Inflation is having an impact on planned capital projects and on Norfolk County’s reserve funds.
County councilors recently approved more than $700,000 in capital budget amendments to cover the increased costs of various previously approved capital projects.
The additional costs caught the eye of Mayor Amy Martin during a June 13, council-in-committee meeting. Councilors were asked to approve a summary of bid awards – that is the awarding of tenders for various purchases and projects.
“We see the summary of bid awards come through and sometimes they include budget amendments,” Martin said. “We’re seeing it more and more and obviously we don’t live in a bubble and we’re aware of inflation and increased costs.
“I realize that with these projects we’re at the point where we have to commit and go ahead with them.”
At the same time however, Martin said there are a lot of budget amendments – increases- and she felt compelled to flag the issue for other councilors.
Martin said she isn’t comfortable endorsing budget amendments without knowing the overall status of the reserves being used to make up the shortfalls. She called for future reports to provide information about the status of reserves.
As well, Martin wanted to know if there is discussion among county staff about not moving forward on some projects when bids are coming in over-budget forcing the county to draw on its reserves.
County CAO Al Meneses said finance and purchasing staff do have discussions when tenders come in over budget to determine if a project should still move forward.
If tenders continue to come in over budget due to inflation, Meneses said the county may want to push some of the projects included in the 10-year capital plan back a couple of years.
“Longer terms, I think this is something that you’re going to see when it comes to budgeting as early as July when we have another report coming forward,” Meneses said.
The county will have to determine what it can afford and keep within the 10-year forecast so it doesn’t have to raise the municipal levy (property tax) any higher than necessary.
Meanwhile, steps will be taken to ensure councilors receive a report on the status of the county’s reserves when money is being removed to cover projects that come in over budget.
The recent bid award summary presented to councilors included several projects that came in over budget. By way of example, the county had planned to spend $1.751 million to purchase five new snowplow trucks. But the tender came in a $2.152 million – a difference of $401,000. To cover the additional cost, the county is dipping into its fleet capital replacement reserve.
The county is also going to take money from its roadway construction reserve to cover the extra $90,000 needed for a culvert rehabilitation project. The project budget was $337,000 but the bid came in at $427,000.
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