What’s the Cost of Delaying Capital Projects – A Recent Look

It is not uncommon for a community to want to contemplate a decision on significant capital projects or infrastructure. But over analysis, fear of the unknown, and short-term decision making can be costly.

For example, there have been several DPW facilities constructed locally in recent years that illustrate the cost of delaying needed capital investment.

• In 2017 The Orleans DPW was constructed for $12.8 million, approximately $304 per s/f.
• In 2019, the Yarmouth DPW was constructed for $16.2 million, approximately $431 per s/f.
•  In 2024, the Duxbury DPW was constructed for $26.75 million, approximately $794 per s/f.
• Currently, Truro is contemplating a new DPW facility. Originally estimated to cost approximately $15 million, the latest estimates in 2024 are $29.2 million – over $800 per s/f and the project has still not been approved by voters.

Provincetown had been trying for a number of years to replace its aging police station. The new station received approval in 2017 at a cost of $8.625 million. Unfortunately, by the time final bids were received in 2019, that price had escalated to $12.5 million. The Town wrestled with the additional funding for several years, finally completing the new police station in 2024 at a cost of $17.1 million – approximately $1,230 per square foot.

Eastham has its own experience with the cost of delays

• A town-wide water system was proposed in 2007 at a cost of $76 million, which failed to pass Town Meeting. In the intervening years, other related articles failed, including a 2013 Article for a town-wide system at a cost of $114 million.
• Finally, in 2014 and 2015 the funding for a town-wide system was approved with a final cost of $130.8 million.
• The 8 years of delay added $54.8 million to the water project cost.
• In addition, the town lost the previously guaranteed zero percent financing available in 2007, which added approximately $70 million in interest costs to our debt service over the 30-year life of the loans.
• Total added costs to the water project total just under $125 million by failing to act timely in 2007.
• These unnecessary, additional costs have a direct impact on our annual budget and increases our debt service payments by $4.2 million (on an average annual cost basis over the life of the project – calculation of individual year impacts will vary depending on timing of loans).
• These amounts equate to an unnecessary additional property tax burden of $700 per year on an average annual basis, to the average valued home.
  
  

Eastham is now at another crossroads with a decision on wastewater infrastructure. All towns on Cape Cod have had to address this issue, and several have made the decision to move forward. Wastewater costs on approved projects in Harwich, Dennis, Yarmouth, Barnstable, Mashpee, and Falmouth have skyrocketed, sometimes 2 to 3 times from what was originally estimated due to years of delay. Not only are these projects more expensive, funding opportunities from the state and federal government are also drying up, leaving an even further burden on the local property taxpayer.

What can we do to minimize the significant cost impacts of capital projects? Maintain a long-term perspective. Plan and build for future needs. Minimize facility and infrastructure replacements as much as possible by:

• Avoiding deferring maintenance;
• Funding ongoing maintenance & repairs throughout the life of the asset;
• Adopting an ongoing, regular funding plan to ensure resources are available when needed;
• Providing for additions and updates when needed to maintain functionality for current operations;

Major addition, repair, or replacement is ultimately unavoidable. Schedule a realistic addition & replacement plan in the Capital Improvement Plan in such a manner to avoid multiple major capital projects at the same time. When an asset has reached the end of its useful life, don't delay – move forward, fine tune the CIP when a project is necessary in the near term, explore and taking advantage of funding opportunities and line them up for when the project is needed to minimize costs to the community.