Boots & Sabers

The blogging will continue until morale improves...


Everything but tech support.

2210, 17 Aug 16

Delays Cause Cost Increase?

This story doesn’t make any sense.

Seven University of Wisconsin System building projects Gov. Scott Walker delayed in the current budget to limit borrowing now cost $30 million more, according to the state’s nonpartisan budget office.

The UW System is requesting the state borrow $257.3 million for the building projects in its 2017-19 capital budget request. That’s up from $227.6 million it requested for the same projects two years ago.

OK, so the UW system is requesting $30 million more for the same 7 projects it requested, and was denied, in the last budget. The news story seems to parrot UW’s spin that waiting on these projects make them cost more. It’s an effective political game that UW is playing to try to convince legislators to approve spending now “or it will just cost more in the future.”

There are two fatal flaws with that argument. First, it assumes that the projects are inevitable. They are not. For example, one of the projects is for a new field house and soccer support facility for UW-La Crosse. We could just say “no” and move on completely. That way it never costs a dime.

The second flaw is the assumption that costs always go up. They don’t. In fact, prices fluctuate and sometimes actually go down. In this case, the only basis we have to think that the price for these projects increased is that UW requested more money. Why? Why are the costs higher than two years ago? These are construction projects.

As we know, labor rates have been almost flat. The price of petroleum-based materials, like asphalt and plastics, should have decreased with the price of oil. After all, when the original request was put together in 2014, the price of oil was over $100 a barrel. That same barrel is about $47 today. That also means that fuel for all of the construction equipment is significantly cheaper.

Furthermore, the cost of borrowing has been stuck at historic lows for years now. The bonding costs should not be significantly higher than the last time they made the request.

So why is UW asking for $30 million more for the same projects? Why do they think that these projects will cost that much more? What justifies a 13% price increase from 2 years ago?

I suspect the only justification is that UW is playing politics with their budget requests.


2210, 17 August 2016


Pin It on Pinterest