Feb 06 2013

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GC Officials Mull $69,000 Shortfall

Gate City officials deferred taking action on repaying a nearly $70,000 amount over budget on the town’s recent water line improvements.

At the meeting held Thursday in the Gate City Town Hall Auditorium, members of the Gate City Town Council discussed options available to them that would allow the town to repay a $69,256 shortfall occurred during the first phase of the project.

The town’s engineer, Andy Miles of Vaughn & Melton, explained in detail how the project exceeded its original cost estimate and provided documentation to support his assertion. Council members first learned about the shortfall at their Jan. 8 meeting.

The special meeting was called Thursday meeting to allow the council to discuss financial issues with the waterline replacement project and other legal and personnel issues. Four of the five members of the board were present along with Gate City Mayor Frances Perry. Town Council member Robin Richards did not attend the meeting.

“Typically in the past, the health department has funded any overruns,” Miles explained. “But since Jan. 8 until now, the health department has said they will not increase the loan amount above and beyond what they initially offered, so the $69,000 shortfall belongs to the town.”

The Town of Gate City received a 0% interest, 30-year loan in the amount of $784,550 for Phase 1 and a 3%, 30-year loan of $480,837 for Phase 2 for a total loan amount of $1.265 million from the Virginia Department of Health.

According to Miles, the final expense reported at the meeting for Phase 1 came in at $853,805, an amount over budget of $69,255.

Phase 2 was also short by only a single dollar in its total estimated cost of $480,837, leaving a difference of $69,256 shortfall in the total project.

He attributed the additional cost to more expensive construction costs in relation to a connection at the Gate City Middle/High School complex for the fire suppression system, changing out some meters, additional work at the Gate City Fire Department and other items.

“The question to the board now is where is the $69,000 coming from,” Miles said. “There are probably some options. VML (Virginia Municipal League) does have a loan program. The health department also does and there are commercial loans available. Jeremy said he had talked with the contractor who offered some input.”

Town Manager Jeremy Keller, whose last day was Feb. 1 as he resigned to take a new position, noted that he had learned about the health department’s decision to not cover the shortfall earlier in the day, which prompted the special meeting.

“Everything in Phase 2 is directly related to construction costs…it does look like we are going to have to come up with $69,256,” Keller remarked. “We will have to come up with this amount somewhere.”

The town manager said the construction company vice president was willing to wait on his portion from the town in order to receive the approximately $230,000 owed to him by the Virginia Department of Health.

“We need to get that agreement in writing and give us a little time to research our options,” Keller added.

Miles said the health department’s decision to not pay the shortfall amount was based on the fact that the loan for the project has already been closed.

He estimated the price tag for the connection at the school at $40,000 and $25,000 for replacement of 2-inch meters.

“The work was approved and I didn’t think we could leave the school without fire protection,” Miles added.

The council went into closed session for further discussion on legal and personnel issues. Once they returned to open session, they deferred action until their Feb. 12 meeting.


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