Construction Costs – High or low?

I read with interest the contradictory claims of construction costs in today’s big story in the Duluth News Tribune and its subordinate publication the Budgeteer. According to “expert” Charlie Kyte, executive director of the Minnesota Association of School Administrators:

“Kyte pointed out that bond interest rates and construction costs are lower than usual right now. Olsen confirmed that bond interest rates, though not at their historic low, are “very, very good” right now.

‘It is a very rare occasion when you can borrow money at low rates and get construction done for low costs,’ Kyte said. ‘There is something to be said for striking when the iron is hot.'”

But according to Dr. Dixon in today’s Budgeteer

: “Let’s start with $257 million. That figure refers to the cost of the project if it were done today. We know the project will take several years, we estimate five, and we know over that period construction costs will be affected by inflation. Construction inflation has been running about 7 percent over the past several years, so over five years we estimate inflation of about $36 million. Add $257 and $36 million and that’s where the figure $293 million comes from.”

Either Construction costs are really low right now or Construction costs are racing past regular inflationary rates at 7% per annum so that the Red Plan will cost us an additional surprise $36 million.

If the Red Plan’s supporters can’t agree on how much their project is going to cost who can we believe?

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