Tippecanoe-Chapman Septic System Project Costs Higher Than Predicted
August 17, 2022 at 12:38 a.m.
By Staff Report-
Coming in at approximately $41.5 million, the project costs are higher than predicted in 2020 when funding applications were finalized, and design efforts began, according to a news release from Jones Petrie Rafinski.
“A lot has happened over the last two years that have had an impact on project cost and scope,” said Jon Tyler, chairman of the District Board of Trustees. “Including a period of unprecedented inflation, which has had an impact on every aspect of the project.”
During the planning phase of the project, the District’s target rate was $80 to $85. The rate being considered is now $10.60 per month higher.
“We believe the district has done an extraordinary job delivering an affordable project within an extraordinary economic climate,” Tyler said. He pointed to some strategic moves made by the District officials to provide a better overall result to future customers.
As a part of this strategic thinking, District officials negotiated an interlocal agreement with the city of Warsaw wherein a capacity buy-in and bulk customer rate delivers the most cost-effective method for treatment of wastes created within the service area, the news release states. This approach likely resulted in a savings in capital cost of between $1.5 million and $3.4 million over the other considered alternatives. District officials believe that if the current impact of inflation was applied, these savings become even more significant, the release states.
Officials also have included significant upfits over the originally planned project relative to cost savings and convenience for property owners’ connections to the sewer. This included the allowance for locating grinder pump stations up to 100 feet within the home sites so as to allow as many connections by gravity as possible. This results in a substantial reduction in customers “out of pocket” expenses. However, this imparts an added capital cost to the project of approximately $4 million. Based on the 35-year amortization at the project lenders’ established interest rate equates to approximately $6 per month per EDU.
The trustees also elected to build a complete power supply system as opposed to placing the burden of power connections on the customer as is true in the Lakeland system at the Barbee Chain of Lakes. This routinely results in a significant out-of-pocket cost to the customer. According to Tyler, including this component in the capital project equates to an approximate $3.20 per month increase to the customer rate.
The District has elected to omit connection fees from the project model. According to Tyler, connection fees typically offset a portion of the final rate, there will likely be a small application fee applied when customers begin to process permits,
Advancing the project at an extraordinary pace allowed the District to take advantage of a significant increase in available funding at very attractive terms while working with the USDA and the state as a part of the American Covid Rescue Plan Programs, according to the news release.
The project team worked to procure over $14 million in grant funds for the project with the balance in long-term (up to 40 years) low-interest loans from two resources. According to Jeff Rowe, fiscal advisor for the District, “Grant funding at this level for a project of this scope is an outstanding achievement given the current economic conditions under which the project bids have been taken.”
Working through a construction market with costs at unprecedented levels across the board, the District’s engineer, JPR of South Bend, took many steps in the lead-up to bid. According to Steve Henschen, JPR project manager, “We conducted a pre-selection and pre-pricing of project key components such as pump products, controls, etc. This allowed us to lock down the value of these substantial expenses early. We also provided notification to 30 different contracting companies (in four states) in an effort to solicit competition within the heavy construction community (ultimately receiving only three bid submissions). Bidders included Niblock Excavating from Bristol; Selge Construction of Niles, Mich.; and HRP Construction of South Bend.
“We decided to conduct the bid openings in three District time frames to encourage interest and competition,” said Henschen. “We communicated with contractors in every way possible through out that process to ensure a complete understanding of project requirements and conditions.”
Beyond efforts employed by the project team, Tyler said it’s important to consider how changes in the economy over the last 24 months have affected the outcome. “Regardless, we are still able to deliver the project within a reasonable margin of the target rate,” he said.
“All in all,” said Tyler, “every effort has been worth the work, the project is transformational in scale and will bring benefits to the community that will be measured over generations.”
“A project at this scale is rare for a rural utility and would not be possible without the commitments made by our trustees, the Indiana USDA/Rural Development Program, and that of the Indiana Finance Authority, State Revolving Loan Program,” Tyler said. “We can’t wait to get started.
