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Wright County News

Posted on: April 3, 2020

County Saves $1.5 Million Under Estimate for CSAH 39 Construction Project

In June 2017, the Wright County Board of Commissioners followed suit with numerous other counties in the state that were struggling to keep up with the funding needs for county highway and road infrastructure by implementing a half-cent Local Option Sales Tax (LOST) for transportation. The requirement was that all revenue generated by the tax could only be used on transportation projects that were on a list presented at a public hearing in 2017.

It is the LOST funding mechanism that will be used on the CSAH 39 project in Otsego (from Hwy 42 west to O’Dean Avenue) and the county got some good news – almost $1.5 million that was expected to be spent on the two-year project was saved by low bids that can be used for other projects on the LOST list.

Wright County Highway Engineer Virgil Hawkins said that the project, which had an engineer’s estimate of $8.32 million, came in at $6.33 million – almost $2 million under the estimated cost – a whopping 24 percent. Hawkins said he always hopes bids come in under the budgeted amount, but was stunned at how far the winning bid from Park Construction Company of Minneapolis came in under the estimate.

“We were hoping it would come in under budget, but I don’t think anyone was thinking the low bid would come in almost $2 million under the engineer’s estimate,” Hawkins said. “We’ve had projects that have come in under estimate, but 24 percent under doesn’t happen very often.”

One the primary drivers for the shockingly low bid was the competition among the construction industry to land contracts. Typically for large road construction projects, there are two or three bidders. Occasionally, there will be four.

The CSAH 39 project had six bidders and all came in under $8 million – the high bid was $7.8 million – 6.4 percent under estimate.

Using Local Option Sales Tax dollars to pay for the county’s share, the plan was to budget $4.5 million of LOST funding in 2020 and $2 million in 2021. The numbers for both the county and the city dropped significantly with the bid being as low as it was.

“A total of $6.5 million was expected to be the county’s share for this project and the city’s share was expected to be about $2 million,” Hawkins said. “Based on the low bid being so far under (estimate), the city’s share is going to be $1.29 million and the county is going to pay $5.04 million. It’s a nice savings on this one.”

In the two full years that the LOST program has been in place, it has far exceeded projections for revenue generated. The expectation was to bring in $5.5 million a year according to 2017 projections. It has averaged $7.3 million and a year and, thanks to the competitive bidding on the CSAH 39 project, Wright County gets to use almost $1.5 million to use toward other transportation projects on the LOST list.

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