Construction Budgets Move and We Move On!
I noticed it when the first subcontractor contract came back—then subs’ contract after subs’ contract all had the same changes. Framing, masonry, plumbing and most notably the electrical contract was all much higher than our initial construction estimates. We have completed construction on ten USGBC LEED buildings. We felt we had the experience of developing construction budgets so that a project as massive as restoring a 150-year-old burned-out church façade would be do-able with our team. Nevertheless, the uptick in construction pricing before construction was unnerving. I double-checked our estimates and the contractors to make sure we had not made any mistakes. That was not the problem. Then I checked my construction colleagues to see if they were experiencing increased construction pricing. And without fail, each said yes. It was a double-edged sword for us—of course, we want construction prices and the economy to improve locally, so the people in our community could work, but it could have waited until we finished our project were my personal selfish thoughts! Construction prices had not increased in New Jersey since the beginning of the Great Recession. I did not think construction costs would increase between predevelopment and construction. I had a 10% contingency, but the construction costs increases were between 20% and 25%. When I realized the problem, it was obvious--I had not taken into consideration the impact of the disbursement of Hurricane Sandy relief funding on the local economy for our construction project.

Even though Hurricane Sandy was in 2012, the funding disbursements did not start until the middle of 2013—increasing demand and costs of contractors. Increasing employment opportunities is great for the local economy; however, it delayed construction of the Façade. In reaction to this situation, I felt the best thing to do was to raise more funds for the project. Therefore, we went out and obtained a commitment for New Market Tax Credits from NJ Community Capital. We also hired MacMillan and Scotland as our NMTC attorneys. We are in the process of completing our audit so that we can close on the tax credits, which should happen by January 31, 2014.

The New Market Tax Credits allowed us to add an interesting component to the project. I have always wanted a national artist to develop an installation for the Façade. I felt the Façade project to compliment the Façade itself, but we did not have enough funding. With the additional funding from the New Market Tax Credits, we now have funding for an installation. I decided to hire the national renowned artists, Miguel Luciano, to develop an installation for the project. I was impressed with his work and felt that his experience in Newark, national and internationally would provide the type of energy to the project that we were missing from the initial designs.

Constructions budgets move and we have to move on. The challenge is to ensure as a manager that we have taken into consideration as many variables as possible on these types of projects. We want these community projects to be perfect, economically, socially and even politically. But the reality is that they are always works in progress, alive, with ideas and strategies incorporated into the design and modeling forever.