Project managers advise the project could take up to 24 months to complete, starting later this fall.
Coming in at approximately $41.5 million, the project costs are higher than predicted in 2020 when funding applications were finalized, and design efforts began, according to a news release from Jones Petrie Rafinski.
“A lot has happened over the last two years that have had an impact on project cost and scope,” said Jon Tyler, chairman of the District Board of Trustees. “Including a period of unprecedented inflation, which has had an impact on every aspect of the project.”
During the planning phase of the project, the District’s target rate was $80 to $85. The rate being considered is now $10.60 per month higher.
“We believe the district has done an extraordinary job delivering an affordable project within an extraordinary economic climate,” Tyler said. He pointed to some strategic moves made by the District officials to provide a better overall result to future customers.
As a part of this strategic thinking, District officials negotiated an interlocal agreement with the city of Warsaw wherein a capacity buy-in and bulk customer rate delivers the most cost-effective method for treatment of wastes created within the service area, the news release states. This approach likely resulted in a savings in capital cost of between $1.5 million and $3.4 million over the other considered alternatives. District officials believe that if the current impact of inflation was applied, these savings become even more significant, the release states.
Officials also have included significant upfits over the originally planned project relative to cost savings and convenience for property owners’ connections to the sewer. This included the allowance for locating grinder pump stations up to 100 feet within the home sites so as to allow as many connections by gravity as possible. This results in a substantial reduction in customers “out of pocket” expenses. However, this imparts an added capital cost to the project of approximately $4 million. Based on the 35-year amortization at the project lenders’ established interest rate equates to approximately $6 per month per EDU.
The trustees also elected to build a complete power supply system as opposed to placing the burden of power connections on the customer as is true in the Lakeland system at the Barbee Chain of Lakes. This routinely results in a significant out-of-pocket cost to the customer. According to Tyler, including this component in the capital project equates to an approximate $3.20 per month increase to the customer rate.
The District has elected to omit connection fees from the project model. According to Tyler, connection fees typically offset a portion of the final rate, there will likely be a small application fee applied when customers begin to process permits,
Advancing the project at an extraordinary pace allowed the District to take advantage of a significant increase in available funding at very attractive terms while working with the USDA and the state as a part of the American Covid Rescue Plan Programs, according to the news release.
The project team worked to procure over $14 million in grant funds for the project with the balance in long-term (up to 40 years) low-interest loans from two resources. According to Jeff Rowe, fiscal advisor for the District, “Grant funding at this level for a project of this scope is an outstanding achievement given the current economic conditions under which the project bids have been taken.”
Working through a construction market with costs at unprecedented levels across the board, the District’s engineer, JPR of South Bend, took many steps in the lead-up to bid. According to Steve Henschen, JPR project manager, “We conducted a pre-selection and pre-pricing of project key components such as pump products, controls, etc. This allowed us to lock down the value of these substantial expenses early. We also provided notification to 30 different contracting companies (in four states) in an effort to solicit competition within the heavy construction community (ultimately receiving only three bid submissions). Bidders included Niblock Excavating from Bristol; Selge Construction of Niles, Mich.; and HRP Construction of South Bend.
“We decided to conduct the bid openings in three District time frames to encourage interest and competition,” said Henschen. “We communicated with contractors in every way possible through out that process to ensure a complete understanding of project requirements and conditions.”
Beyond efforts employed by the project team, Tyler said it’s important to consider how changes in the economy over the last 24 months have affected the outcome. “Regardless, we are still able to deliver the project within a reasonable margin of the target rate,” he said.
“All in all,” said Tyler, “every effort has been worth the work, the project is transformational in scale and will bring benefits to the community that will be measured over generations.”
“A project at this scale is rare for a rural utility and would not be possible without the commitments made by our trustees, the Indiana USDA/Rural Development Program, and that of the Indiana Finance Authority, State Revolving Loan Program,” Tyler said. “We can’t wait to get started.
Project managers advise the project could take up to 24 months to complete, starting later this fall.
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