Inflation could add $50M to $60M to county’s judicial center plans, if proposed timeline holds
photo by: Chris Conde/Journal-World
If you are one of those people who nearly cracked over the rising price of eggs the last couple of years, you may want to get out your bubble-wrap suit. Douglas County commissioners — and by extension county taxpayers — may soon find out there is an even more painful form of inflation.
Building-construction inflation adds up in a hurry, and Douglas County leaders may experience $50 million to $60 million worth of it if they undertake a large project to revamp the county’s Judicial and Law Enforcement Center.
Douglas County commissioners this fall have been presented plans that, at first glance, show a price tag between $105 million and $112 million to address what Douglas County officials say is a pressing need for more courtroom space, better courthouse security and more durable space for operations like the 911 dispatch center and sheriff’s office operations.
But that $105 million to $112 million estimate is almost certain to be wrong by a wide margin if county officials actually undertake the plan. That’s because the estimates do not take into account construction inflation for the full project. Once they do, the estimates are more likely to grow to $160 million to $170 million, according to calculations done by the Journal-World using estimated construction inflation rates provided by the county’s architects.
Certainly, county officials aren’t oblivious to the current state of inflation, but as they have publicly discussed the judicial and law enforcement projects they haven’t done the calculations of how much it really could impact this project.
The numbers are large enough that it may require the county to be careful in making promises to taxpayers that the project can be done without a tax increase. As you look more closely at the project and its finances, it seems clear that the county has reasonable numbers to suggest that the first phase of this project could be accomplished without a tax increase. However, it is not clear that the second phase of the project could be done without one.
Until now, it has been difficult for the public to estimate the inflation impacts of the project because a key detail has been missing: the overall timeline of the project.
County Administrator Sarah Plinsky, however, told me this week that the second phase of the judicial and law enforcement project is not expected to begin for at least 15 years. That second phase includes new space near the Douglas County Jail for a building that would serve as the headquarters for the Douglas County Sheriff’s Office, the 911 dispatch center and the county’s emergency management center. It also includes a second round of major renovations to the existing Judicial and Law Enforcement Center near 11th and Massachusetts streets.
The documents presented to county commissioners show the Phase II costs to be $39.1 million to $41.6 million. But Plinsky confirmed for me those cost estimates are if the project is built now, not 15 years from now. (The documents also list that the estimates are in current dollars, if you take time to read the fine print.)
It creates an unusual situation because governments normally don’t plan for building projects 15 years in the future. Many governmental capital improvement plans, including Douglas County’s, only go out five years.
Until Plinsky told me this week, I had no idea the Phase II portion of the judicial and law enforcement project was 15 years in the future. In fact, I started this article thinking it would have a different focus. I intended to focus on why the county might be moving ahead with building a sheriff’s office headquarters on the site of the Douglas County Jail just a few years after the City of Lawrence completed a nearly $20 million police headquarters project in northwest Lawrence.
The city manager in 2017 (Tom Markus, not current City Manager Craig Owens) had expressed interest in building the city’s police headquarters on the site of the jail, thinking it would be a good location for a future joint headquarters facility for the police and sheriff’s office. That idea was largely rebuffed by county officials at the time, with some reasons including the jail site wasn’t of adequate size and that the sheriff’s office had no need to move from its downtown location.
For the county to move ahead with such a headquarters project now would create questions about its responses to the city in 2017. But, those questions are less relevant if we are still 15 years away from such a project.
But don’t fret, there are other questions to ask about the project now. Here are a few:
— Is it possible the inflation fears are overblown? Perhaps, but I would say the inflation estimate could be too low. The architects, Lawrence-based TreanorHL, estimated current construction inflation at 5% to 7% per year, in documents provided to the county. Of course, no one knows whether it will remain at that pace for 15 years. I used the midpoint of 6% to calculate the $160 million to $170 million total price tag for the project. Looking back further, construction inflation since 2009 has been about 4.5% in the Kansas City area, according to data provided by the architects. If the economy were to revert back to that rate of inflation, the total price tag would be around $140 million to $150 million.
However, it should be noted that the 6% inflation estimate is less than what construction inflation recently has been in the area. The architects provided the county with a chart that showed construction inflation in the Kansas City area has been about 8.5% annually since 2020. If those trends were to hold, the total price tag would be closer to $200 million to $210 million in 15 years.
— Do we really think Phase I of the project can be done without a tax increase? The county does have numbers that suggest it can do Phase I without a tax increase. A big reason why is because of the large amount of cash reserves the county has, which I’ve written about quite a bit over the last couple of years. Plinsky is estimating that the county has $14 million to $16 million of cash reserves it could use to help pay for the project. The county’s share of the existing countywide, one-cent sales tax should provide enough money to make annual debt payments on the rest of the project.
Depending on how you look at it, those cash reserves may be paying off now. However, it also is fair to note that those cash reserves were created, in part, through tax increases in prior years. As we’ve reported, from 2002 to 2021, Douglas County had the largest property tax mill levy increase of any urban county in the state. More recently, commissioners have been reducing the mill levy, as public pressure has increased to do so.
It also is accurate to say that the purchasing power of Douglas County’s cash reserves has been declining as inflation has been increasing. Douglas County earns some money on its cash reserves, but it doesn’t earn anywhere close to an 8.5% return, which is what would have been needed to keep pace with construction inflation over the last couple of years.
— Is the county concerned about increasing the law enforcement presence at the Douglas County Jail, given that the jail is next door to the Lawrence Community Shelter? This may seem like an oddball question. But I raise it because we’ve reported the county objected to a city idea of building its Pallet Village project for the homeless on vacant property at the Lawrence Community Shelter. The county told the Journal-World in March that “placing a new shelter for unhoused residents next to a jail is not trauma-informed for camp residents.” That was one of several reasons the county had for opposing an idea of building tiny shelters on the LCS property. The city is now building that project on North Michigan Street.
Does the inverse of that situation apply? If the county located 60 to 70 additional law enforcement personnel next door to the shelter, would that be “trauma informed” for camp residents? When I asked Plinsky, it sounded like the county is content to cross that bridge when we get to it, rather than try to figure it out now.
“The option currently being explored does not increase the presence of law enforcement officers at or near the Douglas County Correctional Facility,” Plinsky responded via email when I asked her about the trauma-informed issue.
That answer is accurate if you only look at Phase I of the current proposal. Under Phase II, the issue of more law enforcement next to the shelter would exist (unless the shelter moves). That answer may be indicative of how the public should view this whole project. Phase I is really what we are talking about. Phase II may have a slim chance of ever happening.
If that is the case, then the proposed expansion and renovation of the existing Judicial and Law Enforcement Center had better do a really good job of meeting the county’s needs. I have been looking at that part of the project too, and I’ll write more about it in the coming days.