City borrowing more money to complete substation

Published 5:04 am Saturday, January 27, 2007

By Staff
Project’s cost rises by more than $600,000
By MIKE VOSS, Contributing Editor
Washington’s City Council voted 4-0 on Friday to approve borrowing an additional $336,486 from Wachovia Bank to help build an electrical substation.
The project, initially scheduled for completion this month, likely won’t be finished until the end of September.
The Wanoca substation project in the eastern segment of Washington was initially estimated to cost $1 million. But it’s over budget and behind schedule. The project now carries a price tag of $1,648,127. The overage is being attributed to increases in labor and materials costs.
Copper and steel prices also skyrocketed, Hardt said.
Councilman Mickey Gahagan, who sells metals such as copper and aluminum, concurred with Hardt that prices for metals used in the construction of electrical substations have increased significantly since Hurricane Katrina struck the Gulf Coast.
Instead of selecting a general contractor to build the substation, the city has been awarding contracts for different parts of the project to various contractors. That approach to the project was recommended by Hardt.
Previously, Hardt told the council it could save money on the project by doing it that way. Hardt told the council that a general contractor would mark up its bid to reflect that it would farm out parts of the project to subcontractors.
Hardt told the council he believed it would be cheaper to forgo awarding a contract to a general contractor and hire specialized contractors to build specific parts of the project. Hardt also said that many items for the project cannot be purchased at one time. Many items must be bought after other items have been purchased, Hardt wrote in a memorandum to City Manager James C. Smith.
Councilman Ed Gibson did not buy Hardt’s explanations. He said the project’s increased cost is the result of the project being mismanaged.
Gibson also had another worry.
Earlier this month, the council approved awarding a $333,326 labor and equipment contract for the substation to E&R Construction Co. The city has yet to incur other costs related to the project — $180,000 for materials and about $50,000 in engineering fees.
The new loan carries an interest rate of 4.33 percent. The city will make 39 monthly payments, with the first payment due March 1. The interest rate on the initial $1 million loan for the project has been set at 3.02 percent. That loan, taken out in June 2005, is being paid back over 39 months, too.
Because of the project’s increased costs, other Washington Electric Utilities’ projects have been delayed.
Councilman Archie Jennings did not attend the meeting. Because Jennings works for Wachovia, he would have recused himself from voting on the matter, city officials said.