Constructing a fire station is a very complex event.I thought I'd share some best practices from my years of helping fire departments construct and finance their new fire station.
Here's my top 5 list:
- It will cost more than you think. There are always overruns and changes that add to the cost of their project. It's safe to assume a 10% cushion but I regularly see a final cost 20% more than the original budget. Best Practice: When you set your budget, plan on how you will pay for 120% of the original cost.
- It will take longer than you think. And time is money. At least, you pay more when you borrow money for longer term. Best Practice: Budget more for borrowing costs.
- It's not cheap. Depending on your local rules and regulations, you will generally pay 1 - 2% of your mortgage for transaction costs like appraisals, title insurance, and environmental investigations. Best Practice: Be prepared for the mortgage transaction costs.
- It can go very wrong. I've talked to dozens of departments who shared horror stories of poor contractors. Stories of unfinished stations, vanishing contractors who took the money and ran, didn't build to satisfactory standards, etc. Best Practice: Don't pay before the work is done. Set up a check and balance that the work is done well before you issue progress payments.
- Failure to plan is planning to fail. I talk to departments who get so far ahead of themselves with the excitement of a new station that they make dozens of small financial mistakes. Mistakes like not planning for extra costs or rolling costs into the financing. Best Practice: Plan thoroughly. This is a big project and huge mistakes are easy to make. Mistakes that will take years to overcome.
SummaryIn a word, plan. Then, plan some more. Understand that constructing a new fire station is a very complex physical and financial project. If you don't know how, get help from someone experienced with exactly what you are trying to do.
John R. Hill