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Palm Beach’s aging water pipes cost millions to replace

Our Town with William Kelly: Palm Beach’s utility burial program faces $13 million shortfall

Inflation is expected to drive the cost of burying all overhead utility lines on the island upward by about $13 million, town officials say.

An existing $2 million shortfall to meet construction costs is expected to grow by $11 million once bids are returned for the final three phases of the work, according to a town estimate.

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

Annual transfers from the marina to the utility-undergrounding operation will be increased by $1.5 million to a total of $4.1 million. The increase will take effect during the budget year that begins Oct. 1, the Town Council decided at its July 11 meeting.

Inflation in South Florida is at 9 percent, which is more than double the national average of 4 percent, according to the Consumer Price Index. It’s even higher in the construction market, town officials say.

The town’s 10-year initiative to bury all overhead power, cable television and phone lines began in 2017 and is scheduled for completion in 2027.

It was carved into 15 construction zones, or phases, 12 of which are either complete or in progress. The three remaining zones are Phase 7 North, from the Palm Beach Country Club north to the south side of List Road; Phase 7 South, from Atlantic Avenue north to Via Los Incas and Sanford Avenue; and Phase 8, from Royal Poinciana Way north to Everglade Avenue.

Design is nearing completion for Phases 7 North and South and is 42 percent complete and on schedule for Phase 8, according to the town.

Town staff is negotiating with utility undergrounding contractors Burkhardt Construction, Wilco Electric, and C.R. Dunn to hold down the cost increases, Town Engineer Patricia Strayer said.
The town has secured a commitment to limit the cost increase to 7 percent for Phases 7 North and South, Strayer said.

But, so far, there has been no similar commitment for Phase 8, she said. The town is estimating that the increase for Phase 8 will be consistent with the Consumer Price Index.

Bob Miracle, deputy town manager for administration and finance, said the town won’t have exact numbers until the construction bids are in hand.

Staff will present a contract for Phase 7 North at the Aug. 8 council meeting, Strayer said. The contract for Phase 7 South will be presented to the council in January. The Phase 8 contract should be presented to the council in August 2024.

The utility undergrounding program is being funded through a mix of revenue sources. By far the largest is a $90 million bond issue that was narrowly approved by town voters in a March 2016 referendum. The bonds are being repaid through assessments on private properties.

The entire project was originally estimated to cost $90 million. But the $90 million was never realistic, according to Town Manager Kirk Blouin. It was revised upward in 2019 to nearly $123 million – after applying a credit for an $8.5 million FEMA grant.

Town Councilman Lew Crampton said the council is not going back to the taxpayers to ask for another round of assessments.

“We are basically going to use extra money from the very profitable marina operation …. so by the time the construction is done we will also have fulfilled on the shortfall – so there is no shortfall,” he said.

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