and concrete. That projected cost does not include any of the features presented in the plan presented by the city. Nor is there a published budget that I’m aware of for what the entire trail’s asphalt will cost, let alone the cost of the entire plan that the city presented. With this project already 100% over what was initially stated as an estimate, the lack of a budget should be a concern.
Accountability
If a budget is missed and nobody is held accountable, then there is no incentive to hold to a budget. When city budgets are missed by millions, we can expect that those millions are passed on to taxpayers. In this case, the residents of Fishers are likely to pay for these overages. When the overages start adding up to tens of millions of dollars as is currently projected, then this is going to be felt by the community.
The country appears to be heading into a possible recession, which means the amount of revenue coming into government agencies is likely to drop. The State of Indiana has already indicated shortfalls of multiple billions of dollars. If revenue is decreasing at the state level, then this will impact the local level as well. The city is going to have to either cut costs or find new sources of revenue just to meet planned expenses.
We need to push for our city government to not only start creating and sharing plans the project returns on the investments. We also need to hold them accountable to deliver to the plan budgets. In the business world, if you regularly are missing projections for spending by 25 to 100 percent, you get fired. Until we start holding our city planners accountable, we are likely going to continue to see projects that are substantially over projections. As a result of that, you can expect additional tax increases to be coming.
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