The Fairgrounds Project; millions more needed

Published 12:00 am Tuesday, February 8, 2005

As Suffolk readies the redevelopment of the East Washington Street corridor with the most ambitious and expensive downtown project yet, do we really know the actual costs of the project?

With millions of dollars already spent on other downtown projects, has city management really identified the true costs of this project given the explosive price growth for both construction materials and labor?

This timely question must be asked, given the fact that other projects of a similar nature in our sister cities have almost doubled in cost over the last year or two.

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The best example of this is the &uot;Broad Creek Project&uot; in Norfolk, where infrastructure costs alone have grown in the last two years from $15 million to $28 million dollars.

This estimate may even be low, with several millions more necessary to complete the project as planned.

With our city management pushing forward into the residential development business, have they sold us on a project budget that will most likely be inflated by the same multiples found in the Norfolk project?

With similar pressures on infrastructure commodities needed like steel and concrete pushing up prices, it seems likely that much more money will be demanded for the &uot;Fairgrounds Project.&uot;

How much more is unknown and where such funding will it comes from is also…

There is little doubt that significant increases in the cost of this project will occur, as it consumes similar commodities and suffers the same cost overruns known in similar projects.

As an example; several school and municipal projects in Suffolk have already taken a budget hit.

Concrete, steel and construction costs have significantly increased the budgets of these projects by 30 to 50 percent or more.

It is clearly apparent that the same market forces apply to the costs of the &uot;Fairgrounds Project.&uot;

In addition to these cost increases, the recent deal struck with Kraft Foods to retain a portion of the area for their new warehouse will limit the intended development area.

As such, fewer units will be built to spread the fixed infrastructure costs across and the price points of the units built will rise accordingly.

It should also be noted that due to the market price of housing in general and materials and labor costs specifically, the price of each unit built will most likely rise significantly above the prices spoken of.

These real budget issues have yet to be discussed in any material way by our city management. Will the council be tapped for millions more to get this project done as found in Norfolk?

With the situation clearly known to the informed observer, the question becomes; why are we not looking at it now and budgeting for it accordingly?

The most proscriptive answer to this question is: the admission that millions more will be needed for the &uot;Fairgrounds Redevelopment Project&uot; is not good politics to place on the plate right now.

Such shallow thinking exhibits the unreasonable methods that will and have been used to distract the public from the real costs of such projects and unfair spending downtown.

While it is clear that local downtown developers will literally make a killing on this project due to the &uot;buy-down&uot; of infrastructure costs as described by our city manager, why are the true costs of the project being hidden?

One should also note that it does not make sense to focus all the efforts for affordable housing in Suffolk on this one and only project.

With the cost escalation we know will be forthcoming, the statement from the Fairgrounds Project Manager describing that: &uot;this redevelopment effort will not displace those who live within the Fairgrounds now,&uot; must by logic run headlong into the practical deterrent that such prices will cause.

The City has described their attempt to encourage or build homes that run from $85,000 for a single-bedroom apartment, to $205,000 for a three bedroom single family home. Clearly this pricing level will not be possible as the City encounters costs that are directly driven by the increases discussed above.

It should also be noted that a review or study has yet to be conducted to determine how the miracle of home ownership will trickle-down to those who live there now, much less at the prices that most of them can afford.

Another issue to note is that with recent increases in interest rates, the costs of home ownership has risen even further.

The city project manager and city manager have stated in the recent past, that this project is not the &uot;gentrification&uot; of this part of town, and that it will cost only so many millions.

This clearly is not true on the first point and they are not being totally honest on the second by not revealing the real costs that will accrue to build the project. It should be noted that with significant cost escalation taking even more for this project, there most likely will be less for any other priorities.

The City of Suffolk has staked all of its Community Development Block Grants (CDBG) from HUD and more on this scheme.

It is now apparent that even the millions already programmed will be insufficient to do the job and millions more will be needed.

As the expansion and gentrification of the East-Side of downtown continues with slight of hand economics as described above, it will lead to the push to displace the undesired and working class from downtown.

When one looks at the probable outcomes of this project, it is clear that the full facts have yet to be discussed by city management.

If council, who approved this scheme, continues to assume that they are getting one-thing, but finds out they are getting something that costs significantly more, it may indicate that it is time to take a closer look at some serious changes.

Roger Leonard is a Suffolk businessman and regular News-Herald columnist. He can be reached at