Floyd County LEC and courthouse update cost projected at $18.84M
Supervisors account for project expenditures and funding sources
By Bob Steenson, firstname.lastname@example.org
The Floyd County Board of Supervisors presented a “good faith, best effort attempt” to tell the taxpayers of the county exactly what the new county Law Enforcement Center and courthouse renovations project has cost and where the money came from, at the board’s meeting Monday morning.
The board presented a two-sided legal-size sheet with a timeline showing when and how the decisions were made on one side of the paper, and a spreadsheet of resources, expenses and future obligations on the other.
It also included a breakdown of how much each contractor was paid and dollar amounts of change orders that have occurred throughout the four years of actual construction.
Including studies done before the project started, the total cost of the project so far has been $17,870,165.10, according to the spreadsheet.
There’s close to a million dollars that will still need to be spent, but almost $800,000 of that is “retainage” – a percentage of the contract price that is withheld from contractors until they have satisfactorily completed their parts of the project.
Another $67,000 of that future obligation is for projects yet to be completed, such as sidewalk work to make the existing curb in front of the courthouse Americans with Disabilities Act compliant, and work to fix a plaster wall that was damaged during construction.
The final price for “The Project” is estimated to be $18,836,102.65.
County voters had overwhelmingly approved in May 2018 allowing the county to issue $13.5 million in general obligation bonds for the project, based on cost estimates provided by project architect and engineering firm Prochaska & Assoc., of Omaha.
Although bonds with a par value of $13.5 million were issued, the actual amount of revenue received was about $2 million more, because by the time the second half of the bonds were sold interest rates had dropped and the bonds were sold at a premium.
Selling bonds at a premium means selling them for higher than the par value and giving bond buyers a higher than current market annual coupon rate (interest rate), but the extra amount received up front is more than the extra interest costs.
In addition to the total $15.554 million in bond proceeds, the county has so far used $1.376 million in federal American Rescue Plan Act (ARPA) COVID relief funds Floyd County received, $746,170 from the county General Fund and General Supplemental Fund, $93,376 from County Social Services as reimbursement for the costs to model space for that group in the courthouse; as well as several smaller sources.
Supervisor Chair Mark Kuhn had promised a full accounting of the project, which has been the object of derision by some in the county as what they say is a project that went out of control.
“I wish I could tell you it’s ‘done done,’” Kuhn said. “It is not done done yet. We are so close to the end. We feel it’s important to let the people know where we’re at.”
The need for a new county jail had been discussed since 2013, when the state’s chief jail inspector said the current Floyd County Jail on the fourth floor of the courthouse was inadequate and unsafe for the detainees, the county Sheriff’s Office staff and the public.
After the $13.5 million bond referendum passed, it became apparent that the actual cost of the Law Enforcement Center (LEC) and courthouse project could turn out to be far more expensive than the estimates that Prochaska had initially provided.
After making several cost reductions in the design plans, the estimate for the construction costs on the project was $11.8 million. When the actual bids were opened on Sept. 10, 2019, the low bids on each part of the project came in at a total of $14.427 million, or more than 22% above the estimate.
The Board of Supervisors at that time – Doug Kamm, Linda Tjaden and Roy Schwickerath – debated whether to drop the project, start over and redesign it, or find other funding sources.
The board quickly agreed that something had to be done to address the need for a new jail, and delays would only increase the price.
The company hired by the county as construction manager, the Samuels Group, estimated it could cut $400,000 from the cost in “value engineering reductions” that would have minimal impact on the quality and functionality of the project.
The project’s bonding representative suggested the lower bond rates could result in an extra $2 million in bond premium revenue, and County Auditor Gloria Carr suggested that $2 million to $2.5 million could come from General Fund reserves.
With those additional funding sources identified, the Board of Supervisors in 2019 accepted the construction bids and proceeded with the project, breaking ground in October 2019.
Over the four-year course of the project, there have been 106 change orders approved by the county Board of Supervisors on the bid contracts, for a total of $579,800 or 4% in extra construction costs.
There was another $371,243 in expenses because of a lawsuit the county filed against Prochaska for breach of contract, saying the company had not delivered a project that could be paid for with the estimated $13.5 million.
A net of $162,500 of that cost was for a settlement paid to Prochaska for additional pay it said it was owed because its fee was based on 10% of the construction cost, which had increased significantly.
“This is, like I said, a good faith best effort attempt to tell the taxpayers of Floyd County what this project cost, and do so in a way that allows some narrative on how those changes were made, how the project changed when it was approved at a referendum on May 1st of 2018 to the current,” Kuhn said.
Kuhn noted that he had been on the Board of Supervisors when initial decisions were being made that would lead to the bond referendum vote, but he left the board at the end of 2018.
The current board, Kuhn, along with Supervisors Jim Jorgensen and Dennis Keifer, took office at the beginning of this year after Tjaden and Schwickerath decided to not seek re-election, and Kamm was defeated in the November 2022 election.
During a question session after Kuhn’s presentation of the project timeline and spreadsheet, it was asked what would have happened if the ARPA money had not come along.
Kuhn said it was very fortunate that it did, because otherwise the money would have had to come from the General Fund, which is barely reaching the recommended 25% annual carryover amount.
Auditor Carr said when the project was being proposed, the county had said the debt service levy to pay for the project would not exceed $1.08 per $1,000 of assessed taxable valuation, and it had stayed at around 99 cents per $1,000.
Carr said it was fortunate that bids were locked in at 2019 prices. With four years of a combination of COVID and inflation, similar projects around the state today show that the project could not be built now for anything close to what Floyd County ended up paying for it.
Another questioner asked where the remaining almost $1 million will come from.
Carr said the supervisors will have to decide whether it will come from remaining ARPA funds or the General Fund, or a combination of the two.