Linksman Golf Course has been closed for 17 years, but Mobile County Commissioner Randall Dueitt is optimistic it can be transformed into an 18-hole publicly owned golf course with pickleball courts and other attractions along the Dog River area south of Mobile.

But a major problem has emerged, one that is saddling projects throughout Alabama and beyond: The building economy isn’t cooperating.

“The first bid was $13 million, and I thought it was too much,” he said. “I rebid it, and the second bid came in at $16 million.”

The golf course project is now on hold as the county searches for ways to find savings.

“The project is not in jeopardy, by no means. We own the property and bought it two years ago. But we anticipated having a golf course open this time next year,” Dueitt said.

Budget busters

The frustrations are felt throughout Alabama, where local governments are scrambling to find solutions to save money without sacrificing big-ticket or even small-size developments and infrastructure improvement projects.

City administrators, managers, mayors, city councils and county commissioners have spent the past couple of years struggling to match project estimates with the realities of the project’s actual costs. In many cases, the estimates haven’t come close to matching up to the construction bids on each project, blowing budgets out of whack.

The resulting public debates focus on whether a city should be dipping into crucial tax reserves to pay for the rising costs to build parks, roads, parking garages, and buildings.

Terms like “value engineering” have become frequent at city council and county commission meetings, where penny pinching can be difficult to find on massive multi-million dollar projects.

Local government officials are finding they have few options:

• They can scale back a project or its scope by altering its design and dipping into the city’s in-house labor pool to save on construction costs.
• Explore outside funding sources if they are available.
• Delay or outright kill a project.

“Each situation is unique so there is no single answer,” said Steve Boone, assistant city manager and finance director in Mountain Brook, which has not had to consider revisions or delays to one of its projects.

The issue isn’t just a headache for local officials. Perhaps the most head-turning recent example includes the high costs of building new state prisons. An estimate from September shows the cost of building a single prison in Elmore County costing $1 billion, which is roughly the same amount lawmakers estimated two years ago to build two new prisons.

Government agencies are finding they are not immune from rising inflation, supply chain shortages and soaring labor costs that gripped the national economy since the pandemic.

Garages, waterfronts, senior centers

Examples have hit cities, both large and tiny:

• In Mobile, the City Council recently authorized moving over $9.5 million of General Fund reserves to pay for an increase in the estimate cost of building a $38.2 million parking garage adjacent to the Mobile Civic Center. The costs came in at 31% higher than originally expected, prompting council members to weigh whether so-called “value engineering” – such as reducing the number of parking spaces or changing construction material – would be wise. The council opted not to do so.
• In Decatur, the city spent $10 million on a parking deck to accommodate a Fairfield Inn. The original estimate had the project at $7.5 million, prompting city leaders to find ways to save on costs. One solution, according to Mayor Tab Bowling, was to remove brick from the garage’s façade that was not visible to pedestrians. The project also includes new dorms for students at the Alabama Center for the Arts.
• In the Huntsville area, a water rate increase affecting all users of Huntsville Utilities was finalized in August amid a rehabilitation and replacement project that was coming in too costly due to inflation and rising labor costs.
• A waterfront park and pier project in Fairhope could be threatened as bids are being reconsidered. In Fairhope, the city got $6.2 million from a BP oil RESTORE Act grant. The project has been put out for bid several times, but the price tag has been far too expensive. The council is currently negotiating on a price with a contractor. If the council cannot find a way to proceed, Mayor Sherry Sullivan said one of the options could include abandoning the project entirely. Other options could include the city handling its funding, or changing the project’s scope, she said.
• Projects have moved forward in Dothan and Bayou La Batre, despite officials fretting about rising construction costs. In Bayou La Batre in South Mobile County, a $30 million RESTORE grant is going toward a revamp of the city’s harbor. But county commissioners signaled concerns earlier this year about having to scale the project back if the project’s costs escalate considerably. In Dothan, city officials voted unanimously in March to proceed with a pet shelter complete with grooming rooms and medical spaces despite a $2.2 million increase attributed to rising construction costs.
• Counties are wrestling with their budgets as road projects escalate. According to the Association of County Commissions of Alabama (ACCA), the annual price per ton for a paving contractor to resurface a road in Elmore County has gone up 31% over the past two years, and 54% since 2017. The county recently removed a $130,000 paving project from its 2023 transportation plan to account for the cost increase in annual bids. In Etowah County, the costs for tar and gravel used for its paving projects have skyrocketed 71% since 2017, according to ACCA.
• In Lee County, the cost for asphalt per ton used on a construction project has risen 86% since 2019.
• In tiny Holly Pond (population under 800), the Town Council voted early last year to cancel the construction of a senior center after the lowest of three bids came in well over its $200,000 budget.
• In Pell City a state-funded sidewalk improvement project through its historic downtown had to be cut down after bids came back higher than the project’s original budget.

“We are proceeding cautiously with all projects and updating cost estimates more regularly,” said City Manager Brian Muenger.

It’s just not building projects that are affected. Equipment purchases are also much costlier, even when compared to a year ago.

According to an ACCA analysis, the cost of a medium duty backhoe is up 31% from 2022, while heavy to light duty motor graders are up anywhere from 26%-34% from a year ago.

Relief ahead?

Despite the costly realities, there is some hope that prices might have peaked and that a downturn could be coming. For one, the Producer Price Index – a closely watched inflation gauge – was down in October by 0.5%, according to the Bureau of Labor Statistics. That was its biggest one-month decline since April 2020, at the height of the pandemic.

Mike Thompson, the city administrator in Foley, said he’s seen improvements in prices and with labor issues. For months, some cities have been faced with few bidders on a project, requiring them to either accept or reject the few offers they get to proceed with a coveted development.

Thompson also said that there have been improvements in getting materials delivered in a timely manner.

“As the national market softens some due to increased cost of capital by the federal reserve, we see a little relief on some of the issues … which takes some demand off of contractors, labor costs, and supply chain, which in turn helps us with our projects,” Thompson said.

Foley has faced escalating prices on projects that otherwise would seem to be simple developments. The city had to bid out three times for a new restroom building at a city park. Two years ago, that project was designed and estimated to cost $150,000, but bids came back this year at $300,000 – and with few bidders.

“We have combatted this by internally managing projects to more closely value them,” said Foley Mayor Ralph Hellmich. “Works pretty good, but one just has to accept the new realities.”

Some mayors are hesitant to even toss out a project estimates.

In Daphne, Mayor Robin LeJeune said plans are in place to proceed with an expansion to the fast-growing city’s 30-year-old justice center. Initial estimates pegged the project at $8 million, which includes expanded courtrooms, new offices, and a larger evidence room for the police department.

Bids are expected to go out to contractors to consider in the spring.

But are those estimates still on point?

“We’re not sure,” LeJeune said. “We’re hopeful.”

There are some silver linings.

In Saraland, an early Christmas came to Mayor Howard Rubenstein when the city received a lower-than-expected bid for the construction of a new, 100-acre multi-use sports complex.

The first phase of a two-phase project came in at $5 million under budget, Rubenstein said. The city is now preparing for a groundbreaking on the project in either late January or early February.

“We are sure we won’t be cutting scope, and it will be full steam ahead,” Rubenstein said. “I was expecting the worst, but we are very pleased.”