City’s loan could close before center’s completion
By ANDREA FURLONG
Regardless of whether the Williamsburg Child Development Center is completed, the City of Williamsburg’s loan from the USDA will close in approximately one week.
USDA representative Sheri Rice approached the council at a meeting held June 14 with the news.
“We have promised the bank that we will close by July 1 to pay off the interim financing,” she said.
City attorney Eric Tindal told the council it’s not uncommon to close project loans and hold a final inspection prior to a site’s completion, if the items to be finished are considered minor.
“I think typically with any project even after the final inspection there is a punch list of a few items that need to be done. That’s all protected by the bonding, but I’ve never had the bonding company be. . ,” Tindal said, hesitating to finish.
Some of the work left to be done includes the redesign of handicapped parking spots, installation of a drainage system, installation of fencing, grading and similar work.
Council member Patrick McGovern questioned how the city can motivate general contractor Prostruct to finish the project sooner to keep expenses from growing further, as the city closes its loan. He noted the city ceased collecting liquidated damages on the project when substantial completion was reached four months ago.
“I’m concerned that they haven’t even finished that punch list from the inside that was created in February. How much longer is it to going to go before that stuff gets done?” McGovern asked.
Rice suggested the city withhold pay if it’s not seeing significant results from the general contractor.
“Really what the final completion is saying that everything from the substantial completion is complete. If it’s not the driving force, you don’t get paid. If they are not performing, you should not pay them,” she said.
Tindal said that strategy might work with a general contractor, but he reminded Rice bonding company IMT Insurance is the entity responsible for finishing the project, since the original general contractor filed for bankruptcy.
“Ultimately, it’s IMT who won’t get paid. They might not have quite the same financial incentives and pressures as a contractor,” he said.
Tindal said he anticipated the city “would be filing suit before the (project’s 1-year) warranty expires” if the punch list from February continues unfinished for several more months.
A SECOND LOAN
Rice also said the $928,000 USDA loan to the city will only be able to cover 77 percent of the estimated $156,000 needed to complete the project. The two childcare entities occupying the building — KIND Care and W4C’s — do not have the funds to cover the $36,000 shortage, she said. Rice recommended the council either take out a second USDA loan for the $36,000 or set up a loan for $14,200, a figure which factors in the anticipated $8,000 Alliant Energy rebate and $13,8000 in liquidated damages yet to be received.
Rice noted the city would probably not be in this financial position if the project’s completion hadn’t been delayed by eight months.
“Really, the biggest item that hurt was the interim interest. Because the project did go on so long the interim interest ended up being over $70,000. That is really what ate up a lot of the contingency that would have been available to take care of any of these other overages,” she said.
Rice also said the council might consider giving the $8,000 rebate to the childcare entities to reimburse them for $38,000 of out-of-pocket expenses they paid on the project.
Council member Theresa Phillips said the rebate should go to the city, which was originally going to be a pass-through for the childcare entities on all items related to the childcare center.
“You know, Sheri, when we started this project with you, there was a couple comments made or a decision made that this was not going to cost the taxpayers of Williamsburg, and here we go,” Phillips said.
Upon Tindal’s recommendation, the council agreed to decide at a later date how to spend the project’s $8,000 rebate.
The council approved 3-1 to borrow an additional $36,000 from the USDA through a 40-year loan. The interest rate is projected to be set at 4 percent.
IN OTHER BUSINESS
• The council approved hiring Hopp’s Trenching Service to install a drainage system at the Williamsburg Child Development Center for $11,000.
• The council approved reappointing LaVonne Sandersfeld and Emily Andrews to the library board, as recommended by librarian Loretta Hansen.
• The council approved a new management and use agreement for the childcare center that reflects the city’s larger role of ownership of the building.
The next council meeting is set for Monday, June 28, at 7:30 p.m.
UPDATED June 22, 2010 12:16 PM