Opinion: Amherst Has a Gambling Disorder

Amherst has a gambling problem.

The Mayo Clinic defines gambling as being willing to risk something you value in the hope of getting something of greater value.  It describes a gambling disorder as the uncontrollable urge to keep gambling despite the toll it takes on your life.

Faced with the Jones Library renovation-expansion’s massive cost and uncertain fundraising future, town leaders have consistently put their faith in Lady Luck. They have had three opportunities to avoid risking millions of budget dollars by canceling the project and reverting to the time-tested Joint Capital Planning (JCPC) process for funding town building maintenance and repairs, but they have chosen not to fold.

First was in April 2021 when, lured by a $13.9 million construction grant from the Massachusetts Board of Library Commissioners (MBLC) and a promise by the Jones Library Capital Campaign (JLCC) that it would kick in $5.7 million, the Town Council voted 12-2 to authorize borrowing $35.3 million for the renovation-expansion.  Little consideration was given to the fact that the plan would demolish a 30-year-old addition that the town had recently finished paying for, create the ninth largest library in Massachusetts, and jump ahead of long-planned replacements of the obsolete DPW facility and Central Fire Station.

In October 2022, after updated estimates pegged the cost of the project at between $43.5 million and $49.8 million, the Town Council by an 8-5 vote asked the Town Manager to amend a Memorandum of Agreement with the Library Trustees that called for moving forward with the renovation-expansion on the condition that the Library Trustees commit to sinking $1.8 million of its own funds into deferred maintenance should project costs ultimately exceed available funds.  Faith was put into the JLCC’s pledge that it could raise the now needed $13.8 million to $20.1 million to meet the Library Trustee share.

In December 2023, with construction documents ready for bidding, the Town Council reached another decision point.  The full cost of the project, the size and scope of which cannot be changed per MBLC grant terms, would need to be appropriated for the renovation-expansion to continue. Over critics’ cries that they were succumbing to the sunk-cost fallacy of believing too much had been invested to stop pouring money into the runaway project, the Town Council added another $9.9 million to its borrowing authorization to fund the $46.1 million expected cost of the renovation-expansion.  Despite several councilors citing financial risk to the town, the supplemental borrowing passed 12-0 with one abstention.

Fast forward to the close of construction bidding in April 2024.  After three delays by the project team to revise construction documentation, the project received only one bid.  It came in $7.2 million over the expected construction cost of $35.5 million.  The Jones Library Board of Trustees asked the Town Manager to reject the bid which he did this week.

You might think that the oversized renovation-expansion, with a cost now $17 million more than estimated three years ago, would finally be scrapped, with the town pursuing a more realistic plan to address building repairs that the trustees have put off since 2014.

You would be wrong.

The Library Board of Trustees, with its treasurer dissenting, has voted to ask the MBLC to extend a June 30 construction launch deadline for another six months so that the project can be put out for another round of bidding in September.  Joining the trustees in advocating for this course of action are two groups who will benefit financially from taxpayer dollars if the project drags on.

Professional fundraisers earned more than $50,000 from the library prior to 2017 when the JLCC was formed.  Since then, the capital campaign has reported paying out more than $350,000 in fundraising personnel expenses and has projected in a cash flow model that it will pay out $1 million in fundraising expenses through 2027.

Capital Campaign Co-chair Kent Faerber told the Jones Library Building Committee that “combinations of cost-cutting, changing the project, and fundraising would make it possible to go forward.”  He added, “the alternative would clearly not be responsible.”

The cash flow model shows the JLCC intending to remit $2.5 million to the town by January 31, 2024, but it has succeeded in transferring only $1.6 million to date.

Also advocating for continuing the project are designers Finegold Alexander Architects (FAA).  FAA principal Ellen Anselone has attributed the high construction bid to lack of competition due to the “summer slam season” when many construction crews are already committed. She believes that yet unspecified design modifications and increased interest from contractors could result in a construction bid that would not require the town to exceed its declared cap of $15.8 million to contribute to the project.

Anselone has acknowledged that FAA cannot find $7 million worth of reductions in the current design, so modifications must be made.  She offered as a hypothetical cost reduction, choosing to repair existing windows rather than install new energy-efficient double-glazed windows.  The need for more design work will require an extended agreement with FAA and Owner’s Project Manager (OPM) Colliers. 

“The work would be in the $80,000 to $90,000 range for just the redesign work and then there’ll be some money for the duration of bid,” said Anselone. Pressed further she estimated that additional bid work “would be probably in the $50,000 to $60,000 range.”

OPM Tim Alix reported that Colliers has been billing “just under $11,000 per month.”  He added that there would be a charge of about $1000 for the online bid hosting service.

Admitting uncertainty about additional expenses, Anselone concluded, “it depends how much work we actually do, how much work Tim’s teams will do, and we can sort that out and try to lower that working with you, Paul [Town Manager Paul Bockelman].”

In reasoning that construction bids will be lower if there is more competition, Anselone pointed to a government cost estimating study by the Army Corps of Engineers. Not discussed at the JLBC meeting, however, was a section in this report that describes appropriate actions when all bids exceed the Government Estimate (GE).

“After bid opening, if the bids received (to include apparent low bidder) are significantly higher that the Government’s Estimate suggesting an unreasonable GE, there is a high probability that one or more bidders will protest the reasonableness of the Government Estimate.

Another situation occurs when the designer/cost consultants’ final estimate is not within 15% of the low responsive bid at bid opening. If either situation occurs, the designer has a contractual responsibility to assist the Government in a detailed review and evaluation of the Government’s estimate. The designer/cost consultant will promptly conduct an independent view of the GE at no additional cost to the Government.”

The lone library project bid was 18% higher than the construction estimate.  It is not clear if the 15% rule applies to municipal projects, but we may hope that town negotiators are keeping this principle in mind.

Besides the uncertainty of what design features may be targets for modification, and how much designer and project management services will cost, there is an expectation that an extension and re-bid will result in cost escalation due to inflation.  OPM Alix estimated that a six-month delay would add $800,000 to $1.2 million to the expected project cost.

Disregard for uncertainty and excessive risk-taking may prove very painful for the Town of Amherst.  Financial reports show that the town has paid out approximately $2.3 million to produce construction documents for the recently canceled renovation-expansion project.  Should re-bidding be disallowed or unsuccessful, this cost will need to be written off and a $2.7 million disbursement of state grant money plus interest returned unless the town can convince the MBLC to forgive the refund.  Town Manager Bockelman has suggested that this would be reasonable since the town has been pursuing the grant requirements in good faith.

In view of the mounting losses and continuing expenses, commitment of additional town funds to the distant hope that project costs can be brought down to an affordable level seems yet another poor gamble.

It is not hyperbole to say that in the private sector, management heads have rolled for less.