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Inflation fuels 75 percent cost hike for utility burial

Our Town with William Kelly: Inflation fuels 75 percent cost hike for utility burial

The next phase of the townwide burial of overhead utility lines will cost $10.5 million – which is 75 percent higher than the town had expected.

Town officials say inflation, particularly in the overheated South Florida construction market, is the cause.

On Tuesday, the Town Council approved a nearly $10.5 million contract with Burkhardt Construction as a “guaranteed maximum price” for burying all overhead utilities in Phase 7 North, which extends from the Palm Beach Country Club north to the south side of List Road.

The $10.5 million is 75 percent more than the town’s cost estimate of $6 million. Town Engineer Patricia Strayer said the cost would have been even higher had Burkhardt not been willing to negotiate with other contractors to hold down the increase.

“Seventy-five percent is a hard number to swallow, but I don’t’ think we are going to get it lower,” Strayer told the council. “This is the best we’re going to do.”

“We’re holding our noses,” Councilman Lew Crampton said of the unanimous vote to approve the contract.

Construction on Phase 7 North could start as early as October and take 18-24 months to complete, according to Strayer.

In addition to the Burkhardt contract, the council approved a $354,000 payment to Kimley-Horn Engineering for engineering design services for Phase 7 North.

Town officials say buried utilities are safer, more reliable, and more aesthetically pleasing than overhead utilities.

The townwide undergrounding project began in 2017 and is scheduled for completion in 2027. It was carved into 15 construction zones, or phases, so it would be easier to manage.

Construction bids still must be awarded for the final two phases. The bid for Phase 7 South, from Atlantic Avenue north to Via Los Incas and Sanford Avenue, will be presented to the council in January, Strayer said.

The bid for Phase 8, from Royal Poinciana Way north to Everglade Avenue, will be brought to the council in August 2024, she said.

Before the recent inflation woes, the total cost of the townwide undergrounding project was pegged at $128 million, based on a 2019 estimate.

But Strayer told the council in July that the cost should be revised upward by an estimated $13 million. That includes an existing $2 million shortfall to meet construction costs for several phases that are now under construction and an estimated $11 million to meet inflationary increases for Phase 7 North, Phase 7 South and Phase 8.

But town officials won’t know the actual cost of the overrun until the last two construction bids are in hand.

The council plans to cover the escalating costs by digging deeper into annual surpluses generated by the Town Marina. The marina, which reopened in November 2021 after a $38 million rebuild, is expected to earn $15.5 million, with total expenses of $2.9 million, during the budget year ending Sept. 30.

Annual transfers from the marina into the utility undergrounding operation will be increased by $1.5 million to a total of $4.1 million, the council decided last month. The increase takes effect for the budget year that begins Oct. 1.

The undergrounding program is being funded mainly through a $90 million bond issued narrowly approved by town voters in a 2016 referendum. The bonds are being repaid through assessments on private properties.

Crampton said in July that the council won’t go back to property owners to ask for another round of assessments. He said the marina surpluses will enable the town to meet the shortfall.

Construction Progress

+ Phase 1 North, from the Palm Beach Inlet to Onondaga Avenue, completed in 2019.

+ Phase 1 South, from South Town Limit to Sloan’s Curve, completed in 2020.

+ Phase 2 North, from Esplanade Way to Ocean Terrace, completed in 2020.

+ Phase 2 South, from Sloan’s Curve to intersection of South Ocean Boulevard and South County Road, 96 percent complete.

+ Phase 3 North, from Osceola Way to the north side of La Puerta Way, completed 2021.

+ Phase 3 South, from South Ocean Boulevard and South County Road to the alley south of Worth Avenue, 85 percent complete.

+ Phase 4 North, from the south side of La Puerta Way to north side of List Road, 95 percent complete.

+ Phase 4 South, from Peruvian Avenue to Royal Palm Way, 47 percent complete.

+ Phase 5 North, from Country Club Road to Southland Road, 74 percent complete.

+ Phase 5 South, from South Lake Drive/Hibiscus Avenue and Peruvian Avenue/Royal Palm Way, between the Intracoastal Waterway and the Atlantic Ocean and from Royal Palm Way to Seaspray Avenue, 63 percent complete.

+ Phase 6 North, from Chateaux Drive and Kawama Lane to the south side of Plantation Road, 25 percent complete.

+ Phase 6 South, from Seaspray Avenue to south of Royal Poinciana Way, construction has begun.

+ Phase 7 North, from Palm Beach Country Club to the south side of List Road, construction will begin as early as October.

+ Phase 7 South, from Atlantic Avenue to Via Los Incas and Sanford Avenue, construction expected to begin early next year.

+ Phase 8, from Royal Poinciana Way to Everglade Avenue, construction expected to begin late next year.

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