Cost increases estimated for the new Steamboat Springs fire station and city hall project are now exceeding what the Steamboat Area Fire Protection District says it can contribute.

The district’s agreement with the city outlines that it needs to shoulder a third of the costs for the new station. But as the price for the building approaches $18.8 million on the latest estimates, District President Karl Gills warned City Council on Tuesday, Jan. 17, the district has “significant concerns” about its ability to come up with its share.

“To be frank, the district cannot afford our portion of this total… or anything near that amount,” Gills said. “It would jeopardize our intermediate and long-term viability, and our ability to support our portion of the operational and other capital costs for the fire service and EMS service going forward.”

---

---

Projected costs for the fire station alone have grown 15.5% since initial estimates pegged the project at $16.3 million. In September, that number climbed to $17.3 million even after factoring in design choices like removing one of the bays from the station in an effort to reduce the overall cost.

The latest increase is due primarily to increased construction costs, though it also includes a roughly $650,000 bump after council opted for an all-electric system for the building in a divided vote in November, according to Deputy City Manager Tom Leeson. More value engineering since then has cut another $600,000 from the building’s price tag.

---

---

But the cost is still over the $17.3 million number that the fire district used when creating its annual budget, a budget that had allocated the district’s full portion for the station based on costs at the time. While the district could rework the budget to pay more, Gills told council that would come with tradeoffs.

“The easy answer is, that’s where we are,” Gills said.

The city hall portion of the project has seen similar, though slightly smaller, cost increases, also largely driven by construction costs, Leeson said.

The total for city hall is now projected at $14.9 million, an increase over the original $13 million projection of 14.7%. This includes just $13,000 more for the all-electric system and $470,000 in savings from value engineering.

Together, the costs for the new buildings are now about $33.7 million.

Leeson said he hoped the end costs could be lower when the project is put out to bid with more firms competing for the job, but council member Heather Sloop said she was terrified costs could see further hikes — a concern she has expressed before.

 “We’re not even near where the actual budget’s going to be,” Sloop said. “We’re not even at final drawings yet and it’s terrifying me.”

How to pay?

Gills said the district has taken steps to meet its portion of the project by accumulating reserves in recent years and incrementally increasing its mill levy, which is now as high as voters have approved.

While it would be a stretch, Gills said the district could meet its portion of the previously projected costs, even though it may lead to asking voters for a further increased mill levy in the future to cover operational costs.

Members of council indicated they might be open to adding a cost ceiling to the project for the fire district’s portion, with the city likely picking up the added cost overruns. Council directed staff to continue to explore financing options with the fire district board, but didn’t make any official decisions.

“I don’t want to jeopardize our fire district from not being able to do the maintenance and the operations,” said council member Michael Buccino. “As this thing could escalate to $19.3 million or even more… I don’t want to tie their hands.”

One option presented to council to cover fire station increases would use reserve dollars previously set aside for a housing project aimed at serving transportation workers. This money could be repurposed for the fire station and then the city could either issue debt for the transportation housing project, or they could use proceeds collected from the recently passed tax on short-term rentals.

Council members Sloop and Joella West said they did not like the idea of using the short-term rental tax money. Council member Dakotah McGinlay, while sharing their concerns, noted that council wrote the ballot language in a way that it could be used for such a project.

“I don’t know how our community would react to that,” West said.

“We are asking our community to help us solve this problem and we need to figure out how to solve this problem for our own staff as well,” McGinlay said. “That’s why we wrote the (ballot) language in the way that we did, so that we had a little bit more flexibility.”

Council opted not to decide how to pay for the transit project if the reserves were to be reallocated, instead pushing that decision to a later date.

As for the city hall cost increases, council decided to continue with planning with the idea that they could issue more debt for the project. Budget Director Kim Weber said the city’s current debt service ratio is low and they could accommodate a move like this. This option isn’t being considered for the fire station, as the city does not want to subject the district to ongoing debt service.

Concerned about the increasing budget, Sloop said council may need to consider alternatives to a new city hall building, adding “when times are tough, you reassess and reevaluate to make sure that you’re not spending the community’s money in a manner that is excessive.”

No one else on council indicated they were considering abandoning the city hall project. Leeson said doing so now would mean the work already done would likely be lost.

“We would be starting from ground zero essentially,” he said.