Grand Marais city councilors were somewhat alarmed when they received the news that there was going to be an estimated increase of $362,000 to put in the foundation for the Grand Marais Public Works Facility Building.
The news came from a memo from McGough Construction the contractor the city has selected to oversee building the public works facility.
Councilors were presented with the information by Grand Marais city manager Mike Roth at the council’s Wednesday, February 8 meeting.
The reason for the extra cost came to light after geotechnical borings were drilled on the building site that showed that in some places bedrock is two feet below the building and 12 feet below the structure in other locations. McGough suggests removing all bedrock and fill to the 12-foot level, and adding stem walls and replacing the old fill to give the building a firm foundation.
The cost of adding stem walls ($300,000), dealing with irregular rock ($25,000) and replacing the material removed with new fill ($47,000) adds up to $362,000, which Roth pointed out was only an estimate.
“This option would reduce the risk of differential settlement but also comes with the additional cost of the project,” wrote Erik Johnson, of McGough.
McGough asked if there was another location to construct the building but after looking at another site on the former Tomteboda property, nothing else was found to be better or more suitable than the present site, said Roth.
Another suggestion from the company was to raise the building by bringing in more fill—4 to 5 feet—but that wasn’t any more cost efficient, and settling could be an issue in the future, noted Roth.
“I’m disappointed that no one saw this coming,” said Councilor Dave Mills. “Was there any explanation about how this was overlooked?” he asked Roth.
“They didn’t have any soil borings to look at,” when they bid for the project, said Roth.
“Anyplace we dig a hole up here, we are bound to run into problems,” said Mayor Jay Arrowsmith-DeCoux, who noted that the groundwork for the public works facility at the business park was estimated at $900,000 before any boring samples were taken.
“My impression is this is not a great way to start,” said Mills, who asked if Roth could talk to McGough to see if they had any other cheaper but just as good methods for the foundation. Roth said he could do that, but suggested the council keep moving forward with its plans and stick to its current timeline.
“We are looking at a 40-year building. It’s a big expense, but to do it, we want to do it right,” said Councilor Tim Kennedy.
“There’s no reason this building shouldn’t last 100 years. It’s just a big cement box,” added Roth.
“I think we have sat on this project too long and we have other projects we need to work on,” said Councilor Tracy Benson, adding that the council should move forward unless an even bigger stumbling block presented itself.
Mills was asked by the other councilors if he felt the project should move forward. He agreed it should, but if savings could be found, incorporate them.
The plan is to start work on the building by summer.
How will the city pay for the project?
The public works facility is estimated to cost $5 million, but Roth said more surprises would no doubt be discovered as planning and construction take place.
Roth said he requested Ehlers, who are experts in public finance, to outline a plan and timeline for the city to fund the public works facility.
“Ehlers is in the process of developing a basic cash flow model to help gauge the city’s capacity to undertake a variety of public works facility financing plans, in addition to meeting existing obligations and reserving capacity for potential future capital projects,” Roth said. “At this stage of our analysis, it is clear that the city can fund the public works facility through any number of cash/debt combinations, due to the city’s strong reserve levels in multiple funds.”
The city intends to fund the public works facility, said Roth, with reserves drawn from its General, Electric, Sewer, and Water funds, and bonds to be repaid with future revenues from those same funds.
Ehlers is in the process of developing debt options for the city and believes the optimal choice is for the city to issue a general obligation bond that has two authorities. The first authority is to make a Capital Improvement Plan to be repaid with General Fund and transferred Electric Fund reserves. The second is a Utility Revenue purpose to be reimbursed with revenues from the Sewer and Water Fund.
“We will assist the city in determining how it wishes to allocate the bonds between the two purposes and four revenue sources, but the entire issue will be secured by the city’s G.O. pledge and rated before the sale (of bonds) by Standard and Poor,” wrote Bruce Kimmel, Senior Municipal Advisor for Ehlers.
A public hearing on the Capital Improvement Plan will be held at the city council’s March 8 council meeting. If the board approves the plan, it will authorize Series 2017A Bonds to be offered through Ehlers. On April 12 Ehlers will accept the bond bids and the council will award the bond’s winning bidder. In early May, there will be a bond closing, and the city will deposit the proceeds into a construction account.
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