05-27-2023, 05:42 PM
(05-24-2023, 05:45 PM)taylortbb Wrote:(05-24-2023, 05:19 PM)westwardloo Wrote: So they assumed a construction inflation rate of 3.6% per year. That is not out of the realm of possibility, but is probably on the higher end of what is likely to happen. The last 2 years were crazy for predicting costs. I don't know what the historic rate of inflation for the construction industry is, but I imagine it is closer to 2 - 2.5%.
Unfortunately construction inflation has been much higher than that. During the 2010s, when the original ION construction happened, construction inflation averaged 6% annually. Covid spiked that into the double digits. If they're assuming "only" 3.6% annual construction inflation, they're likely severely underestimating the costs of stage 2.
If we can't figure out, as a society, how to get construction inflation under control we're getting very close to not being able to build anything. Nevermind transit, we won't even be able to build housing for our population.
At 6% annual construction inflation we'd be looking at:
- $2.72B capital cost (2022$)
- $2.44B construction inflation (2033$)
- $1.03B contingency (2033$)
Which would give a $6.2B total cost (2033$).
It is important to adjust for "regular" inflation when talking about 2033$, as we can expect wages, etc (and therefore the tax base) to approximately track general inflation. Assuming 2% annual inflation then $6.2B (2033$) is about $5B (2022$), or the official estimate (3.6% annual construction inflation) would be about $3.6B (2022$). $3.6B in present-ish-day dollars is still far too much to be spending on the Cambridge extension though.
Don't forget that tidbit from the Council meeting about hot this Stage to cost estimate was only -25% to +50% accurate and that the numbers given out were the high end, that +50% end of that envelope.
That means the actual likely costs are as much as one third less from the $4.76B getting bandied about.