Driving up costs: Hamilton County, City of Fishers agree to split $42 million in cost overruns for Ind. 37

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Beaver

During his time as a Hamilton County councilman, Brad Beaver said he has never seen a city be the lead agency for a major project. That is, until the State Road 37 Improvement Project.

“The original deal was $125 million. The state put in $100 million, Fishers $12.5 million and the county put in $12.5 million, which was supposed to be for four intersections (on Ind. 37 from 126th Street to 146th Street),” Beaver said. “As it turns out, this is the first time in my career with the county when we entered into a big deal like that, and they allowed Fishers to be the lead agency, which means they’re the ones who will award the contracts.”

The Hamilton County Council recently voted 5-2 to split the $42 million project cost overruns with the City of Fishers. The overruns are a result of changes to the drainage plan, utility reimbursement costs and right-of-way acquisition.

Jason Taylor

Fishers City Engineer Jason Taylor said the city decided to act as the lead agency because the majority of the businesses along Ind. 37 are Fishers businesses and that the project would move more quickly if the city led it. He said drainage costs rose when the city chose gravity drainage lines instead of pumps. Because the state would require the city to own, operate and maintain pumps, city officials thought money could be saved in the long run by installing gravity drainage lines. The cost increase also happened because the city decided to construct the drainage lines at the beginning of the project instead of at the same time as the 146th Street interchange was constructed.

Generally, the concept of using gravity to drain water instead of pumps saves money in the long run, Beaver said. But he said the benefits won’t be seen immediately because of the cost overrums.

“$42 million will take a long time. You would have had to pay for pumps every other year for a dozen years,” Beaver said. “Yes, our great grandchildren will thank us for the gravity drain instead of the mechanical pumps.”

Beaver said he’s more disappointed with the way the City of Fishers handled the issue than he is the cost overrun.

“The county highway department was passing along to us that there were going to be cost overruns, but they didn’t know what it was going to be,” Beaver said. “The project goes on, and lo and behold, over a year into it, (Fishers) lets the first intersection and one thing led to another and oh, by the way, we are $42 million over budget.”

Because of a request from the Hamilton County Council and Fishers City Council, Taylor said a monthly progress report now will be presented to both councils.

Beaver said the county council and the City of Fishers made an agreement at the beginning of the project to share cost overruns, but that was before the county realized overruns would be more than $40 million. At this month’s county council meeting, members debated the meaning of the word “share.”

“There were several council members who were unhappy and wanted to argue the point that our agreement was we would share, and that share was a word and not a percentage and that we shouldn’t be covering half of it, only a portion of it,” Beaver said.

However, the county agreed to cover half of the cost overruns, with Fishers covering the other half. Beaver said he expects more overruns.

“There’s only one intersection open to the public and we have three or four more to go, so will $42 million be the total cost overruns? Unlikely, in my opinion,” he said. “Nobody’s happy about the cost overruns, but we are more unhappy about it being so late in the game when they told us what the number was and that we had no choice to drop out of intersection options. You can’t take us down a road and not tell us what’s going on and then say, ‘Oh, hey, we need another $20 million.’”

Taylor, however, said he doesn’t expect more cost overruns, and that cost might actually decrease.

“The goal is that we are actually below that number that was discussed at the county council, $167 million overall (for the whole project),” Taylor said. “The goal is to reduce that.”

Despite several county councilors voting against funding for the county’s share of the cost overruns, the motion passed, but not without a lesson learned for Beaver.

“In the end, we might gripe and complain, but in the end the county is going to pay our half,” Beaver said. “We make a deal, we honor our deal. We’ve never stiffed anybody yet, but I will say to you, projects in the future with any municipality will get a second look.”

How will the county and City of Fishers pay for $42 million of cost overruns?

To address the $42 million worth of State Road 37 Improvement Project cost overruns, Hamilton County and the City of Fishers have agreed to pay more than $5 million to keep the project moving.

Hamilton County Councilor Brad Beaver said the county had the cash on hand and wouldn’t need to issue bonds for the first $5 million. He’s not so sure about the next $15 million, though. But Fishers City Engineer Jason Taylor said the overruns may decrease, and that each entity won’t be required to pay an extra $15 million each.

“Being on the finance committee, me and two other members of council have tried to handle money in a way that we didn’t have to do bonding and covered it with cash, but when it goes to $20 million, we don’t have that kind of cash laying around,” Beaver said.

Beaver said bonding isn’t always the best way to pay for a project.

“Bonding is just a nice way of saying borrowing money, so when you borrow money, you are then committing your income for the next 20 years to pay off that bond,” he said. “So, it’s not an answer that has no pain with it.”

Issuing bonds also could lead to tax increases.

“Either you keep control of your budget and reduce future projects or start scaling it back, so your income meets your outgo or, yeah, that’s what leads to tax increases,” Beaver said. “So much borrowing means you have to have so much income to cover the bonds. We are not in that situation now, but a couple more projects with overruns like that, we would be.”

The City of Fishers plans to issue a $6 million bond in January to cover its half of the overruns. If the additional funds to cover the cost overruns are required, another bond could be issued later.”


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