Lacey police station construction cost jumps due to 'hyperinflation'

Lacey City Manager Scott Spence expressed optimism that the city can still proceed with the plan to build a police station despite the 'hyper-escalation' in the construction cost, which is now estimated to be between $49 million to $52 million.

At the city council work session held Thursday, November 10, Bill Valdez of KMB Architects updated the council members on the cost estimate of the police department facility construction.

According to Valdez, when they wrapped up the pre-design process in January 2021, they estimated a roughly $29 million construction budget.

"But at the beginning of 2021, we have seen extensive hyper-escalation occurring in 2021 and 2022. That has affected our overall construction costs. It has an effect through all labor and material costs," Valdez explained.

He said the supply chain issues associated with COVID and the lack of materials and labor had affected the huge increases in construction costs over the last two years.

As of October this year, Valdez said the cost estimate is between $49 million and $52 million - a sum of $38 million for the construction costs and $13 million for the soft costs.

Construction costs include:

• Tree removal and site work
• Building construction
• Design contingency
• Escalation contingency
• General conditions
• Contractor overhead and profit
• Contractor bond
• Builder's risk insurance
• Business and occupation taxes

Soft cost covers:

• Architecture/engineering design
• Project management
• Construction contingency
• Inspection
• Commissioning
• Moving costs
• Fixtures, furniture and equipment
• Sales tax

The construction is expected to start in the first quarter of 2024.

Because of the project's size and the site's complexity, Valdez anticipated that the project would take 24 months to build.

"If we have any delays or any shift in the construction date, we can see actual increases in construction costs to the project on a monthly basis," Valdez said.

"That is larger than when we came into this. [But] I don't think that changes the course [of what] we are recommending, which is a Councilmanic bond process," Spence commented.

He said they would have to look deeper into reserves and adjust their priorities.

Spence said they rely on reserves to fill the gap in the construction budget.

"It is a two-year project. When we look at our reserves, we look at the 2021 fiscal year. We will look at 2022. Then 2023 may help us too. I am still optimistic about 2024. Hopefully, some of those numbers will be in our favor," the city manager said.