DE0201C - BPW DGS Construction Contingency by winstongamso


                                        General State Facilities
                        Board of Public Works/Department of General Services

Construction Contingency Fund (Statewide)

GO Bonds                           $2,500,000        Recommendation: Reduce $500,000

Bill Text: Provide funds to be credited to the Construction Contingency Fund to be administered in
accordance with Section 3-609 of the State Finance and Procurement Article.

Program Description: The Construction Contingency Fund (CCF) provides funds for State
construction projects that exceed their previously authorized amounts or to cover change orders
during project construction. These funds may not be used for projects that have not already received
State capital authorization.

Comments: Section 3-609 of the State Finance and Procurement Article allows for a maximum of
1.25% of the current general obligation (GO) bond appropriation to go to the CCF. That maximum
comes to $10.125 million for fiscal 2008. As shown in the Fund Data Annual Uses and Sources chart
in this analysis, the CCF balance as of the end of February 2007 is $2.3 million; therefore, the
proposed GO bond authorization would not violate the statutory fund ceiling.

         A volatile construction market, marked by elevated construction escalation, has made
estimating capital project costs difficult. As a result, use of the CCF has increased in recent years
with a total of $18.1 million in approved authorizations from the beginning of calendar 2005 through
the first two months of calendar 2007. Fortunately, the additional funding provided through the CCF
has been made with little in the way of State appropriations to the fund; only $834,000 of GO bond
authorizations have been made to the CCF in the last three fiscal years combined. Instead, the fund
has been sustained through the process of disposing of unspent GO bond proceeds as outlined in State
Finance and Procurement Article Section 8-129. This section of statute provides that unspent GO
bond proceeds may be used to reduce State debt authorizations, allocated to the CCF, or credited to
the Annuity Bond Fund to pay the outstanding bonded indebtedness of the State. A total of
$15.7 million has been transferred to the CCF in accordance with Section 8-129 from the beginning
of calendar 2005 through the first two months of calendar 2007.

        While economic data maintained by the U.S. Bureau of Labor Statistics indicates that in the
last quarter of calendar 2006 there was some leveling off of the annual growth in construction costs,
the State still has many projects that have or are planned to receive construction authorizations that
have yet to go through the construction bid process. It is difficult to estimate with any confidence
whether the State authorizations for these projects will be enough to award the winning construction
bids until the individual bid packages are opened and evaluated by the Department of General
Services and the other State entities with independent procurement authority. Despite this
uncertainty, the Department of Legislative Services recommends reducing the proposed

For further information contact: Matthew D. Klein                                 Phone: (410) 946-5530

                        Analysis of the FY 2008 Maryland Executive Budget, 2007
                                  DE0201C – BPW/DGS – General State Facilities

fiscal 2008 authorization to the CCF by $500,000. This would provide $2.0 million of new
funding to the CCF, giving it a balance of a little over $4.2 million. Continued use of the
disposal process for unspent GO bond proceeds provided in State Finance and Procurement
Article Section 8-129, so successfully utilized during the past three years, should provide an
additional source of funds to the CCF should the need arise.

Fund Data
                                 Annual Uses and Sources Fund Summary
                                          Calendar 2003-2007
                                                      2003         2004          2005          2006         2007
 Beginning Balance                                   $218,415    $1,403,621    $3,819,156    $5,080,702   $1,902,036
    Fund Transfers In                                  732,516      950,000     7,694,760       638,334    7,418,249
    Return of Unused Funds                             182,690      613,735             0             0            0
    Appropriation                                    1,000,000    2,000,000       834,000             0            0
 Subtotal: Available Funds                          $2,133,621   $4,967,356   $12,347,916    $5,719,036   $9,320,285
 Less Authorized Use of Funds
    Groundwater Remediation – Two Facilities          165,000            -               -            -
    Springfield Hospital Food Service Center          565,000            -               -            -
    Bloomsbury Square Demolition and Parking                -      198,200               -            -
    140-bed Housing Unit – ECI                              -      950,000               -            -
    Statewide Underground Storage Tanks                     -            -         272,887            -
    Ventilation Improvements at WDC                         -            -       1,750,000            -
    Academic and Admin. Complex at PSTC                     -            -         808,827            -
    Baltimore City Juvenile Justice Center                  -            -       2,000,000            -
    Dove Pathway Access at HSMC                             -            -         150,000            -
    Ctr. for Business and Graduate Studies at BSU           -            -       1,210,500            -
    St. John’s Archeological Site Exhibit at HSMC           -            -         900,000            -
    Road/Parking Improvements at Calvert Cliffs             -            -         175,000            -
    Coppin State University                                 -            -               -    1,902,000
    Salisbury University                                    -            -               -    1,570,000
    MD School for Deaf – Columbia/Elevator                  -            -               -      345,000
    St. Mary’s College – Student Services Bldg.                                                            1,675,000
    Patuxent Inst. – Fire Safety Improvements                                                              5,397,665
 Subtotal: Authorized Uses                           $730,000    $1,148,200    $7,267,214    $3,817,000   $7,072,665
 Ending Balance                                     $1,403,621   $3,819,156    $5,080,702    $1,902,036   $2,247,620

BSU: Bowie State University
ECI: Eastern Correctional Institution
HSMC: Historic St. Mary’s Commission
PSTC: Public Safety Training Center
WDC: Women’s Detention Center

                       Analysis of the FY 2008 Maryland Executive Budget, 2007
                              DE0201C – BPW/DGS – General State Facilities

                                         Authorization Request
                                            ($ in Millions)

                 2006          2007          2008        2009        2010        2011        2012
Description     Approp.       Approp.       Request     Estimate    Estimate    Estimate    Estimate

GO Bonds           $0.834       $0.000        $2.500       $2.500      $2.500      $2.500      $2.500

Total              $0.834       $0.000        $2.500       $2.500      $2.500      $2.500      $2.500

Recommended Actions
        Reduce by $500,000.

                   Analysis of the FY 2008 Maryland Executive Budget, 2007

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