The power line lowering project to the east of the Warsaw Municipal Airport may face a funding deficit due to a cost increase and an unexpected Indiana state tax.
Nathan Leinhart, project manager with CHA, the airport’s engineering firm, told the Warsaw Board of Aviation commissioners at its meeting Tuesday that they were able to get final numbers from American Electric Power (AEP) for their construction costs, as well as submitted all the documentation to the Federal Aviation Administration (FAA).
“We are continuing to coordinate with the FAA to bridge the funding,” Leinhart said, reminding the board that in late 2019 the FAA announced a grant for $6.3 million for the project, pending receipt of bids and final values. “So now that we have those, we submitted that. We are at a total project cost of $7,776,511, with the majority of that attributed to the construction for AEP to lower the power lines. We’ve got approximately $155,000 for professional services associated with construction, and also $3,500 that is for a required independent evaluation of those professional services. So, all in all, we are, as you can see, well above the $6.3 (million) that was programmed.”
He said in conversations in mid to late June, there’s been some correspondence from the FAA that said $6.3 million awarded in 2019 was based on a 90% FAA contribution value as opposed to the 100% of the Supplemental Appropriations Act it was based on.
“So, not only do we have a funding deficit that we’re working with the FAA to resolve, but we’re also working with them to determine if, when and how this was changed. We’ve been continuing our biweekly calls, with our last call being just this past Thursday where it was left that the program manager … is working internally to get some upper management folks” involved because the conversations are elevating above the program manager’s level, Leinhart said.
He said it was his understanding that meeting would take place this week.
Board President Jay Rigdon asked, “Nathan, should we really be unhappy with the FAA about this?”
“I will say it’s been a surprise to almost every other entity that we’ve spoken to, and by entity I mean INDOT was not aware of it. Other counterparts that we work with were not aware that the FAA had changed the rules of engagement for (Fiscal Year) ’19, so, yeah, it’s a surprise. We were hit with a curveball we were not anticipating when that email came through,” Leinhart said.
Looking at Leinhart’s report, Rigdon said, “Now, based upon this policy change and these estimates, are we looking at a significant search for this funding to finish paying for this project?”
Leinhart responded, “Potentially, yes.”
At 90%, based on the submitted dollar value of $7.7 million, the FAA would be contributing $6.9 million, or about $600,000 more than was announced in late 2019, he said. The state is going to participate at 5% and then there would be a local share of 5%.
He said he and Airport Manager Nick King talked about this throughout the month of June. They’ve been trying to figure out how the FAA made the funding determination and why the rule change wasn’t publicly advertised until now.
“We’re not taking this lying down, let’s put it that way. We’re badgering all the people that we can to get answers to this and try to get these questions answered,” Leinhart said. “But ultimately, yes. If the FAA comes back and says, ‘No, this is what it is. This is our policy. It’s been in place since’ whenever they issued it, then this would be the breakdown of what the costs would be.”
When the $6.3 million grant was announced, Rigdon asked King if “our congressional delegation” was involved in the announcement.
“They were. They were surprised by this announcement when I called them and told them as we were,” King said. “They are not pleased and they are aware.”
Leinhart said the good news in all of this was that the timeline they were targeting was hit on time. “We got the information in when it was requested, so we’re continuing to keep these conversations moving forward as appropriate,” he said.
Dan Robinson, board member, asked what the last construction estimate was that AEP had provided. King said that was around $6.3 million, hence the original award amount.
King asked Leinhart if he knew anymore about the “tax exempt portion” or if that question ever got answered.
Leinhart said that of the $7.6 million attributed to the construction, there was roughly $700,000 to $800,000 for a state mandated utility tax for improvement.
“It was something that AEP was working to try and pursue an exemption for, and it was determined that they actually were unable to be an exempt entity for that type of work. So, unfortunately, of that $7.6 (million) number, about $800,000 of it is a state-mandated tax,” Leinhart said.
On a related matter, Leinhart said they opened bids June 25 virtually for the runway 1836 rehabilitation. The only bid received by the 1 p.m. deadline was from Phend & Brown for 8.4% below the engineer’s estimate, he said. The required information was then submitted to the FAA within a week.
Leinhart said there was a second bidder, but the company submitted their bid after the deadline and was returned without being opened.
“With the bid, we put together a bid recommendation, contingent upon the receipt of the full funds from the FAA, to make that award to Phend & Brown in the amount of $2,482,456.50, and that cost value comprises the base bid plus several additive bid items for some underdrain and storm sewer improvements,” he said. There were some bids for alternative items that were considered cost-savings to the work. Without any additives or alternatives, Leinhart said Phend & Brown’s base bid was about $2.3 million.
“With the grant application and the construction costs and the bidding and construction phase services, in addition to the independent fee evaluation, we submitted a grant application to the FAA in the amount of $2,794,867,” he said. “What we’re finding is that the FAA only programmed $1.8 million, and so, during the conference call with the FAA last week, this got rolled into the elevated conversation. The program manager is fairly new to the FAA, so I think perhaps he might be a little leery to make decisions or make any kind of commentary that may not be the way it’s actually played out.”
The grant is 100% FAA funded, so there would not be any local match, Leinhart said. The $1.8 million is the full program value, “so we are short just under $1 million so discussions continue as far as trying to bridge that gap with additional discretionary funds.”
Leinhart said they’ll continue discussions with the FAA and have more of an update at the board’s Aug. 11 meeting.
The board approved the award to Phend & Brown for $2,482,466.50 contingent upon receipt of the 100% federal grant.