WELLINGTON ‒ The predominant topic during a special meeting of Wellington County Council on its 10-year capital plan and 2024 budget was the impact of construction prices, especially on buildings and facility-related projects.
According to a presentation by county treasurer, Ken DeHart, budget estimates for major capital facility projects need to be updated to reflect current construction pricing in the market.
This follows three construction tenders for the Arthur Garage, 65 Delhi Transitional Housing and the Erin Library, coming in significantly over original budget estimates earlier this summer.
"Construction prices have gone absolutely through the roof," said DeHart. “It’s caused a dramatic increase in some of our costing and that’s what we’re going to see reflected in the next 10-year plan.”
According to DeHart, from 2017 to 2020, capital construction costs maintained increases that were the historical norms, between three and five per cent.
However, DeHart said double-digit increases have become the new normal with 2023 seeing an average increase of 10 per cent. These changes compound to an approximate 40 per cent increase over three years.
While it gradually dropped the first half of the year, the consumer price index (CPI) which is used to predict inflation, is currently sitting at approximately four per cent.
“The bottom line is the construction market is flooded with demand and it’s all kind of a perfect storm,” said DeHart. “Construction companies are busy…unfortunately this is the result.”
Comparing current-day developer stimulus packages to those offered during the 2008 financial crisis, DeHart said while they absolutely saw prices go up during that period, it was "certainly not this dramatically."
But some councillors felt construction project numbers for municipal projects are often "very inflated," alleging that developers may be charging more since they know the county "has deeper pockets" and "is good for the money."
"Are they looking at us having deeper pockets? Maybe. But on the flip side, we're less risky for developers because our ability to pay is strong," said DeHart. "So hopefully these things balance each other out."
County Coun. Mary Lloyd asked if this could be considered an incentive for developers to lower their costs.
"In theory, everyone is competing against each other for limited dollars," said DeHart. "Those are factors that could work in our favour...but these last three years have just completely blown everything out of the water."
An updated report will be presented in November.
Isabel Buckmaster is the Local Journalism Initiative reporter for GuelphToday. LJI is a federally-funded program.
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