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Rising inflation hitting city projects as well as wallets, food prices

By Genelle Pugmire - | Feb 18, 2022

Courtesy Provo City

The final beam is put in place at the top of the new Provo City Hall on Tuesday, Jan. 5, 2021. 

Just about everyone is feeling the hit on their wallets caused by, among other things, inflation. U.S. inflation rates have accelerated to 7.5% this February, the highest since February 1982.

Those numbers are well above market forecasts of 7.3% as soaring energy costs, labor shortages and supply disruptions, coupled with strong demand, weigh in, according to Trading Economics.

Inflation is no respecter of persons or places. While it affects individuals, civic developments and projects are also being hit in the project funds wallet.

A brief look to Provo, Orem and Vineyard, tells the story of what many cities are dealing with. According to numerous surveys and polls, these cities are in good shape and in fact are leaders in the state and throughout the country for growth and development.

In Orem, inflation has taken a whack at water projects planned for the city.

Evan Cobb, Daily Herald file photo

Apartments are under construction near North Mill Road on Thursday, Nov. 1, 2018, in Vineyard.

“One of the ways that the City of Orem has experienced the sting of inflation is in our recent water projects. We’ve hit the pause button on our secondary water project for Lakeside Sports Park, Springwater Park and Sleepy Ridge Golf Course because the original engineering estimate pegged the price of the city’s proposed water reuse project at $9 million,” said Sam Kelly, city engineer.

The city’s Water Division was looking forward to moving ahead with the planned project this spring. However, last week, the project hit a wall with bids to complete the project coming in at more than double its estimated cost. Low bid for the work was $18.7 million. The high numbers have forced staff to stall on completing the work, according to Kelly.

“We’re seeing delays in project completion because we can’t get building materials and when we can get building materials we’re seeing higher costs across the board. These supply chain issues are backing up projects and throwing off our project schedules,” he added.

Provo’s Director of Public Works Dave Decker has some good news for residents — and some not so good.

“Provo City moved quickly on the design and construction of the new Airport terminal and the new City Center building to avoid the increase in construction prices that has recently occurred. Both projects avoided the increase construction pricing and the material shortages the construction industry has seen recently,” Decker said.

Courtesy Provo city

Exterior view of new airport terminal, shown on Nov. 23, 2021.

The wastewater treatment plant was started early enough to avoid inflated prices with Package 1 on this project. Package 1 included demolition of the older treatment plant facilities, excavation and foundation work for the new MBR treatment plant. However, Package 2 was issued last fall and pricing for that package did show evidence of increase construction prices. Decker noted that they have also seen price increases in bids for recent projects.

Provo, like many other cities, is preparing its budgets for Fiscal year 2023 that begins July 1. John Borget, director of Administrative Services, is having to grapple with what inflation may look like down the road as those budgets are prepared.

“We are in the early stages of the budget process for Fiscal 2023. With inflation rates rising significantly this past year all areas of the budget are affected. The areas most impacted are wages, vehicle purchases and capital projects,” Borget said.

“Each year, we do a market grade study to see how each position classification compares in the market, this study is done in the February-March time period so we can adjust pay ranges for positions that are below the market and remain competitive. In December we made some adjustments for our police officers when it became clear compensation was below what was being offered in the market,” Borget added.

He said the city continues to see sharp increases in vehicle prices and the lead time for purchases is significant. In some cases, he cannot even place an order until a future specified date.

“The costs for materials for Capital Projects have seen significant increases. Fortunately for the city, the material costs for two of our large capital projects; new City Hall and the Airport Terminal were locked in before the recent sharp increase in costs,” Borget said.

Vineyard is experiencing massive growth and Naseem Ghandour, city engineer, is keeping a close eye on how inflation is affecting the city.

“Vineyard City is experiencing rapid growth, both in the private development and in city public projects, such as the new downtown development and the UTA Frontrunner Station,” Ghandour said. “While rising prices and supply chain delays can create headaches for construction projects, Vineyard City staff has been working with our partners including developers, engineers and suppliers to keep progress moving for Vineyard’s residents and businesses.”

Inflation has impacted the Downtown Vineyard development– the 1,700-acre master planned capital project. Reinforced concrete pipe that is typically used for underground storm water system was delayed due to costs tripling and no guaranteed delivery time, Ghandour noted.

“To overcome this barrier, the city worked with the contractor to substitute RCP with high density plastic (HDP) pipe with additional protection to compensate for the vehicle loads, which makes using RCP the primary choice product,” Ghandour said.

Additionally, the team prioritized the infrastructure construction around the new UTA Frontrunner Station, ensuring that Vineyard’s station keeps its April 2022 opening date.

“Material shortages delayed Phase 2 by approximately two months. As Vineyard maneuvers through these times, we understand that rising costs and supply chain delays impact all of us,” Ghandour said. “We focus on providing a flexible and fluid working relationship with our partners to accommodate work schedules and provide cost-saving and timely alternatives.”

Vineyard Mayor Julie Fullmer notes that many of the project problems are also coming down to supply.

“Inflation has everything to do with supply and demand. The supply chain delays have affected our projects. Significant delays on playground equipment for our parks have been tangible for our residents,” she said. “We’ve worked around material shortages to keep our major infrastructure projects on time, such as the FrontRunner station, and we will continue to overcome these barriers that don’t seem to be slowing.”

“Vineyard is also staying aware of how this is affecting housing. We’ve learned that housing prices have increased in Utah by a reported 40% over the last 18 months. We are working in our planning and zoning departments for solutions to remain flexible to help keep costs down and support housing at a more affordable rate,” Fullmer said.

Inflation is also hitting the local grocery stores. The U.S. Department of Agriculture published a report on the Consumer Price Index for food from 2019 through 2022. In 2022, it is forecast to rise another 2-3% for all food. The average increased 3.6% from 2020 to 2021. In 2021, food away from home saw a higher jump with a forecast increase of 4% to 5%.

The Washington Post reported at the end of 2021 that, “Strong consumer demand, continuing supply chain troubles and the emergence of the omicron variant of the coronavirus threaten to prolong sharply rising prices well into 2022, potentially making inflation the premier economic challenge of the new year.”

However, most economists see some drop in inflation by the end of the year. That is yet to be determined, with some financial skeptics holding to the notion it will continue to rise out of control.

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